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Operator
Greetings, ladies and gentlemen, and welcome to the security release of first quarter 2021 financial results. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. Should anyone require operator assistance, please press star zero on your telephone keypad. It is now my pleasure to introduce your host, Mr. Robert Uhl with Westwick Investor Relations. Thank you, sir. You may begin.
Robert Uhl
Thank you, Operator. Good afternoon, everyone, and welcome to Cellcuity's first quarter 2021 financial results webcast and conference call. Thank you for joining us. Earlier today, Cellcuity released financial results for the first quarter ended March 31, 2021. The press release can be found on the Investors section of our website. Joining me on the call today are Brian Sullivan, Cellcuity's Chief Executive Officer and Co-Founder, and Vicki Hahn, Chief Financial Officer. 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. With that, I'd like to turn the call over to Brian Sullivan, Salcuity's CEO.
Cellcuity
Thank you, Robert. Good afternoon, everyone, and thank you for joining us today. As always, we appreciate your continued support of Cellcuity. On this call, we'll update you on our first quarter results and other business activities, focusing in particular on our strategic licensing agreement with Pfizer to develop and commercialize gadadalicid, recently reported encouraging clinical trial data for gadadalicid, and an update on our clinical trial collaborations. Vicky will follow up my comments with a discussion of our financial results, and then we'll open up the line for questions. We have had a few busy months recently. We entered into a worldwide exclusive license agreement with Pfizer to develop and commercialize gadadalicid, the first-in-class PI3K mTOR inhibitor. We raised approximately $43 million in equity and debt. We signed clinical trial collaborations with Novartis, Pfizer, and PUMA. And we presented compelling clinical and non-clinical data for gadadalicid. Obtaining the exclusive license for gadadalicid from Pfizer as a transformational strategic step for cell acuity. Taking on the responsibility for the clinical development of a targeted therapy builds off the research we've conducted over the past few years using our Cell Signia platform. Our unique ability to assess the dynamic activity of signaling pathways in live patient tumor cells gives us proprietary insights into cancer drivers not available for molecular assessments. Our research to identify various breast cancer disease mechanisms led us to focus on one of the most complex pathways linked to breast cancer, PI3K mTOR. Our findings revealed that many breast cancer tumors have dysregulated PI3K pathways despite lacking PI3K alpha mutations. Our research also found evidence of the importance of inhibiting all class one PI3K isoforms in patients with PI3K alpha mutations. We subsequently evaluated various PI3K inhibitors using our CellSignia platform in live patient tumor cells and found that gadadalus's unique mechanism of action was potentially ideally suited to inhibit PI3K mTOR-involved signaling. Ultimately, our internal research findings and the clinical data Pfizer generated in a trial evaluating patients with ER-positive HER2-negative metastatic breast cancer motivated us to enlicense gadadalicib. Under the terms of the licensing agreement, Pfizer granted Selcuity an exclusive worldwide license to develop and commercialize gadadalicib. Salcuity paid a license fee of $5 million cash and $5 million of Salcuity's common stock as upfront payments. Pfizer is also eligible to receive up to $330 million of back-end loaded development and sales-based milestone payments and to receive additional tiered royalties on potential sales. In early April, Salcuity also announced preliminary data for the 103 patients enrolled in the expansion portion of an ongoing Phase Ib clinical trial evaluating gadadalizib in combination with the CDK4-6 inhibitor Ibrans and an endocrine therapy. Preliminary analysis of the efficacy and safety data as of a January 11, 2021 cutoff date found that 53 of the 88 evaluable patients, or 60%, had an objective response and that 66 of the 88 evaluable patients, or 75%, had a clinical benefit. The safety analysis found that gadadalizib was also generally well tolerated with the majority of treatment-related adverse events, or TRAEs, being grade 1 or grade 2. The most common grade 3 or grade 4 TRAEs related to gedadolizib were stomatitis and rash. Gedadolizib was also found in this study to induce a far lower rate of grade 3 or 4 hyperglycemia than other PI3K inhibitors that target the PI3K alpha isoform. Amongst all patients enrolled in the Phase 1B trial, Only 7% had grade 3 or 4 hyperglycemia. This is in sharp contrast to opalypsib, PI3K-alpha targeted therapy approved for breast cancer, where 39% of patients in a phase 3 trial recorded grade 3 or grade 4 hyperglycemia. Our next step is to meet with the FDA to discuss our clinical development study plans for gadadilisib. Subject to the FDA's feedback, we would then initiate a phase 2-3 clinical trial evaluating gadatalysib in combination with public cyclob and an endocrine therapy in patients with ER-positive, HER2-negative metastatic breast cancer in the first half of 2022. Additionally, in April, we presented results of studies evaluating gadatalysib, inovilisib, the PI3K-ALF inhibitor, and the viticlax, a BCL inhibitor, in breast and ovarian patient tumors at the annual meeting of the American Association for Cancer Research. The results showed that inhibition of hyperactive PI3K mTOR-involved signaling is nine times more effective with gadadilisib than with the PI3K alpha inhibitor alone, such as inovilisib. Our data also showed the synergistic cooperation between PI3K mTOR and BCL signaling was detectable, suggesting potential patient benefit of combining gadadilisib with a BCL inhibitor. These results supported our internal evaluation of gadadilisib and further revealed the potential advantage of inhibiting all PI3K isoforms and mTOR, not just PI3K alpha signaling, when treating PI3K-involved signaling tumors. We also made significant progress advancing development of our CellSignia companion diagnostics. CellSignia is a third-generation diagnostic platform that identifies the underlying cellular activity, dysregulated pathway signaling, in a patient's tumor so that a matching targeted therapy can be prescribed. Disradiated signaling is too complex for molecular tests to characterize in most cases. This gives us the unique opportunity to help pharmaceutical companies obtain new indications for their targeted therapies to treat the patients our Cell Signia tests are uniquely able to identify. To take the first step towards realizing this goal, we collaborate with pharmaceutical companies to evaluate the efficacy of their targeted therapies in patient populations selected by a Cell Signia pathway activity test. If successful, These collaborations would represent a critical step towards obtaining a new indication that expands the market for the evaluated targeted therapies. We continue to believe there is a significant unmet need for new therapeutic options for HER2-negative breast cancer patients. Our research suggests that many of these patients have an undiagnosed and untreated disease mechanism. We believe that Celsignia can identify the disease mechanism for roughly 25% to 35% of these patients and the targeted therapy most likely to benefit them. Our efforts in this area are gaining momentum And in the first quarter, we entered two new clinical trial collaborations. In January, as we previously announced, we entered into a collaboration with the Sarah Cannon Research Institute and Pfizer for a Phase II trial. The trial will evaluate the efficacy and safety of two Pfizer-targeted therapies, Vizimpro, which is a pan-HER inhibitor, and Zalcori, a CMED inhibitor, in patients with previously treated metastatic HER2-negative breast cancer selected with our cell-signia test. Patient enrollment is expected to begin in the third quarter of 2021 with interim results in the second half of 2022. In March, we entered into a clinical trial collaboration with MD Anderson, Novartis, and Puma Biotech to study a new drug regimen. The collaboration will evaluate the efficacy and safety of Novartis' targeted therapy to Brekta and Puma's Neuralynx in patients with metastatic HER2-negative breast cancer selected by the CellSignia platform. This is our second clinical trial to treat patients diagnosed with hyperactive HER2 and CMET signaling breast cancers with matching targeted therapies. We now have five clinical trial collaborations in place and we are proud to have advanced and finalized these agreements despite the headwinds from COVID-19. Our ongoing FACT I and FACT II trials are evaluating anti-HER2 therapies in early stage HER2 negative breast cancer patients. The goal of these trials is to demonstrate that breast cancer patients identified by our cell signia HER2 path reactivity test, obtain a higher rate of pathological complete response to new neoadjuvant anti-HER2 drug treatment than from current standard-of-care chemotherapies. Since patients who receive a pathological complete response to neoadjuvant drug treatment are less likely to have their cancer recur, we believe our self-significant test can play a significant role in extending the lives of many breast cancer patients. We continue to expect interim results from our FACT I and FACT II trials in late 2021 or early 2022, barring any unforeseen additional COVID-19-related disruptions. We're excited about these collaborations and the opportunity to work with some of the world's most prominent cancer research centers. We have additional collaboration discussions in progress, and our goal is to announce new agreements in the coming quarters. We're also looking forward to having the opportunity to collaborate with the clinical investigators that will be conducting these new trials through our collaboration agreements. They're highly respected oncology thought leaders and researchers, and we believe their interest in collaborating with us reflects their respect for the unique potential our cell-signia test offers to identify undiagnosed disease drivers in their patients. And finally, we recently closed two financings that resulted in gross proceeds of approximately $43 million. These financing strengthened our cash position and will allow us to fund key clinical development initiatives. Vicki will describe the financings in more detail in her remarks. So, Vicki, I'd like to turn now to you to review our financial results.
Robert
Thank you, Brian. Our first quarter net loss was $2.79 million, or 25 cents per share, compared to $2.25 million net loss, or 22 cents per share, for the first quarter of 2020. Because these quarterly net losses include a significant non-cash item, which is stock-based compensation, we also included in our press release non-GAAP-adjusted net loss for the quarter. Our non-GAAP-adjusted net loss was 2.34 million, or 21 cents per share, for the first quarter of 2021, compared to non-GAAP-adjusted net loss of 1.78 million, or 17 cents per share, for the first quarter of 2020. R&D expenses increased by approximately 0.39 million during the first quarter of 2021 compared to the first quarter of 2020 due to 0.06 million increase in compensation expense. In addition to that, other research and development expenses, 0.33 million due to clinical validation and laboratory studies and operational and business development activities. The approximately 0.09 million increase in G&A during the first quarter of 2021 compared to the first quarter of 2020 was primarily due to 0.08 million increase in professional fees associated with being a public company and director and officer insurance. We ended the quarter with approximately 34.9 million of cash and cash equivalents This includes the proceeds from a successful follow-on offering of nearly 2 million shares of common stock that raised gross proceeds of approximately 27.6 million. The net cash used in operating activities for the first quarter of 2021 was 2.52 million. This was a result of non-GAAP adjusted net loss of 2.34 million and 0.28 million of working capital changes in prepaid assets and accrued expenses offset by depreciation expense of 0.1 million. In April, we entered into a debt financing agreement with Innovata's Life Sciences Lending Fund One to provide up to 25 million in term loans with the first 15 million tranche funded at closing. we will be able to draw on two additional tranches of $5 million each upon the achievement of certain clinical trial and financing milestones. This coincided with the payment of an upfront license fee of $5 million in conjunction with the Pfizer-GAD Ellipsis License Agreement. Taking into account these two events subsequent to the end of the first quarter, we had approximately $44 million of cash on hand. And with that, I'll turn it back to Brian.
Cellcuity
Thank you, Vicki. So I'd like to just wrap up before we take questions. We're very excited about the progress we made over the past few months. The license of Gazad Alyssib creates a fantastic potential opportunity to create value for our shareholders. We're looking forward to updating you as we advance the program, and we also expect to close additional collaborations utilizing the CellSignia platform in the coming quarters. Operator, I'd like to now open up the call for questions.
Operator
Thank you. Ladies and gentlemen, if you'd like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys. One moment, please, while we poll for questions. Our first question comes from the line of Alex Novak with Craig Hallam Capital Group. Please proceed with your question.
Alex Novak
Great. Good afternoon, everyone. Brian, to actually pick up on that point that you just mentioned at the end there, so regarding the additional clinical trial collaborations that you would expect to announce later this year, can you just give any hints on what to expect there? Would you expect these trials or these collaborations to be, again, with an earlier or late-stage breast cancer, or would these be the first deals that move into a different cancer type?
Cellcuity
You know, we just haven't commented on what we expect, really, until we kind of are ready to announce, you know, the collaboration itself. But we're on track to announce a couple more, as we indicated.
Alex Novak
Okay. That's great. Understood. And then maybe just an update on all the trials. How is enrollment tracking with the FACT 1 and 2? It sounds like things are going pretty much in line with your expectations as the world starts to reopen here. And then where are you with beginning enrollment on the FACTS 3, 4, and 5? Is the trial site getting set up now? Is that the stage that you're currently in? Just any update there?
Cellcuity
Sure. So the FACTS 1 and 2 are kind of tracking to what we've described in the past. FACTS 3, which we announced in, or rather FACTS 4, it's a little confusing, which we announced in December, is farthest along. in getting ready to activate. We expect that to happen this quarter. FACTS III and V, which one was announced in January, one in March, will be on track for activating in the third quarter. All of those studies need to formally get final IRB and scientific committee review and, you know, filing of INDs with the FDA or IND documentation with the FDA. And so those things are happening as we expected.
Alex Novak
That's great. Just going back to the commentary on the press release today, your repair remarks, and then just going back through my notes a couple weeks ago on the get it, tell us a call, it looks like you now expect the next day to be a phase two and three pivotal report. And originally I thought it was just gonna be a phase two. So just curious if the thinking there on the clinical trial need changed in the past couple weeks?
Cellcuity
I think we've always positioned this as a phase two and three trial. And the implication of a phase three trial is that it's pivotal. I think I've just been using that word interchangeably with what the intent I described earlier. But we think the next step for us as I indicated, is to get feedback from the FDA. And if the feedback will help us sort through the final design of that trial. But we do think that there's a likelihood that we could position this study as a pivotal registrational study.
Alex Novak
That's great. And then since the announcement a couple weeks ago, and then going forward here, have you gotten any more inbounds from pharma? regarding about in-licensing other drugs, and then I guess a little bit of a follow-up to that question is, on the alternate side, is pharma reaching out to you, realizing what the potential of the psilocycline has, and clearly you are bringing a drug in internally, so you clearly believe that. So is that drawing any more attention from pharma wanting to do a collaboration?
Cellcuity
Well, I'll make sure to include you in our business development minutes from our meetings, Alex. No, I think two things. We're obviously very focused on preparing for the FDA meeting. There's quite a bit of work associated with transitioning good adolescent from Pfizer to us. There's a lot more to it than just signing an agreement. There's kind of a number of moving pieces, and that's all proceeding apace. As far as other activities, our immediate focus is to lay the groundwork for the next study for good adolescent. while also thinking through other potential indications that good adolescent may uniquely be able to investigate. And that could involve collaborations with other pharmaceutical companies. But as everybody knows, those types of collaborations can take a long time to you know, get explored and, you know, to get finalized. So, you know, we, again, it hasn't been our history to really provide too much detail on these discussions until we actually have something in hand. And I think that's what we'll continue to do going forward.
Alex Novak
Understood. That makes sense. And then just last question. Just any update on when you plan to publish the results from the Phase 1B in a journal or abstract?
Cellcuity
Our goal or intent, at least, is to be able to present the data at San Antonio Breast Cancer Symposium in December this year.
spk06
That's great. Thank you. Appreciate the update. Oh, you're welcome. Thank you.
Operator
Thank you. Our next question comes from the line of Yi Chen with HC Wainwright. Please proceed with your question.
Yi Chen
Hi, this is Bubal and dialing in for each end. Just real quick, how do you expect the R&D cost to evolve for the remainder of the year?
Cellcuity
We've provided guidance on our diagnostic related expenses, and I think we indicated that our net cash consumption would be roughly $2.5 to $3 million on that side of the business, and that the therapeutic side of the business would ramp over the next three quarters to roughly $4 million of expense that would take you to around the first quarter.
Yi Chen
Understood. What are your expectations from the upcoming phase two HER2-negative breast cancer trial with Sarah Cannon and Pfizer? And when do you expect to complete the enrollment process? And I'm curious why there is an extended period for the data readouts.
Cellcuity
On the trial with Sarah Cannon?
Yi Chen
Yeah.
Cellcuity
Well, it's a late stage trial, and the enrollment for trials like that, especially in a third line setting, so these are patients who failed a couple lines of therapy, can take a significant period of time. I think we're trying to be conservative in when we think these patients could be enrolled, and certainly if it happens faster, we would announce the results in line with that.
Yi Chen
Okay, that's it from me. Thank you.
Robert Uhl
Thank you.
Operator
Thank you. Our next question, excuse me, As a reminder, if you'd like to ask a question, please press star 1 on your telephone keypad. Our next question comes from the line of Matt Fitz with William Blair. Please proceed with your question.
Matt Fitz
Hi, Brian. Thanks for taking my question. Just, I guess, a little bit of a follow-up and to clarify wording. Do you envision a pivotal Phase 2 trial or a Phase 2 that has a transition to a Phase 3 after maybe some interim, like, safety run-in or... kind of ORR or something like that.
Cellcuity
Those are the types of questions that we'll be discussing with the FDA and so I'm wanting To communicate that we will be exploring different options with the FDA, that could include a pivotal study, but we want to get that feedback and understand kind of what the design implications would be. But we think it makes sense to consider a pivotal study, but we want to make sure we get the appropriate feedback before we commit to any particular design or approach.
Matt Fitz
Okay, yeah, that makes sense. And then I guess As far as timing for some of those additional indications, you guys showed some intriguing data with the HER2 biosimilar. You mentioned the in vitro trial. If that kind of just comes after you get this, I mean, you've got enough on your plate getting the pivotal trial kicked off, and then maybe after that we hear about some of the other opportunities.
Cellcuity
Exactly, I think in this case we wanna make sure we do the transition effectively and we wanna make sure we lay the groundwork for this study effectively and get it off the ground. But at the same time in the background, start to explore and think through some of the data that's been generated to date with gadadalizumab and other drugs that have explored PI3K inhibitors. We think that Adelizib has, as we've discussed, a unique mechanism that suits it well, particularly, potentially, for diseases that involve endocrine pathways. There's, I think, a strong suggestion about the linkage between the estrogen or endocrine pathways, CDK4-6 in the case of breast cancer and PFRK mTOR. There have also been suggestions in the literature about the involvement of PI3K mTOR pathway and other cancers that involve endocrine drivers. So those types of tumors would be the ones, areas that we would want to investigate internally and incorporate as we complete our analysis into future lifecycle development.
Matt Fitz
Great, makes sense. Thanks, Brian.
Cellcuity
Okay, thank you, Matt.
Operator
Thank you. Ladies and gentlemen, at this time there are no further questions. I would like to turn the floor back to Brian Sullivan for closing comments.
Cellcuity
Well, everyone, thank you for participating in our call. If you have additional questions, I'm happy to chat with you. I hope you have a good evening. Goodbye.
Operator
Thank you. Ladies and gentlemen, this concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
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