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Edited Transcript of CLSN earnings conference call or presentation 29-Mar-19 3:00pm GMT

Full Year 2018 Celsion Corp Earnings Call

COLUMBIA Apr 8, 2019 (Thomson StreetEvents) -- Edited Transcript of Celsion Corp earnings conference call or presentation Friday, March 29, 2019 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, Senior VP of Corporate Strategy & IR

* Michael H. Tardugno

Celsion Corporation - Executive Chairman, President & CEO

* Nicholas Borys

Celsion Corporation - VP & Chief Medical Officer

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Conference Call Participants

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* Justin Alexander Kim

Oppenheimer & Co. Inc., Research Division - Associate

* Kumaraguru Raja

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

* Matthew David Cross

JonesTrading Institutional Services, LLC, Research Division - Research Analyst

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Presentation

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Operator [1]

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Good morning. My name is Savannah, and I will be your operator today. At this time, I would like to welcome you all to Celsion's Fourth Quarter and Full Year 2018 Financial Results Conference Call. (Operator Instructions)

At this time, I would like to turn the call over to Mr. Jeffrey Church, Chief Financial Officer of Celsion. Please proceed, Mr. Church.

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Jeffrey W. Church, Celsion Corporation - CFO, Senior VP of Corporate Strategy & IR [2]

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Thank you. Good morning, everyone, and welcome to our investor conference call to discuss our 2018 results which we announced earlier this morning before the market opened. Joining me today are Mr. Michael Tardugno, Celsion's Chairman, President and CEO; and Dr. Nicholas Borys, Celsion's Chief Medical Officer, who will be available to answer questions during the Q&A session of this call. Today's conference call will be archived, and a replay will be available beginning tomorrow and will remain available by phone until April 12, 2019, as well as available on Celsion's website for 90 days.

Before we begin the call, we wish to inform participants that we will be making forward-looking statements regarding Celsion's current 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 reports filed with the Securities and Exchange Commission. No forward-looking statements can be guaranteed, and actual results may differ materially from such statements. At the end of today's formal remarks, we will open the call for questions.

It is now my pleasure to turn the call over to Celsion's Chairman and CEO, Michael Tardugno. Mike?

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

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Thank you, Jeff. Good morning, everyone. Thank you for joining us for today's call. This morning, I was reviewing this very well written press release. Thank you, Jeff, for that. I was reviewing it with our staff, and I couldn't help but feel proud of all of these -- all of the accomplishments that this small team here in Central New Jersey has been able to achieve over 2018 of positioning this company, we believe, for success in 2019. So on behalf of the shareholders, to the staff, the Celsion staff that's listening in, we thank you very much for all of your hard work and commitment to our mission.

If you've been following our press releases and conference calls, you know that we've made meaningful progress on our -- with our ongoing programs for ThermoDox and GEN-1 as well as strengthening our balance sheet and cleaning up our capitalization structure, all delivered as promised across our various communications over the past year.

Among our many accomplishments, I'd like to emphasize that enrollment of our pivotal 556-patient global Phase III OPTIMA Study in primary liver cancer, also known as HCC and hepatocellular carcinoma, was completed ahead of projections in August of 2018. And now we are now looking forward to the first of 2 preplanned interim efficacy analyses for the OPTIMA Study expected later this year, and if needed, the second interim will be sometime in mid-2020. We'll discuss this more in a minute.

Our Phase I/II OVATION II study was initiated in the second quarter of 2018 as planned. This promising clinical development program in immunotherapy has generated impressive results to say the least. During the first quarter of 2019, we reported final data from our Phase Ib immunotherapy program from the OVATION I Study in ovarian cancer. These data showed 100% objective response. That's partial and complete responses in patients treated at the 2 highest dosing cohorts and 88% R0 resection scores in patients treated at the 2 highest dosing cohorts. And for those of you who may not know, an R0 is a prognostic for prolonged survival, R0 being the best; and a remarkable 75% improvement in median time to progression for those patients treated per protocol.

And we entered 2019 with some $28 million in cash and investments. As promised, we achieved this through most -- the most investor-friendly strategies with very little dilution, no share price discounts and no warrants that can be used to leverage a short position. I'd say to sum it up, we are well positioned with solid fundamentals, the right resources and a sound capital structure, all sufficient to see our clinical programs through transformative milestones and, in doing so, create significant value for our shareholders, patients and the medical community.

Now I'd like to talk about the OPTIMA Study, our global pivotal trial evaluating our lead drug candidate, ThermoDox, combined with radiofrequency ablation, also known as RFA, to treat newly diagnosed primary liver cancer patients. Now for those of you who are new to Celsion, I want to give you some background. Our global HCC incidence is about 750,000. It's growing at about 3% annually. This is the largest unmet medical need in oncology today, irrefutably the largest unmet medical need remaining in oncology. These statistics come from the latest global cancer statistic data -- statistical database. We are well positioned for the market. OPTIMA is being conducted in 14 countries in North America, Europe, China and Eastern Asia, all the major markets for this indication.

OPTIMA's primary end point is overall survival. The study is 80% powered to show a 33% improvement in survival, p equal to 0.05, at the final data analysis, which based on the stat plan occurs after 197 events or deaths. The OPTIMA Study is designed with 2 event-driven, preplanned, interim efficacy analysis. The first at 118 deaths, that represents about 60% of the number required of the final analysis. The second, if needed, at 158 deaths, we have 80% of the final analysis.

The DMC completed its review of the fully enrolled population in December. From this meeting, we can report the following. We expect that the 118 deaths will occur very early in our quarter 3 2019, which is in line with our previously communicated estimates. We will report the outcome as soon as possible, following normal quality checks in preparation following the DMC's review. The second analysis, if necessary, will follow some 6 to 8 months thereafter. We could also report that median PFS from the fully enrolled study continues to exhibit a great deal of promise. The most recent PFS analysis of the fully enrolled study shows 21.2 months or approximately 4.5 months better than what we would have expected from the 285-patient subgroup from the HEAT study, a group that is virtually identical to the OPTIMA Study population. You may recall from our prior discussions that a 3-month PFS improvement in this subgroup resulted in more than a 2-year survival benefit, a remarkable 2-year survival benefit. I want to be careful to point out that the PFS data from the OPTIMA Study is blinded and that the comparison to the HEAT study may not be predictive of the outcome. But I can tell you, this management team is excited nonetheless.

I also want to make a comment about the quality of the HEAT study subgroup on which the OPTIMA Study is based. We determined the subgroup not by looking at the result and working backwards. I'd say that again. We determined the subgroup not by looking at the result and working backwards. If we did so, skepticism would be justified. Rather, we identified the key success variables through careful analysis and prospective preclinical studies. In this case, RFA standardized to a minimum of 45 minutes was the key variable. We then applied that to the intent-to-treat population, 700 patients, in the HEAT study, and then and only then determined that 285 patients were treated according to the 45-minute RFA protocol, with and without ThermoDox. We then followed this well-balanced group quarterly for 2.5 years, and what we saw was nothing short of astonishing, more than 2 years survival benefit. And the group treated with a single dose of ThermoDox -- let me say that again, 285 patients in a well-balanced prospective subgroup, more than 24 months overall survival, following a well-controlled RFA procedure, combined with a single dose of ThermoDox in the largest, unmet medical need in oncology.

Now the purists can remain skeptical, but the NIH isn't. In a separate independent analysis of the entire dataset from the HEAT study, NIH confirms independently that an RFA procedure of increasing heating time plus ThermoDox results in a statistically significant overall survival improvement. So with that endorsement presented at the RSNA conference to a standing-room-only crowd, the company is assuming and moving forward that the trial will be successful.

We're hard at work now drafting the NDA and rigorously assuring that our commercial supply pipeline from 3 separate factories, 2 in the United States, 1 in China, are prepared and ready to go. We're rigorously conducting our initial market research and establishing our launch plans for China, the United States and for Europe, the European community. I believe this is a blockbuster opportunity by anyone's definition. And frankly, we could not be better positioned to take advantage of it.

So now I'd like to turn to our equally exciting but earlier-phase program in ovarian cancer, the OVATION II study. In OVATION II, we're evaluating GEN-1, our gene-mediated IL-12 immunotherapy in patients with newly diagnosed Stage III and IV ovarian cancer. To date, we have completed 5 GEN-1 trials in ovarian cancer demonstrating safety, very important, in DNA-based clinical trials, so 5 trials demonstrating safety, biological and clinical activity. Much of this was published in Future Oncology in October 2018, describing GEN-1's non-viral nanoparticle delivery system. Data from our Phase I dose escalation study, the OVATION I Study presented at the March ASCO-SITC, showed that newly diagnosed Stage III and IV patients treated with neoadjuvant chemotherapy plus GEN-1 resulted in a marked reduction in immunosuppressant response across multiple biomarkers, including FoxP3, IDO-1, PD-L1 and PD-1, and substantial evidence that GEN-1 exerts a pro-immune change in the tumor microenvironment. This translational data appears to support the remarkable clinical findings that I mentioned earlier and are worth repeating, 100% objective response rate. That's partial and complete responses in patients treated at the 2 highest dosing cohorts, 88% R0 surgical resection scores in patients treated at the 2 highest dose cohorts and a significant improvement in median time to progression.

So as you know, we have been sufficiently impressed with these findings to look for ways to accelerate the program. Delaying cancer progression in this population, we know, extends life. Conversely, we know that progression represents the beginning to a very short end for these unfortunate patients. Our thesis is this significant delay in progression has a significant OS benefit. The early evidence suggests that GEN-1 may have the potential to achieve this.

We know that GEN-1 is safe, the translational data is irrefutable and the early clinical data is impressive, even to our most skeptical PIs and medical advisers. So recently, we presented these data to the FDA in a short white paper summary, which was followed by an informal telephone conference call this past Friday, an award we could not be more pleased. The call was planned for 30 minutes and lasted for more than 45 minutes. We could not have asked for a more professional discussion. The FDA was attentive, prepared, interested in our views and very willing to provide constructive advice. Well, overall, we received a great deal of encouragement, and I'd say it repeatedly, for innovative approach to IL-12 for the trial design and for the target population. The agency participants were very complimentary of our presentation, our past work and our future commitment to GEN-1. They acknowledged that the ovarian cancer is a challenging unmet need and that the preliminary GEN-1 data, both clinical and translational, and I'll put this in quotes, "were exciting." The agency was very encouraged and, again, encouraged Celsion to continue development.

During the meeting, some of the outcome was this. We established that PFS was an acceptable primary end point so long as the radiology was independently read. The FDA did point out, however, that it was difficult to fully assess GEN-1's independent clinical benefit without having a control arm and that the confounding factors being -- might be the neoadjuvant therapy and surgery. So these are the suggestions that FDA provided going forward. Once the dose is established in our randomized OVATION II study, FDA recommended an in-person meeting to discuss future trial designs potentially to accelerate clinical development. They also asked to redevelop supportive randomized data from a small subset of the OVATION II study and submit it with our Phase I data for breakthrough consideration if we so choose.

So what does all this mean? We see this is as an exceptionally encouraging outcome. PFS is an accepted primary end point, very important. The invitation to submit supportive data from our randomized Phase II study is a strong signal, we believe, that they would like to see the already identified trend confirmed in a subset of patients from our ongoing phase OVATION II study. And perhaps, I would infer from this that perhaps they're suggesting they would like to see GEN-1 available to patients sooner rather than later, and even the confounding factors of neoadjuvant therapy and surgery work in our favor, assuming that the R0 resection rate with GEN-1 continues to strongly favor the use of our product. So I can say on behalf of the company and our participants, we could not be more pleased.

Moving on, as I have said in prior conference calls, OVATION II has been exceptionally and surprisingly difficult to get started. And it's not for lack of effort, I can promise you that. I can promise you also that this program has our full attention. We believe in the technology. We have the support of some of the most important investigators in ovarian cancer research. Well, there's no doubt that the translational data supports the pro-immune activity that we were expecting from IL-12. That being the case, however, our first challenge to getting the study started was budget. I mentioned that to you, I think, 2 conference calls ago with some institutions proposing patient crossover 50%. I've got to say we're not BMS. We cannot concede to those kinds of terms. Consequently, we've taken a little extra time to negotiate reasonable budgets, which we have done. The more recent and confounding development relates to safety and biological review committees. And I just -- I say this with a little bit of exasperation, many, if not all, third-tier institutions now require 2 -- heard that right, 2 independent IRP -- IRB reviews before they will consider the contract and budget issues. And with NIH's decision to end their center review of DNA-based trials, all clinical sites now have added a biological review committee for approval of the study before the study is initiated.

And now while we can't make up for all the associated delays, we have taken steps to ameliorate them as much as possible. The study was originally planned for 10 sites in the U.S., as I've told you. We've expanded our program to 30 sites and are considering expanding into Canada also. As of this date, we have initiated 7 sites and are expecting to have 20 online by June and all 30 recruiting by the end of the year. Meanwhile, recruitment is underway. We estimate that data will be made available beginning in the second half of this year.

The trial, as you will recall, is designed in 2 phases. The first is a lead-in dose escalation phase at 100 milligrams per meter squared. This is 30% higher than the final dose we saw in OVATION I. This phase will evaluate approximately 6 patients dosed with GEN-1 for safety. Since this is a randomized study, not every patient will be getting GEN-1. The second phase will enroll a total of about 130 patients, randomized again 1:1. So with this randomization, we'll know for sure GEN-1's impact on progression. All patients are treated in the study with standard neoadjuvant chemotherapy plus weekly cycles of GEN-1 or neoadjuvant chemotherapy alone, depending on which arm they are randomized to. Patients then undergo interval debulking surgery. Following surgery, patients in the therapeutic arm will be given GEN-1 plus adjuvant therapy. Patients in the control arm will receive adjuvant therapy alone. I said our primary objective is PFS. With GEN-1's ability to continue to recruit the immune system, we expect cancer progression to be blunted, our hope perhaps even eliminated.

Well, for the study overall, the primary -- PFS primary analysis will be conducted after at least 80 events that have been observed or after all patients have been followed for at least 16 months, whichever is later. Under the open-label design, clinical data will be disclosed throughout the execution of the trial as it is released by these study investigators. Importantly, we believe the additional sites that we're now initiating will facilitate faster patient enrollment and will allow us to track to our original time line and enable us to complete the enrollment in Phase II portion by the end of 2020. That's our objective. We're committed to it.

Now I'd like to point out 2 other very important points regarding the GEN-1 development program and not to be missed. We have been concerned about the high cost of GEN-1, particularly in the volumes that it's administered to patients. If we're successful, we will be the largest consumer or user of plasmid DNA in the world bar none, perhaps using -- needing more plasmid DNA than all the other development, DNA development companies combined. So our efforts to reduce costs have been very important to the success of the program. What I can tell you is this. Our first GMP batch of plasmid, produced by Hisun, our high-quality, cost-efficient supplier, was completed this week. Plasmid batch costs from Hisun will drop by over 85% as compared to that of our European supplier. Additionally, cost for GMP TheraPlas material, our synthetic polymeric vector, was reduced by over 50% of the previous cost. This cost-reduction program was initiated about 16 months ago and is critical, as I said, to the commercial success of GEN-1 and represents a major milestone in our overall development program. Bottom line, at scale, we will have almost an order of magnitude reduction in COGS, cost of goods sold, as compared to the rapidly increasing and, I'd say, predatory pricing of the established ventures consolidated supply chains at CMOs, or contract manufacturing organizations.

Second very important point. I think this deserves a great deal of consideration from investors. I'll also call your attention to the last page of our 10-K filed this morning with the SEC. You'll notice a subsequent event that we have renegotiated the milestone payment terms for GEN-1, extending it 12 months from the Phase II trigger event. The full cash payment of $12.4 million, which could be made either in stock or cash, the company's choosing, is not expected until the OPTIMA Study is fully completed and a number of important milestones for the GEN-1 program are achieved. Also, as an option, the company at its sole discretion may choose to settle the payment on the original time line for a deeply discounted $7 million. We believe that this is an important concession on the ex-EGEN shareholders' part and is a vote of confidence in our work and the belief that GEN-1 has the potential to be a meaningful therapeutic in oncology.

In conclusion, from a shareholder standpoint, I hope you agree that 2018 was a standout year. We implemented numerous initiatives to clean up our capitalization table. There are now no warrants to leverage a short position. The few nonstrategic warrants that remain expire next week. All in, we're a Phase III company with fewer than 20 million shares outstanding. Potential for extraordinary returns is, in my opinion, indeed extraordinary. Additionally, we're actively engaging with fundamental investors and expanding our investor relations efforts with research coverage and presentations at numerous health care conferences. Most recently, we presented at Oppenheimer's Annual Healthcare Conference on March 19. Our presentation and archived webcast are available on our corporate website. I invite you -- I encourage you to review it. Last point, our cash balance of approximately $28 million as of December 31, 2018, coupled with the continued sale of approximately $4.5 million New Jersey net operating losses, provides us with an operating runway that takes us through 2020. In our work, we could not be better positioned.

To discuss our financials now, I'd like to turn the call over to Jeffrey Church. Jeff?

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Jeffrey W. Church, Celsion Corporation - CFO, Senior VP of Corporate Strategy & IR [4]

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Thank you, Mike. Details regarding Celsion's 2018 financials were included in the press release and Form 10-K made available this morning before the market opened. As Mike stated, we have made a great deal of progress across the business during 2018, including financially, with an ongoing focus on efficient cash management for successful program execution.

As of December 31, 2018, Celsion's cash and investment balance was $27.7 million, enabling us to continue to focus on clinical and operational execution into the second half of 2020. In June, we closed on a 4-year $10 million venture debt agreement with Horizon Technology Finance Corporation, for which the first 2 years, our obligation is interest payments only. This debt agreement provides additional flexibility to finance our development programs.

We are also pursuing a variety of financing initiatives to further strengthen our balance sheet, including the following: In September, we filed a new $75 million shelf registration statement with the SEC. This replaces our existing shelf which expired. We announced 2 equity financing facilities that affords us the opportunity to raise additional capital in an opportunistic fashion, with no warrants and a very low commission or fee. The first facility is a $15 million common stock purchase agreement with Aspire Capital, and the second facility is a $16 million aftermarket facility with JonesTrading. We have tested both of these new financing facilities during the first quarter of 2019, raising some additional capital on a very opportunistic manner. Both facilities worked very effectively, in line with our expectations.

In early September, we announced our application to sell $12.5 million of unused New Jersey net operating losses for the tax year 2011 to 2017. In December, we sold $11.1 million of our New Jersey NOLs for a total of $10.4 million through the New Jersey Economic Development Authority's NOL program. This program is available to businesses based in New Jersey and provides the opportunity to sell up to a maximum of $15 million in NOLs per company. Since we still have room before we reach the maximum proceeds available to us under this program, we anticipate selling additional NOLs in 2019 and 2020 until we reach the maximum allotment.

For the year ended December 31, 2018, Celsion reported a net loss of $11.9 million or $0.68 per share. This compares to a net loss of $20.7 million or $2.72 per share for the prior fiscal year. Operating expenses were $21.6 million in 2018, which represents a $2.6 million increase from the $19 million in the prior year. During 2018, the company incurred $4.6 million in noncash stock option expense compared to $1.3 million in the comparable prior year period.

Net cash used for operating activities was $7 million for the year ended December 31, 2018, which compares favorably to the $16.6 million used to fund operations in 2017. Total cash provided by financing activities was approximately $11 million during 2018, which included $10 million in gross proceeds from the company's venture debt facility completed in June 2018 with Horizon and $1 million in net proceeds from sales of common stock. In addition to these traditional forms of financing, the company received, as I mentioned, $10.4 million in nondilutive capital from the sale of this New Jersey state NOLs in the fourth quarter of 2018.

Research and development costs decreased by $1.2 million or 9% from $13.1 million in 2017 to $11.9 million in 2018. Clinical development costs for the Phase III OPTIMA Study decreased $2 million as a result of 2 factors, cost concessions negotiated with our lead contract research organization coupled with lower monthly CRO fees and investigator grant payments after completing enrollment of the Phase III trial during the third quarter of 2018.

General and administrative expenses were $9.7 million for the year ended December 31, 2018, compared to $5.9 million in the comparable prior year period. This $3.8 million increase was due to higher professional fees of approximately $700,000, higher travel expenses of approximately $100,000 and higher compensation expenses totaling $2.9 million. Compensation expenses include costs associated with several new personnel additions as well as an increase of $2.3 million in noncash stock option expense.

Other expenses included a noncash charge of $4.5 million for the year ended December 31 compared to a similar noncash charge of $2.5 million in 2017, both of which related to the impairment of certain in-process research and development assets related to the development of our glioblastoma product candidate. These charges were offset by $4.2 million reduction in the projected earn-out liability related to potential milestone payments for this product candidate in 2018 and 2017.

The company recorded $0.5 million of interest income from its short-term investments during 2018. In connection with the new debt facility with Horizon, the company incurred interest expense of $700,000 during 2018 compared to about $100,000 during 2017.

As mentioned earlier, during the fourth quarter, the company recognized $10.4 million in income tax benefit -- it shows up on our income statement, resulting from the sale of its cumulative New Jersey NOLs. The company has approximately $4 million in future tax benefits remaining under the New Jersey NOL program for future years.

We anticipate that our first quarter net cash usage will be approximately $4.2 million, leaving us with over $23.5 million of cash at the end of the first quarter of 2019. This cash balance, together with additional NOL sales projected for 2019, is expected to provide us with over 7 quarters of runway, extending our operating horizon through 2020.

Our balance sheet and business fundamentals remain strong. We are committed to executing on our financial and operating plan, and we have the financial leverage to properly capitalize the company for success and drive value for our shareholders.

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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Well, thank you, Jeff. And I sincerely thank you on behalf of all of our shareholders who you look out for every single day.

I'll just conclude with a few comments. First, just -- we accomplished an enormous amount last year, all the while looking out for our shareholders' interests, setting us up for a strong 2019 with important data expected for both of our development programs in this year. Both ThermoDox and GEN-1 address significant needs in oncology, and both represent blockbuster opportunities. Our ThermoDox positioning, market access and cost with major opportunity in the U.S., Europe and China markets, if we're right, ThermoDox will fuel the growth engine for GEN-1 and the pipeline promise for our liposomal and TheraPlas platforms. I'm extremely proud of all that Celsion team has accomplished over this last year, and I'm excited for 2019. Now this will be potentially a transformative year for Celsion. I hope you stick with us. If we're right, it could be the ride of your life.

Well, with that, now I'll turn the call over to the operator for questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) And we will take our first question from Kumar Raja from Brookline Capital Markets.

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Kumaraguru Raja, Brookline Capital Markets, LLC, Research Division - Director & Senior Biotechnology Analyst [2]

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So first one on the OVATION I Study, so in terms of the changes in the tumor microenvironment, how soon do you see these changes? And how long is this sustained?

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

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Do you think you can -- Dr. Borys will answer that question.

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

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This is Nick Borys. That's an interesting question. We haven't measured the duration of the changes. We've reported on the changes at the last ASCO-SITC meeting. But we only have time points of baseline and a time of interval debulking. So to measure the duration of that change is a little bit more difficult for us to do. So we'll just have to keep an eye on this space as we move forward into our current OVATION II study because we will have the advantage of having a control population where we could measure the differences. So hopefully, that will be able to answer your question more clearly.

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Kumaraguru Raja, Brookline Capital Markets, LLC, Research Division - Director & Senior Biotechnology Analyst [5]

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Okay. And I also had a question in terms of the dose start, which meant in the OVATION II. It looks like you're going to start with 100 milligram per meter squared. One study is safe and very tolerated. What would be the doses that would be tested in the randomized part?

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

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This is Nick Borys again. Yes, that's correct. We're starting the OVATION II study at 100 milligram per meter squared dose. That's based on our independent data safety monitoring committee, its recommendations from the previous studies. As we reported, we have not identified any dose-limiting toxicities in our patients. So the drug looks to be very manageable and safe in patients. The study is designed only to go as high as 100 milligrams per meter squared in the OVATION II. If we do see some DLTs, we do -- with the study does allow for dropping back a dose, back to the previously declared safe doses as 80 milligrams per meter squared. I think we are -- as we discussed the data, the translational data specifically with our experts, I think all of them agree that we are beginning to see the maximum biological activity in the GEN-1 data. So I don't think we're going to be dosing to tolerance. We'll be dosing to maximum biological activity.

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Kumaraguru Raja, Brookline Capital Markets, LLC, Research Division - Director & Senior Biotechnology Analyst [7]

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And in terms of the OPTIMA Study, what is happening in terms of [you and study-wise] on track? And I expect that the interim analysis would be in the later part of this year.

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Michael H. Tardugno, Celsion Corporation - Executive Chairman, President & CEO [8]

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Yes. And the study is, for the most part, on track. We carefully look at the number of patients who die or the number of deaths. We track them. I mean, obviously, there always could be a stutter step, but we are anticipating the 118 death to occur very early in the third quarter. We may have reported very early on that we expect that it could be as soon as April -- April, May. I mean, so we're right in the same time frame that we have been forecasting. So once the 118 death is achieved, and Dr. Borys and the clinical team have very aggressive means to be able to detect that, so we'll detect them as soon as possible, then the data is put into the database. It's scrubbed. The quality checks are made. The forms are prepared. It's reviewed by the DMC. And it's following that, I think, we can make some statements.

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Kumaraguru Raja, Brookline Capital Markets, LLC, Research Division - Director & Senior Biotechnology Analyst [9]

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Okay. Final question on GEN-1 and glioblastoma. What needs to be done before you guys can enter into the clinic in glioblastoma? And how is the tumor microenvironment similar or different from what you are seeing in the ovarian cancer?

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Michael H. Tardugno, Celsion Corporation - Executive Chairman, President & CEO [10]

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So I think we announced previously, Kumar, that we've put our plans for GBM on hold, for the reason being that we've seen some progress by ZIOPHARM, and we applaud them, frankly, with a similar approach using a viral vector in, both a recurrent population -- I understand they're now treating patients in the newly diagnosed population and may be expanding into pontine glioma. So unless and until we -- it's very difficult to compete, as you can imagine, with a therapy that's virtually identical from a mechanistic standpoint. And so we announced some time ago that we were setting aside our plans for GBM until we know the outcome from the ZIOPHARM program.

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Operator [11]

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And we will take our next question from Justin Kim with Oppenheimer.

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Justin Alexander Kim, Oppenheimer & Co. Inc., Research Division - Associate [12]

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Just a couple on GEN-1. How long might you anticipate it would take to enroll the initial 6 patients for the study? And is there a target medical meeting that we might get an update from the investigator on those patients?

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

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Yes. So well, I think, we hesitate to give any forecast at this moment on enrolling. As I said, we'll have 20 sites up and running by the end of the second quarter. We anticipate getting a quick traction, really, to enroll the 6 patients to establish the dose and the following 6 patients that would not be treated in a control arm. Altogether, that's 12 patients in 20 sites. So I suspect that we could be relatively quick in getting that portion completed. We do have some patients who are enrolled in this study, as we speak. So I'm really -- given some of the stutter steps that we've had, I'm hesitant at this point to give you any firm dates. That being said, once we establish a little bit more confidence, we will be very quick to give you the answer to that question.

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Justin Alexander Kim, Oppenheimer & Co. Inc., Research Division - Associate [14]

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Okay. Got it. And then of the 30 sites that you're planning to have the full sort of Phase II portion of the study, enrolling patients, have you identified all these sites? And would they be primarily academic oncology surgery centers?

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

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Yes. So we've engaged the CRO to help us with that, CRO that's -- whose only focus really is in identifying clinical sites for trials like ours. And it's actually -- it's associated with the Western IRB. So they have this enormous database to identify sites and to evaluate the potential activity of those sites. Dr. Borys and his team have been working closely with this CRO. And maybe you could give a little bit more of an update on that, Nick?

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Nicholas Borys, Celsion Corporation - VP & Chief Medical Officer [16]

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Yes. So we primarily target sites that have a very robust stack of gynecological oncologists. And also, to the point of your question, are they academic sites, so I would say 80% of them at least are academic centers. And now we're finding places that are practices associated with major hospitals, that are gyn onc practices that see a lot of patients, that do a lot of work in this area, that already have a track record in clinical research. And so here, we're finding that this could be a tremendous source of patients and getting closer to the patient care of the way it's practiced in this country. So this is something that we're very excited about, that we hope will accelerate the patient recruitment and getting the data on time.

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Justin Alexander Kim, Oppenheimer & Co. Inc., Research Division - Associate [17]

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Okay. Great. And then the inclusion of Canadian sites would be part of the 30 or in addition?

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Nicholas Borys, Celsion Corporation - VP & Chief Medical Officer [18]

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That would be inclusive. And then that number isn't carved in stone. We're going to -- we'll adjust that number as the enrollment comes in. So maybe we'll need more sites. Maybe we'll need less sites. So -- but right now, our target is at least 30.

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Justin Alexander Kim, Oppenheimer & Co. Inc., Research Division - Associate [19]

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Okay. Great. I just had one last clarification question with respect to the early third quarter interim. Does that time frame include the time for the DSMB review, data collection and quality checks? Or is it that you would anticipate that the number of death, the trigger at that point, and then that would start the process of all the sort of data collection?

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

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Yes, that starts the process. So once we hit the milestone, 118 deaths, we then collect the data. And then it's -- obviously, it's scrubbed. It's looked for any quality issues, which is typical, then the tables, listings and grafts are produced, both blinded and unblinded. And they're submitted to the DMC for their assessment.

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Operator [21]

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And our next question will come from Matthew Cross from JonesTrading.

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Matthew David Cross, JonesTrading Institutional Services, LLC, Research Division - Research Analyst [22]

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Congrats on the progress this past year, and it looks like a very exciting one ahead for both programs here. I had a couple of questions relating to each. So starting out, it sounds like since your last -- or your update last quarter, it sounds like you've refined the time lines for the OPTIMA readouts a bit, with the first interim effectively on track then a bit of a delay relative to prior guidance of around Q4 of this year for the second interim, I guess, towards more mid-2020. So obviously, the event is -- or the trial is event-driven. It's a moving target. But given that you've noted blinded PFS is trending quite closely with what you've expected, could you give us a little bit more color as to if this has changed? Or anything you're hearing from investigators that would have led you to revise the guidance here for the timing of that second interim look?

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Michael H. Tardugno, Celsion Corporation - Executive Chairman, President & CEO [23]

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Yes. So our outlook really is based on the latest information -- blinded information that we received following DMC's review. The estimate of the death rate is provided by our statistician. It does appear that the patient deaths are occurring at a lower rate than we had seen earlier. I think we were concluding -- the last time we spoke, we were concluding that we would be seeing 158 deaths by the end of this year. It looks like that's going to slip into early next year. On the whole, I think that -- we think that tracks nicely with the PFS data that we've seen. So PFS now looks like it's -- in the OPTIMA Study, it's taking about 4 months longer than when we compare it to the subgroup in the HEAT study. So longer PFS, it's not surprising to us that it's taking longer to achieve the number of deaths to hit the valuation points. Does that answer your question?

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Matthew David Cross, JonesTrading Institutional Services, LLC, Research Division - Research Analyst [24]

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Yes, I think that does. I appreciate that. And then since this first interim data readout for OPTIMA is likely to be a major part of the story for 2019, could you kind of remind us of that optionality that I think you've kind of alluded to a little bit here subsequent to this first look and even for the second -- next year, before final data in terms of what modifications you may be able to make, if OS or PFS for either arm are negatively outside of what you're anticipating, but more asking also about the potential to stop the trial early if there's a substantial enough survival benefit, I guess, this 33% specifically is shown sooner.

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

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Yes. So the Hazard Ratio at the first interim, in order for us to be successful, is 0.61. At the second interim, I believe it's 0.70. And at the third interim, it's 0.75. So if we want to talk in layman's terms, 0.75 translates to a 33% improvement; 0.70 represents a 42% improvement; and 0.61 approximately a 60-plus percent improvement in the way the statisticians talk about it in the risk for death. So -- and we use this. This is really according to this [lambda metrics] approach. We use this higher hurdle rate at smaller numbers to minimize the alpha spend -- minimize the penalty associated with taking an interim look. It gives -- hands out a better chance, overall chance even though we may have poor success, even though we may have to wait until the end. So the guidance we have been giving is really based on the subgroup, the prospective subgroup that I talked about, 285 patients, in which we saw a Hazard Ratio -- I believe it was 0.65 with a p equal to 0.02. So if you've written those numbers down, you can plot that 0.65 somewhere between the first interim and the second interim. And the guidance we've been giving, Matt, is that we don't expect, based on this analysis, that the first interim would be the one in which we'd claim to stop the study. There's a chance, but that probability estimated by our statisticians is less than 50%, so likely, our higher chance at the second interim where the Hazard Ratio of 0.7 is clearly a lower bar than the 0.65 than we saw in the subgroup. Either 1 of these 2, however, represents an opportunity to stop the study for success. And Dr. Borys and the DMC have been discussing exactly how we would do that. And it's always a little bit tricky. But I think -- I mean, we're not going to set any new precedents here. We'll do it the right way. But either one of them could be sufficient to stop the study for success. In the case where we have a fewer number of patients, we want to be critically sure that there's no abnormalities or issues with the data that could confound an opinion that we've done the right thing. That being said -- all that being said, recall that this is a study that's fully enrolled. It's a study with a definitive end point. It's OS, meaning you're dead or you're alive, unfortunately. So there is no -- if we choose to assume or choose to stop the study for success at either one of these interim end points, we think we'll have an extraordinarily strong argument that -- virtually, absolutely strong argument that the study should be considered for an NDA submission.

Meanwhile -- so I've been talking a lot on all of that and also a long answer. Meanwhile, I think Dr. Borys, a year over -- a little over a year ago, had a conversation with the CDE of CFDA, the Chinese FDA, regarding their -- let me just maybe characterize it this way. They're impatient with getting the data from the study. They're impatient with getting a therapy on the market here on this huge gap that exists in the treatment of these patients. You know that there are a small percentage of patients who are treated with curative intent. The balance of the patients are treated with a therapy that has a survival benefit that's somewhere between 3 and 4 years. So there's this huge gap that ThermoDox fills, and they know it. And they know that if we're successful, not only fill it, but fill it very cost effectively. So they asked Dr. Borys to consider some other end points that may give us a quicker look at the data. In that regard, we're still talking and considering an approach that CFDA might be able to consider. Last point, there really isn't any opportunity to adjust the study. I thought maybe you made a comment that -- made a course correction or an adjustment. There really isn't any opportunity to do that. This is -- this study is completely enrolled. It's an overall survival study. We are collecting a PFS data as supportive data if it's needed and secondary end point, obviously. But all in, we think we're on a track here that could be a very meaningful outcome in a large unmet need. I hope that answers your question.

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Matthew David Cross, JonesTrading Institutional Services, LLC, Research Division - Research Analyst [26]

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Yes, I appreciate it, Michael, and thanks for the detailed response there. And then I think the last question I had was -- it seems as though one of the central themes for both of your programs here has been to encourage a beneficial paradigm shift, I guess you could call it, in how these patients are treated. And so given that ThermoDox is nearing its first Phase III efficacy with OPTIMA, are you able to speak to what kind of educational efforts and KOL outreach you've done to prep the market to further adopt treatment of larger singular lesions with RFA for those that may not be accustomed to doing so currently in advance of a potential approval?

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

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Let me -- I can't talk you with most -- definitively. Actually, Dr. Borys should do this. The training that's been provided to our clinical researchers, our PIs and sub-Is, that's literally hundreds of physicians has been substantial and detailed and definitive. That said, we've presented this data to multiple medical conferences. And I think the practice of radiofrequency ablation alone has changed. But maybe, Nick, you want to speak to some of that?

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Nicholas Borys, Celsion Corporation - VP & Chief Medical Officer [28]

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Yes. In terms of preparing the market, number one, we view our technology as a platform. So what we're seeing is that once we show data that we're successful in primary liver cancer, we believe that that's just the beginning. So the drug can be applied in a -- I think, in a nice spectrum of HCC patients. And then there is a future, as you know, where we've studied breast cancer, where we've studied other cancers as well. In terms of the KOLs, as you know, our focus is in China. We have a very healthy contingent of investigators in China that have presented data, that are part of our KOL team and work with us in terms of having discussions with the Chinese regulatory authorities. And now we do have -- as Mike mentioned before, we have a medical marketing team in-house that are currently conducting studies to evaluate what the market potentials are and working with key opinion leaders to holding our message. So I think we have a pretty wide approach to how we're going to prepare the market and take it forward once we get good data.

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

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Yes. And just let me add a little bit to that. We've just taken a look at real-world data coming from the Medicare database. And we'll probably put this into a slide. I think none of this is central theme to our corporate presentation, but I think it's worth looking at for those who want to. When we look at the treatment options for patients who are not surgical candidates, intermediate-stage HCC patients, their options include RFA, microwave ablation, chemoembolization, embolization and radiation embolization. For the most part, that's it. There's 5 options. RFA currently is administered in the Medicare population, which is an older population. So it might be skewed a little bit here. In newly diagnosed patients -- it's about 19% of newly diagnosed patients and overall, about 22% of patients. So -- and we had been estimating in our business model somewhere between 20% and 25%. So we're almost hitting it spot on. This treatment represents a drop into RFA. Our biggest challenge, I think, is going to -- if there is a challenge here, is going to be educating RFA practitioners on the appropriate technique to maximize the effect not only of RFA, but to maximize the impact of ThermoDox, which isn't a hard sell. Once you see the data, it's just not a hard sell. That technique, we actually -- Nick and Dr. Lencioni developed a web-based interactive training program for them. Other thing I would say from the Medicare database, when we talk about costs, we've been really focused on the cost efficiency of ThermoDox and RFA. RFA, all of the patients who are treated with RFA, the Medicare database would suggest that 12 months treatment cost for those patients, from the time they're diagnosed to 12 -- to procedures implemented and following 12 months, the cost to the health care system is around $60,000. The cost for surgical patient is over $200,000. The cost for a chemoembolization patient is over $200,000. The cost for radiation embolization treatment is -- approaches $200,000. So if we can -- in 22% of patients, it will expand enormously. I am convinced to a broader range once the data is positive. We -- even if it's only 22%. And with this drop, we have a very -- I think a very significant opportunity for -- not only for pricing, but expanding the use of RFA into broader patient populations. Well, I think that would be an interesting slide for us to put together for you and some of the other analysts.

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Operator [30]

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And we will take our final question from Barry Rubin with [Balmoral Investments].

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Unidentified Analyst, [31]

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Mr. Tardugno, I hope to have the pleasure of seeing you and Mr. Church at the annual meeting. I know it's about an hour already, so I'll make my question fast. I'm sure you all want to go home or rather go back to work. But my quick -- and first of all, a quick shout out to Mr. Church for always taking his valuable time to chat with me about my questions about your company. My question to you is I thought -- I truly -- it's a very quick 2-part question. Number one, I know that you were in Vietnam a while back. What's the size of that market? I assume it's not as big as China, but I'm just curious what the size of the market for ThermoDox is. And my other question is, I thought in the past year or so, I had heard there was a possibility that ThermoDox might have an early approval in China. So if you could just answer those 2 questions, and I want to thank you again for your kindness.

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Michael H. Tardugno, Celsion Corporation - Executive Chairman, President & CEO [32]

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Yes. To be -- well, thank you for the questions, first of all. To be very frank with you, I don't think we have a good handle on the number of patients in Vietnam who would be indicated for radiofrequency ablation and ThermoDox. What we know about the Vietnamese incidence is it's very, very high. So the percentage of the population with hepatitis and eventually with HCC rivals, we believe, China and some of the other countries where the incidence rate is high. And the problem in Vietnam is -- and maybe Dr. Borys wants to speak to this, is that the patients that we're seeing, many of them have -- are presenting with lesions that are too large for RFA. And so in order for us to get a better handle on the actual addressable market in Vietnam, we've got to do some more market research. But maybe you want to make a couple of comments about Vietnam, Nick?

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Nicholas Borys, Celsion Corporation - VP & Chief Medical Officer [33]

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Sure. It's interesting that you raised the question of Vietnam. Vietnam, in spite of what Mike said, we're -- the disease there is in a terrible state. But they have been one of our better recruitings -- or recruiters for the OPTIMA Study. I think that they are going to -- once the drug is approved in Vietnam, Mike might have mentioned in previous discussions with you that the Vietnamese regulatory authorities are keeping a very watchful eye on our studies, and they actually participate very closely with the initiation of our program in Vietnam. So I anticipate that they're going to be pretty rapid, taking up the drug when it's in the market. And like I said, they are fast recruiters. And one big advantage of ThermoDox over the other options is that it's relatively easily done. It can be done by interventional radiologists. They don't need surgeons. They don't need any massive investment in equipment, and Vietnam welcomes that intervention for the cancers. So I do have the incidence numbers on my desk and we're happy to send them to you. But Vietnam, in terms of number of patients, probably has one of the higher concentration of eligible patients for us, I would say, in the Pacific Asian countries.

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

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Barry, I want to -- I know we're running over here, but I think you're digging into an area that is very important for commercializing our product. So the majority of the market for HCC is in the Third World. And China, it's a huge country, but 50% of the incidence is in the rural community, and that is Third World. Southeast Asia, Malaysia, Vietnam, Thailand, the Philippines, very high incidence rates but not a lot of disposable income and a medical system that's under enormous pressure. So one of the things that -- we realized this a long time ago that there really are 2 markets for ThermoDox. There's the developing Third World and the developed market. One of the reasons why we went very quickly to develop manufacturing capability in China was to get a cost of goods that would allow us to commercialize ThermoDox in countries like Vietnam at prices that are affordable. And so that's been our strategy. We've looked very carefully at these markets. I personally promised, for example, the Minister of Health in Vietnam, that we would bring this drug to market as soon as it would become available. But we have to do so in a manner that it allows us to make money, too. So we've been very conscious of our obligation in these Third World markets and put enormous amount of effort into making sure that we have an infrastructure and a cost of goods that will allow us to do so profitably. And with regards to China, I think I mentioned that Dr. Borys had a meeting with the Associate Director -- Assistant Director of CDE and I -- again, I'd characterize it as impatient. This is an overwhelming problem in China. When we go to the hospitals that treat patients with HCC, it's incredible. You can't get through the hallways. There are just so many people, such a great need. Well, they did -- as I had mentioned earlier, they did ask us to explore some alternate end points. Nick and some of our KOLs are discussing them as we speak. We think there may be an opportunity to present something later this spring, before the summer, to the CFDA, and it could have a meaningful opportunity for the market and for the company.

I think that's it. Again, I want to thank everyone who continues to support our company and listens in on these conference calls and follows our press releases. We think we're doing some very important work. Our clinical research, if we're successful, has the potential to reshape the approach to treating some very, very difficult cancers. We'd like to ask you to stick with us. If you've been patient so far, please continue to be patient. As I said, this could be the ride of your life. Again, thank you very, very much, and we look forward to speaking to you at our next quarterly call.

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Operator [35]

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And this concludes today's conference. Thank you for your participation, and you may now disconnect.