Q4 2024 Delcath Systems Inc Earnings Call
<unk> presentation.
If anyone today should require operator assistance. Please press star zero from your telephone keypad.
As a reminder, this conference is being recorded.
It is now my pleasure to introduce David Hoffman Delcath General Counsel, Mr. Hoffman you may begin.
Speaker Change: Thank you and once again welcome to Delcath systems fourth quarter and full year 'twenty 'twenty four earnings and business highlights call with me on the call are Gerard Michel Chief Executive Officer, Sandra P&L, Chief Financial Officer, Kevin Your General manager intervention oncology oil Lewkowicz Chief medical.
Speaker Change: Officer, and Martha Route 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 Change: 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 Security Exchange Act of $19 34.
Speaker Change: 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 Change: Actual results may differ in a material manner 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.
Speaker Change: Detailed in the company's annual report on Form 10-K, 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.
Speaker Change: 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, our press release with our fourth quarter and full year 2024 results.
Speaker Change: It is available on our website under the investors section and includes additional details about our financial results. Our website also has our latest S. E C filings, which we encourage you to review.
A recording of today's call will be available on our website now I would like to turn the call over to Gerard Michel Gerard. Please proceed. Thanks.
Speaker Change: David.
Gerard Michel: You all for joining US today 2024 was truly a transfer former Deerfield tariffs from a U S launch of types of auto in January about your regenerate of $32 $3 million of upside of revenue in the U S for the year, including $13 7 million in the fourth quarter from 14th active U S treating centers.
Gerard Michel: Fortunately in 2024, we secured both a permanent J code and a new technology add on payment commonly called untapped.
Gerard Michel: While incremental revenue revenue from Europe remains modest due to pricing and reimbursement structures European growth in 2024 over 2023 was 137% and this broke remains an important strategic component of the book of the business.
Gerard Michel: These achievements reflect the strength of our world class commercial team, which has successfully navigated the complexities of once you got sort of an experiment cumulus that usage there.
Gerard Michel: Their ability to train multidisciplinary healthcare providers secure hospital formulary approvals and drive procedural adoption of major academic centers has been exceptional.
Gerard Michel: In the fourth quarter, our cash burn was only a $1 million and we achieved $46 million in positive adjusted EBITDA, a first for the companies and ended the year with $53 $2 million in cash and investments with no debt.
Gerard Michel: During the year, we received over $41 million in proceeds from the exercise of warrants. This financial stability enables us to expand R&D and new initiatives to maximize the hepatic delivery systems potential to treat other liver dominant cancers.
Gerard Michel: Shifting focus to the specifics of Q4 results and 2025 plans during the fourth quarter, we activated three new U S treatment centers.
Gerard Michel: <unk> University of Utah, and Mayo Jacksonville, So far in 2025, where you're back to wait another two centers, bringing the total to 16 with an additional center is scheduled for its first treatment in March and they get more centers excepting referrals.
Gerard Michel: Our goal remains 30 active centers by year end. It is important to note that the centers, we have activated or are in the process of being activated our leading academic centers such as Mayo clinic M. G. H Cleveland clinic at Thomas Jefferson All of which are active as well as northwestern MD, Anderson, which are not yet active but excepting referrals.
Gerard Michel: In Q4, the average stripping rate per site was slightly under two per month a rate expected to continue in 2025, as we bring on new centers, which typically start at a lower utilization rates before wrapping up.
Gerard Michel: To support this expansion, we are increasing our commercial team and expanding from four to six regions each structure without liver directed therapy manager and oncology manager and a clinical specialist.
Gerard Michel: Our liver directed therapy manager drives the hospital approval process and ensures the upside of chip procedure team is appropriately trained and once the site is active supports the site as they manage their patient flow.
Gerard Michel: Policy managers engage community based medical oncologist outside of our treatment centers with the goal of building peer to peer referral networks between the community oncologists treating centers.
The clinical specialists to support the treatment teams in preparation for and during the treatment with the goal of ensuring patient safety and improving patient outcomes.
Gerard Michel: Additionally, we are enhancing the field support to assist centers of administrative processes ensure accurate coding and efficient claims submissions, which will facilitate broader adoption.
Gerard Michel: Since the field force will be expanded by mid year, we expect more than half of the incremental centers to be added to be out of this year to come on board in the second half of the year.
Gerard Michel: Cumulus up volumes in Europe through 137% in 2024, with Germany up 75% in other markets, including the UK and Turkey doubling year over year. There were two new centers activated in one existing set of reactivated in Germany, we expect modest but steady growth moving forward, maintaining a breakeven strategy and the reason.
Gerard Michel: The region, the strategic value of our European presence lives and supporting clinical trials generating publications in 'twenty 'twenty four over 10 studies from your obscene centers were published including research on Cumulus sets for use in intrahepatic Cholangiocarcinoma.
Gerard Michel: In 2025, we plan to expand into France, Italy, and Spain, complementing our strong <unk> presence in the UK, Germany, and the Netherlands, we continue to engage oncologists in both the U S and Europe to integrate <unk> into treatment algorithms in 2024, the scandium three trial in Sweden began screening could screen patients. This 40 patient study.
Gerard Michel: Theres two cycles of chemotherapy, followed by <unk> at Liberum Mab in NEVA, Lou Mab versus E Bloom, a map and knee balloon kebab alone.
Gerard Michel: Meanwhile, the show parent trial in the Netherlands, which sequences to chemo treatments. After initial people live a map in the Blue Moab Triple therapy completed enrollment with 76 patients in the third quarter of 2024, we expect the primary endpoint analysis.
Gerard Michel: Progression free survival at one year to be reported in the second half of the year.
Gerard Michel: In 2024 expert consensus identified liver dominant metastatic colorectal cancer and metastatic breast cancer as promising new indications perhaps auto.
Gerard Michel: Our phase II trial in metastatic CRC received FDA clearance in December and local player have zotto plus try floridian dip to Purcell babies, Sue Mab versus standard of care alone in 90 patients enrollment is expected to begin in the second half of 2025 across 20, plus U S and Europe.
Gerard Michel: Sites the primary endpoint hepatic PFS is expected to read out by the end of 2027.
Gerard Michel: With overall survival data following in 2028.
Our market research estimates the total addressable market of six to 10000 patients annually in the third line liver dominant.
Gerard Michel: Metastatic CRC.
Gerard Michel: <unk> metastatic breast cancer trial, and a third line setting up liver dominant patients is expected to begin in the fourth quarter of 2025 pending FDA clearance additional details of the trial design will be share it upon clearance.
Gerard Michel: To drive further innovation, we're expanding our internal R&D capabilities. As an example, we recently appointed Dr. Marc Michael Bruno Bruner, a formal president of the society of Interventional radiology with over 25 years of experience with academia and biotech leadership as senior Vice President of interventional oncology to advance procedural improvements.
Gerard Michel: Explore new indications.
Gerard Michel: In summary, the first year.
Gerard Michel: U S launch of <unk> has been a success.
Gerard Michel: In 2024, we've been able to provide a novel treatment to patients suffering from metastatic uveal melanoma. The success has brought us very close to cash flow breakeven has directly led to a stronger balance sheet. We now have over $50 million in cash and investments and no doubt no debt, we are well positioned to continue to grow revenue, while investing in high impact R&D initiatives.
Gerard Michel: Future for Delcath has never been brighter I will now hand, the call over to Sandra to share further details on our financial position.
Sandra P&L: Thank you Terry.
Sandra P&L: Revenue from ourselves would have thought it was $13 7 million and Cumulus that was $1 4 million for three months ended December 31, 2024, compared to <unk> 5 million for chemo sat during the same period in 2023 full year of 2000 22024 revenues from ourselves the pet side with $32 3 million.
Sandra P&L: And chemo sat with $4 9 million compared to just $2 1 million for Cumulus that during the same period in 2023, we recognize gross margins at 86% in the fourth quarter and 83% for the full year.
Sandra P&L: Research and development expenses for the quarter and year ended December 31, 2024, 9 million and $13 9 million, respectively compared to $4 seven and $17 5 million for the same periods of the prior year.
Sandra P&L: Selling general and administrative expenses for the quarter and year end at $7 million and $29 6 million, respectively, compared to $7 million and $22 1 million for the same periods in the previous year.
Sandra P&L: Fourth quarter and full year net loss was $3 4 million and $26 4 million compared to net losses of $11 1 million and $47 7 million for same period in 2023 non-GAAP positive adjusted EBITDA for the fourth quarter was $4 6 million in full year adjusted EBITDA loss was $2.
Sandra P&L: $5 million compared to adjusted EBITDA losses of $9 3 million and $30 million for the same periods in 2023.
Sandra P&L: As Sharon mentioned, we ended the year with $53 2 million in cash and investments and cash used in operations was approximately $1 million in the fourth quarter compared to $3 6 million of operating cash burn in the previous quarter.
Sandra P&L: As of today, we have no outstanding debt obligations.
Sandra P&L: Thank you for all all for participating today last year was truly an amazing year that concludes our prepared remarks, and I would ask the operator to open the phone lines for Q&A.
Sandra P&L: Thank you.
Now be conducting a question and answer session if.
Sandra P&L: If you'd like to ask a question at this time. Please press star one from your telephone keypad and a confirmation tone will indicate your line is in the question queue.
Sandra P&L: You May press star two to remove yourself from the queue.
Sandra P&L: For participants using speaker equipment may be necessary to pick up the handset before pressing the star keys.
Sandra P&L: One moment please for our first question.
Speaker Change: Thank you. The first question today comes from the line of John Newman with Canaccord Genuity. Please proceed with your questions.
John Newman: Hi, there good morning.
John Newman: Thanks for taking my question and congratulations on all the excellent execution in 2024.
John Newman: The question I have is as you are bringing new sites online in the United States, perhaps that'll.
Speaker Change: I'm wondering if you're seeing any sort of change to the number of treatment cycles that patients are receiving given that perhaps some of the centers have some familiarity with the product.
Speaker Change: Through colleagues at other centers or if you're attending to see the initial number of treatment cycles around the same place and then sort of increase over time. Thanks.
Speaker Change: Sure as you know the label allows up to six treatments and in the focused trial.
Speaker Change: Setting it averaged out to 4.1 treatments. It takes about a year to know whether a patient is going to go the whole six.
But if we look at the kind of what's called the decay curve of patients when they start.
Speaker Change: Or for the patients who have got a full year, where it looks like we're going to be at least before $4. One that we saw in the trial. So it's premature for me to say, it's pretty much over that but I'd be very surprised if a year from now it's under the 4.1.
Speaker Change: But it's been remarkably steady to be honest, we haven't seen much of a change that'll be.
Speaker Change: Like from center to center as the do more treatments that would that said.
Speaker Change: You wouldn't expect.
Speaker Change: It really is driven by.
Speaker Change: Patients are either not tolerating the product or alternatively, having disease progression.
Speaker Change: I think the Tolerability is at least as good as we saw in the trial.
Speaker Change: And I can say the results the docs, who are seeing anecdotally or at least are better than what was seen in the trial. So those are the reasons. It would end up greater than 4.1, I'm hopeful it might.
But premature to say that with any degree of certainty.
Speaker Change: Okay, great. Thank you.
Speaker Change: Yeah.
Speaker Change: Our next questions are from the line of Marie to vote with BTG. Please proceed with your questions.
Speaker Change: Gerard and Sandra and Ah Congrats as well on a great 2024 one.
Marie: I wanted to ask here about the plans on the sales add them expanding from four to six regions help.
Marie: Help us think through how we should be thinking about your SG&A rent you certainly got a very nice job of controlling opex that we want to sort of understand the cadence of that coming through this year.
Speaker Change: Sure Sandra can you help with that yes.
Marie: For SG&A expense.
Speaker Change: <unk> in 2024, we're probably going to see about you know anywhere from a 30% to 40% increase over the.
Marie: 2024 into 2025.
Marie: I think a lot of those expenses will come.
Marie: Probably starting in second quarter and mid year as it begins to expand but I know the sales and commercial team has already started that in Q1 at that fully staffed I can say midyear of this year.
Speaker Change: Okay, very good and I guess, a quick one on the on the pipeline. Thanks for sizing up the opportunities therein and updating us on the timeline, what's left to do on the device itself on on you know, making some modifications for the possible indications and then what's left to do on kind of preparing for the trial in terms of.
Marie: Finding interested sites et cetera.
Marie: Sure in terms of device modifications not unnecessary.
Marie: We're treating.
Marie: The Mets in the liver, so whether or not the medstar firm breast cancer colorectal you feel it doesn't really matter.
Marie: In terms of.
Marie: Getting up and running for the AR for the trial are and ask <unk> to add some color in terms of the basics of IMD approve of breast etc.
Gerard Michel: Thank you Gerard.
Gerard Michel: So in order to get the clinical trials started for the colorectal trial and for the breast cancer trial. Our strategy is to focus on existing treating sites and engage new sets of doctors, who treat the respective diseases. We expect this strategy will facilitate the activation of new sites, because we would be going to the size of the OLED trained and experienced.
And delivering the treatment.
And the engagement is primarily to generate interest the supports of the best cancer and colorectal cancer medical and culture communities.
Brad: Okay. Thanks, Brad I'm. Good thanks, Thanks for taking the questions.
Speaker Change: Our next questions are from the line of Sudan, We are gonna Nathan with Stephens. Please proceed with your question.
Speaker Change: Hi, Jordan Sandra Thank you for the.
Speaker Change: The update here and congrats on the progress My first question is no.
Speaker Change: Regarding R&D Opex and in Europe.
Speaker Change: <unk>.
Speaker Change: To be to be enough aggressive to have meaningful progress on that front, yet maintain kind of a potential cash flow breakeven or profitability profitability profile, which goal is the most important for you in 2025 to be profitable or be breakeven and maybe more robust on the R&D front.
Speaker Change: Yes.
Speaker Change: As I frequently tell investors, new investors and existing investors don't count on us always being cash flow positive.
Speaker Change: We have adequate R&D opportunities for this platform and the cost of capital is reasonable in that second part is critical.
Speaker Change: We will invest now I.
Speaker Change: I would say that the bad news in my mind is that we can't get moving fast enough, where there are the opportunities to spend all our money. So we will be cash flow positive this year without a doubt.
Speaker Change: And perhaps following year.
Speaker Change: And.
Speaker Change: For a while but I am purposely not making any promises of maintaining positive cash flow because I think that is an unnecessary set of handcuffs to put on our business when they have quite a quite a few high potential R&D.
Speaker Change: Possibilities.
Speaker Change: Got it and my second question is I noticed I think a price increase to about 187500.
Speaker Change: Early February.
Speaker Change: I think that's about $2 seven 4% price increase is that expected that cadence going to be expected every six months now or once every year for that or just kind of curious how you're viewing it.
Speaker Change: It depends on inflation, because you know the.
Speaker Change: The legislation is that for CMS mechanic, you know you can't price higher than.
Speaker Change: But price increases and faster than the rate of inflation. So that's essentially it.
Speaker Change: It depends on what happens with inflation.
Speaker Change: Got it thank you and once again congrats.
Speaker Change: Our next questions are from the line of Bill one with clear Street. Please proceed with your question.
Bill: Hey, good morning, and thank you. So I just wanted to ask about your referral network.
Speaker Change: What have you seen so far from that network do you believe that most patients who should be referred are being referred or how much growth is there from from strengthening.
Outreach effort to more local centers.
Kevin Your: Okay, Let me ask Kevin to answer this.
Kevin Your: Sure. Thanks, Gerard you're our referral network has is working well to this point, we are getting referrals from the community into the larger academic centers, even some of our new sites that are waiting for a product approval or referring their patients to existing treating sites.
Kevin Your: And those patients will return back to the site once it is opened.
Kevin Your: We have built each of our regions out with a structure that you had mentioned in the in the in the brief.
Kevin Your: Where we have a dedicated oncology.
Kevin Your: <unk> manager that is out talking to the community understanding their needs and helping facilitate referrals to active treating sites.
Kevin Your: I will add that you know.
Kevin Your: Any good management team adapt strategy as they learn more things and if you did.
Kevin Your: Through the archives and finds you know what I said, we would need in terms of centers years ago, We're definitely looking at more centers almost twice as many as I thought we would need I, maybe said, maybe 20, Max two or three years ago, where he can afford it and that isn't because.
Kevin Your: The academic centers arent willing to accept referrals and it's not that we arent getting referrals, there, but it's become pretty clear that up.
Kevin Your: To have patience.
Kevin Your: Fly for hours or drive seven hours, we're going to lose patients. So we need more centers.
Kevin Your: We're working hard on referrals.
Kevin Your: But the referrals are probably need more centers referrals that referral pipeline, probably isn't going to be as big a mix of the business because I personally anticipated a couple of years back, but again, you know nobody has a perfect crystal ball.
Kevin Your: Okay.
Kevin Your: On the expansion of the recommendation from just bigger confined to liver dominant.
Kevin Your: How many patients and your target patient population or a panic confined versus dominant.
Kevin Your: Almost all patients eventually get extra hepatic pets.
Kevin Your: So it really is a matter, it's a moving target as a matter of you know when their primary when they're diagnosed initially when they're first diagnosed under half I've extra hepatic that's whether it's 20% or 40, it's hard to hard to have exact data.
Kevin Your: Our label.
Kevin Your: Includes patients with extra hepatic nuts. The guidelines recently changed it was strange when the guidelines got updated just around the time of your fruit they actually changed instead.
Kevin Your:
Kevin Your: Liver isolated liver Mets, which made no sense.
Kevin Your: We got on the phone with the Kols around the country talked to them and they thought it made no sense. They reached out to the Guy like committee and it got changed pretty quickly. So there's no incremental patients in terms of our Tam because.
Kevin Your: Because we've always included them.
Kevin Your: But that was a unexpected potential headwind, especially for docs out in the community who don't see a lot of these I just refer to the guidelines that would've been a headline headwind for us. So we're thankful we got that changed.
Kevin Your: Okay and last one I know, there's no guidance, but looking at consensus numbers for 2025 I'm seeing.
Kevin Your: 77 million as consensus so would you describe that as conservative or aggressive.
Kevin Your: I'm going to say no comment.
Kevin Your: Yeah.
Kevin Your: I figured I'd try thanks, so yeah.
Speaker Change: Our next questions are from the line of Yale Jen with Laidlaw. Please proceed with your question.
Yale Jen: Good morning, and thanks for taking the question and congrats on the progress.
Yale Jen: Just wanted to get a sense of your CRC trial to start date.
Yale Jen: Later this year.
Yale Jen: In terms of.
Speaker Change: How many cycles do you think the patient may have.
Speaker Change: Was there any adjustment in terms of a dose duration anything of that compare to your approved label approved.
Speaker Change: The probably the things on the label or does it.
Speaker Change: Any other adjustments sure sure let me.
Speaker Change: I'll take that question sure. Thank you for the question.
Speaker Change: After discussing with leading experts in colorectal.
Speaker Change: Cancer would be decided to put forward a design that we believe will facilitate the adoption of liver directed therapy.
Speaker Change: This line of treatment of metastatic colorectal cancer patients. So we basically took as a basis to standard of care and be added to the.
Speaker Change: <unk>.
Speaker Change: At the beginning to make sure that the controls delivered dominant disease. So we plan to deliver two cycles.
Speaker Change: Of the BHP, followed by standard of care should patients progressed. After initially benefiting when the treatment we have the option to treat them to continue with the patient benefit that was delivered by the first treatment. So.
Speaker Change: The base number of treating psychosis too with the option to be more in separate cases.
Speaker Change: Okay, Great. That's very helpful and maybe just don't want to get a little bit more deeper.
Speaker Change: E D D D orders a sequence.
Speaker Change: Freeman.
Speaker Change: Uh huh.
Speaker Change: Why you have the upside, though first followed by the standard of care versus the other.
Speaker Change: Was there any differences.
Speaker Change: Kind of.
Speaker Change: Yes, absolutely.
Speaker Change: The reasons might be sequenced PHP first followed by standard of care is that the definition of the patient population are those patients with liver metastases dominate the clinical presentation.
Speaker Change: That reason deliver tumor is the real problem and that needs to be addressed first and then the extra VAT of disease can be addressed later.
Speaker Change: Okay, Great that is very helpful. And then maybe the last question here is that.
Speaker Change: I know you guys start to expand in Europe.
Speaker Change: Uh huh.
Speaker Change: In the prepared remark you mentioned some of those.
Speaker Change: What is the expectation of this year 2025.
Speaker Change: For that that debt.
Speaker Change: Yes.
Speaker Change: For a particularly from a revenue perspective and thanks.
Speaker Change: Yeah.
Speaker Change: The expectation maybe.
Speaker Change: Setting the bar, rather low, but the expectation as I said modest growth and I don't know whether or not it's 20 or 30%.
Speaker Change:
Speaker Change: In Europe.
Speaker Change: It's <unk>.
Speaker Change: Step by step changes will occur when we get reimbursement really only have reimbursement in Germany.
Speaker Change: In the Netherlands, the hospitals that use it and they considered standard of care, but taking it out of their own budget.
Speaker Change: In the U K, it's been private pay.
Speaker Change: If we do get reimbursement in a major market and there would probably be.
Speaker Change: Probably the U K is the one that's up maybe the Netherlands, we could see a step change in those particular markets, but because it's not that's really the big driver of future growth new markets, which can take a while to get started as well as reimbursement.
Speaker Change: And theyre kind of binary outcomes.
Speaker Change: Setting the bar a little on the low side, perhaps and just say modest growth for now, but again are the real value there for us is not the economic value the strategic value.
Speaker Change: The more centers that do it in Europe with its device label, which means and it can be used to treat any cancer.
Speaker Change: I think the more we see docs trying to use it in us getting efficacy signals in publications.
Speaker Change: Okay, great maybe they're not so tag on that is that are you.
Speaker Change: You guys need to do some call it some sort of a farmer.
Speaker Change: I'll make some sort of those.
Speaker Change: Studies or whether you already have that.
Speaker Change: Peaceful for the request for the reimbursement.
Speaker Change: We're not going to do a specific primary economic study, but we have to we ended up having to pay consultants to do models and the models. According our models. Accordingly particular countries you know.
Speaker Change: And we will do it for the other.
Speaker Change: Yeah, no I know, we'd soils and you're mostly be yeah every country it needs its own model and yes. So the U K, we put a model together.
Speaker Change: The Netherlands will put a model together.
You know.
Speaker Change: Eventually we're starting out in Sweden, I suspect, we'll have to put a model together for them, Italy, France, et cetera, et cetera, but theyre all basically we're gathering data we already have and are putting into the.
Speaker Change: The country's particular model I'd like to see.
Speaker Change: Okay, great. Thanks, a lot and congrats on the progress. Thank you.
Speaker Change: As a reminder to ask a question you May press Star one.
Speaker Change: The next question comes from the line of Chase Knickerbocker with Craig Hallum. Please proceed with your question.
Good morning, Thanks for taking the questions.
Speaker Change: Gerard I feel like I asked this question kind of every quarter, but I'll ask it again, sorry, but just kind of in those eight centers now that I guess, we have 16 active and those eight centers that are you know in Q, you know approaching being ready to treat patients do you have a sense for kind of what our expectation should be that those are online is that something where in the first half of the year, we should have it all.
Speaker Change: Those centers at some point kind of activating and treating patients and then so basically they have they get to 30 at the end of the year, we kind of need six incremental from there in the back half.
Speaker Change: Yeah. So.
Speaker Change: We need 16 overall for the year, we've got to know to reach to reach the 30, Okay. I expect of the bad but the balance of them more will come onboard in the second half of the year, because we're expanding the sales force will be hit the ground running and really be active in the second half of the year. So if you assume it was you know if you just.
Speaker Change: Bye bye for we need four quarter I think it is going to be closer to three a quarter for the first two quarters and closer to a five a quarter for the back half of the year now my ability to predict this is Ben.
Speaker Change: Really poor.
Speaker Change: So we're doing well, but you know if I had to put some money out of it. That's that's the pace I would I would I would Luke.
Speaker Change: Okay.
Speaker Change: Got it and just if you could give us a sense for kind of kind of what percentage of volume is being driven by kind of caught top three accounts and you're starting to see some of that kind of broaden out to a lot of your other recently activated centers or just kind of a idea on that.
Speaker Change: The percentage of business coming from the top three accounts has definitely been decreasing as we add more accounts.
Speaker Change: But the parade of rule, probably still holds I don't think its quite 80 20.
Speaker Change: But maybe it's 60 30 in terms of a distribution.
Speaker Change: Yeah.
Speaker Change: Got it and then just last for me.
Speaker Change: You know there's.
Speaker Change: Gonna be readout that will be registrational in the HLA <unk> negative disease. It sounds like by the end of the year can you just remind us how you think about that program competitively.
Speaker Change: What types of auto and how you see it helps out all fitting into the treatment paradigm, if they are successful and and and things change and kind of HLA <unk> negative disease as well.
Speaker Change: Hum.
Speaker Change: There are oncologists like systemic therapies.
Speaker Change: Our job is to remind them I don't want to say educate but remind them that hey look these patients die of liver failure.
Speaker Change: And if you'll let the liver disease get out of control at some point, even we can't help them live and are probably can't help. So we think these patients survive long enough to get both the systemic and liver directed and I think they need a systemic on top for a product it wouldn't be appropriate just to use our product in these patients I think the systemic.
Speaker Change: We'll battle it out amongst themselves.
Speaker Change: We will be the only liver directed that's appropriate for this patient population.
Speaker Change: A second thing I would mention is we already face a headwind from these products even before they're approved because there is a very this is a very small patient population.
Speaker Change: And most of these patients end up getting treated at academic centers that are involved in these trials. So were already facing you'd want to call. It a headwind or understanding how to work with these treatments and that many of our patients already first going into trials and getting ours.
Speaker Change: As most of these trials.
Speaker Change: Dictate that you have to be treatment naive.
Speaker Change:
Speaker Change: So if we're already living it and I think it's appropriate that they get systemic on top of us.
Do you ultimately think we could move to something where theres. Some theres. Some sequencing of therapy is that something you are looking at yes, I looked at it.
Speaker Change: As a matter of fact, just yesterday I was we had a small panel of docs, we're having a conversation with and that's what they do.
Speaker Change: It takes up to six to eight weeks to from a patient presenting into them being ready to treat with our product for a variety of reasons ranging from prior off to to just having to map the patient and do a variety of our valuations at the patient and these docs put them on a type.
Speaker Change: But Europe Evo immediately.
Speaker Change: Treat them for two months or so then take them off and you can start sequencing with our product when.
Speaker Change: When I ask them do you put them back on already do the full six they do the full six or as far as I can go before progression or tolerability tolerability issues arise.
Speaker Change: And then they put them back on the systemic thereafter.
Speaker Change: That's one one doctors or one centers protocol, but I think that's going to become increasingly common.
Gerard Michel: Got it and then just last from me Gerard.
Gerard Michel: Any meaningful off label use that you've seen so far in other tumor types and your experience in the U S.
Gerard Michel: No and.
Gerard Michel: As I said before we've had centers approach us who want to get open to do off label use and we've said no you have to start with Uveal melanoma.
Gerard Michel: Suspect we will start seeing some centers doing.
Gerard Michel: Cases here and there I would not bake into your model anytime in the near future like the next year or so any meaningful revenue from that though.
Speaker Change: Great. Thanks, guys.
Yeah.
Speaker Change: Our next question is from the line of Swamp cooler Robert <unk> with H C. Wainwright. Please proceed with your question.
Robert: Thank you Jeff.
Robert: Gerard Congratulations I was looking into my email archive on just about four years ago.
Robert: You and I were talking about how to get all the data from the focus time.
Robert: In house on cloud application and here, we are with $37 million in.
Robert: The 11, you'll have to four years, so huge congratulations to you and your team.
Robert: Having said that so.
Robert: With 16 centers now that have incorporated hip Sato.
Robert: What do you see.
Robert: Any of them influencing that sales cycle in terms of Ah.
Robert: Getting new sites onboard.
Speaker Change: Alright, do I seem to be changing in terms of the process to get new centers on board.
Robert: That are them.
Robert: And in terms of competition, saying that say that the that.
Robert: Other centers in the neighborhood habits, so we need to have it so that we can draw something yeah, yeah, Okay I got it yes.
Robert: So definitely if we use the term fear of missing out or formal there's definitely a little bit a little bit of that going on among the centers. So you know you have your typical early adopters or jump onboard.
Robert: And then maybe it flattens out a little bit and then definitely it's been a bit of a I think the uptick in interest as more.
Robert: Is that necessarily local centers, but other name brand centers.
Robert: Oh X Y Z has it we have to have and so I think there's a little bit of that going on.
Robert: In terms of the.
Robert: The learnings and getting centers on board.
Robert: I would say each I've said this multiple times each center is so unique there.
Robert: It's tough to have you know a well honed plan.
Robert: I think the reps can anticipate potential problems and try to get ahead of them and they're trying to do that.
Robert: But it's still a very I would almost a torturous process to get this thing up and running because it's a unique bird, it's not because it's particularly difficult to do or anything like that it's just it doesn't fit into any particular square peg round hole when it comes to approval, but we get it done.
Robert: Fantastic.
Robert: And then coming down the gross margin you know you exited funded 94 with an 82%.
Speaker Change: Whats the push and pull on that number.
Speaker Change: You know, especially thinking about 25 and beyond and at least in the shutdown.
Speaker Change: Andrew Yes. Thank you. So R&D expenses, you know Q4 was a bit flat versus the previous quarters that we definitely are going to see a ramp up of R&D in 2025 anywhere from $35 million to $40 million.
Speaker Change: And boy Oh, and his team continues to.
Speaker Change: Yeah.
Speaker Change: Start the trial and get sites open of course that there isn't some wiggle room in there and how fast sure I've mentioned, we can spend that money, but yeah. There is definitely going to be.
Speaker Change: A significant increase in R&D over 'twenty 'twenty, four and did you ask.
Speaker Change: Puts and takes on gross margin as well.
Speaker Change: Yeah, Yeah, that's what I was wondering.
Speaker Change: What's the push pull on that number rosemont addressable by Jakafi.
Speaker Change: And so we ended Q4 with 86% gross margin and we do expect that to continue into 2025 and you probably.
Speaker Change: Could reach 90% by the end of 2025.
Speaker Change: Okay, perfect and then the push pull a lot of it.
Speaker Change: Most of it most of the expenses are just start personnel okay.
Speaker Change: The bill of materials as well.
Speaker Change: It is what it is is fixed but we have a fair amount of leverage so with the existing team in terms of capacity, putting more through them. We have a tremendous amount of excess capacity in terms of just the physical infrastructure. So I don't see any large.
Speaker Change: Increases in expense, Capex, which would get loaded out over time on cost of goods.
Speaker Change: So I think we will see you know incremental improvement, but with any high high priced drug like this obviously, you've kind of reached diminishing returns on a percentage basis.
Speaker Change: Even with higher higher throughput.
Yeah Okay.
Speaker Change: And then on the expansion of the R&D and all.
Speaker Change: So what's the mandate.
Speaker Change: That this group has now.
Speaker Change: What I mean is it more on the device improvement or is it time to add an.
Speaker Change: Additional either chemotherapy or biologicals in terms of administering them.
Speaker Change: Either to the Liberty yourself or other tissues, yes.
Speaker Change: Yes, so the short term.
Speaker Change: The relatively low hanging fruit.
Speaker Change: Although it is thought that low hanging in anything in this industry.
Speaker Change: Is it to get up.
Speaker Change: Treat other liver dominant cancers, I'd love to be able to do a basket trial and have the F. D. A wave that through but that's just not what not likely to happen.
Speaker Change: So yeah, we are.
Speaker Change: CRC.
Yes.
Speaker Change: Others that might make some sense for the future I'm not saying this will happen, but ICC pancreatic to pick up to others that might makes sense thereafter sequencing there.
Speaker Change: Questing therapy with immuno oncology agents of Chopin looks good there are lots of other that's one place maybe we would do a basket trial you you were doing well on an I O agent Gotta liver met started progressing that we might do as a basket trial in terms of other agents other chemo agents, even biologics yeah, we have a long list of ideas.
Speaker Change: I think we're walking now and getting ready to jobs.
Speaker Change: You know picking up other compounds is something we're definitely going to start looking at but it's too premature for us to give any specifics, but I think it does speak to the fact that this is a platform.
Speaker Change: That can treat many different diseases in the liver.
Speaker Change: And we anticipate we you know as I said earlier in my remarks.
Speaker Change: If it looks like the compelling R&D opportunity, we're going to make sure we have the right team to do it but we're going to fund it.
Speaker Change: So, let's say so talking about starting to job.
Speaker Change: The U S.
Speaker Change: Has been pretty decent and quantify according to <unk>.
Speaker Change: What what you were saying to us earlier.
Speaker Change: So in terms of.
Speaker Change: Geography expansion.
Speaker Change: What what geographies you know could be low hanging 425.
Speaker Change: Our scientists and here first a deeper penetration of chemotherapy in the current geographies and then worry about expansion to new geographies that I'm trying to figure out how you're going to do this.
Speaker Change: So we we sold about as many units in Europe. This year as we did in the U S. Last year excuse me that gives you a sense of the differential in pricing and the value we forget.
Speaker Change: Again, I want to manage Europe, where I'm not losing millions of millions of dollars every year and expanded so that we can you know get the clinical data out of there now are there other sites sites, where now if if we ended up getting a broad first line colorectal indication about half of those.
Speaker Change: Patients end up with liver Mets and that's not our trial.
Speaker Change: Third line, which is a much smaller market, but if we end up getting for example first line.
Speaker Change: Colorectal first line pancreatic.
Speaker Change: Huge numbers in terms of liver involvement.
Speaker Change: Then it might make sense to really push hard in other markets, where we have lower pricing because you know the volume would help make up for it and we probably might have to consider lowering the price in the U S to get on.
Speaker Change: Policy and such but right now with the pricing structure in Europe with this particular set of data, we have which drives usage.
Speaker Change: I think Europe is going to be modest growth, but strategically important might we go to Japan at some point, perhaps it's again one of the long list of things. The team is considering a but for now I think again for the near term model of the company I think we think about the U S. If we're thinking about a terminal value in your spreadsheet I would factor in.
Speaker Change: Ex U S sales.
Speaker Change: Yeah perfect. Thank you very much Gerard and signed up for it with all my questions.
Speaker Change: Sure.
Thank you that concludes our question and answer session and will also conclude today's teleconference. We thank you for your participation you may now disconnect. Your lines at this time and have a wonderful day.