Plus Therapeutics Inc (PSTV) 2019 Q4 法說會逐字稿

Good afternoon, ladies and gentlemen. Welcome to the Plus Therapeutics Fourth Quarter and Full Year 2019 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 Plus Therapeutics' future operating results and financial position. All such statements are subject to risks and uncertainties, including the risks and uncertainties described under the Risk Factors section included in the Plus Therapeutics' annual reports on Form 10-K and quarterly reports on Form 10-Q filed with the Securities and Exchange Commission from time to time. Plus Therapeutics advises you to review these risk factors in considering such statements. Plus Therapeutics assumes no responsibility to update or revise any forward-looking statements to reflect the events, trends or circumstances after the date they are made.

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

Good afternoon. Thank you, Angela. And welcome to our Q4 full fiscal year 2019 earnings call. I'm Marc Hedrick, President and CEO of Plus Therapeutics. And joining me is our new Chief Financial Officer, Mr. Andrew Sims.

First, on behalf of the entire Plus Therapeutics team, I wish all of you the best possible health during these incredible times. We are a company dedicated to health care, and we hope you and your families are coping as well as you can. And we do encourage you to follow the advice of your doctors and public health officials in this turbulent time.

Today, though, I'm pleased to report the results of Plus Therapeutics' fourth quarter and full fiscal year 2019. However, before we go through our review of last fiscal year, let's first focus on more current news and, in particular, our exciting announcement this morning. Most importantly today, we announced that we have entered into a definitive agreement to license multiple rare cancer drug product candidates from private, Texas-based biotechnology company, NanoTx Therapeutics. The transaction terms include an upfront payment of $400,000 in cash and $300,000 in Plus stock. Furthermore, the company may pay up to $1 million -- $136.5 million in development and sales milestones in a tiered single-digit royalty on U.S. and European sales. The transaction, subject to customary closing conditions, is expected to close in the second quarter of fiscal 2020.

The licensed drug portfolio is anchored upon nanoliposome-encapsulated radionucleotides ((sic)) [radionuclides] and related technologies for a number of cancer targets. The lead drug asset is a chelated Rhenium NanoLiposome, also called RNL, initially being developed for recurrent glioblastoma. RNL is infused directly into the brain tumor via precision brain mapping and convection-enhanced delivery technology to deliver very high therapeutic doses of radiation to patients whose cancer has recurred following initial surgical resection and treatment with chemotherapy and radiation.

We are very excited about this transaction. It is consistent in all ways with our publicly-stated strategic aims that have been mentioned frequently in the past 2 quarters. Among those aims, strategic expansion of our pipeline and, in this case, through an exclusive in-licensing transaction; also, cost-efficient development via a more virtual drug development model while leveraging non-diluted sources of funding, in this case, technology with a strong funding track record via the State of Texas and the NIH and National Cancer Institutes; and a clinical focus on oncology in more rare, poorly met indications, in this case, such as glioblastoma, carcinomatosis and others; and then finally, leveraging our extensive expertise in novel drug formulation in nanoliposomes, in this case, by applying our internal capabilities on CMC and clinical development to move these products into late-stage trials and, one day, potentially commercial introduction.

Also, as we noted previously in our plan, we prefer to invest in drug candidates that meet 3 key criteria. First, they address an unmet or substantially underserved medical need. Second, they combine known, active pharmaceutical ingredients that have extensive safety and efficacy information with new technologies that improve both safety and efficacy. And third, these products will have at least a $250 million addressable market. These drug candidates involved in this transaction check all 3 boxes. I'll provide more details on the technology and the clinical status regarding this transaction momentarily. But in summary, this transaction comports precisely with our previous guidance, and we are particularly pleased that we are able to deliver a first deal so promptly within the first quarter of our new fiscal year.

So now before getting to our FY 2019 review, I'd like to address the current global crisis now in everyone's mind, specifically COVID-19 and this company's response to it. I am relieved to report that there's been no material impact on our operations as a result of the coronavirus. None of our employees have tested positive, and we currently expect no material impact on the results for fiscal year 2020, which ends December 31, 2020. Our recent implementation of a substantially virtual development model is serving us well during the pandemic. Additionally, our facilities in Austin and San Antonio remain open, although while lightly staffed, we have flexible work schedules to provide maximum support for our employees. Be assured that our company has business continuity plans at all sites should the need arise to implement them. No supply chain interruptions have occurred, and we remain in close coordination with our partners and employees of potential risks and mitigations. We are also exploring the provisions of the recently passed CARES law as to how it might provide support to Plus.

As a final point with regard to this issue, besides protecting our workforce and maintaining our business, we are also trying to make a difference to others, coping with the impact of the coronavirus. Recently, we donated the lion's share of our personal protective equipment inventory such as surgical mask, gloves and other protective items to San Diego Scripps Health for distribution to its frontline doctors, nurses and other health care practitioners that are on the front lines caring for patients affected by the COVID-19 pandemic. As many of you know, Scripps Health is a private nonprofit integrated health system in San Diego. And Plus Therapeutics, of course, has had a long time presence in San Diego and La Jolla. We'll continue to do our part to look after our employees and look for other ways we can help the communities in which we live and work.

Okay. So let's return to the FY 2019 review, which marked a productive and pivotal time in the history of this company. In fact, Q4 was the first full quarter of the new revitalized Plus Therapeutics, a clinical stage pharmaceutical company focused on the discovery, development and delivery of complex and innovative treatments for patients battling rare cancers.

Let me briefly summarize some of the substantial progress we made in 2019. Most notably, we injected $26 million into the balance sheet by a combination of transactions, including selling noncore assets, completing a $15 million public offering and negotiating a $4.6 million study closeout reimbursement from the U.S. Department of Health and Human Services. Also, in order to preserve cash and ensure efficient future capital deployment, we consolidated operations from La Jolla, California to Texas and significantly virtualized our development model, meaning an increased and cost-effective reliance on trusted consultants and less on expensive full-time infrastructure. In short, we slimmed down to a built for scale engine of drug development, monetization and liquidity.

Our move to Texas was a key part of this. We are in close geographic proximity to some of the world's most renowned cancer researchers and institutions. As you probably know, our new home State of Texas has a statewide commitment to oncology, best characterized by the Cancer Prevention and Research Institute of Texas, who's funding a second globally only to the United States Federal Government in the public funding of cancer research. Founded in '08, CPRIT has since awarded almost $2.5 billion towards over 1,500 grants focused on academic research, cancer prevention and product development research.

To summarize all this, I'll just reiterate what I said in our recent letter to shareholders. I believe strongly that Plus Therapeutics now has the financial capability, development focus and cost structure to achieve long-term viability and growth.

Now let me march ahead here and provide further details on the transaction we announced this morning. We've licensed a family of drug candidates characterized by novel chemistry, specifically the BMEDA-chelated -- BMEDA is a chelator. In this case, chelates rhenium-186. These are radioisotopes encapsulated via nanoliposomes. These unique drugs are both beta and gamma energy emitters. [Netufer] serves to both kill [hepatic mitotic] cells such as found in most cancer patient. (inaudible) of where the drug is as it works within the tumor, which is very important, particularly in the brain. In these precise formulations, approximately 1 to 2 millimeter radioactive penetration and a 90-hour half-life. When delivered directly to tumors, these compounds can deliver approximately 30x or thirtyfold the radiation to tumors than can standard external beam radiation without the local side effects incurred beam radiation is aimed through normal tissue to get to the brain.

Furthermore, (inaudible) and delivery via various modalities (inaudible) next (inaudible) the newly-licensed rhenium-labeled nanoLiposomes (inaudible) have multi-institutional consortium based in Texas at the Mays Cancer Center and UT Health San Antonio MD Anderson Cancer Center. And it was led by the internationally-renowned Dr. Andrew Brenner, MD, PhD. The lead drug asset in this basket of IP that we [chelated] is a rhenium nanoliposome developed initially for recurrent glioblastoma. Dr. Brenner and his colleague (inaudible) may prolong survival [in patients with recurrent glioblastoma, a cancer that affects about 12,000 people per year (inaudible).

Even today, in the modern times that we live in, radiation is the most effective component of a standard multi-mobile therapeutic regime used in glioblastoma. Multiple randomized studies show about a 5-month improvement in survival with external beam radiation alone compared to an additional 2.5 months with the addition of chemotherapy and 3 months for targeted tumor-treating fields. By infusing the drug directly into the tumor bypassing the blood-brain barrier, normal brain and external tissues are spared from radiation.

In the case of these drugs, the mechanism of action is clear-cut. We know radiation is effective against glioblastoma if an adequate dose can be effectively delivered. For comparison, this is very important. External beam radiation protocols for recurrent glioblastoma typically recommend a total dose of 35 Gray. Gray is how the radiation dose is measured. In contrast, the most recent patient dosed with RNL in the clinical trial that's ongoing today received over 500 Gray, 35 to 500 Gray.

In terms of clinical status, with respect to this trial, we are currently in a U.S. FDA-approved Phase I dose-finding study at a single site in Texas in San Antonio with plans underway to expand to 2 additional sites in Texas at UT Southwestern Medical School and MD Anderson.

In the trial, thus far, 13 patients have been dosed to date, and we are now in the fifth dosing cohort. The radiation dose in the current cohort is now approximately at 15x the dose that is typically delivered by external beam radiation. Higher doses are planned in subsequent cohorts. Thus far, no serious adverse events have been observed in the trial. And in terms of efficacy signals, we continue to follow these patients. But the first 2 patients in which complete tumor coverage with RNL was achieved survived for 30 and 33 months, respectively, and that's compared to a median survival of about 9 months in patients who receive standard of care.

Another thing we really like about this technology is that it had substantial third-party review and support. It was previously funded by the Cancer Prevention and Research Institute of Texas, and there may be further opportunities for future funding as well. Currently, the technology is funded through Phase II, it's in Phase I, but through Phase II by the National Institute of Health and National Cancer Institute here in the U.S. The recently awarded $3 million grant award from the NCI and NIH will function primarily to create cost offsets for Plus during the continued clinical development of RNL for recurrent glioblastoma.

So what about next steps? We plan to do several [things] simultaneously, namely: complete the Phase I trial and determine the maximum tolerated dose; explore ways to accelerate development both in (inaudible) and with the FDA if supported by the clinical data; finalize our plan for more definitive safety in efficacy studies with the agency; and complete the CMC and scalability work required to move this to late-stage clinical and commercial product availability.

Another reason our team is so enthusiastic about this technology and this transaction is that this same product candidate is in preclinical development for several additional indications, including breast, head and neck, leptomeningeal carcinomatosis, liver and ovarian cancers and appears to be quite promising in those, although still early. This technology could be a game changer for some of these really tough clinical problems. Therefore, it's our plan to continue to refine the development plan and support development for additional indications and report back as soon as we complete that planning process.

Furthermore, another licensed preclinical product candidate as part of this transaction is a co-encapsulated doxorubicin and chelated rhenium nanoliposome. It has been studied in the treatment of squamous cell carcinoma to head and neck and may have use in a number of other tumors as well. Finally, these assets are supported by numerous patents worldwide and peer-reviewed publications.

So let me move on to the rest of our pipeline. As you may know, our pipeline also contains DocePLUS, which is a Phase II-ready albumin stabilized pegylated liposomal docetaxel that is intended to target a number of cancers including small cell lung cancer. To summarize what we've said before, it's a reformulation of Sanofi's TAXOTERE or docetaxel using our proprietary nanotechnology platform and being developed for relapsed small cell lung cancer as a new and alternative treatment option to Novartis' HYCAMTIN or topotecan. According to decision resources, topotecan is the standard of care in this patient population and generated $190 million in sales in 2018. DocePLUS has an FDA orphan designation for small cell lung cancer, and we have received FDA pre-IND feedback, indicating that the product may be eligible for the 505(b)(2) regulatory pathway.

Prior to today's announced transaction, management's plan had been to proceed to a Phase II trial in small cell lung cancer patients with platinum-sensitive disease who have progressed after first-line therapy. However, management believes prudence dictates that in the current macroeconomic environment, the uncertainty about the capital markets and with multiple new assets in the pipeline, we will proactively in Q2, adjust as needed our clinical priorities and plans for capital deployment, and we'll do that in such a way to maximize stockholder return. We therefore, put a near-term temporary hold on development spend for DocePLUS while we rapidly assess the overall situation.

Regarding our other asset, DoxoPLUS, we are in discussions with interested parties in acquiring this drug as a potential first generic version of CAELYX in Europe. Additionally, we continue to review a number of other co-development and in-licensing opportunities here to expand our pipeline.

And now I'll turn it over to Andrew Sims, our newly arrived Chief Financial Officer, for a financial review. But before I do, Andrew, let me just give you a brief foreword about Andrew's background, who's a great addition to the team. Andrew was previously an audit partner at Mazars, a global accounting advisory audit, tax and consulting firm. He was originally based in both the Oxford, England and New York offices. Andrew audited and advised global public clients, including a variety of health care companies primarily based in Europe, and he was a lead partner on over 50 acquisitions and numerous cross-border financings and other transactions. He is a certified public accountant here in the U.S. and a charter to come in England and Wales. Andrew was raised and educated in the United Kingdom, but he still has an understandable accent.

So Andrew, we welcome you aboard, and I'll turn it over to you.

Thank you, Marc, and good afternoon, everyone. I'm very excited to be part of the team at Plus, and I'll be discussing Plus Therapeutics' financial results for the fourth quarter and full fiscal year 2019, as presented in our earnings release today.

For the 12 months ended December 31, 2019, our net cash used in operating activities was $5.9 million as compared to $12 million in 2018. Our Q4 2019 net cash provided by operating activities was $1.03 million compared to cash used in operating activities of $2.5 million in Q4 2018. The reduction in annual cash burn was mostly related to discontinued operations, which resulted in reductions in operating expenses.

Net income for Q4 2019 was $0.88 million as compared to a net loss of $2.2 million in Q4 2018. The increase in net income is mainly due to the increase by the development revenue and an increase in the fair value of warrants. For the 12 months ended December 31, 2019, the net loss was $10.9 million as compared to $12.6 million for the same period in 2018.

The research and development expenses in Q4 2019, our research and development expenses were $1.7 million versus a $1.6 million expense in Q4 2018. For the 12 months ended December 31, 2019, R&D expenses were $5.4 million compared to $5.5 million in 2018. The decrease in research and development year-over-year spending was primarily attributed to a decrease in professional services and printing services.

Now on to our sales and marketing. Our sales and marketing expenses increased this quarter to approximately $163,000 as compared to approximately $47,000 in Q4 2018. For the 12 months ended December 31, 2019 and December 31, 2018, our sales and marketing expenses were $468,000 and $643,000, respectively. The decrease in sales and marketing expenses is mainly due to decreases in salaries and benefits related to reduced headcounts due to our planned move towards an R&D-focused company.

G&A expense $1.5 million for Q4 2019 as compared to $940,000 in Q4 2018. For the 12 months ended December 31, 2019 and 2018, G&A expense was $4.8 million as compared to $5.6 million in 2018. The year-on-year reduction in G&A expenses was mainly related to reductions in salaries, benefits and professional services. In addition, this decrease is driven by onetime expense related to the termination of a lease agreement for office space in San Diego. There was also a decrease in legal and professional fees and salaries and benefits.

Now with respect to revenues. Q4 2019 total revenues were $1.2 million as compared to $713,000 in Q4 2018. For the 12 months ended December 31, 2019, total revenues were $7 million as compared to $3 million in 2018. The increase in revenues is mainly due to the recognition of the BARDA revenue.

Turning to the balance sheet. As of December 31, 2019, we had $17.6 million of cash and $9.3 million of debt principal. In December 2018, we amended our debt with Oxford, providing additional flexibility by pushing out our interest-only period through April 1, 2020. Our liabilities increased to $22.1 million for the 12 months ended December 31, 2019 as compared to $18.8 million at December 31, 2018, primarily related to warrants issued in the September 2019 offering.

Finally, some of you may have also seen in the 8-K that was filed premarket this morning, we have entered into the ninth amendment with Oxford Finance, our senior lender. When this loan was first entered into in 2013, the total amount borrowed was $27 million. The remaining balance -- principal balance prior to the ninth amendment was down to $9.3 million. The key aspects of this ninth amendment are the pay down of $5 million of principal to an outstanding balance of $4.3 million; extending the maturity date on the loan to June 2024, which is an incremental 36 months extending the interest-only period from April 2020 through to April 2021; amortizing the remaining balance of the following 38 months at approximately $113,000 per month with a final payment of $3.2 million in June 2024. Prior to this amendment, this loan was set to commence amortizing in May of 2020 at almost $700,000 per month and with the final payment due in June 2021 of $2.2 million.

And I'll turn it back to you, Marc.

Andrew, thank you very much. So let me just update you on key forthcoming milestones, and then we'll turn it over for Q&A. And regarding the milestones related to new assets, we will be integrating those assets immediately and report back soon as we refine and clarify upcoming milestones. So I'll be a bit general here, but I think you'll get the picture.

First of all, most importantly, we want to complete the RNL Phase I trial as soon as possible and determine the maximum tolerated dose. We also want to work with the agency right away to determine: a, the suitability of potential accelerated paths to market such as orphan designation, fast track or breakthrough designation; and then b, develop a -- development to commercial, clinical and regulatory plan for RNL for glioblastoma. We also want to complete the scalability work acquired (inaudible) commercial available (inaudible) pipeline. Regarding DocePLUS, as I mentioned, we want to rapidly, in Q2, clarify its role in our overall pipeline and determine next steps for this asset.

So with that, I'll turn the call back over to Angela, the operator, for any questions anything you may have.

(Operator Instructions) And our first question comes from the line of Ed Woo.

Congratulations on the deal today. And obviously, thank you for donating the medical supplies. Obviously, everything helps in this time of need. My question is on DocePLUS. I know you mentioned that you're going to do a review in the second quarter. But are you leaning towards putting more emphasis on the assets that you guys acquired today? Or is it really just everything is on the table?

Ed, thank you for that, and I appreciate the question. I think we in-licensed so many diverse assets that I think it behooves us to take a step back, a rapid step back, recalibrate and deploy our capital where we can make the biggest impact for stockholders. So yes, I think we're relooking at that asset. We think it's a great asset. It requires some more development dollars, but we also are really enamored with the assets we just in-licensed. So I think to be fair, we just -- we -- and I assure you, this process has been ongoing, but we want to finalize it. That's a reevaluation process. Make a clear, definitive decision and then communicate that and then move the ball forward.

Great. And then I know you touched on -- a little bit about how you guys are still reviewing other possible assets that you guys might be interested in. Has the coronavirus changed any of the outlook in terms of the type of opportunities and products that are out there?

Yes, it's a great question. It's -- in my view, it's too early to tell whether that has changed the outlook on the opportunities that are out there. But I -- what I will say is that the November state legislative approval and voter approval of the CPRIT brand has put a lot of inbound interest in our company based in Texas with deep connections into CPRIT in terms of our team and people that advise us. And a lot of companies that maybe have had run out of capital or capital constrained that have very exciting oncology assets, and they're looking for ways to partner. We had hoped that being in Texas might create some visibility as related to that, and that seems to be the case. But we have a pretty aggressive outward-facing process of trying to identify new assets that we can bring in. And we like assets, like the one we had announced today, that comes in with partial funding that's pretty -- that is increasingly deep in the clinical development program. So that's -- today is an example of the kind of assets that we like.

(Operator Instructions)

Angela, we have an email question. The question is about the market opportunity for RNL for glioblastoma and the overall market size.

So just briefly, currently, there are approved treatments for glioblastoma, but none of them are particularly great. It's one of the most aggressive of the primary tumors that occur in people. As I mentioned, there are about 12,000 people a year that have that disease. So once a patient fails standard frontline therapy, which is the typical course, the prognosis is very poor.

The active reintervention drugs in their current situation like bevacizumab and lomustine have been proven to prolong survival, but they're not great. And after treatment failure, survival's not good, about 120 days or so. So if you look at just the recurrent GBM market with that as a context, we think alone, this is about a $750 million a year annual opportunity. Now if you add on other potential opportunities in first-line GBM or some of the other cancers I mentioned, I think the opportunity runs well over $1 billion. So based on the kinds of things we're looking for, this fits very nicely into that bucket.

(Operator Instructions) And we have no further questions at this time. I will now turn the call back to Dr. Hedrick for any additional or closing remarks.

Thank you, Angela. And thank you, again, for those of you on the call and are listening on the recording. Once again, the transition we completed in 2019 has positioned Plus Therapeutics to maximize the value of our core expertise and nanoparticle drug formulation, drug manufacturing and scale-up as well as clinical development. And while we're extremely pleased by the transaction we announced this morning, we see more such transactions possible in the future.

We'll diligently continue to evaluate a number of other opportunities to support and build out a valuable drug development pipeline, consistent with the criteria we've laid out in previous 2 quarters and typified by today's announcement.

So as always, on behalf of the Board and management, thank you again for participating in this call. More information can be found at our website, plustherapeutics.com and on our LinkedIn and Twitter social media sites. Have a good evening. Thank you.

Thank you. This does conclude today's conference call. Please disconnect your lines at this time. And have a wonderful day.