U.S. Markets closed

Edited Transcript of CLSN earnings conference call or presentation 15-Aug-19 3:00pm GMT

Q2 2019 Celsion Corp Earnings Call

COLUMBIA Aug 23, 2019 (Thomson StreetEvents) -- Edited Transcript of Celsion Corp earnings conference call or presentation Thursday, August 15, 2019 at 3:00:00pm GMT

TEXT version of Transcript

================================================================================

Corporate Participants

================================================================================

* Jeffrey W. Church

Celsion Corporation - CFO, Executive VP & Corporate Secretary

* Kim Sutton Golodetz

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

* Michael H. Tardugno

Celsion Corporation - Executive Chairman, President & CEO

================================================================================

Conference Call Participants

================================================================================

* Hartaj Singh

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

* Jason Howard Kolbert

Maxim Group LLC, Research Division - Former Executive MD, Head of Healthcare Research & Senior Biotechnology Analyst

* Kumaraguru Raja

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

================================================================================

Presentation

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

Good morning. My name is Travis and I will be your operator today. At this time, I would like to welcome you all to Celsion's Second Quarter 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.

--------------------------------------------------------------------------------

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

--------------------------------------------------------------------------------

Thank you, and good morning, everyone. This is Kim Golodetz with LHA. Welcome to Celsion Corporation's conference call to discuss its second quarter 2019 financial results. As has been our practice, 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 August 29, 2019. 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.

With that said, I'd like to turn the call over to Michael Tardugno, Celsion's Chairman, CEO and President. Mike?

--------------------------------------------------------------------------------

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

--------------------------------------------------------------------------------

Thank you, Kim, and good morning, everyone. Joining me today are Jeffrey Church, Celsion's Chief Financial Officer, who will provide us with a review of the financials; and Dr. Khursheed Anwer, Celsion's Chief Science Officer (sic) [Chief Scientific Officer], both of whom will be available for questions during the call. Dr. Nick Borys, our Chief Medical Officer, who normally joins us for calls, is on a well-deserved vacation today. So he won't be with us for the call.

I'd like also to welcome Kim Golodetz and our LHA colleagues to their first quarterly call with us. We have recently engaged LHA as our IR partners and I'm looking forward to the value that I know that they will bring to our interactions with the investment community. As always, it's a pleasure to be speaking with you particularly now as we close in on key milestones that we will have -- that we will have achieved through rigorous execution of our clinical development programs of ThermoDox, a tumor targeting chemotherapy and GEN-1, our elegant gene-mediated immunotherapy. For several quarters, I have reported that our fundamentals are strong and I can report even stronger now with key events expected in the third and fourth quarters of this year. All of the cash sufficient to support an operating runway well into 2020, well beyond the major milestones of our clinical programs. Jeff will cover these financials in more detail during his report.

Now as I begin my formal remarks, I'd like to make you aware of important themes of the company. First, I'd like to say again, we are well positioned to achieve our objectives. We have the resources, the relationships, the personnel, the technology and the capital to continue to deliver as we have been over the past few years. Our clinical development programs continue to advance as promised. Our global 556 patient Phase III study will begin reading out in October of this year, first data from our Phase I/II OVATION 2 Study by the end of the year. We have taken the necessary steps to ensure robust and cost-efficient supply chains for our 2 lead product candidates. Gross margins for ThermoDox will be impressive no matter the market or the local economy. Our gene-mediated immunotherapy will enjoy product cost at a small fraction of other plasmid-based drugs. Both product candidates have multiple sourcing options to ensure continuity of supply and competitive costs ongoing into the future.

Our capitalization structure is as clean as it gets. We've taken steps to ensure that. We trade only in common stock and virtually with no warrants to leverage our hedge a short position. And I hope you will agree, our financing initiatives have been nothing short of investor-friendly. With very little dilution over the past 2 years, we closed this quarter with $22 million in cash on the balance sheet, over $23 million if you consider prepaid expenses, and we look forward to adding another $4 million more through the sale of our New Jersey net operating losses. We have more than enough cash to see us through our key value drivers over the next 18 months.

Condition to all of this, we continue to garner the support of key opinion leaders, global leaders in their fields of medicine and science, witnessed by our recent press releases, announcing the talk given by Dr. Premal Thaker regarding the promise of GEN-1 for ovarian cancer patients and the dramatic potential for ThermoDox in hepatocellular carcinoma, or HCC, or primary liver cancer as it's known, has carefully described by researchers at the NIH and an independent review of our 700-patient HEAT Study data.

We could not be more pleased and confident, so much so that we have begun writing, as I told you in our last conference call, we began writing the NDA for ThermoDox and HCC. Frankly, we could have not started soon enough because if we're right, if we're right, we are well positioned to deliver what may be among the most important new oncology medicines in a generation.

The second quarter and recent weeks were highlighted by a number of announcements that demonstrate our progress with both ThermoDox and GEN-1 development programs. One of the most important or significant pieces of news was announced on August 5 when we disclosed that we had reached the number of events necessary for our first of 2 allowed, it's 2 allowed in our statistical plan agreed to with the FDA, but our first prespecified interim analysis of data from our Phase III OPTIMA study in HCC.

This trial is evaluating ThermoDox in combination with a minimum of 45 minutes of standardized radiofrequency ablation, also known as RFA, in treatment-naive, newly diagnosed HCC patients. The database was locked in 128 deaths which represents a slightly higher number than the minimum number required to conduct this assessment and is within the range agreed to in our statistical plan. I'd like to note that 128 deaths is 65% of the total necessary for the final analysis at 197 deaths and provides for a Hazard Ratio of 0.637 in order for the trial to be successful. I'll say that again, the 128 deaths, the first interim analysis to be successful has to reach a Hazard Ratio of 0.637. A Hazard Ratio of 0.637 represents an approximate 57% improvement in median survival over the control arm. And this is largely consistent with the 0.65 or 55% improvement that we saw or observed in the prospective HEAT Study subgroup on which we based the OPTIMA Study trial design. So if I can translate that, I know that's a lot of information, we have to do just a little bit better in terms of median survival than we saw in the prospective subgroup, the group that was used to base the study design for the OPTIMA trial, in order for us to be successful at this first interim analysis.

While the trial's independent Data Monitoring Committee, or the DMC as we call it, will meet before the end of October to review the interim data, we expect to announce the recommendations as soon as possible thereafter. Now if the study has not reached the threshold for success at this first interim review, a second prespecified interim analysis will be conducted after 158 deaths. At this analysis, the Hazard Ratio necessary for success is 0.70, which represents a lower threshold for success. A Hazard Ratio of 0.70 represents an approximate 42% improvement in the median time to death over the control arm which, as you can see, has a much greater potential for success when you compare it to the data that the study was based on.

So I want to reiterate our previous guidance for the first interim analysis. Well if it's possible for the OPTIMA Study to be declared successful at the first interim, the probability of success improves with a number of patients evaluated. And while we remain optimistic for a positive trial result in October, the likelihood of success is much greater at the second interim analysis, which is expected to occur in the first half of 2020, assuming the current rate of death that we're seeing in the trial population.

Should we achieve the Hazard Ratio at either interim analysis, the DMC will recommend unblinding the study and meeting with the FDA to request accelerated approval. Now as a reminder, the OPTIMA Study was fully enrolled in August 2018 with 550 subjects, as I said, from 65 clinical sites in 14 countries. Those countries represent all the major markets in the world for primary liver cancer. The OPTIMA Study is based on a prospective 285-patient group from the HEAT Study -- subgroup from the HEAT study. And I say prospective, I want to repeat this, I say it every conference call, different than other subgroups. We identified a metric, 45 minutes of heating to be critical for ThermoDox in combination with RFA to improve survival. We identified those patients in the study who had been treated with 45 minutes or more of RFA plus/minus ThermoDox. And then we followed them for 3 years to determine an overall survival benefit. And what we saw is, I'll repeat again, is nothing short of remarkable. In this prospective evaluation of patients who were treated with standardized RFA more than 45 minutes, it demonstrated a median survival of more than 7.5 years when they combine this standardized RFA with ThermoDox. And that's a survival benefit of more than 2 years over the control group who received 45 minutes or more of RFA alone. I hope that's clear.

As Tuesday's press release points out, and if you haven't read it, I hope you will, I suggest that you do, the National Institutes of Health suggests that we had some cause to be optimistic. In an independent analysis conducted at the NIH's request, not at our request, their request, an analysis of the entire dataset from the HEAT Study was performed. NIH confirmed that an RFA procedure of increasing heating time plus ThermoDox resulted in a statistically significant improvement in overall survival. This past Tuesday, August 13, we announced the publication of the results from this analysis. Now in the online journal, the peer-reviewed Journal of Vascular and Interventional Radiology, the NIH's evaluation included survival data from all patients with single lesions. That's all the patients, single lesion, they used single lesions because they could determine with specificity the amount of time that tumors were treated with radiofrequency ablation. That was 437 patients representing almost 63% of the study population. This analysis established an improvement of over 2 years versus the control arm when the heating time of the tumor is greater than 2.5 minutes per milliliter of tumor or volume of tumor which, if you do the math, is largely equal to 45 minutes for a 3-centimeter tumor. This finding is consistent with what I told you earlier with the company's own results. Imagine that, independently evaluated from the full data set, a different look, 437 patients concluding that increasing heating times substantially improves survival and it appears that the inflection point turns out to be above 45 minutes for a 3-centimeter tumor. In which case, if that's filed, the patient's survival benefit over the control arm is more than 2 years, median time to death has never reached. 65% of patients are still alive after 7.5 years. I hope that's convincing in some way, at least mitigating some of the risk associated with the trial design as we have presented it. In parallel with this trial evaluation, we are putting everything in place for product manufacturing and commercial launch. As you know, we have 3 manufacturers for ThermoDox, 2 in the United States, 1 in China. We will be meeting with the U.S. FDA late in August, we've already set the date, for what I'm calling a pre-NDA meeting review of the manufacturing CMC in our preclinical modules. While we've conducted a gap analysis, we'd like to make sure that when we do file the NDA, that there is nothing missing. The last thing we want is a complete response letter, so your company is acting very proactively in this regard. But we will also be meeting, as I've mentioned to you in previous conference calls, we're meeting with the NMPA, formerly the CFDA, formerly the SFDA, that's the Chinese regulatory authorities. Well, we're planning for this meeting in the third quarter to discuss our filing strategy for ThermoDox in China. As I mentioned earlier, the Chinese authorities have expressed great interest in our most recent meeting with them in finding a means to be able to accelerate data review. And given that over 400,000 new cases are diagnosed every year in China, you can understand their impatience for the data from this study, which not only has the potential to have significant clinical benefit but the pharmacoeconomics for ThermoDox plus RFA are nothing short of astounding. Many of these patients are treated surgically or with multiple cycles of chemoembolization, which require long hospitalization and long recovery periods. As I told you in the past, RFA plus ThermoDox, in many cases, an overnight procedure in some hospitals can be in the future even an outpatient procedure.

Another point and then we're going to move on, the commercial opportunity I want to reiterate by our conservative model, and we just reviewed this again yesterday, exceeds $1 billion worldwide. While some 750,000 patients are diagnosed annually with HCC, approximately -- well, the mortality here is significant. Approximately 700,000 patients die annually from this disease. 75% of HCC cases are in China and Asia. More than 30,000 new cases in the U.S., 45,000 in Europe. The cancer incidence and HCC is increasing by 5% annually. HCC is on the minds of every health agency in the world, including NIH and FDA and CDC and EMA and others, certainly the Chinese. Just a few other key statistics here I just point out to you. So what's the -- I mean what -- let's assume ThermoDox is successful, what's the future here? HCC is the third leading cause of death in the world. The major risk factors for HCC are hepatitis B and C. And I'm going to give you one sobering statistic. Approximately 1/3 of 1 billion patients worldwide are infected with hepatitis B or C, a major risk factor for primary liver cancer. So clearly, we're addressing a pressing medical need with our hopes that -- and confidence, let me say it that way, that the study that we're conducting will provide a therapeutic that can be significant in changing the outcomes for these patients. So let's just summarize. ThermoDox, we're very, very excited. We believe this could be an exceptional -- exceptionally valuable asset as more data is generated for HCC. And as I've told you before, there's other solid tumor indications for which, assuming we're successful in primary liver cancer, which we'll immediately turn to, to evaluate where we've seen some potential for success in other solid tumors. And so while ThermoDox and OPTIMA are the immediate focus for some investors, we believe that GEN-1 holds equally compelling promise and is of great interest to investors focused on gene-based immunotherapies. While early in development though, GEN-1 is being evaluated, as you know, in a Phase I/II study called the OVATION 2 Study. These are of newly diagnosed, treatment-naïve, late-stage, Stage III/IV ovarian cancer patients are evaluating GEN-1 in combination with the standard of care, neoadjuvant chemotherapy prior to surgery are treated with this cocktail of chemotherapeutics and our immunotherapeutic. The goal of which is to improve surgical outcomes and to delay progression. On GEN-1, as you know, is our IL-12 gene-mediated immunotherapeutic. This is a very elegant approach to taking what science and medicine have recognized to be a very potent anticancer cytokine inflammatory protein with some serious side effects. Our scientists in Huntsville under Dr. Anwer's direction has developed a very safe local administration of this therapeutic, which is showing great promise from our early studies and particularly from our Phase I trial that was completed over -- a little over a year ago, the data from which has been presented multiple times. We want to say is, gene therapeutic there's always a concern about safety. We have completed 5 GEN-1 trials in ovarian cancer. Safety is unequivocal. I mean, it's -- there's no question about it. Biological and clinical activity has been demonstrated in virtually every study. Much of this was published in Future Oncology in October 2018. Again, I suggest you read it. It's available on our website. And the article describes our TheraPlas platform. This is synthetic, nonviral vector, nanoparticle for the delivery of the plasmid, the [transvac] cells that creates these biopharmacies that produce therapeutic levels of interleukin 12. The beauty of this technology and what attracted us to it was it's not only a safety profile but importantly, its potential to be administered over many, many cycles, as we have seen in our evaluations, without interference from the immune system, which makes it an ideal candidate for immunotherapy. During the first quarter of this year, we reported final data from this Phase 1b study of the OVATION 1 trial. And I'll remind you of the compelling, small but compelling, nonetheless, data from this study at a very top line. And by the way, the study manuscript is being finalized and hopefully, will be published in the relative near term. 100% objective response rate we saw in patients who are treated at the highest -- 2 highest cohorts. 8 of 9 patients treated at the 2 highest cohorts and an R0 surgical resection score. R0 is not expected in these patients, and it's predictive of significant improvement of PFS in overall survival. R0 means -- translated in layman's terms is when the surgeon comes out of the operating room and he goes to the patient's next of kin and he says, "I got it all, I've removed all of the diseased tissue from the patient.” We saw a remarkable 75% improvement in median time to progression with PFS increasing from 12 months, which would be expected and I think all of the literature, historical literature, supports this, 12 months. So we saw 21 months among the 14 patients treated according to protocol. All of this is supported by some very impressive translational data that was evaluated for us at Roswell Park cancer institute under the direction of Dr. Odunsi, the KOL in the area of immunotherapy particularly in ovarian cancer. Dr. Odunsi provided us with data to demonstrate a significant reduction in the immunosuppressive activity across -- of this cancer across multiple biomarkers, including PD-1, PD-L1 and others. And importantly, increased activity of both the adaptive and the innate components of the immune system. Now together are representing a marked proimmune anticancer shift in the tumor microenvironment. Now, so I'm not an immunologist, I'm not going to try to convince you that I understand this to the level that an immunologist would but this is what the immunology community is looking for, this shift to proimmune, the tumor microenvironment that hides itself very nicely from the immune system as it gets a foothold to become a malignant and lethal mass. So we're very excited about the translational data supporting clinical data. We've moved to a Phase I/II study at the recommendation of our advisers. We have a Phase I run-in. We talked about that. The OVATION 2 study, as we're calling it, I reported had a very difficult startup largely due to some changes in the approval process for gene-based therapies from a centralized review at the NIH to decentralize review which took many study sites over a year to establish that along with some review after review by scientific committees, et cetera. In any event, we have momentum moving in our direction. We're delighted to report we've enrolled the first of 2 cohorts in the Phase I portion at 10 trial sites. We fully expect to have 20 trials, 25 trial sites active and recruiting patients in the Phase II portion by year-end. Overall, early into next year about 30 trial sites. The goal of which is to complete enrollment, 130 patients in this study by the end of next year as we had promised. If you recall, this study was originally designed with 10 sites. We've increased it to 30 sites to ensure that we had -- it's somewhat of a higher cost but the goal here is to ensure that we complete enrollment on a trial -- on a timely basis. While the trial DSMB will meet in September to evaluate the first cohort of patients, the second cohort will be completed as soon as the DMC gives the okay. We'll begin enrolling patients. We expect to have the second cohort enrolled and evaluated for objective response and surgical outcomes by the end of the year. Assuming we've achieved the dose of 100 milligrams per meter square, we'll begin enrolling the Phase II portion in early 2020. This is again, as I said, 130-patient trial. It's randomized 1:1. So we'll have a control arm for the first time for this drug candidate to determine its efficacy. And we are excited, really, to begin to evaluate ThermoDox compared -- I mean GEN-1 compared to a control arm. These patients will also be receiving a maintenance therapy after surgery. Our goal is to continue to recruit the immune system to prevent a recurrence of this cancer because we know the length recurrence, improving progression-free survival has a direct and immediate impact on overall survival. As I reported, we spoke to the FDA earlier this year regarding our interest in breakthrough therapy in accelerating our development program. The meeting could not have been more successful. In my opinion, one of the most productive exchanges with the FDA in my career. Once the FDA report as suggested to us, once the dose is established in our Phase II study, the FDA indicated that they would be interested in a face-to-face meeting with the management and our team and our scientists to discuss trial designs potentially to accelerate development, if we so choose. They also asked that we develop supportive randomized data from this small subset, the Phase I portion of the study, combine it with the OVATION 1 data and submit it for breakthrough consideration, which we plan to do. So we're very excited in that regard. And with the FDA's interest is GEN-1 and IL-12 in ovarian cancer. For the Phase II study overall, the primary analysis for primary endpoint is progression-free survival of PFS. That will be conducted after 80 patients -- at least 80 patients have progressed. Or after all patients have been followed for at least 16 months, whichever is later. Under this open-label design, the clinical data will be disclosed throughout the execution of the trial as it's released by the study's investigators. And we've done that. We've evaluated and released data from the OVATION 1 study. And as soon as it's available to us, we'd like to make it available to the investment community so that you can make your judgment on the potential of this program. While we remain optimistic here, the study of the enrollment will be completed by 2020 but even more so that GEN-1 will fully find its place in the treatment armamentarium for ovarian cancer.

So now before I turn this call over to Jeff to review our second quarter financial results, I want to emphasize that Celsion has the potential for transformative announcements. I hope you can see that in my comments from both of our -- or either of our clinical studies later this year. Underpinning our fundamentals is a strong balance sheet, and we have access to capital at very reasonable rates, at very reasonable economics. We continue to expect to create significant value for our shareholders, for patients and for the medical community. And with that I will take a deep breath and turn the call over to Mr. Church. Jeff?

--------------------------------------------------------------------------------

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

--------------------------------------------------------------------------------

Thank you, Mike. The detail to Celsion's second quarter 2019 financial results were included in the press release we issued yesterday evening and in our Form 10-Q, which we made available last night after the market closed. As Mike stated, we made -- we have made important progress in preparing for the significant milestones that are now drawing closer. Our ongoing focus on efficient cash management will allow us to reach several of these key milestones over the near and intermediate term. As of June 30, 2019, Celsion's cash and investment balance was $22 million. In addition, the future planned sale of New Jersey's state NOLs of $4 million and the availability under existing equity lines should allow us to extend our cash runway into the first half of 2021. This timing will put us past the final endpoint of the Phase III OPTIMA Study, which is 197 events, if we need to go that far. Our clean capitalization table includes approximately 21 million shares of common stock and only 600,000 warrants, which have an exercise price above the current market price. I'm also pleased to tell you that the current share position of approximately 1% of our shares outstanding is an all-time low for the company. 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 also have 2 equity facility -- financing facilities in line that afford us the opportunity to raise additional capital in an opportunistic fashion with no warrants and a very low commission or fee.

Turning now to the second quarter financial results. Research and development expenses decreased $1 million to $3.6 million in the second quarter of 2019 compared to $4.6 million in the second quarter of last year. Clinical development costs for the Phase III OPTIMA Study decreased $800,000 in the second quarter of this year and that was due to the completion of enrollment in this trial in August 2018. Costs associated with the OVATION 2 study were $100,000 in the second quarter of 2019. Other costs related to the clinical supplies and regulatory support for the ThermoDox and GEN-1 clinical development programs increased by $300,000 in the current quarter compared to the prior year. In the second quarter of 2019, noncash stock compensation expenses decreased by $2.6 million compared with the same period last year. General and administrative expenses were $2.1 million in the second quarter of this year compared to $3.5 million in the same period last year. The decrease was primarily attributable to $1.8 million decline in noncash stock compensation expense, offset by a $200,000 increase in professional fees primarily related to recruiting fees for several new positions to support anticipated regulatory and commercialization efforts for ThermoDox. In connection with the June 2018 venture debt facility with Horizon, we incurred interest expense of about $300,000 during the second quarter of 2019. This compared to only $15,000 of interest expense last year. For the second quarter of 2019, we reported a net loss of $5.9 million or $0.29 per share compared to a net loss of $8.2 million or $0.46 per share in the same period of 2018. Operating expenses were $5.7 million in the second quarter of this year, which represented a $2.4 million or a 30% decrease from the $8.1 million in the same period last year. Net cash used for operating activities was $4.7 million in the current quarter and this compares to $4.2 million used to fund operations in the second quarter 2018. Cash provided by financing activities during the second quarter were $2.7 million, which included opportunistic sales through the equity facilities I mentioned earlier. In June, we filed an application to sell additional New Jersey state NOLs totaling $2 million to raise nondilutive capital, which we plan to monetize in the fourth quarter of 2019. We anticipate that our net cash usage for the second half of 2019 will be approximately $4 million per quarter. Our current cash, together with the NOL sales and the moderate selective use of the ATM equity line, is expected to provide us funds into the first half of 2021. Our balance sheet business fundamentals are strong. Our capital structure is clean with only 21 million shares outstanding and virtually no warrant overhang. In closing, a successful outcome for ThermoDox, a potential $1 billion commercial opportunity, will be a significant value inflection for the company as well as its shareholders. I'd now like to turn the call back to Mike.

--------------------------------------------------------------------------------

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

--------------------------------------------------------------------------------

Thank you, Jeff. As always, a lively and vivid discussion of the financials. You bring the numbers to life. We thank you. Now before going on to questions, I want to close with 2 points. By the way, Mr. Church does a great job for us and I want to thank him for that. I also want to point out that I'm very proud and I hope you are too of all that our employees continue to achieve through their tireless dedication to patients. And on your behalf, I want to thank them very much. Second, we want you to know we have been very active in presenting the Celsion story to investors and analysts through non-deal roadshows and presentation and investor conferences. During the quarter, we presented at ThinkEquity Conference in New York City and the Deutsche Bank 44th Annual Health Care Conference in Boston. And we thank them. We look forward to participating at Dawson James and Sheridan Conferences in October. We're also very pleased that Dawson James has picked up coverage on the company. Thank them very much for their interest. And we're delighted now we have 4 research analysts covering the company. We hope that their insights into our programs and our capability and our potential give you a reason to take a very good look at Celsion as an attractive investment opportunity. So with that, I'll stop there and ask the operator to open the call for questions. Operator?

================================================================================

Questions and Answers

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

(Operator Instructions) We have a question from Hartaj Singh, Oppenheimer & Co.

--------------------------------------------------------------------------------

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

--------------------------------------------------------------------------------

Thanks for the questions and the really comprehensive update. Really appreciate it. And I'm also looking forward to working with LHA. They always do a very good job. Just a couple of questions. One is, Mike, I know that you've been presenting some blinded data from the ThermoDox trial, OPTIMA. Is there -- one question that we've gotten from investors is that because physicians are giving RFA more consistently, is there probability that just the overall patient population will be better? Of course, I mean assuming that the patients on ThermoDox will be even better than the ones just on RFA alone. Would you think that part of the reason why we're seeing a -- the blinded kind of overall OPTIMA curve like being greater, that probably one part could be just that the RFA procedures they've been doing more -- have been done more consistently at 45 minutes at minimum? And then I just got a couple of follow-ups.

--------------------------------------------------------------------------------

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

--------------------------------------------------------------------------------

I think that's a very interesting question. And we can answer with absolute confidence. Dr. Borys and I and a few of our PIs have discussed it at some length. We don't believe that there's any reason to believe that for those physicians who have historically used RFA for 45 minutes in this technique for larger tumors, which we believe is the correct technique and should have always been used that way. We don't believe that there's been any advance in that regard, Hartaj. There are some academic books on the use of RFA for these larger tumors that describe the proper use of this technology, of this heating technology. It's unfortunate in the first study that these academic treaties, they were not available to all the physicians. I suspect there was a -- we might have had a successful trial. But my sense is the limitations of RFA remain limited and not the technology. After discussion with our PIs, on the technology or the use of the technology, has not improved dramatically over the subgroup. And so our sense here is that if there is an improvement, it's a modest one. And I'll point to the study -- the final analysis, and I'd like to discuss this more at some point. But the final analysis assumes that we'll see a 33% improvement in the overall survival versus the control arm. And you recall, we based the study on a Hazard Ratio of 0.65 that we saw in the prospective subgroup or approximately 55% improvement. So there is a margin of safety that would allow for, if indeed there was some modest improvement in this technique, that would allow for the study to be successful, we believe. So I hope that answers your question.

--------------------------------------------------------------------------------

Hartaj Singh, Oppenheimer & Co. Inc., Research Division - Research Analyst [4]

--------------------------------------------------------------------------------

Yes. No. No, that helps a lot. I mean, I do think that your subgroup in HEAT, they separated so clearly. And I believe that those -- the patients there were on the 45-minute also at minimum, right? So I mean, we will know shortly. And I think that this therapy should, as you say, be a real advance for those tens of thousands of patients' primarily liver cancer. Another question I have is interestingly, you've restarted your primary -- the breast cancer trials in a single-center [IFT] in Europe. Can you just give a little bit of an idea as to what are the expectations, the timing there on the 12 patients? And then what would be potential next steps if that's successful?

--------------------------------------------------------------------------------

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

--------------------------------------------------------------------------------

Yes. I just want to add one more point to the first question. One of the things that we measure is the treatment failure of radiofrequency ablation. There's a percentage of patients that have to be retreated according to protocol if any living tissue remains after the first RFA. The percentage of patients who require a second treatment is literally no different when we look at the subgroup versus the OPTIMA Study, literally no different. So that -- at least again, that suggests to us that the use of RFP at 45 minutes is reasonably consistent between the 2 groups. With regard to the breast cancer study that is being conducted at Utrecht, this uses a heating technology known as HIFU. We've always been very excited about HIFU. There's been limitations with the commercial availability of high-intensity focused ultrasound, largely based on cost and the time it takes to completely ablate a tumor. We proposed over a long period of time in discussing with various manufacturers the value of combining ThermoDox with HIFU in a nonablative mode, in a hyperthermia mode which would reduce the time required to treat a tumor at elevated temperatures sufficient to deliver a local high dose of ThermoDox. This has always been a very interesting combination for us. Under the work at Utrecht, it's been ongoing, I think, for now about 7 or 8 years. We finally got an approval, they finally got an approval to evaluate breast cancer patients. This isn't a breast conservation approach. So the goal here is to complete a lumpectomy and then treat the remaining tissue with a combination of ThermoDox and HIFU in multiple cycles. Our primary endpoint here would be progression-free survival. So that's what we're looking forward to. We know that the study now is just the IRB, or Ethics Committee in Europe it's called, approve the study and the trial now has just begun to recruit patients. Our sense is that the 12 patients required to complete the cohort could take 12 to 14 months to completely enroll. When we talk to the investigators, they believe they have enough potential patients to enroll for potentially 1 a month or 1 every other month. So that's our best estimate at this point.

--------------------------------------------------------------------------------

Hartaj Singh, Oppenheimer & Co. Inc., Research Division - Research Analyst [6]

--------------------------------------------------------------------------------

Great, Mike. Great. And I mean that's a program you and I have talked about previously. I've always been really interested in because, again, the unmet need there you could actually argue is even higher than probably primary liver cancer. So that's great. And then it looks like you've got a patent for ThermoDox, a new patent that was issued that pushes it out to 33. It looks like a method-of-use patent. Can you just talk a little bit about that patent specifically and the method used? And then it seems like there's a new formulation of ThermoDox there. So do you have to do any kind of bridging studies between the current formulation using in OPTIMA versus this new version? And then I just got one last question for Jeff.

--------------------------------------------------------------------------------

Michael H. Tardugno, Celsion Corporation - Executive Chairman, President & CEO [7]

--------------------------------------------------------------------------------

Sure. The formulation path that we think provides us with the best protection for exclusivity relates to the method of manufacture. And it uses a loading technique that fundamentally improves the quality of our drug. So concurrently, the quality of our drug -- it's very high quality. I don't want to suggest that it's not. But it's maintained at minus 80 degrees centigrade at a relatively high cost. So maintaining it at this minus 80 degrees centigrade prevents the degradation of -- well actually it's a dimer that's formed, prevents the formation of a dimer of doxorubicin, which is an impurity. The change in this means of manufacturing allows us to produce a product at a lower cost and start at refrigerated temperatures, which not only has the potential to improve the drug quality because there is no potential for the formation of this impurity but also reduces storage and handling costs. So we think it's a big advantage. The guidance that's provided by the FDA for comparability is not easy, frankly. But it does require some assessment of efficacy. We believe that, that assessment of that efficacy can be established in a crossover study in breast cancer. We've done that before. That's how we've qualified the second suppliers. It does take some time. But in the past, the crossover study that we use to qualify as second supplier, I can't believe we enrolled about 15 patients over an 18-month period. And that would be the strategy that we would use. And I'm just saying that off the top of my head because we have to discuss it with the agency but that's the strategy that we've used. They've accepted it in the past and I think is something that this company is prepared to move on very, very quickly, assuming we get approval for ThermoDox in its current dosage form.

--------------------------------------------------------------------------------

Hartaj Singh, Oppenheimer & Co. Inc., Research Division - Research Analyst [8]

--------------------------------------------------------------------------------

Yes. That makes sense, Mike. And then -- so just to be clear, what you're saying is you'll likely get ThermoDox if OPTIMA is successful and you get approval in its current form and then after approval, you will go to this new formulation?

--------------------------------------------------------------------------------

Michael H. Tardugno, Celsion Corporation - Executive Chairman, President & CEO [9]

--------------------------------------------------------------------------------

Immediately, Yes. Immediately. I just want to say one more thing. There's another patent that we haven't discussed and this is a -- it's called the [phorolipid] patent that allows us to expand the use of this heat-sensitive liposome into therapeutics that are not aqueous. So they're hydrophobic compounds. And so we see the ability to expand the range of drug products that can be included in this heat-sensitive liposome in a pipeline of products for nonchemotherapeutics. We're really excited about the potential. We're only limited by our balance sheet with the potential of this platform.

--------------------------------------------------------------------------------

Hartaj Singh, Oppenheimer & Co. Inc., Research Division - Research Analyst [10]

--------------------------------------------------------------------------------

Yes. No, that's great, Mike. Last question for me, and that is that, Jeff, I know you're getting the $4 million from New Jersey. New Jersey has been very good to small-cap biotechs by allowing this kind of funding approach. You've gotten money previously also. Any potential for more after this? Or this would be pretty much the sum total of what you can -- how far you can go with the NOLs?

--------------------------------------------------------------------------------

Jeffrey W. Church, Celsion Corporation - CFO, Executive VP & Corporate Secretary [11]

--------------------------------------------------------------------------------

Sure. The current program offered by the state of New Jersey does cap that amount at $15 million per company. There is some discussion that, that limit may be raised to $20 million. But right now, we can sell an additional $4 million after what we had sold last year.

--------------------------------------------------------------------------------

Operator [12]

--------------------------------------------------------------------------------

The next question comes from Jason Kolbert, Dawson James.

--------------------------------------------------------------------------------

Jason Howard Kolbert, Maxim Group LLC, Research Division - Former Executive MD, Head of Healthcare Research & Senior Biotechnology Analyst [13]

--------------------------------------------------------------------------------

Congratulations on all the progress. Very exciting. And Jeff, congratulations on getting a handle on kind of the top structure funding and strong balance sheet. I can certainly appreciate the flexibility that, that provides you, particularly being funded through so many catalysts. Mike, you and I have talked a little bit about this and I know you opened the call with it. Can you take some time and go through the powering calculations that went into the trial? Talk a little -- you mentioned the Hazard Ratio at 0.65 and the delta between active and control at 33%. Can you just kind of help me connect those 2 things? And -- so that I can understand the probabilities around the powering and the probability that you get a P-value in terms of the current trial design.

--------------------------------------------------------------------------------

Michael H. Tardugno, Celsion Corporation - Executive Chairman, President & CEO [14]

--------------------------------------------------------------------------------

Thank you. And it's good to hear your voice on our call once again, Jason. Thank you for your interest in the company. And I want to say support, now you've given us some good counsel over the years. So let me just start with the study is 80% powered, and I'm going to use my words here, it's not the statistically elegant words but it's 80% powered to show a 33% improvement in overall survival at the final analysis. That's at 197 deaths. The P is equal to 0.05 if we took no looks, if we took no interim looks. We do take an alpha hit with the interim looks but the interim looks are based on something called the Lan- DeMets protocol. And so the alpha is de minimis. So if we proceed with the 2 interim analyses, the first one and the second one, and we're not successful at either, the P available to us at the final analysis will be something like 0.042. So you get a sense of where our alpha spend is. So 80% is powered to show a 33% improvement, you get the final analysis. But the study was based on this prospective subgroup that we followed very carefully that demonstrated a 55% improvement in overall survival, the therapeutic arm versus the control arm. So you see there's quite a bit of margin there to be successful at the final analysis. On the interim analysis, the first interim analysis was planned at 60% of the final analysis, 60% of the events or deaths. That was 118 deaths. The way that we follow patients is by the time we get a confidence that we have the right number of deaths, we were at 128 deaths. At 128 deaths, the improvement over the control arm necessary for success calculates to about 57%. Its P equal to 0.637. So just a little bit better. Let me try to put that in more concrete terms. If the control arm median time to death is 2 years, then if the first analysis, the therapeutic arm median time to death would have to be 37 months, so 24 months versus 37 months. If we're not successful at the first interim, the second interim is planned at a lower threshold, P equal to 0.07 or 42% improvement in the therapeutic arm over the control arm. In that case, again, assuming we had a median time to death and the control arm of 2 years or of 24 months, 34 months in the active arm would be required to be successful, less than the 37.5 months that we had seen -- would have seen in the subgroup. And in the final analysis, as I said, the Hazard Ratio is 0.75. The objective -- that translates into about a 33% improvement in the median time of their death. So again, assuming the control arm is 24 months, we would have to see an 8-month improvement in the median time of death to be successful. That compares to the subgroup of 37 months. So there's a good margin here that we believe can provide us with some confidence that somewhere along the line here, we would be successful. So I know this may sound confusing. So in the subgroup, we saw a 55% improvement at the first interim, a 57% improvement would be required for success or just a little bit better than the subgroup. If we're not successful there at 42% improvement at the second interim, if we're not successful there, then only a 33% improvement is required for us to be successful. I hope that...

--------------------------------------------------------------------------------

Jason Howard Kolbert, Maxim Group LLC, Research Division - Former Executive MD, Head of Healthcare Research & Senior Biotechnology Analyst [15]

--------------------------------------------------------------------------------

No, I got it. Perfect. That's a great recap of the numbers and you and I talked about this. I don't think there's just an appreciation of what a good design this is and the kind of wiggle room that you've built into it. So you and I worked together to kind of raise people's awareness on that. And thank you so much for your support. And I'm so excited to be following the company and reconnecting with you, too.

--------------------------------------------------------------------------------

Operator [16]

--------------------------------------------------------------------------------

The next question comes from Kumar Raja, Brookline Capital Markets.

--------------------------------------------------------------------------------

Kumaraguru Raja, Brookline Capital Markets, LLC, Research Division - Director & Senior Biotechnology Analyst [17]

--------------------------------------------------------------------------------

Congratulations on all the progress. So following the interim analysis, if we need to move forward the trial, what is the expectation in terms of the rate of death that you're modeling? And how does the changes in that impact the time line for the future data readouts?

--------------------------------------------------------------------------------

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

--------------------------------------------------------------------------------

Yes. So the death rate, we really -- we haven't really disclosed it in absolute numbers. So we're -- so we're currently at 128 deaths. The next analysis would be triggered at 158, that's about 30 more. We may choose to allow for an increased number just to assure we're not -- we have the minimum amount. We're seeing about one patient per week expire, unfortunately. But that's the way it works. So that's been historically. More recently, the last few months that's ramped up a little bit. So it's more like 6 patients per month. So it's somewhere between 4 and 6 patients a month we think we can count on, Kumar. So that's why we're -- that's why we're projecting about a 6-month period or so to accumulate the next number of deaths. And then it's about 6 weeks after that to prepare the data for the DMC.

--------------------------------------------------------------------------------

Kumaraguru Raja, Brookline Capital Markets, LLC, Research Division - Director & Senior Biotechnology Analyst [19]

--------------------------------------------------------------------------------

And in terms of the breast cancer trial, how does the combination of HIFU plus ThermoDox compare versus the combination with RFA? And also in the Phase I trial, how is this going to be optimized?

--------------------------------------------------------------------------------

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

--------------------------------------------------------------------------------

Yes, so that's part of the strategy. The optimization really is a function of dwell time. And there's of limited capability to be able to the sample tissue for drug concentration. But the optimization really has been a function of the preclinical work that we've done in large animals. So there is some expectation, Kumar, that 45 minutes is the right number. We saw in a previous study of breast cancer patients, this is recurrent chest wall breast cancer patients who are refractory to chemotherapy, refractory to surgery. Obviously, they failed surgery, refractory to radiation that the response rate was 100% when we provided hyperthermia -- microwave hyperthermia locally to the cancer lesion. So this 45 minutes to an hour trigger we think is the right time. And that's what we applied to these patients following surgery. So the goal here is to remove the tumor mass and then create this local deposition of drug with a hyperthermia level of energy from the HIFU device, not with ablative energy but with hyperthermia level energy.

--------------------------------------------------------------------------------

Kumaraguru Raja, Brookline Capital Markets, LLC, Research Division - Director & Senior Biotechnology Analyst [21]

--------------------------------------------------------------------------------

All right. And in terms of the OVATION 2 trial enrollment, what's happening in terms of the sites? Are you seeing more sites coming on board? When do you think you will have all the [party] sites on board?

--------------------------------------------------------------------------------

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

--------------------------------------------------------------------------------

Yes. So we're not stopping. I mean, we started with 10, we have an objective to enroll 30 sites. We've identified now 36 sites. So it's likely to be more than 30. On the calendar now, we have initiation -- site initiation plans for 25 sites. We have 10 currently. 15 more sites before year-end and then 5 more sites, not yet on the books but in the process of being qualified in the first quarter of next year. So the goal here is to have enough sites to be able to enroll the balance of the study, that's 118 patients over the course of 12 months at 30 sites. And you can do the math. I mean that's 1 patient per site every 3 months. We think that makes a great deal of sense.

--------------------------------------------------------------------------------

Operator [23]

--------------------------------------------------------------------------------

Our next question comes from [Barry Rubin], private investor.

--------------------------------------------------------------------------------

Unidentified Participant, [24]

--------------------------------------------------------------------------------

Thank you for all the progress and my usual quarterly shoutout to Mr. Church for always answering my questions. Before I ask mine, I just have one business question. About an hour ago, I picked up 1,000 shares more because the price didn't make any sense at $1.66. So when something is on sale, you pick it up. But my business question -- I'm sorry, my business question. You were in Vietnam when, last year or this year?

--------------------------------------------------------------------------------

Michael H. Tardugno, Celsion Corporation - Executive Chairman, President & CEO [25]

--------------------------------------------------------------------------------

Both. Actually, we just got back from Vietnam.

--------------------------------------------------------------------------------

Unidentified Participant, [26]

--------------------------------------------------------------------------------

Okay. So I'm just wondering out of curiosity because I know there's a big HCC business opportunity there. What's going on over there with your communications with them? And is there any way to get expedited approval over there? I was a little confused on that.

--------------------------------------------------------------------------------

Michael H. Tardugno, Celsion Corporation - Executive Chairman, President & CEO [27]

--------------------------------------------------------------------------------

This is really interesting. We know we have a significant delay in the approval of our OPTIMA protocol in China. And it had nothing to do with our company. There were 18,000 applications, and we were in line with everybody else. To offset the delay, we decided kind of reluctantly, to be honest with you, Barry, because of some of the reports that we've gotten on data quality, we decided to go to Vietnam where the incidence rate is quite high that Vietnam has 1/3 of the population -- less than 1/3, 25% of the population in the United States and the -- more, by about 20%, more cases of HCC. So you can see it's a big problem. We met with the Minister of Health. We asked if they would meet with us to discuss our trial design and he brought with him some of his experts in clinical trials and Dr. Borys and I met with him a few years ago. We presented the trial. We told him that we were there not only to conduct research but if we were successful that we bring this drug to market in Vietnam right away. Typically, he told us it takes about 18 months to get a trial approved. But he picked up the telephone right in front of us and started calling the major hospitals on a Sunday, the doctors at the major hospitals, and began a process on a Sunday. I mean, we were in awe, actually, at how supportive the Minister of Health was. We got the trial approved within 4 months. We started enrolling patients. I think we met with him in December and started enrolling patients in April. Vietnam is very productive. We watched them very carefully. We hired a second CRO to focus intensely on trial compliance and data management. We brought in experts from South Korea and the United States and the Philippines to make sure that the RFA procedure is being conducted correctly. We evaluated all of the RFA procedures through our independent radiology review of the CT scans to make sure there was no -- we weren't missing anything. The bottom line was we enrolled almost 100 patients in Vietnam in a relatively short period of time with some of the most enthusiastic investigators. We went back just a month ago, Dr. Borys and I, to thank the investigators for all their work, to review with them the case studies, to get their impressions of where we stood with radiofrequency ablation and ThermoDox. Just impressions because it's a blinded study. They're overwhelmingly positive with the trial and the outcome and their patients' recovery and progress. We presented the results from -- on this enrollment period to the Minister of Health once again who advised us that once we have an approval from any country, China, the United States or the EMU, that they would immediately accept our application and accelerate it through an approval process. So that's where we stand. It's been a very gratifying part of the work that we're doing. This, among other countries, I don't want to take up your time with some boring conversation here. But we -- I was telling Dr. Borys, if we've done nothing else, we've improved the standard of care in Asia Pacific and China and in a very material and measurable way. This little company has brought the rigor of Phase III studies to some of the most important institutions in Asia Pacific and China. The quality of care they're getting as a result of this standardization of radiofrequency ablation is remarkably better. The impact of ThermoDox, we believe, will improve it even more. So the feedback from the regulatory agency in Vietnam and from the investigators was very, very positive. And I can tell you, I mean, you're buying our stock. Your money, your investment in this company is helping to improve the quality of care for -- it's going to be millions of people regardless of how the ThermoDox thing turns out. Although I'm sure it will be very -- I'm highly confident it will be successful. Your investment has allowed this little company to bring modern medicine to some places where HCC is an enormous problem. So we thank you very much.

I think -- Barry, are you still there? Hope we didn't lose you? We did. So operator...

--------------------------------------------------------------------------------

Unidentified Participant, [28]

--------------------------------------------------------------------------------

I'm here.

--------------------------------------------------------------------------------

Michael H. Tardugno, Celsion Corporation - Executive Chairman, President & CEO [29]

--------------------------------------------------------------------------------

So thank you very much, Barry. And we appreciate your support and attention.

So operator, if there's no more questions, we'll move on to closing out the call.

--------------------------------------------------------------------------------

Operator [30]

--------------------------------------------------------------------------------

Okay. There are no further questions, sir. Go ahead.

--------------------------------------------------------------------------------

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

--------------------------------------------------------------------------------

Thank you. I thank everyone again for your time this morning. We believe that the work that we're doing is meaningful. Your support has been nothing short of rewarding for us, and we continue to ask you to stay with us. Because I hope that we've demonstrated in our comment that the next few months has the potential to be extraordinary, extraordinarily exciting and hopefully extraordinarily rewarding. We're now beginning to see the light at the end of the tunnel. And speaking on behalf of everyone here at Celsion, we hope that the approach that we've taken and the potential that we created will result in a transformative outcome. Meanwhile, we stay focused on executing our plan and presenting our accomplishments and our milestones. We look forward to our next meeting, and we hope you have a great, great afternoon. Thank you. The call has ended.

--------------------------------------------------------------------------------

Operator [32]

--------------------------------------------------------------------------------

Thank you, ladies and gentlemen. This concludes the Celsion conference. You may now disconnect.

--------------------------------------------------------------------------------

Michael H. Tardugno, Celsion Corporation - Executive Chairman, President & CEO [33]

--------------------------------------------------------------------------------

Thank you.

--------------------------------------------------------------------------------

Operator [34]

--------------------------------------------------------------------------------

You're welcome, sir.