Tuesday, November 13, 2012

"We have never been so well positioned"— Michael Tardugno, Celsion Q3 conference call

While I was unable to listen live and participate in the Q3 conference call, after listening to the replay, I was extremely impressed with the tone and confidence exuded by management during the call. Of course, most investors already received the news they wanted to hear in the press release last Friday (380 realized, or projected to be realized, and data due in January), still, the company provided updates on a few fronts worth noting. For the most part, yesterday's call was a strong reiteration of many of the things management has said before.

A transcript from Seeking Alpha can be found here, but note that there are some egregious mistakes made throughout the transcript. As an example, in some places, Greg Weaver's name is used in place of Dr. Borys, so please re-read this carefully. Even better, I encourage you to listen to the replay, linked here.
  • CEO described ThermoDox as a drug that could potentially "extend life and perhaps provide a cure" for those with HCC. The "C" word is not one to be used lightly, so those are some pretty strong words. That said, bulls shouldn't get too excited over this, since RFA by itself is meant to be a "curative" treatment. We know most patients will recur even with ThermoDox, so it is really a question of how long progression is delayed. Remember, HCC is the result of underlying liver disease, the manifestation of which is in a lesion. 
  • Regulatory support for ThermoDox and the HEAT study again strongly re-emphasized...per the CEO, "they [regulators] get it."
  • Re-affirmation that it is the company's expectation that the control arm in the HEAT study will have a 12 month median PFS time, and OS ~30M. Per the CEO, "outcome statistics have remained constant since we began research in HCC over 6 years ago." The expectations of the performance of the control arm will forever be debated until top-line data is finally released, but management has never once qualified or stepped back from that 12 month number. For what it is worth, I personally think PFS will come in around 15-16 months, with OS up closer towards 40 months. As some of you know, many (including Mangrove Partners' Nathaniel August and several others) have tried "modeling" the HEAT study using enrollment data and events recorded at the interim analysis date and now for 380. According to some, if the control arm is truly 12 months, the separation in the curves could be fairly large due to unconfirmed guesses/estimates by many that the pooled median for the entire trial is in the 20-25 month range. I try not to speculate at all in this area (everything is purely just that, speculation based on fancy excel spreadsheets), as it is not an area of expertise of mine nor do I think such models carry much utility given all the variables that need to be accounted for. Sorry for the digression on this point. 
  • Stressed the importance of data quality, exhibited by frequent checks and reviews of data timeliness, concordance/discordance, and audits of their CROs...again, a theme we have heard before from the company, "no surprises." With a radiologic endpoint such as PFS, the importance of data quality is critical. Shareholders can be confident, in my strong opinion, that Dr. Borys and Celsion management have placed data quality as perhaps the highest priority in executing the HEAT study. 
  • Payer/market access research reveals potential pricing is at the "top of the charts" for ThermoDox. "Top of the charts" in my opinion likely means a price $25,000-$50,000 per dose. Being able to speak to this given that I have some background in this area, you can bet that Celsion conducted this market research (through a consultancy) with medical and pharmacy directors from various public and private payers. 
  • Half day meeting (in what was supposed to be a 1 hour meeting) with Chinese sFDA recently conducted. The fact that China will accept an NDA without the need for a reference application is a significant development, make no mistake. This approach in China was largely due to the company's partnership with Hisun, which the company has mentioned before, would afford them regulatory pathway benefits in the country. We are already seeing the fruits of their investment in that partnership (see here and here for good primers on drug approvals in China). Now, I will point out, approval is one thing, reimbursement is another, same as is the case in Europe, so that remains to be seen in China. 
  • In reference to Hisun, while Jeff Church has mentioned before that Hisun has a relationship with Pfizer (this was noted in the Celsion Hisun PR as well), I found it interesting that he also called out their relationship with Eli Lilly, a first if my memory serves me right. 
  • Started the rolling NDA process using a common technical document (CTD). In Q&A, noted that first 2 modules can be filed at the time of top-line data release in January assuming the FDA allows rolling submission (I don't see why this is even a question, should be a given as a function of fast-track). The company expects to file in the US and EMA in same time-frame as previously guided, then China shortly thereafter. 
  • ABLATE is underway in 4 locations, recruitment being limited to preserve cash. Will ramp up after HEAT study.
  • Company will be announcing additional research collaborations for HIFU in combination with ThermoDox...."I can tell you now there will be others", something that has been telegraphed before by the CEO on prior calls as it relates to HIFU research partnerships. 
  • No current plans to raise cash before HEAT topline results. Once again, re-stated several times. I have been telling many publicly that it was my firm belief the company would not raise cash ahead of the top-line data, and this appears to be set in stone at this point. 
  • $22.7M in cash to end the quarter (partly due to $4M from warrants). Company has an additional $5M loan that can be drawn from Oxford assuming a positive HEAT study. Per the CFO, "emphasizes the wise use of cash and cost controls and our ability to make cash and by extension our equity work as hard as possible"
  • HEAT study designed to show statistical and clinical significance per Dr. Borys. With regard to OS, CEO said that "survival trends" might be available at the time of FDA approval, which is expected for end of 2013 at the earliest. Previously, the company said mid-2014 for OS data, perhaps this timeline has changed. Further adding to this, Dr. Borys said they "have very high confidence" in confirming OS assuming assuming positive PFS data, largely a function of the company's strong belief that PFS in the HCC setting is an especially strong predictor of survival. 
  • Philips phase II study to begin in "early 2013". It is worth pointing out in honesty this does represent a slip on management's original timeline to have first patient enrolled by the end of 2012. I'll give them a pass on it, mainly because the fault could be with Philips for all we know, and secondly, because I want their attention on HEAT anyways. 
  • Per the Q&A, priority review will be conditioned upon the outcome of a pre-NDA meeting with the FDA. This is interesting, as management has slightly changed their tone from priority review being a "given" as a function of fast-track, to being "conditioned" on the pre-NDA outcome.
  • Licensing interest remains very high, but management basically reconfirmed that they won't sign any license deals until data is released in January, at which point, the company would be "entertaining multiple term sheets". Its been a while since management has promised a large second deal, but they "expect our [their] patience to pay off" when it's all said and done. I personally think a licensing deal will RAPIDLY follow announcement of top-line results with a major big pharma company seeking aggressive expansion in emerging markets. As I have said before, ThermoDox presents the best of both worlds for big pharma, a very attractive oncology asset in China, and one which will receive considerable off-label attention in the developed regions of the world for CRLM. 
  • Company is definitely considering commercializing the US market on their own, which is nothing new. I think the company will in fact retain the US market for themselves (or do some form of co-marketing agreement as mentioned on the call). 
  • In response to one of the questions posed to management about the extent of data that would be released in the top-line data PR, the company reiterated that they will be seeking publication in a major medical journal, and of course, will be limited in the amount of data they can,or would want to disclose, before peer-review. Expect median PFS times in both arms and a hazard ratio to go along with it, nothing more. 
  • A fellow shareholder (Trond Hildahl, whose name SA butchered on the transcript!) asked a question which danced around a topic I was hoping to ask management re: the number of RFA treatments performed within the first month/month and half following initial treatment. Management simply said that RFA is repeatable, which it is, and ThermoDox does not change that. What Trond's question was getting it is the number of RFA treatments necessary to achieve technical success, or an initial complete ablation. I will boldly predict that there will be some significant differences here between the 3-5 and 5-7cm lesions in BOTH arms in terms of technical success, while I expect ThermoDox to slightly improve complete ablation rates. The 3-5cm group will likely have an 80% complete ablation rate after 1 treatment, and that number will go up to ~95% following the second treatment to achieve a complete ablation within that first month and half per protocol. I expect the ThermoDox arm might achieve closer to 97-98% complete ablation rates in the 3-5cm group. The balance of these patients are considered treatment failures, and immediately have PFS events at time = 0. The 5-7cm group will likely have a 65% complete ablation rate initially, and this number will likely go as high as 80-85% in the control arm with the second treatment per protocol, again, with the balance being immediate treatment failures. So, yes, between 15 and 20% of control arm patients in the 5-7cm will immediately event at time = 0 in my opinion. In the ThermoDox arm, I would be really happy to see complete ablation rates ~90% in this cohort after 2 initial attempts. By the way, these numbers were not just pulled out of thin air, please review for yourself some of the literature on my blog for support of this.
    So, that gets at Trond's question. My question is including both these initial treatments to achieve technical success, how many RFA's are patients receiving POST-PROGRESSION in both arms? Again, this becomes a critical, critical driver in the derivation of revenue estimates for ThermoDox, and one that all analysts have overlooked for some reason. While I want management to speak to this for the HEAT study in particular themselves, I would expect patients receive at least 2-3 RFAs during their entire course of treatment, some as many as 5 or 6 in total. Keep in mind, not all patients will remain eligible for curative treatments such as RFA following progression, some immediately would go to TACE or Nexavar. The specific patterns of progression exhibited in each arm is something I anxiously await to see in the full data set presented for publication. 
I definitely digressed more than usual here, but hopefully it was helpful in some ways. I also had some questions that I was hoping to get answered on the call yesterday (like the average # RFA question above), and to that end, I have reached to management to see if they could give me 15-20 minutes to discuss some of the questions I posted. Should I get that opportunity, I will update this post with what I hear. 

After a lot thinking, researching, interacting with other shareholders, physicians, Celsion management, questioning my own thoughts, and actively soliciting opposing views, I continue to come to the same conclusion when it is all said and done: Celsion will unveil a new standard of care for 1st line intermediate HCC come January. 


Friday, November 9, 2012

UPDATED- Celsion Pleasantly Surprises Investors with 380+ PFS Event Confirmation, Final Data Targeted for January. Griffin Securities Reiterates $18 PT

Needless to say, today's PR was quite a surprise and I think the market liked what they heard. I don't have much to say here other than to re-post the PR and highlight some key areas for investors. This is significant since I was under the strong impression that management had no intentions of PR'ing the 380+, exactly as they did prior to the interim analysis last November. You can bet the final number of events will be well over 380 just to be extra safe, I would count on 400 events or so being the final count.

My own takeaways from the PR:
  1. Management listens to investors, I have said this before as well. I can bet this is not necessarily what they wanted to do (who knows, maybe they had intentions of under-promising and over-delivering on this topic as well, as they have been doing for much of 2012 to be honest), but they knew it would be received well by the investor community. 
  2. The company absolutely will not be raising money, period. For a development stage biotech facing life and death here, this is a major, MAJOR sign of confidence. HEAT failure means bankruptcy before the end of 2013. If they wanted to, management could have easily issued 10M shares when the stock was 5 or 6, and had plenty of cushion for several years to come. The fact that they did not, in my humble opinion, speaks volumes about their own sense of confidence in the HEAT study, and reaffirms that they are actively keeping in mind delivering maximum value to shareholders.
  3. Data will be out in January, plain and simple. It's very possible data could be out before opex (10 weeks from now takes us right to op ex), but that is pushing it given the holidays, etc. Of note, the PR did say that they "project" that 380+ has been realized, so it is very likely this has not yet been confirmed per se, but that is likely a formality at this point. 
From today's PR (emphasis, colors mine):

LAWRENCEVILLE, NJ--(Marketwire - Nov 9, 2012) - Celsion Corporation ( NASDAQ : CLSN ), a leading oncology drug development company, today announced that it projects that a minimum of 380 events of progression have been realized in the Company's pivotal, Phase III HEAT Study, a multinational, double-blind, placebo-controlled, pivotal study of ThermoDox® in combination with radiofrequency ablation (RFA) for the treatment of hepatocellular carcinoma (HCC), also known as primary liver cancer. According to protocol, 380 events of progression, subject to confirmation by the Study's independent Data Monitoring Committee (DMC), trigger the data collection process, unblinding and final analysis of the results by the DMC. Progression Free Survival (PFS) is the HEAT Study's primary endpoint. The HEAT Study has been granted Special Protocol Assessment by the FDA. Following DMC review, the Company plans to disclose top line results, an announcement that is expected to occur in January 2013.

"The HEAT Study addresses a significant and growing global unmet medical need in oncology, primary liver cancer. With a positive outcome, ThermoDox® will become the most important 1st line therapy for patients with non-resectable disease," said Michael H. Tardugno, Celsion's President and Chief Executive Officer. "The positive implications of this study, for patients and their families, the healthcare community, our investors and employees, cannot be overestimated."

Mr. Tardugno added: "We enter this transformative period from a position of financial strength, having taken ThermoDox® through to pivotal data while maintaining full worldwide rights outside of Japan, a minimal number of shares outstanding and a strong balance sheet." The Company ended the second quarter of 2012 with $24 million in cash, subsequently supplemented by $4.7 million in option and warrant exercises. Celsion also has available to draw an additional $5 million from a $10 million loan facility with Oxford Finance LLC and Horizon Technology Finance Corporation, pending positive data from the Phase III HEAT Study. "Consistent with our previous guidance, we have no plans to raise additional capital before disclosing top line data from the HEAT Study which, if positive, will vastly expand the Company's strategic and financing options."

Just moments after this PR, a note was issued by Keith Markey from Griffin Securities re-affirming their $18 price target on the stock. Now, I have brought this up before, but even though Griffin has the highest price target on the stock, I will boldly say they are most accurately capturing ThermoDox' true valuation compared to the other analysts from Rodman (formerly I suppose at this point), Brean Murray, and Roth Capital. Keep in mind this valuation from Dr. Markey STILL does NOT include any revenue from the RCW indication, but it does include off-label colorectal liver mets revenue. As I have mentioned here, it is my strong belief that off-label use for colorectal liver mets will be a given if the HEAT trial succeeds. Another factor to be aware of, Dr. Markey is being conservative by only assuming one treatment per patient based on an incidence model, and does not reflect that many patients will receive as many as 5 RFAs potentially through their course of treatment (more likely, between 2-3). So, again, while his target price is high, it is still a very realistic one. I thank Keith again for allowing me to post his note here for my blog viewers.

I am excited, and looking forward to Monday's Q3 conference call and the Lazard Conference presentation as well. As mentioned, I will be updating my list of questions for management ahead of the Monday call as well.