Imunon, Inc. (IMNN) Q3 2012 Earnings Report, Transcript and Summary

At this time I would like to welcome everyone to the Celsion Corporation third quarter 2012 shareholder 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.

Our third quarter 2012 financial results were released this morning before the market opened. We filed our third quarter Form 10Q on Friday after the market closed. The Form 10Q is available on the SEC’s Edgar system and the company’s earnings release and Form 10Q are both available on the company’s website at www.Celsion.com. Today’s call will be archived, the replay beginning today at 2 PM Eastern and will remain available by phone until Monday, November 26, 2012 and on the company’s website for 30 days. Before we begin the call we wish to inform participants that forward-looking statement 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, and clinical trials by others, 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 & Exchange Commission. Today, in addition to discussing our third quarter financial results, we will provide you with a corporate update including an outline of the events ahead in our Phase III HEAT study as well as our overall ThermoDox clinical development program. We will then open the call for questions which we ask that you keep to no more than two. With that, I’d like to turn the call over to Michael Tardugno, President and CEO of Celsion.

Thank you for your interest in and support of Celsion, a company I trust you’ll agree is one of the most exciting and compelling in this world of biotech drug development. I am joined today by Nick Borys, our Chief Medical Officer; Greg Weaver, our Chief Financial Officer; and of course, Jeff Church from whom you’ve just heard, our Senior Vice President of Investor Relations and Corporate Strategy. Before I get started this morning, on this Veterans’ Day I’d like to give a special welcome to those of you who are veterans of the US Military and on behalf of all of us, thank you for your service to our country. This is a great time for Celsion and by extension for our shareholders. Your confidence in our clinical focus and support for innovative technology has brought us very near to the transformative event for our company which is the announcement of the results from the HEAT study because if we are right, and we have no reason to believe we will not be, we will bring to market more than the promise of just hope, we will bring to the market ThermoDox. A drug that will extend life and perhaps provide a cure with those diagnosed with HCC or hepatocellular carcinoma, as you know the largest unmet medical need remaining in oncology. Completion of development and transitioning to the commercialization of ThermoDox is an exciting milestone for our management team and I can tell you this is what we signed on for. This is why we’re here. In a sophisticated industry of clinical science and medicine full of regulatory complexity it’s good to know that many of you have been with us and are here with us this morning. As I have been saying and continues to be, we…

At this late stage in the development of ThermoDox drug product manufacturing and our ability to meet global demand is a key priority both for the commercial launch and for the regulatory steps that precede it. As we announced earlier this year we have in place a commercial supply agreement in China with Hisun Pharmaceutical for the production of ThermoDox for the domestic China market. Hisun Pharmaceutical is one of the largest manufacturers and suppliers of chemotherapeutic agents globally and a go to partner for pharma companies in China including such companies as Pfizer and Eli Lilly. Our Hisun agreement in addition to providing the investment needed to support the production of three registration batches also provides certain regulatory advantages when filing for approval in China. Our Hisun relationship is also important in that it illustrates the careful attention to cash management in the period leading up to data. This balance between advancing the largest study ever conducted in intermediate stage primary liver cancer and maintaining a strong cash position has allowed us to develop what will be a registration stage product, potentially one of the most important new therapeutic introductions in oncology without giving away any global rights outside of Japan. The level of interest for a billion dollar product with near term approval potential in the US, Europe and emerging markets such as China and Asia Pacific is high. China and the rest of Asia Pacific are key markets for ThermoDox as they represent over 70% of the global incidents for HCC. The appetite among both large multinational pharmaceutical companies as well as major domestic Chinese pharmaceutical companies has continued to increase as we approach final data readout. Companies are looking for large new product opportunities like ThermoDox in emerging markets like Asia Pacific to replace revenues from many of their products coming off patent. Now, Greg will provide an overview of our third quarter financial results.

We reported total cash and investments at September 30th of $22.7 million which compares to $24 million at the end of the second quarter which reflects a net change in total cash of just $1.3 million in Q3. During the third quarter the company received the benefit of proceeds of $4 million from investors’ cash exercise of common stock warrants along with some stock option share purchases by company insiders. The total use of cash for operations in the third quarter was $5.25 million which is down from $6.9 million in Q3 last year. The reduction in cash usage was a result of the continuing trend in the drop of operating expenses which is consistent with our prior guidance which is driven by HEAT study CRO costs globally trending down as we completed enrollment in the study in June of 2012 and are now moving in the next stage of the study approaching end of trial results. This is reflected in the numbers with Q3 total operating expenses dropping to $4.9 million which is down from $5.7 million in Q2 of this year and down from $6.8 million in Q3 of last year. Given our current operating assumptions, we expect to end the calendar year 2012 with cash sufficient to fund the full year of 2013 and beating street estimates. Q3 2012 R&D expense of $3.5 million reflects a decrease year-over-year of 35% which is down $1.9 million from $5.4 million the same quarter last year and down 15% from $4.1 million in Q2 of 2012. Our management of clinical activities for the HEAT study continues to trend down as expected partially offset by the increases in our development of the US commercial manufacturing activities for ThermoDox. General and administrative expenses of $1.4 million were flat year-over-year compared to Q3 2011 and are down from the $1.6 million in Q2 of this year. To summarize, we completed the third quarter with cash and investments of $22.7 million as compared to $24 million at the end of the second quarter. This provides the runway to fund operations and debt service through 2013. As we pointed out on last quarter’s call, one important element of our culture here emphasizes the wise use of cash and cost controls and our ability to make cash and by extension our equity work as hard as possible but not at the expense of our commitment to clinical research and growing of shareholder value. I would add we also have an additional $5 million available from our loan facility with Oxford and Horizon following positive clinical data from the HEAT study which adds to the strength of our balance sheet at a relatively low cost of capital. To reiterate, we have no current plans for issuing new equity under the HEAT study data disclosure in January. Now, I’d like to turn the call over to our Chief Medical Officer Dr. Nick Borys.

In my review with you today I would like to focus on our current and recent efforts of ThermoDox development. The HEAT study as part of its special protocol assessment as agreed to with the FDA and endorsed by the European regulatory authorities is designed not only to show statistical significance with our results but clinical significance as well. In other words, positive data means that our results are not only meaningful to regulatory authorities and statisticians but meaningful in the clinical treatment of HCC. The team here at Celsion is working diligently to prepare for our regulatory submission. Supporting this goal are a number of key designations including special protocol assessment and a 505(b)(2) agreement with the FDA as well as fast track. After our NDA submission is accepted we expect to secure a priority review in line with FDA’s current PDUFA performance goals. We have confirmation from the European regulatory authorities that the HEAT study provides the basis for a centralized European filing application or MAA. We will be afforded many of the same priority review benefits through what European regulatory authorities call a full mixed review registration process. As Mike mentioned earlier we have recently met with the Chinese regulators and came to an agreement that the HEAT study would also serve as an adequate basis for market approval and because of our relationship with local manufacturing of ThermoDox we would be eligible of submitting a Chinese NDA in parallel with the US NDA submission and the European submission. So primary liver cancer is a priority or Celsion. ThermoDox’s unique properties support its potential use beyond first line treatment in HCC. As Mike mentioned, we’ve announced several important new collaborations recently that underscore not just our belief in this potential but support for it within academia and…

As I hope our remarks make clear, with your support we’ve worked and are prepared for what will be the most important event in Celsion's history and that is the validation of our technology platform and lead therapeutic ThermoDox and to launch what may be one of the most important new therapies in oncology in a generation. The culmination of many years of work and preparation from a small but very dedicated team. We will continue to focus on our critically important work and look forward to reporting to you on our success. In doing so, we expect to create exceptional value for our shareholders and most importantly make a significant difference in the lives of patients and their families. As always, we greatly appreciate your interest and support and we look forward to updating you on our continued progress. Now, we’ll go on to questions which I’d like to ask you to limit to no more than two to give everyone a chance to get answers. Operator, please open the line.

(Operator Instructions) Your first question comes from Keith Markey – Griffin Securities, Inc.

Just a couple questions, I was wondering if you could tell us do you think the top line data will include the trend in survival?

That’s a hard question to answer at this point. Certainly, we’d like to report as much information as possible. I think we want to be mindful of the fact that we don’t want to deliver results or information prematurely so we’ll want to make sure that the data is mature enough to be able to share the trending information, if it’s available, with the general public and with our shareholders. I think as Dr. Borys would point out, reserving as much important clinical results as possible for publication and for our conference presentation is important. So we’re going to go through a very structured process evaluating what we can and what we will and can share to one which is most importantly to ensure our investors know the results with some confidence that they can continue to support the company. But at the same time we have to balance it with our scientific and academic obligations to preserve and update so that the paper and the presentation is accepted by the highest of top level forum.

Then I was just wondering, can you remind us of the timeframe you expect to file the documents with the different regulatory agencies?

I don’t think we’ve given any guidance on that point just yet but we will be moving as quickly as possible. As I said in my remarks and Nick reconfirmed, we have already begun developing the NDA, it’s being written as we speak. At least one, possibly two sections will be ready for submission. If the FDA allows for a rolling submission we’ll be able to do so quite quickly. The submission date will be conditioned. We have our plans but I think it’s important to recognize that the submission ate will be conditioned on the outcome of our pre-NDA meeting with the FDA. We’ve already had conversations, written exchanges, let me say it that way, with the FDA regarding our expectation for data availability and what our plans are for filing. As we expected and as we looked forward to, they reminded us that pre-NDA meetings would be necessary in order to ensure we are addressing all of the issues in an appropriate manner to ensure a quick and timely review of the application in line with our expectation and I’m sure their expectation that we will have a priority review agreement. Until we have met with FDA, and we will have a similar meeting by the way with EMA and with FSDA. Until we’ve met with these agencies [inaudible] just a little bit of pause here to give you any firm dates with regards to our expectation of filing but you can rest assured that it filing timelines are a subject of regular review and conversation within the company.

Your next question comes from Joe Pantginis – Roth Capital Partners, LLC.

My two questions are I was wondering first can you provide a little more color with regard to the great amount of background logistics that are going on right now? Obviously, you’ve been having a great amount of work through the entire trial, through your clinical quality dashboard but what new things are coming up now to be able to finalize data from this international study? Obviously, you have a lot of geographies to compile the data in a centralized location.

That’s a good question. Collecting data from 79 sites in 11 countries and I think we have 16 different languages that we’re working through is not a trivial task by any means. The clinical group here regularly and frequently meets with our CRO and the extended group. I mean, we reached down right into the countries speaking directly to our CRAs in the countries with regards to collecting data in an efficient but more importantly in a quality manner. As you know, we will be locking the database at some point in order to ensure that there can be no changes following the collection of data and the summary of information that is provided to the DMC ultimately provided to regulatory agencies. But it is a sophisticated and complex endeavor. Nick, do you want to maybe just talk through some of the elements of data collection in the far reaches of the world?

Sure. For the data mangers out there, as you probably know, we are now completing our final data sweeps with a focus on survival sweeps and imaging sweeps to ensure that our PFS events and survival events can be well determined and confirmed by our DMC. You also probably know, as Mike has mentioned on many occasions, that the data is always checked and rechecked. As this data goes through the checking process queries arise where if something is not exactly clear we have go to back to the site and rediscuss it with the investigators and clarify them all. All of this has to be finalized to a point where we can declare a data lock and at which time we can prepare all of the documents, and the tables, and the graphs that are necessary for our DMC that will eventually come to go out to the regulatory authorities for an approval process. So it’s a multilevel effort that’s being done by multiple vendors and it’s being monitored by us here at Celsion. It is a very exciting time for us so everything so far so good.

My second question I guess if you can link you’ve talked about some of your pre-commercial and your pre-regulatory plans, anything you can add regarding potential business development activities?

I don’t think at this point we’re in a position to really talk anymore about interactions with other companies. Although, they are happening and they are frequent and they certainly take some of our precious time and resource, but a priority for the company nonetheless. Our expectation is that post positive data will be entertaining multiple term sheets. Now, whether those terms sheets will address a regional license or larger, will really be the function of other company’s interest. Our sense is on positive data the company will realize the best terms for license. So we’re operating with some patience and expect that our patience will pay off. I wanted to make another point on licensing and I think this maybe further addresses some of the comments that Jeff made. A very high concentration of patients are in Asia Pacific and so when we look at prioritizing our time and effort as it relates to diligence which you probably know is time consuming, the majority of our work and the majority of the interest that we’ve seen is in that region of the world.

Your next question comes from [Ren Benjamin – Burrows & Company]. [Ren Benjamin: Could you talk to us a little bit about the role of overall survival in the entire sort of context of the data package? And maybe help us understand how we should be thinking about overall survival from a regulatory point of view and then maybe from a marketing point of view?

Let me start with the second part of your question first. It’s very clear that a survival benefit will certainly be recognized as a clinical benefit that provides substantial pricing power. There is simply no doubt about it. We are anxious to see the survival trends which we would expect to have, maybe not enough events of death to be able to conduct a proper statistical analysis, but we’ll be looking forward to some survival trend which we would expect to have certainly by the time the application has been reviewed and approved by the US FDA. Survival benefit is important in the overall equation for the market value of ThermoDox, there is simply no doubt about it. Let me just come at it from another way, with regards to PFS as a primary end point, outside the United States we know that particularly in our indication which may be different than quite a few others that have had some notoriety of late, patients in our trial have had no metastases of cancer, no evidence of cancer outside the liver. Post RFA treatment, all of their lesions have been addressed and eliminated. So they are leaving the physician post treatment with no evidence of cancer. Progression is a meaningful event in that situation, in that setting. That was recognized very clearly by the EMA in our scientific advice meetings with the EMA they made it clear to us that PFS alone in this setting may be sufficient for unconditional approval, or final approval of ThermoDox for the European community. We think that’s right. In the US it’s reasonably clear to us, given the construct of the trial as negotiated with the FDA in our SPA negotiation, that a confirmatory end point survival needs to be part of the trial. So we’ll be following our patients to establish a confirmatory end point. What the hurdle will be for OS support PFS I think is yet up in the air. But, we know that the trial is powered in a way to show us 30% improvement in overall survival from a statistical standpoint. Before we leave this question I want to ask Nick if he has anything to add to that?

One thing I think is very important for everyone to know is number one, FDA has committed to approval the drug based on PFS and then later on we’ll continue following our patients for OS which is again a confirmatory end point as Mike has described. PFS in itself is a very important clinical end point as the European authorities have recognized. You can imagine that if we are able to control the disease at the liver before progressions continue, that increases the chance for patients to get other curative treatments such as transplantation. So PFS by itself is very important in liver cancer and that might offer a contrast for other cancers as well. So from my point of view, from a clinical point of view, from a regulatory point of view, getting that PFS is very important, confirming it with OS later on we have very high confidence. [Ren Benjamin: Just another question, kind of the flip side of what Joe had asked regarding partnering, can you talk to us a little bit about how you’re thinking about commercialization? So do you have to get a partner? Is that the primary goal of the company of if the economics just don’t seem to be right are you willing to go it alone? If you are, what does the company look like if you’re willing to go it alone?

I think that’s a good question. It’s been our point of view that to be successful we need [inaudible] areas in development and commercialization for which we have expertise and confidence. Sticking to our meeting I guess, is the saying as it goes it comes to mind. Outside the United States it’s pretty clear to us that we do need a partner to have the maximum potential for success. I do not have any questions that post positive data that we have partnership relationships that we can come to the conclusion we’ll have terms, economics that benefit the company. I’m not overly concerned about that. In the United States however, our view point is quite a bit different. We are prepared to bring ThermoDox to the market in the US ourselves. It may be our first line strategy and in fact, we put quite a bit of time behind assembling this strategy and we think we have a reasonable approach that manages risk, manages the amount of cash necessary to bring ThermoDox to market in a very responsible way. So unless we see term sheets for the US that would provide shareholders with a better return on investment than what our management team could do alone in bringing ThermoDox to market ourselves, we are likely to commercialize ThermoDox in the US ourselves or potentially in some kind of co-marketing or co-distribution arrangement.

Your next question comes from Mara Goldstein – Cantor Fitzgerald & Co.

Just two things, the first is I understand you’re limited to what you might be able to say in terms of how much data will be released at first flush but do you think you’ll have regional stratification when you release the top line data? Then secondarily, I just wanted to confirm that you said the trial was 30% powered to show an improvement in survival?

That’s right. The first question is are we going to release regional results, that I think for at the time we’re going to be releasing top line results we will probably not be drilling down to a lot of detail. Again, as you know, what we’re trying to do is protect the data in order for it to first undergo a peer review process and that will afford us to get publications in very high quality journals. Again, as you know, journals will not publish data if it’s already been publically released. So for me I’ll be very jealous of releasing much data after that before it goes to a regulatory review and before it goes to a peer review. Again, if you look at other examples of great drugs that work in the area of liver cancers and other cancers you’ll see that that is usually the path that is followed. Now, for the second part of your question I think what Mike was quoting was the statistical power for PFS not necessarily for OS.

That’s 30% or 33%?

33%.

Your next question comes from [Tron Gilhald – Heart Stone Capital Management]. [Tron Gilhald: I do have two questions, maybe even three or four if I can pack them in there. I hope you don’t mind a softball question to lead off here, but is some concern amongst analyst and journalists about the ability of micro and small cap biotechs that navigate a successful course through the FDA, I’d like you to review your management staff experience in prosecuting drugs through the FDA approval process?

Well it’s an evolving environment but historically we have had our hands in one way or another from a variety of functional areas on over 27 NDA submissions. I can’t off the top of my head tell you have many have been successful but I suspect it would be a good numbers of those that had been successful. [Tron Gilhald: I just wanted to have it on the record that you’ve done it before.

Let me just go beyond that, we do have a great deal of experience in filing NDAs from an executive level, from a hands on level, from writing documents, various sections of the documents. But we were also smart enough to know it is an evolving market. We have multiple consultants who are very close to the FDA in terms of current filings. One of which has an expertise in publishing and submitting data through this electronic common technical document approach. The other consultant has a great deal of experience in oncology, in messaging and positioning, and certainly in dealing with ODAC which we don’t expect will be a requirement for approval of ThermoDox but certainly we’re preparing for it. So I think the bottom line is we know what we know. We have a great deal of experience but we’re also smart enough to know that staying current requires a lot of effort and so we are bringing into the company experts in the area that have had very recent interactions with the FDA in oncology applications. [Tron Gilhald: The second question is to the HEAT protocol. I was looking at the clinical trials just the other day to review the protocols for it and something struck my eye. It says, “Incomplete ablation start over basically in the same arm.” In other words, if the next visit they find they didn’t get all of the tumor they can go back in and go through the same process within the same treatment arm they were assigned. So that necessarily mean that some ThermoDox patients may have received two doses. I’m wondering if you know the numbers of those and if you have guesses of how that may either help the patient again, from maybe Phase-I trials, how it helps patients or it may add to adverse effects?

We certainly do know the numbers but with regards to how [inaudible] you’re asking us to speculate a little bit here.

As Mike said, yes we know the exact number of patients who are getting multiple doses of ThermoDox and we will be following them and we have followed them carefully and we will be reporting them both to the regulatory authorities and in our subsequent publications. I think one of the great things about RFA as a procedure by itself is that you can do repeat administrations and nothing to date suggests that ThermoDox changes that. We still consider that RFA will continue with ThermoDox giving multiple applications in order to keep the tumor in check and so our data will show the feasibility of that and the safety of that. Also, back to the previous question, again to confirm there are scenarios also in the OS where we are going to be showing with the power of 80% a hazard ratio of 1.33 or 33% improvement for the statisticians there.

Your next question comes from Michael G. King, Jr. – Dawson James Securities.

Just to maybe follow up on the OS line of questioning I was wondering if Dr. Borys could help us understand how post treatment mortality is treated from a statistical standpoint? In other words let’s say patients either in the control arm or the placebo arm go on to subsequent therapy and then expire subsequent to that. Are those events censored or are those events counted in the intent to treat analysis?

I think you’re touching on one of the issues that surround OS as an end point where particular patients that have a long survival from when they progress to the time they die, because they get multiple interventions in between that’s sometimes considered a confounding effect on OS. I think in our case that is less of a concern because, as I think all of us know, the treatment options for people that have progressive HCC are relatively limited. You have perhaps, if the disease is still localized or you have minimum volume disease, maybe you’d be considered for [inaudible]. But generally, the alternative would be going on to [Sorafenib] particularly if you have extrahepatic disease. So I don’t see any confounding issues there. Our rules for censoring patients are quite clear and established for both the PFS end point and the OS end point and I don’t think I’m in a position right now to go through all the censoring rules.

Then just maybe a question for Mike and/or Greg, you’ve done an admirable job controlling costs and a lot of that obviously due to the wind down of HEAT but looking forward to 2013 and beyond I would imagine that you’re going to be expand trials for perhaps breast and liver, you may have some post approval commitments for HCC. I’m just wondering if you can give us a thought just kind of longer term where R&D levels start to scale back up and if we should think about that as far as building our models are concerned?

I think your point is well taken. Post positive data we certainly will be investing in additional clinical programs that support the broader use of ThermoDox. While we’ve been very cautious about investing in the trials we have initiated to preserve our cash to ensure that we have a runway to complete our trial, to be able to negotiate a license from a position of financial strength and if and when the time does come to raise additional capital through an equity offering to do it in a manner from a position of strength. But we do see, as we pointed out, and I think that was a very important part of our discussion with investors today, we do see a very broad opportunity for the utilization of our underlying technology and in particular ThermoDox to treat some very difficult disease. It changes the paradigm so we’re spreading our interests across a number of researches again, priming the pump following which, upon positive data, you would expect to see this company investing pretty aggressively in those trial models.

That is all the questions we have for you today.

I want to thank all of you for your interest and support of the company and your time and attention for this quarterly conference call. Again, as we close down the call we would like to give a special recognition to our veterans on this Veteran’s Day and thank them for their service. On behalf of all of us we appreciate what you’ve done for our country. Beyond that, we look forward to our next conference call with you which should be following the public announcement of the results from our HCC trial. Thank you very much. Have a great day.

This does conclude today’s Celsion Corporation third quarter 2012 shareholder conference call. Thank you for your participation.