Delcath Systems, Inc.

Good day and welcome to the Delcat Systems first quarter fiscal year 2024 financial results conference call. All participants will be in the listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on a touchstone phone. To withdraw your question, please press star, then two. Please note that this event is being recorded. I would now like to turn the conference over to David Hoffman, Delcat General Counsel. Please go ahead.

Thank you. And once again, welcome to Delcat Systems' 2024 First Quarter Earnings and Business Highlights Call. With me on the call are Gerard Michel, Chief Executive Officer, Sandra Pinnell, Senior Vice President of Finance, Kevin Muir, General Manager, Interventional Oncology, Boyo Vukovic, Chief Medical Officer, and Martha Rook, Chief Operating Officer. I'd like to begin the call by reading the Safe Harbor Statement. This statement is made pursuant to the Safe Harbor for Forward Looking Statements described in the Private Securities Litigation Reform Act of 1995. All statements made on this call with the exception of historical facts, may be considered forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Although the company believes that expectations and assumptions reflected in these forward-looking statements are reasonable, it makes no assurance that such expectations will prove to have been correct. Actual results may differ materially from those expressed or implied in forward-looking statements due to various risks and uncertainties. For a discussion of such risks and uncertainties, which could cause actual results to differ from those expected or implied in the forward-looking statements, Please see risk factors detailed in the company's annual report on Form 10-K. Those contained in subsequently filed quarterly reports on Form 10-Q, as well as in other reports that the company files from time to time with the Securities and Exchange Commission. Any forward-looking statements included in this call are made only as of the date of this call. We do not undertake any obligation to update or supplement any forward-looking statements to reflect subsequent knowledge, events, or circumstances. Now, I would like to turn the call over to Gerard Michel. Gerard, please proceed.

Thank you, everyone, for joining today. This is the first quarter DeltCath is reporting U.S. revenue, a significant milestone for the company. In the first quarter, revenue from our sales of Hepsado increased was $2 million and for Chemosat, $1.1 million. Given the March start for three of the four U.S. centers active in the first quarter and the temporary use of product sampling for some of the initial proctored cases, the $2 million in U.S. revenue was predominantly generated by treatments at Moffitt, with the balance of the other three centers activated in the first quarter starting to generate consistent revenue in the second quarter. As we have discussed in prior calls, the pace of revenue growth in the short to medium term will be determined by the rate at which we can train and activate new treating centers. Since our launch in January and in the seven weeks since our recent fourth quarter call, we have made steady progress in expanding the number of centers we are engaged with and actively training. We ended the first quarter with four active sites, Moffitt Cancer Center, Stanford University Cancer Center, Thomas Jefferson University, and the University of Wisconsin. As of today, there are six active treating centers, with the University of Tennessee and the UCLA Cancer Center having recently conducted their first commercial treatments. A further five centers have completed the necessary steps to conduct their first commercial treatment under the guidance of a proctor once hospital formulary committee approval is obtained and are in the process of identifying and scheduling their first patients for treatment with Hepsado. In total, there are 11 centers, an increase of two from our last call, currently accepting patient referrals and listed on our healthcare setting locator. Beyond those 11 centers, another seven centers currently have preceptorship scheduled or are partway through the preceptorship training. To date, we have had over 100 perfusionists, Anesthesiologists and interventional radiologists attend preceptorships representing over 20 institutions in the US, with some institutions sending multiple healthcare providers for the same specialty. As a reminder, the entire process from initially scheduling a preceptor shift to activation can take approximately three months. Given the significant level of commitment required from healthcare providers to become fully trained and certified under the REMS program, we believe all the healthcare providers and the cancer centers involved to date intend to incorporate Hepsado as a core part of their treatment regime for metastatic uveal melanoma patients. We continue to expand the number of centers with which we are engaging, with over 30 centers now somewhere in the process from preliminary discussions regarding the steps required to become a treating center to actively treating patients. There has been a definite increase in interest, partially due to physicians and treating centers sharing their experience with physicians at other centers which are not yet involved. There's certainly a component of what I might characterize as informal and independent peer-to-peer engagement occurring. In addition, increased interest can also be attributed to our permanent and product-specific J-code becoming effective on April 1st. While we are aware that hospitals have successfully been reimbursed for the treatment using miscellaneous C-code prior to April 1st, the establishment of the permanent J-code has definitely simplified the reimbursement process and the willingness of formulary committees to approve the use of Hepstato. We believe we are on track to have 20 active centers by the end of 2024. The approximate anticipated pacing of center activation remains at 10 active centers by the end of the second quarter, 15 by the end of the third quarter, and 20 treating centers by year end. Our projected average treatments per center remains at approximately one per month, ramping to a run rate of approximately one and a half treatments per month by mid-year, and then reaching a run rate of two treatments per month late in the fourth quarter. It is important to note that given our expected ramp for both treatment for center volume and center activation, we should achieve $10 million in U.S. quarterly revenue in 2024, which will likely result in $25 million of cash proceeds from the exercise of the final tranche of warrants issued as part of our March 2023 financing. Sandra will share additional details on our finances in a moment. but I want to highlight that our effective gross margin in the first quarter was approximately 60%, despite the modest initial volume. In addition to the significant commercial activity, we continue to support both internal and external efforts to add to a growing body of evidence that the PHP procedure is an important treatment option for patients with liver-dominant uveal melanoma. as well as potentially other liver-dominant cancers. Recently, we announced the publication of results from the pivotal Phase III focused study of Hepsado in patients with unresectable metastatic uveal melanoma in the journal's Annals of Surgical Oncology. As previously disclosed at ASCO, the publication reported a statistically significantly higher overall response rate of 36.3% for Hepsado versus 5.5 percent from a meta-analysis of historical controls. Other efficacy endpoints include a 70 percent complete response rate with a 73.6 percent disease control rate. In addition, results from the early randomized stage of the FOCUS trial, which was initiated as a randomized two-arm trial but completed as a single-arm study, will be presented at a poster session at the upcoming ASCO Annual Meeting in Chicago. Later in the year, we expect also to publish an expanded analysis of various patient subpopulations in a peer-reviewed journal. Liver-dominant metastatic disease is a significant therapeutic challenge in an area of high unmet medical need for many solid tumor types. To support additional clinical development in some of these areas, it is important for the company to build a strong commercial foundation in metastatic uveal melanoma in the U.S. both for purposes of funding trials as well as creating a network of treating centers. We are well on our way to accomplishing this. While the interest level from interventional rating... 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