Plus Therapeutics Inc (PSTV) 2018 Q2 法說會逐字稿

Good afternoon, ladies and gentlemen. Welcome to the Cytori Therapeutics Second Quarter 2018 Earnings Results Call. (Operator Instructions)

Before we begin, we want to advise you that over the course of the call and question-and-answer session, forward-looking statements will be made regarding events, trends, business prospects and financial performance, which may affect Cytori's future operating results and financial position. All such statements are subject to risks and uncertainties, including the risks and uncertainties described under the Risk Factor section, including in Cytori's annual reports on Form 10-K and quarterly reports on Form 10-Q filed with the Securities and Exchange Commission from time to time. Cytori advises you to review these risk factors in considering such statements. Cytori assumes no responsibility to update or revise any forward-looking statements to reflect events, trends or circumstances after the date they are made.

It is now my pleasure to turn the floor over to Dr. Marc Hedrick, Cytori's President and Chief Executive Officer. Sir, you may begin.

Good afternoon. Thank you, Ian. Welcome to our second quarter 2018 earnings call. My name is Marc Hedrick, President and CEO of Cytori. And joining me on today's call is our CFO, Mr. Tiago Girão. On the call today, I will provide an update on the company's oncology and cell therapy programs. Then Tiago will update on the financial performance. After which, I'll update on forthcoming milestones. Then we'll have time for Q&A.

To begin with, regarding our Cytori Nanomedicine platform. Cytori is developing and manufacturing the chemotherapy drug ATI-0918, a generic pegylated liposomal doxorubicin hydrochloride to be bioequivalent to the European reference drug. We intend to position this as a high-quality U.S.-made product with maximal clinical effectiveness. Our Nanomedicine team in San Antonio, Texas, continues to complete manufacturing and nonclinical-related activities that will support a Marketing Authorization Application or MAA to be filed with the EMA next year.

Our goal is to be either the first or second generic on the market in Europe. The company also continues to engage and evaluate potential commercial partners for ATI-0918 in Europe, the Middle East, North Africa, North America and Asia Pacific region. As mentioned before, the global market for this drug is estimated to be approximately $400 million to $750 million annually. And in Europe, the estimated annual market opportunity is approximately $120 million to $300 million.

Furthermore, regarding Cytori's ATI-1123 chemotherapy drug product candidate, this is a Phase II-ready albumin-stabilized and pegylated liposomal docetaxel. Protein-stabilization enhancements and integration of the lipophilic API docetaxel, and provides liposomal stability. The peg on the liposomal surface extends blood circulation time, while reducing mononuclear phagocytes system uptake.

Regarding this drug, Cytori is continuing to develop it to address the shortcomings of docetaxel, which has been a workhorse chemotherapy -- chemotherapeutic drug, which generated a maximum $2.7 billion in worldwide sales at its peak. A rationale for developing ATI-1123 is to improve safety by removing the need for unwanted solvents, reduce morbidity by eliminating the requirement for standard pretreatment medications, providing better patient convenience and comfort via less time spent in a treatment center, decreasing the cost of therapy and enhancing the systemic docetaxel exposure, which may add efficacy benefit.

The company has requested an orphan drug designation from FDA for small cell lung cancer, and is evaluating the FDA's 505(b)(2) new drug application pathway in the U.S., which may offer an accelerated development timeline and lower development cost.

Now turning to our Cell Therapy program. Our team is awaiting currently the data readouts from clinical trials in scleroderma, and also in urinary incontinence and is actively conducting a clinical trial in thermal burns. 6 months data from the 40 patients, [Fritch] scleroderma trial called SCLERADEC-II is expected this year. Positive EU data, coupled with STAR trial data, may be sufficient to file for conditional EU approval.

There are approximately 115,000 scleroderma patients in the EU, and approximately 30% of those are in our target group with moderate-to-severe disease. Additionally, 1-year data from the 45 patient, Japanese ADRESU clinical trial for SUI or urinary incontinence is expected in early 2019. If the 12-month ADRESU clinical trial data confirms the safety and efficacy shown with the ECCI-50 cell therapeutic, which is similar to the group noted in the published pilot trial, positive data may allow approval and reimbursement for this indication.

As to the market size for SUI, according to the Japan National Cancer Center, over 86,000 men are diagnosed with prostate cancer each year, up to 42% of patients undergoing radical prostatectomy, subsequently develop stress urinary incontinence, which may profoundly compromise quality of life. As previously mentioned, the same ECCI-50 cell therapeutic has also demonstrated promising clinical results in women with stress urinary incontinence. And there are approximately 2.9 million potential patients for this indication in Japan.

Finally, the U.S. FDA has approved the protocol amendment for the RELIEF thermal burn BARDA funded trial, which is intended to facilitate enrollment. In June, Cytori completed a successful in-process review meeting with BARDA. Cytori continues to screen patients for the RELIEF trial and is working in an ongoing basis to add clinical trial sites.

As it relates to additional investigator trials in the U.S. Cytori continues to support the Mayo Clinic's FDA-approved investigator-initiative trial of Cytori cell therapy for bilateral osteonecrosis of the hip, which is a rare disease affects approximately 10,000 to 20,000 new patients each year in the U.S. 8 patients of the target 25 total enrolled patients have been treated to date.

In Japan, where we are most commercially active, Cytori continues to see favorable growth trend and use of its commercially available and approved cell therapy products in the aesthetic and orthopedic market. The company remains on track to see continued double-digit year-over-year growth and considerable utilization. Tiago will discuss these data and trends more specifically in his remarks.

There are a couple of other related items I would like to also point out at this time. A substantial upgrade in our core solution system called now CTX-1 is currently being used in the U.S. RELIEF trial and will be made available commercially based on the outcome of the planned up classification of our solution technology from Class I to Class III registration, which is currently under evaluation by MHLW in Japan.

Recently, we announced a termination of the existing supply agreement for Cytori's proprietary Celase and Intervase enzymes. We currently have sufficient inventory to adequately supply our customer base for the next few years, while we either renegotiate a new agreement with Roche or identify another supplier for the long-term supply and negotiate an agreement with them.

Also, we're in the process of transferring physician consumable manufacturing to Coastal Life Technologies in San Antonio, Texas. This move will reduce costs and improve gross margins. The first sterilized consumables will be available for distribution from Coastal to Japan and Europe in Q4. Finally, as a note, we've successfully completed 2 audits this past quarter, one by the U.S. FDA and one by a notified body DEKRA.

Now I would like to hand the ball off to Tiago.

Thank you, Marc, and good afternoon, everyone. Our primary focus remains unchanged. The development of our late-stage clinical pipeline and related commercial preparatory activities that we believe can translate into shareholder value. In parallel, we are carefully managing our resources as tightly as possible, while continuing to improve our operating performance. Despite the additional new investments in our recently acquired oncology assets, operating cash burn was managed down to $2.7 million in Q2 2018 as compared to $5 million in Q2 2017.

The reduction in cash burn was mostly related to reductions in net losses adjusted for noncash items of approximately $2.1 million coupled with working capital improvements of approximately $200,000.

For the 6-month period ending June 30, 2018, operating cash burn reduced to $6.8 million compared to $9.9 million for the same period last year. The reduction, again, driven primarily by reductions in net losses adjusted for noncash items of $3.4 million. Net losses totaled $3.7 million in Q2 2018 or $0.59 per share as compared to $6 million or $1.94 per share in Q2 2017.

For the year-to-date period, net losses totaled $8.1 million or $1.32 a share compared to $13.6 million or $5.04 a share for the same period in 2017. Note that net losses in 2017 included a noncash charge of $1.7 million recorded associated with in-process R&D charge, part of the oncology asset acquisition.

For research and development expenses, in Q2, our research and development expenses, excluding share-based compensation were $1.9 million compared to $3 million in expense in Q2 a year ago. On the same basis, for the year-to-date period, our research and development expenses were $4.4 million compared to $6.2 million in 2017. The decrease in R&D spending during both periods are attributed to the decrease in headcount from the restructuring activities implemented in September 2017 and the completion of the STAR clinical trial activity. These reductions are offset by our investments into ATI-0918 and the ongoing manufacturing activities in San Antonio as well as our investments into the RELIEF clinical trial funded by BARDA.

As a percentage of overall spend, and when excluding share-based compensation, our R&D for Q2 2018 and year-to-date period was 50% and 48% of total operating expenses, respectively. This is in line with our plans and is indicative of our focus on late-stage programs.

Now onto sales and marketing. Our sales and marketing activities and related expenses decreased this quarter to approximately $511,000 as compared to approximately $1.2 million in Q2 2017. On the same basis for the year-to-date period, our sales and marketing expenses were $1.2 million versus $2.1 million in 2017. And the decrease in expenses during the period are related to the decrease in headcount as well as lower professional services related to the decreased efforts in HABEO precommercial activities, mostly in the U.S.

G&A expense, excluding share-based compensation, was $1.4 million this quarter as compared to $2 million in Q2 2017, and $3 million in the 6 months period ending June 30, 2018, compared to $4 million for the same period last year.

Approximately $600,000 in charges related to onetime lease termination fees were paid in February. And those charges are included in the 2018 fiscal numbers. The continuing tightening of our G&A expenses was related principally to decrease in headcount resulting from the September 2017 restructuring as well as discretionary spend.

Now with respect to our revenues. Q2 total revenues were $1.6 million as compared to $1.5 million in the second quarter of last year. Year-to-date, our total revenues were $3.2 million compared to $3.1 million for the same period last year.

Product revenues decreased by approximately $300,000 in Q2 versus 2017, and was largely related to fewer devices sales in Japan. This was offset by an increase of over 70% in consumable utilization in that region. Year-to-date consumable utilization is up by over 60%. Such growth is primarily driven by the aesthetic and the orthopedic markets, which we believe represents a minimal -- meaningful revenue opportunity for the company today. And as per our guidance, we once again achieved double-digit consumable growth for the quarter in Japan, where we have regulatory approval.

Note that Japan consumable revenues represents now over 90% and 85% of total product revenues for Q2 and year-to-date periods, respectively.

Our government contract revenues related to our activity supported by BARDA. Such activities increased by approximately $350,000 this quarter as compared to Q2 of last year. This is indicative of the beginning of the kickoff phase for the RELIEF clinical trial and the newly awarded -- under the newly-awarded BARDA contract.

Turning to the balance sheet. As of June 30, we have $3.1 million in cash on hand, $13 million in debt. And last month, we closed on a right to offering finance that resulted in additional $5.7 million in net proceeds to the company. We plan to balance our ongoing capital requirement through several targeted activities that include revenue growth, business development opportunities, operating -- operational efficiency measures and working capital management, in addition to accessing the capital market.

Now I'll turn it back to Marc.

Thank you, Tiago. Let me just update on major forthcoming milestones and then we will have time for Q&A.

First of all, our major goal is to complete the ATI-0918 development program and a manufacturing-related obligation that are [absolutely] required to prepare and file an MAA with the European Medicines Agency. Number two, we intend to receive orphan drug designation feedback from the FDA, and 505(b)(2) pathway feedback also from the FDA regarding our ATI-1123 oncology product.

We intend to continue to ramp (inaudible) and hopefully enroll patients soon in the BARDA-funded U.S. RELIEF clinical trial. And then from a clinical perspective, in terms of reporting data, we plan to report 3- and 6-months EU SCLERADEC-II clinical trial data for scleroderma hand dysfunction, and then also report 6 months and 1-year Japanese ADRESU clinical trial data for postsurgical male stress urinary incontinence.

And with that, I'll turn it over to you, Ian, and we'll open up the floor for Q&A.

(Operator Instructions) And our first question is from the line of Jason Kolbert from H.C. Wainwright.

Congratulations on getting the raise done. Can you talk a little bit about the financing plans going forward and the emphasis around 918 and the BD activities? Because while I'm glad to see the cash balance rise, I was hoping to see more cash on the balance sheet. Can you also talk just a little bit about what the pathway might look like to file on scleroderma in Europe? And to file for SUI in Japan so that we can understand kind of the magnitude of those opportunities as you work to kind of elongate the cash runway into those 2 catalysts, while looking at how to use 918 as a tool to elongate that runway as well?

Jason, thanks for the question. While we did supplement the balance sheet in the recent capital raise, as you mentioned, we were hoping to raise additional capital to provide enough runway to get the 0918 drug to approval, which we didn't do. So as Tiago mentioned, the plan is to use a variety of methodologies, including business development to prolong the pathway. In addition, we've done a great job in trying to keep a lid on excess burn and staying focused on key programs that have value, which we intend to do. So on the BD side, the department site, as mentioned, there are a number of things that are ongoing and engaged with multiple parties, the challenge there is just predicting the timing, which is very difficult to gauge and to provide concrete guidance at this point, which we can't. But we'll continue to move the ball forward on all those different levers that Tiago mentioned, with the hope of leveraging most of all those different BD opportunities, which is -- which we're engaged with, with multiple parties. So regarding your second 2 questions, in terms of what's it going to take and what's the plan to seek potential approval for scleroderma and for SUI? We'll take SUI first, because that's, I think, a more clear pathway. Regarding SUI, the plan is to try to expedite the readout on that trial, instead that we'll likely get data by early '19, there may be an opportunity to get data in early 2018, which then -- sorry, late 2018, and that would allow us to go ahead and file for approval which takes about 1 year, so about 1 year from data, we've just been hearing back as to whether we have approval and then another 6 months as to whether there is reimbursement. So that takes the process to launch with reimbursement to about 18 months. There may be some opportunities as I mentioned to expedite that. But we're already having those discussions with PMDA in Japan. As it relates to scleroderma, it's a little bit more of a murky process. So our plan is to evaluate the data. It's a smaller clinical trial. There is a clear path to providing conditional approval with the idea that you come back with additional clinical data later for full approval. And then, we'll just have to -- we'll guide to that after we see the data and that will likely be a -- if the data is positive, efficient, a 2019 event.

Marc, and we're really looking forward to seeing some good things happen in the remaining part of this year.

(Operator Instructions) Our next question is from the line of Yale Jen from Laidlaw & Company.

My question is regarding 0918. As I recall that last -- on the -- during the last earning calls, you have talk about one of the competitors may extend their application in Europe for their liposomal doxorubicin. So where do you see things are in that competitive space? And I have another follow-up.

Yale, yes, on the last call, I mentioned, a Taiwanese company that has a open submission, that's been open for approximately well over a year. And the EMA hasn't acted on that. So as far as we know, that's still active, but there's been no public disposition on that competitive movement. We do think that there are other potential competitors in that market, although we don't have any specific information about those other competitors, but we do anticipate other competitors in that market. And I think from our perspective, the goal is to get that -- get the drug manufactured and on stability testing, so we can file next year and do that as soon as possible. It really is a -- as much a time issue as it is anything else. And so that's -- that is our #1 priority. And so the goal, again, is to get that product made, and get stability testing done and file for EMA approval next year with the goal of being the first or second generic to market. For what we think is a market of approximately $120 million to $300 million a year.

And at this time, I'm showing that there are no further questions on the phone lines. I'd like to turn it back to you, Dr. Hedrick, for any closing or additional remarks.

Ian, thank you. Just like to conclude by thanking everyone that participated either with questions or by listening on the call. Thank you, of course, to our employees. And I wish you a good evening. Thank you.

Ladies and gentlemen, thank you. This does conclude today's conference call. Please disconnect your lines at this time, and have a wonderful day.