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Cell Therapeutics, Inc. (NASDAQ:CTIC)

Q1 2010 Earnings Call

April 28, 2010 8:30 am ET

Executives

James Bianco - Chief Executive Officer

Jack Singer - EVP and Chief Medical Officer

Louis Bianco - Chief Financial Officer

Analysts

Ren Benjamin - Rodman & Renshaw

Operator

Ladies and gentlemen, welcome to the Cell Therapeutics Q1 2010 conference call on the 28th of April 2010. Throughout today's recorded presentation, all parties will be in a listen only mode. After the presentation, there will be an opportunity to ask questions. (Operator Instructions) I will now hand the conference over to James Bianco. Please go ahead, sir.

James Bianco

Good morning and thank you for joining us today.

Before we get started I’d like to remind you as is common with presentations of this type that we will be making forward-looking statements and as such we recommend that you refer to our SEC filings for more information on the risks and uncertainties facing our company and our securities.

Let me also remind you that this call will be recorded and will be available for playback on our website. Any unauthorized recording of this call or use of this recording is prohibited without written consent from the company.

On today, we will review our financials and the progress we have made reducing our expenses going forward, talk a little bit about the proposed timelines for filing our marketing approval application in Europe and the initiations of our follow-on pivotal trial in the U.S., our strategy for achieving our nine-month enrollment target in the PIX306 study and the utility of expanded access program for pixantrone in assisting in that goal, briefly discuss the importance of today's announcement on the NCCTG breast cancer initiative with brostallicin and then review the NASDAQ minimum bid requirement.

Lastly, we will discuss Q2 upcoming events of interest.

So let me start with the financial results. Overall net loss in Q1 2010 was approximately 37% lower than in Q1 2009. When excludes the exception of one-time items such as the $10.2 million gain associated with the balance of sale of Zevalin to Spectrum and the gain on the derivative liabilities who preferred stock restructuring of $7.7 million.

In Q1 of this year, we had two exceptional non-cash expenses, which included equity based compensation and deemed dividends related to preferred stock offering which totaled $25 million.

So after adjusting for these differences, the net loss is approximately $19 million for Q1 compared to $30 million for the same period in 2009 and we have implemented a number of steps that will significantly lower our net operating burn rate going forward to a target burn rate of $4.4 million per month.

These steps are critical in allowing us to focus our resources on moving pixantrone through the European Marketing Authorization review process and on initiating the follow-on pivotal study and seeking approval of an expanded access program for pixantrone in the U.S.

We ended the quarter with approximately $41.5 million in cash, which does not include the $18.5 million in net proceeds we received in April 2010. If we are successful in exchanging the $40.4 million of convertible notes for equity, we believe this cash balance would provide more than 12 months of operating capital going forward.

Let's move on to pixantrone. As we noted in our press release, the meeting we had with the European Regulatory Authorities and their clinical experts assigned to review the application for Pixantrone was very supportive of using PIX301 data for submission of an MAA in Europe.

This was notable in light of their awareness of ODAC and the FDA comments on the trial. They specifically noted their review, which considers the totality of the evidence across all the end points of this trial including their interest in the soon to be updated end-of-study survival results.

In addition to meeting the co-rapporteurs, we also met with the EMEA's pediatric committee who expressed interest in having pixantrone study for as potential to treat hematologic cancers in children, given the lower propensity for cardiac toxicity and standard anthracycline like agents.

The pediatric investigation plan updated for the recommendations made by the PDCO would be submitted this quarter along with a 60-day review request, which allow us to meet an MAA submission target in late September or early October.

We are also working steadily towards submission of a post NDA meeting with the FDA, during which we will discuss the initial trial design for the follow-on clinical study of pixantrone that was recommended by the FDA to supplement requirements for approval in the U.S.

In parallel, we will begin submitting an application for the expanded access program as well.

Let me touch briefly on our plans to capitalize on the intense interest amongst leading lymphoma community practices for participating in a follow-on pixantrone trial. We are working on integrating a social media based campaign linking participating sites with advocacy groups and patients across 75 of the largest integrated largest integrated lymphoma treatment practices, practices like UPMC, Georgia Cancer Specialists, etc.

And based on electronic medical record review, the treatment practices amongst 50 of these centers, we have identified as source of several thousand patients who visit this centers each year, who would be potentially eligible to participate in the pixantrone follow-on trial.

In addition to knowing where these patients are being treated and having their centers participating in the trial, it's also important to know how these centers treat these patients and the outcome of those current practices, allowing us to design the study, which is current with their management for these patients and one in which pixantrone can prove superior in the outcome for the treatment of these patients with relapsed refractory NHL.

We believe the incentive for these centers to enroll rapidly in PIX306 study is that once they have completed their centers enrollment contribution to the 306 trial, we would ask the FDA for pixantrone to become available for them for patients under the expanded access program.

And today, the feedback on the trial design, expanded access and the harnessing of everything from Twitter to investigator blog sites and Facebook shout out each day has been well received and noted as being a very innovative way to conduct the clinical trial in this information age.

Let me move on to discuss the other press release this morning of brostallicin. As noted the prestigious North Central Cancer Treatment Group or NCCTG based out of the Mayo Clinic approached us with an interest to conduct the Phase II trial of brostallicin in women with metastatic breast cancer. This disease is neither estrogen or progesterone receptor positive nor HER2 positive, so called triple negative breast cancer.

This form of breast cancer represents a major unmet medical need as these patients are typically younger women than what one sees with the common ER, PR, or HER2 positive variety. This disease is associated with rapid acquisition of resistance to chemotherapy and with the mutation in the BRCA1 gene and BRCA1 is a tumor suppressor gene, which when mutated is associated with the development of hereditary breast cancer.

Now in genomic, susceptibility screening studies conducted at TGen, the Translational Genomics Research Institute, and through wholly-owned personalized medicine subsidiary, SMI, tumors with mutation and DNA mismatch repair including mutations in the BRCA1 gene were very sensitive to the cell killing effects brostallicin.

In addition brostallicin was shown to work in synergy with cisplatin. As such this NCCTG study in triple negative breast cancer represents a novel approach to harnessing genomic information to select patients who are mostly likely to respond and benefit from a new drug candidate. We look forward to their progress in this important patient population where currently available treatment options are inadequate.

I would like to move on. To remind you as we would expect we should a receive a non-compliance notice from NASDAQ likely this Friday as that would represent the 30th trading day in which the share price closed below the $1 minimum bid requirement.

As you know, companies have 180 days to regain compliance and we feel confident given the events upcoming over the next several months that we can regain compliance on or before the 180th day deadline.

So that essentially sums up our major developments at this point. As we would like to open the call for any questions, please remember to state your name and your question. We would like to take this opportunity to address as many of the questions in the limited Q&A time period that we have. So we ask you not to choose this forum to state your opinions but rather to state a question. Thank you for understanding that process.

So, Operator, you can go to the Q&A period.

Question-and-Answer Session

Operator

Thank you, sir. (Operator Instructions). The first question comes from Ren Benjamin. Please state your company followed by your question.

Ren Benjamin - Rodman & Renshaw

This is Ren from Rodman. A couple of questions, maybe just starting off with pixantrone, you mentioned the soon to end or updated Phase III survival data. Can you talk to us as to when that data will be available and if there is a forum in which you will share that data or will it be just reported via press release?

James Bianco

We are going to share at our upcoming conference in London, Ren.

Ren Benjamin - Rodman & Renshaw

In May?

James Bianco

Yeah, in May.

Ren Benjamin - Rodman & Renshaw

All right. You mentioned that the FDA meeting is going to take place to discuss the new clinical trial design as well as the expanded access, can you give us a little bit of clarity as to the timing as to when that will occur? Just remind us again what the final clinical trial?

James Bianco

The meeting request will likely go in within the next 30 days or so. We are in the process of both finalizing the protocol outline as well as addressing some of the other requests that the FDA had in the complete response letter. And obviously what we tried to do is to test protocol outline amongst the majority of the centers, but certainly the centers that we would anticipate being high enrolling participants and make sure that in fact the control arm is the control arm that they would consider to be standard of care in their practice based upon their treatment practices to date and obviously that the combination therapy that we are looking at for pixantrone would be attractive in terms of the response rate, PFS, and overall survival potential for the product.

So that having being said as we outlined previously we were looking at double therapy pixantrone plus rituximab versus -- and what we wanted to do is try to maintain a control arm as current and as like the 301 study to make sure that we have the higher probability of achieving success like we believe we did in 301. So the control would be either GEM-R, bendamustine-R, were the two most commonly used double therapies across the practices. In fact, in certain fourth-line treatment across these practices, bendamustine-R is used in 10% and 18% of their patients respectively and GEM in about 10% their patients respectively in the so called third and fourth-line patients.

I am not sure if we were going to do JAK lenalidomide, I think that lenalidomide could be (inaudible). Again given that lenalidomide was just given NCCN status for second-line patients who are not transplant eligible, interestingly enough, just as a digression, that study had 49 patients, had a CR rate of 4% and overall response rate was 20% and no PFS single arm study and it got into the NCCN guidelines with a 53% occurrence of grade 3-4 hematopoietic toxicity..

So we think that PIX by itself certainly looks better than what has been reported for those other agents and we think that the study arms, GEM, bendamustine, or lenalidomide, which as you know is Revlimid with rituximab versus PIX and rituximab for patients who are either not transplant eligible or no longer transplant eligible. So that will mean patients who relapse following front-line therapy who are not candidates to receive high dose chemotherapy, platinum-based chemotherapy like R-ICE or DHAP that would allow those patients to go on to the study just and that is the indication for lenalidomide currently in the new updated NCCN guidelines. Or patients who fail to get a response to R-ICE, DHAP and/or fail following stem cell transplant, so just like the 301 patient population previously.

So that seems to test very well across the large centers that we just started to bring out the design concepts to -- we will see what the agency does and we will provide that feedback following the FDA meeting in second or early in the third quarter.

Ren Benjamin - Rodman & Renshaw

Moving on to brostallicin, can you give us a sense as to the timing? It's both a boon and a curse when you are dealing with a cooperative group, right. And so can you give us a sense of the timing of it? How long the trial should take? And what the trial will look like? And have we seen any previous clinical data, you had highlighted in the call several pre-clinical data that suggests why it would work in breast cancer, but has there been any clinical results to suggest benefit in breast cancer?

James Bianco

Let me just start by saying that the NCCTG is probably the premier group doing studies in breast cancer across the United States, certainly establishing treatment practices for that group. And we were thrilled that they were interested in really novel mechanistic basis by which this has a very good scientific foundation or potentially being active in this disease.

So I would like to ask Jack talk a little bit more about how many patients were in the study, how quickly do you think they would enroll and when we might see data.

Jack Singer

This is your typical Phase II [silent] type design where you're going to have a preset hurdle and expand the cohort if you meet that. That said, our previous experience with this group, their enrollment times are very reliable and the study is expected to be completed within two years, start to finish. They have excellent enrollment. It's not like most of the other cooperative group where there is a big issue.

So we are just delighted that they are going to do it. It's a very good study with excellent correlative science and an unmet need. Although this is a sponsored study by the NCCTG, there will be sufficient quality data that if there is a signal this is a very clear unmet need and could be converted towards the regulatory study aimed at regulatory approval.

James Bianco

Let me just comment on a very attractive feature of this study besides having this premier group, this Mayo Clinic-based group do this trial is that its not costing us anything. We are providing drug and I think supports like less than $50,000 a year over the two-year period.

So it’s a very attractive way to look for a signal in a group of patients who currently are underserved with existing therapies and as you now BRCA1, BRCA2 in breast cancer is in hereditary form, any therapy, especially a new targeted therapy, that shows a signal in that disease would have a lot of interest across not just pharmaceutical community but across the breast cancer community in general.

Jack Singer

Let me just clarify that a second, Jim. The patients here are not the congenital BRCA1, BRCA2s, the women who you screen for and find. This is a separate disease in which the BRCA is up secondarily modified not genomically modified. But it has the same phenotype as cancer with the genomically modified BRCA.

James Bianco

But it would be extrapolatable to the genomic based.

Jack Singer

Yes. It would be.

James Bianco

Yeah, because the mechanism of DNA mismatch repair is based on mutation of the --

Jack Singer

This is about 15% of all breast cancers. So its much more common than just the BRCA breast cancer.

Ren Benjamin - Rodman & Renshaw

Great. Just switching gears very quickly to the financials, you had mentioned I think it was the net operating burn will go to about $4.5 million per month going forward. And is that my understanding right? The net operating burn is just meaning the actual cash burn for the company will be about $4.5 million a month or am I missing something that is in that calculation?

James Bianco

No, that’s correct, that’s the net burn then we are talking cash.

Ren Benjamin - Rodman & Renshaw

Okay. And clearly the debt, you had mentioned the debt and the potential either to restructure or come up with some sort of a deal with the debt holders, at least with the upcoming debt I think due in July. Can you give us a little status or an update as to what's happening there and what are sort of the options that are being entertained, if that is possible?

James Bianco

It's been predominantly looking at some discounted part with the debt to equity swap. And a significant piece of that is held by one fund that has been expressing an interesting in equitizing the notes. And I think we do that in an orderly fashion. It actually would be beneficial for both our balance sheet as well as for the bondholder. And so we have retained a financial services firm to actually go out and do that for us. And we hope to have some news on that in the near future.

Ren Benjamin - Rodman & Renshaw

Can you just give us the updated basic and fully diluted shares outstanding?

James Bianco

I just want to make sure you know it wasn’t Goldman Sachs that not just (inaudible) go ahead. Louis is going to tell you what the numbers are.

Lou Bianco

Yeah. For the quarter, shares used in calculating the basic and diluted net loss for common shares were for the quarter 598, almost 599 million shares. Our actual shares outstanding currently are issued in outstanding to 656.3 million.

Ren Benjamin - Rodman & Renshaw

And I am sorry, Lou, that is the fully diluted shares? Or that is just taking into account what are in recent financings and things along those lines and whatever warrants have been exercised?

Lou Bianco

Shares issued in outstanding to 656.3. If you look at everything that’s reserved for there is another 90 million over that.

James Bianco

Recognizing that a significant portion of some of that is way out on the money. Shares that have reserve for the underlying bonds could be at $500 of share.

Ren Benjamin - Rodman & Renshaw

Got it. I guess one final question just regarding milestones coming up, if we can just maybe just chronologically go through, obviously the survival data will be for pixantrone coming out in the next couple of weeks. Will there be any presentations at ASCO? Clearly the FDA meeting will be coming up shortly after that, but can we just go through the steps for the next 12 months?

James Bianco

Yeah, we’ll try to cover it for the next couple of months. 12 months is a good forecast. So at ASCO, there will be some data on radiation sensitization for OPAXIO, which when those abstracts publish will probably put out an alert and certainly when the data is presented we will update you there.

There is the EHA meeting whereby we have a forum here to report some additional data regarding pixantrone. As I said, we were contemplating talking about the safety data for 203 and some of the updated data from the 301 study at the London conference in May.

With regards to pediatric plan we would go in if we get the 60-day grant on approval. We would make that note when the pediatric plan were accepted by the PDCO of the EMEA that would then be the trigger for us being in position to file the MAA or submit the MAA I should say. And as you know the EMEA has specific dates that you can file or submit the MAA that would probably be October 4th or early October. If you miss the early September deadline date that would the earliest for that.

With regards to the FDA, we would certainly host meeting that we've come to hopefully agreement on framework of a study and how to move forward for pixantrone, which would then be submitted under a special protocol assessment process like we did with 301. And then when that SPA were approved and study initiated, we would obviously announce that and we would hope that that would happen in the third quarter in time for the initiation, which we are targeting to occur at the end of the third quarter, again a September timeframe.

Coming in to ASH, we would hope that the 203 data would be mature enough to discuss those results, and again what we are looking for there is independent assessment panel, response evaluation, progression evaluation, et cetera and having enough follow-up on survival of that data starting to look in the front-line treatment setting. We know what the cardiac toxicity data looks like and its very attractive.

So I think that is predominantly the key milestones from here to year end, which is certainly a fair amount of work for this company to focus on getting PIX back on a regulatory track in Europe.

And again we feel very cautiously optimistic about the feedback from the rapporteurs. Just as a note, if you look I am sure you saw this Nycomed Daxas was turned down in the US at the panel, pulmonary respiratory panel, but was subsequently approved in the EU, despite that the negative review for the product here in fact none of the safety issues would be viewed similarly in the EU.

So it's not an uncommon situation especially when you hit the primary endpoint of the study and all the subsequent endpoints for the EMEA to look at that data in its totality rather than the reviews that we got at the end of the process here in the US.

Operator

Thank you. And now I’d like to turn the conference back over to Dr. Bianco for the closing remarks.

James Bianco

As I said, in closing, we are encouraged by the independent views of European health regulatory agency, and we're looking forward to working expeditiously in submitting the MAA later this year or working in parallel as I just mentioned on getting the PIX306 study up and rolling in the US.

This quarter we expect to see some additional data on OPAXIO as a radiation sensitizing agent at ASCO, meetings in June as well as reporting on the cardiac safety data from the 203 frontline study and then we will be able to clean up the 2010 debt and the company will be on a firm ground for continuing its mission of bringing these support-enhanced therapeutics to the tens of thousands of patients who may benefit.

As always, we thank you for support of our mission and for support of the company.

That concludes today’s conference call.

Operator

This concludes the Cell Therapeutics conference call. Thank you for participating. You may now disconnect.

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Source: Cell Therapeutics, Inc. Q1 2010 Earnings Call Transcript
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