Q4 and FY 2023 Delcath Systems Inc Earnings Call
Good day and welcome to the Delcath systems reports fourth quarter and fiscal year 2023 financial results Conference call. All participants will be in listen only mode should you need assistance. Please signal a conference specialist by pressing the star key followed by zero.
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Please note this event is being recorded.
I would now like to turn the conference over to David Hoffman.
General Counsel. Please go ahead.
Thank you.
Once again welcome to Delcath systems, 2023, fourth quarter results and business update call.
David Hoffman: With me on the call are Gerard Michel Chief Executive Officer, Sandra P&L Senior Vice President of Finance, Kevin Your General manager Interventional oncology for you Luca Vic the Chief Medical Officer, and Martha Roke, 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.
All statements made on this call with the exception of historical facts may be considered forward looking statements within the meaning of section 27, a of the Securities Act of 1933 and section 21 E of the Securities Exchange Act.
Before.
Although the company believes the expectations and assumptions reflected in these forward looking statements are reasonable it makes no assurance as such.
The expectations will prove to US then correct.
Actual results may differ materially from those expressed or implied in forward looking statements due to various risk 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-K.
As 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. 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.
Thank you everyone for joining us today on today's call I will focus primarily on our commercial progress in the U S. Since our last update call in November.
We continue to be encouraged by both the medical oncologist and interventional radiology communities interested in engaging with our medical and commercial teams their motivation and stated commitment to incorporate upside okay.
So their practice is treating patients with metastatic uveal melanoma.
The company is currently working with over 20, leading cancer centers across the U S, which have indicated interest in episodic chip.
Shortly share more details regarding our team's achievements over the last four months.
As a result of which we are increasing our site activation guidance from 15 sites by the end of 'twenty 'twenty four to 'twenty active sites by the end of the year.
The approximate pacings buyback innovation 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.
David Hoffman: Importantly, we believe that our current financial resources subsequent to our most recent sub $1 million financing are adequate to achieve these goals. It is important to note that this financing were supported entirely by Delcath senior executives board members and existing institutional investors.
In January 2024, we announced the first commercial patient treated at Moffitt cancer Center.
We ended the first quarter, we expect to have four active sites. These include Moffitt Cancer Center, Stanford University Cancer Center, and Thomas Jefferson University, which are fully trained and are currently treating commercial patients.
This is in addition to those three the University of Wisconsin scheduled to treat its first commercial patient.
End of this week.
In the first quarter given the March start for most of those sites and the temporary use of product sampling for some of the initial Proctor cases first quarter revenue will predominantly be generated by treatments up market with the balance of the three sites activated in the first quarter starting to consistently generate revenue in the second quarter.
While some sites will be more active than others.
On average we expect treatments per site steadily increased from an average of approximately one per month early in the second quarter.
<unk> to a run rate of approximately one five treatments per month by midyear and then reaching a run rate two treatments per month late in the fourth quarter.
These past four months have been a critical period for the company as we prepared for and subsequently launched the startup in the U S.
During the prelaunch early launch period, the commercial and medical affairs teams needed to accomplish three critical objectives. These included obtaining a product specific reimbursement code and pass through status from CMS.
Effectively communicate the potential benefits of hubs auto can you provide to patients suffering from metastatic uveal melanoma to a broader set of medical oncologists intervention radiologist.
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 30th.
David Hoffman: CMS established a permanent product specific J code J 90, 248 for Hep startup, which become effective on April one 2024.
What might be the J code is transitional pass through payment status, which was granted on March 21st and will also be effective on April one well.
While we are aware of that hospitals have successfully been reimbursed for the treatment using a miscellaneous J code establishment of a permanent J code, perhaps auto will greatly simplify the reimbursement process and lowered the perceived risk of a hospital not receiving adequate reimbursement.
Importance and impact of having the unique J code cannot be overstated.
David Hoffman: In conjunction with medical oncologists at each of our target sites, we have been working with the sites and interventional radiologists to identify and train have Saddam kit treatment teams.
To date, we have had over 90, perfusionist anesthesiologist and intervention radiologist attend one or more preceptorships, representing approximately 20 institutions in the U S with some institutions settlement, sending multiple health care providers for the same specialty.
This volume of training activities is clear evidence of the success of our outreach and the resulting broad physician interest in the U S through corporate.
Corporate helps auto as a standard of care for patients suffering from metastatic youll be a melanoma.
In addition to training the treatment teams at each site. We are also working to continue to obtain have started get the hospital formulary and value analysis Committee approvals and additional hospitals and we have found MD champions at each site to help Shepherd haps auto through these processes.
David Hoffman: The product specific J code will greatly simplify these reviews. After it becomes effective on April one we expect to see a significant increase in the pace of facilities conducted their first commercial treatment and fully completing the required rems training and.
In fact in just the first two weeks of April three additional sites of scheduled treatments.
These include the Ohio State University, Wexner Medical Center University of Tennessee, Memphis, and UCLA Health, a further two sites Mayo clinic, Jacksonville, and Duke University.
We did the necessary steps to conduct their first commercial treatment under the guidance of our Proctor Once hospital formulary and value analysis Committee approval is obtained.
In total there are nine sites currently accepting patient referrals.
Which have or will conduct the commercial case before the end of the first quarter.
We havent whichever patient scheduled the first two weeks of April and another two sites, which are pending hospital formulary and value analysis.
Before these not beyond these nine sites approximately another 10 10 to 11 sites currently have preceptorship scheduled or are partway through the Preceptorship training.
As a reminder, the active items activate a site we need to train the centers, which includes didactic training three health care professionals traveling to attend the Preceptorship and subsequently three experienced healthcare 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 Scott some of their free ship Preceptorship to activation can take approximately three months.
Given the significant level of commitment required from these health care providers to become fully trained and certified under the Rems program. We believe all the health care providers and the approximately 20% cancer centers involved debate all intend to incorporate hubs out a kit is a core part of their treatment regime.
For metastatic uveal melanoma patients.
These achievements would not impossible, but without a world class commercial team with support from our medical affairs and operations groups.
Kevin Your Dell Couch General manager Interventional oncology has been focused on building the right commercial organization to launch ups all of them for well over a year. It's.
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 into four regions each of which will be initially served by our commercial team up three.
So very liver directed therapy manager, who will manage the hospital approval process and ensure that the hips auto kit procedure team is trained and supported.
In oncology manner manager Who's building referral networks to the oncologist 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 improved patient outcomes.
At the moment, we have about 70% of this team in place and expect to finish recruiting by July overtime. We may increase the field force a modest about for example, increasing the number of ontology managers two two 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 PHP procedure, whether utilizing milk one delivered by Dell cats, he must not for the Hep side of care.
As an important treatment option for patients with liver dominant uveal melanoma.
As a reminder, there is an ongoing investigator initiated randomized phase II trial in Europe with Chopin trial evaluating the effect of adding immunotherapy to chemostat liver directed therapy.
The trial has enrolled approximately 60 up 76 patients and the investigators expect the trial fully enrolled by the end of this year. The primary objective of the trial is to compare the progression free survival of one year of patients treated with the combination of immunotherapy with if you're doing that and NEVA Lou mab with chemotherapy to patients treated with chemo.
That alone is Japan as 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 second quarter of 2025.
In the fourth quarter, we announced the publication of results from two independent investigator led studies. The first of which was a retrospective comparative study of hemostat and selective internal radiation or search published in the journal of cancers, and the second which focused on the impact of Chemostat on the quality of life of patients with metastatic uveal melanoma and which part.
From the journal melanoma research the comparative study of Hemostat and surface conducted by independent investigators from the University hospital to begin Germany.
Multiple cycles of search versus two treatments of PHP hemostat.
In this paper Chemostat demonstrated clear advantages over certain including a clinically meaningful and statistically significant improvement in O S.
The second publication entitled quality of life After Melbourne hepatic profusion for Uveal melanoma was conducted by independent investigators from the University Hospital, Southampton UK and report a big impact of PHP with Chemostat on the quality of life of patients with metastatic Uveal melanoma. The authors concluded that utilizing dealt caps.
He must act with Minister Hydro smell and deliver is well tolerated by patients and does not negatively affect their quality of life.
Well that's that is used to treat metastatic uveal melanoma represents a validated and sizeable market opportunity for us to capitalize capitalize on we believe that helps auto has the potential to treat other cancers in the liver such as metastatic colorectal cancer metastatic neuroendocrine tumors metastatic breast cancer and intrahepatic lunch.
Carcinoma, and we plan to begin a study on hip hip side of care 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.
Presents significant future growth opportunities for our platform.
In summary, the company has passed a major inflection point in terms of relative risks and potential return given fda's approval of the herbicide market last year the issuance by CMS of a product specific J code. The demonstrated at the end of the demonstrated interest from over 20 major institutions and our proven ability to <unk>.
Rain 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 clearly the future of Delcath has never been brighter I will now hand, the call over to Sandra to share some details on our financial position Sandra.
Uh huh.
Thank you Gerard.
We ended Q4 with $32 5 million in cash investments and cash used in operations was approximately $8 1 million and a quiet quarter.
The increase in cash from prior year.
Given the 2023 private placement financing, which provided approximately $60 million in cash to fund that activity stray approval and the launch of pets that okay in the U S.
Recently on March 19th this year, the company closed a $7 million private placement to ensure sufficient cash for operations until the company achieved $10 million in quarterly revenue, which will trigger a potential warrant exercise, which can result in $25 million proceeds.
We're confident we'll achieve $10 million in quarterly revenue no later than the fourth quarter of this year.
Revenue from our sales that came up that was <unk> 5 million for the three months ended December 31, 2023, compared to <unk> 6 million for the same period in 2020 you can't.
The three months ended December 31, 2023 research and development expenses were $4 7 million compared to 4.4 23 months pretty.
Yeah.
The increase is primarily due to higher personnel expenses.
Three months ended December 31, 2023, compared to the same period in 2020 to selling general and administrative expenses have increased to $7 million from $3 8 million.
The increase was due to activity.
Prepare for commercial launch, including marketing related expenses and additional personnel and the commercial team.
That concludes our prepared remarks I'd ask the operator to open the phone lines for Q&A can you. Please check your question.
We will now begin the question and answer session to ask a question you May Press Star then one on your telephone keypad. If you are using a speakerphone. Please pick up your handset before pressing the keys if at any time. Your question has been addressed and he was like to withdraw. Your question. Please press Star then two.
Our first question comes from Belmond with Canaccord Genuity. Please go ahead.
Good morning, and congrats on the on the hot start for commercialization.
Just in terms of what Youre seeing so far in the patients that are being enrolled and treated can you comment on what other what other therapies they have been through and what therapies. They.
Doctors are choosing not to put them on an end to put them on Hep Sato instead.
And when you're speaking with these doctors is there interest on their part and in combination with systemic agents or.
Are they just simply kind of kind of taking instruction as as youre, giving it in.
Yes, I'm going to hand that question off in a second to Kevin.
And maybe if you can comment on the combination, but I'd start by saying that.
Due to HIPPA rules, we don't have a direct pipeline to what patients.
What other treatments they've got now inevitably since we do sit in the procedures, we do and we do talk to docs, we have some sense of the mix. So I think it's fairly varied.
But Kevin why don't you chime in in terms of in terms of early anecdotal evidence as to.
Whether these patients are pretreated not precluded I suspect it's a mix just like we have the trial.
Yes, Thank you Gerard.
And you're exactly right anecdotally from what we've learned in the field.
To this point is that just as we would suspect patients who are treated with.
Some of them have had prior systemic treatment.
Ed.
Uh huh.
Primary liver directed treatment and we've even had some patients who had no treatments. So.
David Hoffman: It's a little early to make a.
Uh huh.
The bold statement about where we fit into the treatment paradigm.
And I'm sure that that will shift over the year.
Or do you want maybe talk about what your medical affairs team are bad heard about interest in combination therapy.
Sure.
Yeah, similar to what Kevin mentioned, we see several patterns emerging of the implementation of the hip soco and people sit in Europe into the cheaper paradigm, one being induction treatment to get the disease under control and enable other treatments for example maintenance.
But also a very big interest for combinations.
As I've mentioned in the remarks, you don't go on Troponin trial is an EP knievel.
Immunotherapy combination there are other regiments of you'd be knievel that comes down to consideration.
And there is also a strong interest in combinations with debenture ASP as well so we'll be exploring obviously together with investigators.
All of these options to simply find the best path to integrate types out.
Fair enough.
Thanks, and then just as a quick financial follow up looking at your cash position and cash runway and and this.
Final tranche of of financing that would come into play if you had $10 million in a quarter.
What's sort of your base case outlook for.
For the Companys finances going forward it looks like you can get to cash flow positivity.
And then at that point, you can you can push into potentially other liver cancers.
Do you expect cash.
Cash flows from your initial Hep Sato indication to support all that.
Extra potential development or I, just kind of wanted to get a sense of how you are feeling in terms of cash needs on that.
Our base case is to.
Be very sensitive to dilution to existing investors and therefore.
Fund new development out of cash flows from the company so.
Our base cases, we should be able to be cash flow positive assuming the stock works when we at timberland I think barents exercise et cetera without.
Without additional financing.
And that.
We're not planning on starting for huge trials at once.
To be able to fund you know at least one trial off that cash flow and hopefully more over time.
Thank you.
David Hoffman: Our next question comes from Marie Thibault with P. T. I G. Please go ahead, hi, Congrats Gerard and sand around this positive update today.
Wanted to ask a little bit more about some of the commercial traction you're seeing so far I know at moffitt them for now and then some commercial Proctor cases coming just to clarify are all of the first Proctor cases are those commercial or are they all going to be bringing in revenue and then any details you can offer on you know how many.
Patients have been treated commercially so far here in the first quarter are they coming back for repeat what's sort of the trends.
I know, it's early to call a trend, but if theres any more kind of metrics you can give us around that the commercial traction.
I don't think we're gonna be doing too many.
Sample cases in this and the Proctor cases in the second quarter and the first quarter. We found it useful for a variety of reasons to do so.
I think most I would say 80% of the business, we're going to get in the first quarter is going to be from moffitt.
And they're running at a run rate of let's say roughly two a quarter.
So hopefully that will help you there in terms of what you expect them to.
Two per month excuse me you guys have said someone on my video go dry wouldn't you say.
Two per month.
And.
But all of them.
Centers that were are up and running now will definitely contribute.
Tribute to our revenue in the second quarter.
<unk>.
In terms of our patients coming back yes patients are coming back I can't at this point and tell you what.
David Hoffman: 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 are doing one and stopping or two and stopping at this point it looks like bigger they're behaving at least.
With the data we have in hand at the moment they are behaving at least like they did in the clinical trial.
Okay. That's really helpful for us to know and then congrats to Martha cut their doctor rock on her new role can you tell us anything about the priority should be focused on any changes any tweaks.
On the operation side that she's focused on and thanks for taking the I'll answer for her.
This is.
I don't know what day it is but it's still mid single digits.
The I think the number one priority is.
Ensuring we have a robust supply chain there are.
You know a lot of components in this product a lot of single source vendors.
That's something I'm very familiar with Sandra and David from various fell we had actually more single source suppliers, there and we made it in the background. We made a strong effort to make that supply chain is robust as possible.
But 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.
You know an ongoing priority, but thats, probably one of her first tasks.
I think I'll leave it at that.
Very good thank you Darren.
Okay.
Our next question comes from Yale Jen with Laidlaw and company. Please go ahead.
Good morning, and thanks for taking the questions and congrats on a good thought.
My first question is that are you suggest that there could be $10 million revenue towards the fourth quarter.
Could you give us a little bit.
Well make that assumption and some details of that didn't have a follow up.
Speaker Change: Yes, I think if you run through the metrics I gave them a little earlier on the call.
We're ramping one per month to one five per month to per month, starting in the first quarter getting to the end of the year on average per site.
And then the site activation, which I've said, Ken by mid year 2015 ended the third quarter 'twenty by the end of the fourth quarter NIM multiply that by 182 five.
Price per kit.
You'll find that you can achieve 10 million by the end of the year.
Okay, Great that's very helpful and the.
Follow up question.
You've got so far have 90.
Bachelet had being trained.
And what do you anticipate over the next quarter or two.
That number might be and.
The impact you think that could have.
In terms of.
Going forward and thanks.
Yeah, and we're finding that the average site is spending more than three people there often doubling up.
Either an IRR analysis geologists are perfusionist et cetera, when they go.
So you wouldn't divide that 90 by three you get the 30 <unk>.
20 sites.
I think at least one person or have scheduled.
Training.
You know actually haven't thought through how many do I, how many more preceptorships will occur before the end of the year I think it will probably be at least a similar number.
We're partway through.
You know about 20 institutions right now.
Some move at a glacial pace some move very quickly.
So when I said before it takes about.
About three months in reality, some came roaring through in a little under two months and some were one five or working with them or so or six so.
But I think maybe another 90 to 100 preceptorships.
We'd probably get us to 20 plus sites.
Sites by the end of the year.
Okay, Great and maybe just add one more question here, which is.
Again forward looking.
Given that you you anticipate 20 sites the AUM law in.
In place by year end, what's the longer term goal for example for next year, what's the General authority you have and again thanks.
Yeah, well I honestly don't know and I'll tell you. The reason I don't know is we need to spread out whether or not 20% to 25 sites is adequately handling the patient flow whether or not we can put in place adequate referral referral networks to get the patients to those 20% to 25 sites if it looks like it makes.
Sense to open 35 sites will do so.
We wanted to careful that we don't open sites that are only doing one every month or two because I don't think that will lead to it.
Speaker Change: Not lead to the best patient outcomes.
Sites are doing that lower volume.
So we'll have to see how you know how things.
How things.
Evolve in terms of.
Commercial sites, we might open other sites just for purposes of RMB I got a trace of flight training for you know.
But does the 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.
Next year.
Okay, great Thanks, and congrats on the great.
Great.
Yeah.
Again, if you have a question. Please press Star then one.
Our next question comes from Sean Lee with H C. Wainwright. Please go ahead.
Hey, good morning, guys, Sean <unk> and congrats on the positive commercial developments. My first question is on the <unk>.
As such in market. So I was wondering with teams.
There's 20 sites.
Is some of the largest cancer centers in the U S. What percentage of the overall multi do you expect to be covered by the end of this year.
Yeah that's.
I think if we count.
Patients, who have one or more referrals at those sites just show up once they get a consult with an oncologist its probably over 75%.
If we count.
He is actively being treated somewhere outlets 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 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.
That's going to here.
My second question is on I mean, Bruce.
So I was wondering whether you can highlight some of the reimbursement process achieved so far whether you'd run into any issues.
Whether you.
So with more on reimbursements towards the 70 ton.
Payers and CMS with the J code that's it thanks.
Yeah. So the first part of the year.
Did not have a pass through or a C code, sometimes CMS takes more than three months to do that in our case. It was more than three months. So we didn't get it on January one which was our hope and my assumption when I. Initially gave the guidance of a five treating sites, but we managed to get four sites up and running or we will have four sites by the end of the first quarter.
Using a miscellaneous code.
No easy task.
For a product priced at an awkward pricing level that we're at is.
As I mentioned starting April one 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.
Three treatments planned and scheduled in the first 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.
Thanks, that's all the questions I have.
This concludes our question and answer session I would like to turn the conference back over to Gerard Michel for any closing remarks.
Okay I 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.
Future updates probably about two months from now given the length of time to get the K out and have this call.
So again I look forward to dividend with future updates and I very much appreciate the support thank you.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.