Earnings Call Transcript - IMNN Q3 2021

Operator, Operator

Good morning. My name is Bobby, and I will be your operator today. At this time, I would like to welcome you to the Celsion Corporation's Third Quarter 2021 Financial Results Conference Call. All lines have been placed on mute to prevent any background noise. Following the speaker's prepared remarks, there will be a question-and-answer session. At this time, I would like to turn the call over to Kim Golodetz. Please go ahead.

Kim Golodetz, Presenter

Thank you. And good morning everyone. This is Kim Golodetz with HLA. Welcome to Celsion's Third Quarter 2021 financial results and business update call. As has been Celsion's practice and as noted by the operator, prepared remarks will be followed by a question-and-answer session. During today's call, management will be making forward-looking statements regarding Celsion expectations and projections about future events. Generally, forward-looking statements can be identified by terminologies such as expects, anticipates, believes, or other similar expressions. These statements are based on current expectations and are subject to a number of risks and uncertainties, including those set forth in the Company's periodic filings with the Securities and Exchange Commission. No forward-looking statements can be guaranteed and actual results may differ materially from such statements. In particular, there is significant uncertainty about the duration and impact of the COVID-19 pandemic. This means results could change at any time and the contemplated impact of COVID-19 on Celsion's operations, financial results, and outlook is the best estimate based on the information for today's discussion. I also caution that the content of this conference call is accurate only as of the date of the live broadcast, November 15th, 2021. Celsion undertakes no obligation to revise or update comments made during this call, except as required by law. With that said, I'd like to turn the call over to Michael Tardugno, Chairman, CEO and President. Michael?

Michael Tardugno, CEO

Thank you, Kim. Good morning, everyone. Joining me today are Jeffrey Church, our Chief Financial Officer, who will review Celsion's third quarter financial results in just a moment, Dr. Nicholas Borys, our Chief Medical Officer, and Dr. Khursheed Anwer, our Chief Science Officer, will be available during the Q&A session to answer your questions regarding our work with GEN-1 and our vaccine initiative. During the third quarter, we continued to make progress with our leading research programs, utilizing our proprietary plasmid-based technology. As you may note from our press releases, promising clinical observations were reported for our lead investigational product, GEN-1, and its potential. By recruiting the immune system, we expect our immuno-oncology agent to improve outcomes for patients with advanced ovarian cancer. Also note that our vaccine technology in preclinical data were presented during oral sessions at the International Vaccines Congress this last October, supporting our hypothesis for the immunization potential of PLACCINE, our formulated DNA plasmid-based vaccine. A very strong balance sheet along with our ability to access sources of non-dilutive capital allows Celsion to reach key milestones and complete our randomized Phase 2 study of GEN-1 through final readout in the report of proof-of-concept results for PLACCINE early next year without the immediate need for additional capital. Now, I'll briefly review these programs and provide an update on the important catalysts as we see them now. Celsion's in-depth understanding of plasmid technology and vector construction underlies our research focus and provides the basis for our two leading product platforms. TheraPlas, our first platform, is our synthetic non-viral DNA delivery platform. It has demonstrated its ability to deliver DNA plasmid repeatedly and successfully for successful cell transfection over extended periods of time, as much as six months in our Phase II study. GEN-1 is our lead drug candidate on the TheraPlas platform. GEN-1 incorporates the plasmid encoded for IL-12, a powerful anti-cancer cytokine, that in our trials has shown unequivocally its ability to modify the tumor microenvironment, shifting into pro-immune in the highly immunosuppressive environment of advanced ovarian cancer. Published translational data from our recent phase I study in newly diagnosed ovarian cancer patients is clear on this and is consistent with the well-known pharmacology of IL-12. Access to these data can be found on our website. There's a link in the press release discussing the publication of these data. These biological data appear to support observed dose-dependent improvements in tumor response, surgical results, and pathological responses. Progression-free survival appears favorable when compared to published historical studies and when compared to a synthetic control provided to us by the well-respected data management CRO. And while the data is small, coming from a Phase 1 study, our medical advisors firmly believe that the trends are highly supportive of our continued clinical development program. We are now evaluating GEN-1's potential to improve progression-free survival in an open-label randomized Phase II study of newly diagnosed treatment-naive, advanced ovarian cancer patients. The OVATION 2 study is designed with an 80% confidence interval for an observed progression-free survival hazard ratio of 0.75, which in layman's terms means an approximate 30% improvement in risk for cancer progression or median time to progression when comparing the GEN-1 treatment arm with the control arm. This trial is being conducted in 21 centers in the U.S. and one in Canada, including NYU Langone, Mass General, Wash U, the University of Wisconsin, Madison, University of Alabama, UC San Diego, and MD Anderson, among other premier clinical research centers. As we noted in this morning's press release, the study will have accrued as few as 110 patients and as many as 130 and is now approaching 70% enrollment at the target minimum population. We expect to complete enrollment early in the first half, depending upon the number of patients in the study, with final progression-free survival readout occurring when 80 PFS events occur or 16 months median time on the study occurs, whichever comes first. This will put the data readout sometime in the first half of 2023. Now onto our second platform, PLACCINE. PLACCINE is our proprietary next-generation vaccine platform, the hypothesis of which is being evaluated in a preclinical proof-of-concept initiative using mRNA-based vaccines as a baseline comparator. PLACCINE in its current iteration, is designed with multiple viral antigens encoded for a single DNA plasmid vector, delivered with the synthetic non-viral DNA delivery polymer. Our working hypothesis is that a DNA plasmid of this construct has the potential to be superior to mRNA vaccines in a number of ways. For example, the plasmid comprised of multiple antigens reduces the possibility that evolving virus variants will escape vaccine-dependent immunity. The quality of the immune response will be improved through a higher affinity neutralizing antibodies immunoglobulin G or IGG titers, and T-cell response against multiple strains of antigens is expected to be superior. We expect a longer duration of immune response due to the longer duration of antigen expression from DNA versus mRNA. Based on our many years of experience with GEN-1, we expect a more commercially-appealing, more stable product at workable temperatures. We are pleased with our progress so far. In September, we announced results from pre-clinical in vivo studies showing production of antibodies and side effects of T-cell response specific to the spike antigens of SARS-CoV-2, our COVID-19 vaccine. When immunizing BALB/c mice with our fourth-generation vector construct, we noted antibodies to the SARS-CoV-2 spike antigen prevented the infection of cultured cells in a viral neutralizing assay. The production of antibodies predicts the ability of PLACCINE to protect against SARS-CoV-2 exposure and the elicitation of cytotoxic T-cell response shows the vaccine's potential to eradicate cells infected with SARS-CoV-2. These early findings suggesting great potential were presented by our Chief Science Officer, Dr. Khursheed Anwer at the International Vaccines Congress in October. He also noted that there's more work to do to fully establish our proof-of-concept from which we expect to demonstrate broad-spectrum protection and resistance against variants, and improved vaccine stability at storage temperatures of four degrees Celsius and above to facilitate cheaper and faster manufacturing compared to mRNA vaccines. So where are we going with this? Clearly, there are several commercial SARS-CoV-2 vaccines on the market, and hundreds of millions of dollars are being committed to COVID-19 vaccines and therapeutics by big and small pharma. You may be wondering why we are devoting resources to this program now? While we're thinking longer-term, I note the following. Our immediate goal is to validate our vector and delivery technology in preclinical studies using mRNA vaccines as competitors. Once our hypothesis is proven, should there be a commercial possibility, we will seek development partners for COVID-19 clinical trials. Also, once our hypothesis is proven, we expect to begin development of DNA plasmid vaccines to address a broad range of other infectious viral agents. Now, at this point I'd be remiss if I didn't mention the role of our dedicated staff and partners in this effort, driving our research, and an outstanding group of scientists that has recently been reinforced with individuals who bring advanced knowledge in molecular biology, immunology, and vaccine development. We continue to build relationships with development partners in vector construction, analytical methods, and supply chain capability. We've improved our capacity to produce high volumes of research quantities of vaccine prototypes for our proof-of-concept work and have assembled a Vaccine Advisory Board comprised of highly regarded researchers in the field. I conclude my comments on PLACCINE by saying that we continue to be excited and cautiously optimistic about the platform and its highly advantageous potential. Now, just a few comments on our balance sheet. We continue to take advantage of various sources of capital available to us along with the most recent raise of $13.9 million completed early April this year. We improved our cash position with the sale of $2 million of our New Jersey State net operating losses also earlier this year. We also just received approval to sell later this year an additional $1.5 million in NOLs. All available to us, by the way, is an additional $3.5 million in NOLs that can be sold over the next few years. We further strengthened our balance sheet, improved our cash flow this year with a new $10 million loan facility with Silicon Valley Bank, which allowed us to repay $6 million of higher interest venture debt last quarter. Jeff will provide more details about that financing. But the bottom line is that we have smartly strengthened our balance sheet, with investor-friendly common stock transactions and non-dilutive sources of capital, all of which support a cash runway that now extends through 2024. Our cash position, as I mentioned earlier, will allow us to reach a number of important development milestones, including PFS from our OVATION 2 study and proof-of-concept reports from the PLACCINE initiative. With that, I'll turn the call over to Jeff Church, who will go into more detail about our very strong financial position. Jeff?

Jeffrey Church, CFO

Thank you, Michael. Details of Celsion's third quarter 2021 financial results were included in the press release we issued this morning and in our Form 10-Q, which we filed today before the market opened. Celsion ended the third quarter of 2021 with $60.6 million in cash and investment securities, restricted cash, and accrued interest receivable. Over the past three years, and without any dilution to our stockholders, we have raised nearly $15 million from the sale of our New Jersey State net operating losses, which is equivalent to nearly four years of operating expenses. We have a further $5 million of unused New Jersey NOLs available for sale between 2022 and 2024, $1.5 million of which was approved last week by the New Jersey Economic Development Authority per sale this year, which is expected to net the Company about $1.4 million. Coupled with future sales of unused New Jersey NOLs given our current spending plans, we believe we have sufficient capital resources to fund our operations through the end of 2024. We are in an excellent position with respect to liquidity to support us through several important value-creating milestones. Let me now turn to our review of our third quarter and year-to-date 2021 financial results. For the quarter ended September 30th, 2021, Celsion reported a net loss of $5.4 million, or $0.06 per share. This compares with a net loss of $8.1 million, or $0.24 per share, for the quarter ended September 30th, 2020. Operating expenses were $5.2 million in the third quarter of this year, which is up about $900,000 or 21% from operating expenses of $4.3 million for the third quarter of 2020. Let me break this down by line item. Research and development expenses were $2.5 million for the third quarter of this year, as well as the third quarter of last year. Clinical development costs for the Phase 3 OPTIMA study decreased to $200,000 compared with $0.5 million for the prior year quarter due to the discontinuation of this 556-patient trial in the first quarter of 2021. Research and development costs associated with the development of GEN-1 to support the OVATION 2 program, as well as the PLACCINE DNA vaccine technology platform increased to $1.3 million from $900,000 in the prior-year quarter. Other costs related to the Company's clinical development programs decreased to $1 million from $1.1 million in the prior quarter, largely driven by higher manufacturing costs for GEN-1 clinical supplies for the Phase II portion of the OVATION 2 study, offset by lower regulatory and manufacturing costs related to the discontinued OPTIMA study. General and administrative expenses were $2.7 million in the third quarter of 2021 compared with $1.8 million for the third quarter of 2020. This $900,000 increase is primarily attributable to higher non-cash stock compensation expense of $200,000, an increase in professional fees—these are largely legal fees—of $600,000 and an increase in premiums for our director and officers insurance of $100,000. On a year-to-date basis, net cash used for operating activities was $11.1 million, which compares to $11.9 million for the same period in 2020. Cash utilization is in line with our projections for 2021 of approximately $17 million or an average of about $4.25 million per quarter. Cash provided by financing activities was $54.8 million during the first nine months of 2021, derived from equity offerings in January and April, proceeds from the $10 million loan facility with Silicon Valley Bank in June, and the sale of our New Jersey NOLs in May. I will now turn the call back to Mike.

Michael Tardugno, CEO

Thank you, Jeff. I just want to make a quick comment. Our industry—including us—is seeing an enormous amount of litigation, for the most part meritless claims. The costs to us this year are quite high, and for many companies like us, the NOL insurance costs continue to increase. I think this meritless litigation is something that needs to be addressed through legislative action. We would encourage our shareholders to contact our legislators and let them know that this use of investor capital to defend against meritless claims is just outrageous, and that needs to be controlled through some legislative action. With that, I want to say to our shareholders that I want you to know that we're driven by a commitment to bring new medicines to patients in the medical community. Supported by the daily work of our talented scientists, clinicians, and technical staff, we remain focused on delivering against our research objectives and our drive to create value for our shareholders. With that overview of our business and our recent financial results, we are ready to open the call to questions. Would you do that for us, please, Operator?

Operator, Operator

We'll pause for just a moment to allow everyone the opportunity to ask questions. Our first question comes from Kumar Raja with Brookline Capital Markets.

Kumar Raja, Analyst

Hi. Thanks for taking my questions and congratulations on all the progress. Looks like you are doing well in terms of the enrollment for the OVATION trial. In terms of the clinical trial sites, what are you seeing there in terms of patient recruitment? Is it back to the levels that were before COVID-19? What are you seeing there and how is it different from different centers? And in terms of this 110 to 130, where do you think you will end up in that range?

Michael Tardugno, CEO

I'd like to answer the second question first, if you don't mind. This is a Phase II study. Our goal here is to use the data to power Phase III. The statistical plan is designed with a maximum of 130 patients. But our—this is an event-driven study. We're looking for 80 events, frankly to have data sufficient to—after 16 months on trial—to have data sufficient to power the pivotal trial. Where do we expect to be? I am hopeful that we'll be north of 110 patients. The more experience we have with this investigational product, the more confidence we have in the design of the Phase III study. With regards to patient enrollment, we've seen some ups and downs, I would comment. At the height of the COVID-19, the original variant, whether it was the European or the wild-type variant, we saw a challenge enrolling patients. More recently this past summer when the Delta variant raised its head, we saw some reluctance for patients to join our study. I think we're seeing a pickup now and I just, I guess that's my point of view. Nick, do you have any comments on that?

Nicholas Borys, CMO

Thank you, Mike. As you probably can guess, the pandemic has had an impact on patient recruitment in all cancer studies and patients are hesitant to go in for screening. Additionally, in ovarian cancer, one of the problems is that there isn't really a good screening process; it's picked up through ambiguous symptoms. As Michael said, we saw an uptick in our enrollment during the summer when people were feeling good and safe going back to their physicians for checkups. Then the second wave hit in the fall, and we've seen a decrease. More recently, we are now getting reports from our hospitals that there are staffing problems at the centers, but we still continue to enroll our patients. I think at a pretty good rate compared to overall. We're optimistic to meet our timelines, as Michael mentioned before. Pretty much 90% of our sites are actively enrolling patients, so we're getting very good participation.

Kumar Raja, Analyst

Okay. And in terms of the DNA vaccine, what are the next steps there? Are you looking for external funding to move that forward?

Michael Tardugno, CEO

We have sufficient capital to support our proof-of-concept work. We have applied for grants from various government agencies, and we'll apply for more if we think that's important for the validation of our work. We think it's important to apply for government funding. But the bottom line is, we have sufficient capital to take us through proof-of-concept. Regarding what is left to do, Dr. Anwer is on the line. Appreciate it. Do you want to pick up the rest of the question, please?

Khursheed Anwer, CSO

Thank you, Michael. Sure. Our proof-of-concept objectives are to demonstrate that from a single DNA-based plasmid, you can express antigens for two different strains of a virus. We've been modeling SARS-CoV-2 as a benchmark because there are commercial products out there for competitive purposes. Our goal for the next couple of quarters is to demonstrate that from a single vector, you can generate neutralizing antibodies, IgG, and detailed responses against two strains of SARS-CoV-2. We'll demonstrate that the single vector antigen is effective against two strains versus a vaccine designed for a single strain only. DNA inherently has better stability than mRNA, so we must demonstrate the stability advantage through experimentation, as Michael mentioned earlier, that DNA expresses for a longer period of time from skeletal muscle, compared to mRNA. Our hypothesis is that you'll be able to demonstrate durability of immune response from our vectors as opposed to mRNA. You have some key objectives ahead of us in terms of demonstrating proof-of-concept.

Kumar Raja, Analyst

Okay. And in terms of using GEN-1 immunotherapy for other oncology indications, what efforts are being done in that front and when can we get an update there?

Michael Tardugno, CEO

I think we're optimistic that once we show in this Phase II study some positive results, and we fully expect to do so, that any intraperitoneal cavity cancer is a target for us. We haven't decided which, but any of them could be an immediate target. This would include a broad range from colorectal cancers to liver cancers to maybe pancreatic cancers. But Khursheed, can you expand more on that please?

Khursheed Anwer, CSO

Yes, sure. The product that we're developing, GEN-1, as you know, is for intraperitoneal delivery, and by moving this product, you can induce IL-12 and improve immune changes in the peritoneal environment. Currently, we're going after ovarian cancer because over 90% of ovarian cancer patients metastasize into the peritoneal cavity, where the disease localizes the result of depth, so you can control that. Along the same line, there are some other GI cancers, where about 25% to 30% of different GI cancers also metastasize to the peritoneal cavity. These include gastric cancer, liver cancer, pancreatic cancer, and colon cancer. These cancers are also immunogenic. That would be our next goal. We have demonstrated in animal models that GEN-1 has activity against these GI and gynecological cancers. As Michael said, once we have success with ovarian cancer, it is likely we would pursue other GI cancers that showed a demonstrated immune response for local control of disease.

Kumar Raja, Analyst

Thanks so much for taking my questions. I look forward to the updates.

Michael Tardugno, CEO

Thank you.

Operator, Operator

And our next question comes from David Bautz with Zacks Small Cap Research.

David Bautz, Analyst

Good morning, everybody. My first question is for the OVATION study. It's a technical question. So, when a patient is said to have no residual disease, is that based on the surgeon's opinion or is that somehow quantified?

Michael Tardugno, CEO

Thanks very much for that question. Yes, it is quantified on two levels. Number one, it’s based on the surgeon's evaluation of whether there's any residual disease left in the cavity and from tissues that are sent to pathology for review to see if there's any disease left. Those play into that role. Additionally, we are also looking at overall response from the CT findings and the final pathological report. Historically, R0, where the surgeon feels that they completely removed the disease, is typically found in most large studies at around 50% of the time. In our studies so far, we are seeing an R0 response consistently around 75% of the time. This is probably our biggest topic of discussion in our PI meetings.

David Bautz, Analyst

Okay. Great. Thanks for that. And as far as releasing additional data from the study, when do you expect to do that? Will it be at the next quarterly update call or will it be sometime in between that?

Michael Tardugno, CEO

Sometime in between that. We're hopeful to be able to collect enough information supported by the investigators. There are investigator-reported results, and we expect to collect enough information to provide an update probably within the next few weeks.

David Bautz, Analyst

Okay. Sounds good. And lastly on the COVID vaccine, it sounds like you're leaning more towards developing a multi-strain vaccine versus a multi-antigen vaccine. Am I understanding that correctly, or is that still up in the air?

Michael Tardugno, CEO

You have it correct. Christian, do you want to talk about that a little bit, please?

Khursheed Anwer, CSO

Yes. David, as you remember correctly, our overall objective is to develop a vaccine against two antigens and a virus with an immune modifier to improve the quality. However, over the last six to seven months, as this SARS-CoV-2 pandemic has evolved, we have learned that modifying the virus is also equally important. You may have a dominant strain and then an emerging strain in a population. Therefore, we feel that given the current conditions of virus evolution, it might be prudent at this stage to develop the technology for two strains, where you can quickly target the prevalent and an emerging strain, which would fulfill a critical need at this stage. However, as you mentioned, we have successfully constructed a multi-systronic plasmid that expresses spike antigen and M antigen. Additionally, we have shown that we can express IL-12 from the same plasmid, so indeed, we have that eventual goal. If we demonstrate activity against two different strains of SARS-CoV-2, we can certainly build on it. The same goes for multiple antigens; we have been able to construct vectors expressing two different antigens. Certain viruses are difficult to handle, such as RSV and HIV—there's currently no effective vaccine for those. We believe that if we could co-express an immune modifier with the same plasmid, which we have shown IL-12 can be, that could really address some of those challenges with difficult-to-handle pathogens. So, it's an incremental approach. At this stage, what we need is more immediate, and down the road, we will leverage our technology towards two antigens and immune modifiers.

Michael Tardugno, CEO

As Dr. Anwer points out, our hypothesis that a single DNA plasmid can produce more than one protein or antigen along with an immune system modifier is not compromised at all by this minor change in direction, which we think is more urgent. This should be more attractive to a collaborator looking to demonstrate the capability to address multiple variants of the disease. This is just a proof-of-concept. The variants we ultimately may consider could be different than those currently being evaluated in the existing construct. That's the beauty of this technology; the ability to rapidly adapt the vector construct for the most pressing medical issues.

David Bautz, Analyst

So, are you limited to just two antigens or proteins from different strains that you can express?

Michael Tardugno, CEO

No. I think that was pretty clear in Khursheed's comments that we've shown proof of concept with as many as four proteins—two antigens and two sub-unit proteins for IL-12.

David Bautz, Analyst

Okay. All right, great. I appreciate you taking the questions.

Michael Tardugno, CEO

Thank you.

Operator, Operator

Our next question will come from Mike Worth with Celsion.

Michael Tardugno, CEO

Hello, Mike.

Mike Worth, Analyst

How are you doing, sir? I was wondering if you guys had any update from the FDA regarding the fast-track designation.

Michael Tardugno, CEO

Fast-track designation was granted based on an application that we submitted over the summer. That was granted for the OVATION 2 study. Our study of ovarian cancer generally, with GEN-1, has been granted fast-track along with orphan designation. Orphan designation in the U.S. and Europe provides us with, among many other things, exclusive market rights from a regulatory standpoint in the U.S. and Europe for seven and ten years respectively. Fast-track, of course, recognizes the importance of finding therapeutics for serious and unaddressed medical needs—in this case, ovarian cancer—but it's not granted on that basis alone. The FDA requires us to provide evidence—some early evidence—that suggests our approach has great potential to provide an improvement in treatment for these patients. A disease that has a relatively high unmet medical need has some urgency for a therapy or a cure. Along with data that suggests that the work we are doing has the potential for success is required for the FDA to grant us track, which has been granted for this program.

Mike Worth, Analyst

Right. So, will updates come at the end of each phase or is there a way that it could go by the end of Phase 2 if the data shows promising results?

Michael Tardugno, CEO

I understand your question. Fast-track provides the Company with the opportunity, an ongoing opportunity, to interface with the FDA on questions that arise during the course of development, certainly regarding the design of the clinical trials, including the discussion of surrogate endpoints that could provide us with a faster or quicker means to evaluate the drug's effectiveness. As I mentioned, we're considering approaches to reduce the amount of time in the clinic to demonstrate efficacy. That—those discussions are ongoing. Ultimately, the value of the fast track designation becomes significant when we reach the approval stage for the NDA, where fast-track designation allows the FDA to consider our application for priority review, which reduces the review time substantially.

Mike Worth, Analyst

Thank you, sir.

Michael Tardugno, CEO

Thank you.

Operator, Operator

And that concludes our question-and-answer session. I will turn the call back over to Michael Tardugno for closing remarks.

Michael Tardugno, CEO

Thanks, all of you, for joining our conference call this morning, and for those who have asked questions, we really do appreciate your questions. It gives us an opportunity to expand more on the work that we're doing and address any concerns you may have. We encourage more questions, and I'm sure we'll continue to receive them as our studies progress. Again, I want to thank all of you for your time this morning. I trust we've conveyed our excitement about the potential of GEN-1 and our PLACCINE vaccine development platform, which we have high hopes for, given the number of infectious agents for which there are no effective immunotherapy vaccines available. We look forward to keeping you informed of our progress, and perhaps seeing some of you in San Francisco in person. As we understand it now, the JP Morgan Healthcare Conference will be held in-person during the second week of January. If you are attending and wish to speak with us, we can make arrangements through our IR firm by contacting N.J. to schedule a meeting. So, with that, we'll conclude this conference call, and thank you all very much.

Operator, Operator

Thank you. This concludes today's call. You may now disconnect.