Celcuity Inc. (NASDAQ:CELC) Q4 2022 Earnings Call Transcript

Celcuity Inc. (NASDAQ:CELC) Q4 2022 Earnings Call Transcript March 23, 2023

Operator: Greetings. And welcome to Celcuity’s Full Year 2022 Financial Results Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Robert Uhl with ICR Westwicke. Thank you, Robert. You may begin.

Robert Uhl: Thank you, operator, and good afternoon to everyone on the call. Thank you for joining us to review Celcuity’s fourth quarter and full year 2022 financial results and business update. Earlier today, Celcuity released financial results for the fourth quarter and full year ending December 31, 2022. The press release can be found on the Investors section of the website. Joining me on the call today are Brian Sullivan, Celcuity’s Chief Executive Officer and Co-Founder; Vicky Hahne, Chief Financial Officer; as well as Igor Gorbatchevsky, Chief Medical Officer, who will be available during Q&A. Before we begin, I would like to remind listeners that our comments today will include some forward-looking statements. These statements involve a number of risks and uncertainties, which are outlined in today’s press release and in our reports and filings with the SEC.

Actual events or results may differ materially from those projected in the forward-looking statements. Such forward-looking statements and their implications involve known and unknown risks, uncertainties and other factors that may cause actual results or performance to differ materially from those projected. On this call, we will also refer to non-GAAP financial measures. These non-GAAP measures are used by management to make strategic decisions, forecast future results and evaluate the company’s current performance. Management believes the presentation of these non-GAAP financial measures is useful for investors’ understanding and assessment of the company’s ongoing core operations and prospects for the future. You can find the table reconciling the non-GAAP financial measures to GAAP measures in today’s press release.

And with that, I would now like to turn the call over to Brian Sullivan, CEO of Celcuity. Please go ahead.

Brian Sullivan: Thank you, Robert, and good afternoon, everyone. We had an eventful and productive 2022. Our primary goal for the year was to begin enrollment of our Phase 3 VIKTORIA-1 clinical trial for our lead candidate, gedatolisib. This trial is enrolling patients with advanced HR-positive HER2-negative breast cancer, whose disease progressed after treatment with a CDK4/6 inhibitor. We began ’22 working with the U.S. FDA and the European Medicines Agency to finalize feedback on our clinical trial protocol. Once we receive this feedback, we finalized our protocol and then completed selection of over 200 clinical trial sites across five continents to participate in the study. These sites include some of the world’s leading breast cancer institutions.

After formally activating the study in the third quarter, we were very pleased to dose our first patient this past December. The dosing of the first patient in the VIKTORIA-1 clinical trial triggered the closing of a $100 million private placement and drawdown of a $20 million term loan tranche in December. Proceeds from the private placement, combined with the debt facility and the company’s current cash, cash equivalents and marketable securities are expected to be sufficient to fund Celcuity’s current operating plan through 2025. So far, we are very encouraged by the activity at our VIKTORIA-1 trial sites. We remain on track with our prior guidance and continue to expect data for the PIK3CA non-mutated patient subgroup to be available in the second half of ’24, and data for the PIK3CA mutated patient subgroup to be available in the first half of ’25.

The scientific rationale for launching the VIKTORIA-1 study was predicated on two key factors. First, there’s a significant unmet need for better second-line therapeutic options for HR-positive HER2-negative breast cancer patients who received prior CDK4/6 inhibitors. Current therapeutic options offer only modest progression-free survival benefit. And second, we reported very promising results from our Phase 1b study that evaluated gedatolisib plus palbociclib combined with either letrozole or fulvestrant for patients lacking PIK3CA mutations. Published data for approved second-line therapies indicate they only offer a median PFS of two to four months. For patients who have PIK3CA mutations to publish data for median PFS of approved therapies is approximately seven months.

The clinical efficacy data we initially reported in 2021 from our Phase 1b study compares very favorably to these published results. We’ve since updated our data to reflect 13 months of additional follow-up, and we presented this data in a spotlight poster presentation at the 2022 San Antonio Breast Cancer Symposium in December. Updates included efficacy results broken off for patient subgroups according to PIK3CA mutation status in each of the four expansion arms. For the patients in Arm D of the Phase 1b study, those who received the Phase 3 dosing schedule of gedatolisib, the ORR or objective response rate was 60% in PIK3CA wild-type patients and the percentage of patients who are progression-free at 12 months was 49%. These results compare very favorably to published data for fulvestrant, the control drug for PIK3CA wild-type patients in our VIKTORIA-1 study.

In a recent randomized study, fulvestrant reported an objective response rate of 6% and a 12-month PFS rate of 12% for fulvestrant. For the Arm D patients who had PIK3CA mutations, the objective response rate was 73%, and a 12-month PFS rate was 60%. Again, these results compare very favorably to published results for the alpelisib and fulvestrant regimen, the control for PIK3CA-mutated patients in the VIKTORIA-1 study. In two clinical trials, the objective response rate for alpelisib plus fulvestrant averaged 20% and the 12-month PFS rate averaged 25%. The comparable effective response rates in 12-month PFS rate in the PIK3CA wild-type and mutated patient subgroups is driven by, we believe, two key factors. First, the PIK3 mTOR pathway is a driver in HR-positive breast cancer regardless of whether the patient’s tumor has inactivating PIK3CA mutation or not.

And second, inhibiting the four class I PIK3CA mutations or isoforms, and the two mTOR complexes is required to most efficaciously address PI3K mTOR pathway activity. This is the optimal approach biologically because it avoids the cross activation of uninhibited subunits and resulting drug resistance that can occur with PI3K isoform specific or mTOR specific inhibitors. Completely blockading the pathway also enhances the potential to induce synergistic inhibition with other targeted therapies such as CDK4/6 inhibitors. Gedatolisib’s differentiated mechanism of action as an equipotent PANP3KMT inhibitor. This uniquely suits we believe to address the need for more effective second-line breast cancer therapies. We believe this data and the unmet need we are seeking to address played a key role in the FDA’s decision to grant Breakthrough Therapy designation in July last year to gedatolisib in combination with palbociclib and fulvestrant for the treatment of HR-positive HER2-negative advanced breast cancer.

We were also very encouraged by the updated efficacy results for the 41 patients in our Phase 1b study who had not received prior treatment for advanced disease. These patients received gedatolisib combined with palbociclib and letrozole as first-line treatment. In the combined group of treatment-naive patients from escalation arm A and expansion arm A, Median PFS was 42.3 months and the objective response rate was 79%. These results compare very favorably to the median PFS of 24.5 months and 55% objective response rate reported in the PALOMA-3 study for palbociclib plus letrozole. Of note is that the median PFS and expansion RMA patients alone was not reached as of the June 22 data cutoff, — we will present updated efficacy data for expansion RMA as well as for the combined data for the two arms with treatment-naive patients at the ESMO breast cancer meeting in May.

These results provide another demonstration of the intrinsic role the PI3K/mTOR pathway plays as a disease driver in advanced HR positive HER2-negative breast cancer. The data also highlights the potential opportunity to develop gedatolisib as a first-line treatment option. While a randomized first-line study evaluating gedatolisib combined with palbociclib plus letrozole is not practical for us to pursue at this time, this promising data certainly warrants a valuation in the future. Another important goal for us in 2022 was to begin evaluating and prioritizing new potential indications for gedatolisib. This evaluation includes assessment of previous trials for other PI3K and mTOR inhibitors. We view of other pathways linked to the PI3K/mTOR pathway, and conducted nonclinical studies to characterize the activity of gedatolisib in other PI3K AKT mTOR inhibitors in different tumor types.

A significant body of literature has characterized the crosstalk and reciprocal feedback loops between hormonal pathway signaling and the PI3K 8K mTOR signaling cascade in multiple tumor types. This interaction plays an essential role in disease recurrence and progression in prostate and gynecological cancers in addition to breast cancer. As has been demonstrated in breast cancer, co-targeting the hormonal and PI3K AKT mTOR pathways, is a promising treatment strategy, but the approach is confounded by the feedback and feed forward loops between PI3K isoforms, AKT and mTOR that cross activate uninhibited subunits. This literature review as well as considerations of the unmet needs in various tumor types, led us to focus our initial nonclinical research studies on prostate and gynecological cancers.

We presented the results — first results from our studies, which focused on prostate cancer in February ’23 at the American Society of Clinical Oncology Genitourinary Cancer Symposium. We’ve previously discussed how most PI3K/mTOR inhibitors selectively spare or weekly inhibit one or more key PI3K/mTOR pathway components and how this can enable drug resistance depending on the mutation status of a patient’s tumor. In prostate cancer, the PTEN gene is linked to PI3K and it is frequently muted. Inhibitors that only target a single PI3K/mTOR component or AKT have demonstrated limited clinical efficacy in PTEN deficient prostate cancer and no efficacy in PTEN wild-type tumors. As has been found with breast cancer, this suggests that more comprehensive inhibition of the PI3K/mTOR pathway may be required.

With this positive gedatolisib as a pan-PI3K/mTOR inhibitor would be infected in both PTEN wild-type and PTEN-deficient prostate cancer models. To assess this hypothesis, we evaluated a panel of prostate cancer cell lines with different PTEN status for their sensitivity to gedatolisib and six other inhibitors that target at least one component of the PI3K-AKT-mTOR pathway. The results from these studies were very encouraging and supportive of our hypothesis. Our assessments confirm that gedatolisib was the only inhibitor that was as potent and efficacious in PTEN wild type as PTEN-mutated prostate cancer cells. In addition, in every assessment, which included cytotoxicity, potency, cell death, DNA replication and signaling, gedatolisib exhibited superior activity relative to all of the other PI3K, AKT or mTOR inhibitors evaluated.

A particular note was the contrast between gedatolisib and the AKT inhibitor, Capivasertib. Capivasertib has been evaluated in prostate cancer clinical trials, but it has only reported modest efficacy to date in PTEN-mutated tumors and no efficacy in PTEN wild-type tumors. The results from our nonclinical studies with Capivasertib are consistent with these clinical results. We found the Capivasertib was tenfold less potent in PTEN wild-type and PTEN-mutated cancer cells and generally inferior to the Pan-PSK drugs and much less active than gedatolisib. We believe these results and the contract we’ve got gedatolisib provide further demonstration of the importance of comprehensively rather than selectively blockading the PI3K/mTOR pathway. To assess gedatolisib in vivo activity in prostate cancer, we evaluated gedatolisib in three different prostate cancer mylenograft models.

We first evaluated gedatolisib as a single agent in PTEN wild-type and PTEN-loss xenograft models that were insensitive to the androgen receptor inhibitor and dovitinib. In both models, gedatolisib induced more than 80% tumor growth inhibition, whereas dovitinib had no activity. We also evaluated a prostate cancer xeonograft model that was sensitive to dovitinib. In this model, gedatolisib induced 80% tumor growth inhibition as a single agent and 116% inhibition when it was combined with dovitinib. We will present results from our next set of clinical studies at the American Association for Cancer Research Annual Meeting, which is being held in Orlando, Florida from April 14 through the 19. These studies evaluated a panel of gynecological cell line models, which gedatolisib in several other PI3K-AKT-mTOR inhibitors.

An abstract summarizing this data was published last week. Consistent with our findings in prostate cancer, gedatolisib exhibited superior activity relative to all of the other PI3K-AKT-mTOR inhibitors evaluate. Based on the results from these internal non-clinical studies and on gedatolisib’s highly differentiated mechanism of action and PK/PD profile, we think there was a significant opportunity for us to develop gedatolisib in these tumor types. We will provide an update on our clinical development priorities later this year. Now I would like to shift our discussion to the diagnostics side of our business at centers on CELsignia, Celcuity’s third-generation diagnostic platform. As you may recall, the enrollment in the FACT-1 and FACT-2 trials that are evaluating early-stage breast cancer patients selected using our CELsignia HER2 signaling diagnostic were impacted by COVID-19-related delays during — up through early 2022.

These trials are now enrolling patients with early-stage breast cancer whose HER2 pathway is hyperactive as detected with our CELsignia test. Our goal is to provide CELsignia test as a companion diagnostic, so that pharmaceutical companies can expand the number of patients eligible to receive their targeted therapy. We expect to announce interim results from these studies in the second half of 2023. With that, I will now turn our call over to Vicky Hahne, our CFO, to review our financial results.

Vicky Hahne: Thank you, Brian, and good afternoon, everyone. I’ll provide a brief overview of our financial results for the fourth quarter and full year 2022. And I invite you to review our 10-K, which will be filed later today for a more detailed discussion. Our fourth quarter net loss was $11.6 million or $0.69 per share compared to $6.8 million net loss or $0.45 per share for the fourth quarter of 2021. Net loss for the full year 2022 was $40.4 million or $2.64 per share compared to $29.6 million net loss or $2.21 per share for the same period in 2021. For purposes of calculating net loss per share, the reported net loss of $2.64 per share included an additional $0.02 loss per share related to approximately $0.3 million deemed dividend resulting from a warrant modification.

Because these quarterly and full year net losses include significant noncash items, including stock-based compensation, the issuance of common stock and interest, we also include in our press release non-GAAP adjusted net loss for the quarter and full year ending December 31, 2022. Our non-GAAP adjusted net loss was $10.2 million or $0.60 for the fourth quarter of 2022 compared to non-GAAP adjusted net loss of $5.6 million or $0.37 per share for the fourth quarter of 2021 Non-GAAP adjusted net loss for the full year 2022 was $34.9 million or $2.26 per share, compared to non-GAAP adjusted net loss of $21.4 million or $1.60 per share for the full year 2021. Research and Development expenses were $10.6 million for the fourth quarter of 2022 compared to $5.5 million for the fourth quarter of 2021.

The increase was primarily the result of activities supporting the initiation of the VIKTORIA-1 pivotal trial. R&D expenses for the full year 2022 were $35.3 million compared to $25.8 million for the prior year. The increase in R&D expenses included a $10 million reduction in gedatolisib licensing-related expenses. This reduction was offset by increases in other R&D expenses, which included employee consulting expenses as well as increased expenses for existing clinical trials and for activity supporting the initiation of the VIKTORIA-1 pivotal trial. General and administrative expenses were $1 million for the fourth quarter of 2022 compared to $0.8 million for the same period in ’21. G&A expenses for the full year of 2022 were $4.1 million compared to $2.6 million for the prior year.

The increases for the fourth quarter and full year 2022 over the same period in 2021 were driven primarily by non-cash stock-based compensation. Net cash used in operating activities for the fourth quarter of 2022 was $9.5 million compared to $0.1 million for the fourth quarter of 2021. This was a result of non-GAAP adjusted net loss of $10.2 million, offset by working capital changes of approximately $0.7 million. Net cash used in operating activities for the full year 2022 was $36 million compared to $20.3 million for the full year 2021. This was the result of non-GAAP adjusted net loss of $34.9 million and working capital changes of approximately $1.3 million, offset by $0.2 million of depreciation expenses. We ended the year with approximately $168.6 million of cash, cash equivalents and short-term investments compared to cash and cash equivalents of $84.3 million on December 31, 2021.

The $168.6 million does include the net proceeds of $115.2 million from the funding of the pipe and the drawdown of the debt facility. I will now hand the call back to Brian.

Brian Sullivan: Thank you, Vicky. Operator, could you please open the call for questions?

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Q&A Session

Operator: Thank you. We will now be conducting a question-and-answer session. Thank you. Our first question is from Maury Raycroft with Jefferies. Please proceed with your question.

Maury Raycroft: Congrats on the progress and thanks for taking my questions. For Phase 3 status, I know it’s still early days. But wondering if you could talk more about number of sites activated and in what countries? And are there any comments on site activation or enrollment trends that you can share at this point?

Brian Sullivan: Sure. So we have a plan basically at a site level for each site in each country. And we’re on track to activating our sights on the schedule that will allow us to essentially be able to report our primary analysis in second half ’22 or ’24. And so far, really nothing to report other than we’re on plan.

Maury Raycroft: Got it. Okay. And wondering too, if you can remind me what the data safety monitoring review plan looks like for the Phase 3? And will you provide general updates after DSMB reviews?

Brian Sullivan: Generally, no, that is not public information. Igor, maybe you could shed some light on the IDMC we have and their role in the function.

Igor Gorbatchevsky: Yeah. Thank you, Brian. As Brian mentioned, regular update on independent data managing committee review is not a standard practice. However, this study includes all of the appropriate steps to monitor data, including independent data management committee that includes experts in oncology and statistics. And according to the charter data will be reviewed starting with the initial patients to enroll in the study and an ongoing basis. This system has been set in place and IDMC work will proceed per charter.

Brian Sullivan : But that IDMC operates independently of the company.

Maury Raycroft: Okay. And one other specific question I wanted to ask, just — I see in the Phase 3 as one of the secondary endpoints, you’re assessing PFS and OS based on HER2 low status. Just wondering if you can remind me if you looked at HER2-low status in the Phase 1b. And did that have any impact in the Phase 1b efficacy results? And so for the IHC zero versus one and two, were there any trends observed based on those patients?

Brian Sullivan: We didn’t see any differentiation and results based on HER2 status. All the patients were HER2 negative, but whether it was zero, one plus or two plus.

Maury Raycroft: Got it. Okay. Thanks for taking my questions.

Brian Sullivan: Welcome.

Operator: Thank you. Our next question is from Alex Nowak with Craig-Hallum. Please proceed with your question.

Alex Nowak: Okay. Great. Good afternoon, everyone. I was hoping the first one just on the staffing up for the clinical trial. Just where are you at? You think you had a healthy balance right now? And just how to think about OpEx spend throughout this year? Does it kind of sit around that $11 million per quarter level? Or did it go up a little bit from here?

Brian Sullivan: Well, so there’s really two components to the expenses. The primary expense for the clinical study is run through our CRO and associated vendors, and so those are internal individuals. We have an organization — clinical operations organization, regulatory that is essentially overseeing and managing that process. That staff has largely been hired and in place. .The CRO expenses are a function of site activation and enrollment. And we’ll see as enrollment and number of patients — aggregate number of patients who are receiving treatment will increase over the next few quarters. Vicky, I don’t know if — I don’t think we’ve provided — I think, the guidance that you have or what you’ve indicated in your numbers or what has been reported in other forecast is consistent with our internal numbers.

Vicky Hahne: Yeah. I would concur with that some of the Street estimates of analysts who follow us very closely are very reasonable for 2023 as they step up through the quarters.