Good morning, and welcome to the Delcath Systems Second Quarter Fiscal 2022 Financial Results Conference Call. All participants’ will be in listen-only mode. [Operator Instructions] After today’s presentation there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. I’d now like to turn the conference over to David Hoffman, General Counsel of Delcath Systems. Please go ahead.

Thank you. And once again welcome to Delcath Systems second quarter 2022 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 statement 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. Delcath has had a very productive second quarter of 2022 and year-to-date, for both the HEPZATO KIT, the company's investigational product candidate in the United States; and CHEMOSAT, the company's marketed product in Europe. In the U.S., we continue to move forward towards the resubmission of a new drug application for the HEPZATO KIT late this quarter. As previously reported, in late April, we completed a pre-NDA meeting with FDA, and based on that interaction and subsequent meeting minutes provided by FDA, which incorporated feedback and recommendations, we see no barriers to a resubmission of the NDA with the current data in hand. For purposes of the NDA submission, all queries have been resolved and are considered complete, and the FOCUS Trial database has been locked. While the database is locked for purposes of the submission, I want to remind listeners that certain times and event endpoints such as overall survival will continue to mature through mid-2023. Delcath expects to provide FDA with routine periodic updates of these additional data and future submissions. Within 30-days after the resubmission, we expect the FDA will confirm receipt of the submission, and if they agree the submission is sufficiently complete to warrant review, which we fully expect they will, establish a PDUFA date six months from the submission date. While we do not know whether the FDA will convene an Advisory Committee, we are preparing for one and look forward to the opportunity to highlight HEPZATO’s efficacy and safety. The foundation of the NDA resubmission is the FOCUS Trial results, for which Dr. Jonathan Zeiger, Global Lead Investigator, provided an update during ASCO's Annual Meeting in June. I will take the time to review those data here since I have covered that many times in various forms…

Thank you, Gerard. Product revenues for the three months ended June 30th, 2022, was approximately $797,000, compared to $398,000 for the prior year quarter from the sales of CHEMOSAT in Europe. Since the second quarter of 2022 was the first full quarter of direct sales, it is not comparable to the second quarter of 2021, in which we generated product revenues with a European -- on a revenue share arrangement. Research and development expenses for the quarter increased to $5.5 million, compared to $3.5 million in the prior year quarter, primarily due to higher professional service costs, relating to the preparation for our NDA submission by the end of the third quarter of 2022. Selling, general and administrative expenses for the quarter was approximately $4.1 million compared to $3.3 million in the prior year quarter. The increase was primarily due to prelaunch costs related to the commercialization of HEPZATO. Interest expense increased to $665,000 from $40,000 a year ago, due to the interest expense and amortization related to the debt finance that we entered into on August 6th, 2021 with Avenue. On June 30th, 2022, the company had cash, cash equivalents and restricted cash totaling $14.4 million, as compared to cash, cash equivalents and restricted cash totaling $27 million on December 31st, 2021. During the six months ended June 30th, 2022 and 2021, we used $12.4 million and $11.7 million, respectively, of cash in our operating activities. On July 20th, 2022, we've closed a private placement of $5 million issuance and sale of 690,954 shares of common stock at 566,751 fee fund warrants to purchase common stock to certain investors. Each share of common stock was sold at a price of $3.98, and the prefunded warrants have sold at a price of $3.97 per funded warrant. The prefunded warrants have an exercise price of $0.01 per share of common stock and exercisable immediately. We received gross proceeds of a private placement of approximately $5 million before deducting offering expenses. That concludes my financial remarks. I ask the operator to open the phone lines for Q&A. Can you please check for questions.

We will now begin the question-and-answer session. [Operator Instructions] And our first question will come from Scott Henry of Roth Capital. Please go ahead.

Thank you and good morning. I did have a couple of questions. I guess for starters, since we just went through the financials, with the top off from the private placement, do you think that gives you the runway to get to an FDA response? So I think it will be close. But I was just curious of your thoughts.

I think it would be -- we could do it by making some very difficult choices. And I think we'd be -- it would probably be prudent to probably do something a little prior to that.

Okay. Thank you. That's helpful. And then staying on the financial side, I just wanted to check. So under the direct sales in Europe now, does other revenue that we've seen in prior quarters, does that go away? And at the same time, should we think of the $797,000 as a base going forward? And as well the gross margins are they what we would expect to see under the new model?

Yes. In terms of viewing that as a base, yes. And again, the prior quarters were a mix of supply sales and gross profit split. In terms of gross margin, yes, we just look at that as kind of couple percentage going forward. Tony, chime in if I've got anything wrong there. I guess, I got it right. So --

Perfect. Thank you. And I know we -- I just wanted to ask the question. I know we've always expected a six-month FDA review. Is there any risk to the FDA wanting a longer review? Or how comfortable are you in the six-month review assumption?

Well, I can give you the puts and takes on that. The net is we're comfortable they should be able to get through this because it really is one trial and it's not a huge trial that they have to evaluate. So that -- it really is, in many ways, a simple story for them to go through. I can't -- we all know the FDA is busy. We all know that pushed back with use. So I really can't comment on whether this division is more likely than not, et cetera, to do that. But again, it's a single trial they have to review, which really helps us dramatically in terms of workload they have to go through. And then we're really endeavoring to write this NDA in a way to facilitate their review. And there are certain ways to do that just to make that lease together well in terms of story, et cetera. So I would say it's a very good chance -- as reviews go, it's just a very light one for them. But I can't -- on their behalf, I can't say I guarantee they'd get through it in six months. But I think we certainly should be able to.

Okay. Great. Thank you for the color. Final question, just with regards to the expanded access program, how should we think about that as a means to prepare the market such that when you do get approval, the expanded access program is in place in the really centers that you convert into revenue producing centers? Is there a way to quantify how much of an impact that could be at least in that initial year from the expanded access centers?

Yes, I think one way to -- I mean, I can give you the inputs to a model. I'd like to do the framework of the model. And I want to be careful not to give some specific numbers. I mean, I'd like to strive towards having at least five, perhaps 10. The headwinds to that are: one, frankly, this expanded access protocol cost about as much as the Phase 3 does in terms of individual sites and cost base and costs. So again, the capital market situation we kind of pull that back a bit, I'd like to strive to get to 5%. The second thing we determined is that there's been a lot of staffing issues and a bit of turnover and a lot of clinical sites we have. And we have always been -- but it's really brought a finer point to it, we want to be very careful to make these sites, make sure everyone on the team is well trained. So we're being judicious in opening these up. We're not just saying, hey, you were part of the trial. We're making sure everybody in that room has gone through the appropriate training and having the exact impact that the other groups are realizing is not quite as feasible as we had hoped given the dynamics I mentioned before. So that will limit the pace at which we bring them on onboard. Again, we're going to target five. We'll see what happens. But we now want to make sure every one that's opened is doing it properly. The -- in terms of how to use it for commercial kind of mindset, I mean, I think one way to think of it and, let's say, a site could do on average one to two patients a week, let's say, they got an one IR suite a week or so. And if you thought of six to 10 patients at a site by week -- or by month, excuse me, based on that. And then you've got through pricing -- if you wanted to price it comparable to IPI+NIVO to [indiscernible] cost you're looking at a price of at least $75,000. You can start understanding with that framework what a site might be worth and what type of revenue we might generate out of the blocks. And again, that's really dependent on the EAP sites we have up and running when we get launch. And I just mentioned the dynamics behind that as well. So hopefully, that framework will allow you to kind of put together a spreadsheet, but I'll let you come up with your own assumptions in terms of number of patients a month, how many EAPs, pricing. I don't want to be nailed out precisely on those things, aside to say we try to target to get five, and we'll see if we can do that.

Okay, great. Thank you for taking the questions.

The next question comes from Marie Sebalt of BTIG. Please go ahead.

Thank you. Good morning, Gerard and Tony. And congrats on the progress. I wanted to check here now that we're in the final weeks before the resubmission, what else needs to get done? Are you just in the final writing stage? Or are there any other tasks to check off the list?

It’s pretty much the final writing stages. As you go through this, you're occasionally just additional analyses that you want to run. But John, why don't you talk through kind of where you're at in terms of pulling together the critical modules like five and then clinical sections of demonstration?

Sure. Thank you, Gerard. Yes, as Gerard said, the database has been locked and we have all the data in hand. We are putting it through all the programming that was programmed earlier to get the outputs in the analysis. In terms of documents, there's a variety of documents that go into the different modules, and they're all being worked on concurrently as we go week-by-week, and this includes a clinical summary report, the summary of clinical efficacy, some ray of clinical safety. We have a PK manual and a PK analysis, POP PK analysis that we're also conducting. We're also putting together the REMS program that's required for the submission. So a variety of different tasks are in play at the same time. And that's where we currently stand.

Okay. Great, very helpful. And then I wanted to go back to the retrospective study that was published on press release last week. Certainly, some very impressive data coming out of that. And I want to hear how you'll be using that sort of commercially in the U.S. with your direct sales team, as well as whether it will be part of any of your submissions to support reimbursement in those various countries you discussed?

Yes. So it's certainly -- if published, we'll be able to use it in detail as such, which is helpful as long as it's consistent with the label, which it will be. So yes, we'll leverage any literature we can, but consistent with the label that's published. And if not consistent with the label and the doctors are interested, of course, the medical affairs teams can talk about it as well. Any data we have will be -- it's just supportive, but we'll also put it in front of the FDA. And then lastly, in terms of national coverage submissions, again, all of that data that's published is very helpful and supportive. I think a critical component that's also going to be in the NDA is the quality of life study. It was one of those came out of, I think, it was a journal I didn't mention on this call. But then we have another one, I think, it's based predominantly on patients at a live that we're going to use to support the U.K. submission, natural coverage submission, as well as a variety of others. So all the literature is helpful for national coverage, and then we have some specialized quality of life retrospective analyses or prospects that we will conclude in the national coverage submissions.

Okay. Thank you so much.

The next question will come from Bill Maughan of Canaccord Genuity. Please go ahead.

Hi, good morning and thank you. So just looking forward to launch preparation, is there anything -- any other programs or efforts that you need to undertake other than getting the EAP sites up and running? And are any of those kind of on hold or being rationed as you look to be good stewards of capital?

I'd say we're probably slowing down a few things. But given this is such a focus of prescribing population, it doesn't have much of an impact. But Kevin, why don't you just give a brief overview of some of the major activities that are taking place right now in terms of commercial products?

Thank you, Gerard. Currently, we are working on our branding from a marketing aspect, as well as our market access. We are putting together a patient access assistance program, and those will be kicked off in Q4, at the end of Q4 and should be in place by the time for any -- for approval, and in the April time frame. So they should be ready for approval, considering the six month time frame we've been talking about.

Thanks, Kevin. Some of the more important things you're doing as well are looking very carefully in terms of codes that will be used to make sure that the hospitals are appropriately reimbursed for actually conducting the procedure. We've mapped out codes that are similar. They may end up using miscellaneous codes, which was helpful with the codes that are most similar to what we're doing now to reimburse well for the procedure. But that's very helpful that we can point to something that has a decent price to it in terms of the procedure even if we end up using the miscellaneous. So we're going through those necessary mapping processes, as well so that we have a full kind of reimbursed to get -- to assist the hospitals with when we launch.

Okay. And I know you said you're in the final writing stages of the NDA, but just to be a little more specific. Do you have all of the data or assurances you need from any third-parties and everything is in-house? Or is there anything else that's out of your hands that you're relying on someone else for to keep to your time line?

Yes. I think we had virtually everything. I think the POP PK model is not in hand based away from being here, so that's good. I should be on top of that, but that's one where I don't know exactly to pass that. But there's no data gaps or anything like that, that we need. Everything is pretty much in hand. Really what it is now is just taking this all and getting all the writings done, which we are relying through tremendous degree on outside medical providers. I can't hazard a guess on how many are involved, but it's probably over -- well over a dozen people writing in the various modules assisting us. But in terms of data becoming gating, that's not going to occur.

Okay. And then on the takeover of the EU commercialization, has there been any just kind of qualitative learnings from you having switched to a direct sales model in terms of receptivity of doctors? Any challenges that you've identified?

Yes. What we found out in -- well, first of all, I think a lot of the treating centers haven't seen anyone, any representative for a very, very long time for the product. So that was not necessarily a surprise to us, but it confirmed what we suspected. The second thing is where we have run surveys, for example, we ran one in Germany, the docs who are aware of the treatments and using it we're very, very favorable. The issue really is, it's not broad enough knowledge to different referring centers about the effectiveness of the treatment, the process to do referrals, et cetera, and that's what we really need to increase in Germany. In the U.K., there are opportunities to get regional funding while we're waiting for NICE. There hasn't been really any dramatic attempts to access that. So now we're starting that as well. So we've heard nothing that gives us pause to say, there really is negativity about this product. It really has either been crickets or alternatively just not a lot of support since I got it, got the product. So we are really confident we can drive uptake and that there's only a limit of how much you can do with it when the patients are primarily paying out a pocket in much of Europe when they use it, but lacks this regional funding in the short-term and then try to get national coverage in the long-term drive uptake.

Okay. Thank you very much.

The next question comes from Yale Jen of Laidlaw & Co. Please go ahead.

Good morning and thanks for taking the questions. My first question is that what's the inventory preparation at this point, preparing for the launch? And then I have some follow-ups.

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

Sure, Gerard. Thank you. Hello, Yale, thank you for your question. So inventory preparations, as you know, we have -- this is a sterile product. So we're keeping a watchful eye on expiry dating of all of the various that contribute to HEPZATO KITS. So we're judiciously monitoring all of that and amassing launch quantities certainly at the appropriate time. We see no issues with pulling together inventory for initial launch, both on the drug and component side.

Great. John is -- you're keeping a careful eye on lead times.

Yes. So given the supply chain isuse that we've sort of been working through during the conduct of the FOCUS Trial, we have certainly monitored all of the supply chain issues that could become a rate-limiting factor and have built that into our inventory builds and calculation. So as of this moment, we don't see that to be any rate limiting issues on any components.

Okay. Great. That's very helpful. And in terms of the potential AdCom meeting, if that happens, what -- any comment on what sort of preparation you guys may have at this point? Because this could be a very quick things in the first quarter of next year?

Sure. John, do you want to talk a little bit about the prep we're planning on and the third-party we might bring in, you don't want to name of the name, but our efforts there?

Yes, sure. Thank you, Gerard. So yes, we have -- we're not getting a clear indication if we will be in front of an Advisory Committee, but we have started the preparations for that. And in turn, we will, as Gerard said, be interacting with a third-party vendor that is a specialist in preparing sponsors for this type of event. Internally, we will put together different slide decks thinking about our data and efficacy and specifically about addressing any concerns that we think may come up during the FDA review and then highlight the safety and efficacy, of course, that we saw in our analysis, and that will be part of the submission. So this is a large amount of preparation and -- slide preparation with contingencies for questions that may come up during this event if it does take place. This is going to occur over several months, starting as soon as possible and going into the early part of next year.

I’m sorry. Can we anticipate feedback from the FDA on 60 -- 30 days after you filed for the resubmission of the NDA, they will give you a hint as whether that could happen?

I don't -- I mean, John, before timing, if I may correct you, but I don't think they're really going to give us much of a hint until the end of the year at the earliest, January more likely. But John, do you have any other thoughts on that?

Yes. Sure, Gerard. The first 30-days is simply occurs to review to determine if the filing warrants a substantive review. But once FDA starts the substantive review, we could potentially be in receipt of any information request that they so desire from that point forward.

Right. So saying that you're going to have an advisory panel meeting. I generally you don't know until they give you a notification, I believe.

That's correct. They do -- they will tell you that we plan to take your product to an Advisory Committee. But again, they have to cut through certain amounts of data and a certain amount of time has to pass while it's not actually defined. If we do have an Advisory Committee, it will probably be in month five of the review.

Okay. Great and maybe the last question here is that you mentioned about the checkpoint combo study and you will have the third data readout. Do we have any sense of what time that data readout might be?

John, what is the latest you're hearing out of life that you can share?

Yes. So the next readout they have scheduled is approximately after 40 patients, as we have mentioned during our remarks that we're currently at around 28 -- that 28 patients has been treated. So we have been discussing the next potential readout because we also would like very much to see some additional analysis. But currently, they are looking at around the 40th patient. With the 40th patient just treated, we need about 12 additional patients that have to be treated.

Okay, great. That’s very helpful. Again congrats on the other progess so far.

Thank you.

[Operator Instructions] And our next question will come from Swayampakula Ramakanth of HC Wainright. Please go ahead.

Thank you. I hope you're able to hear me well because it's been choppy -- the whole call has been choppy for me.

Yes, I think we can hear you okay.

Very good. Most of my questions have been asked. Just have one question on the EAP program. I know you said that in earnest, the program may not have patients enrolled until October. So if that's the case and then when you are about to commercialize HEPZATO in the U.S., will there be enough data from the program so that you can use it -- use the data for commercialization process?

Yes, I think, I mean, at that moment from that particular study, it probably wouldn't be much, but it's -- any amount is helpful that eventually gets published. But I think if you look at the steady stream of data that's coming out of Europe, the CHEMOSAT which is effectively the same product, I think that will be very supportive in terms of the U.S. as well.

Okay, perfect. I will stop here and then I talk to you folks later. Thank you very much.

All right. Thanks.

This concludes our question-and-answer session. I would like to turn the conference back over to Gerard Michel for any closing remarks.

Yes. I just want to thank everyone for their continued support. This is really an exciting time for the company after a very long journey for around the clock submitting and resubmitting the NDA, confirming a PDUFA dates 30-days after that, participating in a possible and possibly Drug Advisory Committee, and if the NDA is approved, commencing a U.S. launch. And in parallel, we're building a commercial team in Europe while submitting for natural coverage in major markets. Importantly, more clinical data will likely be generated by the Japan trial, the relevance of which could extend well beyond the metastatic ocular melanoma. So I look forward to continuing to update all of you on future calls and have a great day.

The conference has now concluded. Thank you for attending today's presentation, and you may now disconnect.