Sellas Life Sciences Group Inc (SLS) 2014 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Galena Biopharma Co. Incorporated fourth-quarter and year-end 2014 earnings conference call. (Operator Instructions) As a reminder, this conference call is being recorded. I would now like to introduce your host for today's conference, Ms. Remy Bernarda, Senior Vice President, Investor Relations and Corporate Communications. Ma'am, you may begin.

Good afternoon, everyone, and thank you for joining our call today. For those of you listening via telephone, I would encourage you to visit our website and log in to our webcast presentation. For this year-end call, we will be using slides to enhance our information flow. The slides can be accessed on our website in the investors section under events and presentations. These slides are posted both as a PDF document and will also be available on the webcast. The slides are viewer controlled, meaning that you, the viewer, will need to advance the slides. Our speakers will alert you to the slides they are addressing.

As listed on slide number 2 on our presentation, during today's discussion, we may make forward-looking statements about our programs. Such statements include, but are not limited to, statements about our commercialization plans and the development progress of our clinical product candidates, including patient enrollment, trial initiation, and collaboration. These forward-looking statements are subject to a number of risks, uncertainties, and assumptions including those identified under risk factors in our annual report on Form 10-K, which we have filed today, and other documents filed with the SEC and available on our website. Actual results may differ materially from those contemplated by these forward-looking statements.

I would now like to introduce the members of management on the call. Dr. Mark Schwartz, our President and CEO; Dr. Gavin Choi, Senior Vice President, Clinical Sciences and Operations who will discuss our clinical programs; Christopher Lento, Senior Vice President of Commercial, who will discuss our commercial business; and Ryan Dunlap, our Vice President and Chief Financial Officer. Please turn to slide number 3 for the overview of our pipeline.

Dr. Schwartz will now begin our discussion.

Thank you, Remy, and welcome, everyone, to our fourth-quarter and year-and earnings conference call. Our team did a great job in 2014, and it is with great pleasure that we view our progress last year and preview our expectations for 2015. Today we will review these accomplishments and discuss key developments coming in 2015.

Before I go into the details on our programs, I want to address the status of our corporate issues. Regarding the SEC, we are aware that the SEC is investigating certain matters relating to the use of certain outside investor relations professionals by us and by other public companies. We have been in contact with the SEC staff through our counsel and are cooperating with the investigation.

As we mentioned in our press release, the plaintiffs in the Delaware derivative litigation have dropped their case against the Company. As a reminder, Galena had formed a special litigation committee, or SLC, to investigate the claims from this lawsuit and produce a report. Because the Delaware derivative litigation was dropped, the SLC has terminated its work. There are still two derivative cases pending in Oregon federal and Oregon state courts, and we continue to pursue these vigorously.

Although the litigation matters take time to resolve, the Company is committed to bringing these matters to closure in a timely manner. While we cannot say with certainty, we believe we will be able to resolve the outstanding matters in a way that will not materially impact our cash position or the fundamentals of our business.

Now on to our programs. Please turn the slide 4, as I will expand upon my comments from last quarter about how our two business units, commercial and clinical, fit in to our overall strategy. As I have stated before, Galena's current structure, a development-stage immunotherapy-focused Company complemented by a commercial franchise, makes us unique. Our focus is on building Galena into a leading oncology Company. We established our commercial franchise as a strategic component for long-term growth, and sets a foundation for our future.

Our commercial franchise gives us two of the most important elements to maximize the value of our development asset: flexibility, and control. While we are in continuous dialogue with potential partners for our development assets, having our own commercial capabilities provides us with significant leverage to secure better economics around future partnering deals. Or, if we choose, we can commercialize and promote our products ourselves or co-promote in the US with a commercial partner. As Chris will elaborate, the relationships that our commercial team is making now with key oncology healthcare providers, distributors, and managed care groups are not only extremely valuable for selling our current products, but also provide the ability to quickly add future products. Finally, we expect the commercial business to maximize revenues, become accretive, and provide money to the Company to help fund our development assets and minimize shareholder dilution.

I would like to make one note on our Zuplenz launch. In conjunction with our pre-launch activities, we've been working collaboratively with our partner, MonoSol Rx, to make new Galena-labeled products and ensure we can meet the current and anticipated future demand. The product is in its final stages, and we are ready and poised for a launch next quarter.

Now, on to our clinical programs. Gavin will spend time today walking through our clinical operations and the status of our programs. But before Gavin starts, I would like to make a few comments about the immuno-oncology area and the role of NeuVax in this exciting therapeutic space.

The recent successes of CTLA-4 and checkpoint inhibitors like YERVOY, Keytruda, and Opdivo, as well as CAR key, have been very exciting and have been a tremendous benefit for patients. All of these compounds exert their therapeutic benefit to immune mechanisms.

If you look at slide 5, you can see that the central theorem for efficacy of these approaches is a presence of the tumor antigen-directed T cells. As depicted in slide 6, without these T cells, these new approaches would not work.

Now turn to slide 7, where you can see that NeuVax generates large numbers of these antigen-directed T cells, generating a robust immune response. And much like checkpoint inhibitors, we would expect that this NeuVax-enhanced T cell population to demonstrate efficacy in the appropriate setting. NeuVax is our lead asset currently in its phase 3 present trial, and shown in slide 8 is an estimate of the market potential of NeuVax in the present patient population. This segment alone is a $1 billion market opportunity. In addition to the present trial, we have a portfolio of NeuVax clinical trials that include two key combination trials. These trials provide some insurance for NeuVax, which may work as a stand-alone therapy in combination with other agents such as receptive or both. In addition, as the standard of care has the potential to change, having options for our compound will keep us at the forefront of treatment regimens for our patients.

We have a significant number of key milestone and value drivers occurring over the next year. I will have our team walk you through our programs in more detail, and I will then set the stage for what we believe will be a very productive 2015.

I will now ask our head of clinical operations, Gavin Choi, to discuss our clinical programs in more detail.

Thank you, Mark. As Mark mentioned, our primary focus in clinical development is on our immunotherapy programs with NeuVax and GALE-301, with a summary shown on slide 10. Both of our programs have similar approach, utilizing a peptide vaccine in combination with the immune adjuvant GMCSF to prevent the recurrence of cancer. Patients have been treated with standard-of-care therapy, which includes surgery, chemotherapy, and radiation therapy. Once treated, these patients presumably have no evidence of disease but remain at a significant risk of recurrence due to possible micro-metastatic disease. Our goal is to prevent this recurrence because once a patient recurs, death will likely ensue. By preventing recurrence, we can prevent death.

One of the essential elements of our treatment approach is to target patients in the adjuvant setting who are declared disease free. This patient population generally has healthy immune systems that have been reconstituted and are able to mount a robust response to immunotherapy treatment.

Thus, our agents work to stimulate the immune system to generate tumor-targeting cytotoxic T lymphocytes, or CTLs, to prevent the recurrence of cancer utilizing well-validated targets such as HER2 and fully binding protein. Patients treated with our agents undergo a primary vaccine series once a month for six months followed by twice-yearly booster inoculations to provide a long-term protective effect.

While Mark discussed where NeuVax fits into the immunotherapy landscape, I want to share with you in greater detail our ongoing programs as well as potential franchise expansion opportunities. NeuVax is a peptide vaccine derived from the HER2 protein. On slide 11, I provide a brief overview of HER2, which is an oncogene in the EGFR family. Amplification or overexpression of this oncogene has been shown to play an important role in the development and progression of breast cancer. While historically HER2 overexpression was associated with poor prognosis for patients, it is now a primary treatment target for a number of marketed and investigational agents because it is overexpressed in a variety of tumors including breast and gastric cancers.

As you can see on the chart, HER2 is expressed at four different levels. And only HER2 3+ patients have any approved treatment options. NeuVax is currently targeting patients in three of the four categories of HER2 expression with our clinical trials. First, let me start with our most important study, our phase 3 present trial. The trial design can be viewed on slide 12.

95% of the women who are diagnosed with breast cancer will have a treatable form of the disease. While this is very good news for these women, their prognosis is very poor if their disease recurs or becomes metastatic. The PRESENT trial is treating women diagnosed with no positive breast cancer who expressed HER2 in the low to intermediate range, or the 1+, 2+ patients defined by immunohistochemistry, or 2+ non-amplified by FISH.

2014 was a critical year for PRESENT, as we enrolled the majority of our patients, culminating with the dosing of our 700th patient last month. This was a critically important milestone, as the 700th patient represents the enrollment target as defined by the study protocol. This study has been granted a special protocol assessment by the FDA, certifying the agreement with the agency regarding the study endpoints, study design, and statistical assumptions of the clinical trial. We are currently over-enrolling the trial by 5% to 10% given the number of patients already identified in the screening process. Over-enrollment increases our confidence in both the timing and the quality of the statistics and the final outcome of the trial. We expect to complete enrollment near the end of the first quarter.

Once this is accomplished with the last patient enrolled, the clock will start on the primary endpoint of 141 events or three years from the last patient enrolled, whichever is longer. Once we reach full enrollment, the next critical milestone for PRESENT will be achieving a positive readout on our interim analysis. The interim analysis is both a safety analysis as well as a futility analysis. The timing of the interim analysis is based on 70 events defined as recurrence or death. Currently, we anticipate reaching to interim analysis by the end of 2015 or early 2016.

As PRESENT is evaluating NeuVax as a single agent, the NeuVax franchise also encompasses two additional trials in combination with Herceptin, or trastuzumab. These trials not only expand the clinical utility of NeuVax with the ability to treat more women, but they also provide support of safety and efficacy data in addition to the PRESENT trial. While NeuVax may demonstrate efficacy as a single agent, it may also work well in combination with trastuzumab.

There are immune-mediated mechanism of action for trastuzumab that may provide the rationale for such an approach. Through its Fc receptor, trastuzumab mediates antibody-dependent cellular cytotoxicity, which results in the release of antigens and generation of a CD8 positive T cell response via cross presentation. In addition, there is data suggesting that trastuzumab elicits an anti-antigen specific CD4 T cell response, also known as a helper T cell response, as well as a HER2-specific antibody response. Together, these agents promote a broader anti-HER2 immune response that could be augmented with vaccination.

On slide 13, you can see the trial design for our phase 2 combination trial with trastuzumab. With 300 patients to be treated, this is a very robust clinical trial treating women who are node positive and high-risk node negative in our HER2 1+ and 2+ expressers. We estimate completion of enrollment in this trial by end of this year or first quarter of 2016, with a primary endpoint of disease-free survival at two years.

Last year, we also announced initiation of a second trial in combination with Herceptin, and we are grateful to Dr. Beth Middendorf for securing partial funding for this trial from the Department of Defense. The trial's schema can be seen on slide 14.

Importantly, this trial is targeting a new area for us, treating breast cancer patients who are higher -- who are the higher 3+ HER2 expressers. These patients are treated in the neoadjuvant setting or before surgery and have failed to obtain a pathological complete response.

I believe it is also important to note that outside of the PRESENT trial, all of our other NeuVax trials are partially funded by grants or collaborations, giving us the opportunity to expand our pipeline in a cost-effective manner. I would now like to provide a brief overview on the opportunities for future development of NeuVax, so please turn to slide 15.

As depicted in this development priority schema, our primary focus with NeuVax is currently with HER2 1+, 2+ breast cancer in the PRESENT trial, and HER2 1+, 2+, and HER2 3+ breast cancers with our combination trials. Next year, our partner Dr. Reddy's will initiate the gastric cancer trial in India targeting patients in the HER2 1+, 2+, and 3+ setting.

As Mark mentioned, checkpoint inhibitors have been groundbreaking for the immunotherapy space, and potentially combining NeuVax in this area warrants further consideration and exploration. As you can see in the slide on the second and third priority levels, to our numerous development opportunities for NeuVax and other tumor types expressing HER2, we are continually evaluating opportunities to expand NeuVax in appropriate therapeutic settings. We will continue to be diligent about the use of our resources and ensure any future trials are the right fit for the compound and informed by pre-clinical work in published literature.

Now, let me provide a few remarks about our ongoing GALE-301 development. GALE-301 is a peptide vaccine that stimulates CTLs to recognize and destroy cancer cells that express folate-binding protein, or FBP. The FBP is overexpressed in more than 90% of ovarian and endometrial cancers. The level of expression has been found to be greater than 20-fold higher in malignant cells compared to normal cells. FBP is also expressed in 20% to 50% of a wide range of epithelial cancers including breast cancer.

Preventing the recurrence of cancer is notably meaningful in the ovarian and endometrial cancer patient population. Unfortunately, women suffering from endometrial and ovarian cancers have a recurrence rate much higher than breast cancer. As depicted on slide 16, you can see some of the dire statistics around the disease, including a five-year survival rate of approximately 45% and over 14,000 deaths in 2014.

Specifically, GALE-301 is being evaluated in women with ovarian and endometrial cancers with stage I to stage IV disease who have no evidence of disease after undergoing their primary first-line therapies including debulking surgery and chemotherapy. Based on our positive phase 1 data, the trial moved into the ongoing phase 2A portion with the optimal dose of 1,000 micrograms and an added booster regimen in the same population.

As we mentioned last quarter, we met our enrollment goal early and over-enrolled with a total of 51 patients. We believe this enthusiasm is due to the lack of treatment options for these women, spawning heightened interest in the trial.

At the Society for the Immunotherapy of Cancer Conference last November, we presented very promising data from the phase 2A portion of our trial, which is shown on slide 17. The data demonstrated that GALE-301 was well tolerated and elicits a strong in vivo immune response with primarily grade 1 and grade 2 toxicities. Importantly, the data showed a 31% recurrence rate in the vaccine group compared to 50% in the control group at a median follow-up of 13 months. This is a 38% reduction in relative risk of recurrence. We expect top-line data from the phase 2A portion of the trial to be presented this summer.

Moving to our hematology asset, GALE-401 is our controlled-release formulation of Anagrelide in development to reduce elevated platelet counts in patients with thrombocythemia, secondary to myeloproliferative neoplasms. During 2014, our team made the exceptional progress with GALE-401. In a span of one year, we purchased the asset, initiated a clinical proof-of-concept phase 2 trial, enrolled that trial ahead of schedule, and presented the phase 1 healthy volunteer studies in very early phase 2 data at the American Society of Hematology meeting in December.

As you can see on slide 18, the phase 1 results show that in 91 healthy adult subjects, GALE-401 showed a tolerable safety profile and maintained the platelet-lowering ability of the agent while reducing the Cmax. The preliminary phase 2 clinical trial data also showed promising platelet response. The phase 2 trial is ongoing at 8 active sites in the US as we continue to treat and monitor the safety and efficacy of the patients enrolled. We expect top-line readout of the data by midyear or final results by year end.

In closing, we have achieved several important milestones in 2014 across our development programs. I am extremely grateful for our clinical team, for their efforts, and for the courage of the patients who volunteer for our trials. In 2015, we will have a number of key data presentations that will highlight the advancement of our clinical programs. I am excited for what the year holds and the potential of our development pipeline.

I would like now to hand over the call to Chris Lento to review our commercial programs.

Thank you, Gavin. Today I will walk you through the 2014 successes we have had with our flagship product Abstral. I will also take a moment to discuss the status of the launch of our second commercial product, Zuplenz, as well as our plans for continued growth of the Galena commercial franchise.

As noted in our press release, and as Ryan will review in greater detail, our actual net revenue was $9.3 million in 2014. We achieved this number with a focused sales effort, and we are excited for continued growth of Abstral in 2015. As a reminder, Abstral is indicated for the treatment of breakthrough cancer pain, and it is a TIRF, or a transmucosal immediate release fentanyl, product. As Mark mentioned, Galena is an oncology Company, and we are steadfastly focused on building Galena's commercial business within the oncology space.

Our goal is to develop long-lasting relationships with medical oncologists, radiation oncologists, and palliative care specialists as well as with pain specialists who are treating a large number of cancer patients. As we shared last quarter, we believe the oncology market represents the most long-term potential, and we understand that this market is slower to evolve and has a greater need for provider education.

With a focused and targeted approach, our commercial team has four goals that will help Galena drive revenue for the Company. Our primary goal is to make each of our commercial products profitable on a stand-alone basis. This will lend to profitability of the entire commercial franchise and ultimately generate funding for Galena's clinical development programs.

Secondly, we continue to build and grow our relationships in the oncology space. These relationships exist with healthcare providers, wholesalers, distributors, specialty pharmacies, and managed care organizations.

Third, we are focused on building the commercial organization in anticipation of the launch of NeuVax. As Gavin discussed, Galena has a very strong cancer immunotherapy pipeline with multiple shots on goal with NeuVax and GALE-301. A key goal of our commercial team is to establish our oncology footprint now so we are ready to market the drugs from our own internal pipeline when the opportunity presents itself.

Finally, we now have the ability to add additional products to our commercial portfolio. While our commercial programs are currently focused on oncology supportive care, the in-house expertise we have built allows us to expand and to market oncology therapeutics as well.

With that background, I would like to walk you through the metrics are use to evaluate our business. We acquired the US marketing rights for Abstral from Orexo and relaunched the product in the fourth quarter of 2013. We relaunched Abstral that had previously sold approximately $1 million over its previous 12-month period, and we were able to grow the brand to $9.3 million in net revenue in 2014. We believe that we can continue to grow Abstral, and our successful commercialization will carry over to the relaunch of Zuplenz in Q2.

At the time of the Abstral product launch, we had two key goals: reestablish the brand identity for Abstral, and provide access to the greatest number of patients. In order to do this, we introduced our patient assistance program, or PAP. I want to take a step back and remind everyone of the evolution of our patient assistance program, which includes both voucher and co-pay programs. This is relative to my upcoming discussion around the profitability of our Abstral business.

In an effort to reestablish Abstral brand identity, at launch we implemented rules for the patient assistance program that would encourage physicians to prescribe Abstral through a generous voucher program in which all eligible and appropriate patients could receive a one-month supply of Abstral at no cost. As a result, a large percentage of our Q1 2014 sales were fueled by this voucher use. This program gave providers the ability to allow their patients to trial Abstral while also giving the provider the time and flexibility to appropriately titrate their patients.

Initially, providers were able to write a prescription for their patients to receive up to 96 tablets of Abstral via the voucher. Each of these vouchers, when redeemed at the retail pharmacy level, was recorded by data sources as one prescription. For that reason, the number of prescription was much larger earlier in the year. In April of 2014, we made small modifications and rule changes to the program. All patients were still able to receive a one-month supply of Abstral, but no longer were they able to redeem all three prescriptions for 32 tablets each at one time. And time limits between refills were refined.

At the same time, we scaled up our Galena patient services, or our GPS, program, which was implemented to provide support to providers and their patients in the form of prior authorization, support, and reimbursement coverage. With the combination of our PAP rule changes and the success of our GPS program, we have been able to greatly reduce the number of voucher transactions while at the same time almost doubling our average transaction price.

On my first slide, number 20, you can see how this breaks down in our overall calculation of our gross-to-net revenue dollars and how we have improved this over time with the changes to our PAP. Over the course of 2014, we have increased our gross-to-net ratio from 25% in Q4 2013 to 62% in Q4 2014.

In addition, on slide number 21 you can see the dramatic impact of our patient assistance rule changes and our GPS services have had on increasing the average number of Abstral units dispensed per pay transaction. In December 2013, the average units of Abstral per pay transaction was roughly 42 tablets. Fast forward to December 2014, and the average number increased roughly 60% to 69 tablets per transaction. In addition to GPS and the program rule changes, providers have become more comfortable prescribing Abstral for their breakthrough cancer pain patients.

Our current market share in the branded TIRF market remains steady at about 5% of total prescriptions on a monthly basis according to Wolters Kluwer.

While increasing our prescriptions and our market share is obviously a goal of our team, our critical metric is increasing profitability. One of the most important metrics we have used over the past year is the actual revenue derived from each filled prescription or pay transaction. While our prescription numbers may fluctuate, there are significant nuances in the strength of which Abstral can be prescribed and the dollar amounts we receive from each pay transaction. Given that Abstral has six different strengths that can be prescribed in a variety of quantities, this metric is more valuable than most.

For example, a provider can prescribe Abstral for a patient in a one-week supply of 32 tablets of the 100-microgram strength. This prescription would generate roughly $1,000 in retail sales. According to all data sources, this would count as one prescription. Conversely, a provider could also prescribe a patient a one-month supply of the 800-microgram Abstral. This prescription would generate roughly $12,000 in retail sales. This prescription would also count as one prescription according to data sources. Therefore, one does not always equal one, and one prescription can have a vastly different impact on our bottom line.

As you can see on slide number 22, over the course of 2014, we doubled the average price per transaction of Abstral. Therefore, each transaction we generate is becoming more valuable and leading Galena and Abstral towards greater profitability. The strength has continued to grow into 2015 as more and more providers become comfortable with Abstral and are taking advantage of our patient assistance program and GPS service offerings.

I mentioned our overall market share on the branded TIRF market, and I am proud to report that we have materially grown our business in the oncology segment over the past year as shown on slide number 23. While paying physicians represent the majority of our business, in Q4, we generated 20% of our business from oncology-focused specialists. It is important to point out that upon launch of Abstral, less than 1% of the prescriptions came from this segment. We will continue to grow this business organically and expect that adding Zuplenz will further increase our penetration into the oncology space.

We gained a great deal of knowledge during our Abstral launch and during the scale-up of our commercial team. I am incredibly proud of the team we have on board and the opportunity to expand our product offering with Zuplenz, which we expect to launch in Q2. As a reminder, Zuplenz is approved by the FDA for the treatment of patients suffering from chemotherapy, radiation, post-operative induced nausea and vomiting, otherwise known as CINV, RINV, or PONV.

The primary ingredient in Zuplenz is ondansetron, which is the gold standard and the most widely prescribed anti-hermetic worldwide, giving Zuplenz an extremely strong clinical profile and provider acceptance. Zuplenz also has several patient benefits including its ease of use via the oral soluble film delivery method. It dissolves on the tongue in less than 30 seconds, does not require water to administer, has a soothing peppermint flavor with no gritty aftertaste associated with other available versions of ondansetron.

Because of our strong relationships on the product distribution side, we have partnered with our key distributors to successfully manage the significant product inventory, which will become outdated later this year. As Mark mentioned, the new batches of Galena-labeled Zuplenz are in the final manufacturing stages, and we will begin distribution of our new product to coincide with our commercial launch.

As I mentioned last quarter, we also faced significant hurdles regarding the managed care coverage for Zuplenz, and we launched an initiative to improve both Zuplenz commercial and Medicare Part D formulary coverage. It is important to note that negotiations with managed-care organizations can occur at least a year in advance, so we are currently taking the necessary steps to expand coverage for the brand. We have already achieved several significant wins that will increase our Medicare Part D coverage from 1% upon acquisition to roughly 40% in 2015. In addition, we continue to work on achieving -- excuse me, achieving improved formulary status with commercial payers. We expect to be at or near parity with the competition in 2016. Upon launch, we will also be implementing a physician sampling program, a robust patient assistance program, and our current GPS program will also be available to Zuplenz providers and patients.

2014 was an incredibly busy and productive year for our commercial team. Not only did we meet our guidance range, but we also acquired a second product, making us a true portfolio Company. I am extremely encouraged about our opportunities in 2015 as we grow our Abstral sales and as we launch Zuplenz into the market.

With that, I'll turn the call over to Ryan Dunlap to discuss our current financial status.

Thank you, Chris, and good afternoon, everyone. Net revenue from Abstral sales for the fourth quarter of 2014 was $3.2 million, and $9.3 million for the full year 2014. We're happy to say the Q4 was a record quarter for us, reflecting a 100% increase from the $1.6 million net revenue recorded in Q3 and landing us squarely within our 2014 net revenue guidance of $8 million to $10 million. We are certainly pleased with that trend and remain confident in our 2015 net revenue guidance of $15 million to $18 million, with the expectation that our Abstral business will become cash flow positive by the end of 2015 and will continue to be the key revenue driver this year. Also, with the launch of Zuplenz in the second quarter of this year, we expect that piece of our commercial business to begin contributing to our net revenue by the end of the year, with Zuplenz becoming cash flow positive in the latter part of 2016.

As Chris mentioned, in order to strengthen customer relationships and ensure a smooth supply chain, we have agreed with our distribution partners to replace the short-dated product remaining in the channel from the previous licensee with new, longer-dated Galena-labeled product, which will delay the revenue recognition for Zuplenz.

Also, while we haven't yet determined the revenue recognition accounting policy for Zuplenz, when we do, it may be a deferral of revenue recognition until the point of sell-through or when right of return from our customers no longer exists. This could also affect the timing of Zuplenz revenue recognition.

Operating expenses for 2014 were $61.5 million and $14.6 million for the fourth quarter compared to third-quarter operating expenses of $14.8 million, a decrease of $200,000. Right down the key components, SG&A expense for the fourth quarter was $7.6 million, up from $7.3 million last quarter, and R&D costs were $6.3 million in Q4, down from $7.2 million last quarter. With respect to SG&A cost, the small increase was due to higher than expected legal costs not covered by insurance primarily associated with the work of the special litigation committee in connection with the Delaware derivative case.

As Mark mentioned earlier, the Delaware derivative case was dismissed. And as a result, the SLC has terminated its work, so we do expect legal fees related to ongoing litigation to decrease and be substantially covered by insurance moving forward. However, we do expect an offsetting increase in legal fees as we work with our partner, Orexo, to protect our growing Abstral business from the ANDA that was filed and is being litigated, so SG&A costs should be fairly consistent moving forward.

The decrease in R&D costs is largely a result of us nearing the end of the enrollment period for our NeuVax phase 3 PRESENT trial. And based on our current programs, we expect the downward trend in R&D cost to continue throughout 2015 as we complete enrollment and move into the maintenance phase of the PRESENT trial.

Overall, operating loss improved to $11.4 million for the fourth quarter of 2014, $1.8 million better than the $13.2 million reported last quarter. Our loss per share for the fourth quarter of 2014 was $0.06, beating consensus estimate of $0.11, and our $0.31 loss per share for the year also beat the consensus estimate of $0.36.

From a cash flow perspective, we have $23.7 million in cash and cash equivalents at the end of the year compared to $24.6 million at the end of last quarter. The roughly $1 million decrease in cash during the quarter represents mainly principal payments on our long-term debt as we offset the $10.7 million in cash used in operations during the fourth quarter with $10.7 million in cash raised through the sale of common stock.

As announced in November, we executed a purchase agreement for up to $55 million with Lincoln Park Capital which included the upfront sale of 2.5 million shares for $5 million as well as 631,000 commitment shares. We also set up an ATM arrangement in 2013 which gives us access to up to a total of $20 million in capital through the sale of common stock. The strategy for setting up these facilities was to get the Company the flexibility to access capital and minimize shareholder dilution while ensuring sufficient capital to fund our programs, a strategy that we think worked well for us in Q4. So with the cash on hand at year end and these other financing means available to us, we have the ability to continue to fund our operations throughout 2015 and into 2016 as we approach several key operational milestones.

In summary, we are confident about the direction our business is heading and the progress of our commercial and pipeline investments.

So with that, I'll turn the call back over to Mark Schwartz to summarize our upcoming milestones and future value drivers.

Thank you, Ryan. As I stated in my opening remarks, our team significantly advanced all of our clinical and commercial programs in 2014. If you look at slide 25, you can see that there are several fundamental milestones over the next year. For NeuVax, our primary drivers will be completing enrollment in our PRESENT trial next month and the pre-planned interim analysis in late 2015, early 2016. We also expect to complete enrollment in the NeuVax and Herceptin combination trial during that same time frame, with key clinical milestones in 2016 and 2017. GALE-301 and GALE-401 will also update our readouts this year. Finally, as both Ryan and Chris mentioned, we expect to nearly double our revenues this year and look forward to launching our second commercial product this year.

We expect to accumulate multiple value drivers as we head towards the final readout of the PRESENT trial. With the achievement of these milestones across all of our programs, we expect to steadily build value for our shareholders. As I noted in my opening remarks, Galena is unique among similar-sized biotechnology and immunoncology companies in that we possess a very active development program combined with a rapidly growing commercial operation. This business strategy provides us with numerous opportunities to create value in both the short term and long term while positioning Galena to address multiple treatment needs across the full spectrum of cancer care.

We will now open the call for questions.

(Operator Instructions) Yigal Nochomovitz, Oppenheimer.

I just had a few on the commercial side of the business. I know you cited the $15 million to $18 million for guidance range. Can you split that potentially on Abstral versus Zuplenz, number one?

Number two, I just wanted to get your thoughts on the timing of the Zuplenz launch relative to the time when it was in-licensed. It seems like it's taken some time to actually get the product out into the market.

And then number three, is the strategy going to be the same with Zuplenz where you will initially be distributing vouchers to get the initial traction on the market? Thank you.

Hi, Yigal. This is Mark Schwartz. Let me answer the first question, and then I will turn it over to Chris, head of commercial. Thank you for tuning in today.

The guidance that we're giving is $15 million to $18 million. We have not split that out, and we're not going to do that quite yet, I think, until we get a little bit better handle for exactly how Zuplenz launch is, what the market is. We've been heavily involved in pre-launch activities, and we are feeling pretty confident about the program we put in place. But I think given -- until we have a good sense for exactly what the intake is and how our targeting is worked out, what modifications we might need to make as we roll it out, I think we're going to reserve that judgment. The $15 million to $18 million will most likely be mostly Abstral, but exactly how it splits out, I think we will be able to talk to the community here in maybe the next quarter or two.

Yes, thank you for the question. I will pick up part two and part three. Starting with part three, we will not be distributing Zuplenz via voucher. We will have a co-pay assistance program in place as well as using physician samples of the product.

For part two, since acquisition, and as Mark mentioned and Ryan alluded to, we've been engaged in significant pre-launch activities, receiving a lot of interest from key prescribers and key providers. And much of the anticipation of the launch has to do with the manufacturing of our Galena-label product.

Got it. Thank you. And then just one question on PRESENT, as far as -- what exactly is the date of disclose plan for the interim? If you pass and they say keep going and safety looks good, do we hear anything or are we only going to hear something in an unlikely event that you'd have to stop the study? Thanks.

No, it is a pre-planned analysis and it is a futility analysis, so we will get a recommendation by the IDMC or the data safety monitoring board. Assuming it passes its utility to proceed with the trial, we will announce that.

Great. And then just one final question. Regarding the over-enrollment in PRESENT, you referenced the words timing and quality of the statistics. Should we take that to mean that by over-enrolling, you compensated against potential dropouts so that you maintain the power that was originally planned in the study? Or is there some other interpretation there on that -- the benefits of over-enrolling the study? Thank you.

Yes, yes, Yigal. Thank you. Gavin Choi here. Yes, that's precisely correct. So we're going over-enroll by 5% to 10%, accommodating those patients that got through screening, and this will obviously compensate also for the potential increased dropout rate.

Great. Thank you very much.

Mara Goldstein, Cantor Fitzgerald.

Thanks for the slides this quarter. It's very helpful. I have a question on the commercial side first and on prescription trends. I understand the discussion around the vouchers being counted as prescriptions and whatnot, but if you look into the first eight weeks or so from the first quarter, the trends are still historically down relative to the fourth quarter. So I don't know if you can put this sort of on an apples-to-apples percentage for us. I understand the dollar value of a script is higher, and you can definitely see that dynamic in the percentage of higher dose prescriptions, but just in terms of an absolute comparison between what was vouchers versus not vouchers from just the prior quarter to this quarter.

Sure, Mara. Thank you very much for the question. I could actually probably take it a little farther back for you.

Great.

Initially, when we launched our patient assistance program, at its peak, 75% of our business was voucher business. Currently in 2015 through the first two months, only 10% of our business is coming through the voucher. So we've actually made some dramatic improvements there. And you're right, our prescriptions have fluctuated month to month. Overall, the trend line is positive, and we continue to focus on field demand while improving profitability at the same time.

Okay. And can I ask a question on the procedural timing on the litigation around the patent for Abstral? What are the next data points that we should be thinking about?

The litigation is fairly extended litigation. It has really just started. And Mara, I am not sure I can give you a really hard answer on that, as with any litigation. I think our expectation is in a general sense that it is going to be fairly long and protracted. So I don't know that there's going to be any news for quite a while, probably within 12 to 24 months for maybe the first set of motions and activities. And I would anticipate it to go out to the full 30-month space. So I would not anticipate any news shortly.

Great. But that 30-month day is relatively close to the patent expiration anyway. Correct? It's within six months. Right?

You are correct.

Okay. All right. And then can I ask one more question, also a kind of statistics question on PRESENT trial?

Yes. Yes, please.

Okay. So the first look is an interim for futility. I'm just wondering, given there's been so much discussion of late around statistics and clinical trials in immunotherapy and late effect of all the benefit accruing to the tail, what is the possibility that you have a futility measure, but that's a function of being -- having a late effect is an early effect? Should we even be thinking of that?

I think, Mara, you raised a good point, and you're right. Depending on some of the mechanistic elements, a lot of immunology studies have shown a greater effect. I think two things. From an empirical point of view in the phase 2 trials, that's not what we saw. We actually saw a reasonably quick effect given the nature of the mechanism. As well, the futility analysis is about halfway through the trial, so we're looking at 70 events. It's pretty far along into the trial on a relative basis, and I think we should be past that point of futility in relation to the signal that we're measuring.

Okay. All right. Thank you. I will jump back in.

Joe Pantginis, ROTH Capital Partners.

Thanks for taking the question, and thanks also for the details today. A couple of questions on PRESENT as well and the approach of NeuVax. I guess can you remind us that this point how the screening process went, how many patients you needed to screen, and how the efficacy of the screening went?

Yes. Thank you, Joe, for the question. So we have screened over 3,300 patients. As you know, it's a protracted screening process. Overall, the overall screen failure rate is fairly higher, I would say, at about 75% screen value rate.

Okay, great. That's helpful. And then with regard -- Mark, you made some comments earlier with one of your slides obviously about the importance of T cells. And I guess I'm asking for a little bit of reminder here, because I think some intriguing data came out of the phase 1-2. Basically, can you remind us about the level of T cell recruitment that you saw in earlier studies? I believe it was some of Dr. People's data.

Yes, exactly, Joe. This data has been published. But in the phase 1-2 study, we saw as high as about a 2% of the total T cell population was, in fact, NeuVax specific or E75 targeting HER2. And so we could generate a very potent T cell response.

And I think the take-home message of the point I was trying to make in a few slides is that I think a lot of the excitement around checkpoint inhibitors -- as an example, the two recently approved drugs -- is that clearly, the immune system can be a very effective mechanism for targeting cancers. It's taken some time to find exactly the right pathway to get there, but the essence of a checkpoint inhibitor is really taking the brakes off and allowing the T cell to do its job. I think we are coming at exactly that same end point, allowing the T cell to do its job. We're just approaching it from a slightly different perspective. And we believe that one of the key elements of that is that the setting is really appropriate. That it's a setting with a very low disease burden, a very healthy immune system. And so we are getting to the same point in many respects as a checkpoint inhibitors is, a very active T cell hunting down and targeting tumor cells. In our case, they are micro-metastases or occult tumor cells in what is otherwise a healthy woman.

And thanks for that. That was the magic number I was looking for. And I guess can you just put into perspective for everyone -- 2%, that's quite a massive number of the T cell compartments, isn't it?

It is. That is actually very high. It would be uncommon to find a single target directed T cell population that high. I believe there is what, over 1 trillion T cells in the body, so 2% represents a significant number of cells given that -- in fact, one T cell can lyse through its mechanism -- cell license mechanism a cancer cell. And again, the setting is what is really key for us in that we are in a setting of an otherwise healthy immune system targeting either single occult cancer cells or micrometastases. So we're not trying to kill and remove the tumor mass or metastatic tumor, but really isolated tumor cells.

And then I guess the last question is the slide with regard to expanding into other indications, sort of the secondary and tertiary level of indications. You said you're going to look at that with regard to cost management and what have you. Do you have any potential that you're looking at potential IFTs that could also potentially reduce costs?

We do. You are spot right on. We have a number -- there's nothing that we can announce at the moment. We do have several discussions ongoing. We are looking at a number of additional immunotherapies, a couple of checkpoint inhibitors to see how to leverage NeuVax's T cell population increasing capability with other additional mechanisms that would allow us to go after either different indications or different settings that NeuVax alone may not be quite as efficient in, much like we are with NeuVax and Herceptin. So stay tuned throughout 2015. Nothing that we can announce at the moment, but certainly a number that we are pursuing in discussions were in process.

Thank you.

Robert Lee Boyer, Maxim Group.

Last quarter, you had a decrease in sales over second quarter or first quarter. And then this quarter, we had a nice recovery. The thing that that was attributed to last quarter was inventory and the wholesaler stocking level. Could you describe the percentage of the sales that were due to restocking? That would be the pipeline and the supply chain. And also, with Zuplenz, there was mention of the previous licensees' inventory levels, and there was an expiration issue so that new inventory would be out there labeled with Galena's label. Does that mean that there's going to be a write-off, or could you just comment on how long that inventory will last?

Robert, it's Chris. I'll take the first part of that question, and I will allow Ryan to answer the second part. Yes, we had a much larger Q4. And our field demand, or that demand driven by customers, almost exactly matched what we are selling to the wholesalers. So we saw a nice leveling off moving from Q3 to Q4. And you do see some up and downs here, but overall the trend has been positive, and we're learning how to manage the inventory at the wholesaler level.

Yes, hi, Robert. Ryan Dunlap here. I will take the second part of your question. Thanks for the question.

With respect to the Zuplenz swap arrangement, if you look at our 10-K, the way that's been accounted for is it's been set up as a liability in the business combination accounting. So it's not going to be a write-off and it's not going to affect our P&L, but what it does affect is the timing of when we begin recognizing revenue for sales beyond the swap. So it will delay things a little bit from a revenue recognition standpoint, but there won't be a natural write-off that affects our P&L.

Thank you.

Hi. This is Jason Kolbert. Can we just have one quick follow-up, too? I would like to just migrate back to NeuVax for a second. Help me understand what the historical control rates are for reoccurrence and how reliable those figures are and what assumptions you made in terms of the initial trial design so that we can ultimately understand how reliable the powering of the trial might be.

So the historical recurrence rate for node-positive HER2 1+, 2+ breast cancer patients is about 25% over three years. And that data actually has been fairly steady for the last five or 10 years. And there is actually some fairly recent trials in similar patient populations that have published that really confirm that rate. I think the number they are coming in at is 23.5% if I'm not mistaken. So it is right around that same number.

So I think our assumptions going into the trial are still valid by the current data, and I think that's the statistics -- and you raised a good point. Because a lot of times the standard of care changes and things improve and patients -- the assumptions at the beginning of the trial don't hold up by the end of the trial. But so far, the data that we have been able to look at has indicated that the recurrence rates are still at about the same rate that they were when we set the trial up and did the original stats plan.

Thanks, guys. That's really helpful. I'm sure you saw and we all saw the deal this week between Bavarian Nordic and Bristol-Myers Squibb and the combination of a checkpoint, yet another vaccine. So it really seems like you're in the right space.

Thank you. And I think it just validates, obviously, the immunotherapy area as a whole. But more importantly, I think the ability of vaccines to demonstrate their efficacy and ultimately gain the recognition of value that they deserve as we learn how to best use them and what the appropriate settings are.

Thanks, guys. We are really excited watching this trial, and you understand all the reasons why. Thank you so much.

Rahul Jasuja, Noble Life Science.

Quick question on NeuVax that's probably for Mark or Gavin here. So, Mark, I recall that there was the initiative to measure circulating tumor cells, and that was something that -- I know it's clearly expensive to do that, and that was part of the protocol where you are measuring CTCs before and periodically during the trial as well as after.

Now, number one, if you could add some more color on that. And number two, it was clear that as you found a decrease in CTC, there was a corresponding increase in CD8 T cells from your earlier work. In the interim analysis, would that be any criteria that will be measured, and will that be disclosed?

Yes, Rahul, thank you for the question. Gavin here. You are correct. CTCs are part of the trial. It's built into the trial. As you might suspect, if we saw the data, we would likely unblind the trial. So the data is being collected, but we are not aware of the data. And it's unlikely at the interim analysis we will know of that data set.

And how frequent is the CTC measurement? Is it at the onset and then periodically every several months? Or have you not disclosed that about the CTC measurement?

Yes, correct. It's at baseline and periodically through the treatment course.

Okay, all right. Thanks. That's all I had.

Thank you. I would now like to turn the call back over to Mark Schwartz for any closing remarks.

I wanted to thank everybody, and appreciate your time this afternoon. I know it's a bit of a longer call than normal, but there's a lot of good information, and I hope that the slides really helped as we made our key points. Thank you very much, everybody.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program, and you now may disconnect. Everyone have a great evening.