CytRx Corporation (CYTR) Q3 2018 Results - Earnings Call Transcript

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About: CytRx Corporation (CYTR)
by: SA Transcripts

CytRx Corporation (NASDAQ:CYTR) Q3 2018 Earnings Conference Call November 2, 2018 11:00 AM ET

Executives

John Caloz - CFO

Eric Curtis - President and COO

Analysts

Raghuram Selvaraju - H.C. Wainwright

Operator

Good day, ladies and gentlemen, and thank you for standing by. Welcome to the CytRx Corporation Third 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 follow at that time. [Operator Instructions]. As a reminder, this conference call is being recorded.

I would now like to introduce your host for today's program, John Caloz, CFO. Sir, please begin.

John Caloz

Thank you, Howard, and thank you all for joining us on today's call to discuss CytRx's third quarter 2018 financial results. My name is John Caloz and I'm joined today by our Chief Operating Officer, Eric Curtis.

On the call today, Eric will make some introductory comments and provide a brief overview of our recent accomplishments and future plans. Then, I will review the third quarter financial results. Eric will provide some summary remarks. And 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 website 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?

Eric Curtis

Thank you, John and good morning, everyone. Thank you for joining us on today's call.

Today, 2018 has been a year of significant progress and achievement for CytRx, marked most notably by the formation of our wholly owned subsidiary Centurion Biopharma and the meaningful advances seen with our Linker Activated Drug Release or LADR drug candidate's albumin companion diagnostic or ACDx. These assets were developed by our world-class drug development team at our state-of-the-art laboratory facility in Freiburg, Germany.

During the third quarter, Centurion filed a U.S. provisional patent application covering our unique ACDx technology. The U.S. provisional application will serve as the priority application for the filing of subsequent worldwide patent applications directed to this diagnostic method. This breakthrough personalized medicine companion diagnostic will be used alongside our albumin binding ultra-high potency later drug candidates to identify patients will be most likely to benefit from the treatment with Centurion's pipeline access. LADR-7, LADR-8, LADR-9 and LADR-10.

ACDx can also be used with any albumin binding drug candidate that Centurion may advance into development in the future. ACDx is unique, because it utilizes innovative imaging agents to radio label albumin and when used in combination with state-of-the-art imaging techniques allows for detection of albumin uptick in the patient's tumor. Since our LADR drug candidates are albumin binding drugs, we believe we will be able to achieve higher, more predictable response rates in the selected patients identified by ACDx.

ACDx is an important addition to our portfolio, because it will offer physicians the ability to determine a cancer patient's unique physiological tumor characteristics and to use these distinctions to select an albumin based LADR drug candidate that will increase the likelihood of a successful outcome while reducing possible adverse reactions.

ACDx also has the potential to enhance the effectiveness of future clinical trials evaluating LADR 7, 8, 9 and 10 and to accelerate the development process and the time to market.

The co-development of our LADR drug candidates together with the proprietary ACDx technology will prove to be an advantageous strategy to expedite these novel albumins binding ultra-high potency anticancer agents from the bench to the bedside.

For those of you who may be new to this story, the LADR platform is a wholly owned discovery engine combining our expertise and linker chemistry with human albumin biology to create a pipeline of anti-cancer molecules that deliver albumin binding ultra-high potency anti-cancer agents directly to the tumor while minimizing unacceptable systemic toxicity.

To-date, four new drug candidates across two distinct classes of compounds [indiscernible] have been created. Worldwide patents have been filed on these assets and each has completed initial laboratory testing and are eligible to advance into investigational new drug enabling studies. In addition to creating a more valuable pipeline for Centurion, we believe an ACDx enhances the attractiveness of our portfolio for potential strategic partners.

In a 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 firmly believe that ACDx significantly strengthens insurance competitive advantages and affirms the ability of the LADR assets to be studied in multiple tumor types, including melanoma, renal cell carcinoma, ovarian, head and neck, breast and lung cancers. Making our pipeline significantly more sought after and valuable.

This new intellectual property for which provisional patents have been filed by Centurion is an important component of the overall LADR value proposition and will enhance our efforts to further advance these unique promising assets with the overarching goal of bringing these albumins binding ultra-high potency drug candidates to the physicians and patients who need them.

On the topic of a strategic partnership with a pharmaceutical company, we are continuing to tell the personalized medicine story of our pipeline and its value to global pharma companies for a potential strategic alliance. We have had many interactions with pharmaceutical companies and educated them on our groundbreaking technology. With several companies deciding to enter into a CDA with us.

We have learned that companies are interested in our personalized medicine strategic approach and pipeline. We have observed that there is a promise for chemotherapy combined with immunotherapy in Big Pharma emerging treatment trends. Just recently, the FDA approved the combination of Merck's KEYTRUDA in immunotherapy and chemotherapy for first line treatment of metastatic squamous non-small cell lung cancer.

Other promising clinical data in triple negative breast cancer were recently reported by Genentech, combining tech centric and immunotherapy and ABRAXANE, a type of chemotherapy originally developed by Dr. Patrick Soon-Shiong of NantCell. These combinations of immunotherapy and chemotherapy represent a potential enormous opportunity for the Centurion Biopharma pipeline over time.

NantCell Inc. the license or aldoxorubicin understands this important emerging trend. And earlier this year, they initiated three Phase 1 B2 clinical trials investigating high affinity natural killer or HANK cell therapy in combination with several anticancer agents, including aldoxorubicin in certain high unmet need cancer indications, including advanced head and neck squamous cell carcinoma metastatic pancreatic and triple negative breast cancers.

NantCell privately held company is in control of all the future aldoxorubicin milestones, so we cannot speak to event timing for these trials. However, given their past experience with albumin binding drugs, we are confident in their ability to maximize the clinical and commercial potential of aldoxorubicin for patients with STS and other difficult to treat malignancies.

In addition, NantCell will be presenting a poster entitled Nant Cancer Vaccine in Orchestration of Immunogenic Cell def by overcoming immune suppression and activating NK and T-cell therapy in patients with third line or greater triple negative breast cancer and head and neck squamous cell carcinoma. The poster number is P310. The abstracts along with the date and time details are scheduled to be announced this coming Tuesday November 6, at 08:00 A.M. Eastern.

In addition to finding better treatments for these patients with high unmet need cancers there is an equally urgent need for better cytotoxic agents. Once they can administer in higher doses while avoiding the commonly associated toxicities. The approach of combining immuno-therapy and chemotherapy on targeted agents is clearly becoming the wave of the future for the treatment of cancer and Big Pharma our leading needs breakthroughs.

Centurion and CytRx are thrilled to be a part of this emerging movement. In addition to these emerging oncology trends we are continuing discussions with Pharma where we are positioning the value of our pipeline and we'll work diligently to continue to develop our ground-breaking drug candidates for patients who so desperately need help to fight cancer. Our goal remains to close a strategic transaction this quarter.

Turning now to the parent company CytRx. The third quarter saw a number of positive developments on the corporate and financial front. In September, we received our first milestone payment from Orphazyme AS. This payment was a result of Orphazyme dosing the first patient in their Phase 3 clinical trial evaluating Arimoclomol in patients with amyotrophic lateral sclerosis or ALS.

Orphazyme is testing Arimoclomol in three additional indications beyond ALS including Niemann-Pick disease Type C, Calcia Disease and sporadic inclusion body myositis. If Arimoclomol is approved for Niemann-Pick disease in Europe CytRx will receive a $4 million milestone payment plus royalties.

Addition Arimoclomol milestones include a $6 million payment upon approval in the U.S. and a $2 million payment upon approval in Japan plus royalties on net sales in all territories. In August CytRx also announced that it made a final schedule payment under its long-term loan agreement as of August 1, 2018 the loan was paid in full which extinguish all of CytRx's outstanding debt. And finally, in July 2018 CytRx announced the exploration of its warrants for approximately 3.2 million shares of common stock.

We believe the exploration of these warrants the majority of which were associated with a public offering in December 2016 eliminated overhang and provides additional common share float stability. Collectively all of these events improve our overall capital structure.

With that, I'll turn the call over to John Caloz our Chief Financial Officer to provide an overview of the financials. John?

John Caloz

Thank you, Eric. Since we issued a press release earlier today outlining our full financial result. I will just review our third quarter 2018 financial highlights.

Cash and cash equivalents as of September 30, 2018 totaled $24.7 million. This includes the $250,000 milestone payment from Orphazyme that was received during the quarter. Net loss for the third quarter 2018 was $3.3 million or $0.10 per share compared to a net loss of $5.1 million or $0.19 per share for the third quarter of 2017, a reduction of $1.8 million or approximately 36%.

If you exclude the non-cash gain of $3.8 million on the fair value adjustment of warrant derivative liabilities realized in the comparative 2017 period. The reduction in net loss this quarter was $5.6 million or approximately 64% less than the third quarter of 2017. In other words, our burn rate has substantially decreased.

Research and development expenses were $900,000 for the third quarter of 2018, which represents primarily expenses for the development of ACDx. In the third quarter of 2017, R&D expenses of $4.8 million included $3.7 million related to LDAX program and its clinical support, and $1 million for pre-clinical development of new albumin binding ultra-high potency cancer drugs, what we refer to as our LADR candidates.

General and administrative expenses for the third quarter of 2018 were $2.4 million compared to $3.4 million for the third quarter of 2017. G&A expenses decreased by approximately 31% primarily due to a decrease in professional fees. As I stated earlier, as a result of the above, we have significantly reduced our burn rate. Based on our currently projected expenditures for the next 13 months as will be disclosed in our 10-Q which we planned to file later today, our monthly burn rate is estimated at approximately $700,000 per month.

With that, I'll turn the call back over Eric.

Eric Curtis

Thank you, John. We are proud of the achievements we've made so far in 2018. Looking ahead to the remainder of the year, we are laser focused on enhancing our fully owned pipeline of assets, including the four-albumin binding ultra-high potency LADR drug candidates and positioning the value of our personalized medicine pipeline. We believe there is significant opportunity ahead and we are confident that we have the team and the expertise to achieve our objective of creating a new class of rational designed breakthrough drugs to treat patients with cancer while building future value for all of our shareholders.

This concludes our prepared remarks. I would now like to turn the call over to the operator to open the line for questions. Howard?

Question-and-Answer Session

Operator

[Operator Instructions] Our first question or comment comes from the line of Ram Selvaraju from H.C. Wainwright. Your line is open.

Raghuram Selvaraju

Hi. Thanks very much for taking my questions. Eric few for you. Could you clarify whether the companion diagnostic modality will be equivalently applicable to any LADR drug candidates, or whether you expect it to be more relevant comparatively speaking to some or one of them in particular?

And secondly, if you could maybe give us an overview of what's been going on, on the IP front specific to the companion diagnostic? And if you have received any office action notification or when you anticipate that that might potentially happen?

And then thirdly, if you could comment on the nature of the licensing discussions that you're having. If you could just illustrate for us qualitatively whether you anticipate those to be more on the products candidate specific side or whether you expect it to be more on a technology platform licensing side. Thank you.

Eric Curtis

Thank you, Ram. Nice to speak with you again. Let me just address your questions one-by-one. The first one with the companion diagnostic is that it was designed to be able to work together with all of the LADR candidates. LADR 7, 8, 9 and 10, they are albumin binding drugs. And so, we have not designed this program to favor one of the compounds at this point. We have designed it to be able to be flexible to utilize to be utilized with any of our LADR candidates. And we believe that if we develop the future albumin binding drug conjugate that ACDx could be utilized alongside those as well for future discovery work.

As it relates to the intellectual property for ACDx Ram, we have seen everything progressed exactly as we would expect at this point. We don't have any issues or irregular things that are happening everything has gone very, very well and according to plan there is no feedback to be able to express at this point. That would give us any sort of indication one way or the other that there is going to be some formal work that will come from the processing of the patent.

Everything is going exactly the way that you would think and as you know oftentimes these patents can take some time to work through. So, we are very pleased with where we are on that front.

Last question you asked about was the nature of discussions and what I'll just say very high level is that we've had many discussions with various pharmaceutical companies as you know, and you've heard in our prepared remarks we were under CDA with several of those companies.

So, we won't be able to share anything more specific than that other than to say we have had very I think productive discussions. The companies are very interested in our technology. We do think that adding ACDx as a companion diagnostic into our development plan was a very good move, because it puts us in the same category as a lot of cutting-edge research and development programs are today.

We believe that this is a highly coveted concept in personalized medicine and oncology and so we're very encouraged by the potential for ACDx to help us, help physicians find the right patients to treat and to have high response rates in our clinical trials and in the real world when the time comes with our LADR albumin binding drug conjugate.

So, I hope I answered all of your questions there, Ram.

Raghuram Selvaraju

Yes indeed. Thank you very much. Very helpful.

Eric Curtis

Thank you.

Operator

Thank you. Our next question or comment comes from the line of Greg Calendar [ph] private investor. Your line is open.

Unidentified Analyst

Thank you very much. I have a question. Earlier this year on a call you referenced partnership deals and talked about the benchmark upfront payments I think it's a $120 million and I was wondering in terms of how we might think about a potential LADR partnership in this case is that a reasonable sort of ballpark with the type of upfront payments you're hoping to accomplish?

Eric Curtis

Greg, thank you for your question and you're remembering accurately the number itself was an average of recent pre-clinical oncology deals that were struck in, I believe in the last three years. And in this situation, you could remember that includes all technologies whether it would be something that would be related to immunotherapy or CAR-T or all kinds of other things that happen and so we don't know, and I won't be able to express what if the partnership details will look like what the specifics around the value will be.

What I can share with you Greg is what I expressed earlier that I think everything that we are doing is giving us the best opportunity to get the best deal for us. We have now this companion diagnostic added into our development program, which will be able to help us select the right patients, which is enormously valuable for your clinical trial results because when you are looking at patients, you want to be able to screen out patients that won't get a predictable good benefit from drug treatment with your own products and so, they'll need to get treated with something else.

But those that are likely to have very good response, you would want to put into your trial because obviously they'll get the benefit, it's the most important thing. But then secondarily, you'd show a very favorable response rate in the clinical trial which is going to pay off for the company and for the program in general.

So, I think we are obviously still mindful of what those numbers are reflective of what you've just stated, but I think at this point and on this particular call, we won't be able to comment too much further on that Craig. Thank you for your question.

Unidentified Analyst

Appreciate it.

Operator

Thank you. [Operator Instructions] I'm showing no additional audio questions in the queue at this time. I'd like to turn the conference back over to management for any closing remarks.

Eric Curtis

Thank you, Howard. And I'd like to thank everyone for joining us today on the call. We are extremely excited about the remainder of 2018 and we believe we have a very bright future ahead of us and so we wish you all a very pleasant rest of your day and a good weekend coming up. Thank you.

Operator

Ladies and gentlemen, thank you for participating in today's conference. This concludes the program. You may now disconnect. Everyone have a wonderful day.