Celsion Corporation (CLSN)

[Donis]

http://seekingalpha.com/article/1621242-celsion-corporations-ceo-discusses-q2-2013-results-earnings-call-transcript?part=single


Executives


Jeffrey W. Church – Senior Vice President, Chief Financial Officer and Corporate Secretary

Michael H. Tardugno – President and Chief Executive Officer


Analysts


Keith A. Markey – Griffin Securities, Inc.


Celsion Corporation (CLSN) Q2 2013 Earnings Conference Call August 8, 2013 11:00 AM ET


Operator

Please standby. Good morning. My name is Priscilla, and I will be your conference coordinator today. At this time, I would like to welcome everyone to the Celsion Corporation Second Quarter 2013 Financial Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. (Operator instructions)

I would now like to turn the call over to Jeff Church. Please proceed.

Jeffrey Church

Thank you. Good morning, everyone, and thank you for joining us. Our second quarter 2013 financial results were released this morning before the market opened. We also filed our Form 10-Q for the quarter ending June 30, 2013 at the same time. The Form 10-Q is available on the SEC’s Edgar system, and the Company’s earnings release and Form 10-Q are both available on our website at www.celsion.com.

Today’s call will be archived, the replay beginning at 2 PM Eastern, and will remain available by phone until Thursday August 22, 2013, and will on our website for 30 days.

Before we begin the call, we wish to inform participants that forward-looking statements are made pursuant to the Safe Harbor Provision of the Private Securities Litigation Reform Act of 1995. You are cautioned that such forward-looking statements involve risks and uncertainties including, without limitation, the risk of clinical failures, delays or increased costs; unforeseen changes in the cost of our research and development activities, possible acquisition of other technologies, assets, or businesses; and possible adverse action by customers, suppliers, competitors, regulatory authorities and other risks detailed from time-to-time in the company’s periodic reports filed with the Securities and Exchange Commission.

Following our formal remarks today, we will open the call for questions. I’d like to turn the call over to Mr. Michael Tardugno, President and CEO of Celsion. Mike?

Michael H. Tardugno

Thanks, Jeff. Good morning and thank you for your interest in and support for Celsion. I’m joined today by Dr. Nick Borys, our Chief Medical Officer and by Jeff Church, from whom you’ve just heard, our Senior Vice President and CFO.

Today in addition to discussing our second quarter 2013 financial results by providing an update on three important topics, they are these. First, an update on the Phase III HEAT study and primary liver cancer.

As we noted in previous press releases, our post hoc review of the HEAT study data has identified an important signal suggesting that an optimized RFA treatment in combination with ThermoDox as measured by RFA 12 time or heating time may provide a meaningful overall PFS and survival benefit.

This insight is consistent with the mechanism of our HEAT-activated liposomal technology. Longer heating sign activates more drug release in the margins and tissue surrounding the tumor target. We’re following this development with all appropriate scientific rigor and belief as to our medical advisors at this group deserves our attention and continued exploration.

Our second topic, our restructuring initiatives announced in April 2013 has been fully implemented. Cost reduction and corporate realignment steps were taken and I might add with care and vision to adjust spending levels, reducing pressure on our cash resources, while maintaining the necessary capability and the competencies important to Celsion’s current business plans and strategy.

Our balance sheet was further strengthened during the quarter to a timely and I might add smart equity offering. Our recent financing not only reflects the investment community’s confidence in Celsion, but importantly, ensures the company’s ability to advance our ThermoDox program among other clients.

Third topic our rigorous comprehensive strategic acquisition project designed to identify new technologies and products for our development pipeline is progressing. The competency of our management team, cash reserves and our vibrancy as a public entity provides us with a strong position as the company exposed M&A options to expand our research interests and to reduce our exposure to a single development program.

Now, before I jump into each of these topics, I’d like to comment on the 2013 Annual Meeting, which was held on July 19 in New York City. First of all I’ll report that all five proposals were approved by shareholders by a substantial margin. I want to thank you for your support. I also want to thank those who were able to attend in spite of the high record temperatures and we can all access to that.

New York City proved itself to be a venue with easy access for many and a location that I might add it was quite affordable. So we look forward to future Annual meetings in the Big Apple which I hope will be well attended. And this time we will try to make sure that we will there in the Yankees or in the town.

Jeffrey W. Church

Now, I would like to review some history and recent developments with our Phase III HEAT study. If you’ve been following our press releases, it’s clear that we are well positioned in oncology and then we have significant support to fully evaluate the HEAT study data. As you know, we have completed a comprehensive retrospective post hoc analysis from which we have determined the following. Those patients with relatively smaller lesions did better when given ThermoDox as compared to the control group.

Our experts found us to be important and urged this to continue our analysis so, we can understand why. When we looked at those patients in particular, we saw that longer RFA treatment time appears to be another key factor. When we look at all the patients with the single lesion, we saw that longer RFA procedures correlate very well with improved outcomes in all tumor sizes. This was particularly enhanced in the ThermoDox group. These findings reinforces our understanding that profusion further enhance fatigue together with adequate heating of the tumor and the surrounding liver tissue are important factors in ensuring that doxorubicin is highly concentrated in the targeted tissue.

The plasma concentration of ThermoDox is an important factor in determining when to heat targeted tumors ThermoDox concentrations found in the targeted liver tissue appear to be more important. This data from a large cell group greater than 40% of the study, or approximately 300 patients continue to mature when it comes to overall survival. And we are, of course, following off patients in the HEAT Study to the secondary OS endpoint to determine benefit if any.

As promised we’ve been collecting data on a quarterly basis. Our latest overall survival analysis was recently completed for patient data collected as of June 30. Now we would like to know with even more confidence that these data indicated substantial improvement over the control group in ThermoDox treated patients who had a RFA procedure greater than 45 minutes.

Details of these findings will be discussed and data presented at the upcoming Broker Conference in September of this year. It would be very clear and in particular with retrospective analysis, any announcement of a trend or a positive signal has to deal with some caution. As we have consistently pointed out much of what we are discussing has not met a threshold for statistical significance, then the case of OS has now reached the median.

Regardless our experts and investigators believe these data to be important to the global HCC community and have been anxious. And I might say excited to present these finding to their peers at scientific meeting such as the WCIO and the ECIO. In fact, ILCA, the International Liver Cancer Association has invited our lead principal investigator for Asia Professor Ronnie Poon to present the HEAT Study data as one of four at their Presidential Plenary Session in September at their Annual Conference. This presentation including prospective as well as post hoc analysis will be webcast by ILCA.

So we conclude this, I’m confidence that the data reflecting and optimize RFA treatment time, although not perfect is impressive enough to warn our plans to validate the findings, which is in progress, and to hold discussions with FDA, which we would expect to occur early in the fourth quarter of this year.

In further support of our regulatory discussions, we’ve initiated several non-clinical studies to validate our hypothesis regarding the impact of longer RFA heating times. These studies are designed to evaluate local perfusion as a function of adequate heating of the tumor and to determine its importance in assuring ThermoDox ‘s efficacy in HCC.

Assuming our right and we do not say any contradictory evidence in future data who will propose a regulatory platform, which may likely include additional clinical studies, focused on the target population with the enrollment and spec plan based on FDA’s predictive enrichment guidance. I’m going to make a few comments on our financial strength. We are planning to work that I just spoke up, we took a hard look at our organization and our infrastructure.

As we reported last quarter in April 2013, we implemented a program to restructure the company to ensure their resources and our current work plan are aligned. Doing so, we’ve eliminated about one-third of our full-time equivalent workforce, as well as several full-time consultants. Our head count is now approximately 15 FTE a number which I might add is consistent with the personal levels we have effectively operated with over the past four to five years.

We’ve also taken steps to defer cash cost associated with the ABLATE study and other related contract work and do so until such time as we better understand the results from the HEAT trial. In all, these measures have brought our operating expense to $100 million per month once their full benefit is realized and I am pleased that you are seeing the impact reflected in our latest financial statements, which Jeff will cover next in some detail.

And also I want to quickly add that the restructuring will have no effect on the continuation of the DIGNITY study, key development projects and our continued sponsored support for various high proof programs. As we look to transition the landscape for treating these patients, I am pleased to say that we enrolling our Phase II trial for recurrent chest wall breast cancer at four centers, soon to be five clinical sites. This is an open label study evaluating multiple cycles of ThermoDox plus hyperthermia in refractory patients with superficial recurrence of breast cancer. This is a very needy population as many of know, and since it is an open study, I am hopeful to begin reporting limited case histories later this year.

For those who are new to Celsion, I refer you to our website for additional information including results from the company and Duke University’s Phase I studies. We believe there is a great deal of promise in our approach to this challenging indication. Also I want to make note that we generally signed a Memorandum of Understanding in July. We are affirming Hisun’s confidence in ThermoDox and Celsion and reaffirming also our development and manufacturing collaboration.

We have a partner, who like Celsion is fiercely passionate about winning the fight against cancer. Both Celsion and Hisun are anxious to memorialize and make public our plans to continue in intentions to expand our strategic programs to the territory of Greater China. We expect to provide more details once our definitive documents are completed. I would also note that we’re supporting three partnerships to advance the development of ThermoDox with high flu at the Centre for Translational and Molecular Medicine in Utrecht. We expect to move to a clinical program later this year, in fact, two of the lead researchers will be joining Dr. Borys and our team here tomorrow to discuss the clinical program path IV.

At the University of Washington, under the direction of Dr. Huan Weng, we have a preclinical program addressing pancreatic cancer with the combination therapy of high flu plus ThermoDox. And if the University of Oxford in the United Kingdom, cancer metastatic liver will be the subject of Phase II study as we proposed. So in addition to right-sizing our cost structure and focusing on research of importance over the past few months, we’ve taken steps to strengthen our balance sheet.

Most recently closing on a $9.8 million equity financing, the stock sale was priced at the market that’s with no discount and I might add no warrant coverage. Financings like these provide Celsion’s strong cash reserves at very attractive almost unheard terms. And I would suggest reflect the great deal of confidence by fund investors in Celsion.

In summary with approximately $50 million of cash and equivalents at the end of the second quarter, we have sufficient resources not only to execute a well measured ThermoDox program, but also to identify and acquire additional products and technologies.

On that subject, in April we engaged Cantor Fitzgerald to assist us with a comprehensive and systematic review of merger and acquisition opportunities with the goal of identifying novel products or companies with near-term value creation potential. In addition to the strong balance sheet that I just mentioned, our company’s status and established clinical development expertise and infrastructure are important assets of the company.

The goal of this important initiative is to identify complementary products or technologies that will help the company grow, mitigate risk associated with single product technology, and create greater value for our shareholders.

We have found that this is a target reach environment for M&A particularly for private mid-stage opportunities. Our review so far has been comprehensive, international, and private and public companies, and cautiously optimistic we will find an accretive deal to announce in the relative near-term.

I’d be remiss if you point out in addition of cash and market liquidity are most important leverage in a successful M&A search is our talented group of professionals or expert at international clinical research and operations regulatory present planning, as well as CMC and commercial manufacturing. Acquiring drug technology is one thing.

Turning into valuable medicine is the province of great people which I’m proud to say we have. So now I’d like to say that we are excited with the potential for ThermoDox, we are strategically focused, well financed, and optimistic with our plans for the future.

And with that, I will turn it over to Jeff who will provide an overview of our second quarter 2013 financial results. Jeff?

Jeffrey W. Church

Thank you, Mike. Starting with cash, we reported total cash and investments at June 30, 2013, of $48.9 million as compared to $23 million at the end of 2012, an increase of $26 million in the first six months of 2013.

We finished the quarter with a much stronger balance sheet, following the execution of our financial strategy after the announcement of the Phase III HEAT Study results earlier this year, which puts us in a strong strategic position to continue the development of our LTSL technology platform, as well as to explore the acquisition of other promising clinical stage product opportunities.

I would like to highlight our fundraising activities in the first six months of 2013.

In the first quarter, Celsion raised net proceeds to $21 million from two financing transactions, which we discussed on our last conference call. In June, we completed a registered direct offering of common stock generating gross proceeds of $9.8 million. This financing was executed at the market. Therefore there was no discount and more importantly no warrants were issued as part of that financing.

Our financing was executed very efficiently with healthcare investors familiar with Celsion and its development program. And as Mike stated earlier, the financing terms for this transaction were very attractive and provides the company with strong cash reserves to execute its business strategy.

As of today, we have a total of 61.2 million shares of common stock outstanding. We have no outstanding preferred shares as all the previously issued preferred stock has been fully converted to common shares. Total operating expenses for the second quarter 2013 reflected drop of 30% from the $5.7 million in the second quarter last year to $3.8 million in the current quarter. Total operating expenses for the first half of 2013 reflected similar decrease, approximately 26% from $12 million to $8.9 million in the current six-month period.

Net cash used for operations was $3.6 million in the first six months of 2013. This compares to $10.9 million used to fund operations last year. This $7.3 million decrease was driven by the continued drop in operating expenses coupled with the $5 million non-refundable cash payment we received from Hisun Pharmaceuticals Company in the first quarter.

Our lower operating costs are the result of continuing downward trend in drug development expenses and the previously announced corporate restructuring program. Regarding our expense control program which we initiated this quarter, we have taken the appropriate proactive steps to manage our costs, first, we reduced our compensation related expenses by a third on an annualized basis. Next we reduced various administration costs and curtailed clinical development activities related to the ABLATE study.

The combination of these measures has reduced our costs significantly and in combination with the anticipated downward trend in clinical costs, we expect our run rate moving forward to be roughly $1 million in monthly operating expenses. This reflects a drop in overall expenses from prior year levels of about a third and more importantly, provides cash efficient to execute next step for our ThermoDox development program.

For the second quarter ended June 30, 2013, the company reported net income of $421,000, compared to a net loss of 6.1 million in the second quarter of 2012. In the current quarter, the company reported a loss from operations totaling $3.8 million, which was offset by a non-cash benefit or gain of $4.4 million from the quarterly change in valuation of a warrant liability associated with prior equity financing transaction.

For the six months ended June 30, 2013, the company recorded a net loss of $4.8 million compared to a net loss of $12.3 million in the comparable six month period last year. The loss from operations in the first six months of 2013 with $8.6 million, which was offset by a non-cash benefit and the change in the warrant liability somewhat what I mentioned earlier that occurred in the quarter. This resulted in a net loss for the first half of 2013 of $230,000.

This net loss was then reduced by one-time non-cash deemed dividend of $4.6 million related to the convertible preferred stock offering completed in February 2013. This accounting treatment records the imputed value of the convertible preferred stock and the warrants issued in this equity offering. To be perfectly clear the preferred stock issued in February paid no cash dividend and had no other preferences. This team dividend entry is entirely driven by the accounting rules, this non-cash and non-operating in nature.

R&D costs decreased to $2.1 million in the current quarter. G&A expenses for the second quarter totaled $1.95 million, up $356,000 over the comparable prior year period due to the one-time severance charge associated with the company’s restructuring program announced earlier this year.

I would now turn the call back to Mike.

Michael H. Tardugno

Thanks, Jeff, and nice overview. As I hope our remarks made clear the company is moving forward and focused on its future under Dr. Borys’ direction. We completed our analysis of the HEAT Study, meet with our collaborators and partners as well as regulatory agencies to discuss our latest findings and prudently determine our next steps. We have a strong balance sheet, and now have the flexibility to engage a number of strategic options.

Our partnerships continue and we expect them to remain strong. We continue to focus on our critically important work and look forward to reporting our progress as we have throughout the year. Doing so, we hope to create a value for our shareholders and most importantly, we’ll make a significant difference in the lives of patients and their family.

Now with that operator we will go to questions. And we’ll ask the listening audience to limit your questions to no more than two, to give all a chance to get answers to their questions. So operator, please open the line.

Question-and-Answer Session

Certainly. (Operator Instructions)

Jeffrey W. Church

Operator, can we start with the first question please?

Operator

We’ll take our first question from Keith Markey with Griffin Securities. Your line is open.

Keith A. Markey – Griffin Securities, Inc.

Good morning, Michael. Good morning, Jeff, Nick. I was wondering, based up on the overall survival trends you’ve seen lately, when do you think that the median will be reached in the HEAT Study, in terms of overall survival?

Michael H. Tardugno

So, I’m going to give you an answer with some caution, because you know, it’s difficult to predict the – currently for survival end point. The debt rate unfortunately the debt rate is something that we’ve looked at for a reasonably carefully. I would say it’s going to be at least two quarters maybe three.

Keith A. Markey – Griffin Securities, Inc.

Okay.

Michael H. Tardugno

Let me just reserve, but I’ll make a point here is that that we could be updating that in the next conference call with the longer or shorter timeline. That is just a reasonable projection based on the rates that we’ve seen so far.

Keith A. Markey – Griffin Securities, Inc.

Right. Yeah that’s all I could expect. And then I was just wondering is it statistically possible that you would get a significant benefit in overall survival within the subgroup that you’ve identified or is it just simply too smaller group to be able to come to a significant result?

Unidentified Company Representative

Well, the answer to that is yes. I mean do you want to expand on that at all?

Nicholas Borys

Yeah, I think as we’ve been reporting all along that as we look at the data particularly in the patients to optimize heating times, the data certainly gives us more, more confidence that we’ve found how best to treat these patients. And based on that and based on the numbers, I think it is very well possible that we could see statistical significance.

Keith A. Markey – Griffin Securities, Inc.


That would great.

Nicholas Borys

You are becoming more confident of the significance of the subgroup with each reading of the data so far.

Keith A. Markey – Griffin Securities, Inc.

That would be great, because wouldn’t it help to potentially shorten the overall development of ThermoDox if you should chose to go forward?

Michael H. Tardugno

Absolutely.

Jeffrey W. Church

Yes.

Keith A. Markey – Griffin Securities, Inc.

Okay. And then I was just wondering, could you, I know that things are to a certain extent in state the of flux, but could you sort of outline the milestones that you are aware of at least for 2013 and 2014 at this point?

Michael H. Tardugno

Well, yeah. I think where we are looking at the remainder of the year, Keith is that, we expect to propose a meeting with FDA in the fourth quarter early in the fourth quarter. The meeting would largely be designed to review a proposal for a confirmatory protocol, taking advantage of this enhanced population of – spoke in my prepared remarks. That would be I think a very important milestone to report to the Investment community.

Keith A. Markey – Griffin Securities, Inc.

Okay.

Michael H. Tardugno

In addition to that we have been spending a great deal of time and effort evaluating our potential M&A candidates. We are hopeful that before the end of year, that we can be announcing to our shareholders a proposal for an M&A transaction, which we believe would be consummated in the first half of 2014. Assuming we have a goal with the FDA and other regulatory agencies, our expectation would be in the first quarter of 2014 to begin enrollment of the confirmatory trial in HCC.

By the middle of next year 2014, we would expect to begin reporting case histories from patients who are participating in the recurrent chest wall breast cancer trial.

Unidentified Company Representative

I think to name a few. I think the important milestones at this point.

Keith A. Markey – Griffin Securities, Inc.

Very good. Thank you so much. I’ll get into the queue again.

Operator

Thank you. (Operator Instructions) We’ll take our next question from Sal Marorso, a Private Investor. Your line is open.

Michael H. Tardugno

Good morning, Sal.

Unidentified Analyst

Good morning. How are you?

Michael H. Tardugno

Great, thank you.

Unidentified Analyst

My question was the Phase II that you’re currently in. When do you think we will hear results on that?

Michael H. Tardugno

Yeah, as I just mentioned it’s an open label trial. We are going to roll approximately 25 to 30 patients. My expectation since it is open label is that, we’ll be able to begin reporting individual case histories in the late and the first half of next year or early or second half of next year.

Unidentified Analyst

Okay. And one other question regarding your ponder in China and when do you expect to actually file that or what’s the next step in China?

Michael H. Tardugno

So what we are considering a confirmatory trial as we did with the HEAT Study. We are considering enrolling patients on a global basis particularly in those countries where HCC is a particularly high incidence. China would be a very important market. So following our discussions with FDA, assuming they are positive and we have every reason to believe they will be. Our next stop would be for, it’s known as the CFDA.

Unidentified Analyst

Okay.

Michael H. Tardugno

The Chinese Food and Drug Administration to review our protocol plans and our overall intentions for marketing assuming a positive outcome while an overall intentions for commercializing ThermoDox in greater territories of China.

Unidentified Analyst

Okay. One last question if I may?

Michael H. Tardugno

Yes.

Unidentified Analyst

Okay, regarding is it possible to, I’ve seen it before where the FDA would basically approve make the company to do a Phase IIIb and offer it out for compassionate use as guide something to speak with FDA about regarding ThermoDox here in U.S.?

Unidentified Company Representative

Compassionate use is a subject that we have considered. During the course of the HEAT Study, it’s an approach that does not provide the level of control that our disciplined Phase III protocol does. So there is some level of risk frankly.

Unidentified Analyst

Okay.

Michael H. Tardugno

In reporting EUs and AEs and protocol compliance. That said, we’re mindful of our responsibilities and obligations, although now compassionate use is essentially a new protocol for each and every patient.

Unidentified Analyst

Okay.

Michael H. Tardugno

So it’s quite labor intensive, but there maybe an exception.

Unidentified Analyst

Okay.

Michael H. Tardugno

We’ll leave it up to Dr. Borys’ judgment where we would consider offering compassionate of the use. Although, I don’t know that we’ve had a request for that. That clearly makes sense to us.

Unidentified Analyst

Okay. All right. Thank you very much.

Michael H. Tardugno

Thank you.

Operator

(Operator Instructions) And it appears we have no further questions. At this time I’ll turn the call back to Mr. Tardugno and Mr. Church for closing remarks.

Michael H. Tardugno

Thank you, operator. Thank you to all that have joined us today and as I hope our remarks may clear the companies moving forward. We continue to focus on our critically important work. And look forward to reporting our progress as we have throughout the year as always. We greatly appreciate your interest in Celsion and your continued support. Thank you and have a nice day.

Operator

This does conclude today’s program. You may disconnect at any time. Thank you and have a great day.

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Source: Celsion Corporation's CEO Discusses Q2 2013 Results - Earnings Call Transcript