Imunon Inc (IMNN) 2017 Q4 法說會逐字稿

Good morning. My name is Evan, and I will be the conference operator today. At this time, I would like to welcome you to the Celsion's Fourth Quarter 2017 Earnings Conference Call. (Operator Instructions) At this time, I'd like to turn our conference over to Mr. Jeffrey Church, Celsion's Senior Vice President and Chief Financial Officer. Please proceed, Mr. Church.

Thank you. Good morning, everyone, and welcome to our year-end investor conference call to discuss our 2017 results, which we announced this morning before the market opened. During our call today, Michael Tardugno will provide an operational update with our clinical programs, and I will summarize our financial results for the fourth quarter and the full year ended December 31, 2017.

Today's call will be archived and the replay will be available beginning tomorrow and will remain available by phone until April 10, 2018, as well as available on Celsion's website for 90 days. Before we begin the call, we wish to inform participants that we will be making forward-looking statements regarding Celsion's current expectations and projections about future events. Generally, forward-looking statements can be identified by terminologies such as expects, anticipates, believes and other similar expressions.

These statements are based on current expectations and assumptions and are subject to a number of risks and uncertainties, including those set forth in the company's periodic reports filed with the Securities and Exchange Commission. No forward-looking statements can be guaranteed and actual results may differ materially from such statements.

At the end of today's formal remarks, we will open the call for questions.

I would now like to turn the call over to Mr. Michael Tardugno, Celsion's Chairman, President and CEO. Mike?

Thank you, Jeff. Good morning, everyone, and thanks for joining today's call. With me are Dr. Nicholas Borys, Celsion's Chief Medical Officer; and Jeffrey Church, our CFO, from whom you've just heard. As always, we are delighted to have the opportunity to update you on our progress and to answer your questions.

I'd like to start this morning by saying as we noted in our press release, Celsion had an exceedingly productive 2017, substantially strengthening our balance sheet while making meaningful progress with our ongoing clinical programs in primary liver cancer and ovarian cancer. Entering 2018, with over $25 million in cash and investments, expecting to complete enrollment in our pivotal Phase III trial of ThermoDox in the largest unmet medical need in oncology and moving aggressively to confirm our very impressive early clinical data with a randomized study of our gene-mediated immunotherapy, GEN-1, in newly diagnosed advanced ovarian cancer patients, we are well positioned. Positive data from either of these programs will be transformative for the medical community, for patients and most certainly for Celsion's shareholders. I have every confidence that 2018 will prove to be the milestone year for the company. This may be our year.

For those of you who are new to Celsion, I'd like to start by providing a high-level overview. Celsion is an oncology-focused development-stage company with 2 platform technologies, both of which have product candidates in clinical trials. The most advanced technology is a novel heat-sensitive liposome that incorporates well-known approved chemotherapeutics. It's administered intravenously, circulating the liposomes through your blood vessels -- through the blood vessels. When they come in contact with the target tissue that's been heated just above body temperature, that's above 40 degrees centigrade, the nanoparticles release their payload to create a locally high concentration of the drug that targets local lesions. Now we know this mechanism through our preclinical work -- we know that this mechanism works with certainty.

Our lead candidate on this platform is ThermoDox, which as the name implies, is a heat-sensitive liposomal formulation of doxorubicin. ThermoDox is being evaluated in combination with the heating technology routinely used, that's radiofrequency ablation, in a global 14-nation, multicenter, pivotal Phase III study of the largest unmet medical need remaining in oncology, and that's hepatocellular carcinoma, also known as HCC or primary liver cancer.

Our second and equally important platform is called TheraPlas. TheraPlas is short for therapeutic plasmids. As the name implies, this nanoparticle-based cell transfection technology has the ability to deliver DNA sequences coded from the proteins with known anti-cancer properties into cells for sustained local production of the biologic for which it is programmed. Our first candidate on this platform is an immunotherapy that we call GEN-1.

GEN-1 activates the production of the highly-potent inflammatory protein or cytokine interleukin 12. IL-12 is well known to actively recruit the body's immune system to work against deadly cancers. However, safely and effectively harnessing the power of IL-12 for therapeutic uses has proven to be challenging in the past. Our solution to this problem is GEN-1. GEN-1's -- Celsion's GEN-1 candidate is being evaluated as a new treatment for ovarian cancer and in this dosage form has demonstrated convincingly that it does not produce the toxicity issues associated with the free recombinant IL-12 protein.

These 2 platform technologies and the 2 drug candidates derived from them, ThermoDox and GEN-1, represent our tight clinical development focus for 2018. Data indicate that both of these drug candidates show great promise. And with ThermoDox progressing through Phase III and GEN-1 entering a randomized Phase I/II study in 2018, we expect these trials will produce a steady news flow of milestones in the coming year.

Since our last conference call in November, we have announced several important accomplishments that are driving momentum in and outside of the funnel. First and importantly, on the financial side, our balance sheet is strong. During the fourth quarter, we significantly improved our cash balance. We announced several equity capital initiatives totaling over $27 million and we did so by utilizing the most non-dilutive structures available to us. Our cash position, which Jeff will discuss in more detail, now provides an operating runway that we expect will take us well into the third quarter of 2019.

For ThermoDox, progress has been significant, and if the current Phase III OPTIMA study proves to be successful, treatment for patients with intermediate-stage HCC will improve remarkably. We theorize a single treatment with ThermoDox combined with the proper use of RFA will have the potential to be curative, remarkable. The cohort that we followed quarterly for overall survival for over 2.5 years never reach the median after 80 months. By any standard or measure in oncology, a remarkable observation in a population where median OS is about 55 months.

As you may know in 2013, we announced that ThermoDox failed to meet its primary PFS endpoint in the earlier HEAT Study. Following the announcement, at the strong recommendation of the study's principal investigators, Celsion, along with its scientific and medical advisers, made an effort to better understand the observed outcome, and in doing so, assessed the potential pathway forward for the treatment option for patients with HCC. The results from these evaluations were detailed with the publication of the HEAT manuscript in October 2017, this past year -- fourth quarter this past year -- in Clinical Cancer Research, a high-impact peer-reviewed medical journal. The article provided learnings from the HEAT Study and included the findings from a published computational analysis, a published prospectus study in a pig model, and a multivariate analysis, as well as a post hoc subgroup analysis. These analyses together provide a clear understanding of the key ThermoDox HEAT-based mechanism of action, and that is this: the longer the target tissue is heated, the greater the doxorubicin concentration locally. And consequently, it appears, a dramatic improvement in survival.

Very importantly, the publication promotes the hypothesis that overall survival, OS, may improve by over 2 years as compared to a similar control group when ThermoDox is combined with RFA standardized to a minimum dwell time of 45 minutes. The authors in the manuscript then provide support for our ongoing Phase III OPTIMA Study.

It's important to point out that these subgroup conclusions in the manuscript are not the authors' alone. As I mentioned before, in 2016 at the request of the Director of Interventional Oncology, we provided the National Institutes of Health with 3 terabytes of data from the HEAT Study, from which they conducted an independent analysis of the intent-to-treat population of 437 single-lesion patients from the HEAT Study, a different cohort than was reviewed in the manuscript, 437 intent-to-treat patients with single lesions.

They studied 2 virtually identical cohorts: RFA with ThermoDox and RFA alone. They concluded that when combined with ThermoDox, longer RFA heating times result in a statistically significant improvement in overall survival. The same is not true, they conclude, on RFA alone. These findings were presented at the Radiological Society of North America Conference in December 2016, and I might add, to a standing-room-only crowd.

More recently in February 2018, an abstract discussing the company's Phase III HEAT Study evaluating ThermoDox in combination with RFA was 1 of 6 selected for presentation by the HEAT Study manuscript lead author, Professor Won Youn Tak as a part of the lecture of the presidential section in the Korean Liver Cancer Association's 12th Annual Scientific Meeting in Seoul, South Korea.

Now it seems to me this is one rare time -- if you're following all of this -- it's one rare time where clearly the medical community is getting it long before the investment community appears to.

The trial design for the Phase III OPTIMA Study of ThermoDox plus RFA standardized for 45 minutes in newly diagnosed HCC patients is based on these substantive learnings and publications. And because of this, we conclude that the OPTIMA study is highly derisked. Fourteen regulatory authorities from across the globe in all major HCC markets, including Europe, North America and Asia, have reviewed and approved the OPTIMA Study protocol. Our regulatory strategy is based on these interactions.

We have designed the OPTIMA Study to enroll a sufficient number of patients from each ethnicity or country to support registrational filings and market launch in the U.S., Canada, Europe, China, South Korea, Taiwan, the Philippines, Thailand, Malaysia and Vietnam. And oh, by the way, in the U.S., ThermoDox has received FDA Fast Track Designation, which provides, among many other things, priority review. ThermoDox has also been granted orphan drug designation for primary liver cancer both in the United States and Europe, which among other things, extends market exclusivity for 7 and 10 years, respectively, in these major revenue markets.

Additionally, the CFDA, that's the China Food and Drug Administration, informed Celsion in a meeting that both Dr. Borys and I attended that if the ongoing Phase III OPTIMA Study is successful, the trial could serve as a basis for a direct regulatory filing in China without the need for prior approval in the U.S. or Europe, which is currently required for foreign company applications. This would allow Celsion to accelerate its plans for regulatory filing in China, and if approved, provide a significantly earlier launch in China than originally expected.

China represents perhaps the most significant market opportunity for ThermoDox globally as approximately 50% of the over 850,000 new cases annually of HCC are diagnosed and originate in China. Here again, I submit to you that the regulatory community gets it. What I mean by that, they understand this is a high-potential study, a derisked high-potential study that has the potential to positively affect the lives of many.

So on the execution side for the OPTIMA Study, we've engaged internationally recognized, world-class contract research organizations, CROs, and data management teams to ensure Good Clinical Practice, ICH compliance, protocol adherence and high-quality data analytics. We also have a proven highly reliable supply chain with 3 redundant contract manufacturing organizations, who are registered and capable of producing ThermoDox in all regions of the world. I might add, our costs from the supply chain -- our cost of goods from the supply chain support emerging markets with high gross margins.

Finally, I'm happy to report that the 550-patient OPTIMA Study is approaching 80% enrollment and that we expect to complete enrollment late summer or early fall of this year. We also expect to provide results from the study's first preplanned [internal] efficacy analysis in the first quarter of 2019. By any standard of measure, I'd say that's progress.

Now let's turn to GEN-1. As I discussed earlier, GEN-1, developed on our TheraPlas technology platform, is a gene-mediated immunotherapy which recruits the entirety of the body's immune system to fight malignancies. GEN-1's active agent is a DNA plasmid coded for a potent, broad-spectrum immunotherapy interleukin 12, or IL-12. The IL-12 plasmid is incorporated into our proprietary synthetic nanoparticle delivery system. When administered locally into a body cavity, like the peritoneal cavity or the bladder or even a cavity created by the surgical removal of a tumor mass, the nanoparticles invade the surrounding cells, all of them, and take over the metabolic machinery, turning each cell into a mini factory for local sustained production of the IL-12 cytokine.

Now the first indication we're studying for GEN-1 is ovarian cancer. As you know, for patients newly diagnosed with this cancer, there's less than a 45% chance of surviving for 5 years. One major reason for this, of course, is that the diagnosis is made when patients have advanced disease at Stages III and IV typically, when the cancer has spread throughout the pelvis.

In previous clinical trials in this patient population, GEN-1 has been used either as a monotherapy or in combination with standard chemotherapy and has shown promising results. Most importantly, however, GEN-1 demonstrated clear signs of activity and clinical benefit in our Phase Ib dosing escalation study known as the OVATION I Study. OVATION I, as we have reported, evaluated GEN-1 plus neoadjuvant chemotherapy followed by interval debulking surgery in newly diagnosed Stage III and IV ovarian cancer patients. The goal of neoadjuvant chemotherapy in this population is to improve surgical outcome by shrinking the tumor mass. In this study, we added 8-weekly cycles of GEN-1 to this chemotherapy regimen.

Early but impressive findings include the following -- and this is not all. I mean, if you're interested, please go back and read our press releases -- but include the following: GEN-1, plus neoadjuvant chemotherapy demonstrated no dose-limiting toxicities and is safe up to 80 milligrams per meter square. Investigators of the oversight committee, that's the DSMB, did not find any significant toxicities associated with GEN-1. There appears to be a dose-dependent bioactivity and efficacy signal.

While the clinical findings included a partial or complete response in 86% of patients, the surgeons were able to completely remove all visible tumor and RO resection -- I mean, sorry, in R0 resection in 100% of patients treated with the highest dosing cohort was observed. Distinct immunological changes in the local disease environment appear to be pro-immune in 75% of the subjects evaluated. And progression-free survival is projected to be over 21 months using a Kaplan-Meier projection in this study group. Historically, PFS median in this population is approximately 12 months.

Now based on these findings, in December 2017, we announced the submission of the Phase I/II clinical protocol to the FDA for GEN-1, called the OVATION II Study. The OVATION II Study is a randomized trial, will treat up to 6 patients in the GEN-1 arm at 100 milligrams per meter square, followed by a continuation at the selected dose in a Phase II study of up to 130 patients.

The entire -- the entry criteria and treatment protocol are the same as the prior OVATION I study with one major exception. Following debulking surgery, patients will continue to receive up to 9 additional intraperitoneal doses of GEN-1. This is a maintenance treatment. Our hypothesis is that continuous stimulation of the immune system after surgery may provide a further benefit, in effect, preventing progression.

We anticipate initiating enrollment in this Phase I portion as quickly as possible. A total of 12 patients via -- a total of 12 patients will be in Phase I portion. We expect our first patient to be treated in June, and we'll begin initiating the Phase II randomized portion of this study in the first quarter of 2019. As this will be an open-label study, we expect to report data periodically through 2019.

We're excited with GEN-1's potential as are our principal investigators. For example, on March 1 of this year, Premal Thaker, the lead principal investigator in our GEN-1 development program, presented, and I quote, "Ovarian Cancer: New Horizons and Treatments", at an investor event in New York City. Dr. Thaker's presentation highlighted GEN-1 as a novel approach designed to deploy IL-12 without the toxicities associated with recombinant IL-12 protein and outlined results from the OVATION I study in 14 newly diagnosed patients with Stage III and IV ovarian cancer, who are intraperitoneally administered the GEN-1 plus neoadjuvant chemotherapy. During her presentation of the results from this study, she noted immunological changes consistent with the ability of GEN-1 to increase peritoneal levels of IL-12 and its downstream anticancer cytokines with little changes in systemic circulation and no systemic toxicities. I submit to you Dr. Thaker's testament is just a sample of the support from our PIs. Frankly, we could not be more excited with this program and the medical community's interests.

So that's a quick overview of both of our clinical programs. And with that, now I'll turn the call over to Jeff for a review of our fourth quarter and full year 2017 financial results. Jeff?

Thanks, Mike. During the fourth quarter of 2017, we continued to efficiently deploy our cash as we executed our important clinical development initiatives. We ended the year with $24.2 million of total cash and investments. We further strengthened our balance sheet with the modest $1.3 million equity raise of our ATM facility with Cantor Fitzgerald in January 2018.

During the fourth quarter, we raised $17 million through the exercise that previously issued an outstanding warrant at their original strike prices, completed an underwritten equity offering of shares of common stock and warrants totaling $6.6 million and selectively sold another $3.9 million of our common stock of the ATM facility in November 2017. As Mike mentioned, based on our current budget projections, this significant capital infusion enables us to cover our projected operating needs into the third quarter of 2019.

Celsion's 2017 financials were included in the press release, which was issued before the market opened this morning. Our Form 10-K for the year ended December 31, 2017 with audited financial statements was also filed this morning.

We continue to monitor our cash expenditures to ensure the most efficient use of cash to create shareholder value. We maintain a tight development focus on our pivotal Phase III trial with ThermoDox in primary liver cancer and the follow-on Phase I/II clinical trial for GEN-1 in newly diagnosed ovarian cancer patients.

Net cash used in operations for the year ended December 31, 2017 was $16.6 million. This compares to $18.4 million in the prior year. Also, during the year, we paid off our venture debt facility with Hercules. Currently, we have no debt on our balance sheet.

Operating expenses were $19 million in 2017 compared to $21.2 million in the same prior year period. This decrease is in line with our earlier projections and a result of our cost reduction efforts implemented during 2016 and 2017, of a tighter product development focus, as mentioned earlier, and prudent cash management. Our projected cash utilization for 2018 is approximately $4 million per quarter. This projection should remain constant into 2019 as we complete full enrollment of the 550-patient OPTIMA Study in mid-2018 and increase our clinical development focus of GEN-1 in the second half of 2018 through 2019.

We continue to operate with a lean organizational structure with only 20 full-time equivalent employees. Most of our spending is directed to research and development activities. As we look forward, we believe that maintaining a strong balance sheet is important to continue the momentum we have built around our lead clinical development programs.

For the year ended December 31, 2017, we recorded a net loss of $20.4 million compared to a net loss of $22.1 million in the same prior year period. Research and development costs for 2017 were $13.1 million compared to $14.6 million in 2016.

Our R&D expenditures were lower due to the tighter clinical development focus on those programs that we believe will help drive shareholder value in the near term through the readout of our pivotal Phase III OPTIMA Study.

General and administrative expenses for 2017 were $5.9 million compared to $6.5 million in 2016. This 10% decrease in G&A costs was due to lower noncash stock compensation expense, lower personnel costs, lower insurance premium and reduced professional fees.

During 2017, other expenses included a noncash charge of $2.5 million related to the impairment of certain in-process research and development assets related to the development of our glioblastoma cancer product candidate. This impairment represents a delay in the GBM program largely due to competitive IL-12 products being evaluated in the same indication. This impairment charge was offset by a $1.2 million reduction in the earn-out liability related to any potential milestone payments for the GBM product candidate.

During 2017, we recorded a deemed dividend charge totaling $346,000 related to the repricing of certain outstanding warrants during the month of June. The company raised over $5 million in gross proceeds from the exercise of the warrants during the second quarter. Included in this total were approximately $1.3 million warrants, which were repriced and then immediately exercised, which yielded over $3 million in gross proceeds to the company. These warrants were previously registered and were already included in our fully-diluted capitalization.

Interest expense decreased by $631,000 in 2017 due to lower principal balances outstanding under our debt facility with Hercules. As I mentioned earlier, this loan facility was paid in full on June 1, 2017.

I'd like to conclude by stating that our balance sheet and business fundamentals are strong. We are well-positioned to deliver significant news around our important product development programs. We have the financial tools and support to properly capitalize the company for future success.

I'll now turn the call back over to Mike.

Well, thank you, Jeff. Before I make my concluding remark, operator, would you -- I just wanted to do a telephone check. I just -- I got a notice here that our Internet went down. Can you hear us?

Yes, I can.

Okay, thank you. So yes, Jeff, thanks for that summary. Terrific as usual. I'd like to conclude my prepared remarks by reminding you that our fundamentals are sound, our work is of major consequence. If successful, we're looking at a large potential market opportunity in both primary liver cancer and ovarian cancer. With both of our clinical programs designed to treat first-line patients, success with either program will establish both a significant advance for patients and position the company for success.

Now that's the conclusion of our prepared comments, so I'd like to ask the operator to open the lines for your questions, and please limit them to no more than 2 so we give everybody a chance to ask a question. Operator?

(Operator Instructions) Our first question comes from Hartaj Singh from Oppenheimer.

This is Emma on for Hartaj, actually. On GEN-1, can you walk us through on the FDA's comments on the OVATION II protocol and then what specific changes you've made to the study design?

Sure. Nick, do you want to do that? We'll just make -- there weren't a lot. We'll just make sure that we capture the major ones.

Yes. The FDA basically asked us to make the study a bit more robust. And specifically, they were asking us to collect the overall survival data. And our primary endpoint in that study is progression-free survival. And the FDA said, "Please add the overall survival data to this," so we complied with them.

Great. And then just one follow-up. Do you plan to continue to provide updates on PFS for the patients in OVATION I, particularly those who in the highest dose cohort?

Yes, Emma. So -- and we're following all the -- all of the patients who obviously have been treated, we've been following them for survival -- I mean, for progression. We'll continue to do so until the last patient is progressed, if in fact they do progress. We will be reporting on these patients throughout the coming year.

(Operator Instructions) And there appears to be no other questions at this time.

So I'll just close by saying that we remain very optimistic on both of our clinical programs showing significant promise, and we remain very excited for the potential of ThermoDox to show a positive result in the early part of 2019. We look forward to providing you with the updates in the future. And as we advance our development pipeline, I'll look forward to our press releases and our next conference call. Again, thank you for joining us for today's call.

This does conclude today's conference. Thank you for your participation. You may disconnect.

Thank you.