Q3 2020 Celcuity Inc Earnings Call

Good day, everyone and welcome to today's acuity released third quarter 2020 financial results. At this time all participants are in a listen only mode. Later, you will have an opportunity to ask questions. During the question answer session.

Registered to ask a question at any time by pressing the star and one on your Touchtone phone. Please note. This call maybe recorded it is now my pleasure to turn today's program over to Vicki. Please go ahead.

Thank you operator, good afternoon, everyone and thank you for joining us today for a discussion of cell acuity third quarter 2020 financial results and business highlights.

We issued a press release announcing our financial results for the third quarter ended September Thirtyth 2020, a few minutes ago. Today's press release can be found on the investors section of our website www dot so acuity dot com.

Before we begin I would like to remind listeners that our comments today will include some forward looking statements. These.

These statements involve a number of risks and uncertainties, which are outlined in today's press release and in our reports and filings with the FCC.

Actual events or results may differ materially from those projected in the forward looking statements.

Such forward looking statements and their implications involve known and unknown risks uncertainties and other factors that may cause actual results or performance to differ materially from those projected on.

On this call. We will also refer to non-GAAP financial measures. These non-GAAP measures are used by management to make strategic decisions forecast future results and evaluate the companys current performance matters.

Management believes the presentation of these non-GAAP financial measures is useful for investors understanding and assessment of the company's ongoing core operations and prospects for the future you.

You can find a table reconciling the non-GAAP financial measures to GAAP measures in today's press release and with that I'd like to introduce Brian Sullivan our CEO.

Thank you Becky and good afternoon, everyone. Thank you for joining us today I'm glad that they were able to update you on our progress this past quarter.

I'd like to comment on our third quarter results I will focus in particular on the status of our collaboration discussions our product development projects as well as a fact, one in fact, two clinical trials Vicki will follow my comments, Oh se discussion of our financial results and then we'll open the lines for questions.

So curious third generation diagnostic platform sales signal.

Hi identifies the underlying cellular activity dysregulated pathway singling that drives many cancers and this allows us to diagnose this regulated signaling pathways in a patients tumor that habit disease mechanism treatable with the matching targeted therapy.

Our strategy is to help pharmaceutical companies obtain new indications for their targeted therapies to treat their patients our cell signal tests identified.

Since this regulated signaling is too complex for molecular test characterized in most cases, we can leverage the capability of ourselves like me a platform to create a proprietary business strategy.

Execute our strategy, we continue to make progress advancing collaboration agreements with pharmaceutical companies and our clinical sponsors over the past several months our clinical collaborators have received approvals from several major pharmaceutical companies can do contract and finalized protocols for clinical trials that evaluate their approved targeted therapies and patients are taking up test Hello.

These are the same collaboration discussions we have referenced <unk> previously when they were at an earlier stage.

Once our clinical sponsor collaborators receiving approval from afar sort of from a pharmaceutical company a number of actions are required to translate the pharmaceutical companies attempt to collaborate with us into a final agreement between so acuity a critical sponsors in the pharmaceutical company.

Oh this process is as I as I have described previously and an extensive and time consuming one because of the number of parties and documents involved for example, a the first clinical the final clinical trial protocol must get approved separately by several groups at the critical sponsors institutions and then bye.

Separate groups within the pharmaceutical company before collaboration agreements can get finalized.

Each of these review steps can take months. Fortunately, we're close to completing these steps are several collaborations his wife, which is why we expect to close several pharmaceutical company collaborations over the next few months, including one or two before year end.

The collaborations we expect to close soon we'll evaluate different drug combinations with hertwo negative metastatic breast cancer patients selected with ourselves signal multi pathway activity testing. These will be our first collaboration study late stage metastatic patients.

Collaboration with Genentech, and Puma or evaluating early stage breast cancer patients.

There was a significant unmet need for new therapeutic options for her two negative metastatic breast cancer patients. Our research suggests that many of these patients seven undiagnosed unless untreated disease mechanism. We believe ourselves take me a test can identify the disease mechanism for roughly 25% to 35%. These late stage patients and the targeted therapies most likely.

The benefits.

The collaboration we expect to close soon we'll evaluate patients with either hyperactive hurt to cycling tumors or those with hyperactive seen that in her two signaling tumors.

Discussions with pharmaceutical companies to evaluate Pithree K inhibitors in breast and ovarian cancer patients with hyperactive guys. UK Sigley are also progressing.

These discussions are at an earlier stage than those involving patients with hyperactive her to where CMS ugly. So we don't expect those collaborations to close until sometime in mid 2021 or beyond.

For pharmaceutical companies the collaboration with so acuity offers unique a unique opportunity to evaluate the efficacy of their targeted therapies in patient populations. The company would not otherwise be able to evaluate if successful. These collaborations would represent a critical step towards attaining a new indication that expands the market for the evaluated targeted therapies.

We're also very excited about the clinical investigators we expect to partner with the field. These trials. They are amongst the most respected oncology thought leaders and researchers in the country and we believe they are interested in collaborating with US reflects their respect for the unique potential ourselves Signet test offers to identify and diagnose disease drivers for their patients.

Yes.

During the third quarter. We also continue to advance development of additional cell signaling pathway activity tests. Our goal is to develop new sales, taking a test that identify ras pathway, driven cancers undetectable with molecular tests in breast and ovarian cancer.

This regulated signaling involving grass network nodes.

Responsible for a significant percentage of all cancers, what's just led many pharmaceutical companies to sponsored research in this area.

We expect to report data for these new tests that have cancer conference in the first half of 2021.

I still think me a platform also provides unique insights into the interdependence of the various Ras pathways.

For many patients a targeted therapy that inhibits one RASK RASK path way in turn May activate another Ras pathway and this is typically referred to as a resistance mechanism, which at present can reduce the efficacy of the targeted therapy.

For instance, it as generally understood that the inhibition of Pithree K can detrimentally activate mtwo or Mexicali and vice versa in some patients.

The sales signal, we can analyze these interactions between the different pathways and this interconnected network using a patients tumor cells. So it allows us to identify drug combination that can blockade these interactions and prevent the resistance mechanisms from a current.

The benefits of the patients will be better tumor control and ultimately longer overall survival.

In addition, we can also assess the relative potency <unk> efficacy of the different therapies targeting Ras nodes. This enables us to characterize the relative superiority of the different approved and investigational targeted therapies for Ross pathways, which will help guide our collaboration activities.

Finally, we continue to expect interim results from our fact want in fact, two trials in the second half of 2021.

Although some sites continue to experience good night seen delays it should not further delayed reporting of results. However, as you all aware, we do not yet know whether the recent increase in COVID-19 related hospitalizations in a number of states will impact enrollment activities for these trials over the next few months.

Both the fact, one in fact two trials are evaluating at the her two therapies in stage.

In early stage for two negative breast cancer patients. The goal of these trials to demonstrate the breast cancer patients identified by ourselves looking at her two pathway activity tests obtain a higher rate of pathological complete response, the neoadjuvant anti hertwo drug treatment then to Karen current therapies.

Since patients who receive a pathological complete response to the Neoadjuvant drug treatment are less likely to have their cancer recur. We're hopeful ourselves taking your tests can play a significant role in extending the lives of many breast cancer patients.

That concludes my initial remarks, but I'd like to now turn it over to Vicki to review our financial results.

Our second quarter net loss was 2.47 million or 20 cents 24 cents per share compared to 1.98 million net loss or 19 cents per share for the third quarter of 2019 net loss for the first nine months of the year was 6.92 million or 67 cents per share.

As compared to 5.55 million or 54 cents per share for the same period in 2019.

Because these quarterly net losses included significant non cash item stock based compensation. We also included in our press release non-GAAP adjusted net loss for the quarter. Our non-GAAP adjusted net loss was 2.3 million or 20 cents per share for the third quarter of 2020 compared to non-GAAP adjusted net.

That's up 1.68 million or 16 cents per share for the third quarter of 2019.

Non-GAAP adjusted net loss for the first nine months of 2020 was 5.59 million or 54 cents per share compared to non-GAAP adjusted net loss of 4.87 million or 47 cents per share for the first nine months of 2019.

R&D expenses increased approximately 2.8 million during the first nine months of 2020 compared to the first nine months of 2019, primarily due to <unk> 0.7, 1 million increase in compensation expense, which included 0.4 5 million of non cash stock based comp.

Station. In addition, other research and development expenses increased <unk> 0.0, 9 million due to clinical validation and laboratory studies and operational and business development activities.

The approximately 8.3 million increase in Jena. It during the first nine months of 2020 compared to the first nine months of 2019 was primarily due to.

0.2, 4 million increase in compensation expense, which included <unk> 0.2, 1 million of non cash stock based compensation. In addition, other general and administrative expenses increased <unk> 0.0, 6 million, primarily due to professional fees associated with being a public company we.

Ended the quarter with 13.7 million of cash and cash equivalents. The net cash used in operating activities for the third quarter of 2020 was 1.65 million.

This was a result of noncash non-GAAP adjusted net loss of 2.03 million offset.

5.28 million of working capital changes in prepaid assets and accrued expenses and depreciation expense of 2.1 million.

Great. Thank you Vicki so in summary, we're pleased with the progress we're making our discussions with pharmaceutical companies and critical sponsors continued to advance and we expect to close and collaborations. This year. We're very excited about the getting approvals to proceed from the pharmaceutical companies. We expect to present data for another Celtic me a test for breast cancer patients and.

Only 2021 and remain confident that we will obtain interim results from the fact, one in fact two trials in the second half of 2021.

Operator, we'd like to take questions, though.

At this time, if you would like to ask a question. Please press the star.

Your touchtone phone.

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Once again that is star.

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Two questions to queue.

And it looks like our first question.

From H.C. Wainwright. Please go ahead.

Hi, This is bill Baldwin dialing in for each and can you hear me Okay. Yes, we can.

Awesome.

I live in body stated in your prepared remarks can you provide additional color on fact, one in fact to study and how the progress look like during this current quarter.

Well I think if you again, we when we announced a that we expect to get results and.

Second half of a 2021, Oh the quarter progressed as we expected.

And you know the.

Uh huh.

Unknown is how much cove it could have an effect, we don't think its a significant factor in most of our sites. We do know a couple in particular that has been hit hard.

Recently and are are kind of pausing some of their clinical trial activities, but I don't think you know that that will.

The trial itself and kind of assumed that there would be some pauses along the way over the course of the remainder of 2020.

Once again that is star one to ask a question well take our next.

Question from.

From Craig Hallum.

Oh. Please go ahead.

Great. Good afternoon, everyone just to follow up on that last question, there and when we saw the cases right. So in early Q3, what happened to enrollment in fact, one fact too.

Yeah, we have a different distribution of sites, we did see and you know and I I'm, giving kind of more anecdotal information.

Because the number of patients that were screening and seeing are not.

Not ones you necessarily draw too many trends, but we know just from a from a activity standpoint the sites themselves.

Or a couple of sites essentially slowed down there enrollment activities in general.

But that that's not a lot and I don't want to overstate that I'm, just saying that that that has been.

Some anecdotal feedback we've received I'm only mentioning it because over the past week or so there's been reports of some areas, having limitations of hospital beds, and and you know talking to NFC IBP, we know that when that happens that constrains or other activities, but we.

I still believe that we're on track to report results and.

You know the second half of 2021, so I guess, I'm, only providing color, but not attempting or trying to change our outlook.

Yeah, No absolutely, Brian obviously on Minnesota, seeing a big impact right now so it's not wisconsin than others. So.

So I guess as enrollment continues here over the next couple weeks, what do you primarily going to be looking for I guess, what would be the high at the point, where you'd have to say all right, maybe we won't be able to get to the second half of 2021 read outs or are you feeling pretty confident with the number of patients you have enrolled right now.

Where enrollments were going perhaps through all Q3 versus just signaling out early Q3, but all Q3, you're pretty happy where enrollments been heading that you're pretty confident in that second half number.

Right I guess I don't keep a bucket forecast what are supposed to grade the forecasted the red yellow green.

But yeah, we're confident for now I mean, you know again, if we had the data we'd report it. So we still have patience to get and we projected that we'll get the patients.

So that we can report the data out in the second half I mean, I cant really I.

But there is nothing about what's been going on that would change our opinion about that.

Yeah, Okay, no, but I understand you're trying to make sure you know things were still even with the latest case bikes things are still tracking in line. It sounds like they certainly are so I just want to confirm that.

That's good the collaboration that you expect to sign the next few months here would these be phase two studies similar to facts one in fact, too and I know one of the pieces, but back when in fact, it was because it was for early stage cancer. The enrollment time is longer. The fact that these would be metastatic is it fair to say.

The enrollment should be condensed but.

I would think I mean it it's.

There are fewer metastatic patients. So you got two things going on one yeah. There more early stage patients, but but you know they have a much better prognosis overall.

On a static basis, there are fewer of them.

But they have a more urgent need to find alternatives and.

And so we think we will have.

Have a much greater ability to engage you know that the patient community you know because you know they they have fewer options and the clinicians know that they have to in cases, where these patients have failed their prior therapies have alternatives. So the it's an entirely different dynamic you know each trial has its own characteristics because.

They are addressing different populations.

In the case of.

Her to see Matt you know we got several of these trials are most of them will be phase two but in some cases, we're evaluating two drugs that haven't been tried before so you you do a small phase one b study to just confirm dosing.

That other no toxicity overlaps, but that's that's relatively very small it might be a small 10 patients to all patients.

And that's not selection. So you are really just getting safety data in that case.

But for others, you know you've got maybe a.

Setting where the patients are.

Oh well.

Yeah have failed several lines of therapy, and so their motivation to participate and doctors motivation to find an option for them as is higher so net.

Net net I you know, we will estimate when a when we think we could get data at the time, we announced the trials but.

You know, it's it's a.

Oh, the timelines you know again I don't want to get ahead of my skis, because I know there are a.

A number of different trials that have different characteristics and each time line will have its own story to tell.

Yeah, no absolutely I understand and just to confirm is this two collaborations for two separate hertwo negative breast cancer metastatic breast cancer I just want to make sure I was correct on the number and the indication so it would be too different to different drug combinations and.

Yeah, and you know the encouraging you know.

Sign for US is that you know the among the steps along the way are having the the drug companies go through a whole process to approve the concept approve the protocol approved you know their intent to provide drug into collaborate on a regulatory basis and so you know receiving that is obviously.

Yes. It gives you a high degree of confidence that it just now a matter of.

Getting other final documentation done which take longer than I'd like but but again, it's it's a you know what the path is it's just a matter of getting certain documents to move from from different desks.

Yeah, Yeah, no bad absolutely one more clarification, then just one more question after that in the metastatic cancers.

This one particular did you say that the task would be able to identify roughly 25% to 30% of patients that a molecular marker what are the best just for this specific and for this new indication we are targeting so essentially.

Okay. So if you add up yeah. You know we have three tests you know her to her to see met through cat, if you aggregate the patient subgroups it.

It leaves the roughly yeah, we would take 30% if I was just to use a round number and its its probably.

Closer to 35, but but to say, 30% as a round number.

And Ah you know these patient groups or individual patient groups are far smaller than that so you know there will be an indication that will be studying that's for her to.

It will have different combination drugs, so separate trials with separate drug combinations of drugs that their combined with.

We're working on several trials to evaluate differ.

Different pan her inhibitors with different C met inhibitors.

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And and that will have a certain proportion of patients.

That.

It will be less than 30%, but you know north of 20% as an example.

Okay got it and then just last question here, how far are you still having conversations with erosion generic that could pull them up with regards to additional collaborations with them or is this just an area of opportunity for you.

Well I mean, we are having ongoing conversations with with I I got up and until we close call. It close to them I don't like to announce that don't watch went up the names, but I can say that no Puma has a very good pan her inhibitor Roche has.

Yeah there.

Her two drugs you know I think.

They have different characteristics and and and.

And so you know we're in touch with both and hope to collaborate with both over overtime.

That's great very helpful. I appreciate it thank you you're.

You're welcome thank you.

Looks like we have another question.

<unk>.

Please go ahead.

Hi, this is the bottom thanks.

That's one day one.

So how many cooperation.

Hi, Jim.

<unk> yeah right.

Well I'm sorry.

I would say a three to five.

Oh, yes, yes.

Yes so.

More than two [laughter], okay. Okay.

Okay. Thank you so much.

[noise] once again.

Good question.

Yeah.

Your questions at this time.

Speakers for any additional or.

Thank you everyone for attending the call. We appreciate your interest and so acuity and I look forward to.

Speaking with you again in a few months take care.

This does conclude todays program. Thank you for your participation you may disconnect.

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