Delcath Systems, Inc. (NASDAQ:DCTH) Q3 2023 Earnings Call Transcript

Delcath Systems, Inc. (NASDAQ:DCTH) Q3 2023 Earnings Call Transcript November 13, 2023

Operator: Good day, and welcome to the Delcath Systems Reports Third Quarter Fiscal Year 2023 Financial Results. All participants will be in listen-only mode. [Operator Instructions] After the today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to David Hoffman, General Counsel. Please go ahead, sir.

David Hoffman: Thank you. And once again, welcome to Delcath Systems 2023 third quarter earnings and business update call. With me on the call are Gerard Michel, Chief Executive Officer; Sandra Pennell, Senior Vice President of Finance; Kevin Muir, General Manager, Interventional Oncology; Vojo Vukovic, the Chief Medical Officer; and John Purpura, Chief Operating Officer. I'd like to begin the call by reading the safe harbor statement. This statement is made pursuant to the safe harbor for forward-looking statements described in the Private Securities Litigation Reform Act of 1995. All statements made on this call with the exception of historical facts, may be considered forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.

A shot of vials of experimental medicine made in a biopharmaceutical laboratory.

Although the company believes that expectations and assumptions reflected in these forward-looking statements are reasonable, it makes no assurance that such expectations will prove to have been correct. Actual results may differ materially from those expressed or implied in forward-looking statements due to various risks and uncertainties. For a discussion of such risks and uncertainties, which could cause actual results to differ from those expressed or implied in the forward-looking statements, please see risk factors detailed in the company's annual report on Form 10-K, those contained in subsequently filed quarterly reports on Form 10-Q as well as in other reports that the company files from time to time with the Securities and Exchange Commission.

Any forward-looking statements included in this call are made only as of the date of this call. We do not undertake any obligation to update or supplement any forward-looking statements to reflect subsequent knowledge, events or circumstances. Now I would like to turn the call over to Gerard Michel. Gerard, please proceed.

Gerard Michel: Thank you, everyone for joining today. Since the FDA approval of HEPZATO KIT on August 14 for patients with metastatic uveal melanoma, we have been focused on outreach potential treating sites and building our commercial team in preparation of commercial launch, which is now anticipated for January. While it's taken slightly longer than expected to work with our CMOs to finalize or produce QC released, labeled and packaged melphalan specific to HEPZATO, we have been productively using the time between approval and launch to expand the number of treatment teams that have undergone by doctor training and attended a preceptorship, both of which required before a new treating team can perform their first proctor case.

In HEPZATO KIT FDA approval, we have been encouraged by both the medical oncologists and interventional radiology communities, motivation and stated commitment to incorporate HEPZATO KIT into their practices to treating patients with metastatic uveal melanoma. While we are fielding interest from more than 20 sites, we are primarily focused on a subset of these to ensure that we achieve our planned activation targets throughout the year. In conjunction with the local medical oncologists at each of our target sites, we have been working with the sites interventional radiologists to identify and train HEPZATO KIT treatment teams. In addition to training the treatment teams at each site, we are also working to get HEPZATO KIT approved through the various traditional hospital formulary and value analysis committees, and we have started that process in 13 hospitals.

Currently, we have three EAP sites, Moffitt Cancer Center, Duke University and the University of Tennessee, which are fully trained. They can start treating commercial patients upon the availability of commercial product. In addition, we now have a further four sites, Mayo Clinic, Thomas Jefferson, Ohio State University and Stanford University that have completed the necessary steps to conduct their first commercial treatment under the guidance of a proctor once commercial product is available and formulary and Value Analysis Committee approvals are obtained. Beyond those seven sites, another four sites, UCLA, Providence St. John's, Mass General (ph) and Piedmont Hospital, currently have the preceptorships scheduled in November or December.

In total, we expect at least 10 sites will have completed the required training to treat a commercial case by the end of January, contingent on scheduling a proctor team for that first case and the successful completion of the various Value Analysis Committee processes. Given the need for the first case to be proctored and the required community approvals, I don't expect all of the 11 previously mentioned sites to be actively treating patients in the first quarter. However, based on interest and progress to date, I am confident that we will achieve at least five active treatment sites sometime in the first quarter, 10 by the end of the second quarter and 15 treating centers by the end of 2024. We expect treatments per site to start out at approximately one per month and end the year at approximately two per month.

Since HEPZATO KIT is a liver-directed interventional radiology procedure and not an infused drug, we are focused on medical centers as currently mentioned that they currently offer liver-directed therapies for metastatic uveal melanoma patients and currently treat a meaningful number of patients with liver-directed therapy. Noteworthy centers include Thomas Jefferson University led by uveal melanoma oncologist thought-leader, Marlana Orloff; an interventional radiologist, David Eshman (ph), a leader in liver-directed therapy. Thomas Jefferson by far treats the largest number of metastatic uveal melanoma patients in the country. Other [indiscernible] centers include UCLA, we view the melanoma thought-leader of medical oncologist Bartosz Chmielowski and interventional radiologist Sid Padia.

Mayo Clinic with medical oncologist Roxana Dronca and Yiyi Yan, interventional oncologists, Charles Ritchie and [indiscernible]. Moffitt Cancer Center with the FOCUS trial principal investigator John Zagar and Stanford University with medical oncologist Sunil Reddy and interventional radiologists, Gloria Hwang. Since approval, Kevin Muir, Delcath's General Manager of Interventional Oncology has been busy building the commercial organization. Kevin has made a point of bringing on team members that have deep experience in launching complex therapies require multiple stakeholders in the hospital setting. For example, our new Director of Sales, Zac MacLean, comes from Boston Scientific and has over 20 years of experience leading teams in bringing new liver-based interventional procedures to market.

Under Zach's guidance, we have divided the U.S. into four regions. Each of which will be served by a commercial team comprised of a liver-directed therapy representative and two oncology managers. The liver-directed therapy representative will manage the hospital approval process and ensure that the HEPZATO KIT procedure team is trained and supportive while performing the procedure. The oncology managers will engage community-based medical oncologists outside of our treating centers with the goal of building referral networks to the oncologists within the treating centers. In addition, each team will be supported by a clinical specialist who will support the treatment teams in preparation for and during the treatment with the goal of ensuring patient safety and improving patient outcomes.

To ease patient access, Kevin's team has been working with market access consultants to submit the required applications to obtain the C-code, J-Code and NTAP from CMS. Given the nature of HEPZATO KIT, we anticipate all codes and add-on payments to be granted. We are in the final stages of designing a patient access program called HEPZATO KIT Access, designed to assist patients and hospitals in numerous aspects of treatment planning, including prior authorization. We are working with a well-established hub service with significant experience in both ultra-orphan diseases and oncology designed to design and manage this program. We continue to support both internal and external efforts to add to a growing body of evidence that the PHP procedure, whether utilizing melphalan delivered by Delcath’s CHEMOSAT or the HEPZATO KIT is an important treatment option for patients with liver-dominant uveal melanoma.

We recently announced the publication of results from a retrospective comparative study of CHEMOSAT and selective internal radiation or SIRT published from the Journal of Cancers. The independent investigator study from the University Hospital Tubingen, in Germany compared two liver-directed therapies, multiple cycles of SIRT versus two treatments of percutaneous hepatic perfusion of CHEMOSAT in patients with liver-dominant metastatic uveal melanoma. Median overall survival was 301 days for the 34 patients treated with SIRT and 516 days for the 28 patients treated with CHEMOSAT. An adjusted [indiscernible] regression model, there was a significant difference between SIRT and CHEMOSAT with a hazard ratio of 0.32 and associated 95% confidence interval of 0.14 to 0.73 (ph) and a p-value of 0.006.

The overall survival results clearly demonstrate the positive impact of treating liver metastases on patient outcomes with CHEMOSAT. As a reminder, there is an ongoing investigator initiative in randomized Phase II trial in Europe which upon trial, evaluating the effect of adding immunotherapy to CHEMOSAT liver-directed therapy. The trial has enrolled 55 of the planned 76 patients and the investigators expect the trial to be fully enrolled mid-2024. The primary objective of the trial is to determine the efficacy of combination treatment of immunotherapy with ipilimumab and nivolumab with CHEMOSAT treatment versus CHEMOSAT alone, defined by progression-free survival at one year. Secondary objectives include overall survival and overall response rate.

An interim futility analysis conducted in September resulted in the independent data monitoring committee, recommending the continuation of the study without modification. As mentioned earlier, we now expect to start commercializing – to start commercial sales in January 2024. We have been utilized the time between approval and launch to increase the number of trained treating centers and initiating the formulary approval process of numerous institutions. The feedback and progress to date gives us confidence that HEPZATO KIT will become the standard of liver-directed therapy care for metastatic uveal melanoma patients quickly after launch. I will now hand the call over to Sandra to share some details on our financial position. Sandra?

Sandra Pennell: Thank you, Gerard. We ended Q3 with $40.5 million in cash. Cash used in operations was approximately $9.2 million in the third quarter and $23.1 million for the first nine months of the year. The increase in cash is due to the funding received as part of the Tranche A warrants exercise. Specifically, the Tranche A warrants were exercised for $35 million for the equivalent of $7.5 million in common stock. The $35 million should be sufficient to fund the company until another 4.1 million shares of common stock equivalents are issuable at a strike price of $6 as part of the Tranche B warrant without having to issue additional equity capital. The Tranche B warrants would result in $25 million of gross proceeds upon the company achieving $10 million in quarterly revenue.

Current shares outstanding, 22.1 million and 40.5 million on a fully diluted basis. Revenue from our sales of CHEMOSAT was $0.4 million for the three months ended September 30, 2023, compared to $0.9 million for the three months ended September 30, 2022. For the three months ended September 30 this year, R&D expenses were $4.7 million compared to $4.1 million for the three months ended September 30, 2022. The increase is due to activities related to the FDA inspection and other requests in advance of their approval of HEPZATO. For the three months ended September 30, 2023, compared to the same period in 2022, selling, general and administrative expenses have increased from $4.8 million to $6.2 million due to activities to prepare for commercial launch.

That concludes our earnings and business update. And I'd ask the operator to open the line for Q&A. Can you please check for questions?

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