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

Q1 2019 Celsion Corp Earnings Call

COLUMBIA May 29, 2019 (Thomson StreetEvents) -- Edited Transcript of Celsion Corp earnings conference call or presentation Wednesday, May 15, 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, Executive VP & Corporate Secretary

* Khursheed Anwer

Celsion Corporation - Executive VP & Chief Scientific Officer

* Michael H. Tardugno

Celsion Corporation - Executive Chairman, President & CEO

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Conference Call Participants

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* Justin Alexander Kim

Oppenheimer & Co. Inc., Research Division - Associate

* Kumaraguru Raja

* 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 Kathy, and I'll be your operator today. At this time, I would like welcome you all to Celsion's First Quarter 2019 Financial Results Conference Call. (Operator Instructions) Please note, today's call is being recorded.

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

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Jeffrey W. Church, Celsion Corporation - CFO, Executive VP & Corporate Secretary [2]

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Thank you. Good morning, everyone, and welcome to our investor conference call to discuss our first quarter 2019 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. Khursheed Anwer, Celsion's Chief Scientific Officer, who will be available to answer questions during the Q&A portion of the call.

Today's conference call will be archived, and the replay will be available beginning tomorrow and will remain available by phone until May 29, 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 Mr. Mike 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. It's my pleasure to be on the phone with you, particularly after yesterday's very successful Annual Shareholder Meeting. I'm pleased to report that all proposals were accepted by our shareholders and by a large margin. On behalf of our employees and the Board of Directors, I want to thank you for your continued support.

As I outlined during our year-end conference call just a few weeks ago, our fundamentals could not be better. We are well positioned for 2019. The steps taken last year across all of our business functions from clinical development to our multiple investor-friendly financing initiatives to ensuring that we have a robust supply chain and our NDA planning, all have positioned Celsion to deliver some of the most important new oncology medicines in a generation.

As I said, it's been just a bit over a month since our last call, so I may be rehashing information that we have previously shared. But bear with us, most of it is well worth repeating.

Let me start by saying if you've been following our press release this morning and our past conference calls, you know that we've made meaningful progress with our ongoing development programs for ThermoDox and GEN-1 that our balance sheet is strong and that our cap structure is clean with no warrants held by funds that can be used to hedge a short position, all delivered as we promised during our various communications over the year.

I've been emphasizing these points because for the most part, investors considering a position in Celsion today can see us as a unique biotech investment, a pure-play for our science, a pure-play for our drug technologies and a pure-play for our incredibly important clinical programs. Investors taking a position in Celsion today will be leveraging over $35 million paid to date in our $45 million Phase III study and our years of research on immuno-oncology program.

Enrollment of our pivotal 556 patient global Phase III OPTIMA Study in primary liver cancer, also known as HCC, or hepatocellular carcinoma, enrollment was completed ahead of projections in August of last year. We are now looking forward to the first of 2 preplanned interim efficacy analysis for the OPTIMA Study expected later this year, and if needed, a second interim analysis in mid-2020.

Our Phase I/II OVATION Study was initiated in the second quarter of 2018 as promised. This hopeful clinical development program in immunotherapy has generated striking results in a small Phase I study. Small numbers, we admit, but impressive trends nonetheless, trends we have pointed out have captured positive comments and support from opinion leaders and, most recently, from the FDA.

During this past quarter, we reported final data from the Phase Ib immunotherapy program, which we call the OVATION I Study in ovarian cancer, and I'm going to remind you of the findings. 100% objective response rate. That's partial and complete responses in patients treated at the 2 highest doses. 88% 0 resection scores in patients treated at 2 highest doses. For those of you want to know what a 0 resection is, well, that's when the surgeon leaving the operating room, tells the patient's nearest of kin that he got all of the disease tissue, removed it all with clean margins. And a remarkable 75% improvement in median time to progression.

We finished the quarter with no substantive dilutive events and early $25 million in cash, investments and prepaid assets. Moreover, our financings over the past 1.5 years have been achieved through the most investor-friendly of strategies with little dilution, no share price discounts, and most importantly, no warrants that can be used to leverage a short position.

And after we sell another $4 million in New Jersey state NOLs, that's net operating losses, our cash runway will extend some 2 years well into the first half of 2021.

So to sum it up, with the potential for a near-term transformative announcements from our 2 clinical studies and with our strong balance sheet, we expect to create significant value for our shareholders, patients and for the medical community.

Now I want to talk about the OPTIMA Study, our global, pivotal trial evaluating our lead drug candidate ThermoDox combined with radiofrequency ablation to treat newly diagnosed HCC patients, again with some background, particularly for those who are new to Celsion.

Our global HCC incidence is about 3 quarters of a million dollars. That's 750,000 new cases growing at 3% annually. It's acknowledged to be the largest unmet medical need remaining in oncology. OPTIMA is conducting -- is being conducted in all the major markets in 14 countries in North America, Europe, China and Asia Pacific. OPTIMA's primary end point is overall survival. The study is 80% powered to show a 33% improvement in survival at the final analysis, which based on the stat plan occurs after a 197 events or deaths. OPTIMA is designed with 2 event-driven preplanned interim efficacy analysis, the first at 118 deaths representing 60% of the 197 required for the final analysis and the second, if needed, is 158 deaths or 80% of the final analysis.

Now I want to reiterate our guidance with regards to these interim efficacy analyses. The bar for success at the first interim is quite high. It's possible, but we believe not probable in our estimation that we will be successful at the first look. We believe that the probability of success at the second look, however, is much greater.

So how are we doing? So far, the Data Monitoring Committee for the OPTIMA Study completed their review of the fully enrolled population in December. From that meeting, we have reported the following: In line with our previously communicated estimates, we expect the 118th event to occur very early in quarter 3 2019. We'll report the outcome as soon as possible following normal quality checks, data formatting and the DMC's review. The second interim efficacy analysis, if necessary, will follow some 6 to 8 months thereafter.

We have also reported, and I'd like to restate that median progression-free survival, that's PFS, from the fully enrolled 556 patient study continues to exhibit a great deal of promise. The most recent PFS analysis shows 21.2 months, approximately that's median time to progression, 21.2 months or approximately 4.5 months better than what we observed in the subgroup from the HEAT Study, a group that is virtually identical to the OPTIMA Study population.

If you recall, there are 3-month improvement in PFS in this subgroup, the HEAT Study subgroup, resulted in more than a 2-year improvement in overall survival in that subgroup.

Now 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. And I can tell you, we are excited nonetheless.

Now I want to emphasize an exceedingly important point and remind you of how our HEAT Study subgroup was determined. It is not a retrospective subgroup. It's a prospective subgroup. We determine the subgroup not by looking at the results and working backwards. Rather, we identify the key success variable through very careful analysis and prospective preclinical studies. In this case, the success variable was RFA standardized to a minimum of 45 minutes. We then applied this finding to the intent-to-treat population of the HEAT Study and then, and only then, determined that 285 patients were treated according to this 5-minute or greater RFA protocol, plus/minus ThermoDox, with and without ThermoDox. We then followed this very well-balanced group quarterly for 2.5 years, and what we saw was nothing short of astonishing. More than 2 years survival benefit in the group that was treated with a single dose of ThermoDox, I'll say that again, 285 patients in a well-balanced prospective subgroup, more than 24 months overall survival improvement following a well-controlled RFA procedure combined with a single dose of ThermoDox in the largest unmet medical need in oncology over 7.5 years, and a median time to death was never reached in the group that received well-controlled RFA plus a single dose of ThermoDox.

I suppose the purists can be skeptical even with this prospective approach, but the NIH is not. In a separate independent analysis of the entire dataset from the HEAT Study, NIH confirmed that an RFA procedure of increasing time plus ThermoDox results in a statistically significant overall improvement in survival. I'm advised and confident that the manuscript and the findings will be published soon in a peer-review journal. We look forward to presenting that to you soon.

Meanwhile, the company is assuming success. We are hard at work on drafting the NDA, rigorously assuring that our commercial pipeline from 3 separate factories, 2 in the United States, 1 in China, are prepared and ready. We're conducting our initial market research and establishing our launch plans for China, the United States, and the European community.

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 or gene mediated IL-12, that's interleukin 12, immunotherapy in patients with newly diagnosed Stage III and IV ovarian cancer.

To date, we've completed 5 GEN-1 trials in ovarian cancer, demonstrating safety, biological and clinical activity. Much of this was published in future oncology in the October 2018 version -- or 2018 edition, describing GEN-1's non-viral nanoparticle delivery system. Data from our Phase I dose escalating OVATION Study presented at the March 2019 ASCO-SITC symposium showed that Stage III/IV ovarian cancer patients treated with neoadjuvant chemotherapy plus GEN-1 resulted in a marked reduction in immunosuppressive response across multiple biomarkers, an 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 in patients treated at the 2 highest doses. 88% R0 surgical resection scores in patients treated at the 2 highest doses and a remarkable 75% improvement in median time to progression.

Now as you know, we've been sufficiently impressed with these findings to look for ways to accelerate our clinical development 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 patients. Our thesis is that a significant delay in disease progression will have a significant impact and improvement in overall survival. The early evidence suggests that the 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 set is impressive even to our most skeptical PIs and medical advisers.

As I mentioned last month, we presented these data to FDA in a short white paper, which was followed by an informal telephone conference call with the agency, an award we could not be more pleased. As I said last March, the call was planned for 30 minutes. It lasted for more than 45. We couldn't have asked for a more professional discussion. The FDA was attentive, prepared, interested in our reviews and willing to provide constructive advice. Moreover, we received a great deal of encouragement, and I'd say repeatedly for our innovative approach to IL-12, for our trial design and for our target population.

In the call, we established that PFS is an acceptable end point so long as the radiology is independently read. FDA pointed out that it was difficult to assess, however -- fully assess GEN-1's independent clinical benefit without a control arm and pointed out, as we acknowledged, confounding factors could be neoadjuvant therapy and surgery.

So FDA suggested the following next steps. Once the dose is established in our Phase II study, FDA recommended a face-to-face meeting to discuss future trial designs potentially to accelerate clinical development. They also asked that we develop 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 do all does this mean? Well, we see it as an exceptionally positive outcome. PFS being accepted as a primary end point positive. The invitation to submit supportive data from the randomized Phase II trial, we believe, is a strong signal. And I believe that they would like to see the already identified trend confirmed in a subset of patients from an ongoing Phase II study.

Now as to the progress of the study, as I've said in prior calls, and I'll repeat again, OVATION II has been exceptionally difficult to get started. And it's not for lack of effort. I promise you, this program has our full attention, will continue to have our full attention.

And while we can't make up for all of the associated delays, the majority of which are, as I've said before, bureaucratic, and negotiating contracts and biological committee reviews and the like have taken an enormous amount of time. So we have taken steps to ameliorate this loss of time for as much as possible. The study was originally planned for 10 sites in the United States. We've expanded to 31 sites, including several new candidate sites in Canada. As of this date, we've initiated 10 sites and expect to have 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 with 2 phases. The first is a lead-in dose escalation phase at 100 milligrams per meter squared. This phase will evaluate safety in 6 patients dosed with GEN-1 at the higher dose. The second phase will enroll a total of up to 118 patients, randomized 1:1. So it's a randomized study. We will know for sure from the study the effect of GEN-1 on progression-free survival and in the translational data.

Patients in the study are treated with neoadjuvant chemotherapy, that's a standard therapy for patients with a high tumor burden at Stages III/IV. They will also receive 8 weekly cycles of GEN-1, and the control arm, it will be neoadjuvant chemotherapy alone. Patients will then undergo interval debulking surgery. Following surgery, patients in the therapeutic arm will continue to receive GEN-1 plus adjuvant therapy. Patients in the control arm will receive adjuvant therapy alone.

Our primary objective, as I said earlier, for the study is PFS. With GEN-1's ability to continue to recruit the immune system, we expect, we're hopeful -- we're virtually confident that the GEN-1's impact in the follow-on treatment will have the potential to blunt, our hope, perhaps eliminate a recurrence or progression of the cancer.

For the study overall the PFS primary end point analysis will be conducted after at least 80 PFS events or 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 our study investigators.

Now I'd like to make one very important other point or last point. Our first GMP batch of plasmid produced by Hisun. That's our -- a high-quality, cost-efficient supplier was successfully completed. Plasmid batch costs as a result will drop by over 85% as compared to that of our current European supplier. Our cost reduction program is critical in the commercial success of GEN-1, and represents a major, major milestone in our overall development program. Bottom line, at scale, we'll have an almost an order of magnitude reduction in cost of goods sold as compared to the rapidly increasing, and as I said before, predatory pricing of the established venture consolidated supply chain, CMOs, that's contract manufacturing organizations.

So I hope that you'll agree that we're on track for a standout year. All in, we are a Phase III company with important data readouts from our fully enrolled OPTIMA Study and HCC. Expected in the coming months. There are now no warrants in our cap table to leverage a short position. With fewer than 20 million shares outstanding, there is potential for extraordinary returns. We are actively engaging with new fundamental investors and are expanding our Investor Relations efforts with new research coverage, presentations and numerous health care conferences.

Most recently, I'll remind you we presented at Oppenheimer's Annual Conference in March and ThinkEquity during this month of May. These presentations are archived webcasts and are available on our corporate website. I encourage you to listen and to view our presentation slides. Then to discuss our financial results for 2018, I'd like to turn the call over to Jeff Church. Jeff?

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

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Thank you, Mike. Details regarding Celsion's first quarter 2019 financials were included in the press release and the Form 10-Q made available this morning before the market opened.

As Mike stated, we have made a great deal of progress across the business during 2018 and the first quarter 2019, including financially with an ongoing focus on efficient cash management for successful program execution. As of March 31, 2019, Celsion's cash, investment and prepaid expenses totaled $24.9 million, enabling us to continue to focus on clinical and operational execution into the second half of 2020. We are pushing a variety -- we are pursuing a variety of financing alternatives to further strengthen our balance sheet and position the company for success.

We have a $75 million shelf registration statement with the SEC to sell registered shares at the appropriate time. We also have 2 equity financing facilities that affords us the opportunity to raise additional capital in an opportunistic fashion with no warrants and a very low fee or commission. The first facility is a $15 million common stock purchase agreement with Aspire Capital, and the second facility is a traditional active market facility totaling $16 million with Jones Trading.

Last year, we announced the sale of $11.1 million of our New Jersey state NOLs, that's had operating losses, through the state economic development authorities NOL program. This program is available to businesses based in New Jersey and provides the opportunity to sell up to $15 million of net operating losses per company. Since we still have room, about $4 million before we reach the maximum proceeds available to us, we anticipate selling additional NOLs in 2019 and 2020 until we reach the maximum allotment. For the quarter ended March 31, 2019, the company reported a net loss of $2.3 million or $0.12 per share. This compares to a net loss of $4.5 million or $0.25 per share for the comparable prior year period. Operating expenses were $5 million for the first quarter 2019, which represented a $600,000 increase from the $4.4 million we reported in the same period last year. During the quarter, the company incurred $700,000 in noncash stock option expense compared to $200,000 in the prior year period. Net cash used for operating activities was $5.5 million in the current quarter. This compares to $4.6 million used to fund operations last year.

Total cash provided by financing activities was approximately $1.8 million during the first quarter, which includes opportunistic sales through our 2 equity facilities that I mentioned earlier. We will be filing our application to sell additional New Jersey state NOLs in June in an effort to raise nondilutive capital from the sale of these NOLs in the fourth quarter of 2019.

Research and development costs were $2.8 million in the first quarter of this year. That compared to $2.7 million last year.

Our clinical development costs for OPTIMA Study, as you'd expect, has decreased about $400,000 as a result of lower CRO costs and investigator grant payments after we completed enrollment of this Phase III study during the third quarter of 2018. Costs associated with ThermoDox manufacturing and the GEN-1 process improvements and cost reduction initiatives did increase in the current quarter.

General and administrative expenses were $2.2 million in the quarter ended March 31, 2019, compared to $1.7 million in the comparable prior year period. This $500,000 increase was due to higher compensation costs, which include costs associated with several new personnel additions in the areas of regulatory affairs and manufacturing as well as an increase of $200,000 in noncash stock option expense.

Other expenses included a noncash gain of $2.7 million in the quarter ended March 31, 2019, and this related to the amendment, which we talked about earlier and was reported in our earnings release for any potential milestone payments for the GEN-1 ovarian cancer product candidate.

The company reported about $100,000 in interest income from our short-term investments in both the first quarters of 2018 and '19 in connection with our debt facility with Horizon, which we signed in the second quarter 2018. The company incurred interest expense of $400,000 during the first quarter of 2019 compared to no interest expense in the first quarter last year. We anticipate that our net cash usage for the balance of the year will be approximately $4 million per quarter. Our current cash, together with additional NOL sales projected for 2019, is expected to provide us with almost 2 years of runway, extending our operating horizon through 2020.

Our balance sheet and business fundamentals are strong. Our capital structure is clean with 20 million shares outstanding and virtually no warrant overhang. We are approaching some very important milestones in the coming months, one that could drastically transform Celsion's business trajectory and value proposition.

I'd now like to turn the call back to Mike.

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

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Thank you, Jeff, for that lively and vibrant review of our financials. And as usual, very well presented. Thank you.

I trust that you will agree that our work over the past year has reinforced our potential for success and has put Celsion in a position to provide great returns for our shareholders and significant value to our -- to cancer patients and the medical community.

I continue to be proud of all of our employees who have achieved so much and look forward to the continued accomplishments over the coming months. We're off to a great start for what could be a transformative, as Jeff said, a transformative 2019. And I look forward to sharing our progress as it unfolds.

Now with that, I'd like to open the call for questions. Operator, would you do so, please?

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Questions and Answers

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Operator [1]

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(Operator Instructions) And we'll go first to Justin Kim of Oppenheimer & Co.

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Justin Alexander Kim, Oppenheimer & Co. Inc., Research Division - Associate [2]

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So can you just walk us through the logistics and providing a subset of placebo-controlled data with GEN-1 to the FDA, via the Phase II study and at what point the company would make a decision to pursue such a path?

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

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Yes. So just -- could you repeat that? It was just a little bit garbled, Justin.

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Justin Alexander Kim, Oppenheimer & Co. Inc., Research Division - Associate [4]

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Sorry, sorry. Just some of the logistics around providing a subset of the placebo-controlled data that the FDA had invited the company to present for a breakthrough therapy designation.

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

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Yes. So I think the agency left that decision to us. So as you know, the OVATION II Study is designed as a randomized study. The first portion of which is a Phase I program, which is also randomized. We intend to roll -- enroll approximately 12 patients, 6 in the control arm, 6 in the therapeutic arm. And then assuming that it's a safe dose, we'll continue on it Phase II with the design being exactly the same as the Phase I patients.

I think we would, sooner rather than later, like to present the agency with data from that -- from the study. So my sense here is without giving you exact number, but it could be 25 patients or so, something in that neighborhood, which would likely be mid next year where we have some randomized data that shows the beneficial effect of GEN-1 versus the control arm.

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Justin Alexander Kim, Oppenheimer & Co. Inc., Research Division - Associate [6]

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And then with things such as resection rate -- resection scores be adequate in terms of that type of response for the FDA?

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

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I believe so. They were very impressed with this resection score, R0. We know from the literature -- I mean, it's very clear that R0 represents a potential for improvement in survival and overall outcome. Waiting for a progression-free survival in the randomized cohort would be likely, again, assuming that PFS continues to show the kind of improvement that we saw in the OVATION I Study.

So our sense here is translational data supported with improved resection outcomes would be sufficient to present the FDA with evidence that the mechanism is effective, it's working, if the immune system is responding, as we expected it to, and the surgical outcomes are measurably improved as compared to what would be expected.

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Justin Alexander Kim, Oppenheimer & Co. Inc., Research Division - Associate [8]

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Okay. Great. And maybe just one on the manufacturing side. Could you share a little more detail on some of the blocking and tackling there and sort of with the recent run with Hisun, have you reached sort of the suitable scale and cost for commercialization? Or are there additional improvements that will be underway to further drive down the costs?

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

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Yes. So that could -- always in manufacturing, there's a phenomenon here that you can always count on, and that's a good quality manufacturer always finds opportunity to improve cost and quality of their product. We've seen that with Hisun over the 5 or 6 years that we have been working with them and producing ThermoDox, for example. So high-quality manufacturer. But the product that was manufactured recently, the plasmid we manufactured recently were manufactured at scale, the yield was, I'd say, about 85% or 90% of what we anticipated or targeted, let me say it that way. So there is some continued opportunity for improvement in costs associated with improvement in yields. But frankly, even at this relatively lower yield, the cost improvement that I indicated in my prepared remarks is significant.

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Operator [10]

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We will now move to a question from Kumar Raja of Brookline Capital Markets.

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Kumaraguru Raja, [11]

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So first one on OVATION. So in terms of activation of the sites, what has been the progress in that front? And in terms of PFS events versus the patients reaching 16 months, what is the expectation there in terms of do you think the 80 PFS events will reach before the 16 months or you think you need to wait longer for that?

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Michael H. Tardugno, Celsion Corporation - Executive Chairman, President & CEO [12]

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Okay. So let me address the first question with regards to initiating study sites. One of the big surprises for us, and I assume for other companies that are involved with gene research, is the recent decision by the NIH to disband the RAG, that's the recombinant DNA committee review of clinical trials. That was a centralized review. In the past, we'd submit our protocol to the RAG committee and they decide whether or not to support it. And assuming they supported it, we were able to then prosecute the application and the initiation -- initiate clinical trial sites very rapidly thereafter. And we saw that, I think, the evidence of that in our Phase I study where we were able to bring on 4 clinical trial sites rapidly following the RAG committee support. With that decision to disband the committee, the NIH has required now that all investigator sites who receive NIH funding for any purpose, a clinical research purpose, maintain a biological committee to review biological-based clinical trials.

So for the study sites that -- and to some of the -- to our investigators and the individuals who are involved with initiating clinical trials, this is a bit of a surprise. The process for establishing these committees is lengthy. The committees have to be registered with the government. The government review and approval of the committee is lengthy. And then once that approval is received, the committee has to meet -- has to be formed and meet to review the application. Then once the committee makes a decision, the administration -- the medical administration of the hospitals have to approve the clinical trial. That process has been enormously long and frustrating, frankly.

We think we're through the worst of it. The majority of the sites that we identified now have the biological committees registered with the NIH. The committee reviews of our protocols are virtually completed, and the majority of the investigator sites that we've identified, and now it's just a matter of getting the study sites up and running. So we have a timetable to do that. As I indicated in my prepared remarks, we expect to have all 30 sites up and running by the end of the year. So that's -- and we have employed the use of a consultant who's now made, as you can imagine, whenever there is this kind activity, a consultant that now makes a business in assisting companies like ours to get through this biological review process. So that -- did that answer the first question, Kumar?

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Kumaraguru Raja, [13]

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Yes, it does.

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

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Thank you very much. The second question again, please, for me, could you repeat it?

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Kumaraguru Raja, [15]

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Yes, I'm trying to get a sense with regard to, obviously, you guys are going to look at either the 80 PFS events or 16 months, whichever is going to be later. So I'm trying to get a sense what is the possibility that this 80 PFS events will be later than the 16 months.

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Michael H. Tardugno, Celsion Corporation - Executive Chairman, President & CEO [16]

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Yes. So we are hopeful that it will be. So it -- this is going to be hard to predict for us. We know that PFS appears -- the delay in PFS or the delay in progression appears to be associated with GEN-1 in the Phase I study. That is a -- that administration of GEN-1 was neoadjuvant to surgery. In our Phase II study, we are administering GEN-1 neoadjuvant to surgery and then as a adjuvant treatment following surgery. The goal here is to continue to recruit the immune system to delay progression. So my sense, if we're right, my -- if we're right about the activity of GEN-1, my sense is it will be -- the PFS in the 80 patients will be the later of the 2.

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Kumaraguru Raja, [17]

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And also, once you submit the randomized data, assume that you guys get the breakthrough designation, what is the possibility that the OVATION II Study should be sufficient for filing?

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

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So I mean it's hard for me to interpret completely what the FDA is -- what's on their mind. They know that our interest is in accelerating the program. What we would -- assuming that everything goes the way we expect it to, we would propose that the current study be expanded to improve the power, and I'm not sure what the end would be, but to continue the study with a larger population, and as a result, have sufficient power to show an improvement in PFS recognized as the primary end point as a pivotal trial. So that would be our objective.

The biggest problem in the sequential clinical trials, Phase I, II and III, is the time between studies. That's our biggest enemy. So what we like to do is increase the number of patients in our current study, and have the agency agree that in the larger population, we have enough power and randomized properly to support a definitive outcome, and an NDA registrational opportunity.

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Operator [19]

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We will now go to Matthew Cross of Jones Trading.

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Matthew David Cross, JonesTrading Institutional Services, LLC, Research Division - Research Analyst [20]

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Just a couple on GEN-1. So first off, sounds like everything is pretty consistent with your prior quarterly update in regards to time lines for OPTIMA and OVATION II, but I was hoping to get a bit more granularity on the process for both the Phase I and Phase II portions of OVATION. If I recall correctly, I think late last year, you'd been hoping to begin enrollment of the Phase II portion and presumably report out final data from Phase I in Q3 of this year. And I know you've guided here towards completion of enrollment by the end of 2020, but is it still reasonable to assume that we could see the Phase II initiate around Q3? And could you comment on how seamless of a transition this should be from the first to second phase, including any planned discussion with the FDA between phases?

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Michael H. Tardugno, Celsion Corporation - Executive Chairman, President & CEO [21]

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Yes. I think those are all good questions. So the -- we expect to have all 6 patients in the therapeutic arm dosed with safety assessment completed by the end of this year. And so the -- we expect the DMC review of the higher dose to be completed by the end of this year. Assuming that there are no dose-limiting toxicities, then we will move on seamlessly to the Phase II portion likely to occur at the -- in the first quarter of next year.

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

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Okay. Got it. That's very helpful. And then just a...

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

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By the way, with regards to data from that group, we were reporting surgical scores, and we'll be reporting some translational data. But PFS, obviously, would not be available to us at that point.

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

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Sure. Of course. Okay. Thank you for the clarification. And then just a quick follow up along the lines of what was asked earlier regarding this FDA's interest in the control arm in comparison to GEN-1. Could you maybe give us your current thoughts on whether this something you would expect you need to demonstrate? It sounds like you're kind of assuming prior to a potential NDA filing maybe in a Phase III if it's needed, or as you've mentioned potentially in an expanded Phase II portion.

But basically, is this something that you could -- you would need to demonstrate you would expect prior to an NDA filing? Or is this something that could be confirmatory following approval? And then how exactly would this be pulled from the OVATION II as a subset given that everybody, obviously, for now is per protocol receiving both neoadjuvant, chemo and debulking surgery? And I guess the bigger question for me here is also, is there any context you can give around how this may open up utilization of GEN-1 to additional treatment sites maybe beyond newly diagnosed patients where debulking surgery is a standard?

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

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So there's a lot in that question. So let me try to take it one at a time. So as I said earlier, the agency is -- essentially left it up to us, and we believe we have enough information to show -- to confirm what we saw in the Phase I study. And some positive translational data supporting some meaningful clinical results. Objective response rates at the highest dose is 100%, the R0 resection, which is meaningful. I think the literature is -- supports our view that an R0 result has the potential to improve survival by a significant margin. So the agency, I believe, is leaving it up us to determine whether or not we have sufficient evidence to confirm the Phase I results from the randomized Phase II.

We obviously may not have -- we may have not have progression-free survival information to be able to share with the agency at that point, but the surgical results, complete response rates, translational data, I believe, more than sufficient from what I heard on the telephone call, the supportive information, supported data for the Phase I study.

So what is it -- how does that translate? Our view -- I encourage those to meet with them face-to-face to discuss means to be able to accelerate our program if the data supports it. Our view, our internal view here -- and the agency may be open to other approaches or maybe even suggestive of other approaches. But our view is that as I said earlier, the biggest enemy here to clinical development progress is the delay between phases of clinical trials. Phase I to Phase II takes well over a year. Phase II to Phase III takes well over a year. We'd like to expand, increase the -- and expand the Phase II study and get -- and have the agency agree that, that would be sufficient to support the registrational application on a single study. That's what we would be looking for.

With regards to GEN-1's applications to other GI cancers, now we are -- we're quite hopeful that GEN-1 could be expanded to a range of cancers for which the administration is intraperitoneal, which includes uterine cancers, could be pancreatic cancers, colorectal cancers and the like. So we believe there's an opportunity to expand GEN-1 to a range of GI cancers, assuming we have the incredible support that we expect to see from this Phase II study in ovarian cancer.

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

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Great. Okay. I look forward to seeing how that progresses. And then I just had one quick one as well on ThermoDox, given that you mentioned you begun commercial research for marketing in China, U.S. and the EU. And I was wondering if based on kind of some initial results from those lines of inquiry, whether you've changed any way or could provide the latest on kind of what your partnering strategy may look like, I guess, particularly for the EU. I know you've spent a lot of time focused on the Chinese and U.S. markets. But both for China and the EU, whether do you expect partnership and co-promote situation in those markets or just based on the initial feedback you're getting from this research, what your current thinking is there?

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

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Our thinking remains the same that for ex-U. S. markets, we were best served by partnering for commercialization. Our research really is intended to support any negotiation for the terms of a license or the sale of the asset to a partner or a third party to commercialize ThermoDox. So that's the important part of the research that we're doing for ex-U. S. markets.

For the U.S. market, I've said this before, although we'll always do what's right for shareholders. I want to say that right from the outset. But I do believe the Celsion could be the best steward for commercializing ThermoDox in the United States. We continue to do some fundamental research. Most recently, we've -- you've heard of real-world data. We've taken some real, real-world data from the Medicare database.

Some interesting -- I'll just share with you some interesting top line information that we've seen and have synthesized. There's a range of treatment options for patients in the United States treated -- diagnosed with HCC from surgery to transplantation, to chemoembolization, to embolization, pure embolization, to embolic beads to radiation embolization, cryoablation. Of all of those treatment options that I just mentioned, the most effective, measured from the time to retreat -- or the amount of retreatment for the percentage of patients we treated within 12 months, the most effective is radiofrequency ablation, interestingly enough. And the treatment that's most cost-effective by a large margin, interestingly enough, is radiofrequency ablation.

So our view is that if we can improve this effective procedure, measurably improve it, which is a cost-effective procedure that the company has quite a bit of pricing power in an effective treatment that's being improved measurably with the addition of ThermoDox. So we'll have more to say on that in some detail in the coming months.

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Matthew David Cross, JonesTrading Institutional Services, LLC, Research Division - Research Analyst [28]

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Great. Well, sounds like you guys are well positioned here and thanks for the detailed responses. As I know, it hasn't been too long since your last call, but appreciate getting the latest.

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

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You bet.

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Operator [30]

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We will now move to [Mitch Landgraf,] private investor.

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Unidentified Participant, [31]

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I think I'm safe on speaking on behalf of retail investors that we commend and appreciate the efforts you have placed to inhibit shortselling. Also, as a nationally recognized cancer volunteer fighter in nonprofit sector, I just have to commend this company for what you're doing for cancer patients. I'm frequently asked what I think of the top 2 or 3 areas of promise in cancer treatment. And without hesitation, Celsion is one of the top 2 that I mention.

Questions are in the ThermoDox treatments, are we still with a single vial preparation or single vial treatment that does not need a pharmacist available to do any mixing? Is that still correct?

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

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Yes, [Mitch]. So we have a single vial formulation. You absolutely know the history of the company. That we finalized for formulation about just 10 years ago. We produced probably 35 or 40 lots (inaudible) with manufacturers of that single vial formulation very successfully. So yes, and it's well received by the pharmacists. Typically, it's 3 to 4 vials. A dose is dependent upon Boyd's Formula. That's a body surface area calculation. So 3 to 4 vials, very well received. I think if there's any issues with our single vial, it could be the storage conditions. We know it's at minus 80 degrees storage temperatures. Well, the reason I bring that us up is that -- that will not inhibit the distribution or sale of our product, but most recently, we talked about a -- I'm sorry about that.

Most recently, we talked about granting of a new patent. I just want to remind everybody that patent provides us with a formulation opportunity that obviates the need for this low temperature storage, also extends the patent life and also allows our temperature-sensitive liposome to be used in a wider range of therapeutics. So thank you for giving me the opportunity to mention that, Mitch .

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Unidentified Participant, [33]

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Very good. And my second question actually relates back to the earlier conference call. I just didn't have time on the call to get in and ask the question. I haven't had success reaching the company in the last month to get the question answered. But it relates to regulatory approval in China. Is there a potential path for premarket authorization or basically market -- bringing ThermoDox to market in China, in the Chinese market prior to U.S. or U.S. FDA PMA?

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

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So that's our strategy, frankly. So what we like to do, so China being the largest market in the world, 50% of incidences in China. We'd like to file our NDA with the NMPA, used to be the CFDA, now the NMPA. Given their -- I would almost say in patients, I think I said that in the last conference call. Dr. Borys, whom I have met with the head of the CDE, the Center for Drug Evaluation, who has encouraged us not only to file quickly, assuming positive data, but also to consider end points other than OS, for example, 3-year survival percentages.

So we know we have a receptive audience, and it's not because we are unique in any other way, but HCC is an enormous problem in China. And I think they see the benefit of this cost-effective approach, assuming we're successful both economically and more importantly to the medical community in China. So our strategy for filing, and that's the direction I'm giving to our NDA team who's currently working on writing the NDA, is China, the United States and the European community, in that order. But let me just say this, we won't delay the U.S. application if -- for -- because China is a priority. I mean we are preparing the NDA in something called a common technical document format. So essentially the -- there's a harmonized format that's been accepted by the Chinese, by the European community, by the Japanese and by the FDA. So we intend to move quickly on all fronts, but our first application will likely be in China.

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Unidentified Participant, [35]

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I really appreciate that all that detail. And while you correctly note that I know this company's history and have been a supporter for over a decade, I am most excited about its potential blockbuster future. Thank you very much.

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Operator [36]

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We will now question from [Barry Rubin] of [First Soil] Investments.

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Michael H. Tardugno, Celsion Corporation - Executive Chairman, President & CEO [37]

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Mr. [Rubin], I'd say one thing is the only thing missing from our Annual Shareholder Meeting this year was you. We did miss you. In your absence, we did mention the fact that you were missed.

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Unidentified Analyst, [38]

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I would have come, but I wanted to hear the update today. I know you couldn't by law tell me anything yesterday so that's why it held off to that. But thank you for those nice comments. I just have one quick question because this is the end of the session, I assume. I thought I had heard in the last conference call that when ThermoDox is approved the manufacturing will be overseas. Am I correct?

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Michael H. Tardugno, Celsion Corporation - Executive Chairman, President & CEO [39]

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Well, partially correct, [Barry]. So we have developed 3 manufacturing sites, 2 in the United States and 1 in China. The goal for the China manufacturing has always been to provide a low cost of goods for markets that are very, very price-sensitive.

So China, for example, even though it's a booming economy, 50% of the patients who are diagnosed with primary liver cancer, 50% of the patients in China, so that's over 200,000 patients in China, are individuals who live in well, well, well below what we would consider the poverty line. And so making this drug affordable to indigent populations is very important, it is part of our strategy. So the Chinese manufacturing partner will be able to support cost effectively and give us good margins cost effectively in the rural communities of China, in Malaysia, in the Philippines, in Vietnam and other countries where the economies are still emerging into the modern world.

Our manufacturing strategy for the United States and for Europe is to use U.S. manufacturers supplemented with some Chinese manufacturing. We always want to have a secondary backup, a redundant capability.

So that's really our strategy. U.S. manufacturing, for the most part for the Western economies, the developed economies. Chinese manufacturing, for the most part, for countries that are very, very, very price-sensitive. (inaudible) another shout out for this whole strategy here.

Our goal here is -- our goal is to create value for our shareholders. But from a product development standpoint, we want to make sure that this drug, ThermoDox, is available to the entire world, and regardless of the financial condition of the patient.

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Unidentified Analyst, [40]

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Which leads me to my final -- just a quick follow-up on the manufacturing. The portion that's done overseas, who does the quality control? Do you have any supervisors that will be coming from the states? Or whoever it is being produced overseas, they'll be quality controlled from over there? Does Celsion oversee it?

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Michael H. Tardugno, Celsion Corporation - Executive Chairman, President & CEO [41]

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Well, [Barry], I almost want to give you a hug here because you're going right to some of the most important questions with regards to manufacturing. Dr. Anwer sitting on my left here has developed the GMP capability for product evaluation in our Huntsville, Alabama laboratories. We intend that -- we did that for a reason so that we can evaluate product quality independently in our own laboratories for every manufacturing, including the Chinese. And you may want to talk a little bit if you want -- I don't want to put you on the spot. Do you want to talk a little bit about -- more about our GMP capability and our center of excellence in Huntsville.

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Khursheed Anwer, Celsion Corporation - Executive VP & Chief Scientific Officer [42]

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Yes, of course, Michael. As Michael said, for about the last -- 2, 2.5 years ago, we set up a GMP facility in Huntsville, Alabama, our site in State of Alabama, and we have established all the QC procedures, validated those to do product testing under Celsion banner. And we have been able to release a lot, have done stability study to those validated methods. That's ThermoDox questions, but we also have QC set up for GEN-1 as well, as Michael had mentioned that we have plasmid now produced in China by Hisun. So it really gives us advantage in terms of time and a quality check on our foreign manufacturing partners.

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Unidentified Analyst, [43]

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Great. Thank you for taking my call.

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Michael H. Tardugno, Celsion Corporation - Executive Chairman, President & CEO [44]

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Hope that gives you some assurance. We're very sensitive to this notion of quality, Mr. Rubin, very, very sensitive.

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Operator [45]

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We have no further questions.

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Michael H. Tardugno, Celsion Corporation - Executive Chairman, President & CEO [46]

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So again, I want to thank all of you for joining us for this morning's call. I hope that you agree that our work over this past year has reinforced our potential for success and that the progress that we're making foretells a transformative year for Celsion for the patients who have -- unfortunately have been the subject of our research and for the medical community. I look forward to continuing to update you as our progress this year advances, and look forward to our communications with the press releases and future conference calls. Thank you all very much. Have a good day.

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Operator [47]

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And with that, ladies and gentlemen, that does conclude today's call. We thank you again for your participation. You may now disconnect.