Imunon Inc (IMNN) 2020 Q3 法說會逐字稿

Good morning. My name is Kasey, and I will be your operator today. At this time, I would like to welcome you all to Celsion's 2020 Third Quarter Financial Results Conference Call. (Operator Instructions) At this time, I would like to turn the conference over to Kim Golodetz. Please go ahead.

Thank you. Good morning, everyone. This is Kim Golodetz with LHA. Welcome to Celsion Corporation's conference call to discuss its 2020 third quarter financial results and business update. As has been Celsion's practice and as noted by the operator, prepared remarks will be followed by a question-and-answer period. Today's conference call will be archived, and the telephone replay will be available beginning later today through November 30, 2020. Webcast will be available for the next 90 days on Celsion's website.

During this call, management will be making forward-looking statements regarding Celsion's expectations and projections about future events. Generally, forward-looking statements can be identified by terminologies such as expect, anticipates, believes or other similar expressions. These statements are based on current expectations and are subject to a number of risks and uncertainties, including those set forth in the company's periodic filings with the Securities and Exchange Commission. No forward-looking statements can be guaranteed, and actual results may differ materially from such statements. In particular, there are significant uncertainty about the duration and contemplated impact of the COVID-19 pandemic.

This means results could change at any time and the contemplated impact of COVID-19 on Celsion's operations, financial results and outlook is the best estimate based on the information for today's discussion. I also caution that the content of this conference call is accurate only as of the date of the live broadcast November 16, 2020. Celsion undertakes no obligation to revise or update comments made during this conference call, except as required by law.

With that said, I would like to turn the call over to Michael Tardugno, Celsion's Chairman, CEO and President. Michael?

Thank you, Kim. Good morning, everyone. Joining me today is Jeff Church, our Executive Vice President and Chief Financial Officer, who will provide a review of Celsion's financial results in a few minutes. Also on the call for the Q&A portion is Dr. Nicholas Borys, our Executive Vice President and Chief Medical Officer.

I'll start by saying in July, we announced wholly unexpected incredibly disappointing news. After revealing the Kaplan-Meier curves for the Phase III OPTIMA study, the DMC found that the study had nearly crossed the futility boundary, albeit with a highly uncertain P-value, p equals to 0.524, not leaving the decision of whether to continue or terminate the study up to the company.

I'll discuss this more later in my remarks. But I'll start with this fact because I'm sure it's on the minds of many of you because I want you to know that we have immediately taken a number of critical steps in the wake of this announcement: One, first is to redirect our resources and accelerate the OVATION 2 study, our exciting Phase II trial in advanced ovarian cancer; the second was to stabilize and ensure a strong and restructured balance sheet; the third is to reduce our current and projected spending; fourth, to evaluate our current portfolio, including adaptations of our existing platform technologies for application in new indications in new therapeutic areas; and fifth and finally, to fully interrogate through independent means the data from the Phase III OPTIMA study.

I'd like to begin by updating you on the OVATION 2 study, the evaluation of GEN-1, our gene-mediated immunotherapy in advanced ovarian cancer. Having successfully completed the Phase I run in portion of the trial earlier this year, OVATION 2 has entered Phase II and is now recruiting newly diagnosed patients. The first 2 treatment arm patients were randomized in July, probably 5 months ahead of schedule. Patients in the treatment arm are being treated with a 100-milligram per meter squared weekly dose of GEN-1. Dosing frequency and dosing amount are based on a very encouraging safety profile established in the Phase I running.

Despite some delays in minor complications associated with the COVID-19 pandemic, we continued to anticipate completing enrollment of up to 110 patients by mid-summer 2021. Also, by the end of this year, we expect to have over 20 active sites enrolling patients in the U.S. and Canada, with a total number of clinical sites projected to be 25.

Now to review the trial. OVATION 2 study is a 2-arm study. The primary analysis will be conducted after at least 80 PFS that progression-free survival events are observed in approximately 110 or more subjects randomized in the trial based on a one-to-one randomization.

Given the nature of the treatment, the study is open-label that's unblinded, so we will be able to provide clinical updates as they become available throughout the course of the trial. We expect to provide updates from cohorts of 20 to -- 25 to 30 patients who have completed treatment. These updates will include overall response rates according to RECIST in surgical resection scores, both are secondary endpoints, and both are reasonably good prognostics for PFS and overall survival. These data should provide a good idea of GEN-1's treatment effect as the trial progresses.

Final tumor response rates and surgical resection scores for all Phase III patients will be available in the second half of 2021. Final PFS data, the primary endpoint will follow about 1 year later. The 2-arm study design calls for neoadjuvant chemotherapy plus/minus GEN-1. The neoadjuvant chemotherapy is the current standard of care for advanced disease among patients whose cancer burden is judged too great for immediately removing it surgically. The goal of neoadjuvant chemotherapy is to shrink the tumors and drive the accompany ascites as much as possible to improve the surgical results. The surgeon's objective, of course, is to achieve an R0 resection or visually complete removal of all cancer with no disease found in the surgical margins. Following debulking surgery, the patient will undergo 3 additional cycles of adjuvant chemotherapy and up to 9 additional weekly GEN-1 treatments, if the patient has been randomized to the treatment arm.

We are prophesied that the weekly GEN-1 treatment regimen before and after surgery will recruit a high level of immune system activity over a 6-month period. The results being a critical goal or delay in progression because we know clearly that disease progression suggests a core prognosis.

I'd like to take a moment to review GEN-1's technology and mechanism. GEN-1 is engineered using our proprietary care class platform technology. TheraPlas is a synthetic nonviral nanoparticle DNA plasma delivery system that provides the means to transfect cells with a DNA payload coded for proteins of therapeutic value. Unlike viral delivery systems that can typically only be administered once, TheraPlas is not subject to the neutralizing activity of the patient's immune system. It's the beauty of our technology. It does not carry the risk of viral carriers and can be administered over and over again, making ideal for titrating cancer treatments and particularly immunotherapy. This is typically required for safe and effective results.

GEN-1 is the first drug on the TheraPlas platform technology and incorporates the DNA plasmid coded for the pro-inflammatory cytokine Interlukin 12 or IL-12. GEN-1 is administered local regionally into a body cavity, such as the abdomen for advanced ovarian cancer. This consigned local regional activity avoids the systemic toxicity associated with the use of recombinant IL-12, that's factory-produced IL-12. Toxicity and systemic administration of IL-12 is the reason it's not in widespread use today.

Our approach to develop our scientists at HudsonAlpha Institute in Hudson, Alabama, provides an elegant solution that significantly improves the local regional activity of IL-12, while mitigating unwanted toxicity. So following administration, self-transaction is accomplished resulting in a safe, persistent, durable and effective local secretion of IL-12 lasting for up to 1 week.

So when do we stand with the program and why are we so encouraged? Well, let me start with why are we so encouraged? For the 14 patients treated in the Phase I portion, 8 were treated with GEN-1 at a dose of 100 milligrams per meter square plus the neoadjuvant chemotherapy and 6 were treated with neoadjuvant chemotherapy alone.

All 14 had successful resections of their tumors, with 7 out of 8 in the GEN-1 arm or the treatment arm having an R0 resection. That's 88%. While those treated in the treatment arm in GEN-1 having an R0 resection and are doubling over the 6 patients in the control line. Now when we pull these data with data from the earlier Phase Ib study, which had a population of patients with the same inclusion/exclusion criteria, the data suggests that GEN-1 has a promising dose-dependent efficacy. These findings are reinforced with a significant improvement in progression-free survival when comparing study patients to a statistically matched synthetic control arm of similar patients from prior studies. These observations should be reviewed with caution, however, due to the small number of patients in the lack of statistical significance.

As a final note, I want to remind you that we have received orphan drug designation from both the U.S. FDA and the European Medicines Agency, which enhances the commercial value of GEN-1, in particular, the orphan designation we received from the EMA earlier this year provides, among other things, 10 years of market exclusivity following marketing approval.

Now I want to make a few comments on our portfolio developments, and we won't be taking any questions on this. It's very -- we're very early on in our discovery phase. So I mentioned the role of TheraPlas subject, I want to take this opportunity to mention that TheraPlas is a very powerful platform technology. We're currently evaluating it for application in other important therapeutic areas where we believe TheraPlas may provide significant medical and logistical advantages. If we're right, this flexible and adaptive delivery technology can be combined with multiple patentable payload approaches and evaluated in a broad range of indications and global concern. Assuming our proof-of-concept experiments yield positive results, we'll have more to announce on these efforts in the coming months.

I'd like to move on to some financial comments. As said earlier, we've stabilized our balance sheet, we've ensured our access to capital and reduced our spending. Jeff will discuss this more, but I want you to know that, including the planned sale of our New Jersey NOLs, which were recently approved by the economic development agency, now moving on to approval by the governor, our cash runway will extend to the first quarter of 2022. We have enough time to bring several development milestones to fruition, and we will comfortably cover the enrollment of phase costs of the OVATION 2 study. I want to emphasize that our balance sheet remains strong, with cash and prepaid expenses well over $19 million. We have ensured access to capital at reasonable rates, for example, during the third quarter. We renegotiated our $10 million loan facility with Horizon Financial. We elected to repay $5 million of this loan in August and restructured the remaining $5 million of the facility with market competitive terms.

Jeff will cover that more during his comments, but in doing so, we are able to leverage our equity capital, which provides further support to our product development initiatives with far less dilution to our stockholders, reducing our debt substantially, also lowers our debt service costs.

Another point, we entered into a common stock sale agreement with Lincoln Park Capital, as we announced. It included the sale of 1 million shares and a 30%-plus premium to market.

We've also successfully negotiated the termination of contracts associated with our plans to commercialize ThermoDox and have reduced ThermoDox's associated headcount and consulting arrangements.

All told, we've projected $10 million reduction in planned expenses over this year and next.

Now I'm going to conclude my prepared remarks with an update on where we are with OPTIMA study of ThermoDox to treat patients with newly diagnosed primary liver cancer, or otherwise known as HCC. The independent data monitoring committee's finding that the Phase III OPTIMA study across the futility boundary with the second interim analysis and leaving the decision to continue or terminate the study up to the company puts us in a very highly unusual situation, if not completely uncharted territory. And for a variety of inconsistencies in confounding observations, which we've discussed earlier, and none of which may change the study's outcome, we have determined that we should continue to follow patients for overall survival until such time that utilities either confirmed or dispelled. So where are we? The second interim analysis covered 80% of the test needed for the final analysis. Reported hazard ratio suggested by the capital minor curve analysis was 0.903 with a P equals 0.524, as I said earlier, and the futility boundary is 0.90.

Since April 27, 2020, when we locked the database of 160 deaths for the second interim analysis, a total of 16 new deaths have been reported over 6.5-month period, only 7 of which occurred since July. This rate of deaths is reasonably consistent, albeit with some near-term concerns for the death rate, but it's reasonably consistent with what was predicted by our consulting's statistician for this time period. We now have a total of 176 reported deaths in the study from a total patient enrollment of 554. The study's statistical plan specifies a minimum of 197 deaths for the final data analysis.

Now what steps are we taking as promised? We have engaged a global biometrics contract research organization with forensics statistical analysis capability who specializes in data management, statistical consulting, statistical analysis and data sciences and with particular expertise in evaluating unusual data from clinical trials and experience with associated regulatory issues.

The primary objective of the CRO's work is to determine the basis and reasoning behind a decision to continue to follow patients for survival. And the secondary objective is to determine if there are any outside influences that may have impacted the forecast of utility.

In parallel, and also as promised, the company submitted all OPTIMA study clinical data and CMC data along with product for independent laboratory evaluation to the National Institute of Health, and we expect to receive a report back from the NIH in the next 4 to 6 weeks. We will likely report findings from the -- from these independent statistical analysis by the CRO and the NIH before the end of the year, either or both of which will guide our decision to continue to follow patients to the final analysis of milestone than it should be reached sometime in mid-2021.

I want to conclude my prepared remarks with a few final thoughts on this subject. The DMC's recommendation on July 9, 2020, to consider discontinuation of the OPTIMA study was beyond disappointing, and it was not anticipated, nor is it supported by the published science, independent published evaluation of the HEAT study by the NIH and published preclinical research conducted by Celsion and our consultants to support the OPTIMA study.

We firmly believe, therefore, that we are obligated to undertake this rigorous evaluation of the data. And I might say that cost to do so is quite modest. And while the trial outcome as predicted by the second interim analysis may not change, it is unlikely as it may be in the event that we see the potential for substantial clinical benefit from the CRO and the NIH analysis. We will carefully review our options with the 14 regulatory agencies under which the OPTIMA study is being conducted. All that said, we may choose to discontinue the study at any time. At this point, we can't tell you definitively what we plan to do, but I assure you that we will be transparent about it when we do.

Now with those comments, I'll turn the call over to Jeff.

Thank you, Michael. Details of Celsion's third quarter 2020 financial results were included in the press release we issued this morning and in our Form 10-Q, which we filed today before the market opened. As Michael indicated, the company ended the third quarter of 2020 with $18.3 million in cash and cash equivalents, coupled with the recently improved sale of our New Jersey net operating losses of approximately $2 million that we plan to complete before the end of this year. We believe we have sufficient capital resources to fund operations into the first quarter of 2022.

During the first 9 months of 2020, net cash used for operating activities was $11.9 million compared with $14.6 million for the comparable prior year period. That's a 19% decrease. The company has taken significant steps to reduce operating expenses moving forward while maintaining a tight focus on key value drivers.

With respect to future funding flexibility, we have a $75 million shelf registration statement on file with the SEC with over $40 million remaining on that facility. We also have a traditional at-the-market facility with JonesTrading that allow us to raise money opportunistically with no warrants and at a very low commission.

Now let's turn to the third quarter P&L. For the quarter ended September 30, 2020, Celsion reported a net loss of $8.1 million or $0.24 per share. This compares to a net loss of $5.5 million or $0.25 per share for the quarter ended September 30, 2019.

Total operating expenses were $4.3 million for the current quarter, down 22% from $5.5 million for the third quarter of 2019. Research and development expenses were $2.5 million compared to $3.7 million a year ago. The $1.2 million decline was partially due to a $700,000 decrease in clinical development costs for the Phase III OPTIMA study. The OPTIMA study was fully enrolled in August 2018.

Virtually all regulatory and manufacturing-related activities associated with the ThermoDox development program have been put on hold while we await the findings from the 2 separate analysis being conducted by the statistical experts and the NIH. Costs associated with the OVATION 2 study were $200,000 in each of the third quarters of 2020 and 2019. Other costs related to ThermoDox in GEN-1 clinical development programs decreased to $1.3 million in the current quarter, down about $100,000 from $1.4 million in the third quarter last year. This is largely driven by lower regulatory costs for ThermoDox, partially offset by higher manufacturing costs for GEN-1 clinical supplies needed for the Phase II portion of the OVATION 2 study.

General and administrative expenses were flat year-over-year at $1.8 million. These lower operating costs were offset by 2 noncash charges, I emphasize noncash charges. The first was a $1.1 million charge for the change in evaluation of the earn-out milestone liability related to the GEN-1 ovarian cancer program, and the second was a $2.4 million charge related to the impairment of in-process R&D assets. This related to the development of the company's GBM or brain cancer product candidate. The company incurred interest expense of $500,000 during the third quarter of this year versus interest expense of $300,000 in the comparable prior year period. This was related to the horizon of venture debt, which we restructured, and the restructured $5 million loan provides for a 1-year interest-only payment period followed by a 21-month amortization payback period thereafter. We anticipate that our net cash usage for the fourth quarter of 2020 will be approximately $3.7 million, noting that cash used for operating activities year-to-date was $11.9 million compared to $14.6 million in the same period of 2019. We expect full year cash utilization of between $15 million to $16 million in 2020 with the cost of continuing to follow patients in ThermoDox being minimal and largely behind us.

In closing, we believe that further progress with GEN-1 in advanced ovarian cancer with data being reported periodically will provide additional opportunities for building shareholder value.

We'd now like to turn the call back to Michael.

Thanks, Jeff. Before going to questions, I want to close by saying that Celsion continues to have the great potential to create value for our shareholders and a highly capable staff committed to bringing life-saving medicines to market with 2 extraordinary platform technologies, one in the legacy of medicine and the other in the exciting future of nucleic acid therapies.

Our development competencies span the scope at was required to rigorously evaluate our candidates. Our relationships with regulatory authorities, both in and outside the U.S. are exemplary and encouraging, and we have sufficient cash and with smart spending and cash management, we expect to deliver on our promises.

Follow-up on the call to questions. Operator, would you do so, please?

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

I guess, first, can you talk about how you plan to monitor the ThermoDox study for fatality or I should say, whether it will be down at the end of the number of events or just in real time?

Nick, do you want to take that? The question was how do we plan to monitor on an ongoing basis?

Yes. Thanks, Hartaj, for your question. On how we plan to monitor, we continue to have our electronic data system, capturing the data from all of our sites involved in the OPTIMA study and where we have a particular focus on the overall survival data. So that continues to be ongoing. The rest of the data in terms of [CONMED] and all the other detailed data has been minimized to date. However, if we get interesting data that we could restart that all over again. I hope that answers your question.

Yes. That's helpful. And then regarding your ex U.S. regulatory interactions. Any update from pathway ex U.S. or we should think that's pretty consistent with your strategy here with that year with the U.S.?

Yes, I'm sorry, we don't have a good connection. Could you just repeat the first part of that question, please?

Yes. Just regarding your ex U.S. since it's a global study, right? I mean, regarding your ex U.S. regulative interactions, how we should think about the strategy there? Or we should -- is quite similar to your strategy here with the U.S. FDA agency?

Yes, sorry. I want to try to restate your question. So what is our regulatory strategy outside the United States with regards to the Phase II OPTIMA study. Assuming that we continue, so the first point, I think is my last point is probably the first point. If we have sufficient evidence that we should continue that evidence coming from the independent analysis being conducted by the CRO that we spoke of on the NIH, our first step will be to meet with the FDA. This is a very unusual situation that we're in. We can find no other comparable circumstance under which a sponsor has been unblinded with an indeterminant recommendation from a DMC. So we're doing our great best here to maintain a blind among our investigators, while at the same time, evaluating the efficacy of the drug based on the survival information. Assuming that we understand why we had this side step in the second interim analysis and this understanding leads us to believe that ultimately, the study has the potential to be successful. I will meet with the FDA along with (inaudible) and will bring our or absolutely bring our consulting statisticians and present the case to them. We don't know what the outcome is going to be, but we're very confident. The study, it will not be, in any way, compromised. This is an overall survival study. OS is a definitive endpoint that we have no ability to be able to influence. The study has been fully enrolled. So there's no possibility that the investigators in the study could alter the treatment of care for the patients. So we're pretty confident that we can provide an explanation in a rationale to the FDA that allows them to believe that we can submit an NDA if the data supports it. That would be our first step. Our second step then following that would be to meet with the NMPA in China. They have a similar discussion, followed by a meeting with the EMA for a similar discussion. Our first movement here -- our first activity will be to meet with FDA. And of course, explained to the investment community simultaneously what we are doing and why we're doing it. Hope that answers your question.

Yes. And then last, just wondering, have you made any update in your thinking on how OVATION 2 conducted, especially given the ongoing kind of resurging pandemic over here in the U.S.?

Okay. That's an interesting question. And Dr. Borys reports that in his discussion with our principal investigators, we're seeing a reduction -- a substantial reduction in the number of patients across all oncology indications reporting to the hospital for -- with symptoms. We also heard from the key opinion leader at the Mayo Clinic that their visits or their hospital admissions and visits for oncology cases have dropped dramatically. And that being said we still believe with the number of investigator sites that we intend to enroll, it's up to 25, that the study enrollment will be completed by mid next year. The enthusiasm for the study has not at all been affected by the pandemic among our investigators. So I'll make that comment and then Nick, if you want to add anything to that comment, please do.

Yes. No, that's a very important question these days. We're very fortunate. Our study centers are distributed throughout the country and Canada. And what we're seeing is wherever we see hotspots of COVID, maybe some of the enrollment might decrease, but other sites have seen increases. And so we're hoping that because we're nationally distributed in terms of sites that will help us in our enrollment. And with the recent good news also, we could see more of enrollment going into the future.

Our next question comes from Kumaraguru Raja with Brookline Capital Markets.

So I would also like to continue with regard to the COVID-19. So does this take into consideration that hospital will be allowing elective procedures?

Well, we take that into consideration. I think in our case, the interval debulking surgery is not exactly considered elective procedure. So these are absolutely necessary procedures, and we review with every site that's involved in the study to make sure, number one, that they have COVID-based procedures in place. We collect all the deviations that might be associated with COVID. For example, if there's -- if it's necessary for a patient to delay or miss a visit, all that is accounted for in our start-up with every hospital and in the protocol design. So this is done in conjunction with FDA guidelines, NIH guidelines. And the #1 issue is getting patients not afraid to come in for their initial diagnosis. That seems to be the biggest problem, but once they come into the system, the patients are very motivated to move forward with their treatment, not to skip any treatments and indeed to get their interval debulking surgery because here, this is very life threatening.

Okay. And in terms of the powering, does the control arm include synthetic controls, too? Is that based on that?

In terms of the powering, I'm sorry, we're having a little bit of a communication issue. Could you repeat that, please?

Like you guys are saying the powering of the OVATION study, does that powering, is it based on including synthetic controls in the placebo arm?

No. The way the protocol is designed is, at the moment, we're not going to be using our synthetic controls. We're studying this. This is very exciting technology, but we're using actual patients in our randomization scheme. Maybe later on, we'll take another look at it, but as Michael mentioned before, we have a very enthusiastic core of investigators, and they're very anxious to enroll both actual patients into the control arm and into the treatment arm so that we have real data.

Okay. If you include synthetic control, how is that expected to impact the powering of the trial?

The impact of a synthetic control arm would be just another way to look at the data. I think everyone would agree that when you have actual patients enrolled in the study, that's going to be our strongest data. The synthetic control arm will be helpful in case we run into a major problem in patient enrollment. We hope that we don't have to resort to that. It's an interesting technology. We continue our discussions with the vendor that's involved in that. I think their data has been very good directionally, but our commitment right now is through actual patients.

Okay. Finally, in terms of GEN-1 manufacturing and the amount of drug supply you have, can you provide an update on that?

Yes, that's a very timely question. So the components for the GEN-1, we have multiple sources for. The plasmid, for example, is manufactured currently in an approved site in Europe. Secondary site is being developed in China. Now the plasmid materials sufficient to enroll the Phase II study have been fully manufactured. The polymer that the synthetic nonviral delivery platform, the polymer has been fully manufactured in 2 locations, one in China and one in the United States. So those materials are all available for the finished product. We just completed manufacturing of 4 lots, enough to complete enrollment of the Phase II study. The last lot was produced, I think, last night. We -- at our manufacturing partner in China, (inaudible). And by the first reports on that manufacturing have all been very positive, but we don't see any interruption potential in the supply chain, I guess, is the bottom line because we have backups and second sourcing and a current very reliable supply chain. Hope that answers your question.

And this concludes today's question-and-answer session. I will now turn it back to today's speakers for closing remarks.

So I want to thank all of you for your time this morning. We continue to be driven by our commitment to bring new medicines to the medical community and by the work of our talented scientists, clinicians, technical and administrative staff, and we look forward to keeping you apprised of our progress. We'll speak with you again when we report our 2020 fourth quarter and full year financial results. In the meantime, stay safe. We hope you have a great and nice afternoon. Thank you.

Ladies and gentlemen, this concludes today's call. Thank you for your participation. You may now disconnect your phone lines.