Imunon Inc (IMNN) 2012 Q2 法說會逐字稿

Good morning. My name is Nancy. I will be your conference operator today. Today's conference is being recorded. At this time I would like to welcome everyone to the Celsion Corporation's second quarter 2012 shareholder 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 Mr. Jeffrey Church, Celsion's Senior Vice President. Please proceed.

Good morning everyone, and thank you for joining us. Our second quarter 2012 financial results were released this morning before the market opened and are available on the SEC's EDGAR system and on the Company's website at www.celsion.com. Today's call will be archived and replayed beginning today at 2.00 PM Eastern and will remain available until Tuesday, August 28, 2012. The replay can be accessed at 1-877-870-5176 in North America or 1-858-384-5517 internationally using conference ID8709649. An audio replay of the call will also be available on the company's website for 30 days.

Before we begin the call, we wish to inform participants that forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. You are cautioned such forward-looking statements involve risks and uncertainties including without limitation the risk of clinical failures, delays, or increased costs, unforeseen changes in the cost of our research and development activities and clinical trials by others, possible acquisition of other technologies assets or businesses and possible adverse action 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.

We are joined today by Michael Tardugno, president and CEO of Celsion; Dr. Nick Borys, our chief medical officer; and Greg Weaver, our chief financial officer. On today's call, Mike will provide a corporate update, including an outline of the important milestones ahead in our Phase III HEAT study for ThermoDox in primary liver cancer. Greg will discuss our second quarter 2012 financial results. Following that, Dr. Borys will discuss in further detail our overall ThermoDox clinical development program. We will now open the call for-- after-- then we'll open the call for questions which we ask that you keep no more than two. With that I would like to turn the call over to Mike.

Thanks, Jeff. Good morning, and thank you for joining us. I know of no better way to open this call than with the comment I made at the annual shareholder meeting this last June. And that is this. This is a great time for Celsion and, I dare say, to be a Celsion shareholder. I am pleased to report that your Company has never been so well positioned. For those on the call who are shareholders, I would like to express our thanks for your support and continued confidence in your Company's strategic clinical focus and innovative heat-sensitive liposome technology. The HEAT study, our Phase III 3 pivotal trial combining the first drug in our tumor-targeting platform, ThermoDox, with RFA to treat hepatocellular carcinoma or HCC is fully enrolled. We are now looking forward to data by our best estimates in the fourth quarter of this year from the largest pivotal trial ever conducted in the intermediate stages, the largest unmet need in oncology. And we have the financial resources sufficient to see us through data and well beyond, which means, to be clear, we have no current plans for equity financing prior to data and Greg will discuss this in more detail during his comments.

If we are right about the outcome of the HEAT study, have every reason to believe that we will be bringing to market one of the most important new drugs in a generation. That's ThermoDox. You don't have to take our word for it. Look at the support we've had from multiple regulatory agencies around the world and in particular from the FDA. We've negotiated an SPA, we have Fast Track, we have Orphan Designation. We've an agreement to file using 505(b)(2) approach and we are a candidate for priority review as a function of the strength of our data. The reason for this, well, it's clear. HCC is an enormous unmet medical need. Let's go through the facts, because I think you will agree with me they are sobering.

ThermoDox's principal indication is HCC, the world's fifth largest cancer and a disease of significant concern within the global oncology community and public health agencies. Incidence is approximately 28,000 in the United States. It's tripled in incidence over a 30-year period from 1977 to 2007. There are 40,000 incidents in Europe. And it is growing rapidly at 5% worldwide from a base of 750,000 new cases annually. Over 50% of these new cases will be in China, emphasizing the importance of this market for us and our rationale for a high concentration of investigator sites in that country. The World Health Organization predicts that HCC will become the number one cancer worldwide by 2020, surpassing lung cancer. For countries in the west and Japan during the ten-year period ending 2019, incidence is expected to increase by 20% in prevalence by 47%. It's also clear that the evidence for a successful HEAT trial is on our side.

We know doxorubicin, the anticancer agent in ThermoDox, is active in liver cancer. Our drug system technology is designed to improve its efficacy in the presence of heat. We know that combining ThermoDox with RFA has shown remarkable potential in early phase studies to delay disease progression. We know that delayed progression or PFS, progression-free survival, is both sensitive and specific as a surrogate for overall survival. In our target population, mediate time to progression is 12 months, with median time to death 30 months. Outcome statistics in this population have remained constant since we began our research into HCC over six years ago. There are few nonsurgical therapeutic treatment options available as radiation therapy and chemotherapy including Nexavar are largely palliative in the treatment of these patients.

For those of you who are following HCC developments closely, you know that Nexavar and ThermoDox have both been cited by the NIH for priority trial status, with ThermoDox in the HEAT study being the only one evaluated as a first-line therapy. What this means is clear. For us to assume positive outcomes for both drugs, ThermoDox plus high radio frequency ablation will always precede and be complimentary to, not competitive with, Nexavar. So we're convinced, as are more importantly the [KOLs] interviewed in our early market research, that with positive data the HEAT study will provide a basis for perhaps the most important new therapeutic introduction in oncology in the largest unmet medical need in cancer today.

So what represents positive data? Total 380 events of progression will fully power the study to show a 33% improvement in PFS. I wish we could be more precise with our projections, but we continue to project that these events will occur late in 2012, after which data will be reviewed by the study's independent data monitoring committee and results will then be made public. I would like to make a few more comments about the HEAT study. We continue to work diligently to assure no surprises with clinical data. Through our clinical quality dashboard we track and evaluate timeliness, currentness, radiologic concordance and certain trends in the clinical data set which routinely are scoured by our data management team.

This information is reviewed and discussed at each and every DMC meeting. The most recent of these meetings, which took place at the beginning of the second quarter, included a review of data from 652 patients and concluded with a unanimous recommendation that the study continue according to protocol. The next DMC meeting, as we have indicated, is scheduled for mid September whereby the committee will review all safety data from 701 patients enrolled in the HEAT study and evaluate our clinical quality dashboard. In addition, we'll get an update from our independent radiology review committee, the IRRC, on the number of confirmed events, which will allow us to better plan for the database lock to evaluate the primary end point. If as a result there is any material change to our time-line estimate for 380 PS events we will advise in a press release that follows the DMC recommendations.

We have instituted a re-monitoring program -- quality, quality, quality -- for a high number of high-volume sites which addresses almost 80% of the patients enrolled in Asia Pacific, the goal of which is to check and double check the data supporting proper study conduct. We have also implemented a comprehensive clinical quality audit program as a check on our CRO and their work product. The goal here, as I said, no surprises. We continue to conduct early market research, market landscape analysis and price ranging studies. Our research is with physicians, key opinion leaders and payors. The goal is to better understand the patient journey, ThermoDox positioning and its value in the treatment of HCC. Definitive pricing and pharmacoeconomics in our research where needed will be conducted following the availability of data, because as you know price and economics are greatly influenced by clinical benefit.

Now that said at this point based on our early research we are reasonably convinced that in the US ThermoDox will be reimbursed as a pharmacy benefit. That's ASP plus six and initially price reimbursed under a J code. On the manufacturing front we are establishing multiple manufacturing partners in the US. This is an important requirement to assure supply continuity and a requirement by most pharma companies interested in a commercial license. In China to assure a reliable quality supply chain with a cost of goods that can support high gross margins, we announced a commercial supply agreement with Hisun Pharmaceuticals, a highly respected Chinese company for the production of ThermoDox for the domestic China market. And Jeff will have more to say about this in a minute. Consistent with our global regulatory strategy the HEAT study is designated -- designed-- I'm sorry, designed to address as many markets as possible with a single study.

We continue to work closely with regulators in multiple countries including the US, Europe and countries in Asia Pacific to ensure that the HEAT study meets each region's standards for regulatory review and approval. And a last point here. We have started the NDA process with a selection of a CRO with FDA portal access, publishing expertise and using a common technical document approach as a basis for NDA filing and MAA filings. As we announced at the end of last year, we have EMA scientific advice confirming that the HEAT study will provide data acceptable as a basis for submission of an MAA for centralized filing and full approval in Europe. As we noted at the time, the European approval provides the basis for international filings in countries where reference approval, typically that's a CPP, a Certificate of Pharmaceutical Product, from a globally recognized regulatory agency which, with FDA approval, provides us with more than one option for international filings. Using the CTD, we would expect to file in the US and in Europe on about the same time line.

Nick will speak more on this, but I would like to report progress on our program to evaluate ThermoDox in multiple indications. The ABLATE study, a randomized Phase II study of ThermoDox in combination with radio frequency ablation for the treatment of colorectal mes to the liver is underway. The DIGNITY study, a difficult trial to enroll as you know. The one that we refuse to give up on. This is a very needy population and deserves our support. The Phase II portion of the DIGNITY study will begin enrolling patients later this year. An abstract for the Phase I results has been accepted for presentation at the prestigious 2012 Congress of the European Society of Medical Oncology in Vienna this coming September. Professor Hope Rugo from the University of California San Francisco School of Medicine will present our results.

I'd say, and I want-- not overstating this, we are consumed with the potential to build the next generation approach to treating difficult solid tumors without the need for a scalpel. Combining ThermoDox with high intensity focus ultrasound changes that paradigm. Our initiatives in collaborations with some of the top institution in medicine include support for preclinical studies at the University of Washington School of Medicine where we are exploring the use of ThermoDox in combination with MR-guided HIFU for the treatment of pancreatic cancer. We are collaborating with the University of Oxford in England to begin a clinical study of ThermoDox in combination with ultrasound-guided HIFU to treat metastatic liver cancer. We expect treatment of the first patient in this study in late 2012.

Finally, as we announced last week, plans to launch a Phase II study supported by a joint development program between Celsion and our partner Philips Electronics that combines ThermoDox with Sonalleve MRI-Guided HIFU technology for the palliation of painful bone metastases caused by lung, prostate or breast cancers is expected to begin enrolling patients in the relative near term. Supporting all of this is a strong financial position, which Greg will discuss in a minute that includes a new and creative $10 million loan facility. But before I turn it over to Greg, I would like to ask Jeff, who we've asked to evaluate the dynamics of the rapidly changing China market to comment on the importance of Hisun and the China Market. Jeff?

Thank you, Mike. The commercial role of ThermoDox will of course require global manufacturing and distribution, capabilities we have begun to provide for. As Mike mentioned earlier, we announced this past quarter a long-term commercial supply agreement with Hisun Pharmaceutical Company, one of the largest manufacturers and suppliers of chemotherapy agents globally. Hisun is the leading manufacturer for multinational pharmaceutical companies like Pfizer, with whom they signed $300 million joint venture this year. China and the rest of the Asia Pacific are key markets for ThermoDox, as they represent over half of the global incidence and prevalence for HCC. The Chinese market is unique in the world. We simply can't look at this emerging market through the same prism that one would evaluate other markets. We believe that a local partner such as Hisun is critical not only for success on the manufacturing and regulatory fronts but in realizing the commercial potential with ThermoDox in a rapidly evolving market like China.

This is an aspect of ThermoDox's commercial development we are paying close attention to. As we come closer to concluding the HEAT study, these consideration will move front and center. As a late stage product candidate with global multi-indication potential, unencumbered worldwide rights and a growing presence within the oncology community, ThermoDox has and will continue to attract a great deal of partnership interest. By maintaining a strong cash position through careful cash management and by advancing ThermoDox to this late stage without significantly diluting our rights to the product, Celsion is in a position to create significant value from our lead program once data is available. And now Greg will provide an overview of our second quarter financial results. Greg?

Thank you, Jeff. The company completed the second quarter with cash and investments totaling $24 million as compared to $24.6 million at the end of the first quarter. Our end of the Q2 cash reflects the addition of $4.9 million in proceeds from our new term loan executed in June. Important point here is that we have cash on hand to fund operations including scheduled interest and principle amortization into the fourth quarter of next year. That's $24 million to run our business for an excess of five quarters, with operating expenses on a declining trend over that period. This management team continues to focus on cost controls and make our cash work as hard as possible and the virtually non-dilutive loan proceeds provided additional strength to the balance sheet as we approach year end and critically important milestone of unblinding the HCC trial.

The total use of cash in Q2 is $5.45 million as compared to $5.95 million in Q1, a reduction of $500,000. The reduction in cash usage was driven by the HEAT trial CRO costs globally trending down as we completed enrollment and had moved into the next phase of the study approaching end of trial results. All consistent with guidance provided on our previous quarterly call. We reduced our second quarter loss from operations by $600,000 to $5.7 million as compared to $6.3 million in Q1, again consistent with the prior guidance. R&D expense in Q2 of $4.1 million reflect a decrease of $800,000 from the same three months last year and down $600,000 from Q1 of this year. Again R&D costs trending down for clinical activities from the HEAT study, which is partially offset by some increases in development of commercial manufacturing activities for ThermoDox.

G&A expenses of $1.6 million in Q2 reflect an increase of $300,000 from the same quarter last year and were flat with Q1 of this year. The year over year comparative increase reflects spending to support pre-commercialization activities and other professional fees. The 10-Q filed this morning includes disclosure of our manufacturing agreement with our partner in China, Hisun Pharmaceuticals. Hisun is responsible for the initial costs associated with the transfer of the manufacturing technology for the sale of ThermoDox in China and accepting both technical and approval risks. We will repay Hisun for these activities, along with a fee on a cost plus basis upon Hisun's successful completion of planned registration batches of ThermoDox. We are pleased with the financial terms of the agreement and, beyond that, this deal is strategically important to provide international manufacturing capability from one of the best in the business in Hisun needed to support commercial success in the largest markets in Asia and at a very attractive cost of goods sold.

Lastly, regarding the registration statements we filed after market yesterday, first the S3 shelf registration statement similar to the one we had in place in prior years. This one registered $75 million for future financings and should provide flexibility and lower the cost of capital for future financing transactions. It made sense to get this filed now and clear any potential SEC review prior to reaching the upcoming unblinding of the HEAT trial clinical data. And to be clear, we have no plans for issuing new equity prior to data. We also filed an S8 registration statement to register the underlying shares for stock options that were previously approved by shareholders over the past two years, which are a part of our employee incentive plan. And that concludes my financial comments. Thanks for your attention. I will turn the call to Nick.

Thank you, Greg. I would like to start by providing an update on our continued progress with the HEAT study. For primary liver cancer there exists poorly defined treatment options between early stage disease eligible for surgical resection and later stage disease subject only to palliative treatment. RFA, a treatment with curative intent, is the predominant choice for non-resectable liver cancers, with average local recurrence rate of around 50% in our patient population. Its efficacy however is limited by tumor size, showing significantly less effect in tumors greater than 3 centimeters in size. By combining RFA with ThermoDox, the margin surrounding the tumor is heavily treated with doxorubicin, an effect which our data strongly indicate may extend the cure rate of RFA to larger, more locally advanced tumors. Having a direct understanding of ThermoDox's effect in larger tumors is therefore a critical component of the ThermoDox clinical value proposition.

The team here at Celsion is working diligently to prepare for regulatory submission. Supporting our regulatory goals are a number of key designations, including special protocol assessment, a 505(b)(2) agreement with the FDA as well as Fast Track and Orphan Drug status. After our NDA submission is accepted, we expect a priority review in line with FDA's current PDUFA performance goals. We have confirmation from the EMA that the HEAT study provides the basis for a centralized European filing application MAA. We will be afforded many of the same priority review benefits through what EMA calls a full mixed review registration process. Though primary liver cancer is a priority for Celsion, ThermoDox's unique properties supports its potential well beyond this indication. As Mike mentioned, we have announced several important new collaborations recently that underscore not just our belief in this potential but support for it within academia and industry.

First, we announced recently FDA clearance to advance a joint development program for ThermoDox combined with Royal Philips Electronics Sonalleve MR HIFU technology in the palliation of painful metastases to the bone. We expect to initiate a Phase II study in this indication within the next six months. There are between 300,000 to 500,000 patients in the US with bone metastases. Many of these patients experience excruciating and unrelenting pain and are often treated with powerful analgesics such as opiates resulting in only modest benefit. External beam radiation therapy is effective in palliating painful bone metastases but is limited by accumulating toxic effects to healthy organs. Philips Sonalleve MR HIFU system has the potential to precisely and noninvasively target lesions with acoustic energy, creating sufficient heat to activate ThermoDox and preferentially release high concentrations of doxorubicin in the targeted treatment area. This multi-modality approach may have the effect of creating a next-generation noninvasive treatment for this condition. It may also have other treatment potential.

We also announced our collaboration with the University of Oxford in the UK to begin a clinical study of ThermoDox plus HIFU in the treatment of metastatic liver cancer. This trial, which is supported by the National Institute for Health Research Oxford Biomedical Research Center, will be carried out as a multidisciplinary collaboration between Celsion, the Oxford University Institute of Biomedical Engineering and the Oxford University Hospital NHS Trust. This early phase clinical study is being finalized and will require approval from the local ethics committee. Treatment of the first patient is targeted for late 2012. The details of this study will be made public following approvals from the university.

Lastly, Celsion and the Focus Ultrasound Foundation announced their support for preclinical studies designed to explore the use of ThermoDox in combination with MR-Guided HIFU for the treatment of pancreatic cancer. The studies are being conducted at the University of Washington School of Medicine by Professor Joo Ha Hwang. The UW research is expected to include animal models to confirm the ability of HIFU to target high concentrations of doxorubicin in proprietary pancreatic cancer cell lines at an in vivo studies to assess the response to these tumors treated using ThermoDox with and without HIFU-induced hyperthermia. We believe that these collaborations are just the beginning for combining important device technologies such as HIFU with important drug technology such as ThermoDox. I look forward to reporting on the progress of these collaborations in the months to come.

We continue to expand the number of institutions for our ABLATE study, a multicenter randomized Phase II study that is expected to enroll up to 88 patients with colorectal cancer metastasized to the liver. Patients will be randomized to receive either RFA plus ThermoDox or RFA alone for the treatment of their liver tumors. The primary end point of this study is local tumor control at one year following treatment. This study as you know is enrolling patients but at a deliberate slow pace. The rationale is that we will accelerate patient recruitment following positive data from the HEAT study. The treatment of colorectal cancer remains an area of significant unmet medical need in the field of oncology. The American Cancer Society estimates more than 140,000 people will be diagnosed with colorectal cancer and more than 50,000 are expected to die of the disease in the US alone. Up to 25% of patients with colorectal patients present with liver metastases and another 50% develop liver metastases within five years. RFA is both efficacious and a widely accepted local treatment modality for this disease. However, it too has limitations. As in our work with HCC, we believe we can improve RFA's efficacy in colorectal liver metastases by combining it with ThermoDox.

In recurrent chest wall breast cancer, we continue to move forward with our Phase II study, the DIGNITY study. The DIGNITY study builds upon promising data from Phase I. The Phase II study has been limited to 40 patients with this form of breast cancer and will enroll patients who have received but failed prior treatment. As you can see, the ThermoDox research program is diverse, has depth, and is international in scope. We have taken advantage of the latest in medical thermal technology and expect to make it better towards a cure for cancer that is less invasive and more durable. We look forward to advancing our internal programs and our collaborations as ThermoDox reaches maturity in the HEAT study. With that I, will turn the call back over to Mike.

As always Nick great, update. Thank you. Jeff and Greg, good reports. As I hope we made clear to you, we are preparing for what will be the most-- and one of the most important if not the most important event in our company's history. It is a validation of our technology platform and our lead therapeutic ThermoDox with results from the single largest study ever conducted in intermediate HCC. The outcome of the HEAT study will set into motion a transformative process at Celsion, one that will take us from a development stage organization to an integrated commercial biopharmaceutical company with perhaps the single most important new cancer treatment introduced to the global oncology market in a generation. It is indeed a breathtaking time for Celsion and we are proud to be a part of it and we are delighted that many of you are with us.

As always, we greatly appreciate your interest in the Company and we look forward to updating you on our continued progress. Now, operator, we will go to questions which I would like to ask the audience to limit to one with a follow up to give everybody a chance to have their questions answered. So, operator, please open the line for questions.

Thank you, sir.

(Operator Instructions)

Joe Pantginis with Roth Capital Partners.

First a question on HEAT and then question on HIFU. First I just wanted to see what are your plans right now with regard to data release? I know you talked about potential timing and the lag between the timing of events and the IDMC review. But what are you planning to actually release when you say top-line results?

So we're taking a little bit of time to think about the answer to that question, Joe. We know for sure we'll be releasing information relative to the primary end point of PFS. There may be an opportunity to discuss the trends in an overall survival benefit. But what we intend to do is to make it very clear to the investment community that the trial has been successful in achieving its efficacy end points.

Beyond that, as you know, many important conferences and publications require that submissions include information that has not been disclosed publicly. So there will be an enormous amount of information coming out of this trial, much of which will be reserved for presentation at major conferences or included, reserved for the publication of the final trial data which we hope will be in a major medical journal.

Thank you for the updates regarding the HIFU studies as well. I was just wondering if you could provide a little additional color on the overall rationale to go beyond RFA about combining ThermoDox with HIFU and any potential supporting data.

I am going to start the conversation, and am I going to ask Dr. Borys to jump in. Since I've joined the company, we've seen HIFU as an enabling technology or heating technology for the use of ThermoDox in areas of disease where there currently is no FDA approved device to heat, ablate or treat the lesion.

So HIFU brings this very unique technology to noninvasively using acoustic energy to heat a large mass of tissue, either to temperatures above ablation or to dial back or defocus to heat the tissue mass in question to the temperature above the transition temperature of ThermoDox. Now, for us in thinking about the combination of our drug system technology with this noninvasive heating technology, the doors to changing the paradigm in cancer open wide.

Now, we think Dr. LaBounty, in an interview that he gave to another analyst, suggested that this is really, if you look at Star Trek, this is a Star Trek approach to treating serious disease. Think about it this way. An MRI-guided HIFU device locating a solid tumor preceded with a dose of ThermoDox, noninvasively warming the tissue, releasing a high concentration to therapeutically kill the tumor and the patient following treatment gets up off of the gurney and walks to his car.

That's the vision that we have for the application of these two technologies. It opens ThermoDox up to a broad range of solid tumor indications. So that's the vision. Nick, would you add anything to that?

No, Mike, I think you've said it all basically in your statements. And again the interest to us is that this is totally noninvasive heat therapy. And the great part about being at Celsion is that these great centers that are developing HIFU technology are coming to us looking for ways to improve on that technology, and we believe ThermoDox is that answer.

I would just add one more thing. We've talked about three trials, one free clinical, two clinical trials, two of which are sponsored and collaborate -- we are supporting in collaboration with other sponsors, one of which we have a partnering agreement with one of the largest names in medical devices, electronic medical devices, Philips.

There will be more coming. There is more interest. We are looking for the right applications. We won't dilute our efforts or our resources, but we will be talking about more. In some areas of cancer for which there are very few options, Joe, this is exciting. It's an extraordinary opportunity for our small company to make an enormous difference in how cancer patients are treated.

Mike King with Rodman & Renshaw.

I just wanted to ask two questions regarding HEAT. First, is the September -- it's a September interim look, it also includes a futility look? Then I have a follow up for that.

Nick, you want to get that?

Yes, in terms of futility, the way I approach that question is if there are safety problems. And that would be the way that the DMC looks at this issue. If there are significant ones, they'll bring that to our attention. And as we previously stated, we don't anticipate any problems thus far the safety and the overall safety in the program has been as expected. So we don't expect any surprises there. But that's what it will be based around in terms of a futility analysis.

Thanks for that clarification. Then I wonder if you could also perhaps help us think about the-- at the time that you've got a medium PFS, how mature will your OS survival data be? Do you have any way for us to understand that? Because I know that for full approval you'll have to hit that secondary end point.

I'm going to start to answer this question again, Mike, is so OS is an important confirmational end point as you point out. OS is included as a secondary end point, and it's a part of the trial design. The trial is properly powered to show an overall survival benefit. So we certainly have a visibility to the number of patients who have died in the trial.

It appears to us that the death rate is consistent with what I had talked about earlier, adjusted for what could be the -- our expectation for an improvement in the therapeutic arm, but it appears to be our assumptions for survival or survival benefit are reasonably consistent with the way the study was designed.

Now, that said is, we will know more with regards to how mature this OS data will be following our DMC meeting. We may or may not choose to answer your question specifically as a result of our conversation with the DMC at that time. I think that captures it. Nick?

I don't think I could add more to what Mike said. I think we have to wait a little bit longer to make more specific comments on overall survival.

Keith Markey with Griffin Securities.

I was wondering can you tell us where you expect to see the fastest acceptance of ThermoDox in the Asian market? Would it be Korea, Taiwan, Singapore or possibly China at the end of all of that or in a different order?

I think what we have to rely on is enrollment rates, investigator enthusiasm and our understanding of the regulatory process. Our point of view on both Korea and Taiwan is that we believe that we certainly have enrolled enough patients to support registration without the need for bridging studies. We have some reason to believe that in Taiwan a filing -- given that, the filing directly without need for CPP may be acceptable to the Taiwanese FDA.

We haven't assured ourselves with confidence that the same opportunity exists in Korea. If we could take the regulatory process out of it, what we have seen in both of those countries without question has been enormous enthusiasm for the trial. We have among our investigators some of the most important names if not in the world certainly in those countries. We believe their interest, their leadership, their enthusiasm for the trial would be a significant driver for adoption of ThermoDox as an adjunct to radiofrequency ablation.

Now in China, China is just a very interesting market. From a clinical trial point of view, we have 17 -- I believe 19 sites there now. Again, some of the most important things in liver cancer in the entire country. The physician who is our lead principal investigator for the Chinese contingent has written the definitive academic text on radiofrequency ablation and has told us multiple times is that she will be amending that academic work with the results of the ThermoDox trial as soon as the data is available.

She has been an enormous supporter. She provides education broadly in many conferences to the interventional radiology and surgical community treating patients with this disease. That said, the challenge in China is always establishing pricing. Pricing is established at multiple levels. We can go into that if you would like separately.

But assuming we get through the timing and pricing hurdles in the approval process, which by our best estimate certainly could be 12 months and maybe more, we would see the adoption of ThermoDox plus radiofrequency ablation I think spear headed for the most part by the influence of our-- again of our principal investigators.

You anticipated my next question, which was about pricing. Can you give us a sense as to how even between different geographies you might think the pricing could be?

That's an interesting question. We certainly look at other branded products who are marketed in countries throughout the world including Asia Pacific, Europe, and the US. It's interesting that when we look at the discount given to the US government on its purchase of branded drugs for Medicare, the discounts are not significantly different than those in Europe by the way. I think we could find chapter and verse where that's true.

In the Asian community, the premium market obviously is Japan. The dynamic in Asia Pacific is reference pricing. So we do have a-- I think a reasonably good feel for what the pricing, in some cases discount and in some cases not, might look relative to US pricing.

The goal here would be to establish a launch strategy that maximizes our pricing potential, without being predatory, maximizing our pricing potential in the region because there is a natural tendency as a function of government regulation for prices to decrease as a matter of law over time. I think we can be more definitive with you with regards to the pricing once we have some more quantitative data and more I'd say direct conversation with pricing authorities in regions outside the US and Europe.

Mara Goldstein with Cantor Fitzgerald.

I have a question on the HEAT study and just so that Greg doesn't feel neglected I'd like to ask a question to him as well. My question is on the HEAT study. Can you remind me of the stratification of the trial and then how will progression be measured and adjudicated?

The stratification for the study is based on lesion sizes first off. So lesions between the size of 3 to 5 will be in one strata. And then lesions greater than 5 to 7 will be in the second strata. The study will also be stratified by what type of device was used as an RFA device. There are three FDA-approved devices at the moment. We will also be looking at those separate strata.

Your second question with regard as to how PFS is being measured. We follow the standard design that was recommended by a paper that was published right around the time that we designed the study, which is a modified rhesus criteria where we use CT scans using a triphasic approach to measure and evaluate liver tumors within the liver and extra-hepatic as well. We image the patients for the first year every two months and after month nine, then we image the patients every three months for progression. That's done at an independent core laboratory.

What happens if a patient progresses prior to a scheduled scan?

Then the progression is counted from the last date when the scan was clear.

Then the scans are -- how are they -- obviously the patient's physician is seeing the scan. And then is somebody else? Is there a blinded participant looking at that scan and confirming that so that there is concordance, or is it just obvious enough that it doesn't need to be -- doesn't need to occur?

The official arbiter of progression of the data is our independent core lab. We look at the data from the independent core lab and work very closely with the investigators in order to maintain a very high concordance rate.

If I could just follow up with Greg on the Hisun agreement. I thought I heard you speak to reimbursement to Hisun for supply material. I'm just wondering how that comes into the P&L?

We have footnoted some of that detail in the 10-Q that we filed. But essentially the cost of the tech transfer, the batches that are being processed by Hisun over the next year are being fully funded by Hisun. We'll book a payable -- on our books a payable to Hisun as those activities occur. But we won't be paying any cash to Hisun until a few years from now. We actually -- the agreement allows for a four-year window. So there is plenty of opportunity here for us to have Hisun take the lead on funding of these things. We will be booking on to the balance sheet to payable.

In the unlikely event that you don't achieve commercialization, do you -- are you then required to close out that payable or does it go away?

I think that's a good question. I think the payable is intended to be reimbursed, but the-- again Hisun is taking the technical risk here, the inventory risk and funding these things up front, which is really financially-- really a good deal for Celsion so we're pleased with that and pleased to be working with Hisun. We've got a good rapport with them. We've got ongoing meetings with them on the operational side under Dr. Bob Reed, things are going well and I look forward to continuing our relationship.

A follow up from Mike King.

I wanted to ask you to perhaps expand on an answer to I think it was Joe Pantginis' question earlier about -- I am curious that when you guys look at the market opportunities to ThermoDox, can you help us understand what the -- if we looked at all the tumor types to which it may be amenable and which some adjunctive heating source or other ablative therapy is used, how large of a market opportunity do you think that is?

Large in terms of number of patients, Mike?

Yes, I think that's a good place to start, or a number of procedures if you want to do it that way.

I think we have a very clear picture of the current standard of care for treating these patients. It's very clear. It's described in a number of compendia. The NCCN has a very good outline very consistent with the AASLB criteria published in -- Barcelona criteria published by the ASLD. The primary approach to treating these patients is a function of staging. Dr. Borys can talk about the stages in a little bit more detail.

The current addressable population with radiofrequency ablation, and these are patients who are neither resection candidates or possibly not transplant candidates, although some patients are put on a transplant list as a function of radiofrequency ablation and that makes this a little bit more complicated discussion. But for patients who are not resection candidates and for patients who have not -- who are not presenting with such an advanced state of disease that RFA is not indicated either because you have to ablate too much tissue or it has progressed outside of the liver, those patients we call intermediate stage patients. They're currently treated with RFA.

Of the total incidence, about 25% of patients presenting would fall into that category. So remember total incidence here globally is about 750,000. About 25% of those patients in this staging paradigm would be treated with radiofrequency ablation. Our view is that only some percentage of that 25% would be treated with radiofrequency ablation plus ThermoDox.

There is another heating technology on the horizon called microwave ablation. I think we've concluded that although it is not included in our study but it's a small percentage of patients treated with ablation. They have given -- assuming they have the right lesion size and they're not contraindicated, they may also be given an adjunct of ThermoDox to the microwave ablation.

But overall going back to your original question, how many patients or how many treatments? It gets complicated by prevalence too. Our model includes prevalence. But if we just talk about newly presenting patients, we are counting on about 10% to build our revenue models, 10% of the total number of patients who are initially diagnosed. And we're assuming that will ramp up to that 10% over a five- to seven-year period. Does that answer your question?

Sure does. Thank you.

Mike Seebeck with LWM.

Thank you for the update. I'll try to be very quick here. And I'm going to get off track a little because the other questioners asked some great questions. In terms of the Phase I trial for the bone palliation, the bone cancer, if you could wave your magic wand and establish an MTD tomorrow and begin a Phase II, what are you going to try to structure the end point for on that trial?

That's a good question. I think maybe we need to help you understand this clinical trial. It is a Phase II. Nick, could you take it?

Yes, first of all, I just wanted to reiterate that the agreement we reached with the FDA is that this will be a Phase II trial. The dose for ThermoDox has already been established. So we're going to continue with that. In terms of primary end points we are going to be looking at analgesic end points which would be pain. We are going to be using pain scores as part of that and quality of life scores as part of the end points.

And that's the type of information that could be gathered and evaluated in a fairly short period of time, correct?

Yes, and we're doing nothing new. These are the standard approaches that other treatments that are available to these patients, so we'll be comparing ourselves against external beam, against opiates, and their standard approach to how to measure responses in these types of patients.

In terms of the HIFU potential and other heating potential and other active ingredients to be encapsulated, I'm seeing advertisements for HIFU for prostate cancer in places like Mexico and Canada and I know the HIFU community is looking to drive acceptance of HIFU into the US market. And there is going to be a lot of opportunities I think with Celsion's range of products.

Is there any developmental work being done, especially now that we have relationships with the HIFU manufacturers that could be sponsored and paid for by them in other, shall we say, agents like cisplatin and docetaxil that I believe that the Company have potential to encapsulate and deliver via this method?

I think first and foremost we have demonstrated the platform capability of our LTSL technology. We have reported successfully incorporating two platinum compounds, cis-platinum and carbo-platinum. And we have incorporated docetaxil. We have seen some very encouraging results in tumor inhibition studies for all the compounds. We decided that we would devote our financial resources to our clinical program. So following feasibility, we set those compounds aside. It was a deliberate decision on the part of your management team here.

Our goal was, and has always been, to demonstrate the full potential of the heat-sensitive liposome technology. And following successful a clinical program then to fully finance the development of one or more of those compounds as we begin to evaluate them in a variety of different human cancer cell lines, some compounds may be more effective in certain cancers than others. That early work, that preclinical and feasibility work, I think is very important prior to initiating any discussion about co-development with a device partner or another pharmaceutical or biotech partner.

Typically, what is required before a discussion of partnership is a robust demonstration of feasibility. We are prepared to do that, assuming of course positive data from the HEAT trial, which we have no reason to believe won't be positive. I think we have time for one more call, operator.

Thank you, sir. That will come from private investor Anthony Olich.

Nice to see all the big guns on the call today. Mike, you mentioned that the DIGNITY study is difficult to enroll. Our Star Trek story lends itself well to a non-clinician presentation. Is it out of the question to try and do an education piece for women on one of the leading talk shows to talk about our exciting new therapy, again with the caveat that it is in clinical trials but that we have a delivery system that targets and looks very promising in terms of prospect to attack this devastating disease. Is that something totally out of the question?

Not at all, Tony. As a matter of fact, in the hey day of enrolling Phase I trial we tried multiple approaches to -- multiple outreach approaches directly to patients that have made themselves available to clinical trials through a Thomson Reuters searchable database and also directly to physicians who treat these patients. We spent a significant amount of money.

We also -- your point here that this is a great human interest story that could inspire individuals with late-stage cancer on the chest wall to enroll in our clinical trial and that hasn't gotten by us. The quid really for a human interest story or a scientific writer in a major media publication like the Times or the Journal or even one of the weekly magazines, the quid really is some data to support our thesis that we can make a difference in these patients.

And that goes now to who Dr. Rugo -- Professor Rugo, who will be presenting data from our Phase I trial with I think could be some very impressive results. That presentation will be made as we said earlier at the European medical conference, a very prestigious conference. We will also-- we are also providing a research publication, which includes combined data from not only our Phase I trial but also the work that was done by Kim Blackwell at Duke, which is a equally impressive if not remarkable in some of the results seen in the 16 patients that were treated there.

I know this has taken some time. We are as impatient as everybody else. But publication in a major journal, presentation at a major conference with now two investigators who are willing to stand up and talk about the potential of this treatment may give us the ability to attract the mainstream media or the public writers to discuss our story. So we were hoping that-- a very next-- it might be a very nice next step. But I think more importantly we're looking for physicians who treat these patients now with clinical data to refer their patients to our trial. Thank you so much.

I wanted to clarify a previous question that was asked about stratification. And I misspoke. We are stratifying by lesion size. The other stratification is not by device type but it's by the RFA technique type. I apologize to the questioner. We are stratifying according to whether the procedure was done through percutaneously, laparascopically, or surgically. Sorry about that. I just wanted to clarify before we ended this call. Thank you.

Thank you, Nick. Thank you very much. Okay. So we have come to the end of our second quarter conference call. As always we appreciate the opportunity to share with you our work and the results of our efforts in bringing ThermoDox through the rigors of this very difficult clinical program. We are coming close to the end here, folks. We are as excited as possibly can be. We are delighted to have you with us on this journey.

We are looking forward to the next conference call. We'll certainly be making available any material progress that the company realizes between now and then. Again, thank you very much for your attention. And we look forward to speaking with you in the future.

That does conclude today's presentation. Thank you for your participation.