Delcath Systems Q1 2023 Earnings Call Transcript

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May 12, 2023

There are 8 speakers on the call.

Operator

Good day, and welcome to the Del Cast Systems Reports First Quarter Fiscal 2023 Financial Results Call. All participants will be in listen only mode. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to David Hoffman of General Counsel.

Operator

Please go ahead.

Speaker 1

Thank you. And once again, welcome to Del Cast Systems 2023 First Quarter Earnings Call. With me on the call are Gerard Michel, Chief Executive Officer Doctor. Jonny Jon, Senior Vice President of Medical Affairs and Kevin Muir, General Manager of U. S.

Speaker 1

Interventional Oncology John Popora, Chief Operating Officer And Anthony Diaz, Vice President of Finance. I'd like to begin the call by reading the Safe Harbor statement. The Reform Act of 1995. All statements made on this call with the exception of historical facts Maybe considered forward looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Although the company believes that expectations and assumptions reflected in these forward looking statements are reasonable, It makes no assurance that such expectations will prove to have been correct.

Speaker 1

Actual results may differ materially from those expressed or implied in forward looking statements due to various risks and uncertainties. For a discussion of such risks and uncertainties, which could cause actual results to differ from those expressed or implied In the forward looking statements, please see risk factors detailed in the company's annual report on Form 10 ks does contain and subsequently filed quarterly reports on Form 10 Q as well as in other reports That the company files from time to time with the Securities and Exchange Commission. Any forward looking statements included in this earnings call are made only as of the date of this call. We do not undertake any obligation to update or supplement any forward looking statements to reflect Now, I would like to turn the call over to Gerard Michel. Gerard, please proceed.

Speaker 2

Thank you everyone for joining today. Since filing the NDA resubmission on February 14, I'm receiving a notice on March 20 that FDA determined resubmission constituted a complete Class 2 response. The company has been working with the agency on the review process of the August 14th PDUFA date approach. This primarily entails a routine information Since I know the question will be asked, at this time, we have received no indication about whether the We will schedule an advisory committee meeting. Of course, until we hear otherwise, we will continue to assume one will be scheduled.

Speaker 2

Given the recent financing and the approaching PDUFA date, we are accelerating our preparation for the commercial launch of Pimsado, if approved. Our commercial model will be comprised of referring oncologists and treating centers. Therefore, Core part of that preparation is the identification of potential commercial treating sites, which are sites that are either trained in treating patients in the expanded access protocol prior to launch or committed to becoming trained within a few months after approval. As we have mentioned before, DelCap currently has 3 sites enrolled in the program with 4 more sites undergoing startup activities. In addition, approximately 5 other sites have expressed Their intention in becoming treating sites if the hepatoc is approved.

Speaker 2

So in total, we believe there are over 10 sites with the potential to become treating sites in a relatively short time for any post launch. While we will continue to seek additional treating sites, we believe this number of identified sites We'll ensure that we do not have treatment bottlenecks as referrals build from medical oncologists post launch. A second key component to successful launch is outreach to medical oncologists. Recall that the majority of our U. S.

Speaker 2

Investigators in the FOCUS trial For surgical oncologists, while we have a number of very supportive metastatic ocular melanoma KOLs, We need a broader set of medical oncologists familiar with our data. Thus, we have started to build the medical affairs team and we will have MSLs out in the field by next month. Post launch, the MSLs will continue to focus on medical education with oncologists. We have also begun recruiting Sales force management team. The sales force will be bifurcated with 1 team focused on supporting existing treatment centers and working on opening new treatment centers with the 2nd team focused on calling our medical oncologists to facilitate potential referral of appropriate treatment Turning to ongoing clinical work, because we have spoken about the preliminary Chopin results extensively on past calls, I wouldn't review those results yet again.

Speaker 2

However, I will note that the independent investigators conducting that study Have informed us that they are on track to publish a preplanned interim analysis by the end of this year. The analysis will include 40 of the planned 76 randomized patients Comparing percutaneous hepatic perfusion with ChemoSat alone, with percutaneous hepatic perfusion with ChemoSat plus Ipilimumab and nelolumab. Based on conversations with treating medical oncologists, we know there is strong interest patient for these pending interim results given the signals seen in a small Phase 1 study and the prevalence of immune oncology As previously reported, on March 29, The company closed a private investment and public equity deal with healthcare focused institutional investors as well as investing existing investors It will provide up to $85,000,000 in gross proceeds, including approximately $25,000,000 of upfront funding. The Financing was led by Vivo Capital with participation from Logos Capital, BVF Partners, Stone Pine and Serrato Capital as well as existing investors including Roswell Advisors. We are delighted to have the financial backing of these high profile healthcare focused funds And we believe the initial $25,000,000 will be adequate to support the ongoing commercial launch preparations.

Speaker 2

The previously mentioned financing will trigger another $35,000,000 of gross proceeds upon approval and then another $25,000,000 in gross Proceeds upon achieving $10,000,000 in quarterly revenue. In addition, we announced that we had reached an agreement With Avinet Capital to resume the interest only period on the Avinet loan from March 31, 2023 to September 30, 2023 deferring $4,300,000 of principal payments. Together these two financial transactions greatly enhance Our ability to appropriately fund launch preparations and should eliminate any perception of a financing overhang, which often hinder share price appreciation upon product approvals. I look forward to taking questions in a moment. But first, we'll turn the call over to Tony to review the financials.

Speaker 2

Tony?

Speaker 3

Thank you, Gerard. As stated in our earnings release, we're in the process of completing our customary year end close and review procedures, including certain valuation work associated with the issuance of the warrants and stock preferred stock in Dowel Cast's previously announced private placement that closed on March 29, 2023 and as of and for the quarter end March 31, 2023. Dialcast's full Q1 2023 financial results will be reflected in the quarterly report on Form 10 Q, which will be filed no later than May 22, 2023. Revenues is expected to be approximately $600,000 for the 3 months ended March 31, 2023, Compared to $378,000 for the 3 months ended March 31, 2022. The estimated increase in Product revenue was due to the transition to direct sales in Europe, which occurred in March 2022 as well as an approximately 37% increase in unit volume.

Speaker 3

For the 3 months ended March 31, 2023, research and development expenses is expected to be relatively flat as compared to $4,500,000 for both periods compared to the 3 months ended March 31, 2022. As of March 30 1st, 2023, the company had cash, cash equivalents and restricted cash totaling $24,300,000 as compared to cash, Cash equivalents and restricted cash totaling $11,800,000 as of December 31, 2022. The increase in cash of $12,500,000 was due to proceeds from the private placement which closed on March 29, 2023, offset by the use of $4,300,000 of cash and operating activities and $6,300,000 of principal payments towards the company's existing loan with Avenue. That concludes my financial remarks. I'll ask the operator to open the phone lines for Q and A.

Speaker 3

Can you please check for questions?

Operator

Thank you. We will now begin the question and answer session. At this time, we'll pause momentarily to assemble our roster. Our first question comes from Yale Jen from Laidlaw and Company. Please go ahead.

Speaker 4

Good morning and thanks for taking questions and congrats on all the progress. I've got 2 here. One is that given you guys already have we'll have more cash. Any thoughts Any plans in the pipeline development? And then I have follow-up questions.

Speaker 2

Yes. We're going to restrict our pipeline activities to probably advisory committee meetings For the time being, I think our primary focus is a successful launch. With that said, there will be Activity in parallel going on with the care, but I don't see any significant actual clinical dosing patients probably till sometime next year. Now with that said, we are prepared to support Investigator initiated trials as they are put in front of us by interested oncologists And we're hopeful that we'll have a number of those started probably later this year, whether it's additional combination trials with immuno oncology agents Or trials in other indications. But next year without a doubt, we will be running trials In other indications, both other tumor types and likely other indications combined with immuno oncology

Speaker 4

Okay, great. That's very, very helpful. And then maybe one more question here. We just one of the competitors, I think, recently reported There are studies in the ocular melanoma, both in the first line as well as in the Any thoughts, any comments on the whether what type of possible sort of competition may Happen or not happen, any color

Speaker 2

would be in the cycle? Yes, I think we report referring to IDeA's data, which I thought looked quite good myself. Their ORR and duration of response looks more like in the realm of what we're seeing With our product. I think what's important to note is 2 things. 1, patients most patients go through more than one line of therapy.

Speaker 2

The second thing is most medical oncologists treat this disease, believe patients should get both a systemic therapy As well as a local regional therapy. The latter of course is what we are. So I don't see additional systemic therapies coming out As being a direct competitor with us, I think the question is what goes first, a systemic or a local regional therapy. I think more data needs to be generated to determine really what's best for the patients. I would note that most of these patients When they do succumb to the disease, it is usually due to liver failure from liver mets.

Speaker 2

So I know there'll be a place for us At some point for most of these patients.

Speaker 4

Okay, great. That's very helpful and appreciate that. Congrats on the progress.

Speaker 2

Thank you, Dhya.

Operator

Our next question comes from Swayampakula Ramakanth from H. C. Wainwright. Please go ahead.

Speaker 5

Thank you. This is RK from HCI Wainwright. Good morning, Gerard. Just a couple of requests in the sense from me too. In terms of the EAP program that's being run, Could you give us an idea of how many patients have been treated so far or being treated under this program?

Speaker 5

And also, any commentary on the experience so far from both physicians and the patients?

Speaker 2

Yes. So right now, well over I think they had 40 patients at the start of this year. So they're probably well past the 40 at this point and I have a precise number. I had to guess based on the pace and it's an estimate for me, it's probably somewhere in the range of 50 patients out of 76 That need to be treated. It is a randomized trial ORR is the primary objective response rate is what we reported in the interim data And they're not sharing those results with us as time goes on.

Speaker 2

Of course, as is appropriate, they should not share that with us. All I can say is we're very hopeful that the data the signal that was seen in the small number of patients, 7 patients early on We'll continue to hold, but we'll have to wait. If we turn to the 7 patients, they tolerated the sequential treatments Quite well. I don't think there are any toxicities that the physicians didn't think they could handle or that would be undue for the patients. So that was a very important issue to start with.

Speaker 2

And then again, as I talked about before, very, very high response rates, 100 percent disease control, 86% I think, response rate and 2.5 years roughly Duration of response and PFS or QB PFS at the last data cut. So Fingers crossed that level of response and duration can be held with the larger end and we get the interim data later this year.

Speaker 5

Fantastic. And then, it's encouraging that you're getting more centers Signing up for getting ready to adopt when hepato becomes approved. So at this point, what do you think is the market in terms of like number of centers who regularly do liver directed therapies And which can be I don't know if you're kind of dividing the market into different tiers as like Early adopters and adopters that you have to work on To gain their confidence and start using heapsavol.

Speaker 2

In terms of the number of Centers that do liver directed therapy, it's I don't know a precise number, it's at least in the 100. If we think about TACE and Y90, which are the 2 primary liver directed therapies. For this particular indication, We have no need nor would it be prudent to try to get into any meaningful percentage of that. I think if we had 10 centers up and running within 3 to 6 months or within 3 months, let's say, Launch that would be fantastic. I can't see us ever going past and this number might I can't see it going much past 20 centers, maybe 25 at peak.

Speaker 2

The reason for that is we want to keep close tabs of these treating centers. And again, recall that it is only about It's hard to say, but we're saying some people say we're conservative, but we're saying our TAM is 800 patients. I don't want to have a center doing one of these every 3 months. I'd like to see centers doing at least 2 a month just to make sure they're well trained. The team is up to speed.

Speaker 2

So again, I think 25 at the most peak, very happy with And 1 to 2 quarters post launch if we can accomplish that, that will mean a phenomenal launch if we have the referrals Up the pipeline to support that, to support those centers.

Speaker 5

Very good. Thank you very much for taking the questions.

Operator

Our next question comes from Bill Moghen from Canaccord Genuity. Please go ahead.

Speaker 6

Good morning and thanks. So of the initial Do you have a sense of how many patients they represent? And then second question, are you at the point yet where you can have even preliminary discussions with payers? Do you have any sense For HEBSATO as it launches or any sort of timeline on that? Thanks.

Speaker 2

Sure. Let me handle that first part of the question in terms of how many they represent. And Kevin, I'm going to ask you to talk through The dynamics with hospitals and reimbursement in a moment. In terms of the number of patients they represent, Shooting from the hit maybe 30% of those 10%, maybe 40%, Because we're that's surprisingly focused on centers that already have a set of patients. But that's not really that's not what so that's only part of the equation.

Speaker 2

The other part of the equation Going out to medical oncologists, we're not intending to open sites and get in the roof to refer to these treating sites. That's the other part of the equation. Now the reason what we have to make sure for both parts of that kind of equation is For treating sites, some sites might not be able to do more than 2 a month, others might be able to do 8 a month, It varies, but if we assume that 4 a month is the average, so So we think about 1 a week probably will be kind of average per sites. If we assume that then 15, 20 sites is more than Generate several $100,000,000 worth of revenue. But the key to that is getting the patients referred to those treating sites.

Speaker 2

Again, as I said before, we don't want sites that do one every 2 months. Ideally, we'd have a site to do about 4 a month.

Operator

This concludes our question and answer session. I would like to turn the conference over

Speaker 2

to you. Oh, hang on. No, no, no, no.

Operator

I'm sorry.

Speaker 2

Kevin, can you chime in on the reimbursement for the hospitals when I

Speaker 7

look at

Speaker 2

that dynamic?

Speaker 7

Yes, I can. So over the past period of time, we have done some significant market research with the payers. And So far through that market research, we found that our we think our strategy is prudent. We have a market access team in place And we are prepared to handle the questions that we get. The true outreach to the payers will happen Shortly upon approval when we are taking our EAP patients and converting them from clinical patients to commercial payments.

Speaker 7

So like I said, from a market access, I mean from a market research standpoint, we think we have a sound strategy. We talked to some of the payers, but We'll see how that we will and we're confident that when we take those payers or I mean the patients from clinical To commercial, we the strategy will prove itself out. Yes. I think it's

Speaker 2

important, Kevin, is the majority of the patients will be Outpatients, correct?

Speaker 7

Yes.

Speaker 2

So the reimbursement will be under CECO, correct initially?

Speaker 7

Initially, we'll start with the traditional path of a C code and hopefully go to a J code shortly after.

Speaker 2

Right. So for the majority of patients, it will be a pass through expense. Yes. And given this is an ultra orphan Product of the minority of patients that may end up being treated on an inpatient basis, I. E, they need to stay an extra night past a single night.

Speaker 2

What our hub service has told us is that given the small number of patients here And the fact that these are very sophisticated academic centers that are working with it, they probably it's not going to be an issue bundle payments. We'll be able to maneuver through that. But again, the bulk of these patients will be on outpatient patients, so it will be a pass through.

Speaker 6

Got it. Thank you very much.

Speaker 2

Okay.

Operator

This concludes our question and answer session. I I'd like to turn the conference back over to Gerard Michel for any closing remarks.

Speaker 2

Yes. I just want to thank everyone for taking the time this morning to listen in. And we have a lot of work ahead of us since we prepped for a launch, but we're going to keep our heads down and push forward. And thank you again for the support. Have a great day.

Operator

Conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

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