Good morning. My name is Roxy, and I will be your conference operator today. At this time, I would like to welcome everyone to the Celsion Corporation First Quarter 2014 Financial Results Conference Call. [Operator Instructions] I would now like to turn the call over to Mr. Jeffrey Church. Please proceed. .

Thank you. Good morning everyone, and thank you for joining us. Our first 2014 financial results were released this morning before the market opened. We also filed our Form 10-Q for the quarter ended March 31, 2014 at the same time.

The Form 10-Q is available on the SEC's EDGAR system and the company's earnings release and Form 10-K are both available on our website at www.celsion.com. Today's call will be archived. The replay will be available beginning today at 2 P.M.

Eastern and will remain available by phone until Thursday, May 22, 2014, and will also be via our website for 30 days..

Before we begin the call, we wish to inform participants that forward-looking statements are made pursuant to the Safe Harbor Provision of the Private Securities Litigation Reform Act of 1995.

You are cautioned that such forward-looking statements involve risk and uncertainties, including, without limitation, the risk of clinical failures, delays or increased costs; unforeseen changes in the cost of our research and development activities; possible acquisition of other technologies, assets or businesses; and the possible adverse action by customers, suppliers, competitors, regulatory authorities; and other risks detailed from time to time in the company's periodic reports filed with the Securities and Exchange Commission..

Following our formal remarks today, we will open the call up for questions. I'd like to turn the call over to Mr. Michael Tardugno, President and CEO of Celsion.

Mike?.

Thanks, Jeff. Good morning. Thank you for joining us and for your interest in and support for Celsion. I'm joined today by Dr. Nick Borys, our Chief Medical Officer; and by Jeff Church, from whom you've just heard, our Senior Vice President and Chief Financial Officer..

Let me start by saying it's good to be with this morning to outline our goals for 2014, a year that is set to be transformative for Celsion, and to review the progress against our 4 key objectives that provide for the underlying foundation of our research programs and our future value proposition..

First, as we've announced, Celsion is moving forward with our pivotal Phase III OPTIMA study of ThermoDox, in combination with optimized radiofrequency ablation or RFA, for hepatocellular carcinoma, which will -- we will refer to as HCC or primary liver cancer throughout our call this morning.

This study design is based on compelling data from post-hoc analysis of our HEAT study, and is the result of more than a year of disciplined and methodical analysis of the data from this 700-patient clinical trial, continuing consultation with leading liver cancer experts and our PIs and with discussions and input from key regulatory agencies, the U.S.

FDA chief among them. The OPTIMA study reflects our strong commitment to and belief in our ThermoDox program for primary liver cancer, which has established a high potential pathway for approval for this formidable and deadly cancer..

Second, we continue to leverage the potential of ThermoDox in additional indications. The data we are seeing from our other ThermoDox programs, including RCW, that's recurrent chest wall breast cancer, preclinical work with HIFU, an intensity-focused ultrasound, underscore ThermoDox's broad potential in a wide variety of cancers. .

It can target tumors with very high concentrations of doxorubicin and triggered with heat just above body temperature..

Third, we continue to pursue our strategic M&A initiative. Doing so, we intend to acquire assets that will capitalize on sales and drug development capability and competencies, expand our research and product pipeline and reduce enterprise risk, increasing the probability of significant returns to our shareholders.

We have been disciplined throughout this process, being mindful that no deal is better than a bad deal, I remain confident in this program's potential to transform our company..

Fourth, we are committed to the efficient use of capital and a strong balance sheet. You will note from our financials that we are well funded. With a net $48 million in cash and in addition, we have access to $20 million -- a $20 million venture line with Hercules Corporation.

Taken together, we have the ability to think and act strategically and to execute our plans and manage a system with long-term value for our shareholders..

Jeff will discuss our discipline and use of capital in just a minute. But first I'd like today to begin our conversation or our discussion of our Phase III OPTIMA program..

We are moving forward with the high degree of confidence in this global pivotal program.

We have a detailed roadmap, as we have discussed, founded on compelling clinical data, confirmatory post-hoc multivariate analysis, support of preclinical research and predictive computational models, and, of course, our deep understanding of the HCC treatment landscape..

Frankly, we may know more about the first-line treatment of intermediate stage HCC than just about any other company on the planet.

Our earlier HEAT study completed last year did not meet the primary endpoint of PFS, that's progression-free survival, but per protocol, however, and at the urging of our medical advisors, we have continued to follow patients to determine an overall survival benefit, which is the secondary endpoint of a HEAT study.

And this is where we have been truly able to appreciate the promise of ThermoDox for this indication..

The HEAT study provided Celsion and the liver cancer and medical community generally with invaluable data and insights into our potential treatment for this deadly disease. So here is what we know. Approximately 80% of individuals diagnosed with HCC are not candidates for curative surgical resection of their tumors.

There are no approved drugs for treating early and intermediate stage HCC. For these patients, medical device procedures like RFA, radiofrequency ablation, are the option of choice. These are the patients who are candidates for our study..

From our study, we know that RFA is effective and even more so, within the watchful environment of our Phase III clinical protocol. But, for patients with RFA-treatable lesions greater than 3 centimeters, RFA has to be used within its design limits..

Our data, for the first time, shows that longer heating cycles means a better outcome.

Further, our analyses in a key well-controlled, well-defined subgroup of 285 patients, representing some 41% of those patients in the HEAT study, with a single HCC lesion ranging from 3 to 7 centimeters, they were treated with what we will now call optimized RFA, that's RFA that's been used in a way to treat larger lesions of the liver for greater than 45 minutes, these patients benefit with a much longer survival..

The data further suggests that, in patients treated with an optimized RFA procedure alone, that's without ThermoDox, just the RFA procedure, a survival benefit of 15% is seen. Then, when ThermoDox is combined with an optimized RFA procedure, the survival benefit is improved potentially by 50%, and that's based on a post-hoc analysis.

That could translate into an increase in overall survival over the control arm of over 2 years..

In the most recent OS update announced last month, a patient subgroup treated in the ThermoDox arm, whose RFA procedure lasted longer than 45 minutes, again that's optimized RFA, experienced a 50% improvement in overall survival, with a Hazard Ratio of 0.66 and a p equal to 0.06.

And while I will point out that the median survival for the subgroup has not yet been reached, it's also important to note that this is the fifth consecutive quarterly OS data analysis showing a greater than 50% improvement in survival..

We have looked at all the factors that could contribute to this outcome. A multivariate analysis do not appear to discount this finding in any way.

So then, I'd like to repeat, notwithstanding that this is a post-hoc analysis, the data are striking that the magnitude of the clinical benefit has remained consistent with each of the 5 quarterly analyses completed today..

Moreover, these data are supported by the science and the mechanism of actions of our HEAT-activated liposomal technology, while longer heating times activate drug release, concentrating it in the tumor margins and the surrounding liver tissue..

But beyond our point of view and to ensure that this activity and some conclusions, our analyses have been independently evaluated by our study investigators and some of the most important leading liver cancer researchers in the world.

The findings have been scrutinized at multiple peer-reviewed meetings worldwide, most recently at the fifth European Conference on Interventional Oncology, known as the ECIO, where our Phase III program for ThermoDox is highlighted by Professor Riccardo Lencioni in his honorary lecture. .

Professor Lencioni is Director of the Diagnostic Imaging and Intervention at the Pisa University School of Medicine. He's a former ECIO President and the current Chairman of the World Conference on Interventional Oncology.

He is also the lead European principal investigator for our clinical studies of ThermoDox, and one of the foremost experts in the field of interventional oncology..

Now to be very clear with this or with any other retrospective analysis, in any report of positive efficacy has -- any report of positive efficacy has to be reviewed with caution. And as I have consistently pointed out this morning and over the last year, OS has not yet reached its median.

And that being said, we have used our unique understanding and our perspective to engineer what we believe to be a robust, well-designed trial..

In February, we received FDA allowance following the customary 30-day filing to commence the OPTIMA study. We expect to enroll our first patients by mid-year. The study is designed with approximately 550 patients globally and with up to 100 sites in North America, Europe, China and Asia-Pacific..

This is a 2-arm double-blinded randomized one-to-one study, comparing ThermoDox in combination with optimized RFA, which will be standardized to a minimum of 45 minutes across all investigators, versus optimized RFA alone. The primary endpoint is overall survival. The study is powered [ph] to show a 33% improvement in OS.

The statistical plan calls for 2 of the interim, our efficacy analysis by an independent data monitoring committee, and it employs a minimum -- a minimal office [ph] spend..

I want you to know that we are well on our way to bringing this trial online. We have selected our CROs, investigational drug product has been manufactured, the MC has been appointed, clinical trial agreements, CTAs are being filed worldwide. We have CTAs in Canada and Hong Kong. We are on track to enroll our first patient..

Beyond the U.S., the OPTIMA study enlists support for registration in key global markets. To support our efforts in China, for example, a country that reports half of the global HCC incidents, with over 400,000 new patients each year, Nick Borys and I met personally with the CFDA, that's the China's state food and drug administration.

Hisun, our manufacturing partner for the China market, also attended. Our goal was to discuss our OPTIMA study, including the minimum patient enrollment required for the marketing approval of ThermoDox in China..

And while I'm pleased to report that we were delighted with the outcome, and, based on those discussions, we submitted an application for accelerated clinical trial approval. The Chinese market is representing 50% of the world's incidents. Finally, agreement to move forward with the study is an important key growth for Celsion..

Beyond the U.S., Canada, Hong Kong and China, regulatory documents to initiate the study have been submitted in Taiwan, Malaysia, South Korea, Philippines and Thailand.

Our European regulatory submission completed last month, and is taking advantage of the harmonized process within the EU, which allows for a central and parallel approval for the key countries in Europe..

What I'd like you to -- I'd ask you to take you from all of this is this. We have a compelling thesis for ThermoDox plus [ph] an optimized RFA procedure is supported by some of the most important researchers in HCC globally. We have taken every opportunity to learn and to reduce associated trial risk.

We are moving quickly to advance the OPTIMA study in countries and among investigators with whom we are confident will be fully committed to the trial..

In parallel with our efforts in HCC, we continue to advance ThermoDox in recurrent chest wall breast cancer, and we have some remarkable results to date. We're actively enrolling patients in the DIGNITY Phase II trial. This study, as you know, has been difficult to enroll though, I have to tell you, we refuse to give up.

How can we? This is a desperate population. Patients have had a mastectomy, they failed 2 or 3 lines of chemotherapy, they failed radiation and have few, if any, options left. They face this cancer with very nasty and debilitating complications..

When we look at the ThermoDox plus hypothermia data generated so far in this fragile population, it strengthens our resolve. We are now approximately 75% enrolled in a trial with 5 clinical sites in the U.S. This is an open label trial.

As you know, we're evaluating multiple cycles of ThermoDox plus hypothermia in the patient population with superficial recurrence. In this population, even minimal tumor response might be considered a win..

That said, in February, we reported from a Phase II trial that a local response rate of 80% has been observed in the first 5 valuable patients with refractory disease, notably 2 of the patients had a complete response. It's important to understand that no approved treatments exist for these patients..

These are early but effective results, and notably they are consistent with the data that we've seen in both the Celsion and Duke University Phase I study in the same population.

We also continue to evaluate the potential of ThermoDox in combination with high intensity focused ultrasound, also known as HIFU, for the treatment of certain solid tumors..

The potential of this approach was highlighted in the 14th International Symposium on Therapeutic Ultrasound in April. Dr.

Mark Dewhirst of the Duke Cancer Institute, presented data supporting the development of ThermoDox plus HIFU as a non-invasive treatment option in indications where conventional treatment is not satisfactory, and where failure to control local disease causes morbidity or mortality.

We have been -- we have formed several indication-specific collaborations at leading academic research institutions, all of which have the potential to lead to clinical progress. For example, at the University of Utrecht in the Netherlands, we are combining ThermoDox with HIFU for breast cancer.

This program is also supported by a $10 million euro European grant and is expected to enroll human subjects later this year..

Our interest in metastatic liver cancer resulted in the sponsored research agreement with the University of Oxford.

The clinical trial is further supported by the National Institute for Health Research, to be carried out as a multidisciplinary collaboration among Celsion, the University of Oxford Institute of Biomedical Engineering and the Oxford University Hospital NHS Trust. Enrollment of the first patient in this clinical study is targeted for this year..

Also, this past January, we formalized the development program with Dr. Costas Arvanitis at the Brigham and Women's Hospital in Harvard Medical School, to evaluate ThermoDox and HIFU for glioblastoma, that's brain cancer, and this shows very much focus on methods and feasibility in animal models.

We are also supporting preclinical work at the University of Washington -- I'm sorry, Washington University in pancreatic cancer..

So as you can see, we have an active and full set of initiatives in this area to reflect our commitment to leverage the potential of ThermoDox and to advance our strategy to deliver on its potential as a pipeline within a product..

And while our confidence in ThermoDox programs remains as strong, if not stronger than ever and, frankly, reinforced with recent data, we do recognize the need to expand our pipeline and in doing so, reduce the risk and exposure inherent to a company with a single technology platform..

So we have been conducting, as we announced, an M&A search for acquisition of technologies and products that are most synergistic and complementary to our current product pipeline and internal capabilities. Our work is with Cantor Fitzgerald.

They have been assisting us with the comprehensive and systematic review of opportunities, with the goal of identifying novel products or companies with near-term value creation potential..

they have to be oncology focused, at the clinical stage and both synergistic and complementary with our existing technology and internal capabilities. This type of program, as you know, or may have surmised, done right usually takes time..

I want you to know we are actively reviewing several potential targets in some of the most exciting areas of oncology today, we're hopeful to make an announcement in the near future. However, with the proviso, as I started out, by saying, that no deal is better than a bad deal. We are being very judicious with our review of potential candidates..

So before turning it over to Jeff, I'd like to summarize my comments by saying this. 2014 is set to be a transformative year for Celsion.

With the launch of the OPTIMA study, we are implementing a well-defined Phase III development strategy for ThermoDox based on clear and controlling data from the HEAT study and with the support of key industry experts and regulatory agencies.

We continue to explore the potential of ThermoDox in additional indications, and early data in these settings remain supportive of the ThermoDox value proposition. We are well funded, with a clear strategic direction, and committed to maximizing shareholder value. And I must say, we are optimistic with our plans for the future..

So now, I'll now turn it over to Jeff, who will provide of an overview of our first quarter 2014 financial results.

Jeff?.

Thank you, Mike. Starting with cash, we reported total cash and investments at March 31, 2014 of $52.2 million as compared to $43.8 million at the end of 2013. At the current projected spending levels, this represents over 3 years of operating runway.

The increase in our cash position reflects the completion of a $15 million registered direct common stock offering in January. This financing was priced at the market with minimal warrant coverage..

We also have another $15 million available to us under our loan facility with Hercules Technology Growth Capital. Our financing Strategy puts us in a strong strategic position to continue the development of our heat-sensitive liposome technology platform, as well as to explore the acquisition of other promising clinical stage products..

As Mike mentioned earlier, a very important component of our strategic plan is a strong balance sheet and the ability to raise additional capital at the appropriate time, and on attractive terms, to efficiently advance our clinical development programs and execute our product acquisition initiative..

Our January 2014 financing was completed on terms that were very attractive. At the market, as I've stated, with 50% warrant coverage, it should be noted that half of the warrants issued have a 1-year term, not the traditional 5-year term, we see in other financing. This creative financing structure is the envy of our industry..

At the end of the first quarter, the company's working capital was approximately $48 million. We have a very strong internal control and budgetary system over spending. Our culture has been and will continue to focus on the smart use of cash with our commitment to efficient clinical research and product development and growing shareholder value..

Our internal operating expenses for the first quarter of 2014 were $5.2 million compared to $4.8 million last year.

Research and development costs were $2.9 million for the first quarter of 2014, a decrease of $300,000 compared to the prior year, due in large part to the completion of enrollment in the HEAT study, partially offset by clinical and regulatory startup expenses and the manufacture of clinical supplies associated with the preparation for our Phase III OPTIMA study.

With the initiation of the OPTIMA study in the first half of 2014, and the continued evaluation of ThermoDox in the DIGNITY study, we expect research and development costs to increase over the course of 2014 compared to 2013..

G&A expenses were $2.4 million in the first quarter of 2014 versus $1.7 million in the same quarter last year, primarily as a result of higher insurance premiums and personnel costs, including an increase of $200,000 in noncash stock option expense.

For the first quarter of 2014, the company reported a net loss attributable to common shareholders of $5.4 million this year versus $5.3 million in the comparable prior year period. .

The net loss for 2013 included 2 noncash-related items, the first being a noncash benefit of $4.3 million from the change in valuation to common stock warrant liability associated with the net refinancing in September 2009, and a noncash charge of $4.6 million related to the deemed dividend from the beneficial conversion feature associated with a preferred stock financing in February 2013..

Net cash used for operation was $4.8 million in the first quarter of 2014, as compared to net cash provided by operation of $1.8 million last year.

The prior year period was favorably impacted by a $5 million nonrefundable cash payment received from Hisun Pharmaceutical Company, that's our Chinese manufacturing partner, coupled with the timing of trade payables at the end of 2013..

I will now turn the call back to Mike. .

Well, thank you, Jeff. As you can see, Celsion is focused on its future. We're executing against our objectives for the year and moving forward with our pivotal OPTIMA study, backed by compelling data and with the support of key opinion leaders worldwide..

We believe in ThermoDox, its value proposition and continue to explore its potential in additional applications. We have a strong balance sheet and the flexibility to consider a number of strategic options that could complement or provide synergies with our efforts..

We hope to create value for our shareholders and, most importantly, make a significant difference in the lives of cancer patients and their families. As always, we greatly appreciate your interest in the company, and we look forward to updating you on our continued progress..

Now with that, we'll go to questions.

[Operator Instructions] So operator, if you would open the line for questions, please?.

[Operator Instructions] We'll take our first question from Keith Markey with Griffin Securities. .

I do have just one.

I was just wondering, considering what you've said about ThermoDox and its applications that you're investigating, how do you see ThermoDox being used either with RFA or other heating modalities as -- possibly in conjunction with immunotherapeutics?.

In conjunction with what?.

Immunotherapeutics. .

Immunotherapeutics. .

Fine. And I think that's an interesting question. I think for the most part, we are focused on populations where RFA is a standard of care, Keith. I'm going to turn this over to our Medical Officer in a minute here because I'm not the doc. But RFA or a surgical procedure, typically, I think the paradigm is if you can remove a cancer lesion you do.

The value of ThermoDox with RFA, yet to be demonstrated, but the data is quite compelling, suggests that when we add ThermoDox to this procedure, it improves the outcome, and my view is if immunotherapies become available for patients who are initially treated with radiofrequency ablation, it would be a program or a therapeutic that would be complementary too a treatment with RFA.

And Nick?.

Yes. Keith, that's interesting question. It's a topic that was discussed at the recent ECIO meeting that Mike mentioned in his presentation. You may have heard -- I guess, maybe that's prompted your question, you may have heard that RFA could cause an immune response in the liver from its activity.

And that puts us in a very interesting position of positioning ourselves for future immunotherapies with RFA, with ThermoDox. So I think much research is -- needs to be done there and more exploration. So if -- it's an interesting question, but we need much more answers before we could be definitive. .

I think I can say, our view is that immunotherapies hold a great deal of promise as we've seen with Yervoy, but high -- at least at this point, we cannot envision an immunotherapy obsoleting a procedure like RFA that can be used to treat the disease locally, at least at this point. .

Yes. Actually, it makes sense, because what I've read is that in some cases anyway, the larger the tumor, the greater the risk that there could be some severe side effects from some of those immunotherapies.

And so I guess that if you treat with RFA plus ThermoDox, you basically debulk that tumor and then maybe the immunotherapy would have a better chance of working without the side effects that I've read about. .

We will take our next question from Alec Roberts, private investor. .

I've had this stock for so long, I can't remember when I first bought it. I buy it as frequently as I can, and I certainly bought it after the 31st of January last year, because I told my wife, when I came downstairs after that, that shock everybody had. And I said, "This doesn't make sense.

This doesn't make sense." And you have proved that very well over the last 1.5 years. I just have a simple question, because I've been on every one of these quarterly calls for so long now, but you keep on saying -- I mean, this is a simple question, I'm sorry.

You keep on saying, after you give all those great results, that you haven't yet reached the 50% stage of the OS, Overall Survival, and I don't understand what the significance of that statement is.

Could you please tell me?.

Well, I guess, I referenced the 50% -- reaching 50% of the events in the study has the effect for statisticians of presenting a stable database. So prior to the -- reaching the 50% of the median, there is some uncertainty whether or not the data that's being analyzed is -- you can draw a firm and complete conclusions.

So the more patients that you have, the more subjects that you have to evaluate, the more confident you are in the data. .

The longer you spin this out, I mean, the longer the people live, the more confident we have with our data, is that what it really means?.

Yes. The more -- the greater the number of patients who have experienced an event, in this case, unfortunately, it's death, the higher the confidence we have in the conclusions drawn from the data set. .

Okay.

So once you hit the 50% OS, what sort of statement -- qualifying statements happen after that?.

I think at that point, we would consider the study concluded and would start following this patient subgroup on a quarterly basis. .

[Operator Instructions] We'll take our next question from John Conlin [ph], private investor. .

Just 2 quick questions. Regarding the OPTIMA study, you mentioned a bunch of countries and regions that are included.

I don't think I heard Japan, and I was wondering if Yakult is still involved, to what extent or are they still reviewing the initial patients that were in the HEAT study? And #2, the Lencioni presentation that was made last month, is that going to be up on your website?.

Well, let me take the second question first.

Do we have an update on when the study -- when the presentation will be available?.

It's -- we're working with the ECIO. They typically post that to their site. We're working out the arrangements so that we can get access and rights to post that on our site. So we're hopeful that, that will occur pretty shortly. .

With regards to Japan and Yakult, I'd like you to know that Yakult continues to be very strongly interested in ThermoDox, and, even more importantly, in ThermoDox for primary liver cancer. You know that liver cancer -- primary liver cancer in Japan is a problem, it's a very large problem, very high incident rate.

They are fully committed to a partnership with Celsion based on the data.

While the regulatory and clinical strategy in Japan differs from that in other parts of the world, for the most part, historically, the Japanese rely on a positive outcome from a Phase III trial from other major countries and an approval of that product prior to initiating any bridging studies, that would allow for registration or regulatory approval in Japan.

It's just the way they do business. When we initiated the HEAT study, we took a little bit of a risk. I'm not sure if you recall that or are referring to our earlier study, where there were some Japanese investigator sites involved.

We took some risk with that because essentially, what we conceded to do was to embed a -- essentially a Phase I study within a Phase III study. And it just was very difficult to compare the Japanese population that was being treated with the rest of the world.

And so, on the recommendation of our DMC, we discontinued enrolling patients in the HEAT study, in the prior study. Nick Borys and I have met recently with the Yakult team. We gave them an update.

They are -- I can report to you, they are actively looking for ways, assuming that we are successful, and I think we have every reason to believe that we will be. They are actively looking for ways to be able to shorten this period of time for which ThermoDox would be evaluated in Japan for registration. It's an active activity.

I wanted you to know that as soon as we have something to report, and I suspect we will over the coming months, as soon as we have something to report that represents meaningful news from this partnership with Yakult, we will do so. But I would say this to you, we are very proud of our relationship with Yakult.

They have been supportive from the beginning and even through this disappointment that we had a year ago they continue to follow us very closely and has been a more than just a license partner, they've been a collaborator in many elements of our clinical program. .

At this time, there are no additional questions. .

So I think we will then close the meeting. And as we close this quarter's conference call, I want to thank all of you, again, for your interest.

I can say, on behalf of the entire company, we do look forward to these conference calls, and I think even more importantly, we're looking for an exciting 2014 and of course, we do so with the expectation of your continued support. Thank you very much, and have a good day. .

That does conclude today's conference. Thank you for participation..