Earnings Call Transcript - PSTV Q2 2020

Operator, Operator

Good afternoon, ladies and gentlemen. Welcome to the Plus Therapeutics Second Quarter 2020 Earnings Results Call. At this time, all participants have been placed in a listen-only mode, and the floor will be open for your questions following the presentation. Before we begin, we want to advise you that over the course of the call and question-and-answer session, forward-looking statements will be made regarding events, trends, business prospects and financial performance, which may affect Plus Therapeutics’ future operating results and financial position. All such statements are subject to risks and uncertainties, including the risks and uncertainties described under the Risk Factors section, included in the Plus Therapeutics’ Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q filed with the Securities and Exchange Commission from time-to-time. Plus Therapeutics advises you to review these risk factors in considering such statements. Plus Therapeutics assumes no responsibility to update or revise any forward-looking statements to reflect events, trends or circumstances after the date they are made. It is now my pleasure to turn the floor over to Dr. Marc Hedrick, Plus Therapeutics’ President and Chief Executive Officer. Sir, you may begin.

Marc Hedrick, President and CEO

Thank you, Erica, and good afternoon. As Erica said, welcome to our Q2 fiscal year 2020 earnings call. My name is Dr. Marc Hedrick, President and CEO of Plus Therapeutics. And joining me is our Chief Financial Officer, Mr. Andrew Sims. Today I'm very pleased to report the results from the second quarter of our fiscal year 2020. However, before I get to our Q2 update and results, I would like to update you on the COVID-19 situation as it applies to Plus. First, on behalf of all of us on the Plus Therapeutics team, we sincerely wish that you and your families, friends, and colleagues are in the best possible health and spirits as the pandemic continues to affect us all. While in no way minimizing the horrible impact of the virus in the world in 2020, this present crisis points to the critical importance of our industry, not only directly to the health of ourselves and our fellow man, but as the importance of our industry to the health of the economy as a whole. During the pandemic, Plus’s capital-efficient and substantially virtual operating model continues to serve us well. Our facilities are open and staffed in a flexible manner to provide maximum ability to fully operate the company at 100% and help support our employees and their families. We are following Texas Governor Abbott's lead, and specifically the language from this August 8 proclamation that says, 'everyone must do their part to slow the spread of COVID-19 by wearing a mask, practicing social distancing, and washing hands frequently and thoroughly. We will overcome this challenge by working together.' We agree. Similar to my report last quarter, no significant supply chain interruptions have occurred. And we currently expect no material impact on results for fiscal year 2020 which ends December 31, 2020. Now I would like to discuss in detail our drug development activities and specifically, I'll focus my remarks on three key topics: First, progress on the clinical development of our lead drug Rhenium NanoLiposomes or RNL, currently being developed for recurrent glioblastoma, also called GBM. Second, our report progress in bringing forth additional indications for our RNL products, apart from the current GBM. And finally, I'll have an update on other important business matters. The lead in-licensed drug asset in our rare cancer focus portfolio is RNL, which is currently being developed for recurrent GBM or brain cancer. Recurrent glioblastoma is nearly a universally deadly cancer that affects about 13,000 people per year in the U.S. Essentially all primary tumors go on to recur after initial treatment. There are currently few approved treatments in the recurrent setting that, in aggregate, provide only marginal survival benefit, in contrast to emerging therapies for many other cancer types. So glioblastoma is still a very significant problem. As it stands today, for glioblastoma, standard external beam radiation therapy or EBRT is still the most effective component of the standard multimodal therapeutic regime. Multiple randomized studies show a five-month improvement in survival with EBRT radiation as compared to an additional only two and a half months with the addition of chemotherapy and three months for added specific tumor treating fields. Now, our team has a number of specific reasons why we are very optimistic about the recently licensed RNL platform for glioblastoma. It's got an impressive scientific pedigree that first caught our attention. Its development actually began about a decade ago by a multi-institutional consortium at the University of Texas, Mays Cancer Center, UT Health San Antonio, and MD Anderson Cancer Center. Since its initial development, it has received funding from the now $6 billion funding mechanism called the Cancer Prevention and Research Institute of Texas. First to get off the ground, and now its development is partially funded by the U.S. National Cancer Institute. Now, having successfully brought the technology in-house to Plus and with further in-depth scientific and clinical diligence, we continue to be more and more impressed by the number of unique aspects to the overall value proposition of RNL, both for recurrent glioblastoma and potentially other cancers as well. I'd like to highlight some of those for you on the call. First, in terms of pharmacokinetics, our RNL drug has a very long half-life and low dispersion or drug distribution in the brain, meaning it stays around for a long time in the targeted area, maximizing the time on the tumor for radiation and therefore, in turn, maximizing the cancer-killing effects. In terms of the isotopes we use, the radiation itself is delivered via a unique therapeutic and diagnostic radioisotope called rhenium, which is made in a nuclear reactor and emits both the cancer-killing beta particle or high-energy electron and gamma energy useful for conventional imaging. In terms of manufacturing, our proprietary liposome construct and loading technology allows reproducible and scalable loading of high dosages of radioactive rhenium into the liposomes. Now, the therapy is highly targeted to the tumor, achieved by precision imaging preoperative in silico surgical planning and advanced machine-aided stereotactic delivery technology. The safety margins are thought to be high as RNL appears to be selective to cancer cells while sparing normal brain tissues. Prognostically, the gamma emission feature of the RNL may provide significant prognostic accuracy by allowing for real-time imaging and dosimetry calculations. And we're seeing that real-time in our cohort of five patients. In terms of dosing, we could potentially deliver 25 to 30 times as high a radiation dose as the next best therapy, namely external beam radiation. Finally, and importantly, patient convenience. RNL is administered in a single treatment and short hospital stay versus EBRT, which is fractionated and may require 20 or more treatment visits for a full therapeutic course. There are other aspects of the value proposition that we could discuss, but you get the idea. Last quarter, we listed several important milestones for the program for the remainder of 2020. Let me briefly review our progress to date. Most critical for us was optimization of the regulatory plan, completion of the clinical trial, and bringing the manufacturing and supply chains forward to industry standards in anticipation of the next steps in clinical development. We're making good progress on all three. First, we have transferred the IND to Plus, and we are now the registered trial sponsor with the FDA. We completed a quality assurance audit and assumed primary responsibility for the safe conduct of the trial. We're also in the process of seeking orphan designations and fast-track alternatives including potentially breakthrough designation based on the ultimate data obtained in the trial. Since closing the transaction, we have named a trial 'RESPECT' and launched a clinical trial website related to that trial. We've added a second site at UT Southwestern in Dallas, and completed enrollment of cohort five. Assuming the clinical data continues to meet the safety threshold, we should be ready to commence dosing in cohort six in late August, as stipulated by the present protocol pending DSMB review. We also hope to have a third site on board at MD Anderson in Houston later in 2020, to further support enrollment. Finally, we have transferred the Phase 1 responsibility for manufacturing of RNL to Plus and are actively working on our plan to scale up to GMP quality standards and to provide for late-stage clinical batch sizes. Now let me update you on the RESPECT safety and feasibility trial. As I referred to previously, the fifth dose escalation cohort is now complete and 15 patients have been treated thus far with RNL. Single treatment dosing is now above 500 gray. Escalation of the treatment volume is such that the estimated treatment volume in the planned sixth cohort will accommodate tumors of up to 4.5 centimeters, which should include the majority of tumor recurrences seen in glioblastoma. As per the protocol, we are also increasing the number of delivery catheters up to a planned maximum of four catheters per patient. In the last cohort, in two of the three patients, we actually used three catheters and that went very well. That's important because it permits us to target a variety of tumor shapes and locations within the brain. It's all about capturing the most number of patients possible that have recurrences. There have been no treatment or related adverse events observed thus far, and there appear to be early signals of efficacy in patients with adequate dosing in tumor coverage. Thus far, two patients with good tumor coverage have survived greater than 30 months versus a mean survival of nine months with the best available care. However, I must caution that this is not an efficacy trial. It's a safety dose escalation feasibility trial. We expanded enrollment activities, including those to increase trial awareness at the second trial site, and we hope to expand soon to site number three as mentioned. Now, as I mentioned on the last call, we are actively evaluating from a strategic perspective bringing forth additional clinical development programs for RNL outside of recurrent glioblastoma. The potential indications we are interested in developing today represent indications for RNL for which there is substantial preclinical information already published, and actually some of that can be found on our website, and we're happy to share that if you reach out to us. In particular, and by no means to limit the scope of our analysis, leptomeningeal carcinomatosis, peritoneal carcinoma, and recurrent head and neck cancer represent three promising potential indications with solid preclinical data already published. Each of these indications also is consistent with our previously stated portfolio investment strategy, namely to address an unmet or substantially underserved medical need; all three of those qualify combined with new and active pharmaceutical ingredients that have solid safety and efficacy information available with new delivery technologies that improve both safety and efficacy. Again, all three meet criteria. Third, we prefer that they have at least a $250 million annual addressable market opportunity. Again, all three boxes are checked there. Our plan is to complete this analysis and potentially move forward before the end of 2020 consistent with our previous guidance. Now, just a brief comment about our licensing activities in first out-licensing. We have initiated discussions with potential partners to discuss opportunities to help us expand RNL development more rapidly. Our preference with RNL is to keep the U.S. rights and seek partners internationally. Regarding our two other clinical stage assets, DocePLUS and DoxoPLUS, as previously mentioned, we plan to further their development only with partner support. We are and have been in such discussions, but our development focus is obviously centered on RNL and moving it rapidly forward. Additionally, we are committed to continuing a deliberate and disciplined outreach program geared to identify other possible strategic in-licensing candidates that either logically expand our drug pipeline or related technology capability. To our RNL transaction, I think that's a good example of what we are looking for. We look for technology that has good science, a good pedigree, is appropriately valued, and can be developed in a capital-efficient manner. For example, potentially utilizing development grants in the case of RNL, from the NIH, or potentially from the State of Texas, specifically the separate funding mechanism I mentioned before. So those comments complete, let's turn the call over to Andrew for reviewing the quarterly financials.

Andrew Sims, CFO

Thank you, Marc, and good afternoon, everyone. I'll be discussing Plus Therapeutics’ financial results for the second quarter of 2020 as presented in our earnings release today. For the six months ended June 30, 2020, our net cash used in operating activities was $2.9 million as compared to $4.4 million in 2019. Our Q2 2020 net cash used by operating activities was $1.4 million compared to cash used by operating activities of $1.2 million in Q2 2019. The overall reduction in cash burn for the six-month period was mainly related to discontinued operations, which resulted in reduced operating expenses. Net loss for Q2 2020 was $1.8 million as compared to a net loss of $9.1 million in Q2 2019. The decrease in the loss is mainly due to the approximate $7 million loss from discontinued operations in 2019, related to the Q2 2019 asset divestiture. Now, with respect to revenues, Q2 2020 total revenues are $0.2 million as compared to $0.3 million in Q2 2019. For the six months ended June 30, 2020 total revenues were $0.3 million as compared to $1 million in 2019. The decrease in revenues is due to the anticipated closeout of the BARDA contract. For research and development expenses, in Q2 2020, our research and development expenses were $0.3 million versus a $1.2 million expense in Q2 2019. For the six months ended June 30, 2020, R&D expenses were $1.2 million compared to $2.7 million in 2019. The decrease in research and development year-over-year spending was primarily attributed to the completion of the BARDA contract in 2019. Approximately $0.8 million was incurred in Q2 2020 relating to the in-license agreement with NanoTx. $0.4 million was paid in cash at the close in early May with the balance in stock. Now on to our sales and marketing, our sales and marketing expenses were approximately $0.1 million for both Q2 2020 and 2019 and $0.2 million for the six-month periods ended June 30, 2020 and 2019. G&A expense was $1.3 million for Q2 2020 as compared to $0.9 million in Q2 2019. For the six months ended June 30, 2020 and 2019, G&A expense was $2.8 million as compared to $2.2 million. The year-on-year increase reflects an increase in professional fees in Q2 relating to the recent in-licensing transaction. This increase was partially offset by a decrease in payroll and related expenses. Interest expense decreased in the six months to June 30, 2020 to $0.2 million from $0.6 million in the six months to June 30, 2019, reflecting the principal paydowns in 2019 and 2020. Turning to the balance sheet. As of June 30, 2020, we had $9.3 million of cash on hand and $4.3 million of debt principal. In April 2020, we amended our debt with Oxford, providing additional flexibility by pushing out the interest-only period through May 2021, together with a pay down to $5 million of principal. Our liability decreased to $10.6 million at June 30, 2020 as compared to $22 million at December 31, 2019. This decrease is primarily driven by two factors. The first was the $5 million pay down of the Oxford debt facility in April 2020. The second was the amendment and resulting reclassification of the warrant liability to stockholders' equity in Q2 2020 totaling $6.7 million. I’ll now turn it back to Marc.

Marc Hedrick, President and CEO

Thank you, Andrew. So to finish up before Q&A, I'd like to recap the progress toward our stated 2020 milestones. Our primary year-end goal is to complete enrollment of the dose-finding feasibility safety study for RNL, which we plan then to report that data and work to subsequently publish it in the medical literature. That goal is predicated on the assumption that cohort 6, following cohort 5's completion, is the last dosing cohort, which is a reasonable judgment at this point. To that end, we intend to begin treating patients at the planned new trial sites of UT Southwestern and ultimately MD Anderson. We will also continue to optimize the regulatory clinical program for RNL for glioblastoma, and at the appropriate point in time obtain FDA guidance on next steps, including development of a Phase 2 and/or pivotal study plan for glioblastoma. In parallel to the trial, our CMC team is in the process of substantially upgrading the supply chain for RNL as well as the manufacturing controls and capabilities of the product to late-stage clinical trial standards. It's actually our team that is manufacturing the liposomes for the current patients and the last patients with cohort 5. Soon, we intend to complete our internal review of additional indications for RNL and execute any required IND enabling studies required for clinical introduction. We're going to continue to be aggressive but highly disciplined in assessing new pipeline enhancement opportunities for the company. And we'll continue partnering discussions with the goal of finding strategic development partners for our RNL, DocePLUS, and DoxoPLUS programs. With that, I'll turn it over to the operator for any questions that might be in the queue.

Operator, Operator

Thank you. The floor is now open for questions. Our first question is from Robert LeBoyer with Ladenburg Thalmann.

Robert LeBoyer, Analyst

Good afternoon, and congratulations on the progress. My question was just partially answered by Dr. Hedrick. And I was going to ask if you were going to complete a sixth cohort of three patients, and any estimate of timing as to when that would be?

Marc Hedrick, President and CEO

Hey, Robert, thanks for participating. It's Marc. Yes, so the NIH protocol actually calls for eight cohorts and goes up to a total radiologic activity of about 41 gray. Right now we're substantially below that. However, we've increased it to a volume and to a dose, and it still appears to be safe with a nice safety margin. We believe that with the increase in dose and volume with cohort six we can cover the majority of recurrent tumors. So it’s a little bit of an issue of diminishing returns as to whether you continue to go on and push the dose and the volume higher. Our instinctive talking with our clinicians involved in the trial is that cohort six is probably the right number. The plan there would be we have to wait 30 days after the last patient in cohort five, and then we can begin to treat the first patient in cohort six. We will need to wait and just make sure that the higher volume and radiation dosage that the patient tolerates well. Then we can go on and complete the cohort, and indeed, the last cohort will involve a total of six patients. Considering our efforts to communicate the trial and recruit patients from around the country, we think that those efforts, plus adding additional sites, give us a good shot at completing that by the end of the year.

Robert LeBoyer, Analyst

Okay, great. Thank you very much.

Operator, Operator

[Operator Instructions]. Our next question is from Ed Woo with Ascendiant Capital.

Ed Woo, Analyst

Yes, thank you for taking my question. My question is more on opportunities right now. Obviously, there's a lot of disruption with COVID going on. Have you seen increased opportunity for you to evaluate new products, or has it been shut down?

Marc Hedrick, President and CEO

Hey Ed, from the perspective of RNL for glioblastoma, with the exception of very early on when we were just uncertain how the hospitals would look at this and our ability to take over the trial having just closed a recent transaction, we weren't really sure. But as I mentioned, it really doesn't affect us as it relates to the glioblastoma trial. Regarding the additional indications related to RNL, again, I don't see an issue there. Related to looking at other assets, I think the only issue is that now everything's done virtually. Up front there was a kind of awkward transition between what everybody was used to in business development activities to the new world, and it really is a new world. But we're seeing continued opportunities out there in our sweet spot. We're continuing those discussions and we're evaluating those in the context of where other places we might put capital. Right now I don't see much of a difference, other than where we're doing it differently, and we're not meeting in person or meeting online.

Ed Woo, Analyst

Great. And then, my question is obviously about opening additional sites in Texas to conduct the study. Texas is one of the hotspots for COVID right now. Do you see any impact or is it manageable?

Marc Hedrick, President and CEO

Yes, good question. We were concerned upfront, but what we're hearing from both of our two sites, San Antonio and UT Southwestern, is this is an essential activity. These patients are desperate as you know, they're going to die without intervention. It's inevitable. So they are prioritized. There have been no delays that we see. In fact, closing this relatively recently, the fact that we have two patients in, we've got a trial website up and running, and we're getting inbound requests for people to stay in the trial. We're handing those off to the two institutions. We just don't see a delay there. We're feeling pretty confident that COVID won't affect our ability to fully enroll this trial for Phase 1.

Ed Woo, Analyst

Great. That's really good to hear. Thank you for answering my questions, and good luck.

Marc Hedrick, President and CEO

Thanks, Ed.

Operator, Operator

Our next question is from Mr. Emad Samad with WBB.

Emad Samad, Analyst

Hey Marc, thanks for taking the call. I have a question. You mentioned something about evaluating other programs to launch with the RNL program. How quickly does the separate funding come into play? And how soon does it come into play as you're making that evaluation? Could you just talk about that a little bit so we understand how that funding comes through and how much it could potentially offset it?

Marc Hedrick, President and CEO

Yes, good question. That separate funding is still a little bit up in the air. We're waiting for word any minute about changes to the funding cycle. Typically, they would take grants around this time every year for the two funding cycles. We would potentially receive funding from that at the first of the year. My guess is that's going to get pushed off because we haven't heard anything in the last few days. So we'll see. That funding has already been approved by the voters, and I don't anticipate it going away. I think there have been some logistical challenges in Texas related to CPRIT. CPRIT will fund preclinical or clinical studies, up to Phase 2 and up to $20 million. We think that there's an opportunity to seek funding for further RNL development for recurrent glioblastoma, irrespective of the NCI funding that we have today, but also funding to bring the additional RNL assets into the clinic. As I mentioned, CPRIT had previously funded the RNL program and helped get it off the ground. They have already seen a positive impact from that funding by virtue of the fact that it's gotten funding and now is heading towards the next clinical step and appears to be a promising therapy. I think RNL for other indications has some opportunity to be funded. Our plan is to file every cycle. One important reason for relocating Texas around our San Antonio facility is that we can take full advantage of that, and we think there's an enormous opportunity there. We're actually getting inbound calls from companies not in Texas but looking for potential partners to work together to access the available funding in Texas. So, bottom line, the timing is up in the air, but we don't see that funding source going away or being carved back.

Emad Samad, Analyst

Okay. Thank you for that clarity.

Operator, Operator

There are no further questions at this time. Dr. Hedrick, I’ll now turn the call back over to you for closing remarks.

Marc Hedrick, President and CEO

Great, thank you, Erica. To close, I'd like to thank everybody for joining us on the call today. I'd like to take a moment to specifically point you to our new clinical trial website at www.respect-trials.com. Much more information can be found at our corporate website plustherapeutics.com, and in our LinkedIn, Twitter, and other social media sites. As always, on behalf of the board, management, and employees, thank you for your support of the company and have a good evening. Thank you, Erica.

Operator, Operator

Thank you. This does conclude today's conference call. Please disconnect your lines at this time and have a wonderful day.