Plus Therapeutics, Inc. (PSTV) Q1 2020 Earnings Report, Transcript and Summary

Good afternoon, ladies and gentlemen. Welcome to the Plus Therapeutics First Quarter 2020 Earnings Results Call. At this time, all participants have been placed in a listen-only mode, and the floor will be open for questions following the presentation. [Operator Instructions]. Before we begin, we want to advise you that over the course of the call and question-and-answer session, forward-looking statements will be made regarding events, trends, business prospects and financial performance, which may affect Plus Therapeutics’ future operating results and financial position. All such statements are subject to risks and uncertainties, including the risks and uncertainties described in the Risk Factors section, included in the Plus Therapeutics’ annual results on Form 10-K and quarterly reports on Form 10-Q filed with the Securities and Exchange Commission from time-to-time. Plus Therapeutics advises you to review these risk factors in considering such statements. Plus Therapeutics assumes no responsibility to update or revise any forward-looking statements to reflect events, trends or circumstances after the date they are made. It is now my pleasure to turn the call over to Dr. Marc Hedrick, Plus Therapeutics’ President and Chief Executive Officer. Sir, you may begin.

Good afternoon. Thank you, Christina. And welcome to our Q1 fiscal year 2020 earnings call. As Christina said I’m Marc Hedrick, President and CEO of Plus Therapeutics. And joining me is our Chief Financial Officer, Mr. Andrew Sims. Once again, on behalf of all of us on the Plus Therapeutics team, we are hoping that you and your families are maintaining the best possible health as this pandemic drags on. Today I am very pleased to report results from the first quarter of fiscal year 2020. Before I get to our Q1 update and results, I would like to update you on the COVID-19 situation as it applies to Plus. Our 2019 strategic decision to implement a substantially virtual operating model is serving us well during the pandemic. Our facilities in Austin and San Antonio have remained open, but lightly staffed with flexible work schedules to provide maximum support for our employees. Coincident with Texas Governor Abbott's executive order effective on April 30, 2020 Plus has implemented a Phase 1 reopening plan intended to put the company on a trajectory to return the business to full operational mode as soon as possible. All federal and state recommended steps intended to protect the health of employees while moving towards full operational mode have been implemented. Over the past two to three months no significant supply chain interruptions have occurred, and we remain in close coordination with our partners, vendors to ensure the situation does not change. At this point, none of our employees have tested positive and we currently expect no material impact on results for fiscal year 2020 which ends December 31, 2020. We continue to screen patients for our ongoing clinical trial and we are starting to see some shifts away from COVID precautions to more routine hospital operations. We also continue to make progress in our efforts to add new clinical trial sites. Relatedly, we explored the provisions of the recently passed CARES law and the PPP program and in fact received bank approval for a modest PPP loan. However, we proactively determine that as a public company that has continued to work and execute in a relatively normal fashion for the past quarter, that it was not appropriate to participate in the program at this time. As a final point with regard to this issue besides protecting our workforce, in Q1, we donated the lion's share of our personal protective equipment inventory such as masks, gloves, other PPE to frontline doctors, nurses and healthcare practitioners caring for patients, including those affected by the COVID-19 pandemic. As the supply situation has changed, we are now able to replace that equipment with no adverse corporate impact. While certainly the highlight of the first quarter was the announcement of a significant addition to our portfolio and pipeline, the drug candidates we have added hold a prospect of redefining the way we treat brain cancer and many other poorly met cancer indications. Relatedly, this Monday we announced the closing of this transaction. We believe strongly that this recent transaction is illustrative of our scientific business and investment values beyond just the assets themselves, but Plus Therapeutics as a whole and as a public issuer. We think that these additions to our pipeline redefine more than the way we may one day treat brain cancer and other cancers, but the way shareholders should view this company more generally going forward. After the transaction itself, we licensed multiple rare cancer drug product candidates from the private Texas based biotechnology company, NanoTx Therapeutics. The transaction terms and brief review included an upfront payment of $400,000 in cash and $300,000 in Plus voting stock. Furthermore, the company may pay up to $136.5 million in development and sales milestone payments and a tiered single-digit royalty on U.S. and European sales. The lead in-licensed drug asset is chelated rhenium nanoliposome, also called RNL and which is being developed for recurrent glioblastoma or brain cancer. While RNL is similar in some ways to brachytherapy in which the radiation is delivered by implants in an inside-out fashion rather than outside-in for the radiation as is the case with external beam radiation. It differs, though, in that the radiation is delivered as a drug. In fact, some have called this approach liquid brachytherapy. But importantly, our approach is more versatile and confers many technical advantages over both traditional brachytherapy and external beam radiotherapy. Later in the call, I'll provide more background on the newly licensed technology. But I'd like to first put the 2020 transaction in strategic perspective. In 2019 Plus Therapeutic successfully executed a significant corporate transition putting in place all the critical and necessary elements to be a platform company for developing innovative clinical stage pharmaceuticals. This transaction expands not only our pipeline but enhances our leadership positions in nanotechnology, chemotherapeutics and radio therapeutics for rare cancers and other diseases. This 2019 transition involve key financial transactions, pipeline reformation, corporate rebranding, rebuilding of our core operating team, virtualizing some key functions where possible and geographic relocation. Ultimately, these moves provided the company with the financial strength, development focus and cost structure to put the company on a more durable path to long-term viability and growth. We worked hard over that timeframe to achieve this transition and we are equally excited about this transaction that we just announced the closure of. This first licensing transaction is inherently consistent with our publicly stated strategic aims mentioned frequently in the last three quarters, specifically strategic expansion of our pipeline, cost efficient development via more virtual drug development model, while leveraging non-dilutive sources of funding, a clinical focus on oncology and more rare, poorly met indications, and finally, leveraging our expertise in novel drug formulation and nanoliposomes. Also, as we noted previously in our plan, we prefer to invest in drug candidates that meet three key criteria. First, they address an unmet or substantially underserved medical need. Second, they combine known active pharmaceutical ingredients that have extensive safety and efficacy information with new technologies that improve both safety and efficacy. And third, we prefer that they have at least a $250 million addressable market opportunity on an annual basis. The drug candidates in this most recent RNL transaction check all three boxes. As mentioned above, the license drug portfolio consists essentially of nanoliposome-encapsulated radionucleotides and related technologies, potentially useful to treat a number of cancer targets that don't have good treatments today. The lead drug asset RNL is a key chelated rhenium nanoliposome initially being developed for recurrent glioblastoma. The newly licensed RNL platform was developed by a multi-institutional consortium based in Texas at the Mays Cancer Center, UT Health San Antonio, and MD Anderson Cancer Centers. It was led by the esteemed neuro-oncologist, Dr. Andrew Brenner. RNL is infused directly into the brain tumor via precision brain mapping and convection enhanced delivery technology that allows delivery of very high therapeutic doses of radiation in patients whose cancer has recurred following initial surgical resection and treatment with chemo radiation. In colloquial terms RNL is high caliber precision targeting of as much as 30 times the typical dose of radiation directly to the tumor. It's a rifle shot of radiation to the tumor target and only the tumor and unlike a shotgun blast that is typical of external beam radiation that affects collateral damage to the surrounding normal tissues, and in the case of glioblastoma, that's normal brain tissue plus the other structures of the head, neck, and face. Furthermore, it's a single rifle shot delivered once unlike standard external beam radiation that is delivered day after day, for weeks in order to achieve a tolerated cumulative dose. More scientifically, RNL has a number of technical features that give it advantages over other approaches to glioblastoma and potentially other tumors. First, very high doses of delivered beta imaging radiation, perhaps up to 30 times external beam radiation or EBRT are delivered. Two, the Rhenium-186 isotope is a dual energy emitter. It's made in a nuclear reactor and delivers both a beta particle or high energy free electron to kill rapidly dividing cancer cells but it also emits a gamma particle for imaging person purposes, so doctors know with precision where the radiation is at any time after treatment. Three, it has a long half life or time on tumor of approximately 90 hours or specificity. Specificity in that it's delivered beyond the blood brain barrier directly to the tumor with novel delivery and imaging technologies. Five, it has tumor micro fields that increase each rhenium’s atom another 2 to 4 millimeters to help reach residual non-enhancing tumor. Six, it’s metabolized safely by the kidneys without collateral damage to local structures and radio sensitive organs such as bone marrow, very similar to I-131 for thyroid cancer, as I mentioned the lead indications for glioblastoma. And Dr. Brenner and his colleagues have developed this patented technology with the concept that it may prolong survival in patients with recurrent glioblastoma, a cancer that affects about 12,000 people per year in the U.S. and for which there are currently few approved treatments that in aggregate provide only a marginal survival benefit. And notably, essentially all primary tumors recur after initial treatment. Even today, radiation therapy or EBRT is the most effective component of the standard multimodal therapeutic regime using glioblastoma today. Multiple randomized studies show five month improvement in survival with EBRT radiation compared to an an additional 2.5 months with the addition of chemotherapy and three months for tumor treating fields. By infusing the RNL drug directly into the tumor, bypassing the blood brain barrier, normal brain and external tissues are spared from radiation damage. In the case of these drugs the mechanism of action is unambiguous. We know radiation in the form of high energy electrons is effective against glioblastoma, if an adequate dose can be effectively delivered. For comparison, current external beam radiation protocols for recurrent glioblastoma typically recommend a total max dose of about 35 gray. In contrast to most recent patient dosed with RNL in our clinical trial received over 500 gray. In terms of the current clinical trial status, we are currently in a U.S. FDA approved Phase 1 dose finding study at a single site in Texas that's UT San Antonio, with actions underway to expand to two additional sites in Texas specifically UT Southwestern and MD Anderson in Houston. Thus far, we are now in the fifth dosing escalation cohort. The radiation dose in the current cohort is now at approximately 15 times the dose that is typically delivered by external beam radiation. Higher doses and volumes are planned in subsequent cohorts and no serious adverse events have been observed thus far. Though not powered for or intended to establish efficacy, the first two patients, in which significant tumor coverage with RNL was achieved, survived for 30 and 33 months respectively. That is compared to median survival of about six to nine months in patients who received standard-of-care. Additionally, the technology has substantial third party review and support. It was previously granted funding by the Cancer Prevention and Research Institute of Texas; and in addition, currently, the technology is funded through its Phase 2 trial by the National Institutes of Health/ National Cancer Institute. Beyond the use of RNL in glioblastoma, our team is enthusiastic about this technology because the same product candidate, it works the same exact way as in preclinical development for several additional indications including breast and head, neck cancer, leptomeningeal, carcinomatosis and liver and ovarian cancers. The ability to get super high doses of high energy radiation precisely to the tumor-only could be a game changer for some of these tough clinical problems. Even prior to the close of this transaction, we began a very active analysis of follow on indications for the RNL technology. Also, there's much data already published and available or referenced on our website. Please refer to that for more information beyond what I can deliver on this call and expect more on these additional indications in Q2 and Q3 from the company. Regarding next steps for the RNL program, besides advancing the pipeline in glioblastoma, we are working to a complete enrollment for the Phase 1 trial even as we begin preparations for a follow on Phase 2 pivotal trial. And we will also determine applicability for FDA accelerated fast track designations in the U.S. and appropriate orphan designations globally. Regarding our other two clinical stage assets DocePLUS and DoxoPLUS, we currently plan to further their development only with partner support. We are and have been in such discussions but at present we are focusing resources on RNL and its development. Additionally, we continue to review a number of other co-development and in-licensing opportunities to expand our pipeline. So with those comments, let's turn the call over to Andrew for a review of the quarter. Andrew?

Thank you, Marc, and good afternoon, everyone. I'll be discussing Plus Therapeutics’ financial results for the first quarter of 2020 as presented in our earnings released today. Our Q1 2020 operating cash burn was approximately $1.5 million compared to $3.3 million in Q1 2019. The reduction in annual cash was mostly related to discontinued operations, which resulted from reductions in operating expenses. The net loss for Q1 2020 was $1.1 million as compared to a net loss of $3.2 million in Q1 2019. The decrease in net loss is mainly related to discontinued operations of $0.7 million and the change in fair value of the warrants of $1.7 million. The research and development expenses in Q1 2020 or R&D expenses was $0.9 million versus a $1.4 million expense in Q1 2019. The decrease in R&D year-over-year spending was primarily attributed to a decrease in spend as a result of discontinued manufacturing subsequent to the sale of the company's former Cell Therapy business. R&D expenses will increase in 2020 as investments are made into the development of RNL. Now on to our sales and marketing. Our sales and marketing expenses remain consistent on a quarterly basis at approximately $0.1 million. G&A expense was $1.5 million this quarter as compared to $1.4 million in Q1 2019. The Q1 2020 increase was primarily driven by increased professional fees which was offset by a reduction in personnel expenses when compared with the same period in 2019. Now with respect to revenues, Q1 2020 total revenues were $0.1 million as compared to $0.7 million in Q1 2019. Decrease in revenues is mainly due to the closeout of the government contract with BARDA. Turning to the balance sheet. As of March 31, 2020, we had $16.1 million of cash and $9.3 million of debt principal. Subsequent to the quarter and as disclosed in Form 10-Q, we amended our debt facility with Oxford providing additional flexibility by pushing out our interest-only period through May 2021 together with paying down $5 million of principal leaving a remaining principal balance of $4.3 million. Our liabilities are $20.8 million at March 31, 2020 compared to $22 million at December 31, 2019, with the main change relating to the decrease in the warrant liability. The warrant liability was $5.2 million at March 31, 2020. And as disclosed in the company's 8-K filing on April 23, 2020, the company entered into a revised warrant agreement with the holders of 3,372,000 Series U warrants. In return for reducing the strike price of the warrants, the warrant holders agreed to amend the settlement provisions upon fundamental transactions such as the warrants would meet the requirements for equity classification under authoritative accounting guidance. The company expects that in April 2020 approximately $4.2 million of warrant liability will be reclassed to the equity section of the balance sheet. In addition, approximately $0.7 million of other income representing a change in the fair value of amended warrants from April 1, 2020 to the amendment date will be recorded in the statement of operations and other comprehensive income or loss for the three months ending June 30, 2020. And now, I'll turn it back to you Marc.

Thanks, Andrew. Let me finish up before Q&A and discuss progress on our stated 2020 milestones. Thus far in 2020, as guided, we have announced and closed our in-licensing transaction for RNL and executed a complete restructure of our term loan as Andrew mentioned. Going forward through the remainder of the year, we intend to optimize the regulatory and clinical program for RNL for glioblastoma and obtain FDA feedback on next steps. Two, we tend to substantially upgrade the supply chain for RNL as well as the manufacturing controls and scalability of the product or late-stage clinical trial standards. Three, we intend to expand the Phase 1 trial from one to three sites. Four, we hope the complete enrollment of the dose finding study for RNL, assuming the COVID-19 impact does not increase and report that data and work to publish that data in a publication subsequently. Five, we intend to work with the agency to develop a Phase 2 pivotal study plan for glioblastoma. Six, we intend to complete our internal review of additional indications for RNL and execute any required IND-enabled [indiscernible] clinical introduction. Seven, we will continue to be aggressive but highly disciplined in assessing new pipeline enhancement opportunities for the company. And finally, we'll continue partnering discussions with the goals of finding strategic development partners for our clinical programs, RNL DocePLUS and DoxoPLUS. With that, I'll turn it over to the operator, Christina, for any questions that might be in the queue.

The floor is now open for questions. [Operator Instructions] Thank you. And our first question is coming from Anita Dushyanth with Zacks Investment.

Just had a couple of questions regarding the Phase 1 trial. So regarding the cohorts, I know you mentioned you're enrolling currently cohort 5. Could you reiterate sort of how many subjects there are totally in this enrollment and how many per cohort?

So yes, it’s a standard dose escalation, dose finding study protocol where we did three cohort, assessed safety, and then moved to the next cohort. So thus far, we've enrolled 13 patients. And we're -- we treated first patient in the fifth cohort. And in each cohort, their escalation is not only in dose in terms of [indiscernible], but also in terms of volume because tumors have different volumes. We are escalating dose [indiscernible]. My guess is that they'll be somewhere between six to eight patients before we finish the trial. The trial has been enrolling relatively slowly because there's been one site. So one thing we hope we can do as the new sponsor has come in and help facilitate getting UT Southwestern and MD Anderson up to speed quickly. We made progress even in the interim prior to closing and that will add two new sites that are enthusiastic about contributing patients to the trial.

And as a follow-up to that, I was wondering, as far as the Phase 2 is concerned, like are you looking at the response rate and the survival as an outcome and what would the timeframe be for that?

So currently in the NCI-approved grant and the clinical trial, it would be a survival. And it’s one -- one of the things that we're looking at if we were with the [PRS], with the trial is to look at ways that we might be able to accelerate that trial and maybe look at surrogate endpoint, potentially effective response rate and an expedited path to the clinic. So, right now I think it's premature before we talk to the agency about ways to optimize a clinical strategy to talk about at this point.

And I know you indicated that this is clearly addressing an unmet need. Are you in conversation with the FDA regarding applying for a fast track or orphan designation?

So have we disclosed the transaction last week? The answer is, no, we haven't been really authorized to communicate with the agency yet. So that’s high on our priority there. We think there's some opportunities there around orphan designation, accelerated approval, and fast track for potentially breakthrough assuming the data support that. So that's high on our priority list to explore. As soon as we get a meaningful feedback from the agency, we'll make that public.

Okay. And just one last thing from me, what other possible indications are you looking at where the RNL has potential? I think you mentioned head and neck cancer -- or just correct me if I'm wrong?

Yes, so that's a great question and, it's a hard question to answer without a lengthy response. And so, there are a number of published papers that I'm happy to share with you offline and make available fully to you. But the things that I'm most excited about are over current head and neck cancer. And the reason why is those tend to recur locally. I’m a plastic and reconstructive surgeon. I’ve reconstructed a number of these patients that have very disfiguring lesions, have maxed out on radiation therapy and they really have nowhere to go once they recur, typically around the side of the original tumors or suture line. So it would be much simpler even for glioblastoma to identify the tumor and inject the RNL compound directly into the tumor to get coverage of the tumor to essentially do the inside-out radiotherapy at the tumor. So that's something I think that's very promising potentially. The other thing that I'm interested in is sort of a variant of the same theme. It's one, leptomeningeal carcinoma. Leptomeningeal is increasing in number. There are perhaps a hundred thousand plus patients in the U.S. to get carcinomatosis in the leptomeninges and then really no good treatments for it. Although the primary treatments are getting better that once that complication occurs, there are really no good treatments. There was one drug that was on the market called DepoCyt that was recently removed over the summer. It's no longer available. So I think that's a real opportunity in that. The Part B is peritoneal carcinomatosis, which is a complication of a number of other gastrointestinal cancers, in particular ovarian cancer, which often presents very late in the course because it's typically in the early stages. And there've been no really good treatments for treating those intra-peritoneal metastases. So I think in this -- and there’s preclinical data on everything, and I’m bringing up with you. So they're encouraging preclinical signals and I think the next step for us is to figure out within this group that I just mentioned and a group of other indications that we're also looking at which are the most promising, which makes the most sense to pursue and then figure out what's required from an IND-enabling perspective to get those into the clinic.

And your next question comes from the line of Ed Woo with Ascendiant Capital.

Touching back on the prior question in terms of the number of indications, do you believe that you'll just be focusing on one other indication? Or do you believe that maybe you'll be focusing on multiple indications at the same time?

Yes, hey, Ed. It’s Marc. Good question. I think it's partly related to the availability of capital. I anticipate looking at least one other indication, and determining what's required with the agency to move that into the clinic, and then that will depend on some capital availability. One strategic reason we moved the company to Texas is to have availability of the CPRIT related funding. As I mentioned, this RNL technology, it's previously received an award through CPRIT. It doesn't have current funding, it's funded through the NCI, but I think there are opportunities with CPRIT to fund additional indications and our hope is to leverage that as well as other non-dilutive sources to do that. But I think I would anticipate us being cautious and cash is important now in the current environment. So I think we'll take a very cautious approach but we'll make that clear in terms of our inclinations once we’ve completed our analysis.

And then on RNL you mentioned that you have funding through Phase 2 through the National Cancer Institute. Is that correct?

Yes.

That sounds great. Have you got the funding already or is it kind of a work in process where you do the development and then you kind of get reimbursed back? Or how does that work?

Yes, so there's -- the funding is awarded -- but maybe back up a sec. So one of the things that attracted us to this indication was not only how innovative it was, and how potentially game changing it could be through a number of really pesky oncologic problems. But it had -- it just received when we got to know the company, it just received NCI funding through Phase 2. So that's predicated on a trial and clinical approach, where there's not a corporation involved. So our plan is to build off that NCI funding and do what we can do to accelerate enrollment and bring the supply chain and CMC as to what we think are commercial standards of scalability and controls and so forth. And that's going to require some capital. So that's not dialed into the roughly $4 million that the NCI has awarded. Now in terms of the cadence of the awards, generally, as you know, with those types of grants, they tend to occur over time and they're granted yearly. So that this grant pays out over a number of years and it pays through Phase 2. But this is actually the first year of the award. So yes, that award has been issued.

Great, and then moving back to DoxoPLUS and DocePLUS. Has there been any status in terms of looking for partnerships on those drugs?

Yes, nothing to report. I think as I mentioned in my prepared remarks, at this point, given our excitement and the innovative nature of the RNL programs, as we force rank our internal opportunities -- and it’s been increased greatly since we added this asset. I think it makes sense to focus on partnering. And thus far there's interest but we haven't seen the right deal and the right partner. So we'll continue to do invest some time and effort into finding the right partner. But we won't invest any specific dollars in further developing those programs. Those will go entirely to the RNL program.

[Operator Instructions]. You do have a question for the line of [Jim Fitzpatrick with Oasis].

So if I look at your cash position and reducing your burn, you're in a pretty good position for the foreseeable future. Is that correct?

Hey, Jim, thanks for the question. I would say we're in a much better position than the company's been in quite a while. So yes, we're in a good position as it relates to the RNL asset, particularly given the fact that it comes sort of prefunded, if you will.

Right. And then do you see your burn and cash position changing in the future? Or is that a pretty good run rate for the foreseeable future?

I'm going invite our CFO Andrew Sims to answer that more specifically. Andrew, do you mind?

Sure. Thanks, Marc. Jim, as per the 10-Q we just released, we finished Q1 with just over $16 million of cash. As I mentioned, we restructured the Oxford facility and made a principal payment of $5 million in early April -- April 1. Depending on the requirements for RNL development, we have approximately 12 to 18 months cash balance without raising additional capital, that range is driven by the speed of enrollment and development of RNL. So the plan is to be as aggressive and efficient in the use of cash as possible, but at the same time making rapid progress in the development of that asset. In addition, we will utilize non-dilutive sources of capital such as the NIH grant as Marc mentions, CPRIT which he also mentioned and then partnership dollars. The final piece is, the company in the past has leveraged an ATM and equity line and we intend to put one in place later in this year and obviously use it very carefully and if and when it makes sense to do so.

And you have no further questions at this time. I'll now turn the floor back over to Dr. Hedrick for any additional or closing remarks.

Thank you. I think to close, I'd like to just plug a video that's coming on the technology. You may have seen Tuesday's announcement where Dr. Andrew Brenner, who's the development leader of the RNL program, and an academic neuro-oncologist in Texas is scheduled to conduct a live patient focused webinar entitled “A Promising New Radiotherapy For Recurrent Glioblastoma, an Introduction” that will be on this coming Sunday, May 17, 2020 at 7:00 PM Eastern. That is part of the Newsela Foundation Webinar series to be presented live on the foundation's website at virtualtrials.com/webinar/. There is a complete dial in information is in Tuesday's press release, which you can find on our website in the Investors section. There's no charge for the event, although the foundation welcomes donations. We are participating in the presentation as part of our recognition of Mays’ Brain Tumor Awareness Month. So with that I'll just thank everyone again for joining us today. Much more information can be found at our website plustherapeutics.com and on our LinkedIn and Twitter, social media sites. As always, on behalf of the Board and management, thank you for your support of Plus Therapeutics and have a good evening. Bye, bye.

Thank you. This does conclude today's conference call. Please disconnect your lines at this time and have a wonderful day.