Cleveland BioLabs, Inc. (NASDAQ:CBLI)
Q1 2014 Earnings Conference Call
May 08, 2014, 10:00 AM ET
Rachel Levine - Vice President, Investor Relations
Yakov Kogan - Chief Executive Officer
Neil Lyons - Chief Financial Officer
Langdon Miller - Senior Medical Advisor and Consultant
Mara Goldstein - Cantor Fitzgerald
Walter Schenker - MAZ Partners
Greetings, and welcome to the Cleveland BioLabs first quarter 2014 investor update call. (Operator Instructions) I would now like to turn the conference over to your host Rachel Levine, Vice President of Investor Relations. Thank you. You may begin.
Thank you, and good morning, everyone. Welcome to CBLI's first quarter 2014 investor conference call. Joining us today are Dr. Yakov Kogan, our Chief Executive Officer; Mr. Neil Lyons, Chief Financial Officer; and Dr. Langdon Miller, our Senior Medical Advisor.
Before we begin, I'd like to remind all listeners that throughout this call we may make statements that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that any such forward-looking statements are not guarantees of future performance or the successful execution of the company's strategic plans and involve risks and uncertainties.
Additionally, I want to emphasize that some of the information discussed on this call, particularly our financial and cash outlook and our forward-looking development plans is based on information as of today May 8, 2014, and then actual results may differ materially from the expectations and assumptions discussed today as a result of various factors.
Such risks, uncertainties and factors include the risks outlined in our company's filings with the Securities and Exchange Commission including our most recently filed 10-K. The information provided on this conference call should be considered in light of such risks. CBLI does now assume any obligation to update information contained on this call.
Dr. Kogan, will open this morning's call by sharing progress on our priorities for the year, and pass the call to Mr. Lyon to recap results of the period and discuss updates to the financial outlook. Dr. Kogan will then return for closing remarks and open the call for questions.
At this time, I'd like to turn the call over to Dr. Yakov Kogan, CEO. Please go ahead.
Thank you, Rachel. And thank you to everyone for joining us this morning. We are pleased to share the progress we are making with our strategic objectives for 2014.
We are focused on pursuing at pre-emergency use authorization or pre-EUA submission for Entolimod, as a radiation countermeasure and establishing clinical proof of pharmacodynamic activities for CBL0137 and Entolimod as cancer therapies. Preparations are well underway for July meeting with the FDA to evaluate the potential for pre-EUA submission for the Entolimod radiation program and present our projection of estimated human dose to FDA.
We are in process of compiling sections of our pre-EUA this year, as part of our briefing package. Our goal for this meeting is to establish what [ph] stats remain interested in pre-EUA status for Entolimod as a radiation countermeasure, which may actually start in determining the value of the program for us or for a potential partner.
Partnering in the Entolimod radiation countermeasure program is a paramount for us, as we do not wish to remain solely dependent on government funding to advance this development through a delay. We plan to continue to work with government agencies as funding is available, but believe additional support is important to the long-term success of the program.
For those less familiar with EUA, this is a vehicle through which the U.S. government is able to administer unlicensed rescue therapies in emergency situations. If the FDA grants pre-EUA status, purchase of Entolimod could be made for stockpiling in the event of a disaster, actual use of stockpiled drug and conversion of a pre-EUA to EUA would occur only in a declared emergency situation.
Over 70% of the dollars spent to-date on countermeasures in the U.S. Strategic National Stockpile have been for unlicensed drugs. We believe achieving pre-EUA status could also drive foreign government support for this program. Unlike a delay or NDA submission, which includes all data requirement for full licensure, as pre-EUA submission is based only on data accumulated up to the time of filing and what are relevant for a proposed emergency use.
Let's now review advances on our oncology side of the business. Dosing of Entolimod in patients with advanced cancers continues at Roswell Park Cancer Institute. The seventh cohort is currently being treated and as you estimated that this trial will conclude dosings around the end of the year, assuming that next human tolerated dose is reached.
Preparations are also moving along for a healthy subject study with Entolimod in the Russian Federation. In this study, we plan to follow a similar dosing regimen as in advanced cancer trial at Roswell Park. The healthy subject study will be supported in part by a contract with the Ministry of Industry and Trade or MPT of Russian Federation.
Both of these studies interpret pharmacodynamic assay measuring the reports of specific types of immune cells to administration of Entolimod. We believe this data will help us better accept Entolimod's potential as an immunotherapeutic agent. And the healthy subject trial may help support our safety database for Entolimod's medical radiation countermeasure indication.
With respect to our other product candidate, we recently reported the successful completion of the Phase 1 trial in CBL0102, an orally administered small molecule. Like our optimized oncology drug candidate CBL0137, these compounds also act by blocking activity of the chromatin remodeling complex FACT, but has a completely different chemistry than CBL0137 and is not that product.
The study of CBL0102 was performed in heavily pretreated patients with advanced cancers for which no standard care exist or which had become resistant to conventional therapies. All patients had tumors involving the liver, given one or two high relative biodistribution into the liver. The primary objective of the study was to evaluate for a maximum tolerated dose and dose-limiting toxicities of CBL0102 in these patients.
Secondary objectives were to characterize the drug safety and to profile its pharmacokinetics. The study also assessed for preliminary evidence of 0102 anti-tumor activity. CBL0102 was generally well-tolerated and recommended Phase 2 dose of 400 milligrams per day was established.
The most common adverse events were skin discoloration due to drug accumulation in skin, fatigue, upper abdominal pain, mild to moderate gastrointestinal disorders, and hepatic transaminase elevations, with most events being low grade.
By eight weeks of therapy, a partial tumor regression was recorded in one breast cancer patient, who experienced a 46% reduction in target lesion maximum dimensions. Disease stabilization was observed in four other patients, patients with breast cancer, hepatocellular carcinoma, salivary gland cancer and rectal cancer. In the patient with hepatocellular carcinoma, long-term stabilization was observed for a period of 7.5 months, during which the patient remained on continuous CBL0102 treatment.
Very encouraged by the outcome of this trial and are looking to partner CBL0102 for further potential development. Our primary focus still remains on CBL0137, our optimized proprietary FACT inhibitor, which is currently being evaluated in ongoing Phase 1 trials, assessing both oral and intravenous formulations. Both CBL0137 trials are progressing on schedule.
Dosing of third cohort is underway in the intravenous study, and recruitment of our seventh cohort was recently initiated in the oral studies. Dose escalation will continue and even maximum tolerated dose is reached. There are 22 release and interim report on safety, pharmacokinetics and pharmacodynamics data, collected from first six cohorts of the oral study in the third quarter of this year.
Finally, we are on track to start the Phase 1 healthy subject study with CBLB612 later this year, this breadth end point of establishing a maximally tolerated dose and characterizing CBLB612 activities to mobilize bone marrow stem cells into the circulation. The clinical studies have showed while the efficacy of CBLB612 exceeds that of G-CSF, the market leading drug used for stimulating the bone marrow to produce white blood cells. This study is also supported by a MPT contract.
At this point, I'll hand the call over to Neil to review our financial and return it to me for closing remarks.
Thank you, Yakov. First a few comments about our financial results. For the first quarter ended March 31, 2014, our total revenues remained relatively flat at $1.3 million compared to the first quarter of 2013. We have historically recorded revenue from grants and contracts issued from both the U.S. government and the Russian Federation.
For Q1, revenue from the U.S. government decreased compared to Q1 of the prior year by approximately $400,000, which was offset by an increase in revenue from the Russian Federation, primarily related to the Mobilan brand awarded in Q4 of 2013. Research and development expenses for Q1 of 2014 decreased by $2.9 million or 54% overall compared to Q1 of 2013 and are reported at $2.4 million.
From a product perspective, there were three drivers for this net overall decrease. First, Biodefense spending is down largely due to the completion of a non-irradiated NHP trial and other activities that were underway in 2013. Second, development of the Panacela compound was narrowed and focused primarily on those compounds receiving development support from the Russian Federation. And finally, the cost related to the Curaxins compounds, CBL0102 and CBL0137 were less due primarily to the completion of the CBL0102 study.
From a functional perspective, $1.5 million of the decrease relates to reductions in costs associated with third-party vendors for the reasons I just reviewed. $1 million of the cost deduction relates to reduced personnel cost associated with our transition of personnel to Buffalo BioLabs. $200,000 relates to other cost savings in the area of facilities and travel and $200,000 relates to reductions in non-cash compensation cost.
For Q1 of 2014, general and administrative expenses is down to $1.1 million or 31% compared to Q1 of 2013 and is reported at $2.4 million. This reduction is due to reduced personnel cost of $700,000, $400,000 of which was cash-based and $300,000 related to non-cash equity compensations. And $400,000 in reduced business development and professional fees as compared to Q1 of 2013.
Of note, the combined personnel related cash costs savings amounted to $1.4 million for both the research and development and the general and administrative functions as compared to Q1 of 2013.
Let us now review our existing liquidity and capital resources. In addition to our cash receivables, we also excess capital through development contracts and from our financial partners and our subsidiaries Incuron and Panacela.
On a consolidated basis, we reported $13.7 million of cash in short-term investments at March 31, 2014, with $12 million available for general use and $1.7 million restricted for the use of our subsidiary. We also had in $400,000 in receivables.
At December 31, 2013, we had been awarded $21.7 million in currently active contracts from the Russian Federation, $17.2 million of which had been funded, while the remaining $4.5 million to be funded in the future. Of the $17.2 million that was funded, we received and recognized as revenue on a contract to-date basis $10.9 million, leaving $6.3 million to be recognized as revenue in the future. Of the $6.3 million, $1.1 million has been received and is reflected as deferred revenue on our balance sheet.
In addition, Incuron's financial partner, Bioprocess Capital Partners should contribute their final equity tranche of 180 million Russian rubles set forth in their original investment agreement or approximately $5 million based on recent exchange rates during the second quarter of this year. Panacela's financial partner, Rusnano, originally committed to $26 million in funding, of which $15.5 million remains available for investments at their options.
Now, moving on to historical cash burn and cash guidance, please reference the table of non-GAAP measures included in our earnings release this morning. For the first quarter, CBLI's standalone monthly cash burn, that is without Panacela and Incuron, was $800,000 compared to our guidance of $1.1 million to $1.2 million per month on average.
This favorable variance to the average monthly guidance was anticipated in our projection. Please note that we plan on increased monthly spending later in the year as we increased development activities with third-party vendors and start to pay down the Hercules debt in November.
Additionally, the money that BioLab CBLB612 received from the Russian Ministry of Industry and Trade comes in tranches usually at the beginning and end of the calendar year. Therefore the combination of grant receipts at BioLab CBLB612 and relatively reduced spending in the first quarter generates a favorable net cash burn variance in comparison to the average monthly figure provided in our guidance.
CBLs consolidated monthly cash burn was $1 million, which favorably compares to our guidance of $1.7 million or $1.8 million per month on average, for reasons similar to what I just discussed. Given that these first quarter results are consistent with our projections we continue to believe CBLI standalone cash resources will add into the first quarter of 2015.
The continued financing of our operations remains a top priority. As we have indicated before we continually evaluate all reasonable forms of financing. We believe that our clinical oncology progress, including follow-on study design, will be of interest to biotech investors and commercialization partners.
We intend to communicate update through our financing plans and clinical data throughout the coming month. As part of our financing plan, we will consider monetizing drug candidates that we do not prioritize for internal development, out-licensing prioritized drug candidates to commercialization partners or other strategic corporate actions, and raising capital through the issuance of securities. We cannot comment on the timing of any specific action or a combination of action, but we want to be clear that we are considering all of these actions and intend to finance operations in the most advantageous fashion.
That concludes my comments. Yakov, please continue.
Thank you, Neil. Before we conclude, I would like to make few comments related to our recently filed proxies and upcoming annual meetings.
First, we are nominating three new Directors to our Board, Dr. Daniel Hoth, Dr. Alexander Polinsky and Richard McGowan, Esquire. All three gentlemen have industry expertise and diverse perspectives, what we believe will be extremely valuable as we continue to progress our clinical research and develop our products.
Dr. Hoth brings more than 35 years of experience in clinical drug development, primarily in cancer. He had held leadership positions in both NIH and biotech firms. He currently consults in the area of cancer drug development, primarily for a biotech company. He has contributed to the development of several FDA approved drugs including, Kyprolis, Nexavar, Adcetris, Vectibix and [ph] Votrient.
He was Senior Vice President and Chief Medical Officer at Axys Pharmaceuticals and Senior VP and Chief Medical Officer at Cell Genesys. He also served as a Director of Division of AIDS at the National Institute of Allergy and Infectious Diseases. Prior to this, he served as Chief of Investigational Drug Branch at National Cancer Institute and was responsible for all clinical investigations of IND stage anticancer pharmaceuticals.
Dr. Polinsky is currently Chief Executive Officer and President of OncoTartis and Everon Biosciences, two biotechnology companies he co-founded in 2009 with Bioprocess Capital Partners and Dr. Andrei Gudkov, our Chief Scientific Officer and Board Member. Bioprocess Capital Partners is our shareholder in Incuron, which is currently developing our lead oncology drug candidate, CBL0137.
Dr. Polinsky also serves on the Boards of 4Medica, Gowan Company and AtheroNova, a public company. Dr. Polinsky established and served as a Chief Executive Officer of The Pfizer Incubator, starting three biotechnology companies. Before this he led the development of Pfizer External Research Network and Pharma Incubator concepts at Pfizer Global Research Technology. Dr. Polinsky established and managed a $750 million Pfizer investment in the creation of a modern drug screening collection, as well as the company's global chemistry outsourcing network.
Mr. McGowan, practiced law for over 30 years retiring from active practice in 2010. For 24 years, he specialized on a national level in the prosecution of mass tort pharmaceutical drug, product liability, and class action cases where he served on several Lead Plaintiff Committees and as a Class Counsel. From 2000 to 2008, he also was a partner and President of SFB Holdings, a private investment company. He has worked with micro-cap companies. Mr. McGowan is a long-term shareholder of the company.
As we welcome these nominees, two of our existing board members will retire from service, following the expiration of their current jobs. Dr. David Hohn has served us out as one of our Directors since June 2011 and was appointed Chairman of the Board in April 2013. We are very grateful to David for his dedication, control and leadership. He has been an advocate for CBLI for years and is largely responsible for our partnership with Roswell Park Cancer Institute and numerous other beneficial relationships.
Similarly, Dr. Paul DiCorleto has served as one of the company's Director since 2003 and what a strong supporter of CBLI since our foundation in partnership with the Cleveland Clinic. We are thankful for his years of service and deeply appreciate his advice along the way.
Next, I want to discuss something what is close to my heart, and I am certain to each of your shareholders, the success of CBLI. As I know, you're acutely aware that company's share price has been down since we announced the end of our negotiation with BARDA in general.
We have focused our efforts on a few key initiatives, what we believe have the best chance to deliver near-term and ultimately long-term value, namely, pursuing a pre-EUA for Entolimod as a radiation countermeasure and generating clinical proof of pharmaco-dynamic activity for our oncology drug candidate, CBL0137 and Entolimod. We are pursuing partnerships for every program and have taken every measure possible to reduce our burn rate and maximize efficiencies as Neil described before.
As part of this effort, Andrei Gudkov and I have voluntarily reduced our base pay by 20% as well our directors. We all believe in CBLI's potential and that can meet to achieving success.
Our Directors have been extremely active and have made themselves available on frequent basis to support management, as we have built a significant amount of change over the past year. We recognize the need to direct our financial resources, that revenue be benefited to CBLI is more into our program and retention of key start.
We want the same things our shareholder wants, for the market to recognized CBLI's true value. Our vision is to be successful and sustainable biopharmaceutical company, with a risk-balanced pipeline for the dose into our drug candidate, designed to address significant unmet medical needs. We are excited about our pipeline and committed to demonstrate the utility of our drug candidates in the clinics. We have another hard work cut out for subsidies. We are on track with our key 2014 objectives.
As always we thank you for your support. Our Annual Meeting will be held on June 11, in Buffalo, New York, and we hope to see you there.
We will now open the call to questions. Operator, please begin the Q&A.
(Operator Instructions) Our fist question comes from the line of Mara Goldstein with Cantor Fitzgerald.
Mara Goldstein - Cantor Fitzgerald
I have two questions, actually, and the first is on the July meeting with FDA. Maybe if you could go through with us the various scenarios as it relates to timeline coming out of that July meeting, if the FDA agrees that you can move forward? And what are the relevant data and inflexion points around that program than we should be focused on? And lastly, I was hoping maybe you could just touch on the search for CMO, and if that is suspended at this period in time or still active?
I will start answering your question number two, and then I'll ask Dr. Miller, who is our acting Chief Medical Officer and Senior Medical Advisor to answer number one. So we are extremely pleased and satisfied with Dr. Miller's services provided to us on a part time basis to move Entolimod and introduction programs forward.
So we are currently not in the active search for additional medical help and expertise. Dr. Miller has been working with us since February 2014 and demonstrated his expert and outstanding capacity in this regard. With this, I would like to ask Dr. Miller to answer your first question.
Thanks for the confidence, Yakov. Yes, we are proceeding with preparing the package for the FDA to apprise them of the current situation with Entolimod. We remain very encouraged by the data. The efficacy data are very strong. And as you know we have safety data in large number of healthy subjects. At this point, with calculation of an appropriate human dose, we'd like to go talk to them about the package.
And assuming a positive outcome from the meeting, we will begin preparation immediately, and after that if we're -- completion of a dossier to submit. We had anticipated that that would require several months of work to complete that and consolidate all of the findings for a submission.
Our next question comes from the line of Walter Schenker with MAZ Partners.
Walter Schenker - MAZ Partners
Since we can get an interim analysis and which we will then hear about on the Phase 1 study on CBL0137, what would it take to get some sort of interim input from the Phase 1 study of Entolimod? That's the first question.
Langdon, could you please answer Walter's first question.
As it relates to the Phase 1 study of Entolimod, we are continuing with the dose escalation there. We are anticipating that once the maximum tolerate dose is identified and dose limiting touches is better characterized that we could provide a further information about what we are observing in that study.
Walter Schenker - MAZ Partners
But we don't know how many more cohorts that's going to take?
At this juncture, no, but those escalation is proceeding with that study and we haven't seen any unusual drug related events in the course of that trial.
Walter Schenker - MAZ Partners
And going back to the question on the FDA meeting in July, and the response that it would take months. How many months to compile a dossier? We're compiling a dossier to what end, toward what is the next step assuming those whatever the definition of a favorable meeting is?
Our goal is pre-EUA fillings with FDA.
Walter Schenker - MAZ Partners
So the next step that we hopefully will achieve is submitting a pre-EUA submission?
Thank you. Ladies and gentlemen, this concludes today's call. As a reminder this call will be available on replay by dialing 1-877-660-6853 and entering ID number 13581192. Thank you for your participation. And have a wonderful day.
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