Celcuity Inc. Q4 FY2022 Earnings Call

Greetings. And welcome to Celcuity's Full Year 2022 Financial Results Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Robert Uhl with ICR Westwicke. Thank you, Robert. You may begin.

Thank you, operator, and good afternoon to everyone on the call. Thank you for joining us to review Celcuity's fourth quarter and full year 2022 financial results and business update. Earlier today, Celcuity released financial results for the fourth quarter and full year ending December 31, 2022. The press release can be found on the Investors section of the website. Joining me on the call today are Brian Sullivan, Celcuity's Chief Executive Officer and Co-Founder; Vicky Hahne, Chief Financial Officer; as well as Igor Gorbatchevsky, Chief Medical Officer, who will be available during Q&A. Before we begin, I would like to remind listeners that our comments today will include some forward-looking statements. These statements involve a number of risks and uncertainties, which are outlined in today's press release and in our reports and filings with the SEC. Actual events or results may differ materially from those projected in the forward-looking statements. Such forward-looking statements and their implications involve known and unknown risks, uncertainties and other factors that may cause actual results or performance to differ materially from those projected. On this call, we will also refer to non-GAAP financial measures. These non-GAAP measures are used by management to make strategic decisions, forecast future results and evaluate the company's current performance. Management believes the presentation of these non-GAAP financial measures is useful for investors' understanding and assessment of the company's ongoing core operations and prospects for the future. You can find the table reconciling the non-GAAP financial measures to GAAP measures in today's press release. And with that, I would now like to turn the call over to Brian Sullivan, CEO of Celcuity. Please go ahead.

Thank you, Robert, and good afternoon, everyone. We had a busy and productive 2022. Our main objective for the year was to start the enrollment of our Phase 3 VIKTORIA-1 clinical trial for our lead candidate, gedatolisib. This trial is enrolling patients with advanced HR-positive HER2-negative breast cancer who have seen disease progression after treatment with a CDK4/6 inhibitor. We began 2022 collaborating with the U.S. FDA and the European Medicines Agency to finalize the feedback on our clinical trial protocol. After receiving this feedback, we completed our protocol and selected over 200 clinical trial sites across five continents to participate in the study, including some of the leading breast cancer institutions. After activating the study in the third quarter, we were pleased to dose our first patient this past December. The dosing of the first patient in the trial triggered the closing of a $100 million private placement and a drawdown of a $20 million term loan tranche in December. The funds from the private placement, along with the debt facility and the company's available cash, are expected to adequately support Celcuity's operating plan through 2025. We are encouraged by the activity at our VIKTORIA-1 trial sites and remain on track with our previous guidance. We still anticipate data for the PIK3CA non-mutated patient subgroup to be available in the second half of 2024, with the data for the PIK3CA mutated patient subgroup expected in the first half of 2025. The rationale for launching the VIKTORIA-1 study is based on two main factors. First, there is a substantial unmet need for improved second-line therapeutic options for HR-positive HER2-negative breast cancer patients who have received prior CDK4/6 inhibitors, as current options provide only modest progression-free survival benefits. Second, we observed very promising outcomes from our Phase 1b study that evaluated gedatolisib plus palbociclib with either letrozole or fulvestrant for patients without PIK3CA mutations. Data for approved second-line therapies typically show a median progression-free survival of two to four months, while for patients with PIK3CA mutations, the median PFS is about seven months. The initial clinical efficacy data we reported in 2021 from our Phase 1b study is quite favorable compared to these published results. We have since updated our data to include 13 months of additional follow-up, presenting this at the 2022 San Antonio Breast Cancer Symposium in December. Updates included efficacy results stratified by PIK3CA mutation status across the four expansion arms. For patients in Arm D of the Phase 1b study, those receiving the Phase 3 dosing schedule of gedatolisib showed an objective response rate of 60% in PIK3CA wild-type patients, and 49% of these patients were progression-free at 12 months, which is significantly better than the published data for fulvestrant, which reported an objective response rate of 6% and a 12-month PFS rate of 12%. Among Arm D patients with PIK3CA mutations, the objective response rate was 73%, with a 60% 12-month PFS rate, again favorably comparing to results from the alpelisib and fulvestrant regimen, where the objective response rate averaged 20% and the 12-month PFS rate averaged 25%. The comparable effective response rates in the PIK3CA wild-type and mutated subgroups are attributed, we believe, to two main factors. First, the PIK3 mTOR pathway is a key driver in HR-positive breast cancer regardless of whether the tumor has a PIK3CA mutation. Second, effectively blocking all four class I PIK3CA mutations and the two mTOR complexes is essential for targeting PI3K mTOR pathway activity. This comprehensive approach biologically avoids the cross-activation of uninhibited subunits, which can lead to drug resistance often seen with PI3K isoform-specific or mTOR-specific inhibitors. Fully blocking the pathway also enhances the potential for synergistic effects with other targeted therapies, such as CDK4/6 inhibitors. Gedatolisib's unique mechanism as a potent pan-PI3K/mTOR inhibitor positions it well to fulfill the need for more effective second-line breast cancer treatments. We believe the effectiveness of the data and the unmet need prompted the FDA to grant Breakthrough Therapy designation to gedatolisib in combination with palbociclib and fulvestrant last July for treating HR-positive HER2-negative advanced breast cancer. We were also encouraged by updated efficacy results for the 41 patients in our Phase 1b study who had not received prior treatment for advanced disease. These patients received gedatolisib combined with palbociclib and letrozole as first-line treatment, resulting in a median PFS of 42.3 months and an objective response rate of 79%. These outcomes are notably better than the median PFS of 24.5 months and the 55% objective response rate reported in the PALOMA-3 study for palbociclib plus letrozole. The median PFS in the expansion RMA group was not reached by the data cutoff on June 22. We will present updated efficacy data for expansion RMA and combined results for treatment-naive patients at the ESMO breast cancer meeting in May, underscoring the significance of the PI3K/mTOR pathway in patient progression and presenting a possibility for developing gedatolisib as a first-line treatment. While currently pursuing a randomized first-line study of gedatolisib with palbociclib and letrozole is impractical, this encouraging data certainly warrants future evaluation. Another key objective for us in 2022 was to investigate and prioritize new potential indications for gedatolisib, including assessments of prior trials for other PI3K and mTOR inhibitors, examining other pathways related to the PI3K/mTOR pathway, and conducting non-clinical studies to evaluate gedatolisib's activity in various tumor types. Extensive literature has described the interaction and feedback loops between hormonal pathway signaling and the PI3K AKT mTOR pathway across multiple tumor types, which is crucial for understanding disease recurrence and progression in cancers like prostate and gynecological cancers as well as breast cancer. Co-targeting hormonal and PI3K AKT mTOR pathways presents a compelling strategy, albeit complicated by feedback loops that activate uninhibited subunits. This review of literature, along with unmet needs in various tumor types, guided our nonclinical research focus on prostate and gynecological cancers. We presented initial results from our studies on prostate cancer in February 2023 at the American Society of Clinical Oncology Genitourinary Cancer Symposium. We've discussed how many PI3K/mTOR inhibitors tend to selectively inhibit components of the pathway, potentially leading to drug resistance based on the tumor's mutation status. In prostate cancer, the PTEN gene is associated with PI3K and is frequently mutated. Inhibitors that only target a single PI3K/mTOR component or AKT have shown limited efficacy in PTEN-deficient prostate cancer and no efficacy in PTEN wild-type tumors. This suggests that more comprehensive PI3K/mTOR inhibition may be necessary. Our findings indicated that gedatolisib, as a pan-PI3K/mTOR inhibitor, was effective in both PTEN wild-type and PTEN-deficient prostate cancer models. To assess this hypothesis, we evaluated prostate cancer cell lines with varying PTEN statuses for their sensitivity to gedatolisib and six other inhibitors targeting PI3K-AKT-mTOR components. The results were promising and supported our hypothesis, confirming that gedatolisib demonstrated comparable potency and efficacy in both PTEN wild-type and PTEN-mutated cancer cells. In every evaluation, whether it was cytotoxicity, potency, cell death, DNA replication, or signaling, gedatolisib showed superior activity over all other PI3K, AKT, or mTOR inhibitors tested. Notably, gedatolisib outperformed the AKT inhibitor, Capivasertib, which has been assessed in clinical trials but reported only modest efficacy in PTEN-mutated tumors and none in PTEN wild-type tumors. Our nonclinical studies corroborate these clinical outcomes, showing Capivasertib was tenfold less potent in both PTEN wild-type and mutated cancer cells and generally less effective than pan-PI3K drugs and much less active than gedatolisib. We believe these results further emphasize the importance of comprehensively blocking the PI3K/mTOR pathway. To assess gedatolisib's activity in vivo in prostate cancer, we evaluated it across three different prostate cancer models. First, we tested gedatolisib as a standalone agent in PTEN wild-type and PTEN-loss xenograft models unresponsive to the androgen receptor inhibitor dovitinib. In both models, gedatolisib achieved over 80% tumor growth inhibition, while dovitinib exhibited no activity. We also assessed a prostrate cancer xenograft model responsive to dovitinib; here, gedatolisib induced 80% tumor growth inhibition alone and 116% when combined with dovitinib. We will present results from our subsequent clinical studies at the American Association for Cancer Research Annual Meeting from April 14 to 19 in Orlando, Florida. These studies will evaluate various gynecological cell line models alongside gedatolisib and other PI3K-AKT-mTOR inhibitors, with an abstract summarizing this data having been published last week. Aligning with our findings in prostate cancer, gedatolisib displayed superior activity compared to all other evaluated PI3K-AKT-mTOR inhibitors. Given the results of our non-clinical studies and gedatolisib's differentiated mechanism of action and PK/PD profile, we believe a strong opportunity exists to further develop gedatolisib for these tumor types. We will provide updates on our clinical development priorities later this year. Now, I would like to shift our focus to the diagnostics aspect of our business related to CELsignia, Celcuity's third-generation diagnostic platform. As a reminder, enrollment in the FACT-1 and FACT-2 trials assessing early-stage breast cancer patients selected using our CELsignia HER2 signaling diagnostic was affected by COVID-19 delays into early 2022. These trials are now enrolling early-stage breast cancer patients with hyperactive HER2 pathways as identified by our CELsignia test. Our objective is to establish the CELsignia test as a companion diagnostic to expand the pool of patients eligible for targeted therapy. We anticipate announcing interim results from these studies in the latter half of 2023.

Thank you, Brian, and good afternoon, everyone. I'll provide a brief overview of our financial results for the fourth quarter and full year 2022. I invite you to review our 10-K, which will be filed later today for a more detailed discussion. Our fourth quarter net loss was $11.6 million or $0.69 per share compared to a $6.8 million net loss or $0.45 per share for the fourth quarter of 2021. Net loss for the full year 2022 was $40.4 million or $2.64 per share compared to a $29.6 million net loss or $2.21 per share for the same period in 2021. For purposes of calculating net loss per share, the reported net loss of $2.64 per share included an additional $0.02 loss per share related to approximately $0.3 million deemed dividend resulting from a warrant modification. Because these quarterly and full-year net losses include significant non-cash items, including stock-based compensation, the issuance of common stock and interest, we also include in our press release non-GAAP adjusted net loss for the quarter and full year ending December 31, 2022. Our non-GAAP adjusted net loss was $10.2 million or $0.60 for the fourth quarter of 2022 compared to non-GAAP adjusted net loss of $5.6 million or $0.37 per share for the fourth quarter of 2021. Non-GAAP adjusted net loss for the full year 2022 was $34.9 million or $2.26 per share, compared to non-GAAP adjusted net loss of $21.4 million or $1.60 per share for the full year 2021. Research and Development expenses were $10.6 million for the fourth quarter of 2022 compared to $5.5 million for the fourth quarter of 2021. The increase was primarily the result of activities supporting the initiation of the VIKTORIA-1 pivotal trial. R&D expenses for the full year 2022 were $35.3 million compared to $25.8 million for the prior year. The increase in R&D expenses included a $10 million reduction in gedatolisib licensing-related expenses. This reduction was offset by increases in other R&D expenses, which included employee consulting expenses as well as increased expenses for existing clinical trials and activity supporting the initiation of the VIKTORIA-1 pivotal trial. General and administrative expenses were $1 million for the fourth quarter of 2022 compared to $0.8 million for the same period in 2021. G&A expenses for the full year of 2022 were $4.1 million compared to $2.6 million for the prior year. The increases for the fourth quarter and full year 2022 over the same period in 2021 were driven primarily by non-cash stock-based compensation. Net cash used in operating activities for the fourth quarter of 2022 was $9.5 million compared to $0.1 million for the fourth quarter of 2021. This was a result of the non-GAAP adjusted net loss of $10.2 million, offset by working capital changes of approximately $0.7 million. Net cash used in operating activities for the full year 2022 was $36 million compared to $20.3 million for the full year 2021. This was the result of the non-GAAP adjusted net loss of $34.9 million and working capital changes of approximately $1.3 million, offset by $0.2 million of depreciation expenses. We ended the year with approximately $168.6 million of cash, cash equivalents and short-term investments compared to cash and cash equivalents of $84.3 million on December 31, 2021. The $168.6 million does include the net proceeds of $115.2 million from the funding of the private placement and the drawdown of the debt facility. I will now hand the call back to Brian.

Thank you, Vicky. Operator, could you please open the call for questions?

Thank you. We will now be conducting a question-and-answer session. Thank you. Our first question is from Maury Raycroft with Jefferies. Please proceed with your question.

Congrats on the progress and thanks for taking my questions. For Phase 3 status, I know it's still early days. But wondering if you could talk more about the number of sites activated and in what countries? And are there any comments on site activation or enrollment trends that you can share at this point?

Sure. So we have a plan basically at a site level for each site in each country. And we're on track to activate our sites on the schedule that will allow us to essentially be able to report our primary analysis in the second half of 2024. And so far, really nothing to report other than we're on plan.

Got it. Okay. And wondering too, if you can remind me what the data safety monitoring review plan looks like for the Phase 3? And will you provide general updates after DSMB reviews?

Generally, no, that is not public information. Igor, maybe you could shed some light on the IDMC we have and their role in the function.

Yeah. Thank you, Brian. As Brian mentioned, regular update on independent data management committee review is not a standard practice. However, this study includes all of the appropriate steps to monitor data, including an independent data management committee that includes experts in oncology and statistics. According to the charter, the data will be reviewed starting with the initial patients to enroll in the study and on an ongoing basis. This system has been set in place, and IDMC work will proceed per charter.

But that IDMC operates independently of the company.

I have one specific question. In the Phase 3 study, one of the secondary endpoints is evaluating progression-free survival and overall survival based on HER2 low status. Can you remind me if HER2 low status was assessed in Phase 1b, and if so, did it have any effect on the efficacy results in that phase? Additionally, for the IHC scores of zero versus one and two, were there any observed trends among those patients?

We didn't see any differentiation in results based on HER2 status. All the patients were HER2 negative, but whether it was zero, one plus or two plus.

Got it. Okay. Thanks for taking my questions.

Welcome.

Thank you. Our next question is from Alex Nowak with Craig-Hallum. Please proceed with your question.

Okay. Great. Good afternoon, everyone. I was hoping the first one just on the staffing up for the clinical trial. Just where are you at? You think you had a healthy balance right now? And just how to think about OpEx spend throughout this year? Does it kind of sit around that $11 million per quarter level? Or did it go up a little bit from here?

There are two main components to our expenses. The significant expense related to the clinical study is managed through our contract research organization and associated vendors, alongside internal personnel. We have a clinical operations and regulatory organization overseeing and managing this process, and that staff has mostly been hired and is in place. The expenses from the CRO depend on site activation and enrollment. We anticipate that as enrollment progresses and the total number of patients receiving treatment increases over the coming quarters, these expenses will rise. As for guidance, I believe what you have shared in your numbers aligns with our internal projections.

Yeah. I would concur with that some of the Street estimates of analysts who follow us very closely are very reasonable for 2023 as they step up through the quarters.

Okay. All right. That makes sense. And then maybe a bit more on the delay with FACT-1 and 2. It looks like it's a bigger push. I think it was middle of 2023 that pushed to the second half. Just what you're seeing there at the clinical trial sites? And then just an update on FACT-3, 4 and 5 timelines.

Enrolling a patient in FACT-1 and 2 requires considerable screening, as only 20% of HER2-negative patients qualify for our study based on test results, specifically those with hyperactive HER2 signaling. It's challenging to predict the monthly percentage of patients who meet the criteria for the study, as well as the screening activities involved. Our initial forecast was somewhat optimistic compared to the current situation.

And does that apply to FACT-3, 4 and 5 then as well?

Yeah. The issue is not issues, but the challenges with getting patients enrolled in those studies is that we require a research biopsy. Unlike the VIKTORIA-1 study, where essentially we're enrolling all comers, there's no requirement for anything other than normal standard of care assessments. In the case of the FACT studies, we require a research biopsy, which may not be standard of care typically isn't in order to assess their tumor and determine whether their HER2 pathway status is hyperactive or not. And with COVID, that became very, very difficult because patients essentially were not coming in for non-essential or non-standard of care procedures. So what we've been working with our sites to get them back into that essentially pre-screening mode and scheduling these research biopsies for this patient group.

Okay. That makes sense. You have cash available until the VIKTORIA-1 readout. We also received data indicating potential applications in breast cancer and prostate cancer from a preclinical perspective. How are you balancing these two focuses? How do you plan to concentrate on VIKTORIA enrollment with the cash you have, versus possibly spending more, which could put the enrollment readout at risk, but allows pursuing opportunities in other cancers? What are your thoughts on this?

Sure, that's a great question. Last year, when we raised the funds, we assumed we would conduct a single early phase study in another type of tumor, which we considered in our cash projections. Therefore, our estimate of cash availability through 2025 is based on the expectation of initiating an early phase study in a different tumor type. We aim to report positive data in the second half of 2024. If we could achieve favorable results during that timeframe in another tumor type, it would significantly enhance the value of the business, as it would demonstrate that gedatolisib has the potential to be a standard of care second-line treatment. The data suggests we could also explore its potential in breast cancer and other types. This would underscore the substantial value this drug can offer to cancer patients and consequently to shareholders. Given the long lead time required to generate this type of data, we believe it benefits everyone if we can establish a presence in another tumor type and assess its activity, which, if positive, would be invaluable for all stakeholders.

Absolutely. Makes total sense. Thanks for the update.

You're welcome.

Thank you. Our next question is from Boris Peaker with TD Cowen. Please proceed with your question.

Hey, thanks. This is Nick on for Boris. Just one for me. What data should we be looking for from the FACT-1 and FACT-2 trials that are going to report in the second half that will show that it has a positive effect, like what specific endpoints should we be focused on?

Sure. The endpoint in those two trials is a pathological complete response rate, which is a measure of whether the tumor has been terminated in the patient. There is a specific assessment to determine that. We have a statistical plan that defines a benchmark that we need to beat in order to determine that we have a potentially significant result that would warrant continuing the study, but also continuing towards additional evaluations.

Great. That's it for me.

Thank you.

Thank you. Our next question is from Gil Blum with Needham & Company. Please proceed with your question.

Hi. This is Rohit on for Gil. Thanks for taking our questions. Can you just talk about any preliminary discussions you might have had with the payers? And if you received any feedback or possible pricing dynamics? Thanks.

We have had discussions with payor consultants to gain insight into the landscape. We plan to initiate further conversations as we approach the end of the year. There are established benchmarks for prices associated with novel targeted therapies. The CDK4/6 therapies have been in the market and have established prices that have been upheld over time. The recently approved PI3K drug has also been assigned price points. Our internal revenue projections are based on the assumption that our pricing will be at least comparable to current market peak rates. We believe that if our data shows favorable results, we will provide a greater clinical benefit for patients, which would justify at least an equivalent price.

Thank you.

Thank you. Our next question is from an undisclosed source. Please go ahead with your question.

Thank you. This is from H.C. Wainwright. Good afternoon, Brian. I have a quick question. I'm considering options beyond VIKTORIA-1 at this point. This study involves a combination with the CDK4/6 inhibitor. Are there any thoughts on combining it with other immune checkpoint inhibitors, as that is also being explored in breast cancer?

So immune checkpoint inhibitors to date have been approved in TNBC, triple-negative breast cancer. There haven't been successful results in HR-positive hormonally driven breast cancer as a case in prostate cancer. So it appears, at least the data to date suggests that hormonally driven cancers are not responsive to the checkpoint inhibitors. That certainly is a factor that we take into account as we're considering our development plan.

Thank you. Thanks for taking my question.

You're welcome.

There are no further questions at this time. I would like to turn the floor back over to Chief Executive Officer, Brian Sullivan, for closing comments.

Well, thank you again for participating in our call today and for your ongoing support. We'll be participating in the Needham Healthcare Conference in mid-April. Look forward to meeting with many of you there. I hope you have a great evening.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.