U.S. Markets open in 1 hr 56 mins

Edited Transcript of CYTX earnings conference call or presentation 14-Nov-19 10:00pm GMT

Q3 2019 Plus Therapeutics Inc Earnings Call

San Diego Dec 6, 2019 (Thomson StreetEvents) -- Edited Transcript of Plus Therapeutics Inc earnings conference call or presentation Thursday, November 14, 2019 at 10:00:00pm GMT

TEXT version of Transcript

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

Corporate Participants

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

* Desiree Smith

Plus Therapeutics, Inc. - Corporate Controller, Principal Financial & Accounting Officer

* Marc H. Hedrick

Plus Therapeutics, Inc. - President, CEO & Director

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

Conference Call Participants

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

* Emad Samad;WBB Securities;Managing Director

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

Presentation

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

Operator [1]

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

Good afternoon, ladies and gentlemen. Welcome to the Plus Therapeutics investor conference call. (Operator Instructions)

Before we begin, we want to advise you that over the course of the call and question-and-answer session, forward-looking statements will be made regarding events, trends, business prospects and financial performance, which may affect Plus Therapeutics' future operating results and financial position. All such statements are subject to risks and uncertainties, including the risks and uncertainties described under the Risk Factors section included in Plus Therapeutics' annual report on Form 10-K and quarterly reports on Form 10-Q filed with the Securities and Exchange Commission from time to time. Plus Therapeutics advises you to review these risk factors in considering such statements. Plus Therapeutics assumes no responsibility to update or revise any forward-looking statements to reflect events, trends or circumstances after the date they are made.

With us today from Plus Therapeutics are Dr. Marc Hedrick, President and Chief Executive Officer; and Mr. Desiree Smith, Corporate Controller. It is now my pleasure to turn the floor over to Dr. Marc Hedrick, President and Chief Executive Officer of Plus Therapeutics. Sir, you may begin.

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

Marc H. Hedrick, Plus Therapeutics, Inc. - President, CEO & Director [2]

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

Good afternoon. Thank you, Erica. And welcome to our Q3 2019 earnings call. As Erica said, I'm Marc Hedrick, President and CEO of Plus Therapeutics, and I'm happy to have for the first time joining me today our Corporate Controller and Principal Accounting Officer, Ms. Desiree Smith.

I'm extremely pleased to report the operating results for the third quarter 2019 for Plus Therapeutics, which incidentally is the first reported quarter under the Plus Therapeutics company name. It was indeed a milestone quarter for us, and honestly, perhaps the most important in the company's history. In 3 short months, Plus Therapeutics reinvented itself as a clinical stage oncology company. Let me hit a few of those highlights for you.

First of all, we achieved long-term viability in a directed series of actions, including adding approximately $20 million in cash to the balance sheet through both a $15 million public offering and a $4.6 million reimbursement payment from the U.S. Department of Health and Human Services for our work on our BARDA contract.

Second, we moved the company headquarters from California to a lower-cost, lower-tax state, Texas, where we had a pre-existing facility in an active center of operations. That move was timely and that it coincided with the November 2019 approval by Texas voters of a valid measure that doubled to $6 billion that value upon issuances to support the Cancer Prevention and Research Institute of Texas, also called CPRIT. CPRIT is the nation's second largest public funder of cancer research after the U.S. government. We believe that as a Texas-centric company, there will be greater opportunities to partner with CPRIT now that we have relocated.

Finally, we made a sweeping structural change to our business focus and development model. As previously described, we very deliberately virtualized our development model in order to maximize capital efficiency. Specifically, we trimmed our full-time employee base and real estate footprint to the essential core as we solve not only for capital efficiency, but importantly, for speed and quality. We now intend to use the best third-party experts and service providers to supplement our small agile core team. With these moves, we have architected a base cost structure designed to enable long-term viability and support a drive to dramatic future growth. It's a lean platform that is built for scale and sustainable margin, and we intend to maximize it.

In summary, Plus Therapeutics emerges from the third quarter with financial strength, focused development strategy and a cost structure to maximize the opportunity for long-term viability and growth. Now we intend to proceed at a brisk pace, in large part by strategically utilizing FDA regulatory opportunities designed to accelerate drug commercialization such as the orphan 505(b)(2) path. Plus Therapeutics' current core expertise is in drug redesign and specifically nanoparticle drug formulation, including the formulation of complex drugs as well as drug manufacturing and scale up. We are also focusing specifically on late preclinical and early clinical stage drugs that can be moved cost effectively and rapidly through Phase II.

So we are confident that with our core assets married to a growing pipeline, we can produce extraordinary therapeutics that can provide tremendous benefits to patients and shareholders alike.

As a guide to decision-making going forward as it relates to our portfolio development, Plus has set forth 3 straightforward medical and commercial criteria. First, every Plus Therapeutics drug must address an unmet or substantially underserved medical need. Second, it should combine the tried and true with the new by taking known active pharmaceutical ingredients that have extensive safety and efficacy information and using new technologies to deliver them more safely and more effectively. And finally, we must believe that there is an addressable market of at least $250 million for those selected indications.

Now let me pivot over to our lead agent to discuss that. DocePLUS is a proprietary clinical stage development asset, which is an albumin-stabilized PEGylated liposomal docetaxel. DocePLUS checks all 3 boxes I just mentioned. It is a Phase II-ready asset that squarely addresses a widely recognized unmet need in small cell lung cancer, and also quite possibly other kinds of cancer.

More specifically, DocePLUS is a complex, reformulated new chemical entity based on the clinically proven API docetaxel. DocePLUS, which earlier this year was granted U.S. orphan designation for small cell lung cancer, represents a peak U.S. sales opportunity of an estimated $750 million a year. This drug is intended to be something of a version 2.0, namely a substantially improved version of the market-leading oncology drug by Sanofi, TAXOTERE. The FDA, in our communications with them, has accepted in principle the sufficiency of a completed nonclinical studies package, the appropriateness of the 505(b)(2) pathway for the drug, the potential for accelerated approval for small cell lung cancer, generally considered the most lethal lung cancer subtype with 5-year relative survival rates ranging from 8% to 31%. Finally, the suitability of objective response rate as the primary endpoint for a planned pivotal Phase II trial. We believe strongly that the FDA's feedback illustrates a very positive path forward for this drug.

I won't reiterate our previous investor calls' discussion of why we believe DocePLUS to be meaningfully superior to conventional docetaxel. However, we're happy to share this, of course, within the investor who is interested. But we do believe that DocePLUS has a potential to improve efficacy while simultaneously providing a safety profile that is similar or better than conventional docetaxel.

To reiterate, in terms of the clinical data, a completed U.S. FDA-approved 29-patient Phase I dose escalation trial of DocePLUS indicated that DocePLUS appears to offer advantages over docetaxel injection, specifically in terms of safety and the avoidance of hypersensitivity reactions related to Tween 80, morbidity, the avoidance of dexamethasone premedication and perhaps a lower dosage of API; as well as within the limits of the Phase I study, evidence of efficacy in heavily pretreated patients, even those resistant to conventional docetaxel. As a result, we are on plan to accelerate development of DocePLUS as a liposomal formulation of docetaxel for the treatment of small cell lung cancer in patients with platinum-sensitive disease following first-line treatment. Upon establishment of this indication, we intend to execute the clinical program sufficient to expand use of DocePLUS into other forms of cancer. In the near term, we intend to submit our Phase II trial protocol in small cell patients with platinum-sensitive disease who progressed at least 60 days after the initiation of first kinase. While we intend to develop the small cell lung cancer indication on our own, we are actively seeking potential partners for indications beyond that scope.

Regarding our secondary asset, DoxoPLUS, our liposomal doxorubicin, we are active -- we are in active discussions with parties interested in acquiring this drug as a new generic version of Caelyx in Europe.

As a final point, we are reviewing a number of other in-licensing opportunities to expand our pipeline consistent with the corporate objectives I mentioned earlier.

And now, I'm very pleased to turn it over to Ms. Desiree Smith, our Corporate Controller, for a financial review. Desiree?

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

Desiree Smith, Plus Therapeutics, Inc. - Corporate Controller, Principal Financial & Accounting Officer [3]

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

Thank you, Marc, and good afternoon, everyone. I am very excited to be part of the team at Plus Therapeutics, and I will be discussing Plus Therapeutics' financial results for the third quarter of 2019 as presented in our earnings release today. I will get right to the financial results.

For the 9 months ended 9/30/2019, our operating cash burn was $6.9 million as compared to $9.5 million in 2018. Our Q3 2019 operating cash burn was approximately $2.1 million compared to $2.6 million in Q3 2018. The reduction in annual cash burn was mostly related to discontinued operations, which resulted in reductions in operating expenses.

Net income for Q3 2019 was $526,000 as compared to a net loss of $2.3 million in Q3 2018. The increase in net income was mainly due to the BARDA development revenue of $4.6 million, which was offset by $1.2 million of warrant issuance costs. For the 9 months ended 9/30/2019, the net loss was $11.8 million as compared to $10.4 million for the same period in 2018.

For research and development expenses, in Q3 2019, our research and development expense were $900,000 as compared to a $1.2 million expense in Q3 2018. For the 9 months ended 9/30/2019, R&D expenses were $3.6 million compared to $3.9 million in 2018. The decrease in research and development year-over-year spending was primarily attributed to a decrease in professional services, freelance services and product samples, offset by an increase in BARDA-related product studies.

Now onto our sales and marketing. Our sales and marketing expenses decreased this quarter to approximately $94,000 as compared to approximately $118,000 in Q3 2018. For the 9 months ended September 30, 2019 and 9/30/2018, our sales and marketing expense were $305,000 and $596,000, respectively. The decrease in sales and marketing expenses is mainly due to a reduction in salaries and benefits as well as professional services due to our planned move toward an R&D-focused company.

G&A expense was $1.1 million this quarter as compared to $1.3 million in Q3 2018. For the 9 months ended 9/30/2019 and 2018, G&A expense was $3.3 million as compared to $4.6 million in 2018. The Q3 reduction in G&A expenses was mainly related to reductions in salaries, benefits and professional services. The decrease for the 9 month period is driven by a onetime expense related to the termination of a lease agreement for office space in San Diego. In addition, there was also a decrease in corporate and legal professional fees.

Now with respect to revenues. Q3 2019 total revenues were $4.8 million as compared to $454,000 in Q3 2018. For the 9 months ended 9/30/2019, total revenues were $5.8 million as compared to $2.3 million in 2018. The increase in revenues is mainly due to the recognition of the BARDA revenue.

Turning to the balance sheet. As of September 30, 2019, we have $16.8 million of cash, $4.6 million in accrued revenue from BARDA and $10.9 million of debt principal. In December 2018, we amended our debt with Oxford, providing additional flexibility by position on our interest-only periods through April 1, 2020. Our liabilities increased to $25.6 million for the 9 months ended 9/30/2019

as compared to $18.8 million at December 21, 2018. This increase is primarily related to the warrants issued in September 2019 offering.

Now, I will turn it back to Marc.

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

Marc H. Hedrick, Plus Therapeutics, Inc. - President, CEO & Director [4]

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

Thank you, Desiree. Now let me just briefly provide some color on key forthcoming milestones, specifically, regarding DocePLUS. For

the rest of 2019, CMC development is our focus, and that will be specifically on manufacturing validation lots, developing key test methods, finalizing contracts with our CMO providers; and on the clinical side, finalizing our Phase II protocols with the FDA. By mid-2020, we intend to have drug supply after our Phase II trial and be ready to begin enrollment.

Regarding our DoxoPLUS asset, discussions of partnership with a number of parties, as I mentioned, are underway.

Finally, we continue to evaluate new potential in-licensing candidates in an ongoing manner.

So with that, I'll turn it over to Erica. And if there are any questions, the floor is now open.

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

Questions and Answers

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

Operator [1]

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

(Operator Instructions) Our first question comes from Emad Samad with WBB.

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

Emad Samad;WBB Securities;Managing Director, [2]

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

Marc, you mentioned potentially finding other assets. Now that the company's divested its Cell Therapy assets, can you give us a little more information on the pipeline expansion plans, the kind of characteristics you're looking for, the types of assets you're targeting, et cetera? And as a bit of a follow-on and twist on that, can you also sort of explain how, specifically Texas and the incentives there, could it affect both your current pipeline and help you in your strategies for pipeline expansion as well?

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

Marc H. Hedrick, Plus Therapeutics, Inc. - President, CEO & Director [3]

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

Yes, thank you for the question. So let me talk about the new assets, things that we're looking for. So I was pretty clear in the presentation of what kinds of assets we're looking for. Let me highlight some things that I think are most relevant to your question. First of all, we're looking for things that are late preclinical to early clinical phase. We don't want early preclinical related assets. We like drugs that have a regulatory advantage or regulatory edge, such as 505(b)(2) or orphan status. We're looking for things that also have a market opportunity that's equal to or greater than $250 million. So we do like drugs that are in the oncology and orphan phase. And I'll talk about the oncology-related opportunity as it relates to CPRIT in a moment. But to kind of close out the question you just asked, I think with our balance sheet being much stronger -- in fact, relative to burn, it's the strongest it's ever been since I've been with the company. But we've also decreased our structural burn, our core burn, in other words, what we spend every day is down to a place where

it's also never been before it runs up and it gives us enormous flexibility in terms of types of assets that we can bring in. But I think bottom line, we still -- all that down. We're looking for things that can bring near-term impact to shareholders. That's the key.

Now with respect to moving to Texas, not only is sort of the core cost structure better than La Joya, for obvious reasons, we were relatively confident that the CPRIT funding would be re-upped by the Texas voters this November, which we're happy to see. I think that gives us some opportunity with our lead drug, DoxoPLUS , perhaps in terms of funding that for the core or potentially noncore indications, in other words, spanning the opportunity for that, as well as potentially other assets that we might bring in, we can leverage that funding for those assets as well. So that's definitely something that's on our radar screen, and we think that's a potential advantage for us as a public company in Texas with an oncology focus.

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

Operator [4]

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

(Operator Instructions) Your next question is from [Sydney Trevor], an investor.

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

Unidentified Participant, [5]

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

I just wanted to see if you can explain to me, it says warrant liability, $10,400,000. What does that mean?

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

Marc H. Hedrick, Plus Therapeutics, Inc. - President, CEO & Director [6]

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

Yes. So in a recent transaction with H.C. Wainwright, there were warrants as part of that deal. And those warrants will go through as liability.

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

Unidentified Participant, [7]

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

But why is there a liability if someone has a warrant to buy it?

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

Marc H. Hedrick, Plus Therapeutics, Inc. - President, CEO & Director [8]

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

Yes. There are features in that warrants that dictated it to be booked as liability, not as stockholders' equity.

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

Unidentified Participant, [9]

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

The voice isn't coming in good. I mean, I understand if someone has a warrant to buy your stock. It means there's a potential to inject money into the company in the future. So why is it going to be a liability?

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

Marc H. Hedrick, Plus Therapeutics, Inc. - President, CEO & Director [10]

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

We appreciate the question. Thank you.

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

Operator [11]

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

(Operator Instructions) Your next question is from Ed Woo with Ascendiant Capital.

Okay. It looks like Mr. Woo withdrew his question. So there are no further questions at this time. Dr. Hedrick, I'll turn the call back over to you for additional or closing remarks.

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

Marc H. Hedrick, Plus Therapeutics, Inc. - President, CEO & Director [12]

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

Erica, thank you. Once again, to conclude, Plus Therapeutics emerges from the third quarter with financial strength, focused development strategy, the cost structure to maximize the chances of long-term viability to grow. We are extremely excited about the road ahead, and I want to thank you for participating in this call. Please have a good evening.

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

Operator [13]

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

Thank you. This does conclude today's conference call. Please disconnect your lines at this time, and have a wonderful day.