Good morning. My name is Chelsea, and I will be your operator today. At this time, I would like to welcome you all to Celsion's Third Quarter 2018 Financial Results Conference Call. All lines have bee 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 like to turn the conference call over to the host of the call, Mr. Jeffrey Church, Chief Financial Officer of Celsion. Please proceed, Mr. Church.

Thank you. Good morning, everyone, and welcome to our investor conference call to discuss our third quarter 2018 results, which we announced yesterday after the market closed. Joining today are Mr. Michael Tardugno, Celsion's Chairman, President and Chief Executive Officer; Dr. Nicolas Borys, Celsion’s Chief Medical Officer; and Dr. Khursheed Anwer, Celsion’s Chief Scientific Officer, who will be available to answer questions during the Q&A portion of the call. Today's conference call will be archived, and a replay will be available beginning tomorrow and will remain available by phone until November 29 as well as available on Celsion's website for 90 days. Before we begin the call, we wish to inform participants that we will be making forward-looking statements regarding Celsion's current expectations and projections about future events. Generally, forward-looking statements can be identified by terminologies such as expects, anticipates, believes and other similar expressions. These statements are based on current expectations and assumptions that are subject to a number of risks and uncertainties, including those set forth in the Company's periodic reports filed with the Securities and Exchange Commission. No forward-looking statements can be guaranteed, and actual results may differ materially from such statements. At the end of today's formal remarks, we will open the call for questions. It’s now my pleasure to turn the call over to Mr. Tardugno. Mike?

Thank you, Jeff. Good morning, everyone, and thank you for joining my colleagues and me for today’s call. Let me start by saying it's hard to believe that we're in the fourth quarter now closing out 2018, a year of accomplishment for Celsion. But we still have much to do I can't help but probably look back over the past 10 months. This terrific Celsion team delivered just about everything it set out to do. As a result, I can report that we are well-positioned for 2019, a year that has every potential to be the transformative year for Celsion. As you know, in August, we announced that enrollment in the OPTIMA Study, our 550-patient global Phase III trial of ThermoDox in newly-diagnosed primary liver cancer patients was completed. We are now on a glide path looking forward to data less than a year from now. If successful, ThermoDox will be a first-line treatment in the largest, unmet medical need remaining in oncology today. And perhaps, the most important new drug ever for liver cancer patients. And this past October, we reported progression-free survival, that's PFS data, from our Phase I study of GEN-1, our gene-mediated IL-12 immunotherapy in newly diagnosed ovarian cancer patients. The results from this trial, while smaller number of patients, more than support the OVATION II Study, our ongoing Phase I/II clinical research in the same population of ovarian cancer patients. From OVATION II, you can expect a steady news flow. This randomized, open-label study will be reporting outcomes as they become available over the course of the next year. On the financing front, we are focused on strengthening our balance sheet in the most investor-friendly of approaches. In September, we announced that the New Jersey Economic Development Authority advised us that Celsion is eligible to…

Thank you, Mike. Details regarding Celsion's third quarter 2018 financials were included in the press release and Form 10-K made available yesterday after the market closed. As Mike outlined, we have made a great deal of progress across the business in recent months, including financially, with an ongoing focus on efficient cash management for successful program execution. As of September 30, 2018, Celsion's cash and investment balance was $22 million, enabling us to continue to focus on clinical and operational execution into the first quarter of 2020. In June, we closed a four-year $10 million venture debt agreement with Horizon Technology Finance Corporation for which the first three years of the obligation are interest payments only. This debt agreement provides additional flexibility to finance our development programs. We are also pursuing other financing initiatives to further strengthen our balance sheet. To that end, we announced in early September that our application to sell $12.5 million of unused New Jersey state operating losses for the tax years 2011 to 2017 was approved by the New Jersey Economic Development Authority. During the fourth quarter, we expect to secure an additional $10 million in non-dilutive capital through the sale of the NOLs through the State of New Jersey's Economic Development Authority's NOL program. This program is available to businesses based in New Jersey that provides the opportunity to sell up to a maximum of $50 million of NOLs per company. Since we still have room before we reach the maximum proceeds available to us, we would anticipate seeking additional NOL sales next year until we reach our maximum allocation. For the third quarter ended September 30, 2018, we reported a net loss of $4.7 million. That compares to a net loss of $5.7 million in the same period last year. Operating expenses were…

Thank you, Jeff. I hope you can agree that the first quarters of this year have been marked by steady advancement of our key development program against the backdrop of prudent financial and operational management. We look forward to continuing this momentum in this year when we expect to present important data outcomes from our progress with OPTIMA and the OVATION II Studies. I'll conclude with my opening remarks with – we are well positioned, as I said, with sound fundamentals and a strong balance sheet for what we expect to be a transformational 2019. I hope that you’ll stay with us for this extraordinary year when I look forward to providing you with updates on our progress. So this concludes our prepared remarks today. I would like to ask the operator to open the lines for your questions. Operator?

Yes, sir. [Operator Instructions] And our first question will come from Hartaj Singh with Oppenheimer & Company.

Thank you. Hey, good morning, Mike. Can you hear me, fine.

Yes, hear you. Just fine. Thank you.

Great. Thank you all. A really nice update, Mike. You've got a lot going on there and accomplished a lot during this year. So just a couple of questions, one on OPTIMA and one on GEN-1. On OPTIMA, once the DMC meets in December, can we expect an update? I know I in the – think it was in the first quarter call, you provided an update on what the overall, I think, the PSS curve was looking like for OPTIMA? Could we get an update from that in the fourth quarter, the first quarter call of next year, after DMC? And then just in terms of the first interim. Liver cancer – primary liver cancer is very slow progressing tumor. I imagine that the curves are probably separating, but might not separate enough for the first interim. I mean, is that the reason for just being a little bit cautious going into that first interim for OPTIMA? And then I just got some follow-up questions on GEN-1.

Sure. Let me start with your question regarding the DMC. So as we did with the – following the last DMC, we presented the PFS – the consolidated PFS data from the intent-to-treat population in the current study. We compared that to the PFS data from the subgroup that we used to design the OPTIMA Study. We will again present that consolidated PFS data following the DMC review. You can also expect some refinement of the timelines for the interim analyses, Hartaj. These interim analyses are event-driven, meaning that they rely on the number of deaths in order to trigger the analysis. First analysis will occur after 118 patients, unfortunately, have died. I believe the second analysis is at 158 patients. And the third, I think, is just – if the final analysis if needed would be at approximately 200 deaths. So our best look at the event rate and comparing it throughout the history that we have from the HEAT Study suggests that the first interim could occur late in the second quarter of 2019. But again, we will provide an update once the DMC has had a good look at the event rate and projections from our statistician. And of course, we'll also provide the investment community with a recommendation of the DMC, which we fully expect to continue the study.

Great, Mike. The other question I just had was – yes, that’s what I needed on OPTIMA. The other question I wanted was – just want to talk about was GEN-1. I know you're going to the Phase I and then the Phase II portion of the study, you'll have 12 patients. You're dosing the first two patients now. Just remind us again the design of the study and the need for the first 12 patients before you get into the 118 patients on the expanded part of the study. Again, thank you very much.

Okay. So I’m going to start off with a couple of comments. I'm going to ask Dr. Borys to jump in. So the study design was a Phase I component. And I'll remind everyone, we completed the OVATION I study at 79 milligrams per meter squared dose with no suggestion of any dose-limiting toxicities. And some suggestion, when we looked at the clinical data, that there maybe a dose-related response. On that basis, the medical advisory team that we consulted with regards to this study design recommended that we try one higher dose before going on to the Phase II portion, and we accepted that recommendation. Typically, in a dosing escalation study, a three-plus-three design, the last dose is confirmed with six patients. So considerably, we can complete the Phase I portion of this Phase I/II study with just six patients treated with GEN-1. But we decided, after reviewing the implications of that with our statistician, to randomize this Phase I portion, thereby allowing us to use the 12 patients, half of them treated with – approximately half of them treated with GEN-1 and half of them on a control arm. So we decided to enroll 12 patients in the Phase I portion in order to be able to use this data in the overall data set for establishing the success with the primary endpoint. I think that's about right, Nick.

Yes. I mean to answer your question directly, this is a randomized, open-label Phase II design that's going to incorporate 130 patients. And the key question that we want to answer in this design is something that Mike alluded to in his summary of it. Number one, as in our previous press releases, we are looking at a PFS in these patients from using the GEN-1. We're getting a median of over 17 months. And as you might know, in large randomized studies, these patients typically demonstrate a 12-month PFS. So we're very encouraged, and so are our experts encouraged by that improvement in the progression-free survival of their individual cases. The other thing that we are finding is that, especially at the higher doses of GEN-1, the patients, when they undergo their surgery to take out whatever remnants of the tumor is there, the surgeons are able to get to an R0 status at that surgical time. And again, that's a very good sign for those patients in terms of how well the tumor is responding to the treatment. So in this design, we're going to be able to tease out the effect of the GEN-1 versus the neoadjuvant chemotherapy. We're going to be able to tease out what the translational data means, so that we could better identify patients. And then also, we're going to have a very large population of about 130 patients that could make this data very solid. So I hope that answers your question.

And Nick, let me ask you to answer my question. Just follow-on, Hartaj, so in this study, we also have a post surgery maintenance program, correct?

Yes. So the difference in our study here versus the original OVATION Study is we also introduced GEN-1 as a maintenance therapy. We see this with other immunotherapies. You might be familiar with that, with the PD-1s, and they seem to be having some success. So we feel that we also have an opportunity to study that in this population as well.

Great, fantastic. I really appreciate those responses.

Thank you, Hartaj.

Thank you. [Operator Instructions] And our next question will come from Barry Rubin, who is a Private Investor.

Hello Mr. Tardugno. Thank you for another great quarter, nice to chat with you briefly again. I wanted to be – before I asked my business question, I just wanted to give a shout-out to Mr. Church for always being a nice gentleman, always getting back to be spending more time than you should speaking to me about the company. So I thank him. My business question to you is when ThermoDox is finally approved, are you going to have your own sales force? Or are you planning on partnering with the pharmaceutical company and whichever way you decide, what is the reason for your decision? Thanks so much.

Okay, it's a good question. And so once ThermoDox is approved, what is our commercialization strategy? So let me just start by saying, the rationale will always be a function of doing what's best for our shareholders. I say that clearly – we certainly anticipate that we will partner with major pharma companies for markets outside the United States. We know that there's a great interest in ThermoDox for the Chinese and Southeast Asian populations, where HCC as an enormous problem. 75% of incidents is in China and Southeast Asia, 50% of incidents in China. We know that the Chinese government, the Chinese regulatory authorities and the health care institutions are very interested in finding better ways, more effectively and economically to treat patients who are diagnosed with this problem. We know that regular frequency ablation is common in the intermediate stage. Patients in ThermoDox, in combination with RFA in China, makes a great deal of sense economically and, certainly, if the data is positive, from a clinical standpoint, would be remarkable. With that being said, China is the largest future market for pharmaceuticals on the planet. Every major company knows that. So when you think about the strategic value of China and the fact that HCC, the largest unmet medical need in oncology, is a problem in this future strategic market, you can see the limousines lining up outside our door with business development people from major companies who are interested in China. We expect to see that, Barry, certainly. For Europe, particularly Southern Europe, HCC is another big problem. We know that Italy, for example, has a rate of HCC diagnosis that's comparable, if not higher, that we see in China, so for a variety of reasons. But that being said, we certainly know that it’s – stick to our knitting and expanding any capability that we have to address the commercial market in Europe, which certainly would be beyond what we are prepared to do. So it's very likely that we will find the commercial partner for Europe. In the Americas, United States and Canada particularly, we think we could be the best stewards for ThermoDox and bringing it to market. I think it's well within our capability and our experience to do that. We certainly have to weigh that ambition against the capital required to do so and the associated risk, along with the trends and any potential problem should be presenting us to the license ThermoDox. So that's generally our approach. Thank you for asking.

All right, thanks very much. End of Q&A

Thank you. [Operator Instructions] There are currently no further questions in the queue. So I would like to turn the call back over for closing remarks.

Well, again I want to thank you all very much for your interest and commitment to Celsion. We think, as I said earlier that we are well positioned with sound fundamentals and a strong balance sheet for what we expect to be a transformational 2019. Again, I want to say I hope you stay with us for this extraordinary year when I look forward to providing you with updates on our progress. Thank you very much. Have a great day.

Thank you, ladies and gentlemen. This concludes to teleconference, and you may now disconnect.