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Edited Transcript of CLSN earnings conference call or presentation 26-Mar-20 3:00pm GMT

Q4 2019 Celsion Corp Earnings Call

COLUMBIA Apr 4, 2020 (Thomson StreetEvents) -- Edited Transcript of Celsion Corp earnings conference call or presentation Thursday, March 26, 2020 at 3:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Jeffrey W. Church

Celsion Corporation - CFO, Executive VP & Corporate Secretary

* Michael H. Tardugno

Celsion Corporation - Executive Chairman, President & CEO

* Nicholas Borys

Celsion Corporation - Executive VP & Chief Medical Officer

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Conference Call Participants

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* Hartaj Singh

Oppenheimer & Co. Inc., Research Division - Research Analyst

* Jason Howard Kolbert

Dawson James Securities, Inc., Research Division - Director of Research

* Kumaraguru Raja

Brookline Capital Markets, LLC, Research Division - Director & Senior Biotechnology Analyst

* Matthew David Cross

JonesTrading Institutional Services, LLC, Research Division - Research Analyst

* Kim Sutton Golodetz

Lippert/Heilshorn & Associates, Inc. - SVP and Principal

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Presentation

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Operator [1]

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Good morning. My name is Shelby, and I will be your operator today. At this time, I would like to welcome you all to Celsion's 2019 Financial Results Conference call. (Operator Instructions) At this time, I would like to turn the call over to Kim Golodetz. Please go ahead, ma'am.

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Kim Sutton Golodetz, Lippert/Heilshorn & Associates, Inc. - SVP and Principal [2]

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Thank you, and good morning, everyone. Welcome to Celsion Corporation's conference call to discuss its 2019 financial results. As it has been Celsion's practice and as noted by the operator, prepared remarks will be followed by a question-and-answer period. Today's conference call will be archived, and the replay will be available beginning tomorrow through April 10, 2020, and the webcast will be available on Celsion's website for the next 90 days.

During this call, management will be making forward-looking statements regarding Celsion's 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.

I also caution that content of this conference call is accurate only as of the date of the live broadcast, March 26, 2020. 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, Celsion's Chairman, CEO and President. Michael?

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Michael H. Tardugno, Celsion Corporation - Executive Chairman, President & CEO [3]

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Thank you, Kim, and good morning, everyone. Joining me today is Jeff Church, our Executive Vice President and Chief Financial Officer, who will provide a review of Celsion's recent financial results in a few minutes. Also on the call for the Q&A and working from home are Dr. Nicholas Borys, our Chief Medical Officer; and Dr. Khursheed Anwer, our Chief Science Officer. I will try our best to be efficient with the call even though we're operating from multiple locations. And I have to say this has been a marvel of technology, linking up with you folks. Our -- communicating with our remote executives by Zoom, so we see them on video. We are also on a normal conference phone and also dialed into the investor conference system. So I think we've got it covered from a number of directions. Try to make sure that we are prepared to answer all of your questions from the experts in the company.

As always, it's a pleasure to be speaking with you, and it's particularly true today with so many of you working from home. And I want to start this morning with our gene-mediated immunotherapy, GEN-1 and 2 points from our very exciting announcement that was released this morning jointly with Medidata, a world leader in clinical data management. At first point, it's clear that there is a strong trend of positive treatment effect when GEN-1 is administered intraperitoneally to ovarian cancer patients with advanced disease, as compared to a virtual control group of match patients that was provided by Medidata.

Number two, a hazard ratio of 0.53 as shown an analysis when compared with synthetic data, approaching statistical significance. You'd have to agree that this is quite remarkable, but it doesn't stand-alone. It's supported with impressive previously published translational and clinical data from our Phase I experiences. These 2 points are derived from comparing matched patient outcomes provided by Medidata in a synthetic control arm, which results from the companies -- with results from the company's completed Phase Ib dose escalating OVATION study of GEN-1 in Stage III, IV ovarian cancer patients. These data showed impressive results in progression-free survival, or PFS, with a remarkable hazard ratio, as I mentioned, demonstrating a strong signal of efficacy established in the intent-to-treat population.

As I said in the press release, we believe these data may warrant strong consideration of various strategies to accelerate the clinical development of the program for GEN-1 in advanced ovarian cancer patients by FDA. And we conclude this, and we can make this statement because during our March 2019 discussion of GEN-1 as a potential breakthrough therapy candidate with FDA, the agency team members noted that preliminary findings from the Phase Ib OVATION study were exciting and encouraging but however, lacked the control group to evaluate GEN-1 independent impact on the impressive tumor response, surgical results and PFS. During the call, the agency members encouraged us, more than once, I'll say, encouraged us to continue the GEN-1 development program and to consult with FDA with new findings that may have a bearing on designation such as fast tracked and breakthrough. So we intend to follow through on that.

To reiterate, GEN-1's strong and encouraging treatment effect evidenced by comparison with this synthetic control arm, suggests a potentially remarkable improvement at PFS and FDA recognized endpoint for ovarian cancer and appears to confirm the science behind IL-12's ability to recruit the innate and adapt developments of the immune system to fight malignancies. These findings are supported with previously published and presented translational data that clearly demonstrate the pro-immune changes in the tumor microenvironment associated with local regional GEN-1 therapy.

For those of you who may not be familiar with the concept, I want to give you some background on Synthetic Control Arms, or SCA, I'll refer to them as SCAs. SCAs have the potential to revolutionize clinical trials as we recognized early on in our discussion with Medidata, particularly in certain oncology indications and some other diseases where randomized control is not ethical or practical. And we've actually seen some reluctance for patients to enroll in our study if they would be randomized for the control arm. That would be natural.

In our study in ovarian cancer, for example, puts a great deal of demand on our patients regardless if through the treatment arm or the control arm, so you can understand some reluctance to participate. The FDA, therefore, provide a very valuable alternative to organically recruiting patients into the study. SCAs are formed by carefully selecting control patients from historical clinical trials to match the demographic and disease characteristics of the patients treated with the new investigational product, in our case, GEN-1. SCAs have been shown to mimic the results of traditional randomized controls, so the treatment effects of an investigational product, like GEN-1, can be visible by comparison to the SCAS. The synthetic control groups may advance -- may help the scientific validity of a single-arm trial like ours. And in certain indications, reduce time and cost and expose fewer patients to placebos or existing standard-of-care treatments that may not be effective for them. Medidata, I have to say, has been a terrific partner to work with. They are unique -- in a very unique position to create fit-for-purpose, synthetic controls because of access to a pool of more than 6 million patients from nearly 20,000 previous clinical trials.

I'd like to conclude on this topic with a very important quote from Dr. Borys and I open -- I will open with, "The patients in the GEN-1 arm of the OVATION study virtually demonstrated a doubling of their -- of control of their cancer when compared to the synthetic control arm. Although these findings are not statistically significant due to the small numbers, they are impressive, nonetheless." Thank you, Dr. Borys.

Our current randomized Phase II OVATION 2 study in advance ovarian cancer will commence in the second half of 2020, following the DSMB's safety review of patients treated adjuvantly in 100 milligrams per meter square. This study is designed to demonstrate a 33% improvement in PFS. Over the current standard-of-care, PFS is the primary endpoint for the study.

Moving on now, I just want to repeat something I've said in past conference calls and more true today than ever. The company's fundamentals are sound. We have every confidence in our trials, our investigators and collaborators, our product technologies and most importantly, our employees. Despite this COVID-19 turmoil, Celsion looks forward with laser focus to the balance of 2020, a year that we have every reason to believe will be transformational for patients, the medical community and for our investors. This is because 2019 has positioned us well. In addition to the recent spate of news on GEN-1, and that spate of news included orphan designation, if you recall, and very encouraging data from the first Phase I section of the OVATION II study, suggesting that GEN-1 provides a superior outcome from surgeons in removing cancer, resulting in an R0 result score when the lesions are removed from the patient in interval debulking surgery.

So in addition to all this good news, last year, we made outstanding progress with our ongoing evaluation of ThermoDox in primary liver cancer or HCC, hepatocellular carcinoma, as it's known. You will recall that our pivotal 556-patient global Phase III study, the OPTIMA Study in HCC was fully enrolled in August 2018. It's almost 2 years ago, and we are now looking forward to the second of 2 preplanned interim efficacy analysis now planned for the first week of July this year. This interim analysis will follow a minimum of 158 deaths.

And we have maintained a strong balance sheet. Right now cash is king. Timing for the modest equity raise that we priced at the very end of February could not have been better. In our evaluation of the market's volatility, we felt it was prudent to add a small amount of cash reserve to the balance sheet. We did so with a few institutional investors that have demonstrated an understanding of our technology and the potential for success of our global Phase III OPTIMA Study. Along with the sale of the last of our New Jersey net operating losses later this year, we now have additional cash to buffer most future uncertainties and to assure an operating runway well into the second quarter of 2021 and the final readout, if it's necessary, of the OPTIMA Study.

I'll also point out that we have fewer than 30 million shares outstanding. By using creative investor-friendly approaches to raising capital, we have minimized dilution over the past few years. Now that together with a tight and focused spending and cash management, you know we execute our budget controls very well. So our cash reserve and our ability to manage capital and spending, along with a positive trial, either OPTIMA or OVATION will provide extraordinary, and I'll repeat that, extraordinary returns for our investors.

It bears repeating that the execution of our clinical development programs have been methodical and rigorous. I've been telling you for quite some time that our fundamentals are sound, I'll repeat it again, that you'd expect no material operational surprises from us. Our meetings with various regulatory agencies have resulted in no significant issues. And in fact, have been quite encouraging, as shown in our recent orphan drug designation for GEN-1 from the EMA.

Our manufacturing strategy is solid, and our focus on redundancy during the pandemic, for example, has served us well. Our cost of goods is enviable. We will deliver high gross margins no matter the region or market. And each of our 2 investigational products has blockbuster market potential by any standard of measure, which 1 trial on the cusp of generating important and potentially transformational results, the OPTIMA Study.

Going on, moving on. We expected and received good news in early November 2019 from the first interim analysis from our Phase III OPTIMA Study. As we had guided investors, the DMC unanimously recommended that the OPTIMA Study remain blinded and continue according to protocol. The recommendation was based on a review of safety and data integrity from all patients enrolled in this multinational double-blind, placebo-controlled pivotal Phase III study. Based on the maturity of the study and a high bar for unblinding the study for success, the guidance that we provided repeatedly was unambiguous. We said that it was possible, but not probable, that the threshold at 128 deaths and with only 21 months median time on the study, that it would not be probable that the study would meet the threshold for success, that being a hazard ratio of 0.60 and P equal to 0.001.

The data did show, however, that median PFS and overall survival, OS, events are tracking closely, if not identically, with the trends observed at a similar point in time in a subgroup of 285 patients that we followed for 3 years prospectively from the company's earlier Phase III HEAT study. This prospective subgroup demonstrated a 2-year overall survival advantage and a median time to death of more than 7.5 years and is the basis for the current study design, the OPTIMA Study protocol design.

The subgroup hypothesis, I'd like to say, in a trial design were independently confirmed by the NIH in their independent review of the intent-to-treat population focusing on all 432 patients with single lesions in the HEAT study. That represents almost 65% of the study population. Importantly, the second of 2 preplanned interim efficacy analyses will take place after a minimum of 158 deaths. This milestone is fast approaching, as we said. Note that the p-value and hazard ratio for success at 158 deaths is 0.022 p-value and 0.70, the hazard ratio and compares favorably to the p-value and hazard ratio observed in the 285 patients -- from 285 patients in this prospective subgroup was 0.02 and and 0.65, respectively. So to be clear, say it another way, the bar for success is lower than what was seen in the prospective HEAT study subgroup analysis.

So as I said, and I'll say it again, I remain very optimistic that we have a much better chance for success at the upcoming second interim analysis following the DMC's review. Now if the study does not meet the standard for success in 128 deaths, we uniquely have another opportunity, a third bite of the apple, if you will. We have a final look at the data following 197 patient deaths. At this point, the bar will be much lower. The p-value and hazard ratio required for positive trial at the final analysis are 0.043 and 0.75, respectively, which is even further below the value observed in the prospective HEAT study subgroup and certainly bodes well for a successful trial, if it's necessary. I'll say it again. We anticipate this final endpoint analysis will occur during the first quarter of 2021.

So I just want to repeat what I said, to be clear. I know I went through a number of values. So let me -- for those of you who are following the -- in the HEAT study subgroup, we noted a hazard ratio of 0.65 with a p equal to 0.02. For the upcoming second interim analysis, the bar for success is a hazard ratio of 0.7 with a p equal to 0.22. I hope that's clear. The bar for success is much lower at the upcoming second interim analysis than what we observed in the HEAT study prospective subgroup that we followed carefully for 3 years.

Okay. Now I just want to give you a quick note and update. We've had some questions about the impact of the COVID-19 on our operations. I'd like you to -- just let me start by saying, we anticipate no material impact from this pandemic. The study, as you know, has many sites in China. We have followed very closely under Dr. Borys' careful watch. The coronavirus has had limited impact on the study population. We know that. A few of the hospitals restricted monitoring for a short period of time. Those hospitals are now open for monitoring. The very few handful of patients who may have had a delayed visit for follow-up, now 2 years into the study a delayed visit, are now being scheduled. We anticipate for follow-up with the -- we're now anticipating that they will -- are being scheduled for follow-up. We don't expect any of the data to be compromised in any way for the upcoming interim analysis.

Second, because the trial sites in the U.S. are limiting patient enrollment for new trials, our timing for startup of the Phase II OVATION 2 study, I'd say, maybe impact, we emphasize, maybe impact. We don't know for sure. But I can't imagine if this is so, I can't imagine that it would be for more than a month or 2. We'll keep you posted as the situation develops.

I'd like to talk briefly about manufacturing for both ThermoDox and GEN-1. In my letter to stockholders issued in early March, I addressed manufacturing and the redundancies that we have smartly put in place. Our manufacturing partners in China can supply our lead compounds at a very attractive cost. With the new capital that we raised, we're in a better position to financially access this redundant capability in the United States from our U.S. and European suppliers. So we've worked with these lots of suppliers for years and are confident that they are capable of supporting our clinical research and commercial requirements for ThermoDox as well as our clinical supply requirements for GEN-1.

I do want to note that the COVID-19 has had some manageable, very manageable impact on our Chinese supply for GEN-1. And as a result, we chose to use our backup source for the TheraPlas polymer from the U.S. supplier rather than rely on the Chinese supply.

Finally, while we continue to prepare for success in December 2019, we signed a memorandum of understanding with officials from the Hangzhou Yuhan economic development agency to establish a subsidiary in the Yuhan district of Hangzhou, the capital of China's Zhejiang province. The area is located in one of China's most important biotech hubs, where the Chinese government has made development of advanced medical technologies that address unmet patient needs a high priority. There are numerous financial incentives that will be made available to the subsidiary from the Chinese government. We intend to take advantage of those financial incentives.

The primary purpose of this subsidiary is to commercialize innovative cancer therapy, starting with ThermoDox. In addition to China, the subsidiary will focus on all nearby developing markets, including the Philippines, Malaysia, Thailand and Vietnam. Hisun, our local manufacturing partner, is expected to provide an economically viable ThermoDox cost structure. Registration of this subsidiary is virtually complete. We expect it to be operational within the next month or so. And we have begun writing the NDA MAA for ThermoDox and HCC. Our goal is to have it sufficiently prepared to complete a filing in no more than 6 months of unblinding the OPTIMA Study.

Before I turn the call over to Jeff Church to review our 2019 financials, I want to emphasize that the company is well positioned for success. Our fundamentals are solid and the evidence and endorsements supporting our clinical trials are nothing short of remarkable. If we're right, the next 12 months will be transformational for the company, our shareholders, our employees and most importantly, the doctors and patients who benefit from our research and our products. Now I'll turn the call over to Jeff.

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Jeffrey W. Church, Celsion Corporation - CFO, Executive VP & Corporate Secretary [4]

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Thank you, Mike. Details of Celsion's full year 2019 financial results were included in the press release we issued yesterday evening and in our 10-K, which we filed last night after the market closed. As Mike stated, we made significant progress during 2019 in developing our lead products. We continue to focus on efficient cash management, opportunistic and minimally dilutive financings and careful attention to our cost of goods and our supply chain, all of which position us to execute our strategy and achieve our goals.

As of December 31, 2019, Celsion's cash investments and deferred tax assets totaled $16.7 million. Subsequent to year-end, we raised an additional cash proceeds of $6 million from the sale of equities, including $4.4 million in net proceeds from a registered direct offering price at the end of February. As Mike indicated earlier, we opportunistically strengthened our balance sheet to buffer against the potential for continued erosion of our share price in the face of market uncertainty.

We expect to receive the $1.8 million deferred tax benefit from the sale of our New Jersey net operating losses in the second quarter of 2020. We have an additional $2 million in future tax benefits remaining under the New Jersey tax certificate transfer program that we expect to monetize later this year. Our current cash plus future planned sales of our New Jersey NOLs will extend our operating runway into mid-2021. Importantly, this is well beyond the final data readout of the OPTIMA Study which would occur likely during the first quarter of 2021.

Our capitalization table includes 29.3 million shares of common stock and only 3.8 million warrants, which have an exercise price above our current market price. With respect to future funding flexibility, we have a $75 million shelf registration statement on file with the SEC to sell registered shares at the appropriate time. We have over $60 million remaining under that registration. We also have a traditional at the market facility with JonesTrading that allows us to raise money at an opportunistic fashion with no warrants and a very low commission or fee. The use of the ATM facility is under the complete control of the company.

Turning now to our 2019 financial results. For the year ended December 31, 2019, Celsion reported a net loss of $16.9 million or $0.77 per share. This compares with a net loss of $11.9 million or $0.68 per share for the year ended December 31, 2018. Operating expenses were $21.1 million for 2019, which represented a 2% decrease from the $21.6 million in 2018. More specifically, research and development expenses for 2019 were $13.1 million, up 10% over 2018. Recall, in 2018, we recognized a favorable impact of an $800,000 credit, resulting from cost concessions negotiated with the company's lead CRO for the OPTIMA Study. Excluding this onetime credit, clinical development costs for the OPTIMA Study were $4.1 million in 2019. This was a decrease of $1.4 million over 2018. This 25% decrease was primarily due to the completion of enrollment of the OPTIMA Study in August 2018, which resulted in lower monthly CRO fees during the follow-up phase of the trial.

As the ThermoDox program continues to advance, we incurred regulatory costs related to NDA preparation activities in the amount of $1.1 million in 2019 compared with regulatory costs of $300,000 in the prior year. Costs associated with production of ThermoDox were $1.5 million during 2019. This compares to $1.1 million in 2018, as we completed registration batches at our contract manufacturing organizations, assuming the successful outcome of the OPTIMA Study. Costs associated with the OVATION 2 study were $600,000 in 2019 compared to $400,000 in 2018. Costs associated with research and development activities for GEN-1 and TheraPlas were $3.3 million in 2019 compared to $2.8 million in 2018.

Note that in the current year, we expanded our manufacturing capabilities with the goal of reducing the manufacturing cost for GEN-1 for our planned clinical study requirements going forward. General administrative expenses were $7.9 million in the current year compared to $9.7 million in 2018. This $1.8 million decrease was primarily due to lower stock compensation expenses in 2019 compared to the prior year. Other nonoperating expenses for 2019 included a noncash gain of $3.2 million, net of a $400,000 charge for the issuance of warrants related to an amendment for the potential milestone payments for the GEN-1 ovarian cancer product candidate. This compares to a noncash charge in 2018 of $4.5 million related to impairment of certain in-process research and development assets related to the company's glioblastoma cancer product candidate, offset by a $3.6 million reduction in the earn-out liability related to milestone payments for the same program.

The company realized $0.5 million of interest income in 2019 compared with $400,000 in the prior year. In connection with our venture debt facility with Horizon, which we entered into in June of 2018, we incurred interest expense of $1.4 million in 2019 compared to $700,000 in 2018. During the fourth quarter of the current year, the company recognized a $1.8 million income tax benefit, resulting from the sale of our New Jersey net operating losses.

During the fourth quarter of 2018, we recognized a significant $10.4 million income tax benefit, resulting from the sale of our cumulative New Jersey NOLs for the tax years 2011 to 2017. The company has approximately $2 million remaining under the program moving into 2020. Net cash used for operating activities were $20 million -- I'm sorry, $20.3 million in 2019, that compares to $7 million in the prior year. Cash utilization in 2018 included that $10.4 million cash proceeds from the sale of our NOLs, while the COVID-19 pandemic caused a delay in this year's program, resulting in the NOLs not being received. And we expect to have them received in the second quarter of 2020.

Total cash provided by financing activities, they were approximately $7.8 million during 2019 and an additional $6 million was raised in the first quarter of 2020. We anticipate that our cash usage for the first quarter of 2020 will be approximately $4.5 million. This is in line with our 2020 annual operating budget, which calls for keeping expenses and cash utilization less than $4 million per quarter on average over the course of the year 2020. I'd now like to turn the call back to Mike.

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Michael H. Tardugno, Celsion Corporation - Executive Chairman, President & CEO [5]

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Thank you, Jeff. I hope that you can see that Celsion continues to make great progress in both of our clinical programs with the OPTIMA Study now looking forward to very soon a second of 2 interim analyses. This interim analysis having great potential to be successful. And that GEN-1, a very important immunotherapy, is showing some significant potential in ovarian cancer. Our confidence in GEN-1 has not been misplaced, as we can see from the data that we've been sharing with you over the last number of months, and we look forward to continuing, if not accelerating, our clinical research in ovarian cancer.

And I'll just close by saying I have always been proud of our employees and our dedication to Celsion and patient health. In this time of social distancing, I'm even more proud as they continue to put patients first. So with that, operator, I finished my prepared remarks, and we'll open the line for questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) We'll take our first question from Hartaj Singh with Oppenheimer & Company.

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Hartaj Singh, Oppenheimer & Co. Inc., Research Division - Research Analyst [2]

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I have a couple of questions. One is, so on GEN-1 data you just published, it's good to see that the project keeps on moving along. The one thing I was wondering was when you're, sort of, comparing your lower doses to the higher doses, you have an increase in R0 resections. But the overall response rate and the PFS in these patients seems to -- sorry, dose response and ORR in these patients seems to stay the same. I know these are small patient numbers, but just any thoughts there?

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Michael H. Tardugno, Celsion Corporation - Executive Chairman, President & CEO [3]

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Yes, I don't think that was unexpected. We -- well, we do expect the chemotherapy that -- the neoadjuvant chemotherapy for these patients to be effective. But I'd like to really turn this question over to Dr. Borys. Nick?

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Nicholas Borys, Celsion Corporation - Executive VP & Chief Medical Officer [4]

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Hartaj, if I understand your question correctly, you're wondering if we've already reached a peak in terms of our response rate for the different doses.

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Hartaj Singh, Oppenheimer & Co. Inc., Research Division - Research Analyst [5]

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What I meant is that when you just look at -- you show the n=12 patients of the 17 patients in the 2 different -- the lower doses and the higher doses, and you're definitely getting a better R0 resection. Shouldn't the R0 section translate into better ORR? Because I guess your ORR was -- you say you expected it to be approximately -- it's 80%. So was that just with the GEN-1 group? Or was that the ORR 80% in the GEN-1 plus the chemo? And then what was the ORR for the chemo alone? I guess that's what I'm getting at. Was there a difference between the combination versus chemo alone?

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Nicholas Borys, Celsion Corporation - Executive VP & Chief Medical Officer [6]

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Yes. I mean, I think that's an interesting question. And with the small numbers, yes, we do notice that maybe the ORR is not consistent with what we're seeing in the R0 rate. But remember that what we're looking at is an immunotherapy. And with immunotherapies, the radiology could be a little bit deceiving to what you actually see as a result in the patient. So moving towards more long-term data, looking at the PFS and looking at the R0s and taking the ORR rate a little bit with the grain of salt because it's the immunotherapy might be the best way to go for us.

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Hartaj Singh, Oppenheimer & Co. Inc., Research Division - Research Analyst [7]

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Yes, understood. So I guess, maybe if I ask the question in a slightly different way, which is that, do you know what the ORR is for historical chemotherapy in a similar kind of time frame? Is it 80%? Or is it less?

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Nicholas Borys, Celsion Corporation - Executive VP & Chief Medical Officer [8]

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I'll have to get back to you on that, but I do think off the top of my head, it's about similar to what we see historically.

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Hartaj Singh, Oppenheimer & Co. Inc., Research Division - Research Analyst [9]

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Okay. And then in the Medidata analysis, the hazard ratios look very impressive, but it seems like they're not separating. The p-values are still kind of still on the higher side. Is there any reason -- I mean, again, these are no small numbers and you've got different doses there, but any thoughts there? Why the hazard ratio is so impressive and yet there seems to be a fairly broad disclosure when it comes to the p-value?

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Nicholas Borys, Celsion Corporation - Executive VP & Chief Medical Officer [10]

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Yes. I think one of the questions that the Acorn people or the Medidata people gave us right from the beginning is because these are very small numbers, that the p-values we would expect not to be significant. And what we're looking for here are strong trends. And that's certainly what the hazard ratios are giving us. These numbers are just with 15 to 18 patients that we're looking at, these numbers are really too small to expect anything in terms of a p-value. Once we get into the Phase II study design, where now we have over 100 patients, I think, we could see more robust results.

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Michael H. Tardugno, Celsion Corporation - Executive Chairman, President & CEO [11]

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And I'd like to add to that, Hartaj. When we look at other companies who have pursued breakthrough therapy on small ends, we see a similar kind of a presentation or the clinical benefit as determined by the hazard ratio appears to be quite large. So the magnitude of effect -- the treatment effect appears to be quite large. But typically, not enough in order to state it with statistical confidence.

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Hartaj Singh, Oppenheimer & Co. Inc., Research Division - Research Analyst [12]

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That's fair, Mike. And again. No, that's fair Mike. That's fair enough -- and Borys. And again, I laud you for actually showing the p-values, some companies might not. The other is the ThermoDox, the second interim, which you're expecting. Can you just walk us through if that was to be positive, what would be the next steps just over the next, sort of let's call it, 3 to 6 months? And in terms of the next steps, could COVID-19 throw off any of that in your scenario planning?

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Michael H. Tardugno, Celsion Corporation - Executive Chairman, President & CEO [13]

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Yes, let me start by answering the second question first. I don't see how the COVID virus would impact our plans going forward, assuming we have a positive trial result. I mean the time associated with prepping the documentation for the NDA submissions in China, the United States and the EMA in Europe is not insignificant. Although we have a very accelerated schedule. As I said earlier in my prepared comments, we've begun writing the NDA and we're using a common technical document approach. So essentially running the NDA and the MAA for Europe at the same time. So the next steps, we've planned out very carefully, almost in a Gantt chart like fashion.

I mean assume -- we put the agency on notice about a week before, we hold the DMC meeting -- that we are holding a DMC meeting, and we may have some results to discuss with them. If the results are positive, the agencies on notice, they will be receiving a call from us. We'll let them know that we have a positive trial. And that we expect on blinding the study. I will give them an opportunity to comment on that, but there's no -- there are no doubt in our mind, there's no ambiguity here that a positive interim analysis would result in a successful trial recognized by all the regulatory agencies that have approved their trial. We will then immediately request a pre-NDA meeting that usually takes about 30 days to schedule. That will give us enough time to format the data and slice and dice all of the various scenarios from the the trial results to present to the agency in a fashion to give them confidence that we have a successful trial with clean data to move forward.

Once we have the FDA's comments and of course, we, at this point, we proposed -- be proposing what the label would look like. Once we have their comments, then we will complete the NDA. We expect that whole time to take no more than -- well, it depends on the agency's input, but we expect to take no more than 6 months. And I'm hopeful that it could be quite less, but that's our target, no more than 6 months from the time that we unblind the study. Following that, we have Fast Track designation from the U.S., FDA. Our Fast Track designation provides us with the ability to request priority review, which we would expect to achieve in a face-to-face meeting with the NMPA, that's the new acronym for the Chinese FDA, the CFDA. In a face-to-face meeting with the NMPA that Dr. Borys had about 1.5 years ago, they gave us a commitment to review the -- an NDA application with a high priority and a 6-month turnaround. So that's our expectation. Immediately, we go into high gear to begin producing large quantities of inventory. We're already advising our vendors, our suppliers. We have 3 of them. And their suppliers of raw materials of what our forecast outlook would be. We've been meeting with them on a regular basis. And if this COVID-19 business hadn't interfered with our travel plans, we would have had some definitive production plans. I expect to have those in place in the second half of the year. So that's -- for the most part, that's the plan. There's a lot of other activity that goes on. Obviously, we'd be staffing up. The small little group here in Huntsville and Lawrenceville could use some additional commercial resources, obviously, once we move forward.

And I'll just say this one last point. There are more than 1 pharma companies. You can open your medicine cabinet and see some names, who have taken a very serious interest in the commercial opportunity for ThermoDox. So we'd be spending some time, I'm sure, discussing those opportunities and their potential for shareholders and the company.

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Hartaj Singh, Oppenheimer & Co. Inc., Research Division - Research Analyst [14]

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Great, Mike. And then just last question on -- kudos to Jeff for keeping on squeezing more money in a non -- or as little as possible in a nondilutive sense into the company. But can you just kind of give us an idea for OVATION 2 with the number of patients that you have, 130-plus. Starting the second half, how long do you expect that to run? Just a rough idea, how long will the enrollment take and how long will the actual -- the evaluation period run on that?

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Michael H. Tardugno, Celsion Corporation - Executive Chairman, President & CEO [15]

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Yes, it's a little more cloudy than it was just at the last quarterly conference call, and that's largely because of this coronavirus issue. We have initiated a study in 9 investigator sites. All of them, large hospitals and dealing with preparing for an influx of a number of patients. We also have 16 more sites, including 2 in Canada. They are ready to go. I mean they have their foot on the gas pedal and ready to go when we say go. However, we know that a number of those hospitals will not start a new trial -- will not start a trial until this COVID-19 pandemic issue is behind them.

So it's really hard to give you some solid guidance. But here's what we've been thinking that it will -- once we get the thumbs up from the DSMB, we'll initiate the balance of the trial sites in the U.S. and Canada that will bring up to 25. Our expectation is that each of those sites will enroll approximately 1 patient every 2 or 3 months. We expect to then complete enrollment at 118 patients added to the 12 patients who are recruited in Phase I. And we expect to be able to enroll the -- maybe you can do the math yourself, enroll the study in about a 12-month time frame or less. But that could be -- that time line could be influenced by the reluctance of some of these -- our clinical trial sites to initiate a study until they're convinced that their workload -- this COVID-19 workload doesn't distract them from a good quality clinical study.

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Operator [16]

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We'll take our next question from Matthew Cross with JonesTrading.

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Matthew David Cross, JonesTrading Institutional Services, LLC, Research Division - Research Analyst [17]

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Thanks, guys, for taking a couple of questions from me and congrats on the progress, I guess, particularly for GEN-1. So I was also kind of picking up on what Hartaj was bringing up earlier about the response rate in the ORR, I suppose, for the 100-milligram dose. And definitely hear what you're saying as far as kind of patient numbers were -- what things look like historically. I'm glad to see the trend in R0 resections for the low-dose groups -- the high dose. But I was also wanting to drill in a little bit on the R0 rate for -- on a dose by dose basis. Because it looks like you reported in the first 9 patients a 78% R0 resection rate for the 100-milligram dose, which I guess is kind of between what you saw, that the 100% at the 79 dose and 66% at the 61-milligram dose. So just trying to kind of maybe see what we're missing that gives you confidence that the 100-milligram per meter square dose is indeed the most effective one you've studied so far and should be taken into part 2 of OVATION 2? And kind of -- in related follow-up to that, I guess, can you kind of remind us exactly how you came to the conclusion of establishing 100-milligram per meter square as that carry forward dose? Whether that's driven by safety or PK/PD? And if there's still some potential to continue dose escalation, it's going to confirm that dose response and the ideal regimen for part 2? I know you haven't reported any DLTs thus far in dose escalation. So just trying to speculate a little bit about that.

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Michael H. Tardugno, Celsion Corporation - Executive Chairman, President & CEO [18]

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Yes. So I want to try to answer the second question first, and then I hope, Nick, you got all of that on the dose-dependent R0 responses. So just the maximum dose that we're considering at this point is 100 milligrams per meter square. I don't think there's any plans to increase the dose further, although we have a meeting with our medical advisory group here in the next few weeks to discuss what the next steps are for the trial and really -- and much of it has to do with making sure that there are no -- the meeting is to make sure that there are no interferences with starting up the study that we just talked about. So -- but our plans have been to halt the dose escalation or conclude dose escalation at 100 milligrams per meter square, largely for practical reasons. This is a very high-volume of DNA plasmids, with a very large volume of diluent. So our sense is, this becomes a very practical issue more than a medical issue. I don't believe there are any DLTs -- we've seen any DLTs at the higher dose. But with that, I'm just going to turn it over to Nick. And if you need some exact numbers, Nick, I have the breakdown of the patients at 61, 79 and 100 milligrams per meter square.

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Nicholas Borys, Celsion Corporation - Executive VP & Chief Medical Officer [19]

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Yes. Thank you, Mike. I think the best answer to that question is that at our highest doses, we are consistently seeing a good R0 rate, particularly against historical controls, and from the early data that we're seeing in the OVATION 2 study, where the control group seems to be acting very much like we see in other studies. And the patients that are getting the GEN-1 are consistently getting R0 resections. Again, this is an interesting indicator for us, and it's very positive. The surgeons are reporting that they feel that the patients that are getting the GEN-1 are better to resect and to clean the tumor out of them. And so we're very encouraged by this data.

So I think it's the consistent numbers of the R0 at the highest doses where we feel comfortable in moving forward with the 100-milligram per meter squared dose. And then just to reiterate what Mike was saying earlier, and what you're asking earlier, yes, I can confirm the safety of the drug of GEN-1 looks very, very good. We've had no key hints of a DLT. If we wanted to, we probably could go to a higher dose. But between all the data that we're getting now, if you look at the totality of the data, looking at the R0s, looking at the safety and looking now at how it compares against this well-managed synthetic control arm, it certainly means we have a strong signal of pursuing this further with regulatory agencies and pursuing further in our Phase II study. So looking at the big picture, I think we have some pretty solid data here.

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Michael H. Tardugno, Celsion Corporation - Executive Chairman, President & CEO [20]

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And to give you some numbers in response to your question there. So at the 61-milligram dose, it's 2 of 3 patients in an R0. At the 79-milligram dose, it's 5 of 5 patients had an R0. And at 100-milligram dose, it's 7 of 9 patients have an R0. That averages to an 80% -- I believe, it's 82%.

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Matthew David Cross, JonesTrading Institutional Services, LLC, Research Division - Research Analyst [21]

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Got it. No -- and I totally agree that the data does look great so far. And as far as maybe not even increasing a dose, but I talked about maybe more tweaking the dose given that as you just gave us the numbers, the -- both the ORR and R0 for the 79-milligram group, which was just a little bit smaller than 100, with 6 patients versus 9, did -- was better on both fronts. Especially, I think, getting 5 out of 5 on the R0s. So just -- I was considering whether -- speculating a little bit about whether going back to that dose made any sense or if you really thought that the 79-milligram per meter square dose might have performed similarly with a little -- a few more patients like you saw in 100. But just kind of throwing those ideas out there. And I think that as you...

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Michael H. Tardugno, Celsion Corporation - Executive Chairman, President & CEO [22]

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Yes, I was just going to say the tweaking -- I mean I'd have to rely on -- certainly on our medical advisers and Dr. Borys, but we just seem to be attempting to tweak the dose with these small numbers. We might not arrive at any better result than we currently have.

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Matthew David Cross, JonesTrading Institutional Services, LLC, Research Division - Research Analyst [23]

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Sure. Absolutely. Understood. And then, I guess, one last one for me was just about kind of looking ahead to OVATION 2 and PFS results. I guess if we're trying to extrapolate a little bit from what we're now seeing that you released today, the PFS compared to synthetic control arm. So you've stated for part 2 of OVATION II that the hazard ratio required -- that you need to see a 33% improvement in PFS or that's what you're aiming to see for the primary end point. And I just wanted to confirm whether that would translate to a 0.75 hazard ratio. And if this would be adjusted at all, if discussions with the FDA regarding breakthrough designation and potential modifications to the control arm based on the synthetic data for Medidata, whether that would tweak in any way the hazard ratio you'd be looking for success?

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Michael H. Tardugno, Celsion Corporation - Executive Chairman, President & CEO [24]

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Well, it could. I mean it could. But -- and of course, what we rely on is the p-value, really. So the -- I mean if we achieve significance at a lower number, then we've essentially had a successful trial. But just to your first point, I take some liberties -- some blame and liberties with interpreting hazard ratios. When I say a 33% improvement, it is -- I meant -- I mean a hazard ratio of 0.75, although I get scolded occasionally by Dr. Borys that, that is a liberal translation. 33% is a liberal translation of 75% hazard ratio. But it's easier for me and sometimes for other people to understand. So -- and then, Nick, if you have anything you want to add to that?

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Nicholas Borys, Celsion Corporation - Executive VP & Chief Medical Officer [25]

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Yes. Thanks, Mike. And I think that's a great question. We just saw the data on the synthetic control arm just a few days ago, so we're still digesting it. So I think you make some great points. Will there be -- and I think where you're going with that question is, will there be some adjustments maybe to our study number because this data from the synthetic control arm is so exciting, I would say, maybe. And I would just say, keep on watching this channel because we'll have -- we hope to have discussions with the FDA, see how they feel. The impact of the synthetic data is on our assumptions. And also, as you know, we'll be reporting quite regularly on the findings of our Phase II data because it's open label. And so there might be some adjustments because of this exciting data, and we look forward to discussions with regulatory authorities.

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Michael H. Tardugno, Celsion Corporation - Executive Chairman, President & CEO [26]

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Yes. I'd like also to add to that -- it is our intention, as I mentioned in my prepared remarks, is to review these data with the agency, it's a follow-up that they encouraged us to have in our earlier discussion on breakthrough designation. The goal of the meeting is really twofold. One is, do we qualify for a designation like that? I would hope that we do. I mean I think this data is quite compelling. But the second part of it is, and assuming we do, is how can we accelerate this program? And we have a number of thoughts on how to do that. And you may have asked a question about one area where we could conceivably reduce the time to get a positive result in this Phase II study.

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Matthew David Cross, JonesTrading Institutional Services, LLC, Research Division - Research Analyst [27]

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Got it. No, I appreciate all of that input, and I hope for the best with the regulators in those discussions. Hopefully, they see the data as positively as I think we all do.

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Michael H. Tardugno, Celsion Corporation - Executive Chairman, President & CEO [28]

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And I guess, before we go to the next question, right. So the -- we're in some pretty new territory here. We think a very exciting territory, using a synthetic control arm as a basis to compare the treatment effect of something like GEN-1. It's been discussed for a long time. It's not novel among the theoreticians who discuss innovation in clinical trials, but we have a very good opportunity here to break some new ground. And I think given the posture that the agency has taken recently, I expect that we'll have a very productive discussion. So operator, we can go on to the next question.

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Operator [29]

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We'll take our next question from Jason Kolbert with Dawson James.

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Jason Howard Kolbert, Dawson James Securities, Inc., Research Division - Director of Research [30]

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I know it's almost an hour so I'll keep this brief. I just wanted to go through the 128 versus 158 deaths that you saw in the first interim versus the second, so I can really pin down the timing of when we're going to see that data.

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Michael H. Tardugno, Celsion Corporation - Executive Chairman, President & CEO [31]

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Yes. So we're on the cusp of reaching the threshold for the second interim analysis, Jason. In fact, we are attempting -- we had a schedule for the DMC meeting. But because 2 of our DMC members are not U.S. residents, one is in Barcelona. He's the author of the Barcelona clinic criteria for evaluating and treating liver cancer patients, that's Professor Llovet. He's in Barcelona. And the other -- one other at -- the highly regarded clinical researcher in liver cancers in Toronto. So it's been a -- Nick has been dealing with their schedules. And so we expect, frankly, to have this DMC meeting around the first week of July. And I -- we got to put all the -- start all the i’s and cross all the t’s, but that's when we expect to have it. I am very confident we'll have enough events to hold a successful meeting at that point.

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Operator [32]

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(Operator Instructions) We'll take our next question from Kumar Raja with Brookline Capital Markets.

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Kumaraguru Raja, Brookline Capital Markets, LLC, Research Division - Director & Senior Biotechnology Analyst [33]

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I would like to further explore with regard to the synthetic control data. What would be the expected timeline in terms of communicating this with the FDA? And further, in terms of the OVATION 2 trial, do you think -- how it is going to impact you? Is there a possibility to include more synthetic control patients -- control? Or do you think there will be some reduction in the GEN-1-treated patients there?

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Michael H. Tardugno, Celsion Corporation - Executive Chairman, President & CEO [34]

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Yes. So I would -- let me answer your first question, the timing for discussing this with the agency. There's a bit of a protocol here. With many companies requesting breakthrough designation, the agency has set up a screening committee. That screening committee is the group that we met with in our first discussion. I think we're just off the top of my head. We have to provide them with our white paper request. It's just a small document, relatively small document, but we have to provide them with the request and expect to get a response from them within 30 days of receiving the document. We're going to go to work right away here once we've digested all this data, Kumar, and put together our white paper request and submit it to the agency just as soon as possible. I can't give you an exact date, but I would guess it wouldn't be more than a couple of weeks.

So given that, we would expect a response from the agency. If we were to start the clock now, probably about 6 weeks. There are numerous benefits that accrue to a company that receives the breakthrough designation that -- as we see it. I mean, the opportunity for us to discuss a variety of strategies for accelerating the trial is -- I mean, first and foremost, on our list, conducting clinical research for us includes not only the overhead, but also the direct costs associated with treating patients. So the shorter the time line, financially better off for the company, of course. For the medical community, we get results sooner. So that's an objective. A part of that, our ability to be able to shorten the time line would be FDA's agreement that we can include patients from the synthetic database as a part of our control arm.

I think we've talked about it internally. We don't think it would be wise to replace one for one all of the patients that would -- we would organically recruit into the control. We've talked about a 50-50 split, the goal of which would be not only -- we have a control on a control, if you would, where half of the control arm patients would be the synthetic control arm patients, the other half are organically recruited. Give us some confidence that the results that we're seeing are not -- I mean, are true. We're looking for the truth. So that would -- that's one way to reduce the time and the cost. And obviously, the cost for the virtual patient is less than the cost for an organically recruited and treated patients. And it reduces our timeline. So that would be one of many of our objectives in discussing this very encouraging result that we announced today.

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Operator [35]

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And we have no more questions in the queue at this time.

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Michael H. Tardugno, Celsion Corporation - Executive Chairman, President & CEO [36]

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Okay. Well, we ran over a little bit, but I think it was all worthwhile. Thank to our -- thanks to our analysts for the questions. We really do appreciate it. We hope we've clarified your concerns and provided some additional guidance. We're very excited, I can say without question. The GEN-1 program has now added some additional validation to what we've been seeing all along. And the translational data that we've generated from our first Phase Ib study, I think, is unambiguous. There's no doubt that the the mechanism for GEN-1 works and that the immune system, all of the -- virtually all of the elements of the immune system have been recruited in a way to modify the tumor microenvironment to pro-immune. They seem to support -- in some dose-dependent analyses, they seem to support an improvement in clinical benefit. I know there's been some concern about that. But now the -- so with the comparison to the synthetic control arm, we have become extremely confident. We think this is a breakthrough for our development program, and we're looking forward to reviewing it with the agency and presenting it to the investment community in more detail as we digest it.

That being said, we are excited that this year could be an extraordinary year for the company. As I said, we're planning very early in July for our second interim analysis. The threshold for success suggests to us -- and the maturity of the patients on the study suggests to us that we have every chance of being successful with a blockbuster therapeutic for primary liver cancer. All that being said, the prospects that we have can make a huge difference in the lives of cancer patients, and we look forward to our work in that area. On a personal note, I want to thank you all very much. Please stay safe. And as I tell everybody in this difficult time period, be kind to one another. So that will conclude our call, operator.

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Operator [37]

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