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 alpha...an 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. 

Best,
Siavoche 

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 (http://mangrovepartners.com/). As many of you know, Mangrove has recently taken an 8% stake in Celsion over the last few months (http://celsion.com/secfiling.cfm?filingID=1214659-11-3305). 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.

Best,
Siavoche

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 (http://celsion.blogspot.com/2011/08/perils-of-pfs-as-heat-study-primary.html) 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: http://celsion.blogspot.com/2011/08/from-wcio-2011-highly-relevant.html)

Reference #11- HPB- Lap RFA of HCC long-term follow-up 2008.pdf

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

Wrap-up

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.

Best,
Siavoche

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

Don't Bank on a 190+ PFS Event Press Release

In an effort to get some clarity as to whether or not Celsion would issue a press release confirming a minimum of 190 progression-free survival (PFS) events from their Phase III HEAT trial to formally trigger the interim analysis, I decided to reach out to Celsion IR today.

After a brief (5-10 min max) conversation with Susan from Celsion IR (I would add, she is extremely helpful and knowledgeable, a great asset to Celsion), it sounds like the company is leaning towards not issuing a press release regarding confirmation of 190+ PFS events, formally initiating the approximately 8 week long interim analysis process. I know, this stands contrary to what many of us were thinking, but this also does not surprise me that much since Michael Tardugno, Celsion CEO, was hesitant to firmly say whether or not they would do so. It appears, they have chosen not to, but I want to stress, IR mentioned that they have "not heard plans of doing so" (paraphrasing), and probably thinks they won't, but the company could always turn around and do so anyways.

I countered by asking whether or not this is a material event, just like the 600th patient enrollment, that would need to be PR'd, to which Susan mentioned that companies do not ordinarily report the number of events from their trials, prior to formal data releases. I didn't bring up the fact that I have seen other companies do so ahead of interim analyses, such as Genvec, but her point is well taken. Similar to Keryx, companies often just come out with interim results, and leave it at that. So, I think it is fair enough.

More importantly, IR mentioned that since the interim will be triggered by a minimum of 190 confirmed events, if they issued a PR saying 195 or 200 events have been confirmed, it might raise confusion amongst investors as to the discrepancy between 190 and 195, or 200. In other words, they don't want to have to explain to investors via this PR the difference between when 190 events ACTUALLY happened in the patient population, and when these events were ultimately CONFIRMED. That is what it boils down to.

To tie it all together, I asked the following, "Ok, so is it fair to say the next PR we hear from Celsion regarding the HEAT trial will be the actual interim results?", to which IR responded in the affirmative. And, I would also add, IR made it a point to say September is off the table for the results, and mentioned that it would be "early Q4." I threw out October as a potential time, and IR agreed that is likely a "good guess."

Reading between the lines, here is the vibe I got (I must stress, my own impressions/opinions):

1. 190 events have happened in the population, right now it is squarely about confirmation of the number of events from the company's independent radiology CRO.  
2. In all likelihood, the interim analysis will be based on MORE than 190 events. 
3. Since the interim is expected to take 8 weeks, and since IR thought my October date was a "good guess", I am working under the assumption that the company has indeed received confirmation of 190+ events, and the interim is actively underway as we speak. In other words, we are in the nascent stages of a de facto, potential "run-up" to results.

Take it for what it's worth. For me, this makes no difference one way or another since I am long regardless, and not playing any options. However, I know this might have some implications for many of you, particularly those of you expecting the interim results by the October options expiration date. It will be a close one, in my opinion.

Best of luck, interesting times ahead.

Siavoche

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UPDATE: I spoke with another very helpful IR rep from Celsion today, and he confirmed with little ambiguity the company's intentions of not issuing a PR for the 190+ PFS event confirmation to formally trigger the interim analysis. His reasons were very similar to Susan's, namely, that companies don't often issue such PR's (instead, focusing on the very material interim itself) and that doing so could also be viewed as "celebrating the progression of disease" (I'm paraphrasing, those are my words). In other words, why issue a PR describing patient progressions as a potential milestone.

For investors worried about the company being ambiguous about this, particularly in light of CEO Michael Tardugno overtly not addressing this issue at the recent Rodman & Renshaw presentation, one should objectively ask themselves the following, particularly from the vantage point of CEO:

"What does the company gain by NOT issuing a PR about the 190+ PFS events?"

The answer...absolutely nothing that can benefit them. It does not change the data in the trial, the Q4 timing of the interim analysis, nothing, other than a bit more flexibility in terms of when they actually release the inevitable interim results...in fact, the only possible and most likely reaction would be a negative one from the public, questioning the company's transparency. Obviously, that is not what they desire or want, but they had to know that this would be an inevitable reaction from an investment community that is extremely sensitive about their investments, particularly in this choppy, what's-going-to-happen-tomorrow market. Hence, the company, in my eyes, must have a very good reason for deciding not to do this, especially since they always have been extremely open about PR'ing just about anything and everything related to the company (go ahead, check their PR history http://celsion.com/releases.cfm).

I should reiterate that this is probably one of the most sensitive and delicate periods of interaction between Celsion and their independent Data Monitoring Committee (DMC). From what I have heard from company presentations and other shareholders is that the company has great respect for the DMC, and has bent over backwards to ensure a positive relationship with their DMC throughout the HEAT trial duration. During their last quarterly conference call, the CEO clearly stated that Celsion wants the data to be "actionable" as possible for the DMC. Rather than assuming some nefarious reason for "withholding" information regarding the 190+ PFS events, it might be driven by something as simple as a request from the DMC. After all, once the 190+ clock starts, the pressure really does fall on the DMC. This 'deference for the DMC' theory also implies that if the DMC wanted the company to issue the PR, they most certainly would have done so.

My own personal belief, at this point, is that the decision not to release the PR is probably due to the fact that the company and DMC are probably still unsure exactly how many events will be officially "locked" in to the interim analysis, perhaps because more events are coming in from their CRO. So, in that sense, this is actually a good thing, as the company has a strong incentive to make sure that the data set being used for the interim is as large as possible.

Who knows...but what I think we can and should assume right now, is that the decision not to issue a PR by no means is a reflection of something negative brewing at Celsion, or a desire not to be transparent. My own interactions with the company prove to me that they are unbelievably responsive to their shareholder base, and I appreciate their transparency. As I tweeted to somebody earlier, if we don't see interim data within the Q4 timeline that the company has promised (and mind you, this is a revised data from the earlier 'September' guidance), I will be the very first to scream "red flag" at the top of my lungs. Until then, continue your DD on the company, its technology, the underlying rationale for the HEAT study, and make a firm investment decision that makes you comfortable. With the market volatility on top of the volatility biotechs typically face as they approach a binary event, this is not a period for the faint of heart to be holding the stock. 

What the Rest of 2011 Holds for Celsion

Amidst a volatile US market/economic backdrop, anticipation continues to build for Celsion, particularly leading into the announcement of confirmation of at least 190 progression-free survival (PFS) events from the HEAT study to formally trigger initiation of the interim analysis. Volume has fallen significantly, and the stock has made a modest recovery back over $3, but there remain a lot of potential catalysts between now and the end of the year. As many of you probably already know, I am holding my shares for the long-haul, and do not plan on trading until at least final results of the HEAT study are out, if not, all the way through FDA approval. With that said, investors might see some opportunities surrounding these anticipated 2011 events. I've made an effort to list them chronologically based on my best guess of when they would occur.

1. PR confirming at least 190 PFS events from HEAT trial --> triggers interim analysis
• My guess is this happens very soon, by end of August or early September.
2. Enrollment/treatment of first patient in the Thermodox Phase II colorectal liver mets study (CRLM)
3. Update on the recurrent chest wall breast cancer DIGNITY Phase II study protocol
• In my opinion, a decision to move Thermodox as earlier line therapy, which the company has clearly alluded to, could be pretty significant.
4. Initiation of the Thermodox Phase II prostate cancer bone metastases study with partner, Philips, using MRI-guided High Intensity Focused Ultrasound (MRI-HIFU)
• I recall the company mentioning, along with Philips, they have another meeting with the FDA in September to submit some additional data. Note that Philips' Sonalleve MRI-HIFU device is not yet approved in the US, so that will probably have its own 510k/PMA device application as well, though they are collectively being regulated as a drug-device combination.  
5. The HEAT study interim analysis results, likely due 8 weeks after the 190+ PFS announcement. (my guess, by end of October, early November at the very latest). 
• This is obviously the catalyst many investors are thinking about, and rightfully so. At this point, with a chance for futility being "de minimis" to quote the CEO, I think we can safely assume we are looking at either a continuation to 380 events, or overwhelming efficacy sufficient to justify an early NDA. While the study was designed for the former and that is clearly the likely outcome, speculation is all over the place. I personally give an overwhelming efficacy outcome a likelihood of 20%. If the study continues to 380 events, in all likelihood, top-line results would be out 1 year from now. As another reminder, there will not be actual data revealed if the DMC recommends a continuation to 380 events, so investors need to keep that in mind.
6. Update on the company's carboplatin preclinical research, which, is being spearheaded by the inventor of the company's LTSL platform technology, Duke University's Dr. David Needham.
7. The company also alluded to finally revealing the partner and product behind the "secret" fourth product in the company's pipeline (Thermodox, Docetaxel, Carboplatin being the first three). I have my guesses what this fourth product can be, but I will save that for another post ;-)
8. Completion of a second license deal (the first being Yakult in Japan, see my Japan article) with a major big pharma company. 
• Similar to the HEAT trial enrollment which has lagged behind company estimates for some time, so has the elusive second deal. As a reminder, the company is 100% committed to licensing Thermodox out to a major pharma partner for ex-US geographies, but Celsion is likely considering "going it alone" in the US based on prior statements. Either way, the partner, deal terms, affected geographies, etc., could be game changing for the company. As a reminder, when asked during a cc why this second deal has taken so long, the CEO stated that they are confident a deal will be made following the interim analysis. Outside of a trial halt for early efficacy, a second deal with good terms is probably the biggest catalyst for the company. A fellow poster on the yahoo mb ("Celsiodaat") and knowledgeable investor has insisted for a very long time now the potential partner could be Merck. I happen to strongly agree with that pick for a variety of reasons, not the least of which includes the fact that up until 2010, Merck had international rights to J&J's non-heat sensitive liposomal doxorubicin (Doxil, marketed outside the US in most countries as Caelyx). Between J&J and Merck, Doxil was/is $600-$700M drug. 
9. Tying into a second deal, we should also be hearing about CMC updates for Thermodox as the company gears up for registrational batch manufacturing. 
10. Official guidance from the European Medicines Agency (EMA) regarding Thermodox' filing strategy for the EU.
11. Initiation of rolling NDA for Thermodox.

Yep, there are a lot of things happening outside of just the interim analysis. As a shareholder, I am quite excited at what lies ahead. As always, feel free to leave comments or ask any questions. 

Best,

Siavoche

The Celsion HEAT Study and Japan: Brief Overview

With respect to Celsion and the Phase III HEAT study, one of the questions potential investors/stakeholders might ask (and rightfully so) is the following:

"If things are going so well in the HEAT study, what is going on in Japan and why is the trial paused for enrollment there?"

Again, this is a great question and one that provoked me to coalesce all the facts from the various company conference calls and presentations into a cohesive article. Here is an overview of Celsion, the HEAT study, and Japan, broken into as many discrete facts as possible.

1. For starters, Japan is a indeed a very important and large HCC market, technically, the largest developed country market for HCC in the world. 
2. Celsion partnered with Yakult to develop Thermodox in Japan in mid 2008 (http://celsion.com/releasedetail.cfm?ReleaseID=328465), representing Celsion's first license agreement (later to be amended, see bullet 10 below). Yakult is funding the HEAT trial in Japan, and funds it solely.
3. A near consensus in the literature clearly shows Japan as having one of the slowest drug approval processes in the world, compounded by severe bureaucracy and stringent regulations. This is now a basic starting assumption most pharma companies have in approaching the Japanese market for product commercialization (As one example, Nexavar was approved for HCC in the US in November of 2007, and in Japan in May of 2009).
4. Japan will rarely allow manufacturers to skip to a phase 3 trial without prior clinical study in phase 1/2 studies specific to patients from its own population. Recall that Celsion's Phase 1 studies did not include any Japanese patients. Celsion's/Yakult's ability to jump straight to Phase 3 trial in Japan as part of the HEAT study is, in my opinion, somewhat of an 'innovative' approach, and not usually done. (Read item 3 on page 5 from this overview of conducting trials in Japan from the PMDA: http://www.pmda.go.jp/english/service/pdf/notifications/0928010-e.pdf)
5. In late 2010, the DMC decided to suspend further enrollment in Japan only following a review of safety data from 18 patients enrolled to date at that time (http://celsion.com/releasedetail.cfm?ReleaseID=512752). This was re-recommended in February, as the DMC was still 'pending certain guidance' from the Japanese FDA equivalent, the PMDA (http://celsion.com/releasedetail.cfm?ReleaseID=549437).
6. Dr. Borys mentioned in the Q1 2011 conference call that the hold was neither a 'clinical nor regulatory' hold, but rather, related to differences in standard of care. This was actually first reported by well-respected blogger, G. Chambers from Gekkowire.com (http://www.gekkowire.com/?p=7671). At the 2011 annual shareholders meeting, CEO Michael Tardugno mentioned in detail that the difference in SOC relates to the fact that Japanese patients undergoing RFA in general are often hospitalized for an extended period of time, in contrast to the rest of the world. Thus, Japan has collected an abundance of hospitalizaton-related safety data that appears to be incomparable to the rest of the world.
7. In the now outdated CEO letter from last December (http://celsion.com/letter.cfm), Michael Tardugno clearly states that the Japanese cohort, just like the rest of the world, have safety profiles consistent with the doxorubicin label. This is quite an important point as it pertains to safety.
8. Keep in mind outside of Japan, 582 patients were enrolled in the HEAT study. There have been four (unless I missed a PR) unanimous DMC recommendations to continue enrollment throughout the trial. To the extent that the pause in Japan is related to some kind of safety issue collected as part of routine hospitalization of patients undergoing RFA in Japan, the broader DMC recommendations for 582 patients likely eclipses those concerns (Not to mention, by the way, that recurrent chest wall (RCW) breast cancer patients treated with Thermodox receive 4-6 cycles of Thermodox, in contrast to just 1 in the HEAT study, and the MTD was recently set at 50mg/m2, exactly as in the HEAT study). 
• http://www.celsion.com/releasedetail.cfm?ReleaseID=469443 
• http://www.celsion.com/releasedetail.cfm?ReleaseID=512752 
• http://www.celsion.com/releasedetail.cfm?ReleaseID=549437 
• http://www.celsion.com/releasedetail.cfm?ReleaseID=590333
9. To round out potential safety concerns, in one of the very few instances where a key investigator of the HEAT trial was quoted publicly, Dr. Lencioni, one of the most influential KOLs in the HCC space and lead EU HEAT trial investigator, said there were no safety issues in the HEAT trial. In my opinion, his assessment was a reflection of the trial in its entirety, including Japan. (http://www.medscape.com/viewarticle/739078)
10. In January 2011, Yakult and Celsion agreed to a revised license agreement, whereby Yakult agreed to pay Celsion $2M upfront and $2M when and if enrollment resumes, in exchange for a 40% reduction of approval related milestone payments (http://celsion.com/releasedetail.cfm?ReleaseID=543572). I think one could reasonably conclude from this revised agreement that it represents a strong sign of confidence from Yakult. 
11. The data collected to date from the 18 patients enrolled in Japan will be used in all future trial analyses, including the interim and top-line read-outs. To hit the point home, these 18 patients forever will remain part of the HEAT study (I confirmed this with investor relations via a telephone call June, 2011).
12. Celsion needs 60 patients in Japan to support registration. Since enrollment has completed without Japan, Celsion will pursue patients from Japan above and beyond the 600 to support registration.
13. The current SPA agreed to with the FDA is completely unaffected by any of the above-mentioned issues in Japan, and the company will be able to get approval in the US, China, EU and any other country where they have recruited enough patients for local approval.
14. In the most recent 2011 Q2 conference call, Dr. Borys was quoted as saying: “Now that our HEAT study has met its goal of 600 patients, our partner in Japan, Yakult, is planning to continue an evaluation of Thermodox in Japan in a separate study.” What specific protocol is used, when this next study initiates, or any other details are not yet known, though I am sure we will be hearing from the company in the near future. But, we do know with certainty that Thermodox will be studied in Japan, with full support from their partner, Yakult.

In summary, it is unfortunate that potential approval of Thermodox in Japan (assuming the trial is successful, of course) is now all but guaranteed to be delayed relative to the rest of the world. However, given the unique characteristics of the Japanese regulatory system and the collective, historical experience of several other drug companies seeking to develop and commercialize their products in Japan, it also does not surprise me in the least bit. I'll be sure to provide any future updates on Japan as they materialize.

If you have any comments or if I missed something above, as always, feel free to let me know.

Best,
Siavoche

ThermoDox Reimbursement Deep Dive (Part 1)

As we await the results of the HEAT trial interim analysis, I thought it might be a good idea to shed light on an area often characterized by significant misunderstanding and confusion pertaining to biologics and pharmaceuticals: pricing and reimbursement (P&R). Admittedly, this is an inherently confusing area, and one undergoing significant changes currently, as the Patient Protection and Affordable Care Act (PPACA) contains several provisions directly (e.g. increased mandatory Medicaid rebates) and indirectly (e.g. bundled payment pilots, creation of CMS independent payment advisory board) impacting drug P&R. I would be lying if I said the timing of this multi-part article is a mere coincidence to the recent Dendreon (DNDN) news, in which, among other things, poor reimbursement was blamed by management for the lackluster sales of Provenge. I'm glad to report that in the case of Thermodox, reimbursement should be a lot more straight-forward, although, as I will point out, there are some potentially significant risks Celsion should be aware of as it develops and refines its global pricing and reimbursement strategy.

Make no mistake, all pharma/biotech companies, not just Celsion, need to keep a very close pulse on the reimbursement environment surrounding their products. So integral is this function to the successful commercialization of new drugs that nearly all big drug companies have built, or are in the process of building, internal capabilities (e.g. functional areas such as "Managed Markets", "Global Pricing", etc.) to meet this emerging need.

I should point out a few assumptions/limitations of my article:

1. This article, of course, assumes a successful HEAT trial outcome, which remains yet to be seen.
2. The focus of this article will be for the US, despite the fact that for HCC at least, most Thermodox revenue will come from Ex-US markets, Asia in particular. The reimbursement system is significantly different in the EU (country by country variations make it far from homogenous) and Asia (still evolving in China)
3. Within the US, I will focus on Medicare, despite the fact that private payers will probably also account for a good chunk of patients given the epidemiology of HCC. I would argue, however, that private payers often do adopt Medicare reimbursement guidelines in many instances.

With that said, let's review the reimbursement environment surrounding Thermodox.

It's absolutely fundamental to understand a few important concepts. Drug prices are not regulated in the US (unlike many other developed countries), and thus, manufacturers are free to price drugs as they see fit (some government payers such as Medicaid and the VA are eligible for mandatory discounts, but companies can still price freely). This should not be confused with reimbursement, which is what providers (i.e. physicians, hospitals) are paid by 3rd party payers. There can be, and often is, a significant disconnect between a drugs price and its accompanying reimbursement from a particular payer. Thus, reimbursement can be viewed as a de facto limiter of drug pricing in the US. Second, the site or setting of care is often a critical determinant of how a drug will be reimbursed. In the case of Thermodox, one can think of this in terms of when the drug would be used as part of percutaneous/laparoscopic vs. open-surgical RFA, with the former likely to be done in an outpatient setting, while the latter would most likely be done within the inpatient setting. There are big differences in terms of how Thermodox gets "paid for" in these settings. And lastly, drugs are typically covered by payers under either a patient's medical benefit (typically, physician-administered agents, and this broad bucket includes physician services and hospital care) or the pharmacy benefit (typically orals or self-administered injectables). In all likelihood, Thermodox would be a medical benefit product, just as Doxil is today as well.

Below are some key definitions, along with a fair amount of added color/context for these terms. Several articles I posted under the Payer/Reimbursement-Related  header contain excellent primers to give you an even more in-depth look at these terms and P&R in general, so by no means is this an exhaustive list of relevant terms:

• Wholesale Acquisition Cost (WAC) - This is essentially the manufacturer's sticker or list price, if you will, and is publicly available from vendors such as PriceRx and Medispan.
• Average Wholesale Price (AWP) - Many consultants and industry folks call this "Ain't What's Paid", and I would agree that AWP has completely lost its value as a reimbursement benchmark. This is not an average of anything nor does it reflect actual transaction prices as ASP does (see below). Instead, publishing houses often arbitrarily apply a 20% or 25% mark-up over WAC to arrive at AWP. AWP is still being used by some payers and state Medicaid agencies, but a recent court ruling has put the nail in its coffin and it should be phased out by the end of 2012.   
• Average Sales Price (ASP) - A reimbursement benchmark for Medicare Part B drugs (medical benefit drugs, not to be confused with Medicare's Part D program for pharmacy benefit drugs) that became effective January 2005 as a result of the Medicare Modernization Act (MMA) of 2003. ASP replaced the above-discussed AWP as a reimbursement benchmark under Part B (this is a good example of how private payers copy Medicare, as many have since adopted ASP as well). ASP is based on manufacturer reported actual selling price and units sold data and takes into account most rebates, volume discounts and other price concessions. In contrast to AWP-based reimbursement under Medicare, ASP-based reimbursement has resulted in lower reimbursement to providers (more a function of AWP not reflecting actual drug prices at all), especially to providers who are unable to obtain the volume discounts and recessions built into the ASP calculation. It is updated on a quarterly basis and available to the public via the CMS website. https://www.cms.gov/McrPartBDrugAvgSalesPrice/
• Medicare Part A - Hospital insurance that covers the cost of care in hospitals, skilled nursing facilities, hospice and home health care. Most people do not have premiums for Part A, but patients are subject to annual deductibles and cost-sharing beyond 60 days of hospitalization.
• Medicare Part B - Covers medical services including physician services (including physician administered drugs) and outpatient care.  Under Part B, there is a monthly premium, annual deductible, and 20% coinsurance for all services rendered. However, supplemental insurance often insulates individuals from most cost-sharing under Part B.
• Medicare Severity Diagnosis-Related Group (MS-DRG) - In laymen's terms, this is a flat payment made by Medicare under the Inpatient Prospective Payment System (IPPS) to hospitals for all care related to a particular hospitalization. ICD-9-CM diagnosis and procedure codes determine which MS-DRG will apply, of which there ~750. There can only be one MS-DRG per hospitalization, and the cost of all drugs are included in this payment. So, if the cost of a drug used in the hospital is very high relative to the overall expected DRG, hospitals are going to be much less inclined to use the drug.  
• Ambulatory Payment Classification (APC) - Again, in simple terms, similar to the DRG system, this is Medicare's outpatient equivalent used as part of the Outpatient Prospective Payment System (OPPS). However, Healthcare Common Procedure Coding System (HCPCS) level 1 and 2 codes determine the particular APC that would apply (Level 1 HCPCS = CPT codes, Level 2 HCPCS = J, C, and other codes). Note, there can be multiple APCs per outpatient encounter, and many APCs are specific to particular drugs, known as separately covered outpatient drugs (SCODs). CMS pays for drugs separately in this setting if their daily cost exceeds a threshold of $70, otherwise, they are bundled into their related APC. It is very likely that Thermodox will be separately reimbursed under the OPPS.

From that starting point, refer to the tables below (click table to enlarge) for an overview of Thermodox reimbursement across three distinct sites of care, primarily from the vantage point of the pre-health care reform bill era. Note that reimbursement is very similar in the physician office and hospital outpatient settings. Given its close relationship to Thermodox, I included actual Doxil examples for illustrative purposes only, as well as examples pertinent to radiofrequency ablation (RFA) of the liver.

Table 1 - Hospital Inpatient

Table 2 - Physician Office

Table 3 - Hospital Outpatient

Hopefully, having read the definitions above and my descriptions, the tables above make some sense at least. I have simplified it in many ways, for example, C codes are also used in the hospital outpatient setting for drugs, which I did not mention. In general, notice that I make a fundamental distinction between physician services/hospital payment and drug payments. Given that Thermodox will likely be used primarily in the outpatient setting, reimbursement for the drug will be separate and based on the ASP + benchmark. It will be absolutely critical for Celsion to not only understand how Thermodox would be reimbursed, but to also understand the prevailing reimbursement dynamics surrounding RFA in general. A quick glance at the payment rates, for example, make it very clear that the cost of Thermodox might (yet to be determined by Celsion) exceed the reimbursement cost of an RFA procedure, and this has some variation by the site of care.

The Importance of Coding for Thermodox at Launch

Before moving on to opportunities and risks, I want to point out and clarify a critically important topic as it relates to coding, or lack thereof at launch. The tables above, and real-world J code examples for Doxil (i.e. J9001), for example, reflect a "steady state" situation long after the launch of the product. Similarly, Thermodox will likely NOT have a definitive J code at the outset, but this is not the end of the world.

Until a permanent code is issued, which can take up to one year (perhaps longer), new drugs and biologics must be coded using miscellaneous codes within the physician and hospital outpatient setting (often using J or C codes). For example:

• J9999 is used for new chemotherapy agents in the physician office setting.
• C2399 is used for new chemotherapy agents in the hospital outpatient setting.

Because several drugs might be using these miscellaneous codes, by definition, local Medicare contractors will have to perform a manual billing process, and this will also require additional documentation on the CMS-1500 form (physician office) and UB-04 forms (hospital outpatient). Education by the manufacturer and CMS is required to ensure that these forms are completed appropriately, as incomplete forms are one of the most common reasons for drugs not getting appropriate reimbursement at launch. In terms of timing for payments to providers, Medicare contractors cannot pay electronic claims earlier than 14 days, but no later than 30 (without having to pay interest), and for manual claims, they usually take the full 30 days.

And finally, new drugs are paid differently during this interim period (So, forget about all that ASP + 5% or 6% stuff for the moment). Claims submitted for new drugs from the physician office setting will be paid at WAC + 6%, assuming a WAC has been published. In the outpatient setting, oddly enough, reimbursement is set at 95% of AWP, of course, assuming an AWP has been published as well. Thinking through these surrogate payment benchmarks, this makes sense, since the new product will not have been on the market long enough for CMS to calculate an ASP.

While I do think reimbursement should be relatively clear and easy to obtain for Thermodox, I do want to point out the following risks and opportunities that management should keep in mind:

Opportunities

1. Obtain pass-thru status for the hospital outpatient setting - Celsion will have to be proactive in seeking this status from CMS, although this is by no means a game-changer. Typically, the main criteria for new drugs seeking pass-thru stastus is that the cost of the drug "must not be insignificant in comparison" to the applicable payment rate. Keep in mind that pass-thru status is transitional and eventually is phased out after 2 or 3 years. On the inpatient side, there is an opportunity for hospitals to obtain "add-on" payments for very expensive drugs, but this is rarely done and I will not speak to it much further. 
2. Price Thermodox aggressively - To the extent that Thermodox is not used primarily for hospital inpatients, it is clear that providers have an incentive to often use higher cost drugs on the outpatient side in an ASP + environment (within limit, of course, ask Provenge providers), and absent any restrictions from Medicare, Celsion could price Thermodox relatively aggressively. Note earlier in the article I made a distinction between the pharmacy and medical benefit. Unlike the pharmacy benefit, in which payers can place products on tiers and introduce greater utilization management techniques in the wake of high drug prices, this generally does not occur on the medical benefit to the same degree. Coding differences and logistical challenges make this extremely challenging, and this is a topic outside the scope of this article. 
3. Ensure data is available to justify inevitable off-label decisions made by physicians - Most payers, including Medicare, use widely available compendia (such as by NCCN) to inform potential off-label reimbursement decisions. In fact, Medicare must do so by law, and many states have similar laws that apply to private payers. This will be critical in obtaining coverage for potential utilization of Thermodox outside of HCC, most notably, in  colorectal liver mets and potentially other secondary liver mets. 

Risks/Challenges

1. Assignment of Thermodox to the same J-code as Doxil (J9001) by CMS - This is probably the biggest risk to Thermodox from a pricing perspective, but one that is relatively unlikely. CMS typically does this with drugs considered to be interchangeable, typically, with generics. Recall ASP is a volume weighted average. If CMS assigns Thermodox to J9001, this means that reimbursement will be a blended average of the ASP of both those drugs. Since utilization of Thermodox is likely to be relatively low following launch and ramp up over time, initially, the ASP will be heavily dominated by lower Doxil prices. So, this means that if Celsion priced Thermodox at a 50%-100% premium to Doxil, nobody will stop their pricing, but providers will be taking a bit hit in reimbursement for using Thermodox. Here is where reimbursement becomes the "de facto" limiter of manufacturer pricing, and in such a scenario, Celsion would be forced to price Thermodox similarly to Doxil. While I am digressing a bit, this is precisely one of the biggest sources of contention for biosimilars in the US, and that is, will they receive their own unique J-codes, or be bundled in to their counterpart branded J-codes? Again, I see this as being highly unlikely for Celsion and Thermodox, but it is something to keep in mind. For those wondering, generic Adriamycin or non-liposomal doxorubicin, is billed under J9000, completely separate from Doxil. 
2. Thermodox' value proposition needs to be clearly defined - This goes without say, but Celsion needs to clearly articulate the value of Thermodox to payers in order to avoid potential restrictions. 
3. Local or National Coverage Decisions - In Medicare, reimbursement decisions are typically made by local carriers, fiscal intermediaries, and Medicare Administrative Contractors, or MACs. Ultimately, each contractor at the local level can develop a local coverage decision (LCD) to make payment criteria more stringent. In the case of Thermodox, this might certainly come into play with respect to off-label use in liver mets or recurrent chest wall breast cancer before getting an official label extension via registrational trials, though in oncology, few payers push back on off-label usage. While not done too often, coverage decisions can happen at the national level via a national coverage decision (NCD), at which point, all local carriers would have to follow the NCD. Not all NCDs or LCDs are "restrictive" per se, but again, this should be taken into account. 
4. Bundled oncology payments - This is a concept being piloted by CMS under the recent PPACA bill. Essentially, what such bundles would do is provide a single payment across Medicare Part A and Part B sites of care for an episode of care. So, in contrast to having separate payments in the inpatient setting and separate payments in the outpatient setting, this would create a lump sum that applies to both sites of care. Similar to the DRG system on the inpatient side, you could see how this once again creates a de facto barrier on potential drug pricing. 

Well, I hope you found this article useful. I am sure the reader by now will appreciate how complex drug pricing and reimbursement can be, especially when one considers that I only looked at one payer (albeit, a big one in Medicare) and one country. This will be the first article of a few more to come hopefully, and I am inclined to write one focusing specifically on the Asian markets (though I will have to do some more homework). By the way, many of the references I used for this article, are available on my blog under the reimbursement section.

Thanks again, feel free to leave me your comments or feedback.