Good day ladies and gentlemen and welcome to the Delcath’s Second Quarter 2021 Earnings Call. At this time, all participants have been placed on a listen-only mode and the floor will be opened for questions and comments after the presentation. It is now my pleasure to turn the floor over to your host James Carbonara, Investor Relations. Sir, the floor is yours.

Thank you. And once again welcome to Delcath Systems second quarter 2021 earnings call. With me on the call are Gerard Michel, Chief Executive Officer; Dr. Johnny John, Senior VP Medical Affairs and Clinical Development; Kevin Muir, VP, Commercial Operations; and Christine Padula, Interim Principal Accounting Officer. I’d like to begin the call by reading the Safe Harbor statement. This statement is made pursuant to the Safe Harbor for forward-looking statements described in the Private Securities Litigation Reform Act of 1995. All statements made on this call with the exception of historical facts may be considered forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Although the company believes that expectations and assumptions reflected in these forward-looking statements are reasonable, it makes no assurances that such expectations will prove to have been correct. Actual results may differ materially from those expressed or implied in forward-looking statements due to various risks and uncertainties. For a discussion of such risks and uncertainties, which could cause actual results to differ from those expressed or implied in the forward-looking statements, please see risk factors detailed in the company’s annual report on Form 10-K, those contained in subsequently filed quarterly reports on Form 10-Q, as well as in other reports that the company files from time to time with the Securities and Exchange Commission. Any forward-looking statements included in this earnings call are made only as of the date of this call. We do not undertake any obligation to update or supplement any forward-looking statements to reflect subsequent knowledge, events, or circumstances. Now, I would like to turn the call over to Gerard Michel. Gerard, please proceed.

Thank you everyone for joining today. One of the major highlights of the quarter was a presentation at the 2021 ASCO Annual Meeting, which review both previously announced and new efficacy data from our Phase III FOCUS Trial of HEPZATO KIT in patients with liver dominant metastatic ocular melanoma. The old The oral presentation by the study’s Lead Investigator, Dr. Jonathan Zager, Chief Academic Officer, Chair, USF Department of Oncologic Sciences, at the Moffitt Cancer Center, included data based on 79 of 91 treated HEPZATO patients, which showed an overall response rate of 29.2% with a 95% confidence interval lower bound of just over 20%. Given the magnitude by which the lower bound exceeded the 8.3% prespecified threshold for success, the primary endpoint of the trial has been met regardless of the outcome of patients who have not yet been evaluated. Patient level response data were also presented for this same patient set, indicating that 44% of evaluable patients in the HEPZATO arm had a 30% or greater reduction in target tumor lesions at one or more time points versus 17% for patients enrolled in the Best Alternative Care arm. Importantly, the safety data presented was well in-line with previously reported data from single center European studies. These data combined with the previously disclosed statistically significant improvement over best alternative care and progression free survival and disease control rate further strengthens the case that HEPZATO would offer a compelling clinical benefit to patients were approved by the FDA. The resurgence in COVID is impacting both our clinical sites and vendors, due to that final focus data is going to release somewhat later than we projected three months ago, and we are now targeting October instead of at ESMO in September, given the importance of these data to investors, who will…

Thank you Gerard, and good morning to everyone. Product revenue for the three months ended June 30, 2021 was approximately 536,000 compared to 379,000 for the prior year period of our CHEMOSAT procedures in Europe. Selling, general and administrative expenses were approximately 3.3 million, compared to the 2.3 million in the prior year quarter. Research and development expenses for the quarter were 3.5 million, compared to 2.2 million in the prior year quarter. Total operating expenses for the quarter were $6.8 million, compared with $4.5 million in the prior year quarter. The expenses for the quarter included approximately 1.6 million of stock option expense, compared to no stock option expense in the prior year quarter. The company recorded a net loss for the three months ended June 30, 2021 of 6.4 million, compared to a net loss of 4.3 million in the same period in 2020. On June 30, 2021, we had cash, cash equivalents and restricted cash totaling $19.4 million, compared to cash, cash equivalents and restricted cash totaling 6.2 million at June 30, 2020. During the three months ended June 30, 2021, and June 30, 2020, we used 11.7 million and 13.1 million respectively in cash of our operating activities. On August 6, we closed a $20 million venture debt financing track transaction with Avenue Venture Opportunities Fund. The initial tranche of the loan is $15 million, including $4 million, which has been funded into a restricted account, and will be released upon certain milestones, including a read-out of the complete overall response data and raising $20 million in net equity proceeds. The company may request an additional $5 million of gross proceeds between October 1, 2022 and December 31, 2022, which will be funded at Avenue Venture funds discretion. The loan bears interest at an annual rate…

Thank you. [Operator Instructions] Our first question today is coming from Marie Thibault at BTIG. Your line is live. You may proceed.

Hi, good morning and thank you for taking the questions. I wanted to ask one here quickly on the progress you're making toward the full data release. And what you're hearing from hospitals in terms of access, of course, we're talking with all sorts of companies who are starting to see some restrictions. So, I'm curious if the variants are having any impact on your team's access to the site?

Sure. John, do you want to take that one?

Sure. Good morning, Marie. Thank you for the question. So, we aren't seeing any restrictions due to the increased variants, prevalence here in the U.S., but we have seen that in certain sites in Europe, particularly in Germany, and in the UK. So, in a few centers at our European sites that we are trying to get access to continue with monitoring, we have seen the impact, not all of them and not yet in the U.S.

Okay, that's very helpful and great detail. And I wanted to ask one quick follow-up here. Maybe a little bit [in the wiz], but I noticed that, you know, Delcath had issued an invoice to medac your partner in Europe for a milestone payment related to the FOCUS efficacy trial, efficacy data there, I haven’t seen an update in the release, so I wondered if there was any new news on that front? Thanks.

Yeah. You did correctly notice that as a subsequent event on our Q. We did note that we had achieved a milestone, and that EUR 1 million would be due that milestone was based on achieving top line efficacy results, as defined in our protocol. medac is actually – their position is, that is not due until the full clinical study report is available. For the agreement, you know, we have, let's just say a friendly disagreement, because we think the agreement is fairly clear that it's due upon just positive efficacy data. So, we're going to work through that with them. These things happened. I think, really what the issue is, is one of timing, whether we get it sooner or later. They're not disputing the data itself. They're just disputing whether or not a [full CSR] is necessary prior to payment.

Okay. So we'll stay tuned for the resolution on that, and congrats on the progress. Thanks for the questions.

Thank you, Marie.

Thank you. Our next question today is coming from Scott Henry at ROTH Capital. Your line is live. You may proceed.

Thank you and good morning. Just a couple questions. First, on the income statement, the product revenue in the quarter, 536,000, obviously, still pretty small numbers, but the trend seems to be upward. I'm just wondering if that has any reflection of the changes you’ve seen with the NICE guidance, and should we perhaps expect that to continue in that direction?

Yeah, I think it's more of a generalized increase in the UK and Germany. I think it's too soon for the NICE guidance to have had a material impact yet. You know, sales had not been, you know, growing by leaps and bounds. I think we're finally just getting back to a reasonable world clip that we had had when we had the product on our own. But I do expect the NICE guidance to have some impact as private payers, which is maybe about 10% of the UK have that as they kick in. But really the large impact in the UK is going to be the fact that next year, we can submit a request for national reimbursement. And that might take another year. So, we're probably a good year and a half, two years off before national reimbursement is an option in the UK, but thankfully, now we can actually move down that path.

Okay, great. And then staying on the income statement, would you expect the current, kind of expense and burn rate to be reflective of the next couple quarters or given that the financings improved, would you expect, perhaps spending to increase in the next couple quarters or perhaps we should wait till after we get the data and then see that more of a next year event?

I think there'll be a consistent, kind of ticked up over the next, let's call it six quarters. Based on – I'm not going to give a specific number, but definitely the general trend. And you know, that would be expected based on you know, three things. One, there's always an increase in third party expenses, as you push to get an NDA to get out the door that ranges from consultants you bring in to do mock GMP and GCP audits. It has to do with, you know, increased statistical work medical writers, so all of that will increase to some extent. Secondly, you know, Kevin Muir, although he is very frugal, he is going to have a commercial. He is going to continue to spend increasing amounts as we prepare for commercial launch. And then lastly, back to Johnny John and his team, you know, right now what we're doing in terms of new indications is really advisory board meetings, that type of thing. But you know, sometime next year, we'll start writing checks to sites as we start signing sites up, and hopefully enrolling patients. So, based on all three of those things, we will likely see an increase in expense. Now, with that said, if for some reason, it's not prudent to spend some of those monies, some of those funds, because of financing environment or something else, we always have the option to, you know, slow that spend down or halt some things. So, we will be, you know, very careful in our expenses, and only spend what we think we can afford, based on our balance sheet. And based on, you know, the opportunities in front of us.

Okay, great. And the final question is more of a qualitative one, and probably one I’ve asked you before, but when it comes to the primary endpoint in the FOCUS trial, the ORR under the resist criteria, you know, how much variability is in that endpoint from the interpreter? I'm just wondering, when the FDA goes through that data, you know, how much of that endpoint can be a function of the interpretation versus objectiveness of the data? Just looking for color on that?

It's a great question and it's fairly specified by the resist and how the independent radiology group goes through it. I’ll let Johnny give the details on how that works.

Yeah. So, we are employing an independent radiology committee for this trial. And that consists of three independent readers that review the scans at the committee. So, there's very little variability, they do follow a resist guidelines, and we have an adjudicator if there is, you know, a different response between two readers. So, we don't expect many much variability in the results from the IRC.

Okay, great. Thank you for the additional color there. Thank you for taking the questions.

Thank you. [Operator Instructions] Our next question today is coming from Yale Jen at Laidlaw & Company. Your line is live. You may proceed.

Good morning, and thanks for taking the questions. And Gerard, you mentioned earlier that EMBA additional work in terms of the pipeline development, could you elaborate a little bit more as whether some of the early pipeline development will be conducted in Europe or there’s additional color to that?

Yeah, I think – I mean, the pipeline development will occur both in Europe and the U.S. It could be that we – that more of the way of the development early on is in Europe. And the reason for that is that the indication for CHEMOSAT in Europe under the CE mark is broad across all tumor types. So, it is a bit easier to get studies going in other tumor types such as CRC etcetera. But, you know, our intent is to have a mix of perhaps investigator initiated studies, and probably more of those in Europe, given how familiar those sites are with the product, as well as multi-center studies in both Europe and the U.S.

Okay, great. That's very helpful. Another question, here is that you mentioned that you just applied or just submitted an open access, so expanded access programs. How shall we think about the time this to be implemented and any other colors on that front?

Yeah, I think Johnny is in probably best position to answer that, but I think – before he does answer, I will say one thing, I mean, the most important thing from a commercial perspective of the [EAP] is that, we have a fair number of sites up and running by let's say, mid-summer next year, you know, with plenty of time prior to launch. So, training doesn't become a gating item. In terms of the near-term, how many we want to get up and running, let's say, you know, by the time the NDA is filed, let's say over the next six months, Johnny why don’t you talk about how many sites for the next six months and about when they'll be up and running?

Sure. So, we expect three sites to be – well, two sites for sure to be up and running by the end of this month. And then we are adding another two sites subsequent to that. So, about four sites, we expect to be up and running by September. And then as we move forward in months after that, as sites become interested, we'll enroll them onto the program on a rolling basis. So, approximately five, I would say five, six sites in the next six months.

Okay, great. That's very helpful. That’s most of my questions and congrats for the progress.

Thank you, Yale.

Thank you. We have no further questions in the queue at this time. Do you have any closing comments you'd like to finish with?

Sure. In closing, we're excited about the prospects for the company as we start to finish analyzing the FOCUS trial data, prepare the NDA and start outlining the development plans for the next indications for HEPZATO. As the year moves on, we look forward to updating you on these developments. And thank you all for taking the time this morning to join the call.

Thank you, ladies and gentlemen. This does conclude today's event. You may disconnect at this time and have a wonderful day. Thank you for your participation.