Delcath Systems, Inc.

Q3 2021 Earnings Conference Call

11/9/2021

spk00: Good day, ladies and gentlemen, and welcome to the DELCAS third quarter 2021 earnings call. At this time, all participants have been placed on a listen-only mode, and the floor will be open for questions and comments after the presentation. It is now my pleasure to turn the floor over to your host, James Carbonara. Sir, the floor is yours.
spk04: Thank you. And once again, welcome to DELCAS systems third quarter 2021 earnings call. With me on the call are Gerard Michel, Chief Executive Officer, Dr. Johnny John, Senior VP Medical Affairs and Clinical Development, Kevin Muir, VP Commercial Operations, John Purpura, Chief Operating Officer, and Christine Padula, Interim Principal Accounting 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 21A 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 materially from those expressed or implied in forward-looking statements due to various risks and uncertainties. For 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 earnings 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. Now, I would like to turn the call over to Gerard Michel. Gerard, please proceed.
spk09: Thank you, everyone, for joining today. Eight months ago, we announced that the Phase III focused trial of the Hepsado in patients with liver-dominant metastatic ophthalm melanoma had met its pre-specified endpoint based on an analysis of 87% of the patients. Specifically, in the trial, patients treated with Hepsado had an objective response rate of 29.2%, with a 95% competence interval lower bound of 20%. Given the magnitude by which the lower bound exceeded the 8.3% pre-specified threshold for success, the successful achievement of the primary endpoint could not change, regardless of the outcome of the 11 patients who had not yet been evaluated. Since that time, the clinical teams efforts have been focused on the key tasks required to enable the MBA submission. At this point, 97% of all data has been entered into the electronic database and we have monitored just over 90% of the data. Given the approximately one year pause in data entry and monitoring in 2018 due to company financial difficulties and the unexpected second year of the ongoing pandemic, I am very pleased with this progress. With that said, It is not where I had projected we would be when we started the year, and despite extraordinary and creative efforts by the team, COVID-related site access restrictions for both non-essential internal clinical trial staff and CRO monitors have caused timelines to slip. This has resulted in the delay in sharing the final efficacy data, which we now plan to release at the planned investor day on December 2nd. We are also altering our guidance on the resubmission of the NDA from late in the first quarter to mid-year. While I know investors will be disappointed in this delay, we want to maintain our plan for 100% monitoring and need adequate time for medical writing and quality control. If the FDA allows a rolling submission, we will start submitting the non-clinically related modules earlier in the first quarter. While the HPSADO's fast track status makes the filing eligible for a rolling submission, the FDA generally only accepts responses to CRLs when they are fully complete. Given the six-month BDUCA timeline for a Class 2 resubmission response to a CRL, a rolling submission might be viewed positively by the FDA in that it will give them more review time. This will be one of our questions addressed during the pre-NDA meeting, which we anticipate early in 2022. Our Expanded Access Protocol, or EAP, was submitted to the FDA in August and approved by the FDA in September. To date, five sites have indicated their intention to participate and include Moffitt Cancer Center, University of Tennessee, Duke University, Ohio State University, and Stanford University. We intend to steadily increase the number of sites participating in the EAP throughout 2022 to ensure there is a broad base of trained centers upon commercial launch. Since our last call, the results from a number of single and dual center investigator-initiated retrospective and prospective trials have been published. I would like to ask Dr. Johnny John to give a summary of these publications and presentations. Johnny?
spk10: Thank you, Gerard. In September, investigators from the Leiden University Medical Center in the Netherlands presented data from the Chopin Investigator-Initiated Trial at the 2021 Cardiovascular and Interventional Radiological Society of Europe. or CIRSE conference. The abstract included data from seven patients treated during the first phase of the trial, which is investigating the combination of PHB with ipilimumab and nivolumab in the treatment of patients with metastatic ocular melanoma. The trial has completed a dose escalation phase, and after a median follow-up of eight months, the observed responses in the seven patients were complete response in one patient and partial response in four patients, for an overall response rate of 71.4%. Stable disease was observed in one patient for a disease control rate of 85.7%. The median duration of response was eight months. Grade three and four adverse events most likely related to PHP included fever, neutropenia, inflammatory response, febrile neutropenia, and cholecystitis, one case each of these, and two cases of hypotension. Immune-related adverse events included myositis, two cases, hepatitis, two cases, and two cases of thyroiditis, which were all grade one or two in nature. No deaths and no dose-limiting toxicities occurred. We are very excited by this first trial investigating combination immunotherapy with PHP. Combination therapy is a logical area to investigate, and we intend to both sponsor and support trials investigating the use of PHP in combination with other agents. Particularly intriguing is the use with immuno-oncology agents, given that the efficacy of those agents become greatly diminished in the presence of liver metastases. A second publication, also from the CIRSE conference, presented the results of a multicenter retrospective study, which included 102 metastatic ocular melanoma patients treated with PHP at Leiden University Medical Center in the Netherlands, Asclepios Clinic Barmbek in Hamburg, Germany, and the Hanover Medical School in Hanover, Germany. Complete response was seen in five patients and partial response in 55 patients for an objective response rate of 58.8%. Stable disease was seen in 31 patients for a disease control rate of 89.2%. Median overall survival was 20 months. Hematological toxicity was the most common adverse event with 26% being grade three or four and was self-limiting in most cases. There was one reported procedure-related mortality in which a patient developed sepsis after the procedure and subsequently succumbed to the infection. A multivariable analysis was performed, which showed that patient age, treatment type of the primary tumor, tumor load, and number of PHP procedures were significantly correlated with overall survival, a p-value of less than 0.05. A third abstract that was published at the CIRSE conference was based on 81 patients treated at the University Hospital Southampton in the UK with a total of 250 PHB treatments. The median number of treatments per patient was three. The overall response rate was 60.5% with a median progression-free survival of 8.4 months and median overall survival of 14.9 months. 43 grade 3 or 4 treatment-related adverse events occurred in approximately 28% of the patients. It is noteworthy that there was a significant reduction in such events between procedures performed between 2012 and 2016 versus 2016 to 2020, a difference of 0.90 per patient versus 0.17 per patient, and a p-value of 0.001. There were no treatment-related deaths. While none of these were RCTs and from a regulatory perspective are thus only supporting evidence taken together with the previous publications from Europe and the focus trial data, the totality of the data supports that PHB can safely be administered multiple times and the majority of patients treated receive clinical benefit given the consistently high disease control rates. In addition, while the patient numbers are small, the evidence to date supports that PHP can produce a response across a number of tumor types. I'll now hand the call back to Gerard.
spk09: Thank you, Johnny. We look forward to increasing our efforts to support more investigator-initiated trials as well as launch additional sponsored studies in other tumor types. As previously announced, we have decided to launch sponsored trials in both intrahepatic cholangiocarcinoma and colorectal cancer and we'll give further details on that at our upcoming investor day. We believe that there is a role for Hepsado in multiple tumor types, both as a standalone therapy and in combination with other treatments for both radiologically evident liver metastases and in the adjuvant setting in patients at high risk for liver metastases. Turning to commercial preparation, we continue our prelaunch planning along several fronts. While we are well into the development of our global value dossier, an important tool for discussions with payers, we are confident that we will be starting from an advantageous position with payers, given that we believe we are already incorporated into NCCN guidelines for the treatment of metastatic ocular melanoma. Specifically, the guidelines include regional isolation perfusion of the liver. This is due to the strong efficacy data generated by a number of institutions over more than two decades related to the use of isolated hepatic perfusion, or IHP, and the treatment of metastatic osteomelanoma. Recall that percutaneous hepatic perfusion, THP, is a minimally invasive procedure designed to enable the same level of liver perfusion as IHP, but without the surgical morbidity and mortality associated with IHP. Being consistent with existing treatment guidelines should greatly accelerate both clinical adoption and payer support. We are starting to access de-identified longitudinal patient data to better understand patient referral patterns. We will be able to test the utility of this data as our medical affairs group seeks out and informs referring physicians about the availability of Hubsado EAP sites in 2022. While we are likely about a year away from hiring a sales force, we are also using this longitudinal data to start mapping territories. Turning to Europe, as we previously disclosed via an AK filing, On October 12, we issued a notice of termination to MEDAC with a six-month notice period. On October 27, 2021, MEDAC notified the company that it disputed the company's right to terminate the license agreement and threatened to claim damages from the company should it fail to withdraw its notice of termination of the license agreement. We may well need to arbitrate the issue. When material developments occur, we will make appropriate public disclosures, given the material nature of the contract, But my ability to comment beyond this at this time is limited. In the interim, I do believe that despite our differences on this matter, both companies will ensure that the availability of chemo set to patients is not disrupted. When I joined DelCap, the company was comprised of a small team of just 35 dedicated professionals, an extraordinarily small number for a company running a multinational phase three trial and producing commercial product for sale in Europe. Years of resource limitations have both led delays in the FOCUS trial and had prevented the team from expanding to the point where high-value new indications could be explored. Since the start of the year, we have been steadily recruiting additional talent to complete the FOCUS trial, prepare the NDA resubmission, and plan for the launch of HBSADO and start taking the initial steps to expand our development efforts into new indications. I am pleased that despite the very tight job market, in the past year we have grown headcount by 40%. To highlight just one new executive from this past quarter, we have started building our U.S. medical affairs team with the hire of Dr. Michael Uheg. Michael is an experienced medical affairs professional who developed BTG Interventional Oncology's field medical team supporting North America and Latin America. His experience from the launch and growth of the interventional oncology product TheraSphere is a perfect fit for DELCAP. We have also made key VP and director level hires in regulatory and clinical operations. all with significant experience in oncology drug development and oncology regulatory submissions. In August, we strengthened our balance sheet by entering a deaf facility with Avid Adventure Opportunities Fund, providing up to $20 million with an initial of $15 million funded at close. Taken together, the added capital and new senior team members provide the required resources to accomplish our development, regulatory, and commercialization goals. On December 2nd, we will be hosting a major KOL event, which will feature physicians discussing percutaneous hepatic perfusion, updated focused trial data, including overall survival, and the role of hep-SADO as a potential treatment for patients with hepatic-dominant metastatic osteomelanoma. Additionally, physicians will discuss the large unmet need in liver metastases in general, the potential utility of hep-SADO in treating colorectal cancer and interhepatic laryngeal carcinoma, as well as related clinical development strategies. We expect to have at least six KOLs presenting on the various topics. To state the obvious, commercialization and expansion of HEP-SATO are critical value drivers for DELCAT. The ability to hear from these KOLs on the commercialization and expansion prospects for HEP-SATO should be enormously useful to investors. In summary, this past quarter we've taken important steps towards commercialization of our PHP system in our initial indication and expansion into new areas. We have brought in key funding personnel and continue to be supported by a growing body of data. as demonstrated by the three papers of SIRSI and the publication of the journal Cardiovascular and Interventional Radiology. I look forward to taking questions, but first we'll turn the call over to Christine to review the financials. Christine?
spk01: Thank you, Gerard. Our product revenue for the three months ended September 30th, 2021 was approximately $522,000 compared to the $466,000 for the prior year period. of our sales of chemosat procedures in Europe. Selling general and administrative expenses were approximately $4 million for the current year quarter compared to $2 million for the prior year quarter. And our research and development expenses were $3 million compared to $3.3 million in the prior year quarter. Overall, our total operating expenses for the quarter were $7 million compared to $5.3 million in the prior year quarter. The expenses for the quarter included approximately $2.5 million of stock option expense compared to no stock option expense in the prior year quarter. The company recorded a net loss of $7.1 million for the three months ended September 30, 2021, compared to the net loss of $5 million for the same period in 2020. On September 30, 2021, we had total cash which includes cash, cash equivalents and restricted cash of 29 million as compared to total cash of 11.1 million at the end of September 30th, 2021. During the three months ended September 30th, 2021 and September 30th, 2020, we use 16.2 million and 17.8 million of cash respectively in our operating activities. On August 6, we closed a $20 million venture debt financing transaction with Avenue Venture Fund, Opportunities Fund. The initial tranche of the loan is $15 million, including $4 million, which has been funded into a restricted account and will be released upon achievement of certain milestones. The company may request an additional $5 million of gross proceeds by October 1, 2022, between October 1st, 2022 and December 31st, 2022, which will be funded at Avenue Ventures Fund discretion. That concludes my financial remarks, and I now ask the operator to open the phone lines for Q&A. Can you please check for questions?
spk00: Ladies and gentlemen, the floor is now open for questions. If you have any questions or comments, please press star one on your phone at this time. We ask that while posing your question, you please pick up your handset if listening on speakerphone to provide optimum sound quality. Please hold while we poll for questions. Your first question for today is coming from Marie Theiboldt. Please announce your affiliation, then pose your question.
spk03: Hi, yes, this is from BTID. Thank you for taking the questions. I wanted to ask my first question here on the focus update that we'll hear on December 2nd. So I just want to confirm, will that be the full data that you're expecting to submit to FDA, or will there still be some data that we're waiting on there? And then secondly, on the FDA process, Could you repeat for me sort of what the FDA will be considering and whether they can accept a rolling submission versus choosing not to accept a rolling submission? And will some of the European data that was reviewed today, will some of that be included in the FDA submission? Thank you.
spk09: Sure. All the efficacy data we will present at the upcoming KOL day will essentially be final data. You know, there is some data that still needs to be monitored, some small amounts of data that need to be put into the database still, but none of that will impact any of the efficacy parameters that we show, nor should have a material impact on any of the safety parameters. So, what you see, what we intend to present to you will be consistent with what we will present to the FDA. In terms of the rolling submission, as I mentioned in my remarks, Under fast track status, which we have from many years ago, we are allowed to do a rolling submission. However, in another part of the regulations, it says that responses to CRLs should not be submitted until they are complete. Now, in this case, we're essentially submitting a whole new trial. It's essentially similar to a whole new NDA, so it's kind of a unique situation. So what we're going to do is just talk to the FDA at our pre-NDA meeting and propose to them that we do a roll-in submission, which would give them more time without the PDUFA clock starting. So I would think they'd be interested in that, but we'll see.
spk03: And then on the European data?
spk09: Yeah, the European data. Yeah, all those publications will be referenced or part of the NDA, but it's simply supportive. The FDA doesn't consider that as part of the efficacy analysis, but it is important. With the number of publications out there, it certainly is going to be helpful, but it's categorized as supportive.
spk03: Okay, that's really helpful. Thank you, Gerard. I'll use my follow-up here on the expanded access. Where are you with that? I know that you said five sites have agreed to join. Have they been allowed to start operating under that EAP? I don't know if we've gotten the clearance from the FDA on that front. And thank you again.
spk09: Yeah, we've gotten the clearance out. I'll ask Johnny to give a little bit more color about where we are in that process with those sites.
spk10: Sure, Gerard. So, as the Gerard just said, we have received full clearance from the FDA for our protocol and documents we submitted for the EAP study. We're at various stages with these five sites. Some of them we're expecting to open very quickly with just waiting for the IRB approval to come through. Some of them have gone through a scientific review committee and it's been submitted to the IRB. So we've passed certain hurdles at the site, but we're waiting for the final approval to come through. And in certain cases, we are still negotiating contract and budget language with the site. It's at various stages, but we're hoping to have the first site up and running and ready to enroll patients in the coming month.
spk07: Thank you again.
spk00: Your next question is coming from Scott Henry. Please announce your affiliation, then pose your question.
spk06: Roth Capital. Thank you and good morning. Just a couple questions. First, in the past, At least with 87% of the data, you've expressed perhaps some optimism in the survival benefit. I don't think we're looking for statistical significance, but more of a point estimate in favor of the treatment. Do you have any new information on the survival data at this point, or is that still unblinded? I look forward to hearing the full data December 2nd.
spk09: Yeah, I think I've tried to stay away from the precise number. I'll just simply say, you know, the confidence level I had before has remained unchanged. Given the strong, strong benefit we saw on PFS, as well as, you know, even the studies that came in recently in terms of OS, you know, I'm very confident that we will show a strong, strong advantage. I doubt statistical significance could be achieved just given the size of that I compared her arm. Again, I turned it into a single-arm trial, as everyone knows. But the single arm and the comparative arm, which was terminated, is rather small. So that would be quite a hill to climb. But I'm as confident as I was before that we should show a significant, I shouldn't say significant, it's statistical, but we should show a meaningful advantage.
spk06: Okay, great. Thank you for that color. That's helpful. And then when we think about Timeline of FDA approval, uh, obviously a lot of variables to, to figure out, including whether, you know, you can get some of the data in the rolling submission. Uh, is it reasonable to target the end of 2022 or, uh, is it, is that aggressive?
spk09: No, I think that, that, that, that, that's it. Look, if the FDA meets its PDUFA requirements, um, 20, we will meet 2022. To help them meet their Purdue requirements, we'd like to give them a rolling submission. And, you know, to be blunt, you know, if the FDA gets squeezed, you know, they succumb to human nature like we all do. It's a lot easier to find something to put another CRL out there, whether it's CMC or something else. And I'm not hinting at anything. So we don't want them to feel like they're backs against the wall to meet their Purdue timeline. And that's the primary reason we're going to offer rolling submission because we can get most of this in before the clinical module is ready. So I think it would be both, you know, both their interests and our interests to essentially extend the PDUPA clock by giving them, you know, pieces of it early.
spk06: Okay. Thank you for that caller. And then with the Chopin trial for the combination therapy, What would be the next steps to evaluate that? Johnny, you want to comment on that, please?
spk10: Sure. So as mentioned, the abstract was talking about their dose escalation phase, phase one of the trial. We have moved into phase two, which is a randomized portion of the trial. So that is continuing, and we have patients being treated on an ongoing basis in that So the next step would be to complete the phase two, which is the randomized portion. They may be presenting some data as we go through this second phase at some future conference, but we look forward to getting the full data set from the phase two, which is ongoing at the time.
spk06: Okay, great. Final question, just on the model. How should we think about the interest expense line going forward on a quarterly basis. Sometimes there's some accounting nuances there. Just any sort of target we should think about on that. Did you say interest expenses or a little broke up? Yes, interest expense, correct.
spk09: I think it should be fairly consistent, but Chris, do you want to confirm that?
spk01: Yeah, Gerard, it will be very consistent based on the Avenue venture. So we have 15 months of interest only, and then we start doing interest in principle. So, yeah, quarterly it should be relatively a flat line.
spk06: Okay, great. Thank you for taking the questions. Thank you.
spk00: Your next question is coming from Yael Jen. Please announce your affiliation, then pose your question.
spk05: Thanks for taking the question from Lelo and company. My first question is that before now to the time you're presenting the data in December 2nd, what might be the gating factors that you still need to complete to, yeah, that would be my first question.
spk09: Yeah, in terms of the actual data itself, I don't see any gating factors. There's work to be done, but, you know, assuming our CRO, you know, meets their timelines, which I think they will, because the statistical analysis is primarily done by them and then has to run through their QC process. I think we have plenty of, you know, plenty of buffer. I think the more, not gating item, but I think that the question is more along how mature will you know, clinical trial designs be what we present for CRC and ICC. You know, right now we have a number of, you know, solid outlines and we're having ongoing discussions. I didn't want to hold up the investor day for, you know, when we had final design signed off, et cetera. So that's the thing that's maturing, you know, as the weeks tick on. But in terms of the data itself, from focus, there really is no gating item.
spk05: Okay, great. That's very helpful. And as you were talking about the potential rolling submission that one element of that is a CMC module, would you be able to comment on what the status of that and any more colors on that?
spk09: Yeah. Why don't I have John Papar, our COO, respond to that.
spk08: George, thank you. Hello, Yale. So, yes, so the ongoing work rolling up the CMC module has been ongoing, and it'll be the subject of one of the first modules that we could submit to FDA along with non-clinical data from, say, Module 4. So, those would be our two targets if FDA would agree to rolling submissions.
spk09: And in terms of the ongoing work we have right now, you know, I think everything we have to get done for CMC should be done by the end of this year, you know, maybe a little later. But I think basically, I think by the time we have the pre-NDA meeting, we will be in a position to submit two of the modules. So if the FDA is, you know, okay with that, we'll get moving right away on submitting those two.
spk05: So we should consider, the last question is that, so we should consider that the meeting, pre-NDA meeting with FDA could be first quarter of this year or next year, I should say.
spk09: Yeah, sometime within the first two months of 2022.
spk05: Okay, great, and congrats to finish this milestone, and congrats.
spk07: Thank you very much.
spk00: There are no more questions in queue.
spk09: Okay, well, thank you all for your time and attention. We look forward to sharing another update in actually less than a month at the Investor Day on both the focused trial data and our plans for further clinical development into additional areas of high unmet need. Again, thank you for your participation, and have a great day.
spk00: Thank you, ladies and gentlemen. This does conclude today's conference call. You may disconnect your phone lines at this time, and have a wonderful day. Thank you for your participation.
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