Good day ladies and gentlemen, and welcome to the Delcath fourth quarter 2021 earnings call. At this time, all participants have been placed on a listen-only mode. The floor will be open for questions and comments after the presentation. It is now my pleasure to turn the floor over to your host, David Hoffman, Delcath’s General Counsel. Sir, the floor is yours.

Thank you, and once again welcome to Delcath Systems’ fourth quarter 2021 earnings call. With me on the call are Gerard Michel, Chief Executive Officer; Dr. Johnny John, Senior Vice President of Medical Affairs and Clinical Development, Kevin Muir, Vice President of Commercial Operations, John Purpura, Chief Operating Officer, and Anthony Dias, Vice President of Finance. 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 27(a) of the Securities Act of 1933 and Section 21(e) 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 assurance 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. We have had a very productive four months since our last earnings call. Since that call, we’ve released additional secondary and exploratory efficacy end points from the Phase III FOCUS study, hosted a comprehensive virtual investor update meeting, made important strides towards filing our NDA for the treatment of metastatic ocular melanoma, and continued our discussions with medical oncologists regarding further development and additional indications. Starting with FOCUS study data, we believe the totality of the efficacy data we released last year provides strong support for the clinical benefit of Hepzato for patients with metastatic ocular melanoma. The 31.4% objective response rate in the intent-to-treat population, including a 6.9% complete response rate meaningfully exceeds response rates reported in published studies in this difficult to treat disease. Notably, it far exceeds the 5.5% objective response rate from the meta analysis of immune oncology agents which we use to power the study. Importantly, the responses seen in the trial are durable with a clinically meaningful duration of response of 14 months, and the categories of response ranging from progression of disease to complete response correlates with increased median overall survival. The overall survival of 20.5 months in this patient population compares favorably to published studies in metastatic ocular melanoma. As we have previously reported, supportive predefined exploratory analyses were conducted comparing patients in the Hepzato arm versus a best alternative care, or BAC arm. As a reminder, the BAC arm was comprised of 42 patients originally randomized in the FOCUS trial prior to its amendment in consultation with FDA to a single-arm pivotal study in 2018. These predefined exploratory analyses between the BAC arm and Hepzato show statistically significant treatment advantages and objective response rate, disease control rate, and progression-free survival. Specifically, in patients who received…

Thank you Gerard, and I’m happy to be joining the company during this exciting time. Product revenues for the three months ended December 31, 2021 was approximately $246,000 compared to $379,000 for the prior year quarter from sales of Chemosat in Europe. Other income for the quarter was $1.9 million compared to $129,000 in the prior year quarter, with the increase primarily due to the acceleration of deferred revenue caused by the termination of the medac license agreement. Research and development expenses for the quarter was $3.6 million compared to $2.7 million in the prior year quarter. Selling, general and administrative expenses for the quarter were approximately $3 million compared to $4.6 million--sorry, $4.5 million in the prior year quarter. Total operating expenses for the quarter was $6.6 million compared with $7.3 million in the prior year quarter. Expenses for the quarter included approximately $1.6 million of stock option expense compared to $3.5 million in the prior year quarter. The company recorded a net loss for the three months ended December 31, 2021 of $5.3 million compared to a net loss of $7 million for the same period in 2020. On December 31, 2021, the company had cash, cash equivalents and restricted cash totaling $27 million as compared to cash, cash equivalents and restricted cash totaling $28.7 million on December 31, 2020. During the three months ended December 31, 2021 and December 31, 2020, we used $6.4 million and $5 million respectively of cash in our operating activities. During the fourth quarter of 2021, we raised approximately $4 million pursuant to the ATM offering, predominantly from a single trade. That concludes my financial remarks, and I’d ask the operator to open the phone lines for Q&A. Can you please check for questions?

[Operator instructions] Your first question for today is coming from Marie Thibault. Please announce your affiliation, then pose your question.

Hi, thank you for taking the questions. This is Marie Thibault from BTIG. Congrats on the progress over the last several months, and glad to meet a few other members of the team. I just wanted to hear what we might hear out of this pre-NDA meeting you have coming up at the end of April, if there’s potential for any surprises or any changes to the timing.

I don’t think there’s much potential for any surprises. These meetings are fairly, I wouldn’t say ministerial, but it really is trying to get confirmation from the FDA that the body of data we have is adequate for them to review, which it should be. There are a couple of technical questions in terms of what way would you like to see the data. John, do you want to chime in a bit? Certainly there won’t be any surprises, but do you want to give a little more detail on the purpose of these meetings and what we need to hear from them?

Sure Gerard, thank you. We don’t expect surprises. We do have a vast body of data coming off of the prior complete response letter that we are answering, as well as data on the safety and efficacy side from the FOCUS trial. This is really the first display of our data set in totality along with our complete response letter responses that the FDA will see all in one place, so we’re asking for their guidance on how they would like to see all of that compiled into the NDA re-submission, plus as Gerard said, asking some technical questions about the presentation of those data.

Okay, that’s very helpful. Thank you for that. I’ll ask my follow-up here on Europe. Curious to hear a little bit more about how the transition to the direct sales force is going - you mentioned some hiring, as well as the progress you’re making on the reimbursement effort there. I know that you mentioned you expect to submit for some national coverage by end of year. Thanks for taking the questions.

Sure. The transition was fairly smooth, I think for two reasons. One is I think both parties, medac and ourselves, obviously wanted to make sure that there was no disruption in the supply of product to the institutions and for the patients, and my hat’s off for medac for being very professional in the transition. Second is there was not a lot of promotion ongoing that we were aware of. We’re very much aware of--in terms of trying to open many new sites, we’re very much aware given our continued role in medical affairs, we’re very much aware of where the treating physicians were, even to some cases when patients were being scheduled, so it wasn’t very difficult for us to pick it up. In terms of putting more customer-facing people in Europe, pretty much once you have a site up and running, really what we--there’s not a lot of support that’s necessary. We do like to check in just to make sure that the procedures are being done according to the protocol that we think is best for the patient, so we like to be available, but there isn’t a lot to be done. Really, new reps will really do one of two do things. One is try to find sites that are surveilling these patients and get them referred to the treatment sites, and the second thing will be in opening new sites. I don’t see a great disruption to kind of the base, the very modest base business that’s there. What will occur with us being out there now is going to be--it will take a bit of time, but I think a resumption in growth that we saw in the business through the end of 2018, then it dropped and plateaued. Now in terms of national coverage submissions, we’re targeting to try to get something in for Chemosat this year in the U.K. We’re leveraging a lot of the work we’re doing in the U.S. for the value dossier that’s also required or helpful in the U.S. - a little less required, but more helpful there. A big part of that in terms of describing alternate treatment regimes, literature search and stuff is common between European submissions and the U.S., so we’re leveraging that, but the only one that I’m confident that we’re going to get in, or mostly confident, we’re going to get in the U.K. We’ll look at other--trying to get others in. Every country has their different calendar and process. We’re going to try to get the one in that’s due in the fall in the U.K., so we’re working hard towards that.

All right, good luck with it. Thanks for taking my questions.

Thank you.

Your next question for today is coming from Yale Jen. Please announce your affiliation, then pose your question.

Good morning, this is Yale from Laidlaw & Company. I just wanted to follow up on the earlier question a little bit in terms of in Europe. What should we anticipate potentially from the revenue perspective compared to this year--last year and last few years? Would we anticipate if successful a more meaningful increase, or there will be a learning period before things start to take off?

I think it will take several quarters, i.e. the balance of this year, before we see a meaningful inflection. I would hope by the fourth quarter, we’d start seeing a difference. I think as you know, the biggest--the two biggest drivers--there were three drivers really to increase revenue. One is increasing patient referrals, and that will take some bodies on the ground and finding where those patients are being surveilled. The second is opening new sites both within countries but, more importantly, in other countries, and that clearly will take some time. The third is the reimbursement submissions for national coverage, and those have their own clock. It will take time, but I think we will see multiples of--you know, if we execute appropriately and put the right focus on it, which as a single product company we will, I think even before national reimbursement comes in, well before that we’ll see an uptick in revenue. But I think the fourth quarter is the time we’ll start seeing a meaningful increase in volume and revenue.

Okay, that’s very helpful. Are you guys going to build a head office in Europe, or those sales will be dispersed in their respective territories?

We have an office right now in Galway that does some packaging in Ireland, so that’s technically on paper our head office, but we’re not going to open up a head office with a fair amount of people located in it. I think this will be a virtual--you know, kind of a virtual business in Europe outside of the manufacturing facility. That seems to be the way the world works at the moment.

Okay, great. Maybe the last question here is what is considered to be the gating factor at this point before you are ready to file in midyear this year? Thanks.

I think it really is the medical writing is really the gating factor, hands down. It’s a tremendous amount of information to put together, whether or not it’s the results of the FOCUS trial or it was a rather long list on the CRL side to document all that, but it really is the internal medical writing. John, anything else you want to add to that, or do you agree it’s pretty much the medical writing?

Yes, it’s consolidation, Gerard, of an enormous amount of data in the way the NDA requires, but also as you pointed out, some of the questions in the complete response letter require analysis of that data set in the NDA, so it’s a huge amount of data and medical writing is quite challenging, yes.

So there’s a bit of clean-up, there’s a bit of [indiscernible] monitoring going on at the sites but very little. That’s no longer gating. It really is just getting it out the door, which most companies--you know, the standard is about four months between data lock, and we don’t technically have data lock, final data lock yet because we’re monitoring a few more patients. For most companies, it’s about four months between data lock and being able to get an NDA in. We’re going to try and do it in about two months.

Okay, so therefore no data remain to be collected or unclear at this point, is that right?

Yes, there’s nothing to be collected. We’re shooting for 100% monitoring. If monitoring ends up become gating again and we’re at 99.2, we’ll go with 99.2, which per the industry that’s just fine. Many times, things go out without totally 100%, but we’ll be close to it.

Okay, great. Thanks a lot, and best of luck.

Thank you.

Your next question for today is coming from Scott Henry. Please announce your affiliation, then pose your question.

Thank you and good morning. I’m from Roth Capital. Just a couple questions. First, you talked about being in 10 expanded access centers at the time of U.S. launch. What is the total number of U.S. centers we should think about that account for the bulk of procedures here?

Kevin, you want to handle that?

Sure Gerard. I don’t want to put a specific number on it, but it’s not a very large number. This is a rare disease with a limited number of patients for uveal melanoma. When we look at 10 accounts or 10 hospitals that we want to enroll in the EAP, we estimate that that’s--and those are world-renowned centers on top of that, so those are going to be the larger hospitals that are covering or treating most of the patients with uveal melanoma. But we would estimate that that would represent roughly half of the hospitals in the United States that are treating uveal melanoma. Does that answer your question?

That does.

Yes, if we did the 80/20 roll, I think it would something along the lines of 20 centers probably account for about 80% of the treatments. The data is never totally clear. What we’ll end up doing is trying to steer patients to our initial 10 centers, and this is a fairly tight, well--[audio loss]--they’re not feeling like they’re lost to figure it out on their own.

Okay, great. Thank you for the color. Then Gerard, you gave us a lot of data in the prepared remarks. Just for clarity, is there any new data or perhaps any data sliced in a different way that you would highlight, or should we think about this as similar to the recent presentation?

Yes, I think it was a reprisal of the data we’ve already gone through in the past, plus I added some of the Southampton publication data that recently came out.

Okay, great. Thanks for clarifying that. Then I guess the other question, as we start to see investigators publish data and we start to see other areas where this could be used, Hepzato, how do you think about off-label usage upon approval? Obviously it’s not something you market, but just how should we think about that? Do you expect it to happen in isolated situations and to what magnitude?

Yes, that’s a good question and also a very difficult one to--that one must answer carefully. Obviously we will not promote this, but doctors also are free to read case study reports or alternative cohort reports and such. There is a modest amount of data out there in ICC and we expect there may very well likely be case studies published in other tumor types, so I expect doctors will try this. It really is going to be to the extent of which they wish to push the payors or alternatively the extent to which patients are willing to pay out of pocket. But there is a modest amount of data and I expect there will be more data coming out of Europe in the coming year or two in other indications, and I think in very difficult to treat diseases where importantly there aren’t really well established guidelines, I think ICC fits into that category, which is about two to three times the size of ocular melanoma, I think that’s one where we might pick up some off-label usage.

Okay, great. Finally just shifting to the income statement, a couple things jumped out at me in fourth quarter. First, you’ve got this big bolus of other revenue in fourth quarter ’21. What exactly was that, and how should we think about that line going forward?

Tony?

Yes, we had a prepaid amount that we had with medac that was being amortized over, I think, seven years, and as a result of the termination, we accelerated some of that deferred revenue in the fourth quarter. It was something that was prepaid that we were deferring.

Okay, and that’s a one-time event?

It will be a one-time event, yes.

Okay, perfect. Then also SG&A, around $4 million in Q3, around $3 million in Q4. Which quarter do you think is more reflective of what we should think about for SG&A?

I think probably the higher quarter going forward, given increased hires and increased activity getting ready for commercialization.

Okay, great. Thank you for taking all of the questions.

Your next question is coming from Swayampakula Ramakanth. Your line is live.

Thank you, this is RK from HC Wainwright. Good morning Gerard and Tony. Most of my questions have been asked, but in general I’m just trying to understand what’s the market for Chemosat in Europe, and how are you trying to ensure better market penetration than what medac had done in the last few years?

Yes, I think the potential for Europe, given it’s much larger population offset by a lower price point, is probably about, let’s call it $100 million in all of Europe for ocular melanoma. The increased penetration, you know, we need to do really three things. One is for the markets we are in, start getting patients referred to those treating sites, so that means that we need to find out where those patients are being diagnosed, who are going in on a regular basis, getting CAT scans or MRIs, looking for liver mets. We need to make sure the physicians who are surveilling them know about these treatment settings, know about the data and get them referred to those sites. The second thing is opening new sites, whether or not it’s, for example, in Germany - we probably could use more sites, I think, in the south part of Germany, but as importantly or more importantly opening sites in other markets. France and Italy obviously are two large markets, and Spain, that jump to mind, so we need to garner interest with medical oncologists in those sites and interventional oncologists and open sites. Then the third thing after that would be obviously getting nation coverage. That in itself takes some time and it’s difficult to do that in any market unless you have real support from the treating physicians, so you need to try to get in there prior to national coverage build support, and then put in your submission. Those are the necessary steps and kind of in that order that we’ll take on. It will be a multi-year effort, but I think by the time we’re starting to see some meaningful revenue uptake in the U.S., I think Europe is probably going to lag a bit, again just the national reimbursement requirements to really get revenue going, but we will definitely get there. I think the other point that no one’s mentioned, that I think it’s important to keep in mind, is having European rights from a strategic perspective, I think is very valuable. As this company evolves and grows, I think it’ll be a lot more attractive from other dimensions if we do maintain global rights, or at least importantly rights in Europe and the U.S., so we’re glad to have all that in our camp.

Yes, that’s for sure, Gerard. In terms of national coverage, probably you said this but I didn’t catch it, is there any coverage at all in any geography? I know you said you’re looking into U.K. in the immediate future.

Yes, there is coverage in Germany under a process called [indiscernible]. What happens there is the hospital every year has to actually request funding for approved products that don’t have national coverage - they can make a special request, and they do that sort of in a basket every year. That definitely is a bit of a cap on how much business you can get because not only do you need to get a new hospital up and interested in it, but you’ll also need to get their financial office on board too to actually put in the request every year before they use the product. There are ways to simplify that; for example, getting a set price would be the next step and we’re working on that right now, so if we have a set price, it removes one negotiating knob they have to deal with, but it makes it a bit easier for them. But yes, there is some coverage right now in Germany. It’s not kind of write it down and you get paid type coverage, but it is coverage and we’re going to push hard. Germany is one place we’re going to try to open up additional sites as well as try to get more referring patients, because there is some coverage now there.

Thank you Gerard, talk to you soon.

Take care, RK. Thank you.

Your next question is coming from Arlinda Lee. Please announce your affiliation, then pose your question.

Hey everyone, it’s Ben Shim calling in for Arlinda Lee of Canaccord Genuity. Congrats on all the progress, gents. I’ve got a question for Gerard. Perhaps on Chemosat, can you remind us what the legal intellectual property protection runway is, and how does that compare to the practical competitive barriers to entry? Then I have a couple follow-ups.

Sure Ben, good to hear your voice. There is IP still on various components of the product, but I’ll be blunt and say, look - I think anybody can engineer around that IP over the course of a year, year and a half. There’s no way to get--the type of filter we use, there’s no way to get a 100% airtight set of IP around carbon absorption of small molecules. We do have patents in terms of the specific design, and what that would do, would be require someone to find a way to come up with a filter that does the same thing, which they could do but it would have to be definition different than our system. To get different than our system, they’re going to have to re-run preclinical--you know, in vitro and in vivo preclinical studies, they’re going to need to do Phase I/IIs, then they’re going to have to re-run everything, a pivotal trial in whatever patient population they choose, let’s say ocular melanoma, they’re going to have run that all over again, and they’re going to have run that trial when we’re out there already treating patients. That’s a seven year-plus process to go from zero to on the market, and that is essentially the IP protection we have, which ironically is very similar to the IP protection that occurred at my last company, at Vericel, where they had old school 1980s cell therapy technology growing by leaps and bounds, and what keeps competitors out of the market there is you can’t do exactly what they do, you’d have to recreate it and you’d have to prove to the FDA that it is the same. So similar to that company, there is no 505(b)(2), there’s no 510(k), which is a drug-device combination, ANDA type process to get a me-too on the market. You’d have to start from ground zero and replicate everything, and while replicating it make sure you don’t do anything that we have IP on.

Wow, great. That’s great, thanks. Switching to the NDA re-filing, given the six months review time and given that we’re going to have a bunch of holidays within that second half, how soon will you know if there is going to be an ad-comm, if any?

John, when will we know if there’s going to be an ad-comm or not? We have talked about this, but John, why don’t you handle that?

Sure Gerard. You know, with a six month review clock from the PDUFA requirements, one would anticipate that ad-comm in month five, so that would give them the opportunity to get everything complete. You would know--FDA would tell us probably within a month or two of their receipt of the re-submission if in fact an ad-comm was in the offing. To get that and then plan for it in month five is probably reasonable - I mean, a six-month review clock is short, and if we did have one, it would probably be in month five. We hear you about the holidays sprinkled amongst the out months there, it’s going to be interesting.

Knock on wood, hopefully everything goes to plan here. My last question is regarding the European experience, and you’ve got quite a bit of, I guess, experience in data there and number of patients. How helpful will that be for the FDA in support of this NDA re-filing?

John, what’s your perspective on that?

When you say real world experience, Ben, is that your--

Yes.

The point about real world experience is that, of course, it’s not contributing to the meaningful safety data set. We do have supported evidence from various European [indiscernible] either through a registry or other single center institution work that we’ll use as supportive evidence for the NDA, but it wouldn’t be part of what FDA would consider part of the safety database. While it’s important and it’s supportive, it wouldn’t be considered as part of the FOCUS trial data. It’s a different quality of data.

Yes, I think another way to look at this is if there was a strong theme through the published literature that there was significant safety issues with the current product, with the gen-2 filter, it would be problematic. The FDA would read that, and they will read these papers. The theme is not such. The theme is one of a safe product for a devastating disease, so I think technically it’s not part of the safety database, the publications, but I’d be hard pressed to think that they wouldn’t take note of it. I think it’s very helpful it’s there, but we can’t pound the table and point to it. We have to just make sure they’re aware of them and let them read it without us making too much noise about it.

Got you, that’s very helpful color. Thank you very much for taking my questions.

All right, thank you Ben.

There are no further questions in queue. I would like to turn the floor back over to Gerard for any closing comments.

Yes, I just want to say that I appreciate everyone taking the time and your support. This is a very exciting time for us here at the company, and we very much look forward to giving you further updates as the year progresses. Everyone have a great day, thank you.

Thank you. Ladies and gentlemen, this does conclude today’s event. You may disconnect your phone lines at this time and have a wonderful day. Thank you for your participation.