Ladies and gentlemen, good morning, and welcome to the Delcath Systems Third Quarter 2025 Earnings Conference Call. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr. David Hoffman, Delcath's General Counsel. Please go ahead.

Thank you, and welcome to Delcath Systems' Third Quarter 2025 Earnings Call. With me on the call are Gerard Michel, Chief Executive Officer; Sandra Pennell, Chief Financial Officer; Kevin Muir, General Manager, Interventional Oncology; Vojo Vukovic, Chief Medical Officer; and Martha Rook, Chief Operating Officer. I'd like to begin the call by reading the safe harbor statement. This statement is made pursuant to the safe harbor for forward-looking statements described in the Private Securities Litigation Reform Act of 1995. All statements made on this call, with the exception of historical facts, may be considered forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Although the company believes that expectations and assumptions reflected in these forward-looking statements are reasonable, it makes no assurance that such expectations will prove to have been correct. Actual results may differ in a material manner from those expressed or implied in forward-looking statements due to various risks and uncertainties. For a discussion of such risks and uncertainties, which could cause actual results to differ from those expressed or implied in the forward-looking statements, please see risk factors detailed in the company's annual report on Form 10-K, those contained in subsequently filed quarterly reports on Form 10-Q as well as in other reports that the company files from time-to-time with the Securities and Exchange Commission. Any forward-looking statements included in this call are made only as of the date of this call. We do not undertake any obligation to update or supplement any forward-looking statements to reflect subsequent knowledge, events or circumstances. Our press release with our third quarter 2025 results is available on our website under the Investors section and includes additional details about our financial results. Our website also has our latest SEC filings, which we encourage you to review. A recording of today's call will be available on our website. Now, I would like to turn the call over to Gerard Michel. Gerard, please proceed.

Thank you for joining us today to review our third quarter financial results and business updates. Many of you joined our October 20 business update call, where we reported the compelling results from the investigator-sponsored CHOPIN trial, and you may have also seen our announcement about the first patient dosed in our CRC trial. I'm immensely proud of our clinical and medical affairs team as they work to bring our technology to an ever-growing set of patients with unresectable liver metastases. On the commercial front, the third quarter was impacted by a number of factors, including the 340B pricing related to NDRA participation, which resulted in an approximate 13% reduction in average revenue per kit sold versus the prior quarter. We expect a similar average price level in the fourth quarter. While there was a slowdown in the pace of site activation from June to August, we have returned to a steadier pace, activating 4 new sites in the past 2 months. There are currently 25 REMS-certified treatment sites. Major cancer centers continue to show interest in joining, and based on our current conversations, we are planning to be in the 26 to 28 active treating centers by the end of 2025 and 40 centers by the end of next year. It is important to note that the 40 center target excludes clinical sites, which will appear on our website as required by REMS-related regulations. We aim to build referral networks to these locations as many of our targeted clinical sites have few metastatic uveal melanoma patients. On our quarterly calls, we will distinguish sites with minimal commercial activity that are clinical sites to give investors a clear understanding of our site activation progress. Currently, one site, City of Hope, is active in the colorectal trial and has not yet treated any metastatic uveal melanoma patients, although they anticipate doing so. To support both the expansion of sites and actively treating sites, as we outlined in previous calls, we grew our U.S. sales force in 2025 from 4 to 6 regions, each staffed with a liver-directed therapy manager, oncology manager and clinical specialists. By the second quarter of 2026, we plan to expand even further to 9 regions, enabling the commercial team to both prioritize building referral networks and maintain a steady pace of site activation. As previously reported, in late summer, we experienced a slowdown in new patient starts, partially due to summer seasonality. Each HEPZATO treatment necessitates the collaboration of a trained perfusionist, anesthesiologist and an interventional radiologist after the assessment period. During holiday periods, scheduling capacity challenges are difficult to overcome and new patients may start alternative therapies. Fortunately, patients currently under treatment continue to return at expected rates, averaging 4 treatments per patient. The feedback from oncologists consistently indicates HEPZATO continues to address a significant unmet need for patients with liver metastases resulting from uveal melanoma. Importantly, we believe the CHOPIN protocol, which starts with systemic therapy, may provide increased schedule flexibility in clinical practice since some physicians may just decide to extend systemic therapy duration while waiting for HEPZATO treatment team availability. Aside from seasonality, we believe that competition for clinical trials increased in the middle of the year. Specifically, the Replimune-sponsored trial for RP2 expanded the number of clinical sites to 24 and Thomas Jefferson continues to initiate their own single-center trials. This competitive dynamic ebbs and flows as new trials start and others end. We're confident that the compelling results from the CHOPIN trial should lessen the competitive impact from trials as the CHOPIN data is disseminated and physicians experience firsthand durable patient responses using the CHOPIN protocol. As you know, as a result of the changes in the rate of new patient starts, last month, we adjusted our 2025 annual guidance to $83 million to $85 million. On our October 20 business update call, we discussed in detail the positive results of the trial that were presented at ESMO by Professor Ellen Kaptein from Leiden University. In summary, the primary endpoint was met with 1-year progression-free survival significantly higher at 54.7% in the combination group versus 15.8% in the perfusion group. The combination also significantly improved median overall survival, 23.1 months versus 19.6 months, and best overall response rate, 76.3% versus 39.5%. All results were statistically significant. During the update call, Dr. Vukovic discussed the significance of these findings with Dr. Vincent Ma, Assistant Professor and Medical Oncologist at the University of Wisconsin. Dr. Ma, an experienced user of HEPZATO, expressed that he was impressed by the high objective response rate observed in the CHOPIN trial. He noted that the CHOPIN trial results are potentially practice-changing and are consistent with the scientific rationale underlying this combination therapy. The presentation at ESMO and a replay of our call with Dr. Ma is linked on our website. The combination treatment evaluated by CHOPIN achieved extraordinary efficacy and acceptable safety despite the treatment duration being limited to just 10 weeks with no maintenance therapy. Importantly, no other prospective trial in metastatic uveal melanoma has shown a higher response rate, longer progression-free or overall survival. In clinical practice, after completing the 10-week CHOPIN induction period, physicians may choose to add maintenance therapies with the potential to extend the benefits achieved by combining PHP and IPI+NIVO as an induction strategy. The option of this combination liver-directed systemic therapy regime may accelerate uptake given some oncologists are uncomfortable postponing systemic treatment, and we do know this has caused some patients considered appropriate for HEPZATO therapy to be put on other treatments. In addition to addressing barriers related to physicians not wanting to postpone systemic therapy, and the episodic scheduling constraints. The CHOPIN trial should also alleviate the concerns of the subset of physicians who are reluctant to use HEPZATO to treat patients with extrahepatic disease. Despite the fact that the FOCUS trial included patients with extrahepatic metastases and that hepatic failure is usually the ultimate cause of death, some physicians are reluctant to use liver-directed therapy in patients with extrahepatic disease. Since the CHOPIN protocol obviously includes systemic therapy, which can treat extrahepatic disease, we believe this specific objection will diminish as the CHOPIN results are broadly disseminated. Delcath is actively engaging with healthcare professionals currently using HEPZATO as well as those planning to utilize it. Our team remains committed to meeting regularly with key opinion leaders to foster transition towards establishing this approach as a first-line option for appropriate patients. With the favorable results from CHOPIN and ongoing positive patient outcomes, our field teams will work with clinicians to better understand how combination therapy might be used to improve patient outcomes. Beyond our current focus on uveal melanoma, we are committed to advancing research and development for HEPZATO. We are confident that HEPZATO and its proprietary hepatic delivery system platform offers substantial potential to improve outcomes for a broad spectrum of patients with liver metastases. As mentioned in earlier calls, we are conducting 2 company-sponsored trials in liver-dominant metastatic colorectal cancer and liver-dominant metastatic breast cancer. These studies target large patient populations with unmet clinical needs. Both trials have a primary endpoint of hepatic progression-free survival. Patient dosing for the metastatic CRC trial began in August of this year with enrollment for metastatic breast cancer likely to follow in the first quarter of 2026. For metastatic CRC, we expect the release of interim data as early as the second quarter of 2027 with an anticipated release of primary endpoint results in mid-2028 and overall survival data expected to follow in 2029. For our metastatic breast cancer trial, we anticipate interim data release as early as the fourth quarter of 2027 with anticipated release of primary endpoint results in mid-2029 and overall survival data expected to follow in 2030. In collaboration with experts and key opinion leaders, we continue to evaluate a number of other tumor types and indications for HEPZATO. There is strong interest and scientific rationale to develop HEPZATO in patients with intrahepatic cholangiocarcinoma, cutaneous metastatic melanoma, and non-small cell lung cancer. Immune checkpoint inhibitors are approved and widely used in these 3 cancer types, and there are clear areas of unmet need in the subset of these patients with liver metastases that provide an opportunity to develop HEPZATO in combination with checkpoint inhibitors. It will take another 3 to 6 months to finalize development plans for future combination trials in other indications. The team is executing effectively on the clinical front, and we are prepared to pursue new opportunities in various cancer indications. I will now ask Sandra to briefly review our financial results.

Thank you, Gerard. Revenue from our sales of HEPZATO was $19.3 million and CHEMOSAT was $1.3 million for the third quarter of 2025 compared to $10 million for HEPZATO and $1.2 million for CHEMOSAT during the same period in 2024. We recognized gross margins of 87% in the third quarter compared to 85% for the same period in the prior year. Research and development expenses for the quarter were $8.0 million compared to $3.9 million for the same period in the prior year. Selling, general and administrative expenses for the third quarter were $10.3 million compared to $7.0 million for the same period in the prior year. Our third quarter 2025 net income was $0.8 million compared to $1.9 million net income in the third quarter of last year. Non-GAAP positive adjusted EBITDA for the second quarter was $5.3 million compared to positive adjusted EBITDA of $1.0 million for the same period in 2024. We ended the quarter with approximately $89 million in cash and investments and quarterly positive operating cash flow of $4.8 million compared to $7.3 million operating cash flow in the second quarter. As of today, we have no outstanding debt obligations and no outstanding warrants. Forecast for 2025 gross margins are expected to be between 85% and 87% with continued positive non-GAAP adjusted EBITDA and positive cash flow for the rest of the year. The total HEPZATO treatment volume in 2025 is projected to increase by nearly 150% versus 2024. We thank you all for participating today, and this does conclude our prepared remarks, and I'd ask the operator to open the phone lines for Q&A.

The first question comes from the line of Marie Thibault from BTIG.

I'll keep my questions to just one here. I wanted to understand, I'm glad to see that the pace of center activation has picked up again. I wanted to understand what's built into your Q4 expectations in terms of some of that competitive clinical trial activity you called out in Q3, some of the seasonality, it sounds like it's recovered, but are you expecting any seasonality from the winter holidays? Just a little more granularity on what we should expect for Q4.

Yes. When we put together that guidance, we did assume there'd be a modest amount of seasonality in the fourth quarter. Keeping in mind that we haven't been through too many seasons to date, it's hard to really know. We were surprised by the summer seasonality, as you know. We assume it's prudent to put some expectation there. In terms of clinical trial competition, we kind of assume the same level that we started seeing midyear, so short answer is we factored both in.

We take the next question from the line of John Newman from Canaccord Genuity.

I just wondered if you could comment on how you expect the site additions to roll out going forward into 2026? Whether you think the current pace of additions through the balance of 2025 is a good indicator there?

Yes. I mean right now, I think it's probably prudent to assume that the site additions will accelerate in the back half of the year because we're going to have 9 regions at that point. I think if you want to do a 40-60 split in terms of them coming on board, that might be reasonable.

We take the next question from the line of Chase Knickerbocker from Craig-Hallum Capital Group.

This is Jake on for Chase. As you get up to those 9 sales territories, are there any steps that the team is taking to improve utilization on some of the lower volume accounts?

Yes, I think the two main strategies for addressing lower utilization sites are building referral networks to these sites, particularly since some of them are large liver centers with minimal patient flow, and expanding our sales and medical affairs teams. The second strategy involves shifting physician prescribing behavior, especially at lower utilization sites where we've encountered concerns about utilizing liver-directed therapies for patients with extrahepatic metastases. Additionally, clinical trials at larger centers can be demanding in terms of patient numbers. Therefore, disseminating the CHOPIN data is crucial to mitigate these concerns. Finally, for higher-utilization sites that are at capacity, it's reasonable to suggest that doctors might keep patients on checkpoint inhibitors for a few additional weeks while they wait for a slot for HEPZATO, ultimately still allowing them to receive it.

Then do you expect CHOPIN to start impacting utilization sometime in '26, mid-'26?

'26, yes. I think it would be a stretch to expect to see a step change in the fourth quarter. I think as the quarters roll on in 2026, there's likely to be a meaningful publication that comes out of this trial, hopefully in December, but again, that's out of our hands. It's an investigator-initiated trial. Yes, I think increasingly, as 2026 moves on, there will be more of an impact.

We take the next question from the line of Sudan Loganathan from Stephens Inc.

This is Kesav on for Sudan. Just got a quick one on my end. Since neutropenia is common with trifluridine and tipiracil and bevacizumab, how are investigators addressing this in the Phase II HEPZATO in combo trial? Is this through G-CSF usage or dosing adjustments?

Probably both, but I'm going to ask Vojo to comment.

Sure. You correctly pointed out that the standard of care regimen for colorectal patients in third line can cause some bone marrow toxicity. We also know that PHP with melphalan can also have hematological toxicity. Patients will be managed using appropriate standard supportive care and those adjustments and drug holidays will be also factored in. It's all defined in the protocol.

G-CSF as well as.

Yes.

Of course, the standard of care, right? The answer is yes to both G-CSF and if necessary, delays in dosing.

We take the next question from the line of RK from H.C. Wainwright.

This is RK from H.C. Wainwright. Quick question from me is how to think through your participation in the NDRA program? How we should think about its influence on your profitability and revenue growth, not only in 2026, but beyond? What is your long-term plan in terms of trying to sustain growth against the NDRA?

Sure. Regarding the NDRA and its impact on revenue growth, this represents a one-time decrease due to the NDRA. We don't expect a significant change in average revenue per kit, although we need to assess how many new sites actually engage as we bring them on board. A substantial percentage of major academic hospitals possess an NDRA legal entity, but approximately half tend to participate based on the care location for this product. If participation rates remain steady, I believe the average discount or reduction will continue as it is. As for the overall effect on revenue growth and volume, it remains uncertain. I've mentioned this in previous discussions; without an experimental setup to test it out, we can't precisely gauge the impact. I anticipate that economic factors might influence some sites, which is unfortunate given the severity of the disease. Ultimately, there could be some increase in volume, but the exact extent will be unknown. For insights on gross margins and profitability, I'll let Sandra speak on that.

Yes. RK, overall, we've mentioned in the past, as we build up the R&D program from a profitability standpoint and a cash flow perspective, it might be a little bit bumpy over the next couple of years. However, from a gross margin perspective, we are still expecting probably 85% to 80% into 2026, depending on some cost efficiencies that we can gain and beyond 2026, potentially high 80%.

I think it's also important to note with our healthy cash balance, I just don't see any need to raise capital just to get to the bottom line of the issue.

One quick question, if I may, as a follow-up. I think on the October 20 call, you were stating you had 24 active centers. Now you're saying 25 active centers and you're giving a guidance of adding maybe 3 more by the end of this year. What's the chance that you can overshoot that 28 number? Any commentary there will be helpful.

No, it's highly unlikely we'd overshoot it. Are there 7 or so on deck? Yes. Do I think 4 of them are going to come out? No. I think it's 1 to 3.

We take the next question from the line of Yale Jen from Laidlaw & Company.

We understand there's another European investigator sponsored study ongoing as a combo with the checkpoint inhibitors. Could you guys give us a little bit of color on the status as well as when they report data, was there any impact in terms of the sort of practice of the sequels of the two treatments? Or any comments on that? And I have follow-ups.

Yes, you're referencing the SCANDIUM-3 trial, I believe. Similar to CHOPIN, except they flipped the first drug that's used, they use Euro CHEMOSAT first and then they move on to IPI+NIVO. That's recruiting rather slowly. I don't have a timeline at all as to when I'd love to have a timeline, but I don't have a timeline right now for when that might read out. I think it's kind of in the too distant future right now for projection purposes to think about.

Could you provide some insights on how you plan to allocate capital between maintaining constant growth in revenue and managing increased expenses related to R&D, particularly as you initiate the second breast cancer trial?

Yes. In terms of capital allocation, I think we're really taking this on a program-by-program basis. It's actually how I work with the Board. We have a fixed R&D budget every year for either ongoing trials, in this case, CRC and breast as well as a fixed budget for investigator-initiated trials. We do our homework on, I'll pick one, non-small cell lung cancer, we're digging into now in combination with our checkpoint inhibitors. We're going to look at the protocol, the subset of patients. I suspect it will make a lot of sense to do it, but we have a lot of homework yet to do. If it looks like a positive NPV project, not to sound like a business MBA student here, but basically, if it looks like it makes sense, stands on its merits. We've got plenty of capital on the balance sheet. I think we can fund it off of our own top line. As I've said before, if something looks really compelling and the cost of capital is adequate, we fund it in other means. We'll pick up the programs one at a time. I'm not sitting here with a fixed R&D budget in mind. Instead, again, we look at that on a program-by-program basis.

We take the next question from the line of Bill Maughan from Clear Street.

Bill from Clear Street. After CHOPIN kind of broadly validated systemic treatment with HEPZATO, trying to read that through to breast and colorectal, given that it's not a combination with IO, but it is a combination between HEPZATO and systemic, how much read-through do you see from the success of CHOPIN into these new combinations? Do you see the potential or attraction for adding in maybe a checkpoint inhibitor to that treatment paradigm in those specific indications?

Yes. Currently, those trials are both combined with systemic chemotherapy, which brings additional toxicities, and that's one of the challenges we face in integrating this therapy into existing treatment protocols. One of the advantages of checkpoint inhibitors is that they do not typically cause these stacking toxicities. You mentioned colorectal cancer, which, along with some subsets of breast cancer, does not utilize checkpoint inhibitors. In colorectal cancer, liver metastases are the most common occurrence. The portal vein, which leads directly into the liver, is almost immediately exposed to either tumor antigens or tumor cells. There is a theory suggesting that the reason checkpoint inhibitors are less effective in many colorectal cancer cases is due to the exposure of the liver, which has diminished systemic immune tolerance. Perhaps we could convert cold tumors into hot ones, as the saying goes. Vojo, who is here with me, has discussed this with several key opinion leaders. We are still exploring this idea. Our initial focus will be on areas where immune-oncology therapies are well established, demonstrate strong efficacy, and show high rates of liver metastases, such as non-small cell lung cancer, cutaneous melanoma, and intrahepatic cholangiocarcinoma.

Then just maybe a little more granular one. You specifically called out Thomas Jefferson as a hospital that's running its own trials and potentially competing with you for patient enrollment. Can you quantify that at all?

Let me see. Vojo, do you know how many patients Thomas Jefferson has in their single-center trials, and that's why I pulled them. They probably more than anybody else has their own single-center trial going. Lots of centers do single-center trials, but Thomas Jefferson in uveal melanoma is probably top of the list. How many?

109 patients.

109 patients for their single-center trials, yes.

As there are no further questions, with that, we conclude the conference of Delcath Systems. Thank you for your participation. You may now disconnect your lines.