Imunon Inc (IMNN) 2021 Q3 法說會逐字稿

Good morning. My name is Bobby and I will be your operator today. At this time, I would like to welcome you to the Celsion Corporation's Third Quarter 2021 Financial Results Conference Call.

(Operator Instructions)

At this time, I would like to turn the call over to Kim Golodetz. Please go ahead.

Thank you, and good morning, everyone. This is Kim Golodetz with LHA. Welcome to Celsion's Third Quarter 2021 Financial Results and Business Update Call. As has been Celsion's practice, and as noted by the operator, prepared remarks will be followed by a question-and-answer session.

During today's call, management is making forward-looking statements regarding Celsion's expectations and projections about future events. Generally, forward-looking statements can be identified by terminologies such as expects, 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 is significant uncertainty about the duration and 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 15, 2021. Celsion undertakes no obligation to revise or update comments made during this call, except as required by law.

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

Thank you, Kim. Good morning, everyone. Joining me today are Jeffrey Church, our Chief Financial Officer, who will review Celsion's third quarter financial results in just a moment; Dr. Nicholas Borys, our Chief Medical Officer; and Dr. Khursheed Anwer, our Chief Science Officer, will be available during the Q&A session to answer your questions regarding our work with GEN-1 and our vaccine initiative.

During the third quarter, we continued to make progress with our leading research programs, utilizing our proprietary plasmid-based technology. As you may note from our press releases, promising clinical observations were reported for our lead investigational product GEN-1 and its potential.

By recruiting the immune system, we expect our immuno-oncology agent to improve outcomes for patients with advanced ovarian cancer. I also note that our vaccine technology and preclinical data were presented during oral sessions at the International Vaccine Congress this last October, supporting our hypothesis for the immunization potential of PLACCINE, our formulated DNA plasmid-based vaccine.

Our very strong balance sheet, along with our ability to access sources of nondilutive capital, allow Celsion to reach key milestones and complete our randomized Phase II study of GEN-1 through final readout and report our proof-of-concept results for PLACCINE early next year without the immediate need for additional capital.

Now I'll briefly I'll review these programs and provide an update on the important catalysts as we see them now. Celsion's in-depth understanding of plasmid technology and vector construction underlies our research focus and provides the basis for our 2 leading product platforms.

TheraPlas, our first platform, is our synthetic nonviral DNA delivery platform. It has demonstrated its ability to deliver DNA plasmid repeatedly and successfully for a successful cell transfection over extended periods of time, as much as 6 months, in our Phase II study.

GEN-1 is our lead drug candidate on the TheraPlas platform. GEN-1 incorporates the plasmid encoded for IL-12, a powerful anticancer cytokine, that in our trials has shown unequivocally its ability to modify the tumor macro and microenvironment, shifting it to proimmune, in a highly immunosuppressive environment of advanced ovarian cancer.

Published translational data from our recent Phase I study in newly diagnosed ovarian cancer patients is clear on this and is consistent with the well-known pharmacology of IL-12. Access to these data can be had on our website. There's a link in a press release discussing the publication of these data.

These biological data appear to support observed dose-dependent improvements in tumor response, surgical results and pathological responses. Progression-free survival appears favorable when compared to published historical studies or when compared to a synthetic control arm provided to us by the well-respected data management CRO, Medidata.

And while the (inaudible) is small coming from a Phase I study, we and our medical advisers firmly believe that the trends are highly supportive of our continued clinical development program. We are now evaluating GEN-1's potential to improve progression-free survival, that's PFS, in an open-label randomized Phase II study of newly diagnosed treatment-naive advanced ovarian cancer patients.

The OVATION 2 Study is designed with an 80% confidence interval for an observed PFS hazard ratio of 0.75, which in layman's terms means an approximate 30% improvement in risk for cancer progression or median time to progression when comparing the GEN-1 treatment arm with controller.

This trial is being conducted in 21 centers in the United States and 1 in Canada, including NYU Langone, Mass General, WashU, the University of Wisconsin-Madison, University of Alabama, UC San Diego and MD Anderson, Cooper, among other premier clinical research centers.

As we noted in this morning's press release, the study will recruit as few as 110 patients and as many as 130, and is now approaching 70% enrollment at the target minimum population. We expect to complete enrollment early in the first quarter -- or first half, I'm sorry, depending upon the n, the number of patients in the study, with final PFS readout occurring, when 80 PFS occur or 16 months median time on the study curves, whichever comes first. This will put the data readout somewhere in the first half of 2023.

Now on to our second platform, PLACCINE. PLACCINE is our proprietary next-generation vaccine platform, the hypothesis of which is being evaluated in a preclinical proof-of-concept initiative using mRNA-based vaccines as a baseline comparator.

PLACCINE in its current iteration is designed with multiple viral antigens encoded for a single DNA plasmid vector delivered with a synthetic nonviral DNA delivery polymer. A working hypothesis is that a DNA plasmid of this construct has the potential to be superior to mRNA vaccines in a number of ways. For example, a plasmid comprised of multiple antigens reduces the possibility that evolving virus variants will escape vaccine dependent immunity. The quality of the immune response will be improved through a higher affinity neutralizing antibodies immunoglobulin G, or IgG titers, and T cell response against multiple strains of antigens is expected to be superior.

We expect a longer duration of immune response due to the longer duration of antigen expression from DNA versus mRNA. And based on our many years of experience with GEN-1, we expect and more commercially appealing more stable product and workable temperatures. We are pleased with our progress so far. In September, we announced results from preclinical in vivo studies showing production of antibodies and cytotoxic T-cell response specific to the spike antigen of SARS-CoV-2, or COVID-19, when immunizing a BALB/c mice with our fourth generation vector construct.

We noted antibodies to the SARS-CoV-2-spike antigen prevented the infection of cultured cells in a viral neutralizing assay. The production of antibodies predicts the ability of PLACCINE to protect against SARS-CoV-2 exposure and the elicitation of cytotoxic T cell response shows the vaccine's potential to eradicate infected -- cells infected with SARS-CoV-2.

These early findings suggesting a great deal of potential were presented by our Chief Science Officer, Dr. Khursheed Anwer, at the International Vaccines Congress in October. We also noted that there's more work to do to fully establish our proof of concept from which we expect to demonstrate broad spectrum protection and resistance against variants and improved vaccine stability at storage temperatures of 4 degrees Celsius and above, and to facilitate cheaper and faster manufacturing as compared to mRNA vaccines. So where are we going with this?

Clearly, there are several commercial Sars-CoV-2 vaccines in the market and hundreds of millions of dollars being committed to COVID-19 vaccines and therapeutics by deep pocket, big and small pharma. So may be wondering, why are we devoting resources to this program now. While we're thinking longer term, and I note the following. Our immediate goal is to validate our vector and deliver technology in preclinical studies using mRNA vaccines as comparators.

Once our hypothesis is proven, there should be a commercial -- should there be a commercial possibility, we will seek development partners for our COVID-19 clinical trials. Also, once our hypothesis is proven, we expect to begin development of DNA plasmid vaccines to address a broad range of other infectious viral agents. Now at this point, I'd be remiss if I didn't mention the role of our dedicated staff and partners in this effort, driving our research as an outstanding group of scientists that has recently been reinforced with individuals who bring advanced knowledge in molecular biology, immunology and vaccine development.

We continue to build relationships with development partners in vector construction, analytical methods and supply chain capability. We've improved our capacity to produce high volumes of research, quantities of vaccine prototypes for our proof-of-concept work and have assembled the Vaccine Advisory Board comprised of highly regarded researchers in the field. I conclude my comments on PLACCINE by saying that we continue to be excited and cautiously optimistic about the platform and its highly advantaged potential.

Now just a few comments on our balance sheet. We continue to take advantage of various sources of capital available to us. And along with the most recent raise of $13.9 million completed early April this year, we improved our cash position with the sale of $2 million of our New Jersey State net operating losses also earlier this year.

We also just received approval to sell later this year an additional $1.5 million in NOLs. All available to us, by the way, is an additional $3.5 million in NOLs that can be sold over the next few years. We further strengthened our balance sheet and improved our cash flow this year with a new $10 million loan facility with Silicon Valley Bank, which allowed us to repay $6 million of higher interest venture debt last quarter.

Jeff will provide more details about debt financing. But the bottom line is that we have smartly strengthened our balance sheet with investor-friendly common stock transactions and nondilutive sources of capital, all of which support a cash runway that now extends through 2024. Our cash position, as I mentioned earlier, will allow us to reach a number of important development milestones, including PFS from an OVATION 2 Study and proof of concept reports from the PLACCINE initiative.

With that, I'll turn the call over to Jeff Church, who will go into more detail about our very strong financial position. Jeff?

Thank you, Michael. Details of Celsion's third quarter 2021 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. Celsion ended the third quarter of 2021 with $60.6 million in cash and investment securities, restricted cash and accrued interest receivable.

Over the past 3 years and without any dilution to our stockholders, we have raised nearly $15 million from the sale of our New Jersey state net operating losses, which is equivalent to nearly a full year of operating expenses. We have a further $5 million of unused New Jersey NOLs available for sale between 2022 and 2024. $1.5 million of which was approved last week by the New Jersey Economic Development Authority for sale this year, which is expected to net the company about $1.4 million.

Coupled with future sales of our New Jersey NOLs, given our current spending plans, we believe we have sufficient capital resources to fund our operations through the end of 2024. We are in an excellent position with respect to liquidity to support us through several important value-creating milestones.

Let me now turn to a review of our third quarter and year-to-date 2021 financial results. For the quarter ended September 30, 2021, Celsion reported a net loss of $5.4 million or $0.06 per share. This compares with a net loss of $8.1 million or $0.24 per share for the quarter ended September 30, 2020. Operating expenses were $5.2 million in the third quarter of this year, which is up about $900,000 or 21% from operating expenses of $4.3 million for the third quarter of 2020.

Let me break this down by line item. Research and development expenses were $2.5 million for the third quarter of this year as well as the third quarter of last year. Clinical development costs for the Phase III OPTIMA Study decreased to $200,000 compared with $0.5 million for the prior year quarter due to the discontinuation of this 556-patient trial in the first quarter of 2021.

Research and development costs associated with development of GEN-1 to support the OVATION 2 program as well as the PLACCINE, DNA vaccine technology platform, increased to $1.3 million from $900,000 in the prior year quarter. Other costs related to the company's clinical development programs decreased to $1 million from $1.1 million in the prior quarter, largely driven by higher manufacturing costs for GEN-1 clinical supplies for the Phase II portion of the OVATION 2 Study, offset by lower regulatory and manufacturing costs related to the discontinued OPTIMA study.

General and administrative expenses were $2.7 million in the third quarter of 2021 compared with $1.8 million for the third quarter of 2020. This $900,000 increase is primarily attributable to higher noncash stock compensation expense of $200,000, and increase in professional fees, these are largely legal fees, of $600,000, and an increase in premiums for our director and officers' insurance of $100,000.

On a year-to-date basis, net cash used for operating activities was $11.1 million, which compares to $11.9 million for the same period in 2020. cash utilization is in line with our projections for 2021 of approximately $17 million or an average of about $4.25 million per quarter.

Cash provided by financing activities was $54.8 million during the first 9 months of 2021, derived from equity offerings in January and April, proceeds from the $10 million loan facility with Silicon Valley Bank in June, and the sale of our New Jersey NOLs in May. I'll now turn the call back to Mike.

Thank you, Jeff. I mean, just -- I'm just going to make a quick comment. Our industry, certainly including us, our industry is seeing an enormous amount of litigation, for the most part meritless claims. While the cost to us this year are quite high, and then for many companies like us, our D&O insurance costs continue to increase.

I think this meritless litigation is something that needs to be addressed through legislative action to our shareholders. We would encourage you to contact your legislators, and let them know that this use of investor capital to defend against meritless claims is outrageous and needs to be controlled through some kind of legislative action.

So with that, I want to say to our shareholders that I want you to know that we're driven by a commitment to bring new medicines to patients and the medical community. Supported by the daily work of our talented scientists, clinicians and technical staff, we remain focused, delivering against our research objectives and our drive to create value for our shareholders.

So with that overview of our business and our recent financial results, we are ready to open the call to questions.

(Operator Instructions)

And our first question comes from Kumar Raja with Brookline Capital Markets.

Congratulations on all the progress. Looks like you are doing well in terms of the enrollment for the OVATION trial. In terms of the clinical trial side, what are you seeing there in terms of patient recruitment? Is it back to the levels that was before the COVID-19? What are you seeing there? And how is it different from different centers? And in terms of this 110 to 130, where do you think you will end up in that range?

Yes. So can -- I'd like to answer the second question first, if you don't mind. So our -- this is a Phase II study. Our goal here is to use the data to power a Phase III. The statistical plan is designed with up to 130 patients. But this is an event-driven study. So we're looking for 80 events, frankly, to have data sufficient to -- or 16 months on trial to have data sufficient, to be able to power the pivotal trial.

Where do we expect to be? I am hopeful that we'll be north of 110 patients. The more experience we have with this investigational product, the more confidence we have in the designing of a Phase III study. With regards to patient enrollment, we've seen some ups and downs. It's my comment, I'm going to ask Nick to comment on this also. When at the height of the COVID-19 the original variant, whether it was the European or the wild-type brand, we saw a challenge enrolling patients.

More recently, this past summer, when the Delta variant raised its head, we saw some reluctance for patients to join our study. I think we're seeing a pickup now. And I just -- I guess -- that's my point of view. Nick, do you have any comments on that?

Thank you, Mike. As you probably can guess, the pandemic has had an impact on patient recruitment in all cancer studies, and patients are hesitant to go in for screening. And also, as you know, in ovarian cancer, one of the problems with ovarian cancer is that there isn't really a good screening process. It's just basically picked up sometimes just through ambiguous symptoms.

So as Michael said, we saw an uptick in our enrollment during the summer when people are feeling good and safe going back to their physicians for checkups. Then the second wave hit in the fall, and we've seen a decrease.

More recently, we're now getting reports from our hospitals that there's staffing problems at the centers, but we still continue to enroll our patients and I think pretty good rate compared to overall. So we're optimistic to meet our time lines, as Michael mentioned before. And I have to say that pretty well 90% of our sites are, in fact, enrolling patients actively. So we're getting very good participation.

Okay. And in terms of the DNA vaccine, what are the next steps there? And are you looking for external funding to move that forward?

So we have sufficient capital to support our proof-of-concept work. We have applied for grants from various government agencies, and we'll apply for more. We think what's important is a validation of our work, whether or not we'll be successful, obviously, we -- I can't predict that. But we think it's important to apply for government funding. But bottom line is we have sufficient capital to take us through a proof of concept. With regards to what is left to do, Dr. Anwer is on the line. Khursheed, do you want to pick up the rest of the question, please?

Thank you, Michael. Sure. So as our proof-of-concept objectives are to demonstrate that from a single DNA-based plasmid, you can express antigen for 2 different strains of a virus. We have been modeling SARS-CoV-2 as a benchmark because there's commercial products out there for competitive purposes.

So our goal for the next couple of quarters is to demonstrate from a single vector, you can generate neutralizing antibodies IgG and T-cell responses against 2 strains of SARS-CoV-2 and in the neutralization asset demonstrate that this single vector antigen is effective against 2 strains versus a vaccine that's designed for a single strain only. So that's the key thing. DNA inherently has better stability than mRNA. So we need to demonstrate stability advantage through experimentation.

As Michael had said earlier, that DNA expresses for a long period of time from skeletal muscle as opposed to mRNA. So our hypothesis that we'll be able to demonstrate durability of immune response from our vectors to same RNA.

So these are some of the key objectives that are ahead of us in terms of demonstrating POC.

Nick, let me just jump in here. So Khursheed, would it be accurate to say that our current vector -- like the most recent construct is showing its ability to be able to produce the antigens for which it's coded? And now we're looking for ways to optimize the activity of that vector. Is that reasonable to say?

Correct. Yes, sir. reasonable to say.

Okay. And in terms of using GEN-1 as immunotherapy for other oncology indication, what efforts are being done in that front? And when can we get an update there?

So I think we're optimistic that once we show in this Phase II study, some positive results, and we fully expect to do so. That any intraperitoneal -- peritoneal cavity cancer is a target for us. While we haven't decided on which, but any of them could be an immediate target. And that would include the -- I mean, broad range from colorectal cancers to liver cancers, to maybe even pancreatic cancers. But Khursheed, can you explain more on that, please?

Yes, sure. So the product that we're developing GEN-1, as you know, this is for intraperitoneal delivery. And by delivering this product, you can make IL-12, gamma and favorable immune changes in the peritoneal environment. So obviously, right now, we are going after ovarian cancer because over 90% of reading cancer patients are metastasized into the peritoneal cavity and the disease local is the result of that, so you control that.

Along the same line, there are some other GI cancers, at least about somewhere between 25% to 30% of different GI cancers also metastasize to the peritoneal cavity and these include gastric cancer, liver cancer, as Michael said, lymphatic cancer, colon cancer.

So with the same principle and these cancers are also immunogenic. So that would be our really next goal. We have demonstrated in animal models that activity of GEN-1 against these GI, GYN cancer. So as Michael said, once we have proof of concept with the ovarian cancer, then I think that concept would be almost like parallel for other cancers. If you demonstrate immune response, local control of disease with ovarian, it would be very likely that we could go after one of these GI cancer that we just mentioned to you earlier.

And our next question comes from David Bautz with Zacks Small Cap Research.

So my first question is for the OVATION study. I guess it's kind of a technical question. So when a patient is said to have no residual disease, is that based on the surgeon's opinion? Or is that somehow quantified.

Nick?

Yes. Thanks very much for that question. Yes, it is quantified on 2 levels. Number one, yes, it's based on the surgeons evaluation of what the -- what -- if there's any residual disease left in the cavity and from tissue that's sent to pathology for a review to see if there's any disease left. So those 2 play into that role. And then on top of that, we're also looking at overall response from the CT findings and the final pathological report.

And as you know, historically, R0, where the surgeon feels that they completely remove the disease is typically found in most large studies at around 50% of the time. And in our study so far, very consistently, we're seeing an R0 response in 75% of the time. And this is probably our biggest topic of discussion in our PI meetings.

Okay. Great. And as far as releasing additional data from the study, when do you expect to do that? Will it be at the next quarterly update call? Or will it be some time in between that?

Some time in between then. We're hopeful to be able to collect enough information supported by the investigator -- these are investigator reported results, to be able to collect enough information to provide an update probably within the next few weeks.

Okay. Sounds good. And lastly, on the COVID vaccine. So it kind of sounds like you're leaning more towards developing a multi-strain vaccine versus a multi-antigen vaccine. Am I understanding that correctly? Or is that still up in the air?

You have it correct. Khursheed, do you want to talk about that a little bit, please?

Yes. David, as you remember correctly, our global sort of overall objective is to develop a vaccine against 2 antigens in a virus with immune modifier to improve the quality. However, for the last 6, 7 months, as the SARS-CoV-2 pandemic is emerging and things have been changing, we all have learned that actually, this strain change, modification in the virus is also equally important. You may have in a population a dominant strain and then an emerging strain.

So we feel that seeing the conditions the way the virus is developing, it might be more prudent at this stage to develop the technology for 2 strains where you can quickly target the prevalent and an emerging strain that would be the need of the hour at this stage. Now however, for multiple antigen approach that you had mentioned, we have demonstrated the construction of a multicistronic plasmid from where we have shown the expression of spike antigen and M antigen. And plus, we also have shown from the same single plasmid that you can express IL-12.

So indeed, the construction of a multicistronic vector with at least multiple genes, 2 genes for SARS-CoV-2, 2 subunit genes for IL-12, 4 genes were expressed successfully. So we do have that eventual goal if we demonstrate the activity against 2 strains of SARS-CoV-2, that's the need of the hour. We can certainly build on it 2 antigens. It's the same thing. 2 genes are there, so you could have 2 different antigens. And also certain viruses are difficult to handle, RSV, HIV. There's no vaccine effective at this stage.

We believe that if you could co-express an immune modifier with the same plasmid, which we have shown an IL-12 can be, that could really address some of those challenges in difficult to handle pathogens. So it's an incremental approach. Yes, 2 strains right now that's more what's needed and down the road, we've built our technology with going into 2 antigens and immune modifier.

I think just on -- as Dr. Anwer points out is the hypothesis that a single DNA plasmid can produce more than 1 protein or antigen, along with an immune system modifier is not compromised at all by this minor change in direction, which we think is more -- it's more urgent and may be more attractive to a collaborator to be able to demonstrate the capability for more than one variant of the disease.

And so I mean, this is just a proof of concept. The variance that we ultimately may end up with could be different than those that are currently being evaluated in the existing construct. And that really is the beauty of this technology, the ability to rapidly adapt the vector construct for the most prevailing medical issue.

So it sounds like you're -- are you limited to just 2 antigens or proteins, some different strains that you can express?

No. I think that was pretty clear in Khursheed's comments, that we've shown proof of concept with as many as 4 proteins, 2 antigens and the 2 subunit proteins for IL-12.

(Operator Instructions)

Our next question will come from Mike Wirth with (inaudible).

I was wondering if you guys had any update from (inaudible) or the FDA as far as the Fast Track Designation goes?

So Fast Track Designation was granted based on an application that we submitted over the summer. So that was granted. The OVATION 2 study -- well, in our study of ovarian cancer generally with GEN-1 has been granted Fast Track along with Orphan Designation. So Orphan Designation in the United States and Europe provides us with, among many other things, an exclusive market from a regulatory standpoint in the United States and Europe of 7 to 10 years. Fast Track, of course, recognizes the importance of finding a therapeutics for some very serious and unaddressed the medical need. In this case, it's ovarian cancer.

But it's not granted on that basis alone. The FDA -- we provide the FDA with evidence that some early evidence that the approach that we're taking has some potential, I would say, a great deal of potential to provide an improvement in the treatment of these patients. So disease that has relatively high unmet medical need has emergency for a therapy or a cure, along with data that suggests that the work that we're doing has a potential to be successful as required for the FDA to grant Fast Track, which has been granted for this program.

Right. So is it -- so the updates will come at the end of each phase? Or is there a way that it's good to go by the end of Phase II if the data shows promising that it's currently showing? That is more of my question.

I got you. So Fast Track provides the company with the opportunity -- an ongoing opportunity to interface with the agency on questions as they come up during the course of development and certainly on the design of the clinical trials, including the discussion of surrogate endpoints that could give us a faster or quicker means to be able to evaluate the drug's effectiveness along with, as I said, study design, I think we're considering various approaches to reduce the amount of time in the clinic to demonstrate efficacy.

So those -- that's kind of ongoing. Ultimately, the value, of course, for Fast Track ends up at the -- at the approvals or the NDA, in this case, a BLA stage, where the Fast Track designation allows the FDA to consider a priority review for your application, which reduces the review time by a substantial amount. So I hope that answers your question.

And that concludes our question-and-answer session. I will turn the call back over to Michael Tardugno for closing remarks.

So I thank all of you for joining our conference call this morning. And for those who have asked questions, we really do appreciate your questions. It gives an opportunity to expand more on the work that we're doing and related to the questions or concerns that you may have. We encourage more questions. And I'm sure we'll continue to get them as our studies progress.

But again, I want to thank all of you for your time this morning. I trust we've conveyed our excitement about the potential of GEN-1 and our PLACCINE vaccine development platform, for which we have a great deal of hope given the number of infectious agents for which there is no real immunotherapy vaccine available. We look forward to keeping you informed on our progress and perhaps seeing some of you in San Francisco in person.

As we understand it now, JPMorgan Healthcare Conference will be held in person during the second week of January. And if you are attending and wish to speak with us, please we can make arrangements through our IR firm by contenting LHA to schedule a meeting. So with that, we'll conclude this conference call. Thank you all very much.

Thank you. This concludes today's call. You may now disconnect.