Wednesday, December 21, 2011

Recent Questions Posed to Celsion Management

Many people have asked about the specific questions I recently sent (on 12/8 to be exact) to Celsion management. See below for these 14 questions, which includes one very recent addition to the list (for a total of 15 questions). During a recent discussion I had with Celsion CEO Michael Tardugno, he made clear that the company would seek to address them using the proper channels (i.e. a press release, conference call) in the near future, which complies with full disclosure rules amongst others. As I have said before, the management team has always been highly accessible and transparent to me, and I trust that they will address these questions.
  1. Let’s put this issue to rest once and for all, if I may. Dr. Borys and Jeff Church recently (12/6 phone discussion) mentioned to me that the decision to pursue an additional interim look at the data was driven entirely by the company. Can you provide any additional clarity as to what specifically you meant when you said the company has “sufficient rationale” to do so in the PR? Many of us inferred from the PR that this was making an allusion to the strength of the data, and perhaps, being very close to the boundary.
  2. The interim PR specifically said there would be no “statistical penalty” for doing another interim look. Many fellow shareholders with a strong grasp of statistics have stated that would be impossible, since alpha would have to be spent in another interim look. What exactly did you mean by this?
  3. [This was sent to Mr. Tardugno on 12/20, following our discussion, of course, after the recent CEO letter was released with different verbiage around the statistical considerations of potential second interim analysis] It's clear from the recent CEO letter that the "no statistical penalty" verbiage from the interim PR was changed to "de minimis". I take this as reinforcing that the alpha penalty is negligible. Is the alpha spent on the next interim any less than the normal Lan-Demets because the company is able to "buy back" the alpha spent on the previous interim and redistribute it the new interim?
  4. Without getting into details that you cannot provide, what is the high-level process for the company to seek an amendment to the SPA to conduct the additional interim look? How long should this process take, and will the company issue a PR when/if the SPA is amended?
  5. Considering that doing another interim has real costs in terms of time, alpha, and potential global regulatory relationships, is it even worth doing another interim look, when final data would presumably be only 6 months away?
  6. In your opinion, when would a second interim look take place (i.e., after how many events? 300? Etc.), considering the recent rate of PFS events? Is it within the realm of possibility that a second look would be dependent upon a specific number of OS events, rather than PFS events?
  7. Is it within the realm of possibility that Thermodox hit its PFS endpoint at the interim, but the DMC nevertheless decided to recommend a continuation of the trial due to other factors?
  8. Coming out of the interim analysis, are you still as confident as ever in the market potential of Thermodox, specifically in HCC?
  9. If you had to play devil’s advocate and think of reasons why the HEAT trial would not succeed, what would it be? As I have made clear in prior assessments, my own devil’s advocate view is that intrahepatic distant mets unrelated to the local Thermodox effect, captured by virtue of the PFS endpoint, may put the trial at Jeopardy. Alternatively, some have mentioned improvements in RFA alone that may put the success of the trial at risk. What keeps you up at night most in thinking about potential scientific reasons why the HEAT trial would not succeed?
  10. MANY shareholders, including myself, have wondered why the company recently raised money, particularly when only emphasizing on the Q3 call to have sufficient cash needs for the remainder of 2012? Obviously, we don’t want to “scrape the barrel”, but the company should have had a good cushion (~18M). While the company might argue that cash is needed to have “leverage in discussions with potential partners”, others would submit that the need for cash means a partnership is a long ways away. How do you reconcile those views?
  11. You were quoted in the Q1 conference call as saying you were “confident” a 2nd deal could be made following the interim analysis. In hindsight, were you assuming a halt/early NDA in mind when you made that comment, or do you still think that elusive deal is within immediate reach now that the interim is complete?
  12. When the topic of potential competition for Thermodox in liver cancer arises, I have to say that I disagree with the company’s assessment that there is nothing in the short or intermediate horizon to compete with Thermodox. As you know, in the STORM trial, Nexavar is being studied as an adjuvant to local ablation, with data I believe due by end of next year. Outside of Nexavar, the company must believe there is inevitably going to be competition between combination TACE + RFA treatment, particularly as doxorubicin-eluting beads (DEB) TACE becomes much more common. Is it not true that absent Thermodox, the standard of care is evolving to RFA plus TACE for the population being studied in the HEAT trial? Coming out of the symposium in Hong Kong with your clinical investigators, the company must have a further refined view of what Thermodox will be competing against in real-world clinical practice.
  13. What is the status of the DIGNITY Trial, and what tradeoffs is the company considering in deciding to bring Thermodox to earlier line use vs. expanding to other cancers vs. keeping the protocol as planned originally?
  14. What is the status of the MRI-HIFU bone mets trial? R&R, in a recent analyst report, put the start date at Q4 2012 for that trial, which is WAY off what the company has said previously. Where do you stand in the IND process? Is the hold-up entirely on Philips’ end due to questions around Sonalleve?
  15. Lastly, while I know you may not be at liberty to speak to this, does the company have any comments about the recent Mangrove allegations of bribery? My own assessment is that standstill agreements of the kind offered to Mangrove are commonplace between companies and large shareholders. Those were some very harsh words, and the floor is yours to provide any additional comments.
Clearly, these questions can be prioritized in terms of those that shareholders probably care most about, but either way, I look forward to responses to as many of these as possible in upcoming releases from the company. I remain as confident as ever in the prospects of ThermoDox, and expect the company to execute with laser focus on hitting critical milestones in the next 12 months. Unquestionably, 2012 will be make or break for Celsion, and you can count that I will be covering the company with the same level of rigor as I have done before.

I hope all of you enjoy the holidays, and as always, please feel free to leave any questions or comments.


Tuesday, December 6, 2011

The Celsion HEAT Trial Interim Aftermath: Follow-up with Management

As a follow-up to my most recent article, I thought I would provide readers an update on some of the key questions I posed to Celsion management. Today, Dr. Borys (Chief Medical Officer) and Jeff Church (Chief Corporate Business Strategy and Investor Relations Officer) from Celsion reached out to me to to give me a quick update on some of the key questions I had.

Let me remind everyone that this is exactly why I have such high respect for the management of this company. While I no doubt have recently criticized the company, respectfully, for their recent financing and for "exhausting their benefit of the doubt allowance", I maintain that we have an extremely talented and dedicated team working on behalf of shareholders. They have their work cut out for them, as I mentioned in detail, as many milestones await their successful completion. Let's not also forget that Celsion management is a small group of individuals tasked with some extremely complicated activities and work streams spanning clinical trial execution all the way to key opinion leader (KOL) relationship building. 

That said, let's dive right into some of the questions I had and the clarification Dr. Borys and Jeff Church gave me:

Q: When was the Lan DeMets implementation decided upon, and who decided on that (company, DMC, FDA)? Was this part of the original statistical analysis plan (SAP) or was this something newly decided during the interim analysis? Did the DMC make this recommendation?
A: As I was somewhat expecting, Dr. Borys made very clear that the Lan DeMets implementation was in place well before the interim analysis, as it was pre-specified in the SPA. So, no, this was not suddenly decided upon by the DMC or the company, it was the agreed upon protocol all along with the FDA.

Q: What exactly does the company mean by "sufficient rationale" to conduct another interim look? Was a second look a specific recommendation made by the DMC on the basis of the strength of the data? Or is this entirely an assumption of the company looking at blinded data?
A: To my surprise, Dr. Borys made clear that we should not read too much into the verbiage of the PR. They clarified that the company, even before heading into the interim, was exploring conducting an additional interim look at the data. To make it very clear, the sufficient rationale did not come from the DMC. As such, I take that as meaning that we should not infer anything about the underlying "strength" of the data from the "sufficient rationale" wording.

Q: The company historically has maintained an estimated 12M time for the control arm PFS. Having gone through the interim, has the company adjusted this internal working assumption?
A: Dr. Borys re-confirmed, yet again, that he and the company stand by a 12M expectation for the control arm, even after having gone through the interim analysis. Of course, the company does not have access to any unblinded data, so to confirm, these are expectations from historical data. As I pointed out in my article, many of the models I have seen point to a median PFS time for the pooled data in the mid 20's (months). If the control arm is indeed at 12M, then it might very well be that the PFS threshold was hit at the interim, but some other factor (perhaps establishing a clear OS trend) was missing to prevent an early unblinding. I am speculating here. All I can confirm is the company still firmly stands by a 12M expectation for the control arm.

Q: What is the proposed timeline for modifying the SPA with the FDA? Has the company initiated this process already?
A: Very bluntly, Jeff mentioned that the company would announce anything involving the potential SPA amendment and interaction with the FDA. I completely understand that.

Q: What is the status of the ABLATE study? The trial has been on since early November, but no PR as of yet for treated patients.
A: Dr. Borys said the trial was not "delayed" by any means. He said the some patients have been screened already, and we "should not be surprised" to hear a PR for the first treated patient by end of year.

Q: What is the company's expectation for the performance of the control arm in the ABLATE study (local recurrence at 1 year)?
A: After being put on hold for the two to discuss, they were unable to share with me their own internal guidance on this, which was a bit surprising to me. However, I don't take this to mean that they did not want to share this information, rather, my takeaway is that they are still gauging the medical literature to identify precisely their expectations for the control arm. I will eventually put a lot of focus on this issue as ABLATE gets up and running.

Hopefully, investors found this update informative.

I want to conclude by saying I was extremely excited (and beyond humbled) to learn today that Celsion CEO, Michael Tardugno, has accepted to do an interview with me that would be made available to visitors of my blog (hopefully over the next two weeks). (12/7 CORRECTION: My discussion with Mr. Tardugno is not meant to be a formal interview per se. I incorrectly mischaracterized the nature of this upcoming discussion, which will indeed still take place. That said, Mr. Tardugno invited me to send him questions, which I have already done, and he will respond to the ones that he can speak to. Understandably, full disclosure is a top priority for the company, and he made that very clear during my exchange with him) Staring at the stock price just hovering over $2, some might be tempted to think the CEO is doing "damage control" by reaching out to me. I highly doubt that, as the company has always been very transparent and accessible with questions that I have posed to them. This is obviously a much bigger forum, but nonetheless, consistent with how the company reacts to questions from their shareholder base. For that, we should all applaud Celsion management, and Mr. Tardugno.


Saturday, December 3, 2011

The Celsion HEAT Trial Interim Aftermath: Science, Leadership, and Transparency

The return from Thanksgiving break brought upon a whirlwind of news and changes for Celsion, directly and indirectly impacting shareholders, employees, global clinical collaborators, and just about any other stakeholder with an interest in the company. I have waited patiently, trying to digest everything as it happened, before taking an opinion on what has unfolded recently. Needless to say, there has been a lot of news, and understandably, lots of investor confusion and, perhaps, apprehension. I would advise readers right here to take a deep breath; things are not going out of control by any means. It all boils down to three very simple words that I know have been central tenets to this company, and I hope, they remain that way.
  1. Science
  2. Leadership
  3. Transparency
Let's start with the Science, and dive right into the interim analysis. 

Much has been discussed about the outcome of the interim analysis. Well, the DMC formally recommended the trial to continue after a review of 613 patients, with a total of 219 progression-free survival events, a great outcome no matter how you look at it. Absent two small Phase 1 trials with a total of 24 patients and largely incomparable data, this is without a doubt a resounding endorsement that ThermoDox is delivering on its promise, as I have outlined in detail in my prior scientific overview article. The 219 figure was much higher than I thought, but I have gone on record many times saying I was confident that the interim would include >190 events. There seems to be a consensus from the models I have seen that the median PFS time (months) for the entire trial population is in the mid-20's, let's say 24-25. I think we can assume with certainty that the control arm of the trial, a central focus of the articles on my blog, is performing much better than the 12 months management has projected. Had the control arm been 12 months, undoubtedly the DMC would have made a recommendation to halt the trial. 

What we do know, however, is that something has changed significantly in the tone of the company, and I would argue, this speaks to the strength of the data underlying the DMC analysis. Recall as I summarized in the Q3 cc write-up, management was heavily emphasizing that they would not do anything to sully the respect/credibility they have earned from global regulatory agencies in how they have conducted and executed the HEAT trial. The company, in many ways, was speaking to Mangrove Partners' verbiage from their original 13D filing, in which they proposed the company seek a SPA modification to take a "second look" at the data in the event that the interim did not justify a halt. At the time of the 13D, and re-emphasized during the Q3 call, the company all but dismissed such ideas. For the conservatism expressed at the time, I applaud the company.      

Well, if the company's mantra has been adhering to the Special Protocol Assessment (SPA) agreed to between the company and the FDA, we now see a much more drastic change in direction, and it is a great sign I would argue.

From the 11/28/2011 Interim PR:

Celsion also announced today that the DMC, in its review, followed a statistical boundary determined by the Company using the Lan DeMets implementation of the O'Brien-Fleming spending function. This approach allows for the Company to conduct additional interim efficacy analyses prior to final data read-out at 380 PFS events with no increased risk of statistical penalty. The additional analyses may allow for earlier stopping of the study. Additionally, based on its internally modeled estimates of PFS events, Celsion reconfirmed that 380 PFS events are projected to occur in late 2012.

"The DMC's unanimous recommendation is a significant achievement for Celsion based on the most comprehensive review of the HEAT Study to date, including the first-ever review of efficacy results," said Michael H. Tardugno, Celsion's President and Chief Executive Officer. "Critically, we have the potential to realize a successful outcome to the study prior to its planned completion. We are encouraged by what may be sufficient rationale for conducting an additional preplanned efficacy review prior to the 380 events called for in our protocol, and will seek to amend our Special Protocol Assessment Agreement with the FDA accordingly. We thank the DMC for their work and thorough review, and are grateful for the continued support and enthusiasm from the healthcare community, regulators, our investors and our employees."

What is not clear from this PR is whether or not the Lan DeMets implementation was just now introduced, or was this the agreed to protocol in the trial's statistical analysis plan (SAP)? From my understanding, with Lan DeMets, they can conduct as many interim analyses as they would like, but will have to pay an alpha penalty (contrary to what the PR says). What the company needs to elaborate on is, where did the "sufficient rationale" come from? Is that simply a function of using Lan DeMets, or was that a loud and clear endorsement from the DMC that the data is probably very, very close to the boundary? I would think the latter, but this ties into my "transparency" section later on. The summary from this link is quite an interesting read on Lan DeMets, in that it clearly says Lan DeMets is used when the trial is "close to crossing the boundary." I think the PFS data is likely very strong, but just missed the required statistical threshold needed for an interim halt, hence, the sudden change in tone to approach the FDA and modify the SPA to get a second look at the data.

While on the topic of the interim and potential additional looks, if we assume the company hit 219 events in mid-September, and they once again maintain that 380 events would occur in late 2012, let's say, November, that is 14 months away from September. With 380-219 = 161 additional events remaining, divided by 14 months, we get roughly 12 events per month between now and then. That would imply that as we hit mid-December, we should be at around 255 events. If a second look is agreed upon by the FDA, it is very likely that could come at ~300 events, the mid-point between the 219 and 380 for final data. Folks, very realistically, we could have another look at data within 5 months maximum. Mr. Tardugno's quote from above indicates there is a very real chance that the next look could bring the trial to a conclusion. That is certainly a far cry from prior public comments around the first interim analysis, in which a halt was "unlikely."

The interim, for the reasons mentioned above, is a major accomplishment for the company, a critical milestone no doubt. I was surprised by the knee-jerk, "give me my toys now", mentality the market reacted with when the news was released. Of course, if things were only about the interim analysis this past week.


One of the reasons why I have been so attracted to Celsion is my positive impression of management to date. Certainly, the company has made promises on timelines that were at times, borderline ridiculous, starting with enrollment of the HEAT trial (to be fair, many biotechs suffer from the exact same problem). Of course, it hasn't just stopped there, the timing of the interim analysis ("September to "Q4"), IND process for the Philips/HIFU trial, update on the DIGNITY study, and more recently, the ABLATE trial, have all been delayed it seems once again (see my prior article on end of year catalysts). ABLATE, their randomized, Phase 2 trial of ThermoDox in colorectal liver metastases, was supposed to start enrolling upon completion of the HEAT study enrollment, which occurred in August, not a peep from the company on this, and here we are in December. In fact, Mr. Tardugno at the Rodman & Renshaw conference said he is hopeful the ABLATE trial would enroll its first patient by the end of September. You get the drift here.

So, what is my point with all this? Well, with good leadership comes a certain "benefit of the doubt" that supporters are willing to afford the company. Many, including myself, have given the company the benefit of the doubt in many instances. The issue in Japan, for example, is one such area where I strongly backed the company, and gave many reasons for doing so. I have since reached out to the company in several instances asking what potential new trial design they are expecting for the "new" trial their partner, Yakult, will be conducting in Japan, and have heard nothing, and we have received absolutely nothing on any of the recent calls (this ties to my questions outlined for "transparency" below).

Part of the benefit of the doubt discussion also ties into the recent dilutions we have seen. Yes, I understand the company needs funding, as exemplified by 3 financings earlier this year. As their CFO has stated, they touted to raise "at 52 week highs" when the stock was in the 4's, which implies that a raise at 52 week lows can be viewed as none other than sub-par. Well, following the interim analysis, we got exactly that, another dilution, at near 52 week lows. It is beyond me why the company would say at the recent Q3 cc that they have enough cash to last them through all 2012 milestones, and immediately after raise money under what by all accounts, represent sub-optimal terms.

Some of the biggest areas the company will need to laser focus their leadership pertains to a second license deal for ThermoDox (which like the other milestones mentioned above, has been significantly delayed), commercial manufacturing, and initiation of the rolling NDA (let's see if that end of year estimate for that happens). Commercial manufacturing capabilities appear to be progressing well, as 3 registrational batches should be complete by year's end. Depending on the terms of the deal, the NDA is also heavily tied to the 2nd license deal, as their potential big pharma partner would play a strong role in supporting the NDA submission. Make no mistake, completing an NDA is not for the faint of heart, and having a partner handy for that is critical for Celsion (not to point fingers, but Exhibit "A" on that is Delcath).

Admittedly, I was one of many shareholders convinced that the interim analysis would be followed by a second license deal, hence, negating the need for cash since such a deal, depending on its size and scope, would have a considerable upfront cash component. The clearance of the interim removes a significant amount of risk for a potential partner, and as I said above, if the data was "borderline halt", a partner should be all but ready to sign on. In fact, CEO Mr. Tardugno made a very clear reference to this in the Q1 conference call earlier this year, saying, "We're hopeful that following this interim analysis we can find terms that would represent the appropriate basis that would lead to a license. That’s all I’d like to say at this point." Mind you, this second deal has been promised to be completed in 2010, let alone 2011. So yet again, we have another broken promise. Mr. Tardugno has also in the past made many remarks about the importance of credibility for developmental drug companies, and I would respectfully submit to him that repeated broken promises is a sure of way of slowly losing credibility. From my perspective, the "benefit of the doubt" allowance has been entirely exhausted by the company.

While talking about leadership, I think it might be a good time to discuss the recent drama brewing between Celsion and its largest shareholder, Mangrove Partners (related to this mess, I assume, are the company bylaw changes and executive termination agreements that were recently filed as well). As many of you know, I recently interviewed Mangrove Partners' founder, Nathaniel August, and he has never been one to be shy with words. Recall during the Q3 call that Mr. August vehemently tried to put the CEO on the spot to "be accountable" if the study's final data read-out does not occur by the end of 2012. As I would assume there are legal teams looking into this as we speak, I am not going to provide too much commentary here other than to summarize exactly what happened:

  • Mangrove approached the company to participate in the recent direct offering
  • Celsion agreed, but, as outlined in the recent 8-K "proposed as part of the negotiations that Mangrove enter into a customary standstill agreement." This "agreement" submitted by Celsion to Mangrove, to date, has not been released to the public.
  • Mangrove "took the bait", if you will, and in his words from the 13D/A, "I did continue to negotiate to see how far he [CEO] would go"
  • Mangrove ultimately declined to participate in the deal, and sent the Celsion board a scathing letter which, among other things, asked the company to assign two designees of Mangrove Partners to the Board, hire an independent bank to explore all strategic alternatives, set goals for management that carry the potential for termination, and review the actions of management "in their attempt to silence a stockholder."
  • In effect, Mangrove is accusing the company of bribery, in his words, the "basest of actions." From my own personal interactions with Nathaniel August over the past couple days, I can assure you he is genuinely upset.
  • In the 8-K cited above, Celsion rebutted, and specifically made clear that they would not follow any of Mangrove's recommendations.

Now, how all this plays out will be very interesting. On the one hand, Mr. August owns a considerable portion of the company, so the company has to walk a fine line. However, I think it is very clear, from the very first 13D, that Mangrove all along has wanted to play an "active" role in Celsion's day to day operations, suggesting a SPA amendment among other things, well in advance of the interim analysis. Clearly, Mangrove is still interested in the prospects of the company, and this "bribe" accusation certainly does allow him an opportunity to put an even more pressure on the company. Understandably, he has reason to be frustrated with management, as I have mentioned above, I do as well. However, whether or not the "standstill agreement" will be viewed as a "bribe" is yet to be seen. My personal suspicion is that such deals happen all the time in Wall Street, and are tacitly understood by the "players" involved. I also do believe that Celsion management is trying to keep Mangrove Partners at bay as much as possible. 

My primary concern is that this whole mess, and that is the only way to describe it, does not impact the commercialization prospects of ThermoDox. The company owes it to their employees, their global collaborators, physicians, and most importantly, patients. 


The company has prided itself on transparency in the past (they have been very transparent with me, sans a few exceptions in which emails went unanswered), so, this section of the article will simply be a list of questions I am personally asking management to answer and clarify for us all. I will go on the record saying that a few weeks back, I personally reached out to Celsion CEO Michael Tardugno for an interview that would be made available to my blog visitors (I have yet to hear anything back, and understandably, probably won't for a while). In the wake of the Mangrove mess, transparency from the company resurfaces as more important than ever. Whether it's via interview, email, or any other communication method, what is most important is that we get answers to the following questions below, which I know many fellow shareholders have in mind:

  1. When was the Lan DeMets implementation decided upon, and who decided on that (company, DMC, FDA)? Was this part of the original statistical analysis plan (SAP) or was this something newly decided during the interim analysis? Did the DMC make this recommendation?
  2. What exactly does the company mean by "sufficient rationale" to conduct another interim look? Was a second look a specific recommendation made by the DMC on the basis of the strength of the data? Or is this entirely an assumption of the company looking at blinded data?
  3. (12/4 Update) The company historically has maintained an estimated 12M time for the control arm PFS. Having gone through the interim, has the company adjusted this internal working assumption?
  4. What is the proposed timeline for modifying the SPA with the FDA? Has the company initiated this process already?
  5. Will the company PR when a decision is made on the SPA amendment?
  6. Assuming the SPA is amended, when would a second interim took place? Specifically, how many PFS does the company expect would be needed for the second look? 
  7. Would a second interim look be dependent on a particular number of OS, rather than PFS, events? If so, how many events?
  8. How many OS events were in the interim analysis? Clearly, some of the PFS events might be deaths, but OS events are likely to be much lower. 
  9. Where does HEAT enrollment stand today? When does the company expect to complete the planned enrollment in China? When does the company expect 700 patients to be enrolled? Will these events be PR'd?
  10. The company has provided not a single meaningful update on Japan for the past 6 months. Exactly what potential trial design revisions does Celsion expect will be introduced into the separate study of ThermoDox in Japan by Yakult? Is there a possibility for a lower dose of ThermoDox to be tested? The company must have some working internal assumptions about what Yakult is planning.
  11. When exactly is the new trial in Japan set to start?
  12. Where exactly do we stand in potential negotiations with partners for ThermoDox? What specific geographies is the company considering for such a deal, and would it include all future ThermoDox indications? Are there any specific milestones partners are waiting for before signing a deal(s)? Please elaborate with as much detail as possible. 
  13. What is the status of the ABLATE study? The trial has been on since early November, but no PR as of yet for treated patients. 
  14. (12/4 Update) What is the company's expectation for the performance of the control arm in this study (local recurrence at 1 year)?
  15. (12/4 Update) What is the status of the Philips HIFU trial? A recent Rodman & Renshaw analyst report (See Street/Other Stock Coverage Section) put a Q4 2012 timeline for this trial to initiate. How does the company reconcile that with prior estimates that the trial would begin in 2011?
  16. What is the status of the DIGNITY study? Will this be opened up to other cancers or introduced as earlier line therapy?

Concluding Remarks

I apologize for the length of the article, but there was much to be discussed at this juncture. Let me be very clear in that I remain extremely optimistic that the HEAT trial will be a success. In fact, I would place the odds of a successful trial to upwards of 80% at this point. So, the science is absolutely there, as I have argued here, and argued before. What needs to be ensured moving forward is strong, effective leadership, and a commitment to remain as transparent as possible to all stakeholders involved with the company. With the interim cleared, commercialization of ThermoDox is well within reach now. Moving forward, however, management has their work cut out for them, as there remain several, unaccomplished milestones needed to truly transition the company to a potential oncology powerhouse. I look forward to seeing the Celsion story unfold further, and you can bet that I am holding my shares very tightly through the bumpy roads that might be ahead.

As always, please feel free to leave any questions or comments.


Saturday, November 12, 2011

Celsion Q3 Conference Call Write-Up

"I want to open the call with a comment that I have made to a number of stakeholders over the last  months, and that's this: I believe we're really on to something. We stand at the precipice of data from arguably one of the most important trials, if not in oncology, then certainly in liver cancer."

"The interim analysis, such as this one, is not uncommon in large, registrational trials in oncology. A halt for efficacy is, however, uncommon...That said, this is the first assessment of efficacy undertaken in a randomized population for a large study using Thermodox. So, the outcome [of the interim analysis] is certainly difficult for us to predict."

 Michael Tardugno, CEO, during prepared remarks of the 2011 Q3 conference call

Given investor anticipation for the HEAT study interim analysis, I knew going into this call it would be one of the more memorable conference calls conducted by Celsion. To those of you who heard the call live, I think you would agree that indeed, it did turn out that way, particularly due to the lively Q&A session. Before the call, I emailed management many questions surrounding the interim analysis among other things, and I urged them to proactively address the interim analysis process and where they stand in the totality of the process. I'm glad that this issue was addressed in the CEO's prepared remarks. In what was a very informative, yet explosive, call at times, here is my summary of themes from the call, with quotes peppered in throughout:
  • A minimum of 190 PFS has been confirmed in Q3 per the SEC filing, and the interim analysis is still scheduled for Q4. In fact, management mentioned on the call that the DMC meeting date has been scheduled, and upon questioning from Nathaniel August during the Q&A, was understandably reluctant to disclose the exact date. My suspicion is the date of the DMC meeting is scheduled for sometime before the end of this month. 
    • In the Q&A, the company mentioned that at the time of the announcement of complete enrollment of 600 patients in early August, the company was at or near 190 events based on their own internal tracking, not an official count of confirmed cases. The company eventually requested their independent CRO for an official count, with a "cushion." While the exact number was not revealed, I suspect it will be just under 200. 
  • Stopping rules for interim: The company was unable to provide the P value required for a halt, in response to a question from Nathaniel August during the Q&A. The CEO said that for a decision to be made to halt the study, there "must be a strong rationale for doing so. The PFS bar has been set high intentionally to conserve overall survival bar has not been set, but will have to be trending in the right direction. Thermodox toxicity profile again will be evaluated in parallel on a risk-benefit basis, as it has been in previous DMC reviews."
    • The fact that management highlighted there is no specific OS bar set for the interim bodes well for the potential chances of an efficacy halt.  
    • Also, given the previous unanimous DMC recommendations conducted to date, I would think the safety portion of the risk-benefit profile will be heavily in Thermodox' favor. So, clearly, it is all going to come down to efficacy. 
  • Top-line data from 380 events is due "as early as 1 year from now", and this will be accelerated by extending HEAT enrollment to 700 patients, approximately 50 more than the ~650 anticipated from the incremental amount from the extended enrollment ongoing in China.
    • During the exchange with Nathaniel August regarding who would be held responsible if final data is not out by the end of 2012, the CEO clearly stated that their decision to continue enrollment beyond 600, assuming enrollment goes as planned, should provide a benefit in terms of time to final data of 4-6 months based on their internal modeling. 
    • So, I think it is fair to say that if the company did not plan to enroll any more patients beyond the 600, final data would unquestionably bleed into 2013, perhaps as late as middle of 2013. The additional 100 patients should hopefully get us final data 1 year from now. 
  • There are 3 members in the DMC, as revealed by the CEO during the Q&A session. The DMC is supported by a members of their CRO and data management team. "We are fortunate to count among our IDMC members, some of the most respected statisticians and oncologists in the world, faith in their decision is absolute."
  • "Safety, PFS and survival", in other words, the "totality" of the data will be used to make decision by DMC, once again stressed by Dr. Borys, as he has done on previous calls.
    • Dr. Borys also reinforced the strong regulatory agency support the company has with respect to the HEAT trial, echoing Mr. Tardugno's prepared remarks. Implicit in such comments, both by the CEO and by the CMO, is that the company does not want to do anything to risk losing that support, such as unblinding the trial by releasing data without the full blessing of global regulatory agencies. 
  • In response to my question about whether or not the DMC would have to consult with the FDA before an announcement is made in a potential unblinding scenario at the interim, the CEO mentioned that indeed the FDA would have to give their blessing. 
    • It does not sound like there would be too much, if any, back and forth between the DMC and the FDA to make an interim decision. If the DMC recommends to unblind, the company will then consult with the FDA, and immediately issue a PR for that. So, even if the DMC recommends a halt due to overwhelming efficacy, we will not see any data immediately, just a PR saying that the company will consult with the FDA for their final blessing. Regardless, at that point it, would be a formality in my opinion.
  • If a recommendation to continue is made, the company mentioned that they are maintaining their previous guidance that no additional data would be released. However, the CEO mentioned that they would "consult with the DMC in detail" regarding this topic. So, there is still the possibility that we do get some data if a recommendation is made to continue the trial. 
    • A follow-up question during the Q&A, however, muddies the waters a bit. After some back and forth, the company made it seem that they would only receive pooled data (a "4 inch" stack of papers) from the interim analysis, as they have been getting from all the previous DMC meetings done to date looking at safety. 
    • On the topic of a continuation decision, the company reinforced during the Q&A that this would be a meaningful step forward for negotiations with potential licensing partners. In fact, the CEO mentioned that companies might "lose the opportunity" for a potential deal if they are only willing to wait for final data. 
    • In what almost seemed like a Freudian slip, shrewd listeners may have caught something interesting during the call. During the Q&A, a caller asked in many ways what data the company would receive from the DMC's decision, regardless of whether the decision is a halt or not. After going back and forth many times with this caller, here is verbatim what Mr. Tardugno said: "I think we tried to answer how ticklish this is, we are threading a needle here. We want to make sure our commitment to the FDA is maintained, and that's before we unblind the trial that we involve the agency. As we said earlier, that is going to be a matter of discussion with the DMC when we meet them in the near-term." Depending on how you want to look at this, it almost seems implicit that unblinding the trial is squarely on the company's mind (Not to mention, after my own question about FDA involvement in a potential halt scenario, Mr. Tardugno said he and Dr. Borys were just talking about that earlier in the morning). 
  • CEO mentioned that the ABLATE trial is underway at Albert Einstein Medical Center, and a second trial site is nearly complete. The company also mentioned that they intend to establish other trial sites for the ABLATE study, however, how many and in what geographies, was not mentioned.
  • The company provided no real meaningful update on the Philips MRI-HIFU IND for bone mets, just a simple rehash of previous information. However, the company did say that the FDA is still awaiting responses from their partner, Philips, regarding their HIFU system, Sonalleve. 
    • Unfortunately, there was no meaningful update on next steps for the Phase 2 DIGNITY study.
  • Jeff Church mentioned an interesting point that has gone largely unnoticed by many. He specifically mentioned that the company would seek "geographic and indication-specific partnerships", which is certainly news to me. Up until now, it was my assumption that outlicensing terms would largely include every potential Thermodox indication, but it is good to see that they are considering breaking out deals by indication.
  • During Q3, the company met with the EMA pre-advice committee. The company is revising and submitting their briefing book submission, due by the end of this month. A response should be given by year end, the company will PR this event, and their approach forward in Europe. 
  • From a CMC perspective, the first of three registrational batches is being completed in the next two weeks, while the remaining two batches will be done this year. Completion of these batches is critical for regulatory submission, and their scalable manufacturing approach will support 90% + margins at launch, per management. 
    • Celsion intends to expand the number of contract manufacturing organizations to reduce chances of a potential delay in registration, and to give supply chain reassurance to potential partners. 
  • In the Q&A, the company reinforced that they don't see any direct competitive threats in the horizon. Here is one area where I wish the caller would have countered by asking about the potential threat of Nexavar as being studied in the Phase III STORM trial. Aside from TACE + RFA, which by itself is a competitive threat, I would have liked the company to have mentioned that they are keeping adjuvant use of Nexavar in the back of their minds. But, for the most part, competition is very slim in the liver cancer space, particularly in China, where Nexavar is rarely used because of its high price. 
  • Q3 ended with 21.4M in cash. At this point, using 1.7M burn rate / month, the company probably has ~$18M or so in cash.
I have said that I was expecting interim results by the end of October, early November, and I was clearly wrong. I will stick my neck out on a limb once again and say that we should have a DMC decision by the end of November, at the very latest, within the first few days of December. As I have said before , I remain highly enthusiastic regarding the outcome of the HEAT study, whether it happens at the interim or at final data next year.

Lastly, I want to thank management once again for taking my questions during the Q3 call, and for always being highly accessible to shareholders in general. I am certainly intrigued by Thermodox as an asset, but I am even more confident in management's ability to execute and successfully commercialize on its promise.

As always, feel free to leave any questions or comments. 


Sunday, October 16, 2011

Exclusive Interview with Mangrove Partners' Nathaniel August

I am excited to bring my blog visitors an exclusive interview with a very special guest, Mr. Nathaniel August, founder of Mangrove Partners ( As many of you know, Mangrove has recently taken an 8% stake in Celsion over the last few months ( Mr. August was kind enough to answer some questions I had for him (via email). See below for his responses:

Siavoche: Briefly, describe the origins of Mangrove Partners and your investment philosophy?

NA: Mangrove Partners is the Investment Manager for The Mangrove Partners Fund, LP, a limited partnership fund for accredited investors. We focus on an identified set of investment opportunities that we believe are likely to be mispriced because we can get a systematic edge as a result of either information asymmetry or investor behavior. Our portfolio tends to be concentrated in our top ideas and to have relatively little market exposure as a result of our short investments.

Siavoche: When was the first time Celsion Corporation “popped on your radar”, and what immediately caught your interest in the company?

NA: We began researching Celsion in May of this year after we purchased a large position in Oncothyreon. At the time, we had been introduced by some good friends to the Oncothyreon investment thesis, which is, in essence, that you can make an educated investment in the outcome of an event-based clinical trial if you know when people are enrolled in the trial and the number of events needed to stop the trial. This information can tell you about the behavior of the entire trial population. Since the behavior of the trial as a whole is just the sum of the control and treatment arms, if you can calculate the behavior of the trial as a whole and estimate through research the behavior of the control arm then you can solve for the behavior of the treatment arm. This was the essential insight behind the Oncothyreon investment thesis, and we decided to try to broaden it out so that we could look in a systematic fashion for trials where we could apply this analytical framework. Since this framework is crude, we decided to look for companies where we believed that an unusually large difference existed between the control and treatment arms and where a successful trial would have a very large impact relative to the size of the company. By focusing on these qualitative aspects, we felt we could further tilt the expected value of the investment in our favor. Ultimately, we chose to make large investments in Oncothyreon, Aveo, and Celsion on the basis of this framework.

Siavoche: Why do you think the company does not receive more attention from Wall Street (i.e., analyst coverage by big banks), and only recently has caught the attention of more mainstream biopharma journalists (such as Adam Feuerstein)?

NA: I think the company has a chicken and egg problem - Celsion needs to be larger to get attention from Wall Street but it can't grow larger without getting the attention. Most professional investors refuse to invest in microcap companies, yet it's often difficult for a microcap company to even reach small cap size without some results - revenue, earnings, trial outcomes, technological breakthroughs, etc. For Celsion, the Phase 3 data, whenever it comes, has the potential to have that impact. As regards media attention, I think that the media loves to focus on catalysts and events. Since Celsion is close to an event, it has started to get some media attention. If the trial continues to the final endpoint and we have another 2 years to wait, Celsion will probably be orphaned by the media again until we get to within a few months of the readout on the trial.

Siavoche: We know Celsion has gone through somewhat of a metamorphosis since their days as a device company. What are your impressions of the current management team, and the strategic direction outlined by the CEO?

NA: I think the current management team has taken a number of positive steps and are clearly above average relative to most management teams, but they're not perfect. On the positive side, they have conducted what appears to be a well thought out clinical trial, secured an SPA and fast-track status, and have a promising partnership with Philips. On the negative side, I am concerned that they are too conservative with regards to the circumstances under which they will unblind and may be too tied to maintaining the SPA rather than focusing on correctly powering the trial. These concerns drove our three recommendations to management: (1) that they split the endpoints of the trial between PFS and OS and report on PFS while leaving OS blind in the event that PFS is statistically significant at the interim look, (2) that they reduce the number of events to end the trial to 256, and (3) that they report the hazard ratio at the interim look if they choose to continue the trial to 380 events. The response that we received was that our first two requests would invalidate the SPA and that our third request was effectively an unblinding of the trial. We disagree about the importance of an SPA, because we think that the FDA has shown through its actions that it will not be bound to making poor decisions based solely on a SPA. In essence, we think that the SPA is of minimal value - the same trial will fail or succeed on its merits with or without the SPA. As regards our third request, we can point to many examples of companies that have given some results at the interim look, most notably Dendreon.

Siavoche: Mangrove has recently outlined a 65% chance for an interim halt for overwhelming efficacy in the HEAT trial. This obviously clashes with management’s assessment of a halt being “highly unlikely”, though such statements from the company are probably expected to air on the side of conservatism. What specifically makes Mangrove so confident at the upcoming interim look? We also know Griffin Securities just released a note recently on 10/14/11 with an expectation for the trial to continue to 380 events. Please explain your thoughts and why Mangrove has such a starkly different assessment.

NA: Based on some very recent research of ours, we believe that the standard O'Brien-Fleming framework for a single interim look in a single trial calls for a p-value of approximately 0.001. With this as a starting point, we hired a biostatistician to run simulations of the HEAT trial with various different median times to PFS in the control arm, the known enrollment curve, and 190 events in June, July or August, 2011. With these inputs, we could simulate the median PFS in the treatment arm and we could generate 99.9% confidence intervals around this median. We then sensitized these simulations for several different median times to PFS in the control arm. When the confidence interval we generated had a lower bound greater than the median PFS we assumed in the control arm then our simulation showed, by definition, statistical significance at a p-value of 0.001. I am pretty confident that we're going to see success at any median PFS in the control arm at or below 18-months. Unfortunately, this does not mean that the company will unblind, because they have made some comments to investors that they are self-imposing a new requirement that OS also show a "trend." To date, we have been unable to discern how they define a trend in OS. To add further confusion, I have since received some contradictory messages from management, including a recent telephone call where they seemed to backtrack on the need for a trend in OS. All of this leaves me confused, so while I am very positive on the ability to show PFS at a statistically significant level, I am confused on OS requirements and have added a big dose of maybe to my percentages - hence the 65%. As regards Griffin, I have left a message for their analyst and hope to get a call back. I also called the CEO on his office number and somehow accidentally woke him up in Asia - sorry Mike! This is a long way of saying that I don't know what Griffin is basing this assertion on other than maybe just the comments at the recent Rodman and Renshaw conference.

Siavoche: What is Mangrove’s stock price target if the trial is stopped for overwhelming efficacy at the interim analysis? What sales/revenue assumptions are you making? How does your price target, change, if at all, if you include inevitable off-label use in colorectal liver mets?

NA: First of all, I think off-label use in colorectal liver mets will be minimal without a Phase 2b study because it will be too difficult to get reimbursement without this study. We also discount the ability of the company to generate sales in Asia because it has historically been difficult to sell expensive drugs in China, Taiwan, etc and because the Japanese trial sites have been suspended. Accordingly, we look only at US and EU sales for HCC and I think it's conservative to see $150 million of sales in these geographies. At 2x revenue (again conservative), this is $300 million in market cap or about $10 per share after some additional dilution. All of these assumptions are very conservative, but it's a good place to start.

Siavoche: Is it your opinion that the company’s SPA with the FDA will require statistical significance on both primary AND secondary endpoints (namely, overall survival) at the interim for an efficacy halt? In an email exchange I had with Dr. Borys, he gave me the impression that PFS would be the primary driver, but OS would have to look directionally ok, but not necessarily statistically significant.

NA: I believe that the SPA requires statistical significance on only one of the two endpoints. Your email exchange is symptomatic of the mixed messages being sent by the company regarding the necessary conditions to stop the trial at the interim look.

Siavoche: If the DMC makes a recommendation for the trial to continue to 380 events, we know Mangrove believes 380 would not happen until the middle of 2013. On the one hand, a recommendation to continue by the DMC is a blessing that Thermodox is showing efficacy, an important fact given the small size of the Phase 1 data and different endpoint. On the other hand, you and others have brought up dilution concerns. How do you think the market will reconcile these two realities?

NA: My guess is that the market is already pricing in a continuation to 380 events and that this accounts for the ~30% pullback we've seen in the stock. I continue to believe that 380 events will not be reached until the second half of 2013 at the earliest.

Siavoche: In the event the trial continues to 380 events, Mangrove has recommended that Celsion consult with the FDA to reduce the number of events needed for the top-line analysis. I would argue this might put their SPA at risk for invalidation. Do you have any specific analogs (i.e. company examples) where such a change has been made in a late stage trial?

NA: We believe that negotiating with the FDA to reduce the number of events has no impact on the SPA, because the FDA always has the right to simply say that Celsion cannot change the SPA. Personally, I am of the belief that the SPA is of limited value and that SPAs are, in general, overrated because the FDA's final decision will always rest on the merits of the trial and the data as presented - not based on what a company has negotiated for in their SPA. As regards changing the number of events, Oncolytics recently received a SPA for an adaptive trial where the final number of enrolled patients, endpoint, etc will not be known until well after the trial starts. Similarly, Merck KGaA's START trial received a change to its SPA that allowed them to drop some enrolled patients and add others. It's not that uncommon to see changes made to an existing SPA.

Siavoche: We know management is committed to signing a 2nd license deal to commercialize Thermodox, possibly to include all geographies, although the company has signaled they might want to self-commercialize in the US. Please give us your thoughts on the following pertaining to a second deal:

a. Potential partner?

NA: I'm not sure, but for HCC it would need to be someone with very good coverage of emerging markets and Italy (is that redundant? - joke). Maybe Sanofi?

b. Potential geographies covered?

NA: As per the above, the major geographies for HCC are the Asian countries and Italy. I would tend to advise against partnering for colorectal dominated geographies until the phase 2b data is in. I hope this will be a relatively short trial because colorectal mets are so aggressive.

c. Potential deal terms (i.e. upfront payment, royalties), and more specifically, what type of deal terms Mangrove would like to see?

NA: Obviously, I would prefer that the company get as much as possible. It would be nice to get the cash they will need to get to cash flow breakeven from a partner rather than from equity and it would also be nice for the company to preserve the rights to sell where a colorectal indication is likely to be the primary use until there is better colorectal data which they will be able to use for negotiating a partnership in this indication.

Siavoche: What are your thoughts of the HEAT enrollment pause in Japan, and the company’s recent statement that their partner Yakult would be starting an entirely new study of Thermodox in Japan?

NA: The enrollment pause is quite concerning. I'm not sure what effect it will ultimately have, but it will not be positive. The best outcome is that it ends up being irrelevent. A new trial is helpful and, hopefully, any trouble that the company has as a result of the pause can be addressed by this new trial.

Siavoche: How do you interpret the company’s recent relocation to New Jersey?

NA: I think the stated purpose was to help the company recruit salespeople. I am personally skeptical of the ability of any small biotech company to build a salesforce from scratch and would therefore prefer that Celsion partner Thermodox in all geographies, including the United States. The relocation to New Jersey would appear to be a step in the opposite direction and is therefore concerning.

Siavoche: In closing, is there anything else you would like to add? The floor is all yours.

NA: I think that it is important to remember what we can learn from Delcath - both positive and negative. On the positive side, we learned that targeted drug therapies that deliver a potent dose to the liver have a real chance at showing dramatic results. In fact, the Delcath trial had some of the best statistical results I have ever seen. On the negative side, we need to be cautious about the ability of a small company to navigate the process of going from a successful trial to a successful drug. Delcath has not only failed to get FDA approval, but its self-commercialization strategy in Europe is uncertain. So on the one hand Delcath would tell us to be optimistic about the trial results, but on the other hand it, would tell us that there's a lot of potential value a partner can add in both the approval and commercialization stages.

Siavoche: Mr. August, thank you once again for your time. On behalf of all Celsion shareholders, I thank you so much.

NA: You're welcome.

My Assessment/Takeaways

First and foremost, I want to reiterate how grateful I am to Mr. August for taking the time to answer my questions. Clearly, his calendar must be quite busy, so again, I very much appreciate it. Transparency in the investment world means everything, as I am sure you will all agree, and for that, we should applaud Mr. August.

One area where I will have to agree to disagree with Mr. August is with respect to modifying any aspect of the trial to accelerate the timing of the next top-line analysis, assuming there is the need for one after the upcoming interim analysis. I don't know, the FDA has become increasingly unpredictable as of late, and while Mr. August did cite some examples of companies that were able to successfully modify their SPA's, I just don't think Celsion has the necessary size/clout to get such a thing done. On top of that, with the Japan "issue" (or non-issue, depending on how you want to look at it), I would think the rest of the trial needs to be 100% squeaky clean from the agency's vantage point. But, to his point, modifying the statistical analysis plan per his suggestions could mean the difference between waiting an additional 1 year versus 2 years for "final" data. This all the more places the stakes for the interim analysis that much higher.

The other interesting comment Mr. August made was with respect to securing reimbursement for off-label colorectal liver mets use. I happen to disagree here, and as I put on my previous biopharma reimbursement consulting cap, it is actually quite easy to secure off-label use in oncology. To Mr. August's point, you do need some data, fortunately for Celsion, more than half of their Phase 1 patients had secondary liver mets, including colorectal origin. Believe it or not, even that small of a sample is enough to get compendia listing, supporting off-label utilization. And, to add, if Thermodox is working as well as we think it might be in HCC, oncologists and interventional radiologists will be screaming at payers to cover off-label use, so physician pressure will be hard to overcome. To quote many of the managed care respondents I used to interview while I was a consultant, "no insurance company wants to be on the cover of the NY Times for denying access to life-saving cancer drugs." So, if we factor in more aggressive sales assumptions to include off-label CRLM use, I think it is fair to say his $10 target in the event of overwhelming efficacy might very well be conservative. Of note, the CRLM population is primarily in the western world, where Thermodox is likely to have a more aggressive pricing strategy as well. Make no mistake, that [CRLM] is a huge market for Celsion, as I have pointed out before.

In terms of self-commercializing in the US market, and the potential rationale for the company's move to New Jersey as a means of recruiting sales force talent, I have a slightly different view as well. I think Mr. August brings up a fantastic point that many biotechs try to "go it alone" in terms of self-commercializing, only to later on discover how expensive and costly such an endeavor is, and there are several examples. But, in the case of Celsion and liver cancer in the US, I truly think a small, lean, targeted sales force would be sufficient. At most, I would think ~100 reps is all that is needed to target potential high/med prescribers across the country (again, putting on my prior consulting cap and recalling other analog companies aiming to commercialize specialty products. At ~$150K/annually for each with benefits, that still does add up to a cool $15M annual expense). And, within high unmet need oncology therapy areas, the drug and the data ultimately sells itself. HCC is not a crowded space like, say, rheumatoid arthritis. Options are very limited, and Thermodox will stand besides Nexavar and doxorobucin eluting beads (use in TACE) in an otherwise very "empty" space.

Without knowing the details behind the model developed by Mangrove's team, I would also just caution readers that it is very difficult to simulate the HEAT trial, as I am sure Mr. August would agree. My own interactions with other very statistically savvy CLSN investors confirm this as well. There are a lot of things to consider, including:
  • Average time from enrollment to treatment- There could be at least a 2-3 week gap there, since patients are not likely to get treated the second they are enrolled.
  • Review times- Recall that patients come back in for follow-up after months 1,3,5,7,9,12 and then, every 3 months after that. This would have to be accounted for in the model somehow.
  • Percentage of treatment failures in each arm (i.e., the number of patients who could not achieve a complete ablation after 2 attempts within approximately the first month and half)
In closing, I think Mangrove's actions speak very loudly (talk about putting your money where your mouth is). The company has aggressively bought CLSN stock and options in the last couple of months. As Mr. August mentioned, the rationale for doing so is completely hinged on the premise that the interim will lead to a halt for overwhelming efficacy. Mangrove hired a biostatistician to simulate the trial based on publicly available enrollment data, and using sensitivity analyses to approximate the timing of the 190th event (which probably happened anywhere from Jun-early Sep of 2011). According to him, if the control arm comes in anywhere under 18 months, there is a great chance for an efficacy halt, of course, assuming that hitting statistical significance on the primary endpoint is all that is needed (it sounds like conflicting statements from management give him some pause about this issue). Assuming the above model-specific caveats are accounted for in the statistical simulation, we could very well be en route to an early NDA. In terms of the control arm, my own research, as many of you have seen, points to a median PFS time of anywhere from 12-15 months, and I remain extremely confident in that range. On top of that, the company very recently has confirmed their expectations for the control arm to be running at a median of 12 months.

I don't know about you, but I certainly feel the tension in the air as we approach the interim analysis. Exciting times, to say the least.

As always, feel free to leave questions or comments. I will combine any potential questions I receive and try to circle back with Mr. August for responses.


Tuesday, September 20, 2011

Thermodox in HCC: The Science Points to Phase III HEAT Success

With all the confusion over the company deciding/not deciding to issue a PR for the occurrence of 190+ PFS events to trigger the interim analysis, I thought it would be important to re-focus investors' attention on what is, in fact, the most important question as it relates to Celsion and the HEAT trial:

Will Thermodox hit its primary endpoint (33% improvement in PFS-accelerated endpoint, eventually, overall-survival (OS) as well upon realization of 372 deaths) and prove successful in the HEAT study?

Whether this occurs at the interim (due to overwhelming efficacy, unlikely, but still on the table) or at the top-line read-out of 380 PFS events next year this time, I would like to present here my assessment of the scientific basis pointing towards a high probability of success in the HEAT trial. As you will see, much of the basis of my argument revolves around the well-documented patterns/factors associated with local recurrence in HCC, in addition to the proposed mechanism of action for Thermodox.

Rationale for the Trial

There exists a great unmet need in the treatment of liver lesions greater than 3 cm. Few would question the efficacy/safety of radiofrequency ablation for tumors smaller than 3cm. In such cases, local recurrence is not such a significant medical issue, although it still occurs. A consensus in the literature, however, without question, supports the notion that local recurrence is strongly associated with liver lesions greater than 3cm treated with RFA, the population of patients squarely targeted in Celsion's Phase III study. The extent to which the HEAT trial indeed is addressing an area of significant unmet need is no best exemplified by the National Cancer Institute's (NCI) Clinical Trials Planning Meeting (CTPM) designation of the HEAT trial as one of 8 priority trials in HCC in 2010. That, in and of itself, speaks volumes about the importance of this trial, and why the company has maintained that the results of the trial are highly anticipated by the medical community.

In an attempt to address some of these limitations, newer RFA devices/electrodes have been developed that can ablate larger areas of volume, but physician experience with these remains limited, and no large studies have corroborated their clinical utility. Similarly, RFA has been investigated in combination with transarterial chemoembolization (TACE) or bland embolization (TAE), with the rationale being to use TACE to shrink the tumor initially while cutting off blood supply to the lesion, and then using RFA after to ablate a smaller tumor. While this approach has had some success, again, no large-scale randomized trials have been published to definitively validate its clinical role.

Risk Factors for Local Tumor Progression

All of the following (not an exhaustive list) have been identified by a strong body of literature as being related to local tumor progression following RFA (Reference #1, specifically refer to Tables 1 and 2):

Reference #1- Annal Surg- Local Recurrence After Hepatic Radiofrequency Coagulation 2005.pdf
  1. Lesion size >3cm
    • Again, this is squarely the population targeted in the HEAT study, up to a maximum of 7cm.

  2. Percutaneous vs Laparoscopic/Open-Surgical RFA
    • Most patients in the HEAT trial have received percutaneous RFA, reflecting how RFA is done globally as part of today's SOC. Despite the higher chances of local progression with a percutaneous approach, clinicians likely favor it due to its convenience (can be done on outpatient basis) and its better treatment-related complication rates than a laparoscopic or open-surgical approach.

  3. Lack of a 0.5/1.0 cm ablative safety margin
    • Several papers, very recently, have identified that local tumor progression is associated with a lack of safety ablation margin, which essentially is removal of part of the healthy liver tissue surrounding the lesion via RFA. It is in these areas where micrometastases invisible to CT scans at 1 month follow-up can result in recurrence. Interestingly enough, the margins are precisely where Thermodox flexes its muscle. In fact, as I will show below, imaging results to date show the potential of Thermodox to add up to a 1-2 cm rim of heavily concentrated doxorubicin around the targeted lesion.

  4. Proximity to major vessel
    • This results in what is called the "heat sink effect", whereby the presence of a major vessel reduces the likelihood of achieving the clinically required RFA temperature for complete tissue necrosis. Depending on tumor location, heat sink can be a major barrier to overcome using RFA alone, which explains why it is indeed associated with recurrence. However, Thermodox activates at relatively low temperatures (39.5-42 degrees C) that are still attainable in these locations. So, in this instance, Thermodox would not only be working at the periphery, but would also have a greater effect inwards towards the center of the lesion. 
Having discussed the risk factors for local progression, it is important to highlight some nuances in the term "local progression", as the literature has often mixed up true local progression with intrahepatic distant progression. The former would be progression around the area of the ablated tumor, while the latter would be an entirely new lesion that surfaces in a remote location of the liver (see below for more on distant progression). Consistent with point #3 above regarding the use of an ablative safety margin, scores of literature confirm that local progression indeed often occurs right at the periphery of the ablated tumor. Hence, from this, we can postulate with a relatively high level of confidence that local control can be improved by expanding the zone of ablation.

Below, I would point the reader to two studies (Reference #2 and Reference #3) published in well-respected journals that speak to the site and patterns of recurrence, among other things discussed in the papers. Note that the overwhelming proportion of local recurrences are "contiguous" rather than "adjacent", or distant. Also, more importantly, notice that the most common first site of recurrence, is local as well. This is important given the PFS metric in the HEAT study, which captures any and all types of progressions, intra/extrahepatic, and all-cause death. As an aside, this paper once again shows the strong relationship between tumor size and progression, as well as safety margin and progression.

Reference #2- Annal Surg. Onc - Local Recurrence after Lap RFA 1032 tumors Jul 2008.pdf


Consistent with the study above, note in Table 2 of reference #3 that the most common type of local progression is "extrazonal, peripheral, nodular", irrespective of whether or not the tumor type was an HCC or metastases. This also has big implications for the colorectal liver mets study Celsion is planning to initiate. Also of importance, Table 1 shows that more than half of all progressions occur within the first 12 months, with a median of 12 months for HCC and just under 7 months for metastases (colorectal mets in particular are much more aggressive than HCC, more thoughts on this below), and do notice that this study looked at tumors much smaller than those being observed in the HEAT study. Keep this information handy as we discuss expectations for the HEAT trial control arm (RFA alone) below later in the article.

Reference #3- RJR- LTP After RFA of Liver Tumors- Analysis of Morph. Pattern and Site 2007.pdf

Data Collected to Date

At this point, it would seem logical to jump straight to the Thermodox Phase I data, but doing so should only be preceded by a review of studies conducted to date looking at non heat-sensitive liposomal doxorobucin (marketed by J&J as Doxil/Caelyx) in conjunction with RFA. This is clearly not what Doxil is indicated for, but again, referring back to the unmet need of successfully ablating large liver lesions, the medical community has recently examined how the combination of Doxil + RFA could enhance the area of ablation for RFA. This was actually a topic at the most recent World Conference of Interventional Oncology (WCIO) meeting (Reference #4). The reader is probably wondering how and why a non heat-sensitive liposome could possibly enhance the zone of ablation with RFA? The reasons for this synergistic effect boil down to the following:

  1. Hyperthermia increases the porosity of tumors, enhancing liposome extravastion into tumor interstitium

  2. Cellular stress through the production of oxidative nitrative lipid, DNA, and protein damage

  3. Increased cell apoptosis
Refer to the following papers and presentations from my blog which support this synergistic potential. In reference #4, take special notice of the imaging results of RFA + non heat-sensitive liposomal doxorubicin. In reference #5, examine table 2 and look at the % increase in ablation volume with RFA + Doxil. As expected and seen in many prior Celsion company presentations, the ablation volume significantly decreases with RFA alone as time progresses.

Reference #6 is an interesting one, and I am compelled to include it here out of academic honesty. While focused on much smaller lesions, this small study did not show any impact on progression by adding Doxil to RFA, and more oddly, did not show any increase in ablation zone. It does stand out as somewhat of an anomaly in terms of the effect on ablation size with liposomal doxorobucin.

Reference #4- WCIO 2011 Presentation (Note the imaging results of RFA + non-heat sensitive liposomal doxorubucin)

Reference #5- AJR- RFA of Hepatic Tumors- Increased Tumor Dest, with Adj. Lip Dox 2002.pdf

Reference #6- Hepatol. Int. - RFA of Small HCC with intravenous peg lip dox 2011.pdf

So, the takeaway here is that normally, RFA alone results in a reduced size of ablation zone as time progresses (clearly noticeable via CT at 1 month scan), while the addition of non-heat sensitive liposomal doxorubicin generally leads to an enhanced area of ablation (with the exception of what was seen in Reference #6). In fact, so compelling is this information that experts in the academic community have recently suggested that a large randomized trial be conducted to evaluate RFA + non-heat sensitive for large liver tumors (Reference #7, Oddly enough, though the author was talking about RFA + Doxil rather than RFA + heat-sensitive liposome trials, he does not bother mentioning the late-stage HEAT study underway).

Reference #7- Radiology- Trials and RFA plus liposomal dox - 2010.pdf

One could hypothesize that RFA + Doxil would prove superior to RFA alone in a large-scale, randomized trial such as Celsion's HEAT study. Remember, we are talking about a liposome that was not even designed to be used in this manner, and one that does not have the unique characteristics of Thermodox that is designed to result in rapid intratumoral drug release in very high concentrations. Also, I don't believe there are any plans to initiate such a large study for Doxil + RFA, so the sheer level of evidence will clearly be in favor of Thermodox + RFA when the HEAT trial is complete.

Enter Thermodox: MOA and Results to Date
I won't go into much detail around what Thermodox actually is (I presume most are familiar with the basic technology), but as many of you know, it is a heat-sensitive, liposomal formulation of doxorobucin. The liposomes are technically much different than Doxil, even without the heat sensitivity aspects (Thermodox has a shorter half-life, among other things). Thermodox releases its payload of free doxorubicin only upon the application of locally applied heat, ideally, between 39.5-42 degrees Celsius. Thermodox is given as a simple intravenous (IV) solution 30 minutes before the application of heat, and as a function of the leaky vasculature of tumors, Thermodox nanoparticles (100nm in size) aggregate within the site of the tumor. This tumor liposome aggregation effect is especially pronounced in the liver. The following temperature gradient image taken from one of the references below shows one common type of RF electrode and the spectrum of temperature surrounding the centrally coagulated lesion area. In the 40-45 degree band below, that is where Thermodox would kick in. This is important, since we know from the papers above that local recurrence almost always occurs right at the periphery of the originally ablated tumor, and we also know that an ablative safety margin has been associated with less recurrence (still doesn't get rid of it entirely, since achieving an optimal margin under current imaging guidance is very challenging).

Cool-tip RFA Electrode Ablation Temperature Spectrum 

Before moving on to the actual data from the Phase I trial, to tie together exactly how Thermodox works, I would highly recommend the reader to view the following video from the inventor of the low temperature-sensitive liposome technology, Dr. David Needham from Duke University (lengthy, but a nice overview).


Thermodox Phase I Trial
The Phase I trial of 24 patients for Thermodox is not quite an apples to apples comparison to the HEAT trial. I will quickly point out some of the key differences:
  1. Endpoint- Phase I trial endpoint was "treatment failure", operationally defined as disease progression (TTP) and/or initiation of a new therapy. The Phase III trial primary endpoint is progression-free survival (PFS), a broader/more sensitive metric that encompasses local/distant/extrahepatic progression, as well as all-cause death.
  2. Patient Population- The Phase I was an "all comers" trial. A total of 9 patients had HCC, 15 had metastatic liver tumors from various sites. Generally, colorectal liver mets are the most aggressive from what I have seen (worse than HCC), while neuroendocrine mets are the least aggressive. (On a separate note, it is for this reason that I also perceive the fact that Celsion is initiating a randomized PII colorectal liver mets trial before having HEAT results in hand, as a nice sign of confidence.)

With all that said, the following article (Reference #8), recently published in Future Oncology by Celsion's Chief Medical Officer and one of the HEAT trial lead investigators (Dr. Ronnie Poon) presents a fantastic overview of the results. In my opinion, the most important point to take away from the trial is the strong dose response relationship seen up to the 50mg/m2 MTD. Overall, across all patients, TTF at the >=50mg/m2 dose was 374 days, while it was 80 days for those treated at <=50mg/m2 dose, again, suggestive of clinical activity and strong dose response. Of note, in the Phase 1 trial, there were 4 patients with tumors >5cm, 2 treated at <50mg/m2 (treatment failure at 25 and 93 days) and 2 >50mg/m2 (treatment failure at 261 and 374 days).  In terms of safety, the profile of Thermodox was consistent with that of regular doxorubicin.

Reference #8- Future Onc. - LTLD Adjuvant to Increase RFA Cure Rate- 2011.pdf
Imaging studies from the Phase I data (Reference #9) also tell a compelling story. After all, imaging studies (dynamic CT) will be telling the entire story in terms of identifying progression in the HEAT trial. Keep in mind the imaging studies I referenced above in regards to RFA + non-heat sensitive liposomal doxorubicin as you view this. Note that similar to that seen with RFA + non-heat sensitive liposomal doxorubicin, the area of ablation significantly expands following RFA + Thermodox, while again, the area of ablation for RFA alone clearly contracts within the first month. Take special note of this on slide 20, as well as slide 23, which shows a 1cm and 2cm drug "rim" at 28 days post-ablation

Reference #9- Imaging Features in RFA + Heat Nanoparticles.pdf

So, similar to the RFA + Doxil (non heat-sensitive liposomal doxorubicin), we see an enlarged ablation area with Thermodox, and this is precisely what we would expect given the synergistic effect many have hypothesized exists between RFA and liposomal dox in general. Of course, I did not highlight one very important difference between the two types of liposomal doxorubicin: With Thermodox, there is rapid, intratumoral release of doxorobucin at ~10x the dose as one would expect from regular systemic administration of regular dox (pay close attention to the video with Dr. Needham, above). Coupled with the well-documented high rates of progression seen in larger tumors, the relationship between treating the tumor margins and progression, and imaging results of liposomal dox + RFA (both Doxil and Thermodox), we can now piece together precisely why there is so much enthusiasm heading into the interim analysis of the 600 patient Phase III HEAT trial.

Summary and Key Factors to Be Aware of in the HEAT Trial

I think it is very safe to say that there is a lot of "activity" taking place within the treatment paradigm for HCC, particularly as it relates to intermediate and advanced disease. Ultimately, considering where the current standard of care is with respect to intermediate stage HCC and the documented unmet needs in treatment, I strongly believe a unique window of opportunity exists for Thermodox, with obvious clear competitive implications as well. Without question, there is a strong desire today within the interventional radiology community to overcome some of the very real limitations of RFA for larger sized liver lesions. Thermodox, given its minimal impact on the current standard of care (30 minute IV before RFA) and elegance with which it is expected to significantly extend the reach of RFA, could prove to be a major advancement in the treatment of HCC. Make no mistake, the HEAT study is squarely designed to address a significant unmet need.

Timing is quite important here for Celsion, and this relates back to the current standard of care undergoing a period of evolution, as I mentioned above. While this is not meant to be an exhaustive overview of competitive threats, here are some below that might be competitive with RFA + Thermodox in the future, or in other words, where the standard of care might evolve to in the future. Again, I posit that Celsion's Phase III HEAT study is being executed at just the right time, while there is still much ambiguity in the treatment paradigm, and with potential data coming out of the trial much earlier than many of the discussed treatment modalities below. Given the robustness of the HEAT study, a successful trial would in effect add significant clarity to a very ambiguous treatment paradigm for HCC.

  • RFA + TACE- A fair amount of evidence shows significant promise for RFA + TACE, as well as more novel forms such as RFA + DEB-TACE (doxorobucin-eluting beads). However, no large studies such as the HEAT trial exist to firmly establish this treatment as a "gold standard" approach, particularly since there remains much debate over the timing of when TACE should be done relative to RFA, and the added morbidity presented by adding another inherently complicated procedure such as TACE. Also, I posed this question to management during a prior conference call, and Celsion CMO Dr. Borys made it quite clear that Thermodox as an RFA adjuvant could quite easily complement any combination approaches with TACE anyways.

  • RFA + Sorafenib (Phase III STORM Trial)- I am unclear when data from this trial is expected to be released by Bayer/Onyxx, but I don't think it will be coming before top-line results from the HEAT study. Either way, given Sorafenib's established position in the advanced HCC market, this could prove to be a viable threat to Thermodox as an adjuvant to RFA. On the other hand, Sorafenib is very expensive, and thus, has really had limited success in the area of the world most afflicted with HCC, such as China. Also, similar to TACE, nothing precludes the use of Thermodox as part of triple therapy here.

  • Newer RFA Devices (Multiple Probes)- RFA devices will continue to evolve on their own, as manufacturers make incremental improvements to expand an even greater area of ablation (particularly under percutaneous application). This is still very much evolving (see Reference #10 below). 5 years from now, such devices may be part of the "standard of care", but it certainly is not there yet. The same can be said about RFA + TACE for example. Without Thermodox, 5-8 years from now, the "standard of care" for intermediate HCC might have been RFA + TACE.  The fact is, we are not 5-8 years from now, and I once again highlight how opportune this period is for Celsion and Thermodox from a sheer timing perspective.  
Reference #10- Exp Rev Devices- RFA-Going Multipolar- 2011.pdf

Things to Watch Out For in the HEAT Study

  1. Distant Intrahepatic Progression- I have discussed this before in another thread ( and it is worth pointing out once again, that as a function of the trial's PFS endpoint, distant intrahepatic progression will be captured and counted against both arms of the trial. One expects Thermodox to primarily flex its muscle locally, within the area of the ablated tumor(s), and while I have seen some reports illustrating the relationship between local progression and distant spread, it remains to be seen how Thermodox will impact such progression. It's ability to do so (i.e. prevent some intrahepatic distant spread), in my opinion, could mean the difference between overwhelming efficacy leading to an early NDA at the interim, versus having to wait for top-line data next year. Make no mistake, there will be distant intrahepatic spread in the trial, though one expects local spread to be the most common first site of recurrence.

  2. Protocol Standardization Regarding an Ablative Safety Margin- I have called investor relations regarding whether or not the HEAT trial specifies a protocol for obtaining, for example, a 0.5cm or 1.0cm area of safety margin in the trial, or whether or not this decision is deferred to each of the trial sites. I am yet to hear an answer back from them. While there is a pretty clear relationship between such a safety margin and progression as I have discussed, this is still a fairly "hot" area of research in terms of the ideal margin. I would not be surprised if this decision was deferred to the participating trial sites, particularly since the choice of RFA device (with some broad guidance, of course) and type of procedure (open, laparoscopic, percutaneous) were left open-ended to the respective investigators. Not standardizing a 0.5cm or 1.0cm safety margin, in my opinion, is likely to favor Thermodox.

  3. Control Arm Performance- There has been some debate over exactly what the control arm will look like in the HEAT study but I think it is fair to say there is no reason to think it will significantly deviate from what has been reported in the literature to date. Management has maintained an estimated 12 month median progression-free survival time for the control arm. I would caution the reader that few, if any papers, in the literature look at true progression-free survival as defined in the HEAT study, and thus, finding apples to apples comparisons has been challenging. Either way, I truly do concur with the approximate 12 month estimate management has publicly maintained, though I think the RFA-only arm in the HEAT study might be doing slightly better than that. Historically, percutaneous RFA is associated with higher rates of recurrence holding other factors constant, and we know that the overwhelming majority of patients in the HEAT study received RFA in this manner as well. The above-mentioned "safety margin" issue, for example, could impact how the control arm will look in the HEAT study. Lastly, some recent literature has pointed to newer multipolar RFA (discussed above) as being able to achieve a much larger ablation compared to older RFA probes. The data is still very preliminary, and I highly doubt investigators have enough experience using multipolar RFA such that it would be employed regularly in the HEAT study globally. Thus, I would expect recurrence, both local and distant, to be on the higher end of what is reported in recent literature.

    Having identified some of the factors that might impact the performance of the control arm in the HEAT study, below is an adapted image from Figure 1 of Reference #11 of what I believe the Kaplan-Meier progression-free survival curve will look like for the RFA-only arm. Keep in mind that PFS is a broad measure, capturing local progression, distant intrahepatic progression, extrahepatic progression, and death. With respect to Reference #11, disease-free survival (as defined by the authors) is an excellent surrogate for PFS, thus enhancing the utility of this reference. While the average lesion size is smaller than what we should expect in the HEAT study (in fact, this study did not find a difference in DFS by lesion size, interestingly), at 3.8cm, and laparoscopic RFA was employed, the study took place from 1997-2006. On the one hand, one could say that there have been some incremental technical improvements that might have been employed since the inception of the HEAT study in 2008. Yet, on the other hand, the study in Reference #11 used all laparoscopic RFA (in contrast to the HEAT study's predominant percutaneous focus), and the HEAT study is likely to have larger, more advanced HCC lesions in general. All in all, accounting for some of these differences, and after a brief email exchange with one of the authors of the study (Dr. Berber), my own assessment is that the original DFS curve from that study remains a solid reference from which one could estimate the outcomes in the control arm of the HEAT study. The flattening of the curve after roughly 2 years is squarely in line with what I have seen in the literature, particularly as it relates to local progression.

  4. Sensitivity of Identifying Recurrence via CT Scans- Much of the variability in the literature regarding local progression rates following RFA, in my opinion, can be attributable to variations in how scans are interpreted. I cannot underscore this issue enough, as there exists today some debate about what actually comprises "progression." Obviously, this is standardized in the HEAT study, but the sensitivity of how the reviewers are judging progression will play a big role in PFS determination between both arms. I am just putting this somewhat random piece of information out there for you to consider. (Look no further than slides 4-9 from this very recent 2011 presentation made at WCIO from an earlier blog post to see what I am talking about:
Reference #11- HPB- Lap RFA of HCC long-term follow-up 2008.pdf

Estimated PFS Curve (Adapted from N. Ballem et al.)

For as long as this article is, I likely omitted some other tangentially related topics. However, hopefully this article provides a solid overview of some of the salient issues to think about from a scientific perspective as it relates to the HEAT trial, while outlining some of the reasons why I remain highly confident in the success of Celsion's HEAT study. On the topic of what we should expect in the upcoming interim analysis, I will refrain from making any speculation, for example, by using the estimated control arm PFS curve from above and approximating the timing of the 190th event. As Dr. Borys has reiterated many times, the DMC will take into account the totality of the Thermodox risk-benefit profile in making their recommendation. With that said, a quick glance at the expected PFS curve for the control arm, coupled with the historic enrollment rates in the HEAT trial, gives me confidence that Thermodox is tracking well.

As I have also stressed many times, success in the HEAT study is, ultimately, validation for the entire LTSL platform. Given the significant near-term liver (HCC, CRLM) commercial opportunities and pipeline potential, much is at stake in terms of shareholder value. Of course, even more is at stake for potential future patients.

As always, I look forward to any feedback or comments you might have. Thank you.


*I would like to thank long-time cancer-cause advocate and LTSL-proponent Mitch Landgraf for editing this article.