Cleveland BioLabs, Inc. (NASDAQ:CBLI)
Q2 2014 Earnings Conference Call
August 7, 2014 10:00 AM ET
Rachel Levine – VP, IR
Yakov Kogan – CEO
Neil Lyons – EVP and CFO
Greetings, and welcome to the Cleveland BioLabs Second Quarter 2014 Investor Update Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. (Operator Instructions). As a reminder, this conference is being recorded.
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 Cleveland BioLabs’ second quarter 2014 investor conference call. Joining us today are Dr. Yakov Kogan, Chief Executive Officer; Mr. Neil Lyons, Chief Financial Officer; Dr. Andrei Gudkov, Chief Scientific Officer and Dr. Langdon Miller, our Senior Medical Advisor.
Before we begin, I would 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 are based on information as of today August 7, 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 and 10-Q. 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 recapping recent progress on our operational priorities for the year, and pass the call to Mr. Lyon to review financial results for 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’ll 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 making progress to virtual achievement of our strategic objectives for 2014. We are focused on pursuing at pre-emergency use authorization or pre-EUA submission for Entolimod biodefense indication, and establishing clinical proof of pharmacodynamic activities for CBL0137 and Entolimod as cancer therapies.
To start, I want to share some general characterization of our recent meeting with FDA to discuss dose conversion and evaluate the potential for a pre-EUA submission for Entolimod’s biodefense indication. Our goal for this meeting was to establish what steps remain in pursuing pre-EUA stages for Entolimod’s biodefense indication.
While we are not able to discuss specific outcomes and next steps, until we receive and review the formal meeting minutes, I can say very pleased by the tone and direction of our discussion.
Our team did an excellent job preparing the background package and our materials over region (ph). And we believe there is number of important agreements with the FDA. The achievement of our pre-EUA designation would be incredibly significant milestone for Entolimod biodefense indication.
Unlike a biologic license application or new drug application submission, which includes all data requirements of full licensure, a pre-EUA submission is based only on data accumulated up to a time of five minutes.
Pre-emergency use authorization is difficult for which the U.S. government is able to administer unlicensed rescue therapies in emergency situations. If FDA grants pre-EUA status, purchases of Entolimod could be made for stock piling in the events of disaster. Actual use of the stock pile drug and conversion from pre-EUA to EUA would occur only in a declared emergency situation.
We believe while achieving the pre-EUA status in the United States could support partnerships and foreign government interest in this program as well.
Let’s now review advances on oncology side of our business. Administration of Entolimod in patients with advanced cancers continues at Roswell Park Cancer Institute, the (inaudible) is encouraging. We have plans to conclude this trial before the end of this year.
As I incorporated pharmacodynamic updates measured in this call, of specific types of immune cells to administration of Entolimod. We believe this data will help us better Entolimod’s potential as an immunotherapeutic agent.
With respect to our product candidates, both CBL0137 trials are progressing on schedule. Dosing of the fourth cohort is well underway in the intravenous study. And doing of eight-cohort is ongoing in the oral study. Dose escalations will continue until a maximum tolerated dose is reached.
We are planning to release an interim report on safety, pharmacokinetics and pharmacodynamic data, collected from the stored sixth cohort of overall studies later this year. Finally, we anticipate the opening of Russian IND for a Phase 1 healthy subject study for CBLB612.
The endpoints of this study include established and maximally tolerated dose and characterizing CBLB612’s ability to mobilize hematopoietic stem cells hepatic blood circulation.
The clinical studies have shown what 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 contracts with the Ministry of Industry and Trade or MPT of Russian Federation.
At this point, I’ll hand the call over to Neil to review our financials. I will return for closing remarks.
Thank you, Yakov. We reported three material financing transactions in Q2, including the sale of $3.5 million in equity to Dr. Mikhail Mogutov, Chairman of the Board of Directors of Incuron LLC and Chairman of the Investment Committee and Founder of Bioprocess Capital Ventures, and one institutional investor.
I (inaudible) financing, we repaid $4 million of our loan to Hercules. And lastly, Bioprocess contributed 100 million rubles or $2.9 million towards their final equity tranche of 180 million Russian rubles set-forth in their original investment agreement.
That final 80 million rubles or approximately $2.3 million was contributed in early August. With that final investment, Bioprocess owned 53% of Incuron and CBLI owned 47%. And as a result CBLI will deconsolidate Incuron during Q3 and simply report our investment in them on the equity method of accounting prospectively.
It is important to note that while CBLI is no longer majority owner of Incuron, our team still have significant strategic input into the development program with CBL0137 and are in fact guiding world-wide development strategy and are responsible for planning and overseeing all drug development activities.
Moving on to our financial results. For the quarter ended June 30, 2014, our total revenues decreased by $1.6 million compared to the second quarter of 2013. Total revenues for the six-month period decreased about the same amount to $1.9 million compared to the same period in 2013.
These decreases were primarily the result of the completion of certain contracts with the Department of Defense for Entolimod’s biodefense indication and differences in the underlying research activities associated with cost based contracts with the Russian Ministry of Trade or MPT.
Research and development costs for Q2 of 2014 decreased by $3.1 million or 57% compared to Q2 of 2013 and are reported at $2.3 million. Research and development expenses for the first six months of 2014 decreased by $5.9 million or 56% overall compared to the same period in 2013 and are reported at $4.8 million.
As we discussed last quarter from a product perspective, there were three drivers for these overall net decreases. First, biodefense spending is down largely due to the completion of Entolimod trial in non-irradiated non-human primate, 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, costs related to the Curaxin compounds CBL0102 and CBL0137 were less due primarily to the completion of the CBL0102 study.
From a functional perspective, $1.6 million of the decrease for the quarter and $3 million for the decrease for the six months related to reductions in costs associated with third-party vendors for the reasons I just reviewed. $1.2 million of cost reductions for the quarter and $2.5 million for the six months, relate to reduced personnel cost, cash cost associated with our transition of personnel to Buffalo BioLabs.
And included in those composition figures, $1 million for the quarter and $3 million for the six months, sorry about that. Included in those numbers, which were total cost $100,000 for the quarter and $300,000 for the six-month period related to non-cash compensation costs.
Finally, $300,000 for the quarter and $400,000 for the six-month period relates to other cost savings.
For Q2 of 2014, general and administrative expenses decreased $700,000 or 23% compared to Q2 of 2013 and are reported at $2.3 million. For the first six months of 2014, general and administrative expense is down $1.8 million or 28% compared to the same period of 2013 and are reported at $4.7 million.
All of these reductions for the quarter are due to reduced personnel costs while $1.2 million in reduction for the first six months reduced to reduced personnel cost. Of note, $200,000 for the quarter and $600,000 for the six months relate to non-cash equity compensations. In addition, the six-month period reported $600,000 in reduced professional fees and travel cost as compared to the prior year.
Let us now review our existing liquidity and capital resources. In addition to our cash and receivables, we also access capital through development contracts and from our financial partners in our subsidiaries, Incuron and Panacela.
On a consolidated basis, we reported $11.1 million of cash in short-term investments at June 30, 2014 with $7.7 million available for general use, and $3.4 million restricted for the use of our subsidiaries. We also had $400,000 in receivables.
And as previously noted, Bioprocess contributed an additional $2.3 million to Incuron in early August. At June 30, 2014, we had been awarded $22.3 million in currently active contracts from the Russian Federation, $17.5 million of which had been funded and the remaining $4.8 million to be funded in the future.
Of the $17.5 million that was funded, we received and recognized this revenue on a contract-to-date basis $11.5 million, leaving $6 million to be recognized as revenue in the future. Of the $6 million, $700,000 has been received and is reflected as deferred revenue on our balance sheet.
Finally Panacela’s financial partner Rusnano originally committed to $26 million in funding, of which $15.5 million remains available for investment at their option.
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 second quarter, CBLI’s standalone monthly cash burn, that is without Incuron and Panacela, was $1.2 million in-line with our guidance of $1.1 million to $1.2 million on average per month.
CBLI’s consolidated monthly cash burn was $1.6 million also in line with our guidance of $1.7 million to $1.8 million per month on average. Given that these second quarter results are consistent with our projections, we continue to believe CBLI’s standalone cash resources will last into the first quarter of 2015.
The continued financing of our operations remains a top priority. We have indicated before, we continually evaluate all reasonable forms of financing. We believe that are encouraging leading with the FDA and clinical oncology progress, including follow-on study designs will be of interest to biotech investors and commercialization partners.
We intend to communicate updates to our financing plans and clinical data throughout the coming months. As part of our financing plans, we will consider monetizing drug candidates that we do not prioritize for internal development, out-licensing prioritized drug candidates to commercialization partners, other strategic corporate actions, and raising capital through the issuance of securities.
We cannot comment on the timing or any specific action or a combination of actions, 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. We are making good headway with our key objectives, was the belief have the best chance to increase value for all our stakeholders. As I mentioned earlier, we were very pleased with our recent FDA meeting, regarding the pre-EUA for Entolimod biodefense indication.
And our efforts to generate clinical proof of pharmacodynamic activities for oncology drug candidates continue to advance. Developing truly innovative drugs is a complex and medical (ph) process.
We greatly appreciate your continued patience and support as our program develops and mature to reportable milestone events. We look forward to sharing more with you about all of our programs as the data becomes appropriate to share publicly. We continue to remain committed to delivering the results.
We will now open the call for questions. Operator, please begin the Q&A.
Thank you. (Operator Instructions). As there are no questions, we have reached the end of today’s conference call. Also an accessible replay of today’s conference will be made available approximately one hour from now. To access the replay, please dial toll-free 877-660-6853 or for international callers 201-612-7415 and enter conference ID number 13586610 to access the replay. Again the access information dial-in toll-free 877-660-6853 or 201-612-7415 and conference ID 13586610.
This concludes today’s teleconference. Thank you for your participation. You may disconnect your lines at this time. And have a wonderful day.
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