Delcath Systems Q4 2023 Earnings Call Transcript

Quartr
Provided by Quartr
March 26, 2024

There are 10 speakers on the call.

Operator

Good day, and welcome to the DelCap Systems Reports 4th Quarter and Fiscal Year 2023 Financial Results Conference 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, DelCap General Counsel.

Operator

Please go ahead.

Speaker 1

Thank you. And once again, welcome to Delcap Systems 2023 4th quarter results and business update call. With me on the call are Gerard Michel, Chief Executive Officer Sandra Pinnell, Senior Vice President of Finance Kevin Muir, General Manager Interventional Oncology Voya Vukovic, the Chief Medical Officer and Martha Rook, who recently joined as our Chief Operating Officer. I'd like to begin the call by reading the Safe Harbor statement. This statement is made pursuant to the Safe Harbor for forward looking statements described in the Private Securities Litigation Reform Act of 1995.

Speaker 1

All statements made on this call, with the exception of historical facts, may be 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. 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, those contained in 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 call are made only as of the date of this call.

Speaker 1

We do not undertake any obligation to update or supplement any forward looking statements to reflect subsequent knowledge, events or circumstances. Now, I would like to turn the call over to Gerard Michel. Gerard, please proceed.

Speaker 2

Thank you, everyone, for joining today. On today's call, I will focus primarily on our commercial progress in the U. S. Since our last update call in November. Continue to be encouraged by both the medical oncologists and interventional radiology communities interested in engaging with our medical and commercial teams.

Speaker 2

Their motivation and stated commitment to incorporate HebsattoKIT into their practices treating patients with metastatic hypnial melanoma. The company is currently working with over 20 leading cancer centers across the U. S, which have indicated interest in hepato Kib. I will shortly share more details regarding our team's achievements over the last 4 months. As a result of which, we are increasing our site activation guidance from 15 active sites by the end of 2024 to 20 active sites by the end of the year.

Speaker 2

The approximate pacing of site activation will be 10 active sites by the end of the second quarter, 15 by the end of the third quarter and 20 treating sites by year end. Importantly, we believe that our current financial resources subsequent to our most recent $7,000,000 financing are adequate to achieve these goals. It is important to note that this financing was supported entirely by Delcat senior executives, board members and existing institutional investors. In January 2024, we announced the first commercial patient treated at Moffett Cancer Center. By the end of the Q1, we expect to have 4 active sites.

Speaker 2

These include Moffett Cancer Center, Stanford University Cancer Center and Thomas Jefferson University, which are fully trained and are currently treating commercial patients. In addition to those 3, the University of Wisconsin is scheduled to treat its 1st commercial patient by the end of this week. In the Q1, given the marked start for most of those sites and the temporary use of product sampling for some of the initial proctored cases, 1st quarter revenue will predominantly be generated by treatments at Moffett with the balance of the 3 sites activated in the 1st quarter starting to consistently generate revenue in

Speaker 3

the 2nd

Speaker 2

quarter. While some sites will be more active than others, on average, we expect treatments per site to steadily increase from an average of approximately 1 per month early in the Q2, ramping to a run rate of approximately 1.5 treatments per month by mid year and then reaching a run rate of 2 treatments per month late in Q4. These past 4 months have been a critical period for the company as we prepared for and subsequently launched HEBSADA kit in the U. S. During this pre launch and early launch period, the commercial and medical affairs teams needed to accomplish 3 critical objectives.

Speaker 2

These included obtaining a product specific reimbursement code and pass through status from CMS, effectively communicating the potential benefits that HUBZADA can provide to patients suffering from metastatic uveal melanoma to a broader set of medical oncologists and interventional radiologists and developing an official efficient process to educate, train and activate commercial sites. I believe that our progress to date demonstrates that we achieved all three of these launch related goals. Starting with product specific reimbursement. On January 30, CMS established a permanent and product specific J code J9,248 48 for HEBSADA, which will become effective on April 1, 2024. Supplementing the J code is transitional pass through payment status, which was granted on March 21 and will also be effective on April 1.

Speaker 2

While we are aware that hospitals have successfully been reimbursed for the treatment using a miscellaneous C code, the establishment of a permanent J code for HEBSATO will greatly simplify the reimbursement process and lower the perceived risk of a hospital not receiving adequate reimbursement. The importance and impact of having the unique J code cannot be overstated. In conjunction with medical oncologists at each of our target sites, we have been working with the sites' interventional radiologists to identify and train hepatocytes treatment teams. To date, we have had over 90 perfusionists, anesthesiologists and intervention radiologists attend 1 or more preceptorships representing approximately 20 institutions in the U. S, with some institutions sending multiple healthcare providers for the same specialty.

Speaker 2

This volume of training activity is clear evidence of the success of our outreach and the resulting broad physician interest in the U. S. To incorporate hepzato as a standard of care for patients suffering from metastatic uvea melanoma. In addition to training the treatment teams at each site, we are also working to continue to obtain hepzato hospital formulary and value analysis committee approvals at additional hospitals. And we have found MD champions at each site to help shepherd hepZato through these processes.

Speaker 2

Since the product specific J COB will greatly simplify these reviews after it becomes effective on April 1, we expect to see a significant increase in the pace of facilities conducting their first commercial treatment and fully completing the required REMS training. In fact, in just the 1st 2 weeks of April, 3 additional sites have scheduled treatments. These include Ohio State University, Wexner Medical Center, University of Tennessee, Memphis and UCLA Health. A further two sites, Mayo Clinic Jacksonville and Duke University have completed the necessary steps to conduct their 1st commercial treatment under the guidance of a proctor once hospital formulary and value analysis committee approval is obtained. In total, there are 9 sites currently accepting patient referrals, 4 of which have or will conduct a commercial case before the end of the Q1, 3 of which have a patient scheduled in the 1st 2 weeks of April and another two sites which are pending hospital formulary and value committing analysis.

Speaker 2

Before these beyond these 9 sites, approximately another 10 to 11 sites currently have preceptor ships scheduled or are partway through the preceptorship training. As a reminder, to activate a site, we need to train the center, which includes didactic training, 3 health care professionals traveling to attend the preceptor shift and subsequently 3 experienced health care professionals traveling to the new site to proctor the first case. And of course, reviews by hospitals, formulary and value analysis committees. The entire process from initially scheduling their preceptorship to activation can take approximately 3 months. Given the significant level of commitment required from these healthcare providers to become fully trained and certified under the REMS program, we believe all the healthcare providers and the approximately 20 cancer centers involved to date all intend to incorporate HEBSATTOKIT as a core part of their treatment regime for metastatic UVML in all the patients.

Speaker 2

These achievements would not impossible without a world class commercial team with support from our medical affairs and operations groups. Evan Muir, Delcoast's General Manager Interventional Oncology has been focused on building the right commercial organization to launch Hepsato for well over a year. Kevin has made a point of bringing on team members that have experience in launching complex therapies that require multiple stakeholders in the hospital setting. As a reminder, we have divided the U. S.

Speaker 2

Into 4 regions, each of which will be initially served by a commercial team of 3, comprised of a liver directed therapy manager who will manage the hospital approval process and ensure that the HEBSADA kit procedure team is trained and supported, an oncology manager who is building referral networks to the oncologists within the treating centers and the clinical specialists who will support the treatment teams in preparation for and during the treatment with the goal of ensuring patient safety and improving patient outcomes. At the moment, we have about 70% of this team in place and expect to finish recruiting by July. Over time, we may increase the field force by a modest amount, for example, increasing the number of oncology managers to 2 per region. In addition to the significant commercial activity, we continue to support both internal and external efforts to add to the growing body of evidence that PHB procedure, whether utilizing melflin delivered by Delcat's chemoSat or the hepato kit is an important treatment option for patients with liver dominant UBL melanoma. As a reminder, there is an ongoing investigator initiated randomized Phase 2 trial in Europe, the CHOPAN trial, evaluating the effect of adding immunotherapy to chemo sat liver directed therapy.

Speaker 2

The trial has enrolled approximately 60 of the planned 76 patients and the investigators expect the trial to be fully enrolled by the end of this year. The primary objective of the trial is to compare the progression free survival of 1 year of patients treated with the combination of immunotherapy with ipilimumab and nivolumab with chemoSat to patients treated with chemoSat alone. As SHOPAN is an investigator initiated trial, we do not control the timing of data release. However, our understanding is that the study results, including the primary endpoint will be presented at a major oncology conference in the Q2 of 2025. In the Q4, we announced the publication of results from 2 independent investigator led studies, the first of which was a retrospective comparative study of ChemoSat and selective internal radiation or SIRT, published in the Journal of Cancers and the second which focused on the impact of ChemoSat on the quality of life of patients with metastatic uveal melanoma and was published in the Journal of Melanoma Research.

Speaker 2

The comparative study of ChemoSat and SIRT was conducted by investigators from the University Hospital Tubingen, Germany and carried multiple cycles of SIRT versus 2 treatments of PHP with ChemoCAT. In this paper, ChemoCAT demonstrated clear advantages over cert, including a clinically meaningful and statistically significant improvement in OS. The second publication entitled Quality of Life After Meltholin Hepatic Perfusion for uveal melanoma was conducted by independent investigators from University Hospital Southampton, UK and reported the impact of PHP with ChemoSET on the quality of life of patients with metastatic uveal melanoma. The authors concluded that utilizing Delcap's ChemoSat to administer high dose melt from delivery is well tolerated by patients and does not negatively affect their quality of life. While Habsatto is used to treat metastatic UV melanoma represents a validated and sizable market opportunity for us to capitalize on.

Speaker 2

We believe that hepzado has the potential to treat other cancers in the liver such as metastatic colorectal cancer, metastatic neuroendocrine tumors, metastatic breast cancer and intrahepatic cholangiocarcinoma. And we plan to begin a study on hepatocytes to treat one of these physicians within a year, while still focused on our revenue growth and increasing cash flows from operations. We believe that those in similar disease states are areas of unmet medical need that represent significant future growth opportunities for our platform. In summary, the company has passed a major inflection point in terms of relative risk and potential return given FDA's approval of the hepato kit last year, the issuance by CMS of a product specific J code, the demonstrated interest from over 20 major institutions and our proven ability to train and activate sites. While the treatment of metastatic uveal melanoma patients will support significant growth for the foreseeable future, we are planning to pursue additional indications given the tremendous unmet need for patients suffering from cancers of liver.

Speaker 2

Clearly, the future of DelCap has never been brighter. I will now hand the call over to Sandra to share some details on our financial position. Sandra?

Speaker 4

Thank you, Gerard. We ended Q4 with $32,500,000 in cash and investments and cash used in operations was approximately $8,100,000 in the 4th quarter. The increase in cash from prior year end is due to the 2023 private placement financing, which provided approximately $60,000,000 in cash to fund the activities through approval and the launch of PEBSADA kit in the U. S. Recently, on March 19 this year, the company closed a $7,000,000 private placement to ensure sufficient cash for operations until the company achieved $10,000,000 in quarterly revenue, which will trigger a potential warrant exercise, which could result in $25,000,000 in proceeds.

Speaker 4

We are confident we will achieve $10,000,000 in quarterly revenue no later than the Q4 of this year. Revenue from our sales of ChemoSat was $500,000 for the 3 months ended December 31, 2023, compared to $600,000 for the same period in 2022. For the 3 months ended December 31, 2023, research and development expenses were $4,700,000 compared to $4,400,000 for the 3 months ended the previous year. The increase is primarily due to higher personnel expenses. For the 3 months ended December 31, 20 23 compared to the same period in 2022, selling, general and administrative expenses have increased to $7,000,000 from 3,800,000 dollars The increase is due to activities to prepare for commercial launch, including marketing related expenses and additional personnel in the commercial team.

Speaker 4

That concludes our prepared remarks. I'd ask the operator to open the phone lines for Q and A. Can you please check for questions?

Operator

We will now begin the question and answer session. Our first question comes from Bill Maughan with Canaccord Genuity. Please go ahead.

Speaker 5

Good morning and congrats on the hot start for commercialization. Just in terms of what you're seeing so far in the patients that are being enrolled and treated, can you comment on what other therapies they have been through and what therapies that doctors are choosing not to put them on and to put them on hepzato instead? And when you're speaking with these doctors, is there interest on their part in combination with systemic agents? Or are they just simply kind of taking instruction as you're giving it and just sort of following that playbook? Thanks.

Speaker 2

Yes. I'm going to hand that question off in a second to Kevin and maybe Julio can comment on the combination. But I'm going to start by saying that due to HIPAA rules, we don't have a direct pipeline to what patients, what other treatments they've gotten. Now inevitably, since we do sit in the procedures, we do and we do talk to docs, we have some sense of the mix. And I think it's fairly varied.

Speaker 2

But Kevin, why don't you chime in terms of early anecdotal evidence as to whether these patients are pretreated, not pretreated. I suspect it's a mix just like we had in the trial.

Speaker 6

Yes. Thank you, Gerard. And you're exactly right. Anecdotally from what we've learned in the field to this point is that it's just as we would suspect patients are treated with some of them have had prior systemic treatment and some of them have had prior liver directed treatment and we've even had some patients who have had no treatments. So it's a little early to make a bold statement about where we fit into the treatment paradigm.

Speaker 6

And I'm sure that that will shift over the year.

Speaker 2

Well, you want to maybe talk about some of what your medical affairs has seen or heard about interest in combination therapy? Sure.

Speaker 3

Yes, similar to what Kevin mentioned, we see several patents emerging of the implementation of HEBSATO and ChemoCET in Europe into the treatment paradigm, one being induction treatments to get the disease out of control and enable other treatments, for example, maintenance. But also a very big interest for combinations. As Gerard mentioned in the remarks, the ongoing TROPEN trial is in ipinivo, stomach immunotherapy combination. There are other regimens of ipinivo that are currently under consideration. And there's also strong interest in combinations with the Benfasb as well.

Speaker 3

So we'll be exploring obviously together with the investigators all these options to simply find the best path to integrate HEPSAS also with the treatment paradigm.

Speaker 7

Thanks. And then just as

Speaker 5

a quick financial follow-up, looking at your cash position, cash runway and this final tranche of financing that would come into play if you hit $10,000,000 in a quarter. What's sort of your base case outlook for the company's finances going forward? It looks like you can get to cash flow positivity. And then at that point, you can push into potentially other liver cancers. Do you expect cash flows from your initial HEBSADA indication to support all that extra potential development?

Speaker 5

Or I just kind of want to get a sense of how you're feeling in terms of cash needs on that?

Speaker 2

Yes. Our base case is to be very sensitive to dilution to existing investors and therefore, fund new company. So our base case is we should be able to be cash flow positive, assuming the stock works when we hit $10,000,000 I think warrants exercise, etcetera, without additional financing. And that since we're not planning on starting 4 huge trials at once, to be able to fund at least one trial off that cash flow and hopefully more over time.

Speaker 5

Thank you.

Operator

Our next question comes from Marie Thibault with BTIG. Please go ahead.

Speaker 8

Hi, congrats Gerard and Sandra on this positive update today. I wanted to ask a little bit more about some of the commercial traction you're seeing so far. I know at Moffett for now and then some commercial proctored cases coming. Just to clarify, are all the first proctored cases, are those commercial? Are they all going to be bringing in revenue?

Speaker 8

And then any details you can offer on how many patients have been treating commercially so far here in the Q1? Are coming back for repeats? What sort of the trends if I know it's early to call a trend, but if there's any more kind of metrics you can give us around the commercial traction?

Speaker 2

Yes. I don't think we're going to be doing too many sample cases in the proctored cases in the Q2. In the Q1, we found it useful for a variety of reasons to do so. I think I would say 80% of the business we're going to get in the Q1 is going to be from Moffett. And they're running at a run rate of, let's say, roughly 2.25%.

Speaker 2

So hopefully that will help you there in terms of what to expect in 2 per month, excuse me. I just had someone on my video go, Gerard, what did you say? Excuse me, 2 per month. And in but all the centers that were are up and running now will definitely contribute to revenue in the second quarter. In terms of our patients coming back, yes, patients are coming back.

Speaker 2

I can't at this point tell you what the average number of treatments will be per patient. In the commercial setting, it was 4.1 in the clinical trial. But we see no indication that they're doing 1 and stopping or 2 and stopping at this point. It looks like they're behaving at least with the data we have in hand at the moment, they're behaving at least like they did in the clinical trial.

Speaker 8

Okay. That's really helpful for us to know. And then congrats to Martha to Doctor. Rook on her new role. Can you tell us anything about the priorities she'll be focused on?

Speaker 8

Any changes, any tweaks happening on the operations side that she's focused on? And thanks for taking the question.

Speaker 2

Yes, I'll answer for her. I don't know what day it is, but it's still in the single digits. I think that the number one priority is ensuring we have a robust supply chain. There are a lot of components in this product, a lot of single store vendors. This is something I'm very familiar with as is Sandra and David from Vericel.

Speaker 2

We had actually more single source suppliers there. And we made in the background, we made a strong effort to make that supply chain as robust as possible. And I know that company has never had a stock out. They've done a great job and we're going to make sure the same thing occurs here. So that's an ongoing priority, but that's probably one of her first tasks.

Speaker 2

I think I'll leave it at that.

Speaker 8

Very good. Thank you, Darren.

Speaker 5

Okay.

Operator

Our next question comes from Yale Jen with Laidlaw and Company. Please go ahead.

Speaker 9

Good morning and thanks for taking the questions and congrats on a good start. My first question is that, Gerard, you suggested that there could be $10,000,000 revenue toward the Q4. Could you give us a little bit what make that assumption and some details of that? Then I have a follow-up.

Speaker 2

Yes. I think if you run through the metrics I gave a little earlier on the call, we're ramping 1 per month, 1.5 per month, 2 per month starting in the Q1 getting to the end of the year on average per site. And then the site activation, which I said 10 by mid year, 15 end of the Q3, 20 by the end of the Q4 and you multiply that by 1825 price per kit, you'll find that you can achieve $10,000,000 by the end of the year.

Speaker 9

Okay, great. That's very helpful. And the follow-up question is that you've got so far have 90 specialists have been trained to and what do you anticipate over the next quarter or 2 that number might be and the impact do you think that could have in terms of the going forward? Thanks.

Speaker 2

Yes. We're finding that the average site is sending more than 3 people. They're often doubling up on either an IR, an anesthesiologist or perfusionist, etcetera, when they go. So you wouldn't divide that 90 by 3, you get to 30. It's roughly 20 sites have sent at least 1 person or have scheduled a training.

Speaker 2

I actually haven't thought through how many do I how many more preceptor ships will occur before the end of the year, I think it will probably be at least a similar number. We're partway through about 20 institutions right now. Some move at a glacial pace, some move very quickly. So when I said before, it takes about 3 months. In reality, some came roaring through in a little under 2 months and some were on month 5 working with them or so or 6.

Speaker 2

So, but I think maybe another 90 to 100 preceptor ships would probably get us to 20 plus sites 20 sites by the end of the year.

Speaker 9

Okay, great. Maybe just add one more question here, which is a little bit again forward looking. Given that you anticipate 20 sites to be online in place by year end, What's the longer term goal, for example, for next year? What's the general thought you have? And again, thanks.

Speaker 2

Yale, I honestly don't know. And I'll tell you the reason I don't know is we need to sort out whether or not 20 to 25 sites is adequately handling the patient flow, whether or not we can put in place adequate referral networks to get the patients to those 20 to 25 sites. If it looks like it makes sense to open 35 sites, we'll do so. We want to be careful that we don't open sites that are only doing 1 every month or 2 because I don't think that will lead to it may not lead to the best patient outcomes if sites are doing that lower volume. So we'll have to see how things evolve in terms of commercial sites.

Speaker 2

We might open other sites just for purposes of R and D. I got a site trained for that does a modest volume, so they can do another indication. But again, I think somewhere between 20 at the low end to 35 is the range next year.

Speaker 9

Okay, great. Thanks. Again, congrats on the great

Operator

Our next question comes from Sean Lee with H. C. Wainwright. Please go ahead.

Speaker 7

Hey, good morning, guys. It's Sean here for RK and congrats on the positive commercial developments. My first question is on the expected market. So I was wondering with these the first twenty sites considering they're some of the largest cancer centers in the U. S, what percentage of the overall market do you expect to cover by the end of this year?

Speaker 2

Yes. That's I think if we count patients who have 1 or more referrals at those sites to show up once they get a consult with an oncologist, it's probably over 75%. If we count who is actively being treated somewhere else at the moment, it's a lower percentage. But these patients are used to going somewhere for a referral. And I think that I'll just put that the majority of the market, I'll just leave it at that, will be covered by these sites, because we will be actively putting in place referral networks to these sites, expanding upon the referral networks they currently have.

Speaker 7

That's great to hear. And my second question is on reimbursement. So I was wondering whether you can highlight some of the reimbursement processes you've gone through so far, whether you've run into any issues and whether you would go with more on reimbursements towards with this, especially with prior payers this year with the J code active? Thanks.

Speaker 2

Yes. So the 1st part of the year, we did not have pass through or a C code. Sometimes CMS takes more than 3 months to do that. In our case, it was more than 3 months, so we didn't get it on January 1, which was our hope. And my assumption when I initially gave the guidance of 5 treating sites, but we managed to get 4 sites up and running or we will have 4 by the end of the Q1 using a miscellaneous code.

Speaker 2

No easy task for a product price at an offered pricing level that we are at. As I mentioned, starting April 1, the pass through status will be active as will the J code. And I think a good indication of the impact of that is the fact that we have 3 treatments planned scheduled in the 1st weeks of April. And that is largely due to the fact that some of those sites were clearly waiting for the J code to become active.

Speaker 7

Thanks. That's all the questions I have.

Operator

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

Speaker 2

Okay. I'd just like to thank everyone for their interest and taking the time to tune in today. And I very much look forward to providing future updates probably about 2 months from now given the length of time to get the K out and have this call. So again, I look forward to giving everyone future updates. I very much appreciate the support.

Speaker 2

Thank you.

Operator

The conference has now concluded.

Remove Ads
Powered by Quartr
Earnings Conference Call
Delcath Systems Q4 2023
00:00 / 00:00
Remove Ads