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ImmunoCellular Therapeutics, Ltd. (NYSEMKT:IMUC)

Q2 2014 Earnings Conference Call

August 07, 2014, 5:00 PM ET

Executives

Jane Green - IR

Andrew Gengos - CEO

David Fractor - VP Finance & Principal Accounting Officer

John Yu - Chief Scientific Officer

Analysts

Joe Pantginis - Roth Capital Partners

Mara Goldstein - Cantor Fitzgerald

Operator

Good afternoon, everyone, and welcome to ImmunoCellular Therapeutics Second Quarter 2014 Financial Results Conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session with instructions following at that time. (Operator Instructions) As a reminder, this call is being recorded.

At this time, I would like to turn the call over to Jane Green, ImmunoCellular’s Investor Relations Group. Please begin.

Jane Green

Good afternoon, and welcome to ImmunoCellular Therapeutics conference call to discuss the company’s financial results and corporate update for the second quarter 2014. Today’s call is being recorded and is also available via webcast.

Participating in today’s call are Chief Executive Officer, Andrew Gengos; Chief Scientific Officer, Dr. John Yu; and Vice President Finance and Principal Accounting Officer, David Fractor.

Following this introduction, Mr. Gengos will discuss the company’s performance and future outlook, Mr. Fractor will review the company’s financial results, and then the company will take questions.

If you have not received a copy of the second quarter 2014 financial results press release the company issued today, you can obtain one by visiting the company’s website at www.imuc.com.

ImmunoCellular would like to remind everyone that during the conference call, members of the management team will make certain forward-looking statements. Statements as to matters of events, historical facts as defined in the Private Securities Litigation Reform Act of 1995.

These statements involve risks and uncertainties that could cause actual events or results to differ materially from the events and include statements about our plans, objectives, expectations and intentions with respect to the potential and timing for success of our scientific approach to cancer immunotherapy and our ICT-107, ICT-121 and ICT-140 products, clinical development efforts, operations, financial conditions and other statements that are not historical in nature, particularly those that use terms such as will, potential, could, can, believes, intends, continues, plans, expects, projects, estimates or similar language.

Important factors known to us that could cause actual results to differ materially from those expressed in such forward-looking statements include those set forth in our most recent annual report on Form 10-K, quarterly reports on Form 10-Q and other reports filed with the SEC. Please review these and the company’s other filings.

Now, I’d like to turn the call over to ImmunoCellular’s CEO, Andrew Gengos.

Andrew Gengos

Thank you, Jane. Thank you for joining our call today. We welcome the opportunity to provide an update on our progress in the second quarter of 2014 and year-to-date and to review upcoming events.

Since reporting our first quarter results in May, we presented the updated ICT-107 phase II efficacy and safety data at ASCO. We had conversations with national regulators in Europe, and are preparing for additional discussions with the FDA and EMA. This level of activity has been quite intense, but our efforts have yielded a lot of valuable information and insights that, we believe, will benefit the ICT-107 program moving forward.

We know it is challenging for investors during periods like this when the company is focusing on execution between milestone events. We also know that something of a disconnect has emerged between our optimism and investor perception.

In today’s conference call, I’d like to try to align our collective views on the future of ICT-107 and ImmunoCellular in general. I’ll spend the next few minutes outlining what we have learned from our interactions with the larger neuro-oncology community, the biopharma community, and the regulatory bodies with whom we have been meeting.

Our hope is to demonstrate to all stakeholders that what we do next with the ICT-107 program will be well planned, well executed, and in your best interest.

Our ICT-107 phase II trial was designed primarily to answer two important questions; first, does the program warrant continued development; second, if so, how should we design the protocol to minimize the risk and cost of the next phase of development.

We think that the answer to the first question is yes, the program should go forward. We also think on the second question that we’ve gained considerable insight in how to design the next development step.

Let’s also acknowledge that the phase II trial design afforded the opportunity for us to explore another question. In a lethal disease like GBM, our phase II design, which incorporated both the control group and the primary endpoint required for registration, set up the potential for discussion with the regulators about approval had we been able to generate an unequivocally remarkable result.

Despite encouraging data from the phase II trial, it did not demonstrate a statistically significant survival benefit and for that reason, the possibility of obtaining approval was not something we could consider.

What matters now and what we are focusing on is the forward-looking question of how ICT-107 is positioned for further development. So, I’d like to outline what we learned from the trial based on the updated results we presented at ASCO and our subsequent preliminary discussions with regulators.

As a reminder, at the time of the ASCO update, we had 79 deaths out of the 124 patients randomized in the trial. The key findings are as following; we pre-defined both MGMT gene methylation status and HLA-type as sub-group characteristics for statistical analysis; HLA-A2 patients appeared to have a clear treatment benefit than HLA-A1 patients to-date.

We demonstrated clinically meaningful numeric treatment advantages in both overall survival and progression-free survival for the HLA-A2 patients with unmethylated MGMT. We demonstrated a statistically significant and very large treatment advantage for HLA-A2 methylated MGMT patients in progression-free survival. We’ve not had enough events in this group yet to observe a survival benefit for the treatment group, but the curve so far are trending positively in that way.

Our conclusion is that the HLA-A2 treatment signal is clearest now, and that we should prioritize this population for the next trial. HLA-A2 represents at least 50% of GBM patients in the United States. The HLA-A1 population experience may clarify more over time, but the clear implication is that we should sequence any further testing secondary to HLA-A2 testing.

We discussed the HLA-A2 data and our conclusions at ASCO with key members of the neuro-oncology community and received their endorsement for further testing. We’ve designed a phase III program that focuses on HLA-A2 patients, and we’ll be providing it to FDA shortly as part of our End-of-Phase II submission package.

It would be premature for us to discuss publicly all the details of this proposal until we get feedback from the FDA following this meeting, which is scheduled toward the end of the summer. I will say that we are proposing a trial design that could involve about 600 patients. This number could change as the design is discussed and finalized.

We’ve met with the European regulatory groups from Germany, England, and Holland, and received encouraging feedback on the ICT-107 program and the data we have generated to-date. They are supportive of our generating more clinical data and have recommended that we continue to focus on overall survival as the primary endpoint.

Based on their feedback, we have submitted a request to the EMA for advice that we expect to receive in October or November. This will inform a decision on whether or not to have EU sites in a phase III design.

Our understanding with the EMA was positively - our standing with the EMA was positively impacted by recent notification from the European Committee for Advanced Therapies that ICT-107 has been classified as an advanced therapy medicinal product, or ATMP. This classification gives us access to more communication opportunities with the European regulators and with more experience than senior staff.

It will enable tailored dialogue on regulatory frameworks and clinical development. Should we pursue trials in the EU, it will help us to gain access to the relevant services and incentives offered by the EMA. We interpret this classification as an endorsement of further ICT-107 development and look forward to future interactions with the EMA.

Thus, from the scientific and regulatory standpoints, we think we’re on solid ground in our interpretation of the trial results to-date in our clinical development planning. We’ve also considered the competitive landscape in GBM and how that may evolve during the period when we would be further developing ICT-107.

We think advancing the ICT-107 program makes sense and that the scenario in which we would conduct a single phase III trial for ICT-107 registration would be value creating for shareholders.

Not only have we been focusing on our clinical and regulatory strategies, we’ve also been active on the partnering front. In conjunction with ASCO and thereafter, we have held multiple exploratory meetings with potential biopharma partners.

We have two encouraging takeaways from these interactions. First, the biopharma executives are taking notice of our phase II results. Some of them expressed preliminary interest in partnering discussions should we decide to pursue that strategy.

Second, for those companies that have checkpoint inhibitor programs, there was acknowledgment that a combination trial with ICT-107 in the future could make sense. As we’ve discussed before, that combination approach is of interest to us as well, and we’re pleased that those discussions are continuing today.

We can’t predict the outcome of any of these early discussions, but we think the feedback to-date bodes well for maintaining a broad set of options for how we may further develop ICT-107.

We had a significant amount of internal operational planning and implementation ongoing as well. We’re especially pleased with our progress on the manufacturing front as our phase III commercial process is completed and ready for implementation. All the process development work is done, and can be applied to all three of our dendritic cell vaccines.

The initial work, as we’ve discussed previously, was focused on manufacturing ICT-140 and is also being introduced to ICT-121 manufacturing for the current trial. We have also identified two potential manufacturers in Europe, both of which are capable of supporting a clinical trial for ICT-107 should we embark upon that.

Putting the requisite pieces in place for manufacturing in that region, in the event of a phase III program, would be a matter of straightforward technology transfer.

We also plan to continue to monitor patients in the phase II trial and update the data analysis at upcoming scientific meetings. Toward that end, we’ve submitted an abstract to present updated survival and other data at the Society for Neuro-Oncology, or SNO, Meeting in November.

At that time, we should have several additional months of survival data to present. This additional data could clarify any potential long-term survival benefit for ICT-107 in unmethylated HLA-A2 patients, as well as give us a first view on median survival comparisons for MGMT methylated patients.

With proof of concept for our proprietary DC vaccine platform, we are increasingly excited to advance our ICT-121 and 140 programs. As you know, ICT-121 is ImmunoCellular’s dendritic cell-based vaccine targeting the cancer stem cell antigen CD133. The phase I trial was initiated as an investigator-sponsored study at Cedars-Sinai Medical Center in Los Angeles, which was the only site able to enroll patients.

As the patient population for this indication is not extensive, we determined that it was in everyone’s best interest to transfer the IND to ImmunoCellular, thus enabling us to add more sites for the study and expand enrollment efforts. So, over the last few months, we’ve been busy in making slight adjustments to the protocol to ensure consistency across multiple trial sites and interacting with investigational review boards, or IRBs.

We’re pleased to be nearing the end of this process and anticipate that enrollment should pick up speed. The basic aspects of the protocol are the same despite some minor adjustments. We’ll be looking at safety PFS and OS endpoints in this trial. Our current plan is to have six sites participating, and the anticipated enrollment of 20 patients is estimated for completion by the second quarter 2015.

We have also continued to make progress toward initiating the phase II trial for ICT-140, our seven antigen vaccine for ovarian cancer. As a result of turnover in the lead investigator for the trial, we’ve made some additional protocol adjustments based on additional investigative feedback, which we think is positive and streamlines the planned trial.

We now plan to enroll 56 patients, who will be treated with standard of care plus the ICT-140 vaccine, and we will no longer have an intra-comparative group, instead we will compare results to historical control data.

Patients will be enrolled in this trial - the patients to be enrolled in this trial will have a high risk of recurrence following completion of their first chemotherapy regimen. Endpoints will include safety, progression-free survival, overall survival, and important immunological parameters. This trial is not powered to identify a signal in progression-free or overall survival. It is an exploratory trial and designed to inform decisions on further ICT-140 development.

We’ve submitted the protocol for IRB approval at the five participating clinical sites. Site initiation activities are in progress, and we expect to be on track to initiate enrollment in the late third quarter or early fourth quarter. As a rough estimate, we expect enrollment to continue into 2016 and may consider adding additional sites as we gain experience on enrollment rates.

On the corporate front, as we previously discussed, we’ve made progress with tax planning and operational strategies through the establishment of subsidiaries in Bermuda and Ireland. This enables us to move our international intellectual property rights offshore and potentially operate clinical trials in the EU, and work with regulators directly rather than through consulting agents.

I’d like to emphasize that what we have done is quite straight forward and is common practice in the industry. It is not a form of the inversions that some pharma companies are undertaking. Our strategy is simply designed to enable us to operate more tax efficiently. As an ancillary benefit, this structure could increase our attractiveness as an industry partner, because U.S. pharma companies potentially could use offshore cash to partially finance partnerships with us.

On the business development front, we are continuing to actively evaluate opportunities to expand and diversify our immunotherapy platform. We’re convinced that now is the time to add to our pipeline and build our company. The immune-oncology field continues to be fertile ground for new anti-cancer approaches that harness the power of the immune system, many of which could be complementary to our current dendritic cell-based efforts.

Now, I’d like to ask David Fractor to review our financial results for the second quarter 2014, and then we’ll open up the call for questions. David.

David Fractor

Thank you, Andrew. For the quarter ended June 30, 2014, the company incurred a net loss of $2.2 million, or $0.04 per basic and diluted share, compared to a net loss of $150,000, or $0.00 per basic and diluted share for the quarter ended June 30, 2013.

The net loss for the second quarter of 2014 reflects a credit of $249,000 related to the revaluation of the company's warrant derivatives compared to a credit of $2 million in the quarter ended June 30, 2013. The valuation of the company’s warrant derivatives is highly dependent on the price of the company's stock.

For the six months ended June 30, 2014, the company reported a net loss of $5.4 million, or $0.09 per basic and diluted share, compared to a net loss of $5.1 million, or $0.10 per share, for the six months ended June 30, 2013.

The net loss for the six months ended June 30, 2014 included a charge of $167,000 related to the revaluation of the warrant derivatives and $312,000 of stock-based compensation. During the six months ended June 30, 2013, the company recorded a charge of $604,000 related to the revaluation of the warrant derivatives and $344,000 in stock-based compensation.

For the six months ended June 30, 2014, the company used $5.3 million in cash from operations, compared to $4.1 million during the six months ended June 30, 2013. The increase reflects additional research and development activities associated with enrolling patients in the company's ICT-121 trial and pre-clinical expenses related to ICT-140. The company continues to incur expenses associated with patient follow-up and data analysis related the phase II trial of ICT-107.

As of June 30, 2014, the company had $25.7 million of cash.

Andrew Gengos

Thank you, David. Operator, would you please now open up the call for questions.

Question-and-Answer Session

Operator

(Operator Instructions) First question is from Joe Pantginis of Roth Capital Partners. Your line is open.

Joe Pantginis - Roth Capital Partners

Andrew, I was just wondering, if maybe you can add a little more color, obviously you can’t talk to FDA feedback because you don’t have direct yet, but more to your comments about the broad set of feedback and options you got from the neuro-oncology community, so any color you can provide there. Obviously, the HLA concept has certainly resonated with them. What about looking to stratify based on MGMT status or any other options they may have discussed, that would be really helpful. Thanks.

Andrew Gengos

We learned a lot is the short answer. Let me sort of go into it a bit. I’d say there is two categories of feedback; one is relevant to phase III design; and the other is relevant to what else we could do with ICT-107 potentially in parallel to phase III.

Let me answer the second part first because it’s a quick answer. That is mostly a discussion around combination therapy, so we got some feedback on that. In the first category, I need to be careful, we made a very strong sort of emphasis on HLA-A2 patients in the ASCO presentation, and that is the basis for which we will use in going forward designing phase III.

However, the HLA-A1 patient population, it’s really unclear what’s going on there. It could be that that’s a population worth investigating further, but based on our priorities and our limited resources, it makes more sense to move forward with A2 in phase III now, and we certainly got confirmation of that from our investigators and other folks in the neuro-oncology community.

Now, in terms of MGMT, it appears that ICT-107 has a treatment benefit in both MGMT methylated and unmethylated patients, but as you know from talking with us and looking at our presentations, those two patient populations are just fundamentally different in their ability to respond to radiation and chemotherapy.

And so, one debate we had with the neuro-oncologists was whether we should run a trial that was similar to the phase II in that it was stratified for MGMT, in other words, the statistics took into account, the differences, potential differences in MGMT status between treatment and placebo or if we should run two distinct trials, one in each of the two MGMT groups, and so both of those options for phase III have their pros and cons, and our intention is to discuss that choice exactly with FDA in our End-of-Phase II meeting, and again I think there is a pathway forward with the single trial with both MGMT groups in it, and there is a pathway for utilizing two phase II trials, one for each MGMT group.

Practically, the patient numbers are similar in terms of one trial versus two, because the two-trial approach essentially sums to the one-trial approach, but there are some advantages, as I said, on either side of the equation. So, until we really talk with FDA about that, we won’t have a final trial design.

Joe Pantginis - Roth Capital Partners

And maybe just a quick follow up with regard to the planned FDA meeting later this summer as you said, what is your sort of plan, communication policy, do you think you will get some quick feedback following the meeting, or would you wait for the minutes which would happen, I don’t know, 30 to 60 days later, or when do you think we’d get some answers on the investment front?

Andrew Gengos

That’s a good question, and the honest answer is we haven’t thought about it yet. We will have obviously a 3Q conference call like this, but that would be most likely November, and if we waited for written minutes, then that would be coincident roughly with the November conference call.

I think I’ll reserve the right to decide later, because we really haven’t talked through that yet. We’ve been so focused, as you might imagine, in getting our FDA End-of-Phase II submission prepared and also the EMA advice submission prepared that’s coming up shortly too.

Operator

Thank you. Our next question is from Mara Goldstein of Cantor Fitzgerald. Your line is open.

Mara Goldstein - Cantor Fitzgerald

Can you just go over again the - you said you would need 600 patients for a potential phase III, is that correct?

Andrew Gengos

Yeah, you want me to - what’s the --.

Mara Goldstein - Cantor Fitzgerald

I guess the question is - I’m sorry, I apologize, I’m having trouble with the phone, but you enroll 600 patients in order to reach a certain number of those who will be eligible for treatment or it will be a 600 patient trial, I’m just trying to understand that.

Andrew Gengos

The number is roughly 600 randomized.

Mara Goldstein - Cantor Fitzgerald

Okay.

Andrew Gengos

As you know, you have to screen patients, a larger number of patients to get the number you randomize. In our last trial, there was a lot of unfortunate hand wringing in the language we used about enrollment versus randomized, because at that time, in order to test HLA status, you had to enroll a patient, you had to get informed consent to do that. So, I want to be clear this time when we say 600 or whatever the final number is, those will be randomized patients.

Mara Goldstein - Cantor Fitzgerald

And then, just with respect to some of the commentary around potential combinations, I know you are not necessarily at liberty to say a specific combination, but if you think about the landscape of checkpoint, in addition, and drugs and development, how do you think they would combine, or what would be the most likely clinical test trial scenario for ICT-701?

Andrew Gengos

You have to be a little careful. When you think about the checkpoint inhibitors, let’s just use the YERVOY example, because I think that’s probably most familiar with everybody. YERVOY’s registrational trial was in melanoma, and if you’ve seen the BMS folks tell that story, it’s a pretty fascinating story, but what is a very salient feature is you create -- they created a lot of inflammatory response in their patients that responded to the treatment.

So you might have seen pictures of large sort of inflammatory reactions on large pieces of people’s back or other parts of their skin, and so the concern that the checkpoint inhibitor companies have is that may be well and good when you are dealing with somebody’s skin, but do you really want to have that kind of reaction in the CNS.

So there is a, I think, appropriate level of caution about using checkpoint inhibitors in the CNS, and if you look carefully, at least, the earlier trials of YERVOY and frankly the others, they explicitly exclude patients with CNS metastases, and it’s most likely for this reason.

And so the concept of a combination with a checkpoint inhibitor, what we’re not proposing is that we put a third arm into our phase III, placebo, ICT-107 and then the combination with a checkpoint, that’s probably not appropriate at this time because of the potential unknown reaction that you might expect for the checkpoint inhibitor let alone the combination in the CNS.

And so what makes a lot more sense to us and those that are sort of in that discussion is that a small phase II that is two or three arms, each of the investigational treatments separately and then the combination might make the most sense, and so that’s really what the discussions have been around, how would design that trial, what endpoints are you using, and when is there enough dosing and safety information in the CNS for the checkpoint inhibitors knowing that we already have dosing and safety information that’s sufficient to move forward. Does that answer your question?

Operator

(Operator Instructions) And I’m showing no further questions at this time, I would turn the call over to Andrew Gengos for any closing remarks.

Andrew Gengos

Great. Thank you, Tyron. I want to thank everybody again for participating in today’s call and webcast, and we look forward to continuing to communicate with investors in the coming weeks and months, and to providing you with additional updates on our progress. Thank you very much, and good bye.

Operator

Ladies and gentlemen, thank you for your participation in today’s conference. This concludes the program. You may now disconnect. Have a wonderful day.

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