Start Time: 11:00 January 1, 0000 11:25 AM ET
CytRx Corporation (CYTR)
Q2 2018 Earnings Conference Call
August 06, 2018, 11:00 AM ET
Eric Curtis - President and COO
John Caloz - CFO
Raghuram Selvaraju - H.C. Wainwright
Good day, ladies and gentlemen, and welcome to the CytRx Corporation Second Quarter 2018 Earnings Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. [Operator Instructions]. As a reminder, today’s program is being recorded.
I would now like to introduce your host for today’s program, John Caloz, Chief Financial Officer. Please go ahead, sir.
Thank you, Jonathan, and thank you all for joining us on today’s call to discuss CytRx’s second quarter 2018 financial results. My name is John Caloz and I’m joined today by our President and Chief Operating Officer, Eric Curtis.
On the call today, Eric will make some introductory comments and provide a brief overview of the development programs and plans. Then, I will provide an overview of the second quarter financial results. Eric will provide some summary remarks. We will then open the call for your questions.
Earlier this morning, we issued a press release detailing CytRx’s results for the second quarter of 2018. The release is available on our Web site at cytrx.com.
Before we begin our formal comments, I will remind you that we will be making forward-looking assertions during today’s call that represent the company’s intentions, expectations or beliefs concerning future events, which constitute forward-looking statements.
All forward-looking statements are subject to factors, risks and uncertainties such as those detailed in today’s press release announcing this call and in our filings with the SEC, which may cause actual results to differ materially from the results expressed or implied by such statements.
In addition, any forward-looking statements represent our views only as of the date of this recording and should not be relied upon as representing our views as of any subsequent date. We specifically disclaim any obligations to update any such statements. We refer you to the risk factors section of the annual report on Form 10-K for the year ended December 31, 2017 for a discussion of important factors that could cause actual results to differ materially from these forward-looking statements.
I would now like to turn the call over to Eric Curtis. Eric?
Thank you, John, and good morning, everyone. Thank you for joining us on today’s call. This quarter has been driven by several corporate and financial achievements which have contributed to the evolution of CytRx and a furthering of our pipeline assets.
Most notably, the second quarter saw the launch of Centurion BioPharma Corporation, a private wholly-owned subsidiary of CytRx, which is focused on advancing our new personalized medicine strategy. Personalized medicine utilizes technology to target the right patients who can benefit from a certain type of treatment.
One of our first steps in executing this strategy was the development and the filing of a provisional patent for our new companion diagnostic we call ACDx or albumin companion diagnostic. Its purpose will be to identify patients who are the best candidates to receive treatment from our lead drug assets; LADR-7, LADR-8, LADR-9 and LADR-10 as well as from any albumin-binding drugs we may generate in the future.
In doing so, we believe patients will gain higher response rates to treatment with LADR and the promise of better outcomes for patients makes personalized medicine highly attractive to oncologists and pharmaceutical companies. The creation of Centurion BioPharma Corporation is a significant endeavor that we believe will help to unlock the consolidated value of our pipeline by enhancing our efforts to attract strategic partners.
With maximizing shareholder value as a top priority, the CytRx Board and management team unanimously determined that a tax-free separation of the LADR platform and assets developed at our laboratory facilities in Freiburg, Germany was the best way to attract licensing partners.
As our research and development focused subsidiary, Centurion BioPharma Corporation has exciting plans for our companion diagnostic. ACDx utilizes new imaging agents to radiolabel albumin and when used in combination with state-of-the art imaging techniques, allows for detection of albumin uptake and distribution in the patient’s tumor.
Since our LADR drug candidates are albumin-binding drugs, we believe the response rates will be higher in the selected patients who test positive with this proprietary companion diagnostic.
In preclinical testing, we have seen that ACDx does identify albumin in xenograft tumors. As President and Chief Executive Officer of Centurion, I will be utilizing my experience in both development and commercialization of new medicines to further our programs and secure a strategic alliance.
Our leadership team consists of the inventor of ACDx and LADR, Dr. Felix Kratz, Vice President, Drug Discovery and Dr. Andre Warnecke as Senior Director, Drug Discovery and John Caloz, our interim Chief Financial Officer.
In the rapidly evolving field of oncology, extensive resources are being devoted not only to the discovery and development of innovative drug regimens, but also to companion diagnostics to provide targeted therapies that better serve individual patients.
We believe ACDx strengthens Centurion BioPharma’s competitive advantages and affirms the ability of LADR to be studied in multiple tumor types, making our pipeline significantly more valuable to strategic partners.
Personalized medicine and companion diagnostics are at the forefront of biomedical research today and we are excited to be part of the push to treat cancer with more precision.
To recap some other key highlights from the second quarter, we presented positive data for the next LADR drug candidates at the prestigious American Association for Cancer Research 2018 annual meeting in Chicago. PDF copies of this data can be accessed in the Investor Relations section of CytRx’s Web site under Presentations.
For CytRx, there were also several achievements during the quarter made by aldoxorubicin licensee NantCell. They initiated a third Phase 1b/2 clinical trial evaluating aldoxorubicin combined with immunotherapy or NantCell’s proprietary high affinity natural killer cell therapy in patients with triple negative breast cancer.
The first trial in pancreatic cancer patients commenced in January 2018 and the second trial for patients with advanced squamous cell carcinoma commenced in February 2018. The initiation of this third clinical trial speaks to NantCell’s commitment to investigating aldoxorubicin in combination with their proprietary haNK cell therapy and working to identify effective treatment alternatives for women challenged by triple negative breast cancer in aggressive and very difficult to treat type of breast cancer.
At the American Society of Clinical Oncology, ASCO, 2018 annual meeting in June, NantCell showed data from clinical trials of aldoxorubicin in a poster presentation. The presented data showed that aldoxorubicin, alone or in combination with ifosfamide, lacks cardiotoxicity with doxorubicin equivalent doses beyond 1000 milligrams per meter square. This data adds to the growing body of evidence showing that aldoxorubicin may be able to improve antitumor activity without typical doxorubicin-associated cardiac toxicity.
Also in June, aldoxorubicin was highlighted in the peer-reviewed journal Future Oncology. The paper discusses the albumin-binding mechanism of action, pharmacokinetics, preclinical studies, clinical trial data and the safety profile of aldoxorubicin. It also discusses its relevance in the future treatment of patients with sarcoma, or in patients who have other anthracycline sensitive tumor types, while avoiding cardiotoxicity. The paper can be accessed online on the Future Medicine Web site.
We look forward to further clinical development of aldoxorubicin and NantCell’s continued efforts to bring the drug to patients in need as an alternative to highly toxic doxorubicin.
I’ll now turn the call back over to John Caloz, our Chief Financial Officer, to discuss the financials as well as several corporate events that positively impacted CytRx’s balance sheet and improved our placement in the capital markets. John?
Thank you, Eric. Since we issued a press release earlier today outlining our financial results, I’ll just review our second quarter 2018 financial highlights. Most notably, CytRx has dramatically reduced its monthly cash burn rate and expects to continue to manage its cash effectively.
Cash and cash equivalents as of June 30, 2018 totaled $36.4 million. Net loss for the quarter ended June 30 was 3 million, or $0.10 per share, compared with a net loss of 14.4 million, or $0.60 per share, for the comparative 2017 period, a reduction of 11.4 million, or approximately 79%.
During the second quarter of 2018, the company recognized a non-cash gain of $100,000 on the fair value adjustment of warrant derivative liabilities related to warrants issued in 2016 compared to a non-cash loss of 4.3 million during the second quarter of 2017.
Research and development expenses were $800,000 for the second quarter of 2018, which represents approximately $600,000 for the development of the albumin companion diagnostic and $200,000 for non-cash expenses. In the second quarter of 2017, R&D expenses of 6.2 million included 4.3 million related to our aldoxorubicin program and $900,000 for non-cash expenses.
General and administrative expenses were 1.7 million for the second quarter of 2018 compared with 3.1 million for the second quarter of 2017, including non-cash stock-compensation expense of $400,000 for the second quarter of 2018 and $500,000 for the second quarter of 2017. G&A expenses, or general and administrative expenses decreased by approximately 46% primarily due to a decrease in professional fees.
In July, we announced the expiration of warrants for approximately 3.2 million shares of our common stock. We believe that the expiration of these warrants, the majority of which were associated with a public offering in December 2016, eliminates overhang and provides additional common share float stability.
Last Wednesday, we announced we had made the final scheduled payment under a long-term loan facility agreement with Hercules Group. As of August 1, 2018, the Hercules loan was paid in full, which eliminated all of CytRx's outstanding debt.
Finally, CytRx was added to the Russell Microcap Index, effective upon the market open on Monday, June 25, 2018. The Russell indexes are broadly referenced as benchmarks by active investment strategists and institutional investors for index funds. We are very pleased to be listed on this important index.
With that, I’ll turn the call back over to Eric.
Thank you, John. In addition to the recent corporate events John outlined, we’ve also been diligently working to strengthen our institutional investor base and highlight CytRx’s accomplishments in plans to a broad Wall Street audience.
To that end, we participated in multiple institutional investor conferences in recent months. At these events, we made formal presentations and had one-on-one meetings with institutional investors.
We’re extremely proud of the achievements we have made over the last several months and our major goal is to secure a strategic partnership for our companion diagnostic and high potency LADR drug candidates before the end of 2018. The strategic partnership will determine the path forward for LADR IND-enabling studies and the filing of an IND with the FDA.
As we look forward to the balance of 2018, we are a very focused company. We believe there is significant opportunity ahead and our goal is to create a new class of rationally designed breakthrough drugs to treat patients with cancer.
This concludes our prepared remarks. I’d now to like turn the call over to the operator to open the line of questions. Operator?
Certainly. [Operator Instructions]. Our first question comes from the line of Raghuram Selvaraju from H.C. Wainwright. Your question please.
Hi. Thanks so much for taking my questions. Firstly, I just wanted to ask about a small point of clarification regarding the LADR candidates and the efforts to secure a partnership. Is it to be my understanding that you definitely would not proceed into an IND submission without a partner onboard?
Hi, Ram. This is Eric. Thank you for your question. It’s out intent to be able to secure a strategic partnership in order to have an aligned position with that strategic partner before we would move forward with an IND, and that’s our going assumption. We think that gives us the best chance to get a strategic alliance in place, because if we aren’t aligned at the table there could be some points that would get us off track. So the very specific answer to your question is we want to get aligned with our strategic partner before we would move forward towards an IND.
Okay. And then secondly, I wanted to ask about the specific status of the patent application on the diagnostic because it’s my understanding that this application is only recently filed and has not been published yet. Could you confirm that is indeed the case and thereafter could you also give us a sense of when you might be looking at the timeframe for actual grant or issuance or allowance of this patent? Thank you.
Thank you, Ram. That’s a good question and it is very recent filing for the provisional patent, so it’s just very recently in late July when we had filed for the U.S. provisional patent. And as is typically the case here, it takes time for these to become published. So when that is available, we certainly would let you know and others know that it is available but currently these things take a little bit of time for the system to be able to catch up to them.
Okay. And regarding the timeframe for issuance, do you think it’s going to be a couple of years probably?
Typically, that’s what we would expect to see, Ram, and I think obviously that has no concern for us. We think that’s the typical process in that we believe that we’re on track for everything we need to do to protect our intellectual property.
Okay, great. And then just one last quick question. Assuming that everything moves forward as planned with securing a partnership on one or more of the LADR candidates before the end of this year, how do you guys see R&D spending trending over the course of the second half of this year and beyond compared to the spending levels of the second quarter?
Yes, Ram, so I think that when you think about the partnership aspects, a lot depends on what the actual agreement would say. So there’s many different variations that a strategic partnership can take on which involves some level of spending whether it’s from the R&D perspective or in other areas. So I think a lot of what your question evolves around is the type of the specifics of the strategic partnership. What I would say in general is that our preference is to be very mindful of the expense of these programs and to try to be able to have a partnership in place to help us further than as quickly as possible. As you know, we have four of these assets that are eligible for IND-enabling studies and we want to be able to get to that point as quickly as we can, and we do feel like the best way to do that is through a strategic partnership. John, did you want to add anything to that?
No, you’ve – essentially, I was going to answer the question very similar to the way you did, Eric. We have not projected a significant ramp up in those expenditures until we know for certain what structure of that partnership would look like, which is exactly what you said.
I hope that answers your question, Ram.
Yes. Thank you very much.
Thank you. Our next question comes from the line of Rob Brook from Tribeca Partners [ph]. Your question please.
Thanks very much. Good morning and thanks for taking the question. A real quick one here. You mentioned a reduction in the cash burn during the quarter. What is the current burn rate and how does that translate into your current cash runway? Thanks very much.
Thanks for the question and yes, we’re very pleased that we have been able to reduce our burn significantly. The average burn that I project, excluding the payoff of the Hercules loan which took place on August 1 and which is included in the burn for the next 12 months in this 10-Q of $9.8 million, if you exclude that, the average is approximately $850,000 a month and that’s the runway for the next 13 months which is what I have in the projections.
Great. Thanks very much.
Thank you. [Operator Instructions]. Our next question comes from the line of Tim McPherson [ph], a private investor. Your question please.
Yes, I was wondering what was the rationale or even planning for creating [ph] Centurion into a wholly-owned private subsidiary?
Thank you, Tim. I think if I have your question right, your question is what’s the rationale for creating Centurion BioPharma as a wholly-owned private subsidiary. Is that correct?
Yes, sorry. That is.
Okay, great. I think you’re breaking up just a little bit but if that’s the question, then Tim this was a strategic decision that we made to unlock the consolidated value as we view it of our pipeline assets. We think that by creating this new subsidiary that’s wholly-owned by CytRx, we think that it creates value for CytRx by strengthening our efforts to attract a large pharma partner in order to advance our albumin binding ultra-high potency LADR drug candidates. And when you think about a company like Centurion BioPharma, they can be totally focused on doing the things to advance these candidates.
We felt that that was the best way to attract a strategic partner. And I can tell you that in my discussions, extensive discussions with pharmaceutical partners, potential partners in these last few months, I can tell you that the idea was well received that Centurion BioPharma Corporation is viewed as a company that has a lot to offer and we will see where things go with the strategic alliance progress. But so far the decision to go with Centurion BioPharma as a wholly-owned private subsidiary has been in our view a good move.
All right, thanks. And one more question. When do you anticipate the NDA to be filed for aldoxorubicin?
Yes, great question as well. The aldoxorubicin of both the regulatory proceedings and the commercialization as you know is controlled by NantCell as that was out-licensed to NantCell in July of 2017. So all of the activities related to FDA, the progress with FDA or the process in which that would be taken is a decision for NantCell to make about how it’s communicated and when. So we won’t be able to share anything about the specifics on this only to say that we are fully confident that NantCell is taking the right steps that is a very reasonable effort in what they are doing and we have full confidence that they have the right resources and people and things in place to be able to take on this task to be in the process of seeking out further regulatory process with aldoxorubicin. I hope that answers your question, Tim.
Thank you. Our next question comes from the line of Doug Ralph [ph], a private investor. I think he just removed himself from the queue actually. [Operator Instructions]. And I’m not showing any further questions in the queue at this time. I’d like to hand the program back to you, Eric Curtis, for any further remarks.
Thank you everyone for joining us on today’s call. We certainly are looking forward to the next few months and years to come for our new private subsidiary and of course for CytRx as well. We think that we have many exciting days ahead and we look forward to continuing to update you on progress as it is available. Thank you, again. Take care.
Thank you, ladies and gentlemen, for your participation in today’s conference. This does conclude the program. You may now disconnect. Good day.