Q4 2023 Gamida Cell Ltd Earnings Call
Participants
Mike Kuczkowski; Corporate Communications; Gamida Cell Ltd
Abigail Jenkins; President, Chief Executive Officer, Director; Gamida Cell Ltd
Terry Coelho; Chief Financial Officer; Gamida Cell Ltd
Presentation
Operator
Ladies and gentlemen, thank you for standing by. Welcome to Gamida Cell's conference call for a business update and fourth quarter and full year 2023 financial results. My name is Daryl, and I'll be your operator for today's call. Please be advised that this call is being recorded at Gamida Cell's request. Now I would like to introduce you to our conference host, Mike Kuczkowski of Gamida Cell Corporate Communications. Mike, please go ahead.
Mike Kuczkowski
Thank you, Daryl, and good morning, everyone. Welcome to today's call, during which we will provide an update on the company and review our financial results for the fourth quarter and full year 2023. Earlier this morning, we issued two press releases. One announcing the commencement of a restructuring process supported by Highbridge Capital Management, and the other summarizing our financial results and providing a business update. Both press releases are available at our website, www.gamida-cell.com. Please note, we will not be hosting a question-and-answer session on today's call. Here with me on our call today are Abbey Jenkins, Gamida Cell's President and Chief Executive Officer; and Terry Coelho, our Chief Financial Officer.
Before we begin, I want to remind everyone that during this call, we may make forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. Any statement describing Gamida Cells goals, expectations, financial, or other projections, intentions, or beliefs is a forward-looking statement and should be considered an at-risk statement. Such statements, including those with respect to the curative, therapeutic, and commercial potential of Omisirge, omidubicel-onlv, Gamida Cell's cell therapy candidate, GDA-201, the continued commercialization of and patient access to Omisirge, the financial runway of Gamida Cell, Gamida Cell's ability to complete a transaction supported by Highbridge pursuant to the restructuring support agreement, Gamida Cell's ability to secure the Israeli court's approval of the transaction, Gamida Cell's expectations regarding the delisting from NASDAQ and the timing of the completion of the restructuring proceedings, and the state of Gamida Cell's workforce are subject to a number of risks, uncertainties, and assumptions.
These risks, uncertainties, and assumptions include those relating to clinical, scientific, regulatory, and technical developments and those inherent in the process of developing and commercializing product candidates that are safe and effective for use as human therapeutics, and that's through the pursuit of the transactions contemplated under the RSA, the risk that no transaction may result.
In light of these risks and uncertainties and other risks and uncertainties that are described in the risk factors section and other sections of Gamida Cell's annual report on Form 10-K to be filed with the Securities and Exchange Commission on March 27, 2024 and other filings that Gamida Cell makes with the SEC from time to time, which are available at www.sec.gov. The events and circumstances discussed in such forward-looking statements may not occur and Gamida Cell's actual results could differ materially and adversely from those anticipated or implied, thereby. Although Gamida Cell's forward-looking statements reflect the good-faith judgment of its management, these statements are based only on facts and factors currently known by Gamida Cell. As a result, you're cautioned not to rely on these forward looking statements.
Now, I will turn the call over to Gamida Cell's President and CEO, Abbey Jenkins.
Abigail Jenkins
Thank you, Mike, and everyone joining us today. In this past year, Gamida Cell has achieved important milestones, most notably our long-standing goal of bringing Omisirge to the FDA approval process as the only stem cell therapy approved on the basis of a global randomized Phase 3 clinical trial. As you will hear on today's call, patients continue to receive Omisirge as we onboard more transplant centers. We are gratified that Omisirge is available as a potentially life-saving option for patients with hematologic malignancies in need of a stem cell transplant. For these patients, Omisirge may represent their last, or best, cure, and we are proud to be able to continue to serve our patients.
We have also had to overcome many challenges in this process, including achieving long-term financial stability for the company. Today, I'm providing a corporate update and outlining the progress we've made to stabilize Gamida Cell's financial foundation. As you know, in Q2 2023, we initiated a strategic restructuring and engaged in an extensive process to pursue strategic alternatives to support the commercialization of Omisirge. Our initial strategic alternatives review process, included outreach to numerous potential strategic partners, including large and midsized pharmaceutical companies and we engaged in substantial discussions with many of those parties. Despite this effort, we did not identify a partnership that would adequately address our strategic needs by the end of the year.
In January, we redoubled our efforts and announced that we were focused on reaching a transaction that would provide the long term financial runway necessary for Gamida Cell to commercialize Omisirge, specifically pursuing a merger acquisition or asset sale. Through that process, we engaged with a number of parties, some as reengagement and others new. However, these efforts did not yield any actionable alternatives.
Earlier today, we announced that we have entered into a restructuring support agreement with Highbridge Capital Management, our principal lender. Under the terms of the agreement and upon completion of our restructuring process, Highbridge will convert $75 million of its existing unsecured convertible senior note into all of the equity in the company. The Company will receive $30 million of new capital from Highbridge on the effective date of the restructuring. Highbridge is also expected to invest significant additional capital following the company's emergence. Gamida Cellwill become a private company, wholly owned by Highbridge and the company's outstanding ordinary shares will be canceled. Current ordinary shareholders of Gamida Cell are expected to receive a contingent value right with a potential aggregate maximum value of $27.5 million, subject to the achievement of certain revenue and regulatory milestone within specified timeframe.
This restructuring transaction will enable Gamida Cell to remain a going concern and will support our ongoing efforts to make Omisirge available to more transplant centers and their patients. Gamida Cell's Board of Directors has determined that this transaction is the best path forward at this time to maintain patient access to Omisirge.
As a next step, Gamida Cell will begin a voluntary Israeli restructuring proceeding. We expect the transaction will close in the second quarter of 2024, following approval by the Israeli court. Once it closes, Gamida Cell will become a privately held company, fully owned by Highbridge, and will be de-listed from the NASDAQ. In parallel, we will be implementing a headcount reduction of approximately 25% of our team, to rightsize operations to align with the current business conditions and our focus on Omisirge commercialization. Also, Gamida Cell is finalizing the wind down of its Jerusalem office and consolidating all Israeli operations into our state-of-the-art manufacturing facility in Kiryat Gat.
Two key executives will be moving on from the company, Chief Commercial and Operating Officer, Michele Korfin, will depart the company on April 1; and General Counsel and Chief Compliance Officer, Josh Patterson, will depart the company on April 26. I would like to thank Michele and Josh for their years of dedication and service to Gamida Cell and their commitment to our patients. Their leadership and guidance have been instrumental in achieving the approval and commercialization of Omisirge, and we wish them well in their next endeavors.
In a similar way, I want to thank everyone on the team with whom we've had to make the difficult decision to part ways. These are extremely talented individuals who have been the driving force behind our ability to deliver unmanned modified cell therapy to patients. Even during challenging times in the biotech market, especially over this past year, I have witnessed this team's resilience. Faced with a delay of our date for Omisirge, the team rallied to deliver what was needed to secure approval in April. When it was eventually approved two weeks early, the team rallied again to ensure Omisirge was immediately available to transplant centers and patients.
In the face of the Israel-Hamas war, this team again showed courage and commitment, maintaining our operations without interruptions. Time and time again, this team has put patients first, and I could not be prouder of what we have accomplished. For those moving on, I have no doubt they will continue to bring positive change for patients in their future endeavors, and we will do whatever we can to support their transitions to new positions in the industry. Any company would be lucky to have these talented individuals as part of their team.
Shifting gears for a few minutes into commercial and medical updates. I would like to walk through where we ended the year against our 2023 goal. We onboarded a total of 17 transplant centers, exceeding the top end of the goal of 10 to 15 for the year. Omisirge has confirmed coverage with US payers covering more than 90% of commercial lives, exceeding our full-year goal of 70%. This includes covered -- confirmed coverage with all of the top 20 US commercial payers. Omisirge also has confirmed Medicare coverage and reimbursement. We reported revenue from the delivery of six units of Omisirge in 2023, including four units in the fourth quarter, meeting our goal of delivering a total of four to six units of Omisirge for the year. As of today, three units of Omisirge have been delivered this year, and we have a total of 24 transplant centers onboarded where patients can access Omisirge.
In addition, today, we announced the results from 13 patients in our Phase 1 dose escalation clinical trial of GDA-201. There were no dose-limiting toxicities and no GDA-201 related grade three or four adverse events. Efficacy evaluation showed three patients with complete response, two with partial response, and two with stable disease. You can see the details of these results in our press release. These data offer positive signals about the potential anti-tumor activity for GDA-201. Gamida Cell does not plan to conduct further development of GDA-201 at this time.
Going forward, our executive team, including myself; Terry Coelho, who has agreed to continue as Chief Financial Officer through June 2024; Ronit Simantov, our Chief Medical and Scientific Officer; and Penny Bushell, our Chief Human Resources Officer, will continue to manage the business, focused on supporting the continued uptake of Omisirge with transplant centers and patients.
I will now turn the call over to Terry to provide a financial update and additional details about our restructuring process. Terry, over to you.
Terry Coelho
Thank you, Abbey, and good morning, everyone. I will begin by sharing more information about the restructuring process supported by Highbridge Capital Management that we announced earlier today. Through this process, Highbridge will convert all $75 million of existing unsecured convertible senior notes into equity, which will represent 100% of the outstanding equity in the newly reorganized company. This transaction will reduce Gamida Cell's outstanding debt by $75 million and annual interest expense by $4.4 million. The company will receive a secured debt facility of $50 million, of which approximately $5 million will be the remaining principal amount due on Gamida Cell's existing secured convertible senior notes.
Now turning to results. 2023 represented our first year as revenue generating company. As Abbey mentioned, we reported revenue from the delivery of six units of Omisirge in 2023, including four units in the fourth quarter, meeting our goal for the year. As we shift from a clinical stage company to a commercial stage company, certain reclassifications of spend were incorporated into our financial reporting beginning in the third quarter of 2023. I will point out the key changes as we walk through the financial results.
In the fourth quarter ended December 31, 2023, we are reporting net revenue of $1.1 million, resulting from the delivery of the four units of Omisirge. Full year 2023 net revenue was $1.8 million, resulting from the delivery of six units of Omisirge. Full year 2023 cost of sales, including cost of direct manufacturing and quality in addition to royalty expenses and that shows your costs where applicable was $1.5 million for full year 2023, resulting in 18.5% gross margin for the year. Overtime, we expect the cost of sales and therefore the gross margin improved measurably as production volumes scale to capacity.
Beginning July 1, 2023, the reporting of operating expenses has been modified to reflect the company's transition to commercial stage, with all operating expenses being reported as either research and development expenses, excess capacity, or selling, general, and administrative or SG&A expenses. For 2022, and the first two quarters of 2023, previously reported commercial and general and administrative costs were combined into SG&A expenses. Additionally, certain expenses previously recorded in research and development are now being reported in SG&A beginning in the third quarter of 2023, with no reclassification of prior periods.
Research and development expenses were $24.3 million for the 12 months ended December 31, 2023, compared to $42.7 million in 2022. The decrease of $18.4 million was due primarily to the aforementioned reporting transition, along with reduced omidubicel clinical spend relating to the winding down of the Phase 3 clinical trial and reduced NK platform clinical and research and development spend. Excess capacity costs were $4.1 million in 2023, reflecting costs associated with labor, manufacturing, overheads, and manufacturing depreciation above our standard cost of goods, which are based on staffed capacity levels.
SG&A expenses were $44.6 million in 2023, an increase of $12.3 million compared to 2022. The aforementioned financial reporting transition, which resulted in the inclusion of medical affairs, expenses, and certain indirect supply chain and quality assurance expenses in SG&A reporting, contributed approximately $6.9 million to the increase in 2023 as compared to 2022. Selling and marketing expenses increased by $4.3 million compared to the prior year due to commercial launch activities. General and administrative expenses increased by approximately $1.1 million in 2023 as compared to 2022.
Financial income or expenses net were $10 million of income in 2023 compared to $4.4 million of expense in 2022. The $14.4 million change in financial income was primarily due to $17.5 million of non-cash income related to the valuation of warrants liability, partially offset by $1.9 million of higher interest expenses, $600,000 of non-cash loss related to the valuation of the company's secured convertible senior notes issued in December 2022, and $0.5 million of lower interest income.
Our net loss was $63 million in 2023 compared to a net loss of $79.4 million in 2022, with the lower net loss being driven primarily by the increase in financial income of $14.4 million, together with approximately $2 million of lower operating expenses. In the fourth quarter of 2023, our net loss was $8.8 million compared to a net loss of $22.8 million in the fourth quarter of 2022, primarily driven by the increase in financial income of $10 million, together with approximately $4 million of lower operating expenses.
As of December 31, 2023, Gamida Cell had total cash and cash equivalents of $46.6 million compared to $64.7 million as of December 31, 2022, to the decrease of $18.1 million is due primarily to $61.8 million in net cash proceeds from financing activities, which was comprised of $21.1 million in net proceeds from the issuance of ordinary shares and warrants from the company's underwritten public offering in April 2023 and $43.1 million in net proceeds from the issuance of ordinary shares via the at the market or ATM facility, offset by $2.2 million in principal payments of the company's 2022 convertible senior note and $79.1 million of net cash used in operating activities.
As of March 15, 2024, for our preliminary estimated unrestricted cash and cash equivalents balance was $28.5 million. Although it is difficult to predict future liquidity requirements, we believe that our current total existing funds will not be sufficient to support our ongoing operating activities, including the restructuring process through the end of the second quarter of 2024.
Finally, with regard to our debt position, as of December 31, 2023, the company had reduced its principal balance on the 2022 secured convertible note by $18.4 million from $25 million as of December 31, 2022, $6.6 million at the end of the fourth quarter of 2023. The company also holds a 2021 convertible senior note with an aggregate principal amount of $75 million.
With that, I will turn the call back over to Abbey for some concluding remarks. Abbey?
Abigail Jenkins
Thank you, Terry. Today, we discussed several important business updates, most notably, the decision to enter into a restructuring support agreement with Highbridge Capital. The transaction allows Gamida Cell to continue as a going concern and to focus on commercializing Omisirge as we develop and deepen our relationships with transplant center partners to increase access to Omisirge. Going forward, we will be a leaner, more focused organization and with a more stable financial foundation. Gamida Cell will be positioned to continue delivering this potentially life-saving cell therapy for patients with hematologic malignancies, including those from diverse backgrounds.
I want to once again thank our employees and express our gratitude to our transplant center partners and vendors for their support through this time of uncertainty as we continue to advance the commercialization of Omisirge. We continue to believe in the future of Gamida Cell and are grateful that Omisirge is available for the patients that need it most.
Thank you, everyone, for joining us on the call today. Operator, back to you.
Operator
Thank you. That does conclude today's teleconference. We appreciate your participation. You may disconnect at this time. Enjoy the rest of your day.
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