IMMUNE PHARMS INC (IMNP) CEO Tony Fiorino reviews Corporate Update Conference Call (Transcript)

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IMMUNE PHARMS INC (OTCQB:IMNP) Corporate Update Conference Call November 27, 2018 8:30 AM ET


Tony Fiorino - Interim Chief Executive Officer



Greetings. And welcome to the Immune Pharmaceuticals Corporate Update Conference Call and Webcast. At this time, all participants are in a listen-only mode. [Operator Instructions] As a reminder, this conference is being recorded.

I would now like to turn the conference over to your host Dr. Tony Fiorino, Interim CEO for Immune Pharmaceuticals. Thank you. You may begin.

Tony Fiorino

Thank you. Good morning or good afternoon. I want to thank everyone for joining me on this call. And I apologize for postponing the call by a week. We were quite deep in our negotiations with both debenture holders and regarding Ceplene, and it made more sense to delay the call as we try to resolve both matters. Before we begin, I would like to remind our listeners that my remarks may state management's intentions, hopes, beliefs, expectations or projections of the future including without limitation those regarding clinical trial timelines, presentation of results and partnering plans.

These are forward-looking statements that involve risks and uncertainties. Forward-looking statements on this call are made pursuant to the Safe Harbor provisions of Federal Securities Laws. These forward-looking statements are based on the company's current expectations and actual results could differ materially. Accordingly you should not place undue reliance on any forward-looking statements. Some of the risk factors that could cause actual results to differ materially from those contemplated by such forward-looking statements are discussed in the periodic reports that the company files with the SEC.

These documents are available in the Investor section of the company's website, and we encourage you to review these documents carefully. One note, I will not directly be addressing the forthcoming shareholder vote because of SEC regulations, however, the matters I am discussing are of course important for shareholders know and consider. Before discussing this morning Ceplene announcement, I would like to discuss the May convertible debentures. This debenture was designed to be a bridge financing that the company entered into in May 2018 with the objective of paying the loan back with the proceeds of a larger financing to be completed over the summer.

This larger financing never happened and the delisting from NASDAQ triggered a default in the notes. When I was appointed Interim CEO, these notes were in default and we were able to negotiate with the debenture holders for a waiver of the defaults and an agreement that allowed the October financing to take place. At the time and as you have no doubt seen from our 10-Q filing, the company had very little cash left in the bank and few options. Since then as we completed our proxy statement 10-Q filing and the registration statement for the October 2018 financing, we also engage in further negotiations with the nine funds holding the debentures to try to extend the maturity date of the loan, and therefore avoid multiple consequences, including the potential conversion of shares that we do not have available to issue causing the company to incur additional damages.

And the occurrence of a so called trigger event in the October 2018 debenture which creates a higher interest rate, lowers the conversion price on interest and removes the company's right to redeem the debenture early. Although, we did reach agreements with several of the debenture holders, there are ongoing discussions and negotiations with others and unfortunately we were not able to come to an agreement with all of the debenture holders to extend the maturity of a note. We have continued to negotiate with them and will continue to do so. I had hoped that this could have been resolved last week. And then after delaying the call I had hoped that by yesterday all nine would have agreed to extend but we did not get there yet.

We are continuing to try to come to a solution that will buy some more time with these notes as we clearly do not have the funds at the moment to repay the debt nor do we have the stock available to issue upon conversions. Moreover, we are vigorously disputing the claim made by certain debenture holders that this default results in an additional set of liquidated damages. We will provide updates on the status of the negotiations to extend the maturity of these notes when there are any material changes.

I want to address one specific issue relating to the companies financing that has been brought to my attention. All of our financing since I've been at the company, and by that I don't mean to imply otherwise or other any prior transactions, and I was not here so I'm not personally familiar with them. None of these transactions were done within --all of these transactions were done with institutional investors or accredited individual investors. None of whom can be considered insiders of the company.

Let me state this very clearly, no employee or board member of the company participated in or would have been allowed to participate in these financings. No employee or board member of this company benefits in any way from the declining share price. These matters all relate directly to the problem that the company has within inadequate authorized share count. In order to finance the company going back many years, Immune has sold various kinds of convertible securities either preferred stock or debt which convert into common shares that the company must issue, often these kind of adjustable conversion prices.

Many of you have referred to these securities as toxic as they can result in substantial dilution to existing shareholders in the face of a falling stock price in a reset of the conversion price. These deals also at least sometimes allow companies to avoid bankruptcy to complete clinical studies, develop products or get partnering deals done. These types of financings are very common in a small and micro cap biotech space, where companies do not often have the luxury of high valuations, elevated share prices or product revenues to support other kinds of financings.

The company currently has 225 million shares authorized to issue, about 50 million of which are issued. The remaining shares are not enough to satisfy our current obligation between our Series E convertible preferred and May convertible debentures and the October convertible debentures, we are potentially obligated to issue to those investors far more share than 225 million. This is a problem for the company as there are severe financial damages that we are exposed to when we cannot deliver shares upon a conversion request. It is the presence of these securities and their capital structure and on our balance sheet that convinced me in September that bertilimumab partnership was the only answer for the company.

Because only a bertilimumab partnership has the potential to bring in enough capital to pay off the notes and avoid the issuance of potentially hundreds of millions of Immune shares. So it is my most fervent hope that Immune never needs to issue hundreds of millions of shares of stock that bertilimumab will attract transaction will allow us to pay off a large portion or even all of the convertible debt. It is only in this way that we can expect some normalization of the stock price. As we know, there is persistent selling pressure on Immune's shares as holders of these securities convert shares and sell.

Now I'd like to turn to the Ceplene transaction that we announced this morning, which is a great deal for Immune. In 2017, we reacquired rights to Ceplene outside of North and South America from Meda for $5 million plus some future sales milestones. With the strategic refocus away from oncology and the decision to divest the oncology assets in May of this year, we sought to divest this program. Since July several parties have expressed interest in acquiring European or worldwide Ceplene rights, and we have been in negotiations with two serious counterparties since then.

We are happy to have brought together an option deal that provides some modest short-term financing for the company and which will lead to a much larger transaction upon closing. The deal we signed with Vector Therapeutics gives them in exchange for $500,000 the right to acquire global Ceplene rights from us for a total consideration that could exceed $17.5 million depending on the precise extent of Ceplene related liabilities assumed or paid by Vector. Most importantly, these terms feature non-contingent cash payments of $14.5 million through year-end 2022, and the satisfaction of the outstanding liabilities owed by Immune to Meda. Vector's option gives them the right to acquire Ceplene at these terms until January 31st, 2019, and they can extend that right for another month for an additional $100,000.

The terms of the deal are quite attractive to Immune for several reasons. The upfront consideration including the option payment will result in $5 million coming into Immune by the end of Q1, 2019, with the remaining $10 million coming in annual year-end payments in 2019 through 2022. The transaction will also result in the payment of our outstanding liabilities to Meda. The proceeds of this transaction will allow us to reduce some of our debts, both convertible notes and our payables and liabilities and will support our operating expenses including closing out the ulcerative colitis Bertilimumab study, as well as supporting Bertilimumab manufacturing.

This deal also allows us to part with global Ceplene rights in a single transaction other than regional rights. And as many of you know, Vector Therapeutics was founded and is headed by Immune's former CEO Daniel Teper who has a deep understanding of Ceplene and its commercial potential.

In order to execute the option, Vector must have adequate capital available to consummate the deal. If they are unable to exercise the option, we retained the $500,000 payment; we will be free to enter a transaction with another company. We believe this transaction is a win for both companies and we will be working closely with Vector to try to achieve a speeding closing.

I'd like to move on to discuss Bertilimumab. First allow me to briefly highlight some of the additional data we have received from the VP-01 study. The most important finding was the lack of any anti Bertilimumab antibodies. It is commonly observed that some patients treated with monoclonal antibodies will over time develop antibodies against the treatment. This can in some patients reduce the effectiveness of the antibody or lead to allergic reactions to the antibody. Although the number of subjects is small, this is the first report from subjects exposed to multiple doses of Bertilimumab. So we are quite pleased with the results.

We're also gratified that the multi dose pharmacokinetics observed in elderly bullous pemphigoid patients looks as expected based on the single dose pharmacokinetics previously observed in young healthy volunteers. In ulcerative colitis trial completed enrollment with a total of 57 screen subjects and 33 randomized. This was short of the initial goal of enrolling 42 into the study Because this is a crucial concept study looking to detect a signal suggesting activity and was not designed to prove that Bertilimumab is efficacious in treating ulcerative colitis, we had some flexibility to end the study early.

And it became absolutely critical that we reserve some of the old process for Bertilimumab produced by Lanza for use in comparability studies with the new process for Bertilimumab that will be produced by WuXi Biologics which I will discuss further in a moment. This is particularly critical because Lanza decommissioned its 200-liter bioreactor and can no longer manufacture Bertilimumab for us. So our remaining supplies must be reserved for these comparability studies. We are going to push to unblind the ulcerative colitis study as quickly as possible. The last visit for the last subject is expected in early January. So we continue to believe that we should have the preliminary data by late Q1 or early 2Q, 2019.

I'll turn a moment to asthma. We announced this quarter the results of some asthma work that we are conducting in animal models, which are data that I'm really excited about. I think the most important observation from these studies is that in this animal model of asthma blocking eotaxin-1appears to have a much broader anti-inflammatory effect when does blocking interleukin 5 or IL-5. Since three antibodies that block the activity of IL-5 have already been approved in the US and Europe for the treatment of severe asthma in patients with high eosinophil counts, we think that suggests a profile that could be very competitive with those agents and possibly address a broader patient population.

We plan to conduct additional studies in these asthma models. We plan to present the additional both [Indiscernible] data and the asthma results at scientific conferences in 2019 and we are just beginning to prepare those comfortability data for publication as well. Onto manufacturing, we have made excellent progress on the manufacturing front with our partner WuXi. As a reminder, all studies to date have been conducted with Bertilimumab manufactured by Lanza using an NS0 line, which is a mouse cell line. We are switching to a Chinese hamster ovary or CHO Cell line, a scalable cell line very commonly used in the production of monoclonal antibodies.

WuXi completed the technology transfer by September and are already doing process optimization work, and we are seeing early yields from this work of four to six grams per liter. This far exceeds our expectation as the yields we had seen with our prior CRO were in the range of 2.5 to 3.5 per grams per liter. I will note by comparison, yields observed with the NS0 cell line were approximately one gram per liter. We also have preliminary purification results that are very encouraging.

Finally, on the formulation front. We have achieved concentrations of Bertilimumab up to 100 milligrams per milliliter, which is 10x higher than the concentration we have previously used. We will continue to push the concentration higher and believe this bodes well for the eventual development of a subcutaneous formulation. Onto clinical development and regulatory, we have received preliminary feedback from the FDA on a variety of critically important issues. We asked FDA many questions on our manufacturing preclinical and clinical development plans. FDA was generally in agreement with our manufacturing and preclinical testing plans, and offered some specific input on what kinds of studies would be needed to support a product approval.

As we expected given the substantive changes and improvements in our manufacturing process, the FDA will require a bridging pharmacokinetics study comparing Lanza manufactured Bertilimumab to WuXi manufactured Bertilimumab. We expect this to be a small single dose study with 12 to 15 subjects per arm. We had proposed to the FDA that they allow us to run this study in parallel with any other clinical trials such as a pivotal bullous pemphigoid study in order to allow a more speedy path to a pivotal study. The FDA has insisted that this study be run prior to further those principal trials.

Fortunately, we expect it to be a quick study that will involve healthy volunteers and not patients. Also the patient number and duration of exposure will be small. FDA also agreed in principle that a single pivotal study would be sufficient for approval of bullous pemphigoid provided the study design is adequate of course. And that we have conducted a proper dose ranging study. The study design that we had submitted to FDA was for a large dose ranging study that would also serve as a registrational study. We will revise the study design to accommodate the FDA's requests and feedback that they gave us on the types of endpoints they would like us to look at in that trial.

We believe that in two stages or adaptive design study with a dose ranging stage followed by a pivotal efficacy stage will satisfy all of the FDA requirements. We are already working with our biostatisticians to develop this revised study design. Our plan is once we have more details on the revised study design the next seek a scientific advice meeting in Europe in the first or second quarter of next year to get additional feedback on the clinical development plan in Europe and then to bring a fully developed protocol back to the FDA and to EMA in the second or third quarter of next year. Because FDA is requiring us to complete the bridging PK study prior to further clinical work in both [Indiscernible], we would expect to launch the bridging PK study immediately upon having drug available from WuXi. This could be as early as late 2019 or more likely first quarter of 2020.

Then we will launch the pivotal BP study. We currently estimate that it will take about six months to run the bridging PK studying. Accordingly the launch of the pivotal BP study will be delayed by approximately six months in order to accommodate the FDA's insistence on bridging PK before launching the next BP study. As far as future studies in ulcerative colitis and asthma, we did not discuss other indications with the FDA since our meeting was about bullous pemphigoid. I would expect that from FDA's perspective bridging PK will be required prior to the launch of those studies as well. The ulcerative colitis indication, we would run the next study a Phase 2b trial in conjunction with a partner.

And that study is likely to be at least 200 subjects and involves six months of treatment improvement. Proof of concepts study in asthma on the other hand would be far more affordable as it would be smaller and have a shorter duration of administration. Depending on the nature of the partnership, we achieve for Bertilimumab this could be a study that Immune runs or could be a study run by a partner. As I mentioned on the September update call, we do not have time to wait in order to pursue a Bertilimumab partnership. Since then I have held well over 60 calls or meetings with parties interested in learning more about Bertilimumab, following upon dozens of meetings earlier in the year at the bio conference.

And we are already providing materials to several interested companies under CDA. Many of these companies have some familiarity with Bertilimumab while others are new to the story. Although, we have had a number of conversations regarding regional licensing arrangements. For example, in one or more countries in Asia, a regional deal is not our ideal choice because it will not bring in enough capital to really help the company improve its balance sheet. Accordingly, while we are pursuing those conversations in parallel, we are mainly focused on a US, Europe or a global deal for all indications or if necessary a deal for our lead indication bullous pemphigoid.

Based on our experiences and feedback thus far, I believe the best partnering candidates are mid sized pharmaceutical companies looking for assets in the dermatology or orphan disease space. We have already seen that it is the smaller more nimble companies that can quickly engage, make a rapid assessment as to whether or not they wish to pursue in depth due diligence, and large pharmaceutical companies tend to have longer processes and are less interested in both configured as a lead indication.

We are running a structured and disciplined process to bring us a deal within the timeframe that we have outlined. We have received several proposals from well known partnering firms and are considering the best and most efficient path forward for the process.

I want to make it perfectly clear to all of our shareholders that despite whatever rumors you may have heard, at no time has the company received a credible bid for any of its assets which turned down. On the contrary, the company including the board has worked diligently to solicit bids and has spent a great deal of time assessing the validity of potential indications of interest from any reasonable third party for any of the company's assets. I cannot state it any more clearly the company has not turned down bids for its assets.

I know that every one of you is frustrated and angry over the stock price. I know very well that all of the progress that was made with Bertilimumab over the past year and a half has not seemed to even slow the decline in Immune's market value. Even in the short time that I have been Interim CEO, the stock has continued to decline despite further good news on Bertilimumab. Financial overhang is significant and has been an immense burden on the stock and missed expectations have also contributed to this problem.

Over my time as Interim CEO, I've tried not to sugarcoat anything and I've been extremely forthright about the challenges facing the company. And since then on virtually a daily basis it has become increasingly clear to me that a Bertilimumab transaction is the only chance to repair the cap structure and balance sheet of the company. I believe it is a partnerable asset and I am very encouraged by the seriousness and thoroughness that several companies are already taking in their approach to due diligence. I am working tirelessly to do everything I can to get through the Bertilimumab in front of a very large number of potential partners in the US, Europe, China, Japan and Korea, whether their interests are in dermatology, orphan diseases, gastrointestinal diseases, asthma or inflammation in general.

Again, our goal is a global deal for all indications but we won't wait for that. If we have an opportunity to execute a significant regional deal or drum only deal. Don't imagine that for any company looking at Bertilimumab if this is a quick process. At least for those who are truly considering a partnership. It's easy to get a quick turnaround when the answer is no because the strategic fit or stage of development is wrong or there aren't yet enough clinical data. But getting to yes, a term sheet for example requires a lot of research and dialogue, queries and diligence.

We have thousands of pages of documents, animal and human studies, manufacturing data, regulatory filings that any serious party will review in depth while doing their own analytics on commercial opportunity and clinical development costs. I am not asking for patience. I understand full well that long-term Immune shareholders are long out of patience. I simply want enough runways to get a transaction that can get us to a cleaner balance sheet and a stronger financial position. And this is my goal.

Thank you all for your time and for listening.

Question-and-Answer Session


[Operator Instructions]


Thank you. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.