Imunon Inc (IMNN) 2008 Q2 法說會逐字稿

Good morning. My name is Kerry, and I will be your conference operator today. At this time I would like to welcome everyone to the second-quarter 2008 Celsion earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks there will be a question and answer session. (Operator Instructions). I would now like to turn the call over to Mateo Millette of FD Ashton Partners. Mr. Millette, you may begin.

Thank you, Kerry. Good morning, everyone, thank you for joining us for Celsion's second-quarter earnings conference call. The call will be archived for replay beginning today at 2 p.m. and will remain archived until August 25, 2008. The replay can be accessed at 800-642-1687 or 706-645-9291. The conference ID is 59454102. The call will also be available on our website at www.Celsion.com for 30 days. Also after 2 p.m. today.

Before we begin, we wish to inform participants forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. You are cautioned that such forward-looking statements involve risks and uncertainties including, without limitation, unforeseen changes in the cost of research and development activities and 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 in the Company's periodic reports filed with the Securities and Exchange Commission.

With that said I would like to turn the call over to Michael Tardugno, President and CEO of Celsion. He will introduce the other speakers and give you an outline of today's call and provide some opening remarks.

Thank you, Mateo, and good morning all. Thank you for joining us and for your continued interest in Celsion. By the way, Mateo Millette is a vice president with our new IR firm, FD Ashton Partners and runs their Boston office. And Mateo on behalf of all of us, welcome. Welcome to you and to the FD Ashton Partners team.

As Mateo said I am Michael Tardugno, President and Chief Executive. I'm here today with Nicholas Borys, our Vice President and Chief Medical Officer and Paul Susie, Celsion's Chief Accounting Officer. It is our pleasure to be with you. I'm going to start today by saying, as I have in the past, this is my ninth conference with you since joining the company some nineteen months ago. As always, the opportunity to meet with you to share our progress and to answer your questions is a responsibility that we look forward to. Remember, your questions are always welcome.

Today again we have a full agenda; Paul Susie will provide comments on our second-quarter results including a detailed review of the P&L and balance sheet, following which we will cover a number of topics including an update on our Phase III liver cancer trial and an update on our Phase I and Phase II recurrent chest wall cancer trials. We will give you a brief overview of our progress with liposomal docetaxel, liposomal carboplatin and our active tumor targeting projects. We will then have some time for questions.

Before doing so, however, I have a few general comments that I would like to make. We've accomplished an enormous amount over the last year and a half. This morning's announcement of the Yakult Honsha's eagerness to partner and to conduct clinical trials for Japanese registration adds another very important milestone to Celsion's business model. And provides de facto support for our technology and our clinical and regulatory strategy. Most importantly, however, it reaffirms the promise of ThermoDox shown in our Phase I studies by a respected science oriented third party.

Moreover, I'd say the development of our relationship with Yakult goes to the heart of the competency of this management team to reposition Celsion as an ontology-focused drug development company and a constructed enterprise with great future potential. I have to say it is my pleasure to work with Celsion's fine and dedicated staff. The intensity over the last six months has been unbelievable. Their willingness to step up remarkable.

To that end I believe it is worth recounting the steps that we've taken in this very short timeframe that have gotten us to this point, which I like to think about as our strategic roadmap. In the first half of last year we worked to stabilize, reposition, focus and fund the company. As you may recall a year ago January Celsion was a mix of a company with a marginal medical device business and a promising oncology aspiration.

If it was difficult for the investment community to understand us, it was even more difficult for management to deliver results. Consequently, we announced our six-point plan to focus, stabilize and fund Celsion as a drug development company, against which we accomplished all of our objectives.

In the second half of last year we built our drug development capability and established our, what we like to think of comparatively low risk regulatory and clinical strategy. We started by recruiting individuals into the company with experience and track records of success in drug development and whose interest in cash and to bring ThermoDox to market are consistent with that of a results-oriented, high-performance team.

We then went on to successfully collaborate with FDA to reach agreement for our clinical trials and regulatory pathways. We have written agreement that our protocols for both primary liver cancer through the SPA process and recurrent chest wall cancer, be an open label, pivotal Phase II trial or design should we reach our endpoints to provide results that would support drug approval.

And in a meeting with FDA a year ago last July, we reviewed our drug specification stability results and manufacturing capability. Following that meeting we received agreement that our ThermoDox CMC brief is consistent with FDA's expectations and represents drug quality sufficient to support proceeding with our registrational trials and our plans to scale our manufacturing processes for commercialization.

Then in the second half, in the first half of this year following SPA agreement we focused on the execution of our Phase III, HCC clinical trial and established our strategy to accelerate our pivotal phase to RCW program. And we will have more to say about both later.

And now in the second half of 2008 with our pending agreement for Japan, the puzzle becomes more complete. Our commercial strategy more tangible. Last May during our conference call we discussed our plans for partnerships and licensing, and we said this and I will paraphrase. First, we decided that our priority should be to seek partnerships in Asia and the Pacific region. The reasons we believe this is most important at this time are threefold. The Far East offers the largest single market for ThermoDox for the treatment of HCC, primary liver cancer.

Two, we concluded that we can gain local approval quickly on the back of our US NDA approval. And three, a commercial partner would be necessary to facilitate the regulatory approval process and commercial launch.

Our second priority is Italy with Europe's largest HCC population; again we would like to enter this market with supporting data from our global study. And in the US should we decide not to bring ThermoDox to market ourselves, we've concluded that the best licensing agreement would be gained with supporting data from our pivotal trials, which of course will take some time. So that is the strategy, and now I would like to talk about Yakult and Japan generally.

Yakult is a $2.8 billion multinational healthcare company publicly traded on the Nikkei, with businesses in nutritionals, cosmetics and pharmaceuticals. Their pharma business is exclusively focused in Japan, of which one of the fastest-growing segments is their oncology franchise. Importantly, Yakult has shown a track record of inlicensing and successful commercialization of US derived oncology drugs, making them a highly desirable partner for Celsion on our side.

On their side Yakult's interest in partnering with Celsion is based on extensive due diligence conducted over a five-month period. They have concluded that ThermoDox's underlying technology, our Phase I results, Celsion's clinical and regulatory approach are consistent with their scientific standards, their medical focus and business objectives. All in all Yakult has demonstrated itself to be professional, ethical, earnest and a very capable company. Their staff has been honest and open. We are delighted to be working with them.

A question you may have is why Japan, why now. Primary liver cancer incidence in Japan is two to three times that of the US with over 40,000 new cases each year, making it a very high-value market. Japan's MHLW, that is Ministry of Health Labor and Welfare, that is their FDA equivalent, requires separate studies that are specific to the Japanese population. Commencing those studies now under the direction of a Japanese partner just makes sense. And last but not least, launching as quickly as possible in Japan is consistent with our objective for rapid global distribution of ThermoDox following approval.

We have a binding term sheet, and binding meaning that we have agreed to financial terms with term sheet with financial arrangements that we believe to be consistent with a win-win relationship. Unfortunately, the terms will not be disclosed. However, I can say that there are upfront and ongoing milestone payments with the largest payment occurring upon MHLW approval.

I can also say that our working partnership adds value in addition to the typical milestone and royalty payments associated with the drug licensing agreement. And they include these. Yakult will fully fund and perform all required clinical and preclinical trials for the Japan territory. Yakult will provide assistance for Celsion's global studies in Asia. And Celsion will be the exclusive manufacturer of ThermoDox and will sell ThermoDox to Yakult. Yakult's license is subject to completion of a definitive agreement, a draft of which is in progress. The reason we are announcing our partnership at this time is to allow Yakult to immediately begin clinical studies for Japanese registration.

So now with that, Paul Susie will give you a detailed overview of our financials.

Thank you, Mike, good morning everyone. I would like to give a summary of our second second-quarter 2008 financial results. Our net loss from continuing operations for the quarter ended June 30, 2008 was $2.4 million, which is a decrease of $2.2 million over the net loss for the same period last year of $4.6 million. On a year-to-date basis our loss from continuing operations was $6.5 million in 2008 compared to $7.9 million in 2007, which is a decrease of $1.4 million.

On a quarterly basis our research and development costs declined by $734,000 with $1.6 million incurred in the second quarter of 2008 compared to $2.3 million in 2007. However, on a year-to-date basis the R&D costs increased nearly $500,000 with $4.6 million in 2008 compared to $4.1 million in 2007. While the quarterly decline can be attributed to the timing of the studies, the year to date increase over the same period last year was driven by the costs associated with the startup of our Phase III primary liver cancer study, as well as the drug development and manufacturing costs.

General and administrative expenses were $600,000 for the second quarter of 2008 which is a decrease of $1.1 million over the second quarter of 2007's amount of $1.7 million. Year-to-date G&A expenses were $1.1 million in 2008 compared to $3 million in 2007, which is a decrease of $1.9 million. The decrease is attributable to a number of factors, including a decrease in accrued contingent liabilities, elimination of certain consultants and outside services, and a decrease in salaries and benefits due to headcount reductions. All of which are a reflection of the Company's intent to operate cleanly and manage cost efficiently.

Now our net interest expense was $73,000 in the second quarter of 2008 compared to $197,000 in the same quarter of 2007. On a year-to-date basis net interest expense was 14,000 compared to $364,000 in 2007, and this decrease is solely attributable to the elimination of a loan that we had to Boston Scientific in the prior year.

So in summary we ended the quarter with $12.6 million in cash and short-term investments, which included the collection of the $15 million that was paid by Boston Scientific. Additionally, we have $15 million in receivables that we do in payable in June of 2009. These amounts provide us with liquidity necessary to further our clinical trials as planned. We will continue to manage our cash resources very diligently, and we will explore every cost saving opportunity available to us all without impacting our clinical trials. So with that I will now hand it back to Mike.

Thank you, Paul. So now I would like to give you an update on our global Phase III liver cancer study. Just a little background. On January 18 we announced that our study was agreed with FDA. We also indicated that we had taken steps to initiate the trial in February. We announced that we would have at least two sites up and running in March and that our objective was to have 25 to 30 sites recruiting by the end of the year.

Now I can report that we have clinical trial agreements or study approval in six of seven countries, in addition to the US and Hong Kong we have CTAs in Italy, Korea, Taiwan and Canada. Our seventh country, China, is on track for November which is about two months later than we had originally anticipated. Consequently site initiation will begin in December and will be completed by about the end of the first quarter of '09.

We continue to believe, however, that we will have between 25 and 30 sites enrolling by the end of the year. We currently have eight sites and expect to initiate five to seven more by month's end. As we indicated in an earlier call, patient recruitment is lagging our initial estimates, but based on one-on-one conversations with our investigators, discussions with our principal investigators, a review of similarly conducted studies and responses to our survey of liver cancer specialists, we now believe that we will complete enrollment by the end of next year.

And just as a comparator, our initial estimates assume that we would have completed enrollment by the end of the second quarter of next year, so there is an expectation that the, based on our latest, most conservative estimates I might say, that the enrollment will take about six months longer than we had originally anticipated. That said, enrollment is a priority focus for the entire clinical and management team and we have taken steps to accelerate patient interest and referrals with a clinical marketing program in the US and with similar discussions for marketing programs with all of our investigators throughout the countries for which we are planning our study.

Now I would like to turn to our RCW program, recurrent chest wall cancer program. The headline here is that we are moving ahead with our pivotal trial. As you recall, Duke reports that it completed its 40 milligram dosing cohort and will proceed to the 50 milligram cohort once they receive agreement from the drug safety monitoring board at which time we will also be advised the results from this cohort.

I will remind you also that Duke reported that of the first eight evaluable patients in the study all showed evidence of criminal activity and two of six patients in the 30 milligram cohort had a complete response. Based on these results and FDA's written support for our pivotal Phase II study, we have decided to move forward to initiate the pivotal trial with the following modification.

The first three to six patients will be enrolled at 40 milligrams. Following the 40 milligram dosing we will determine whether the trial will does escalate to 50 milligrams for completion or will be continued and completed at 40 milligrams. We are hopeful to have the first patient on study by year end.

Now on to product development, and again I want to remind you that our immediate objective and our only near-term objective is to develop new products through feasibility with the intent of demonstrating the platform capability of our heat sensitive liposomal technology. Let me start with liposomal docetaxel.

Some of this we have talked about in the past, but just to make sure everybody is familiar with it I will repeat some of the key milestones that we've achieved. We've established a stable formulation, completed two small animal studies, both demonstrating statistically significant tumor inhibition effect when compared to both [free] liposomal docetaxel in a non-heat sensitive liposomal formulation. We have completed our technology transfer from the research facility to our labs and are preparing to scale the formulation to support additional preclinical studies.

The results were reported at the liposome days conference last June in Tokyo by our own [Dr. Huawei Pengu]. The abstract and poster, by the way, are posted on our website if you are interested. We expect to have our first batch of product that is like liposomal docetaxel, heat sensitive liposomal docetaxel manufactured in the cGMP facility in September. The product from that manufacturer will be used in further preclinical studies.

For liposomal carboplatin we have completed our process optimization program and have replicated the results. We've shown temperature related release characteristics similar to that of ThermoDox and small animal tumor inhibition studies are being scheduled.

Our active tumor targeting program is next. If you recall active tumor targeting uses a peptide that has an affinity for EGF receptors. It is now undergoing a series of definitive titrating experience, the outcome of which will help to determine whether or not we will invest in continued development. Just as a reminder, our early in vitro targeting studies have been quite positive using the human cancer cell line. Experiment results are suggesting that the ligand in fact is attracted to the EGF receptors in higher concentrations than ThermoDox without the ligand.

A second in vivo experiment, however, did not show tumor inhibition advantage over this higher concentration at comparable doses. The next set of experiments are planned to determine if lower concentrations of the ligand associated liposome produce results equivalent to the higher doses of the non-peptide ThermoDox. So we'll keep you posted on developments with that compound.

I have a last few points before we go on to questions. First regarding HIFU. We and the device manufacturer continue to be very interested in a joint research agreement to evaluate ThermoDox in combination with HIFU as an effective noninvasive treatment for certain cancers. The concept suggests a promising treatment approach should we be successful. It is unfortunate that because of IP ownership discussions this simple collaboration has taken so long to memorialize, but I believe and at this point I am continue to be confident that we will get there.

So in closing and before questions just a couple more comments. I would like to say your Company is sound. We are executing against our plans. Our management has done an excellent job of delivering not only against its promises, but also against milestones as it reduced our development risk, substantially funded our ThermoDox clinical program and provided a clear regulatory pathway. We have stabilized and focused your Company, mitigated operational risks and built a strong clinical capability.

Last June we received the second payment from Boston Scientific of $15 million for the sale of Prolieve. We fully expect to receive the third and final payment of $15 million next June. As such, and based on our most recent enrollment projections we continue to believe that we have funds sufficient to bring ThermoDox through a pivotal trial to a point where depending upon the results, we will have sufficient data for an NDA filing. And to ensure that we have a quality CMC brief and manufacturing capability.

Our fundamentals are solid. We continue to work hard to deliver and to build shareholder confidence and value, as the proper valuation of our company is my primary responsibility and one that I take very seriously. So with that we will now move on to questions and in the interest of time, I would like to ask that you limit them to no more than two questions each. So operator, would you open the line for questions?

(Operator Instructions) [Mark Murel], Griffin Securities.

Thank you for taking my call and congratulations on the Yakult announcement.

Thank you so much. We are excited.

Would you be so kind as to review the rationale behind the company's recent purchase of Boston Scientific stock, both fundamentally and strategically?

Sure. That is a good question. Last year, fourth quarter, we announced the repurchase of approximately 650,000 shares. At that time we thought the purchase price that we negotiated with Boston Scientific was a value, and so we purchased those shares at the price that we believed to be just a bargain for the Company. More importantly, however, one of the reasons we began looking to purchase the Boston shares was the fact that they had announced that the 800 shares that they held, that they would be looking to find a buyer. So it created a considerable overhang in our discussions with investors who had an interest in Celsion stock.

Furthermore, Boston's ownership of those shares entitled them to a first right or an option for the -- on all of our assets in an arrangement where they would have the first option to purchase any of our assets or to compete with any licensing deals. And we thought that that was a huge issue in our attempts to attract potential distribution partners. So a third reason behind the repurchase of the shares was to eliminate Boston's first right to or first right to any deals that we were planning with any licensing partners. And I think the strategy, frankly, paid off. I can't say that we wouldn't, but to our discussions with Yakult would have been quite a more bit more complex if Boston Scientific would have had a first right to a licensing deal for the territory of Japan.

Sounds great. Thank you very much.

Keith Markey, Griffin Securities.

So we have the Griffins all signed right up. Good morning, Keith.

Congratulations. I was wondering if you might tell us a little bit more about the Yakult deal in terms of when they might be getting started, and how long their clinical trial program might take.

Yes, we are not going to be able to give you definitive answers on how long it will take, but their intention is to get started immediately. One of the reasons why we announced the deal at this point was to allow Yakult to go public. They have to speak with the regulatory agencies regarding their proposal for a clinical program. And I expect that they will be doing that immediately. The outcome of their discussions, one of the outcomes of their discussions will be to establish the requirements for registering the -- registering ThermoDox in Japan.

We anticipate that there will be some modest preclinical studies and it will be required to confirm our preclinical work. We also anticipate there will be some bridging studies largely focused on pharmacokinetics that will compare to our Phase I studies. And maybe I'm getting ahead of myself, but there most likely will be some confirmation requirement of our efficacy studies, our Phase III studies before a registrational application can be made to MHLW. The timing on all of that I think will be a function of the outcome of the Yakult discussions with the agency.

That's very helpful. Thank you. And then I was wondering if you could go through the list of countries where the (inaudible) cellular carcinoma trial is currently ongoing. I couldn't quite get them all.

Of course the United States, Hong Kong, Taiwan, Korea, China, Canada and Italy. And now Japan with the agreement that we have with Yakult.

Terrific. Thank you very much.

You're more than welcome.

[Vincent Dempsey], Celsion.

Could you give me some further clarification on the situation with HIFU? Because at one time it seemed like a partnership was a definite in a certain timeframe and now I'm not quite sure what you are indicating.

I guess what I am -- well, I think it was maybe three quarters ago I made a comment during a conference call that we were pursuing a joint research agreement with what I called a blue chip medical device manufacturer who has a very large investment in HIFU technology. At that time based on our discussions we anticipated putting together a joint research agreement that would not be very difficult to execute. Over the course of the last eight or nine months we've come to full agreement on the focus and the purpose of the study and the requirements for joint collaboration. We continue to discuss, however, some of the issues related to IP ownership. I anticipate that we will have those resolved but I can't give you a definite timeframe when. And we just look forward to partnering with the company to broaden our bench strength and our reach for the application of ThermoDox to treat a variety of certain cancers.

Excuse my ignorance, but what is IP, what terminology did you use?

Intellectual property.

Okay, and that is basically what -- it involves residuals and payments and so on?

It involves patents, know-how, new discoveries, innovations.

And so this is an ongoing discussion at this point?

There is, and we are having very earnest discussions in good faith. And I suspect -- I can't at this point give you a date but I suspect that we will have a research agreement that we can stand behind before too long.

Thanks a lot.

(Operator Instructions) Ruthanne Roussel, Catalyst Financial.

Good morning. That is excellent news about the Yakult partnership.

Thank you, Ruthanne.

Mike, would you mind just going down for me what are the next two or three milestones that we might expect to see Celsion reach? What should we be looking out for in the months to come?

Well, as we talk about the initiation of our pivotal Phase II trial for recurrent chest wall cancer. It is an important next milestone. As I just answered a question relative to a collaboration agreement with a major medical device manufacturer for focused on HIFU in combination with ThermoDox.

Should we be looking for those in that order, or could they come in any order?

The timing, as I mentioned in my comments for initiating the pivotal Phase II study for RCW would be towards the end of the year. I hope that answers your question.

So we might not see the collaboration on the HIFU coming until after the end of this year?

No, I think what I said is the timing we are targeting for the pivotal RCW study is before the end of the year. It will take some time to recruit, recruit sites, complete the IRB review process, conclude discussions and get agreement on the contracts for the investigational sites. So by the end of the year for the RCW Phase II program. The agreement on HIFU development could occur any time.

Okay, thank you. That is clear. I will get back in the queue.

At this time there are no further questions.

Okay. Well, thank you very much. And on behalf of the Celsion team to all of you who have dialed in and to all of our investors, we continue to thank you very much for your support, and we look forward to speaking with you at the next conference call. Thank you.

This concludes today's conference. You may now disconnect.