Good morning. My name is Denise and I will be your conference operator today. At this time, I would like to welcome you to Celsion's fourth quarter 2016 earnings conference call. Today's conference is being recorded. All lines have now been placed on mute to prevent any background noise. Following the speakers' remarks, there will be a question-and-answer session. [Operator Instructions]. At this time, I would now like to turn the conference over to Mr. Jeffrey Church, Celsion's Senior Vice President and Chief Financial Officer. Please proceed, Mr. Church.

Thank you. Good morning everyone and thank you for joining us today to discuss our year-end 2016 financial results, which we announced this morning before the market open. Today's call will be archived and the replay will be available beginning tomorrow and will remain available by phone until March 30, 2017, as well as available on Celsion's website for 30 days. Before we begin the call, we wish to inform participants that forward-looking statements are made pursuant to the Safe Harbor provision of the Private Securities Litigation Reform Act of 1995. You are cautioned that such forward-looking statements involve risk and uncertainties involving without limitation, the risk of clinical failures, delays or increased costs, unforeseen changes in the cost of our research and development activities, possible acquisition of other technologies, assets or businesses and possible adverse action by customers, suppliers, competitors, regulatory authorities and other risks detailed from time to time in the company's periodic reports filed with the Securities and Exchange Commission. At the conclusion of today's formal remarks, we will open the call for questions. I would now like to turn the call over to Mr. Michael Tardugno, Celsion's Chairman, President and CEO. Mike?

Thanks Jeff. Good morning everyone and thank you for taking the time to joins us on this morning's call. With me today are Dr. Nicholas Borys, Celsion's Chief Medical Officer and Jeffrey Church from whom you have just heard, our Chief Financial Officer. As always, we are delighted to have the opportunity to update you on our progress. Today, I would like to primarily focus on two topics. First, our incredibly important clinical trials. And second, I have a few comments on our upcoming Annual Shareholder Meeting now scheduled for May 16. And that's just two months from now. But first, before going in to those topics, I would like to comment on the status of the company. Without a single doubt, the operating fundamentals of our company are solid. Our highly derisked Phase 3 study in the largest unmet medical need in oncology is, for the most part, on cruise control with virtually no operational risk. That doesn't mean we don't have to manage it, because we do. But all of the heavy lifting is done. For example, we have support and validation from some of the most respected researchers and institutions in oncology. 14 regulatory authorities and dozens of IRBs have approved the trial. We have contracts for our study with 60 of the best hospitals and hundreds of investigators worldwide in liver cancer research. We have engaged world-class CROs and data management teams to ensure compliance and high-quality analyses. We are enrolling patients on schedule at a reasonable clip, but never satisfied. We are always working to do better. We have a proven and highly reliable supply chain. Not one, not two but three CMO's, contract manufacturing organizations, with a cost structure that all but guarantees enviable gross margins regardless of the local economy. In summary, no…

Thank you Mike. We continue to operate in an efficient manner with a focus on advancing our two lead product candidates through clinical testing. We ended the fourth quarter with $4.3 million in total cash and investments. In February 2017, we announced a secondary public offering with both institutional and retail investors whereby we raised gross proceeds of $5 million to fund operations into mid-2017. We continue to monitor our cash expenditures to ensure the most efficient use of cash. Our clinical development focus is squarely on the enrollment of our pivotal Phase 3 trial for ThermoDox in primary liver cancer and the earlier Phase studies for GEN-1 in ovarian cancer. We will need to strengthen our balance sheet by accessing the capital equity markets, smart utilization of our ATM facility and through potential strategic investments and collaboration. With additional funding, we expect to initiate the Phase 2 EURO-DIGNITY study later this year. During 2016 and in the first quarter 2017, we completed three financing yielding gross proceeds to the company of approximately $13 million. While we were hopeful of raising more capital in terms more favorable to the company and its shareholders, the current capital market has been very challenging for smaller cap biotechs. We are always mindful of dilution to our shareholders and are currently exploring various financing alternatives with more fundamental investors who see Celsion as a long-term investment opportunity. Cash used for operations in 2016 was $18.4 million. This compares to $20.8 million in the prior year. So the cash utilization was down over 12%. This $2.4 million decrease was a result of our cost reduction efforts implemented during 2016, our tighter product development focus, as I mentioned earlier and prudent cash management. We operate with a lean organizational structure with now less than 20 full-time…

Well, thanks Jeff. As always, a great overview. We covered a lot of ground. Just let me summarize by saying that, the fundamentals of our company, your company are sound. Our trials are progressing based on some very promising data. All of this is happening on a very cash efficient platform. So now, with the conclusion of our prepared remarks, I would ask the operator to open the lines for your questions. I ask that you limit them to no more than two to provide everyone an opportunity to participate in the Q&A session. So with that, operator, please open the lines.

[Operator Instructions]. Our first question today comes from Jason McCarthy with Maxim Group. Please go ahead.

Hi guys. Hope all is well. Two questions, one for each of you. Michael, can you give us an update on where you are in enrollment in the OPTIMA study? What percentage of that is in China? And for Jeff, can you give us a sense of what the operating expenses are going to be in 2017 now that you are operating much more efficiently, as you said? Thanks guys.

Sure Jason. [indiscernible] here to get some percentages. So the OPTIMA Study is approaching 50% enrollment, 550 patients. Of that, 50% enrollment approximately less than about 8.5%, a little over 40 patients, I believe have been enrolled in China, maybe more than that, Jason. The number of patients being treated in China is picking up just about every day. As you know, bringing trial sites on in China has been probably the only, if not the biggest, disappointment in the study. It took us well over a year to gain CFDA approval for the study and it wasn't unique to us. As I mentioned in prior calls, the CFDA has been backed up. At one point, I think I mentioned they had 18,000 application for clinical trials. So after a protracted time to review our study with very little comment, they approved the clinical trial following which we go through a process with each of the centers. There are 14 identified and possibly more will join this study. Nick and I and our study team just returned from a meeting with our investigators in China. It was attended by all of the Chinese investigators, all of them along with four up to five new sites in Vietnam. I can tell you, the enthusiasm is nothing short of remarkable. So we have got a little bit about a short or slow start out of the gate with China. I am confident, however, based on the conversation and the presentations made by our lead investigators during the meeting that the rate of enrollment in China will pick up quite substantially. Our goal, as you probably know, is to enroll 200 patients which is a threshold, it's not an absolute but it's a threshold that the CFDA requires, typically requires for submission of an NDA. So we expect to achieve that. If we are at a little bit over 40 patients in China, that would leave another 160 patients to recruit over the next, what, 15 months. We think that's very achievable frankly. So I hope that answers your question.

It does. Thank you.

With regard to the question on operating cost, as I mentioned, the company is operating at a level of about $1.3 million to $1.4 million per month in 2017. We expect that number to hold fairly constant as we continue the enrollment on the OPTIMA study. As we all know, in studies like that, there is a large startup effort, but with the continued enrollment coupled with additional studies in the ovarian cancer, we think that $4 million a quarter is fairly good guidance for both 2017 and 2018.

Thank you Jeff. Thanks guys.

Yes. And I just want to add to that. So our budgeting is a very, very comprehensive. It's built from the bottom up. I think any of you following the history of the company, when we give you a projection of cash usage, which is not typical but on occasion, when we are asked the question, I think you will find that our history of cash usage is completely consistent with the numbers that we provide you. Next question please, operator.

Our next question comes from Keith Markey with Griffin Securities. Please go ahead.

Good morning. I had a couple of questions. One pertains to the direct regulatory filing in China. I was just wondering if you could tell us whether or not the CFDA is requiring the same level of efficacy to be shown there as the FDA would. And secondly, I was wondering if you could give us an update on the status or some details about the Phase 1 trial of ThermoDox with the Children's Research Institute? And I will turn the -- I have some questions on the ultrasound.

Yes. Two very good questions. Thank you Keith. So it's really interesting, if you were asking this question about the CFDA seven years ago, it's some eight years ago when we met them, I would not have been able to answer the question with as much confidence. CFDA has done a marvelous job bring their standards for the conduct of trial and the evidence required for approval bringing it up to modern regulatory standards, typically very consistent with the requirements of the EMA and FDA. So when Nick presented the trial design for the OPTIMA study to Madam Yang, the Director of CDE at the CFDA, it well received. They spent a little bit of time talking about clinical benefit and the objective of the study which the final objective, of course, is a 33% improvement in overall survival, if I can say it that way, statisticians talk about reduction in risk for death. So 33% improvement in overall survival of the ThermoDox arm over the control arm. I suspect that's a standard that is important to the CFDA. What Madam Yang said to us was that, just almost as I said in my prepared comments, condition on the strength of the data they would be willing to accept an application directly. So 33% improvement on patients who are living four years is not insignificant. That's over a year. So there may be some room, I don't know that I want to bet on that, but there may be some room for some variation around 33% but the agency in China now is expecting statistical significance and you guys know how all that works. The study has to be properly powered to show the improvement with confidence and that's what we would expect from the CFDA.

Okay. Thank you.

With regards to the Children's Hospital, I think things are up and ready to go and I don't have the latest update for you. Are you able to comment on that, Nick?

The only thing I could say is, as Mike says, the study is open at Children's Hospital. They are looking to recruit patients. And at this time we don't have any further details on that. But we do keep in regular contact with them. So as soon as something is out there, we will be sure to get it out there.

Great. Thank you very much.

I think in this study, we did see sometimes companies like ours are reluctant to get involved with studies that are for the most part being managed as an investigator of the study. In this particular case and Nick might want to comment on that, there is a very compelling argument here that ThermoDox has the potential to be effective in treating the disease tissue without having the long-term effects that other cytotoxics will have, particularly in this population, right Nick?

I mean, this study is exciting on a few levels. Number one, we are now going to learn in great detail, the activity of ThermoDox in children. So that's very important for us and also really very important for the children that have very difficult to treat tumors. And bringing the technology of HIFU, for those of you that are not familiar with that, that's high-intensity focused ultrasound, where this can noninvasively treat a tumor, meaning perhaps if a patient is not a surgical candidate, they could use something like this that could attack a tumor, this high-intensity focused ultrasound. Combining that with ThermoDox brings that much more efficiency and activity on to the tumor. So we are pretty excited about it. They are looking for particular cases that are difficult to treat at Children's Hospital. There is a number of other centers that are looking at this in Canada, in other parts of the country that may join later on. So we are very happy to take part in this. This was business initiated by the doctors there and we are looking forward to getting those results. It could take a little time, but it is going to be very exciting data. Thank you Keith. Next question, please, operator.

[Operator Instructions]. Our next question comes from Joe Pantginis with Rodman & Renshaw. Please go ahead.

Hi guys. Thanks for taking the question. So I want to do a little bit more macroscopic question specifically on the NIH analyses. I guess I would ask how have those analyses resonated with peers in the HCC space, whether it be investigators on the OPTIMA study or in general? Thanks.

That's a great question. Let me just preface the answer to that, I am going to ask Nick to jump in here also, with a comment whether this is well received or not, it's just my view, the medical community gets it. They really do. They understand the value of ThermoDox. Certainly doxorubicin is a well recognized, well understood cytotoxic, broad-spectrum cytotoxic. In our dosage form activated with showing some evidence here, very clear evidence that can be effective in difficult, very difficult indications. Before I talk about the NIH, I alluded to the fact that investigators now presenting the data and there has been many of them, Lencioni and Tak and others. When they talk about ThermoDox, they talk about its potential to be curative in a disease that just seven, eight years ago, newly diagnosed patients have about 36 months of prediction of survival. One of the things that the HEAT study did is, it's provided some guidance in the use of RFA, frankly, that has open RFA up to a greater number of patients with a wider range of tumors with a more beneficial outcome but the notwithstanding that, the evidence for ThermoDox is clear. It's convincing to the medical community, no doubt. I attended the presentation. It was part of a series of discussions on HCC. The NIH data was presented by the researchers at NIH. The room held about 800 people. The room was full with people sitting on the floor and standing up in the back. At the conference, the reception to the information supported by follow-on discussion was very well received. We presented this information to our investigators. And I think maybe, Nick, do you want to comment on that?

I think this is a very good question, because it addresses two very important things on how hepatocellular cancer is being treated today. And for anybody that studies this area, you are very familiar with what's called the BCLC criteria. And what our data is doing and what the NIH data is also supportive of this is pointing towards is there should be a change in the way BCLC should be structured. And what our data is saying is that patients treated with our technology can do a lot better when heated with 45 minute RFA and ThermoDox and you could look at curing those patients. When you look at the BCLC, they are saying, well, those patients with the intermediate size, they should be considered for treatment that just would be what's considered palliative or just sort of prolonging the life of the patients and not expecting much more. So when you can talk to our investigators and you talk to people that are still with the dogma, there might be a little bit of a debate going on. So for us, this is a very exciting time. And getting to the conclusion of our data that's supported in this forward-looking manner in our current study could potentially change how HCC is going to be treated. So that's recognized by our investigators. That's increasingly recognized by the people at the NIH with this new data. And I ask you to wait for the full paper to come out, which we are expecting and I think we are going to be changing things the way HCC is treated. So I think this is exciting times for us.

Yes. And I will add just maybe a couple more comments to show that are relevant as I am thinking about your question. We have had a few skeptics in the tumor review boards that assess patients and their eligibility for a trial. And they are typically surgeons whose first reaction to the lesion is to cut it out. And so we compete our trial, in many cases, compete with surgeons for patients. I think there is more than one example where the evidence now supports not only our analyses, in multiple analyses of the supporting data for OPTIMA, but now the evidence is supported with the NIH's conclusion that there is more than one example here of study sites now being more productive, particularly in Europe. In Germany, the NIH information I think has had a very positive impact, for example. In Italy, there have been two conferences held. At the request of our investigators, local conferences, where they invite symposium, let me call them that, where they invite their referring community to these attachment hospitals, these big institutions where they treat difficult cancers. So in Pisa, for example, they invited some 30 referring physicians to the symposium to review the study design, the internal data that supported it and a good overview of the data provided by the NIH. And as a result, we are seeing more productivity in Pisa. Similarly, a hospital in Rome, Italy, at a company called Mio Live and I forgot exactly what Mio Live stands for. That's interventional oncology something, Mediterranean Interventional Oncology. It's a local symposium. It's held annually. They asked us if what we would provide the data for discussion on the trial. And it asked specifically for us to include some of the NIH's observations and the nature of their design. So I am just adding to what Nick said. I think the NIH's analyses, in a way that's completely different than we look at it, has had a positive effect across the board with our investigators and the medical community generally.

That concludes today's question-and-answer session. Mr. Tardugno, at this time, I would like to turn the conference back to you for any additional or closing remarks.

Thank you operator and thank all of you for joining us today. We covered a lot of ground. As I said, our fundamentals are sound. Our trials are progressing with a lot of confidence from your management team on data that we think is as good as it gets in our industry. We hope you share that view. Please, if you ever have any questions or comments with regards to data supporting our clinical programs, feel free to reach out to us. We are operating at a cash efficiency level that I think has the potential to be the envy of our industry. With that, we remain very excited about the potential of our programs. We look forward, as always, to providing you with updates as we advance these programs and the development on what could be one of the most promising pipelines in chemotherapy and in the future of medicine and immunotherapy. We value your support in this common goal that we have for delivering innovative oncology therapeutics to address some of the most important cancers of our lifetime. Well, the proxy for this year will be in the mail soon. As I mentioned, there are some important issues for our shareholders. And we ask you to read it carefully. And as always, we are available to answer questions. We certainly appreciate your support. Thank you again for joining us for today's call. And with that, the meeting is adjourned. Thank you.

That does conclude today's presentation. Thank you for your participation. You may now disconnect.