Celcuity Inc. Q1 FY2023 Earnings Call

Greetings and welcome to Celcuity First Quarter 2023 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. Please go ahead.

Thank you, operator and good afternoon to everyone on the call. Thank you for joining us to review Celcuity's first quarter 2023 financial results and business update. Earlier today, Celcuity released financial results for the first quarter ending March 31st, 2023. 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, sir.

Thank you, Robert and good afternoon everyone. Since we provided a corporate update just seven weeks ago during our full year 2022 financial call, I will only make brief prepared remarks today. I'm very pleased with the execution to date of our VIKTORIA-1 Phase 3 clinical trial enrollment activities at our trial sites. As we've reported previously, VIKTORIA-1 is evaluating gedatolisib in combination with fulvestrant with and without palbociclib, in adults with HR+/HER2- advanced breast cancer, whose disease progressed while receiving a CDK4/6 inhibitor. Our team is relentlessly focused on keeping us on track to report the primary analysis for the PIK3CA non-mutated patient subgroup in the second half of 2024 and the primary analysis for the PIK3CA-mutated patient subgroup in the first half of 2025. This is consistent with our prior guidance. At the ESMO Breast Cancer Congress last week, we presented updated median progression-free survival data for treatment-naive HR positive HER2 advanced breast cancer patients. We think the data is very encouraging. In our poster presentation, we provided updated efficacy and safety data in treatment-naive patients who are enrolled in escalation arm A and expansion arm A of our Phase 1b study. We have previously reported data for this group of patients at the San Antonio Breast Cancer Symposium last cutoff date of June 29th, 2022, but the median progression-free survival in the expansion arm A has not yet been reached. As of the March 16th, 2023 data cutoff date, with the benefit of the additional follow-up period, we were able to report final median progression-free survival and median duration of response data for these patients. For treatment-naive patients in escalation arm A, median progression-free survival was 45.8 months and for patients in expansion arm A, it was 48.6 months. When the results for treatment-naive patients from each of these arms are analyzed together, median progression-free survival was 48.6 months and median duration of response was 46.9 months. These results compare very favorably to the median PFS of 24.5 months reported in the PALOMA-3 study for palbociclib letrozole. We think these results demonstrate the intrinsic role the PI3K/mTOR pathway plays as a disease driver in advanced HR positive HER2-negative breast cancer. This data also highlights the potential opportunity to develop gedatolisib as a first-line treatment option. We continue to characterize gedatolisib activity in various tumor types and compare its activity to other drugs in the class. As we previously reported, the non-clinical studies we presented at ASCO GU in February for prostate cancer, and at AACR in April for gynecological cancers, highlighted gedatolisib's differentiation from other drugs in this class. In each of the studies we performed and all of the tumor types assessed, gedatolisib demonstrated superior therapeutic effect relative to the other PI3K, AKT, and mTOR inhibitors evaluated. Based on the results from these internal non-clinical studies, as well as published reports of prior clinical results with drugs in this class, we think there is a significant opportunity for us to develop gedatolisib in these tumor types. We'll provide an update on our clinical development priorities later this year. And finally, the FACT-1 and FACT-2 trials are continuing to enroll patients with early-stage HR positive HER2-negative breast cancer. These HER2 pathways are hyperactive as detected with our CELsignia test. We now expect to announce interim results from these studies in the first half of 2024. And with that, I will now turn the call over to Vicky Hahne to review our financial results.

Thank you, Brian and good afternoon everyone. I'll provide a brief overview of our first quarter 2023 financial results. The first quarter net loss was $11.9 million or $0.55 loss per share compared to a net loss of $7.9 million or $0.53 loss per share for the first quarter of 2022. Because these quarterly net losses include significant non-cash items, including stock-based compensation and interest expense, we also include in our press release non-GAAP adjusted net loss for the quarter ending March 31st, 2023. Our non-GAAP adjusted net loss for the first quarter of 2023 was $10.2 million or $0.47 loss per share compared to a non-GAAP adjusted net loss for the first quarter of 2022 of $7 million or $0.47 loss per share. Research and development expenses were $11.3 million for the first quarter of 2023 compared to $6.7 million for the first quarter of 2022. The approximately $4.6 million increase resulted primarily from cost supporting activities related to the VIKTORIA-1 pivotal trial. General and administrative expenses were $1.3 million for the first quarter of 2023, compared to $0.8 million for the first quarter of 2022. The approximately $0.5 million increase was a result of non-cash, stock-based compensation and professional fees associated with being a public company. Net cash used in operating activities for the first quarter of 2023 was $12.9 million compared to $5.9 million for the first quarter of 2022. This was a result of non-GAAP adjusted net loss of $10.2 million, working capital changes of approximately $1 million, and non-cash interest income of approximately $1.7 million. We ended the quarter with approximately $157.5 million of cash, cash equivalents, and short-term investments compared to $168.6 million at December 31st, 2022. With that, I will now hand the call back to Brian.

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

Sure. We will now be conducting a question-and-answer session. Our first question comes from Maury Raycroft with Jefferies. Please go ahead.

Hi. Congrats on the progress and thanks for taking my questions. I was wondering, as it relates to the preclinical data that you presented at ASCO GU and the AACR data and the positive ESMO breast cancer frontline PFS data, can you talk more about what gating factors are to inform your next steps with development later this year. I guess, what would go into those decisions? And would it be based on the Phase 3 progress?

So, we've been somewhat independently evaluating the landscape of opportunities to consider for the development of gedatolisib. And so in parallel, the R&D group has done a great job of reporting, developing the data, conducting the studies for the data that we presented at ASCO and AACR, and that helps inform our decisions. Simultaneously, we've been doing a review of prior published data for clinical trials evaluating inhibitors in this class. And then we've also evaluated the market opportunity, standard-of-care treatment, and the unmet need, essentially doing a holistic analysis of gedatolisib, both differentiation, its characteristics as well as the unmet needs and prior results in other areas. And all of that has led us to develop some conclusions about how we would prioritize. We expect to announce the next step for us in development in the next few months, I would say, essentially by no later than Q3. And at that point, we'll make clear what went into our decision and why we prioritized that. With respect to our first-line breast cancer, that would obviously be a very long study, a very significant study. And it's one that we would probably say we'd have to essentially hold off for practical purposes until we get through our second line study. We think the data is still very interesting and compelling and certainly important for investors to consider if they're trying to evaluate what the long-term potential for the company is. I think for most drug developers, the goal is ultimately to have a drug that's capable of providing benefits for patients as early as possible. And the data that we updated and presented at ESMO suggest that we could potentially, where the data certainly points us in this direction, enhance significantly the progression-free survival period for patients who are treatment-naive newly diagnosed with metastatic breast cancer. So long-term, we think that would represent a significant opportunity to help a bigger group of patients for longer periods of time.

Got it. All makes sense. And maybe one other question just on the Phase 3. In the past, you've mentioned how powering and the statistical analyses are conventional for the Phase 3. Are you providing any more specifics on powering assumptions for the three primary endpoint statistical analyses, and how those factor into the regulatory path forward? Or would that be something that we could learn more about at a later point before the second half 2024 readout?

Well, the fiscal analysis plan has been reviewed by the FDA. That was part of the process we went through last year and as we described to folks. So, we've added essentially our approach, the primary analysis that we proposed to use, and that's all been assessed by the FDA. When you talk about conventional powering, I mean typically for primary analysis, I think the expectation is that you have certainly north of 85%. We think 90% is probably more typical. And we would, I would say, err on the side of being more conservative and have a higher power used for determining the sample size and effect numbers to do the primary analysis. And then certainly, the alpha is fairly standard, typically 0.025 for a one-sided analysis. So, we're not breaking trail on any of that. And I think investors shouldn't consider it. But those types of details typically, we think, are more appropriate to present when they're presenting the data.

Got it. Okay, that’s helpful. Thanks for taking my questions. I'll hop back in queue.

You're welcome. Thank you.

Next question comes from Boris Peaker with Cowen & Company. Please go ahead.

Thanks for taking our question. This is Nick standing in for Boris. I have a quick question about CELsignia. I noticed that its data is delayed, with expectations set for the first half of 2024. I was curious if the same delay applies to the other FACT trials, or if their timelines have also been pushed back due to these delays.

Yes, the process of obtaining biopsy samples requires additional screening, which leads to a larger pool of patients that need to be prescreened and enrolled. We initially used certain assumptions to project enrollment during the pandemic, but those projections were somewhat inaccurate. The circumstances surrounding the CELsignia trials are significantly different compared to VIKTORIA-1, which enrolls a wide range of patients. In VIKTORIA-1, we primarily enroll women who have progressed on a previous CDK4/6 treatment and meet specific eligibility criteria, with no major exclusions. However, CELsignia only allows about 20%-25% of patients with a research biopsy and confirmed hyperactive HER2 signaling to qualify. This two-step process complicates activity projections and results in slower overall activity compared to a more traditional trial like VIKTORIA-1.

Understood. Thanks for that detail. Just another quick one. I know what you guys ended up with cash, I was just wondering if you have had any guidance as to the cash runway or cash burn or anything like that?

We've previously provided guidance that this cash would take us through the end of 2025, and we are sticking with our guidance.

Great. Thank you very much.

You're welcome.

Next question comes from Rohit Bhasin with Needham & Company. Please go ahead.

Hi, this is Rohit on for Gil. Thanks for taking my questions. Can you tell us how many patients have been enrolled in the FACT-1 and FACT-2 studies? And then secondly, is there anything you can tell us about your ex-US plans? Thanks.

So, we haven't provided updates on enrollment activities in those studies. And basically, we're providing guidance on when we expect that interim analysis to be done. And as far as ex-US, I guess, are you referring to commercial activities, development activities, could you maybe provide a little more detail on that question?

Yes, if you can just talk about your commercial preparation and activities, that would be great? Thanks.

Our main priority right now is to conduct the study and ensure we obtain the data as quickly as possible. In terms of commercial efforts, there is a well-established route to commercialization that we prepare for alongside our NDA preparation. The initial activities in the United States are currently underway, and I believe we are on track as expected for a company preparing to commercialize at this stage. Regarding our plans outside the United States, we have not shared detailed information publicly yet. Generally, most biotech firms in our situation would consider some form of partnership for commercialization in international markets. We have not made any commitments in that area, and it may be too early for us to finalize anything. However, I anticipate that we will follow a familiar route, partnering with others for different markets or the entire international landscape, which is certainly a viable approach for us.

Great. Thank you.

Next question comes from Alex Nowak with Craig-Hallum Capital Group. Please go ahead.

Hey great. Good afternoon everyone. In the final cut or the latest part of the ESMO data, were there any previously unreported toxicities or any higher rates of adverse events that popped up, maybe that are due to the study or just kind of the data versus the prior cuts?

No, that's a great question. As it turns out, no. The data has been updated and we presented that data in December. There really wasn't any change in that data as presented at ESMO, rather as presented at San Antonio. What is very encouraging about the data is that we had patients on this drug for over four or even five years, and the toxicity profile for those receiving this drug continuously for such an extended period is very encouraging. They stayed on the drug, with a discontinuation rate of less than 10% among this group due to treatment-related adverse events. This typically would only be the case if the side effect profile of the adverse events these patients were experiencing was tolerable and allowed them to maintain a good quality of life. So, the longer the follow-up period, the more encouraged we are because the safety data doesn't change.

No, that's certainly good. With the ESMO data and also the San Antonio data in hand, progression-free survival is almost double what the standard-of-care might represent. How can you utilize this to assist with VIKTORIA recruitment, whether it be sites or patients within those sites?

Well, we're just at ESMO last week and I would say we presented this data in a number of our investigators from Europe who attended as well, some from the US. And I would say the importance of the data is that it highlights the potential role that data could play long-term as a drug treating breast cancer patients. And the data is really, I would just say remarkable and I think that's the perspective that the investigators who are participating in our study have, which is, wow, this is great data. We want to investigate this drug. This drug seems very active and it sounds very exciting, and we want to make sure we get our patients enrolled, and we want to see this drug get evaluated and it certainly looks very promising. So, a big part of what helps with any clinical study is being able to stay in front of investigators, have a reason to talk to them beyond just details of the trial. And any time you can provide additional data that further supports the hypothesis that the trial is evaluating, is very helpful, just to help establish our credibility, the drug's credibility and their overall interest because they can conclude that the likelihood of this drug being available to patients and playing a big role increases in probability when they see more data like that in their mind.

Yes, absolutely. No, that's good to hear. And just last question. Can you just remind us on the IP position with the data within breast? And then certainly it seems like you're building this to be a bit more of a platform going to other cancers. Just how do you take that IP and transition it from breast into the other indications that you're potentially considering?

Sure. So, any drug has multiple kind of layers of patents or different approaches it takes to build out a patent estate. Everybody will get patents for its pharmaceutical ingredient, the API, the actual molecule itself and then they'll get additional patents typically for different formulations. And we think the exclusivity for the drug that we're evaluating in breast cancer and other cancers would provide an exclusivity period through the end of 2039. So, we think we have a long runway. And then with an IV drug, there are opportunities to think about how to optimize the formulation for different applications, and those present different opportunities to further extend the runway of IP protection.

Okay, great. Appreciate the output. Thanks.

You're welcome.

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

Thank you, everyone for participating in the call today and for your ongoing support. We look forward to seeing you at the Craig-Hallum conference at the end of this month or at the Jefferies Healthcare Conference in June. I hope everyone has a great evening. Goodbye.

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