Theralase Technologies Inc. (OTCQX:TLTFF) Q3 2024 Earnings Conference Call December 4, 2024 11:00 AM ET
Company Participants
Matthew Perraton - Chairman of the Board
Kristina Hachey - Chief Financial Officer
Roger Dumoulin-White - President and Chief Executive Officer
Conference Call Participants
Matthew Perraton
Good morning, everyone. My name is Matthew Perraton and I will be hosting Theralase Technologies Inc's Quarterly Investor Conference Call today.
The focus of today's call will be a presentation and discussion on the company's third quarter 2024, interim financial statements and an update on the Phase II bladder cancer clinical study results, following the presentation there will be a question-and-answer session.
The agenda for today’s call, firstly Kristina Hachey, Chief Financial Officer will present the third quarter interim financial statements, followed by a Q&A session on the results. Afterwards, Roger Dumoulin-White, President and Chief Executive Officer will provide an update on the Phase II bladder cancer clinical study, which will also be followed by Q&A session.
Before we begin, I would like to remind everyone that today's presentation may contain forward-looking statements defined within the meaning of applicable Canadian securities laws. Participants should not unduly rely on these forward-looking statements, which are not a guarantee of future performance as there can be no assurance that these statements will prove to be accurate, as they may involve known and unknown risks, uncertainties, and other factors which may cause actual results or future events to differ materially from the forward-looking statements.
Although the forward-looking statements contained in the call today are based upon what management currently believes to be reasonable assumptions, the company cannot assure prospective investors that actual results, performance, or achievements will be consistent with these forward-looking statements.
All forward-looking statements are made as of the date hereof and are subject to change without prior notification. Except as required by law, the Company assumes no obligation to update such statements. This investor call audio track will be posted on our corporate website next week.
Now that I have dispensed with all the legal disclosure, let me introduce the Chief Financial Officer of the Company, Ms. Kristina Hachey.
Kristina Hachey
Thank you, Matt. Good morning, everyone. Let's start with an overview of the key highlights for the third quarter ended September 30, 2024. All values presented are in Canadian dollars.
For the nine-month period ended September 30, 2024, Theralase's total revenue decreased to CAD622,984 from CAD706,694 for the same period in 2023 or a 12% decrease for the same period last year.
Cost of sales was CAD332,136 or 53% of revenue, resulting in a gross margin of CAD290,848 or 47% of revenue. In comparison, the cost of sales for the same period in 2023 was CAD363,882 or 51% of revenue, resulting in a gross margin of CAD342,813 or 49% of revenue. The gross margin decrease as a percentage of sales year-over-year is attributed to an increase in material cost. Selling and expenses increased to CAD257,935 from CAD194,418 for the same period in 2023, a 33% increase. The increase in selling expenses is primarily a result of increased spending for sales, salaries, and advertising.
Administrative expenses for the nine- month period decreased to CAD1,294,969 from CAD1,456,382 for the same period in 2023, an 11% decrease. The decrease is a result of reduced spending on general and administrative expenses and professional fees. Stock-based compensation expense decreased by 26% in 2024 due to cumulative effect of accounting for vesting of stock options granted in the current and prior years. The drug division represented CAD836,029 of administrative expenses or 65% in 2024.
Net research and development expenses for the nine-month period ended September 30, 2024 decreased to CAD2,1699,000 from CAD2,285,390 for the same period in 2023, an 8% decrease. Net research and development expenses for the drug division decreased to CAD1,962,484 from CAD2,250,346 for the same period in 2023, a 13% decrease. The decrease is primarily attributed to a decrease in cost for Study II patient enrollment and treatment. Net research and development expenses for the device division increased to CAD138,215 from CAD34,844 for the same period in 2023, a 297% increase. The increase is attributed to development of a new software program for the TLC-2000 Cool Laser Therapy System.
The net loss was CAD3,337,995, which included CAD562,353 of net noncash expenses comprised of amortization, stock-based compensation expense, and foreign exchange gain loss. This compared to a net loss in 2023 of CAD3,579,855, a 7% year-over-year reduction, which included CAD714,020 of net noncash expenses. The drug division represented CAD2,810,423 of this loss or 84% in 2024. The decrease in net loss is primarily attributed to decreased spending on research and development expenses in Study II.
The company has completed five non-brokered private placements in 2024, raising gross proceeds of approximately CAD3,930,500, issuing 19,298,511 units at various prices between CAD0.18 and CAD0.30. Each unit consisted of one common share of the company and one transferable warrant. All warrants entitled the holder to acquire an additional common share at a price between CAD0.25 and CAD0.45 for a period of five years following the date of issuance.
Lastly, an update regarding our warrants. On September 19, 2024, the company extended the expiry date of 10 million share purchase warrants, all of which are exercisable at CAD0.35 per share. They were issued on September 22, 2024 pursuant to a private placement involving the issuance of 10 million units of the company. The new expiry date of the warrants is September 22, 2027.
On November 12, 2024, the company extended the expiry date of one million share purchase warrants, all of which are exercisable at CAD0.35 per share. They were issued on November 17, 2024, pursuant to a private placement involving the issuance of one million units of the company. The new expiry date of the warrants is November 17, 2027.
I will now like to address a few of the questions that have been submitted by shareholders. The first question is, how much is it going to cost to complete the Phase II clinical study for bladder cancer, and how do you plan to finance it?
The company estimates the cost to complete the clinical study to range between CAD15 million and CAD30 million over the next three years, dependent on patient recruitment rate and the number of clinical study sites required to successfully complete it. The company's primary mandate is to be properly capitalized by securing funding to complete the Phase II clinical study through receipt from the Ontario Securities Commission to register a CAD100 million base shelf prospectus. If granted, this would allow the company 25 months from date of approval to access funds from the base shelf up to a maximum amount of CAD100 million. These funds would be raised in various tranches based on need. In order to be base shelf eligible, the company is required to demonstrate 12 months’ worth of cash flow, which according to our latest financial statements is approximately CAD4.5 million. Therefore, the company plans to raise approximately CAD10 million in debt and/or equity instruments and government programs in the form of grants and loans to become base shelf eligible.
The second question is, are there any plans for private placements or capital raises in the near future? To discuss future financings, it's best to contact Matthew Perraton to discuss what we have coming down the pipe. His email is posted on the screen to connect with him.
The third question is, how does the company plan to fund the brain cancer and lung cancer can clinical studies?
A Phase Ib clinical study for both brain and lung cancer is estimated to cost approximately CAD5 million. Therefore, this money would be available through the base shelf prospectus I just mentioned.
I believe that addresses all the questions I have received about the company's financial statements, and I will now turn it back over to Matt.
Matthew Perraton
Thank you, Kristina, for your thorough overview of the company's third quarter financials and your strategy to appropriately fund the drug division, focusing on our lead asset in bladder cancer as well as the emerging assets targeting brain, lung, and blood cancers. We also extend our gratitude to all shareholders who submitted questions for this call. Your engagement and continued support for Theralase is greatly appreciated.
To make the discussion as efficient as possible, we've consolidated questions with similar themes to avoid redundancy. If you don't address your specific question during this call due to time limitations, we apologize and encourage you to reach out to me directly for further clarification.
As a reminder, as a publicly traded company, we are restricted to discussing only information already available in the public domain. We cannot address inquiries regarding non-public information.
With that, I'll hand things over to the President and CEO, Roger Dumoulin-White, to provide an update on our Phase II bladder cancer clinical study and respond to additional shareholder questions.
Roger Dumoulin-White
Thank you, Matt. Good morning, everyone. To begin, I would like to present the latest clinical data from the Phase II bladder cancer clinical study. To date, Theralase has enrolled and treated 75 patients in Study II who have been provided the primary study procedure by the clinical study sites. Theralase plans to add up to five new clinical study sites in the fourth quarter of 2024 and in the first quarter of 2025, as well as increase enrollment of the existing 10 clinical study sites to complete Study II enrollment in 2025.
96% of the 75 patients treated have been evaluated at the 90-day assessment for treatment safety and efficacy according to the clinical study protocol. 84% of the 75 treated patients have completed the clinical study. For the primary endpoint, which is complete response at any point in time, primarily defined as negative cystoscopy and negative cytology, 61.9% of patients demonstrated a complete response. If we include patients who demonstrated an indeterminate response defined as negative cystoscopy and positive urine cytology without a confirmatory negative bladder biopsy, the total response increases to 68.3%. This means that greater than two out of three BCG-unresponsive non-muscle invasive bladder cancer patients facing a radical cystectomy treated with Theralase's unique study procedure are experiencing complete destruction of the cancer in their bladder.
For the secondary endpoint, which is duration of their complete response, 43.6% of treated patients who achieved a complete response maintained their complete response for at least 12 months or 450 days from the date of their primary study procedure. What this means is that almost one out of two patients who demonstrated a complete response at any point in time continue to demonstrate a complete response at 15 months from the date of their study procedure.
For the tertiary endpoint, which is safety of the study procedure, 100% of patients experience no serious adverse events directly related to the study drug or study device. In addition, 15.4% of patients who demonstrated a complete response at 450 days continue to demonstrate a complete response at 24 months with five patients still pending assessment. And 10.3% of patients continue to demonstrate a complete response at 36 months with eight patients pending assessment.
The swimmer’s plot is a graphical representation of a patient's response to a treatment over time. Specifically, the clinical results for patients who achieved a complete or indeterminate response at any point in time and how they responded over that time. As can be seen in the plot, clinical data is still pending for patients who have demonstrated an initial complete response at 90 days and continue to demonstrate a duration of that response. The Kaplan-Meier curve illustrates graphically, for patients who have achieved a complete response, the estimate of the duration of that complete response and probability that their complete response will continue in the future when all of the clinical data of Study II is analyzed. According to the Kaplan-Meier curve, if the patient obtains a complete response, then the patient has a greater than or equal chance of 54.3% of remaining cancer free for one year. Greater than or equal chance of 36.8% for two years and greater than or equal chance of 25.5% for three years.
For the 75 patients treated in Study II, there have been 15 serious adverse events reported with all except the Grade V fully resolving within 90 days, and oftentimes within a few days. Theralase believes all serious adverse events reported to date are unrelated to the study drug or study device. This is very strong clinical data for patients that have been diagnosed with high-grade bladder cancer disease, specifically carcinoma in situ. As they have failed standard-of-care treatment with BCG, and in the majority of cases have failed other treatments such as an immunotherapy or gene encoded oncolytic viruses. To be clear, these are patients that are facing radical cystectomy or complete removal of their bladder and associated tissues.
In 68% of cases or approximately 7 out of 10 patients, Theralase has been able to completely destroy the cancer in their bladder. This is extremely encouraging for patients who have had no other treatment options other than removal of their bladder and the morbidity and mortality risks associated with that significant surgery. Clinical data is still being collected, but all indications demonstrate that Study II has achieved its primary, secondary, and tertiary objectives.
Now let me move to address a few of the questions that have been submitted by shareholders.
The first question, how many patients are required to complete enrollment and finish the clinical study?
Theralase 's continues to enroll patients into the study and to date has enrolled 75 patients with additional study procedures scheduled before the end of the year. Why this is significant is that in April of this year, a competitor received FDA approval with just 77 patients treated. With 75 patients treated to date, we are very close to completing enrollment into our clinical study. To ensure we have a significant sample size for our study, Theralase would like to enroll an additional 20 to 25 patients into this study in 2025. If successful, this will allow us to achieve soft and hard data lock on a majority of the clinical data in mid-2026 and subject to receiving priority review by the FDA, a determination for marketing approval by Health Canada and the FDA by the end of 2026.
The second question is why is duration of response so important to the FDA?
Duration of response is important to all stakeholders, from the regulators such as Health Canada and the FDA, the insurance companies who are reimbursing hospitals and doctors for these treatments, the practitioners and the surgeons who are delivering the treatment, and especially the patients who are inflicted with this life-threatening disease. One of the biggest risks of bladder cancer is its recurrence and more importantly, its ability to progress into muscle invasive bladder cancer and metastatic cancer. If it does spread outside the bladder, it can spread throughout the body, greatly diminishing the lifespan of the patient. So everyone would agree that they want to destroy it as non-muscle invasive bladder cancer before it has the opportunity to recur or worse, progress.
Due to the high risk of recurrence and progression, the FDA and Health Canada are very interested in the duration of response. Basically, can a treatment provide the patient with a complete response? And if so, how long will that complete response last? Many treatments designed for the treatment of bladder cancer, including FDA approved drugs and those under clinical study and investigation, provide very strong initial complete responses. However, due to the nature of the disease, they drop in efficacy extremely quickly.
Theralase is demonstrating world class performance, both in safety and efficacy, with our duration of response superior to any FDA approved drug or drugs under clinical study investigation.
The third question is, what is the status of breakthrough designation or BTD approval?
The company submitted a pre-BTD submission to the FDA in July 2023. And based on the FDA's feedback, the company worked with the clinical study sites, a central pathology laboratory, a biostatistics organization, and a regulatory organization to update the pre-BTD with clinical data clarifications requested by the FDA, specifically the patient's duration of response after 450 days, and also the inclusion of central pathology to validate the results obtained from local pathology. The company collected a majority of this clinical data and resubmitted the pre-BTD to the FDA in September of this year.
The company met with the FDA in mid-October and the FDA suggested a different format to present the clinical data to better align with clinical data supplied by other companies for this disease. Theralase has now recompiled its clinical data and resubmitted to the FDA at the beginning of December. We expect to schedule a meeting with the FDA in late December, early January to review the new format and hope to gain FDA approval to submit a BTD application in late December, early January with a hope to receive BTD approval before the end of first quarter 2025.
The fourth question is how does Ruvidar stack up to the competition for bladder cancer?
The interim clinical data Study II to date has proven to be world class and superior to big pharma's clinical data, who as you well know, are significantly larger and much better financed than Theralase.
Looking at the competition for FDA-approved technologies, valrubicin, a chemotherapy drug approved by the FDA 40 years ago, has an initial complete response of 21%, following to just 7.7% at 12 months. The first immunotherapy drug approved in this space in early 2020, Keytruda, has an initial complete response of 40%, falling to just 18.9% at 12 months. The first gene encoded adenovirus approved in this space, ADSTILADRIN, has an initial complete response of 51%, falling to just 23.5% at 12 months.
The most recent FDA approval belongs to BCG plus N-803, which has an initial complete response of 62%, falling to just 36% at 12 months. For technologies currently under clinical evaluation, slow-release gemcitabine, a chemotherapy drug, has an initial complete response of 76.7%, falling to 26% at 12 months.
Creto, an intravesical oncolytic immunotherapy, has an initial complete response of 75% falling to 27.6% at 12 months. Finally, detalimogene, a non-viral gene therapy, has an initial complete response of 73% with no reported response at 12 months.
In comparison to these FDA-approved therapies and for therapies undergoing clinical evaluation, the primary benefit of the Theralase Technology are the high initial response by patients of 61.9%, but more importantly, the high duration of response at 450 days of 43.6%, after only one study procedure in 46% of the patients treated. In addition, the much higher safety margin of the Theralase therapy is extremely beneficial for the patients being treated.
From a clinical perspective, the Theralase therapy is urologist led and is able to be provided under general anesthetic. From a manufacturing perspective, the Theralase small molecule is much easier to manufacture versus a biologic and has been proven stable for up to eight years at room temperature, a significant advantage for the clinical sites that provide the Theralase therapy to their patients. Therefore, the Theralase Technology presents a safe, effective alternative therapy for patients who are at risk of having their bladder removed.
The fifth question is, what is the status of any licensing, acquisition, partnering, or distribution agreements?
The company's guidance in our corporate PowerPoint presentation on our website is that the company commenced a commercialization phase at the beginning of 2024. These negotiations with various strategic partners can take two to three years to come to fruition. So the corporate strategy is to have an acquisition or distribution partner in place in 2026 or before just as the company is completing a follow-up on its Phase II bladder cancer clinical study and preparing for submission to Health Canada and the FDA for regulatory marketing approval or hopefully has already achieved regulatory marketing approval. Based on the strong interim clinical data compiled to date, the company believes that these are realistic timelines for a potential partnership agreement. When deemed material by the board of directors, any licensing, acquisition, partnering, or distribution agreements would be announced via press release.
The sixth question is, can you provide any updates on brain cancer, lung cancer, or blood cancer clinical studies?
The non-GLP preclinical research and toxicology has been completed for glioblastoma multiforme brain cancer and is currently underway for lung cancer and the blood cancer lymphoma. GLP toxicology is slated to be completed in the first quarter of 2025, pending capital funding. This will allow commencement of a Phase I, II clinical study for these diseases in mid-2025, subject, of course, to Health Canada and FDA approval, as well as being properly capitalized to commence these clinical studies.
The seventh question is, what do these new indications mean to Theralase?
The impact of Theralase is believed to be significant. Any opportunity for a pharmaceutical company to increase its pipeline for therapies able to safely and effectively treat major diseases such as brain cancer, lung cancer, or blood-based cancers would be considered materially significant to both potential revenues and the stock price.
As an example, the global market in 2022 for glioblastoma multiforme was $2.4 billion with an annual growth rate of almost 10%. The global market for non-small cell lung cancer was estimated at $10 billion globally. For blood-based cancers such as leukemia, lymphoma, and multiple myeloma, the global market reached $63 billion in 2022. Theralase is excited about the possibility of developing safe and effective treatments for the millions of patients inflicted with these cancers annually.
In closing, I would like to state that the company remains focused on commercializing the next standard-of-care treatment for BCG-unresponsive non-muscle invasive bladder cancer, which includes: one, being properly capitalized using various equity and debt instruments. Two, completing patient enrollment and provision of the primary study procedure in 2025. Three, achieving BTD status from the FDA in first quarter 2025. Four, achieving Health Canada and FDA regulatory marketing approval by the end of 2026. Five, successfully partnering the technology in 2026 or before.
In addition, the company plans to: One, commence Phase I clinical studies for brain cancer, lung cancer, and blood-based cancers in 2025. Two, research and develop a topical ointment for the treatment of herpes simplex lesions, and three, develop a vaccine for avian influenza.
Thank you, everyone, for your time today, and I look forward to updating our shareholders as we continue on our path towards commercializing the next standard-of-care treatment for bladder cancer.
Matthew Perraton
Thank you for your detailed responses, Roger. I'd also like to extend my gratitude to everyone who joined us today, especially our shareholders who submitted questions for this call. As expected, a majority of the questions we receive focus on our FDA pre-BTD review and our BTD application. This focus is understandable as obtaining this designation provides the company with additional FDA support and potentially share price accumulation. That said, I want to emphasize that while securing breakthrough therapy designation certainly be desirable from a company's perspective, our primary goal is and remain securing regulatory approval from Health Canada and FDA that would allow for commercialization of this technology across the United States.
Therefore, obtaining BTD is a nice-to-have approval and not a must have approval as far as the FDA is concerned. In other words, not obtaining BTD approval does not preclude the company from obtaining FDA regulatory approval, which is a true prize in clinical development.
Theralase has clinical study results that not only exceed the international bladder cancer group's guidelines used for recent FDA approvals, but outperform all currently approved FDA treatments and even treatments in the clinical development pipeline. Therefore, we're well on our way to achieve our ultimate objective of regulatory approval in 2026.
If there are any additional questions that were not answered during today's call, please don't hesitate to reach out to me directly via my email. My email information is displayed on the screen.
Thank you again for your participation. I look forward to our next quarterly call following the submission of 2024 annual financials. Wish you all a great day ahead.
Theralase Technologies Inc. (TLTFF) Q3 2024 Earnings Call Transcript | Seeking Alpha