Good day, and welcome to the Delcath Systems First Quarter Fiscal Year 2024 Financial Results Conference Call. All participants will be in the listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press Star, then one on a touchtone phone. To withdraw your question, please press Star then two. Please note that this event is being recorded. I would now like to turn the conference over to David Hoffman, Delcath General Counsel. Please go ahead. Thank you. And once again, welcome to Delcath Systems 2024 First Quarter Earnings and Business Highlights Call. With me on the call are Gerard Michel, Chief Executive Officer, Sandra Pennell, Senior Vice President of Finance, Kevin Muir, General Manager, Interventional Oncology, Vojislav Vukovic, Chief Medical Officer, and Martha Rook, Chief Operating Officer. I'd like to begin the call by reading the Safe Harbor statement. This statement is made pursuant to the Safe Harbor for forward-looking statements described in the Private Securities Litigation Reform Act of 1995. All statements made on this call, with the exception of historical facts, may be considered forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Although the company believes that expectations and assumptions reflected in these forward-looking statements are reasonable, it makes no assurance that such expectations will prove to have been correct. Actual results may differ materially from those expressed or implied in forward-looking statements due to various risks and uncertainties. For a discussion of such risks and uncertainties, which could cause actual results to differ from those expected or implied in the forward-looking statements, please see risk factors detailed in the company's annual report on Form 10-K, those contained in subsequently filed quarterly reports on Form 10-Q, as well as in other reports that the company files from time to time with the Securities and Exchange Commission. Any forward-looking statements included in this call are made only as of the date of this call. We do not undertake any obligation to update or supplement any forward-looking statements to reflect subsequent knowledge, events, or circumstances. Now, I would like to turn the call over to Gerard Michel. Gerard, please proceed. Thank you, everyone, for joining today. This is the first quarter Delcath is reporting U.S. revenue, a significant milestone for the company. In the first quarter, revenue from our sales of Hepzato was $2 million, and for CHEMOSAT, $1.1 million. Given the March start for three of the four U.S. centers active in the first quarter and the temporary use of product sampling for some of the initial proctored cases, the $2 million in U.S. revenue was predominantly generated by treatments at Moffitt, with the balance of the other three centers activated in the first quarter, starting to generate consistent revenue in the second quarter. As we have discussed in prior calls, the pace of revenue growth in the short to medium term will be determined by the rate at which we can train and activate new treating centers. Since our launch in January and in the seven weeks since our recent fourth quarter call, we have made steady progress in expanding the number of centers we are engaged with and actively training. We ended the first quarter with 4 active sites: Moffitt Cancer Center, Stanford University Cancer Center, Thomas Jefferson University, and the University of Wisconsin. As of today, there are 6 active treating centers, with the University of Tennessee and the UCLA Cancer Center having recently conducted their first commercial treatments. A further 5 centers have completed the necessary steps to conduct their first commercial treatment under the guidance of a proctor, once hospital formulary committee approval is obtained, and are in the process of identifying and scheduling their first patients for treatment with Hepzato. In total, there are 11 centers, an increase of 2 from our last call, currently accepting patient referrals and listed on our healthcare setting locator. Beyond those 11 centers, another 7 centers currently have preceptorships scheduled or are partway through the preceptorship training. To date, we have had over 100 perfusionists, anesthesiologists, and interventional radiologists attend preceptorships, representing over 20 institutions in the U.S., with some institutions sending multiple healthcare providers for the same specialty. As a reminder, the entire process from initially scheduling a preceptorship to activation can take approximately 3 months. Given the significant level of commitment required from healthcare providers to become fully trained and certified under the REMS program, we believe all the healthcare providers and the cancer centers involved to date intend to incorporate Hepzato as a core part of their treatment regimen for metastatic uveal melanoma patients. We continue to expand the number of centers with which we are engaging, with over 30 centers now somewhere in the process, from preliminary discussions regarding the steps required to become a treating center to actively treating patients. There has been a definite increase in interest, partially due to physicians at treating centers sharing their experience with physicians at other centers which are not yet involved.... There's certainly a component of what I might characterize as informal and independent peer-to-peer engagement occurring. In addition, increased interest can also be attributed to our permanent and product-specific J-code becoming effective on April first. While we are aware that hospitals have successfully been reimbursed for the treatment using miscellaneous C-code prior to April first, the establishment of the permanent J-code has definitely simplified the reimbursement process and the willingness of formulary committees to approve the use of Hepzato. We believe we are on track to have 20 active centers by the end of 2024. The approximate anticipated pacing of center activation remains at 10 active centers by the end of the second quarter, 15 by the end of the third quarter, and 20 treating centers by year-end. Our projected average treatments per center remains at approximately 1 per month, ramping to a run rate of approximately 1.5 treatments per month by mid-year, and then reaching a run rate of 2 treatments per month late in the fourth quarter. It is important to note that given our expected ramp for both treatment per center volume and center activation, we should achieve $10 million in U.S. quarterly revenue in 2024, which will likely result in $25 million of cash proceeds from the exercise of the final tranche of warrants issued as part of our March 2023 financing. Sandra will share additional details on our financials in a moment, but I want to highlight that our effective gross margin in the first quarter was approximately 60%, despite the modest initial volume. In addition to the significant commercial effort activity, we continue to support both internal and external efforts to add to a growing body of evidence that the PHP procedure is an important treatment options for patients with liver-dominant uveal melanoma, as well as potentially other liver-dominant cancers. Recently, we announced the publication of results from the pivotal phase III FOCUS study of Hepzato in patients with unresectable metastatic uveal melanoma in the journal's Annals of Surgical Oncology. As previously disclosed at ASCO, the publication reported a statistically significantly higher overall response rate of 36.3% for Hepzato, versus 5.5% from a meta-analysis of historical controls. Other efficacy endpoints include a 70% complete response rate with a 73.6% disease control rate. In addition, results from the early randomized stage of the FOCUS trial, which was initiated as a randomized two-arm trial but completed as a single-arm study, will be presented at a poster session at the upcoming ASCO annual meeting in Chicago. Later in the year, we expect also to have published an expanded analysis of various patient subpopulations in a peer-reviewed journal. Liver-dominant metastatic disease is a significant therapeutic challenge in an area of high unmet medical need for many solid tumor types. To support additional clinical development in some of these areas, it is important for the company to build a strong commercial foundation in metastatic uveal melanoma in the U.S., both for purposes of funding trials as well as creating a network of treating centers. We are well on our way to accomplishing this. While the interest level from interventional radi- Unable to hear you. You're unable to hear me? Yeah, you are- You can't hear me? Please go ahead. Yes, we can hear you now. Can you hear me now? Hello? Yes, Gerard, we can hear you. You can go ahead. When did I drop off? Can you tell me when I dropped off? We couldn't hear you for about 20 seconds. Sandra, do you know where I dropped off? I heard you the whole time, but if you wanna start back around the ASCO in Chicago, perhaps. Okay. So you heard me the whole time. All right, I did. Always, always some technical difficulties somewhere. So let me rewind here. Apologies to the listening audience here. All right. I'm gonna just pick up with later in the year, we expect expanded analyses of various patient subpopulations, a little FOCUS study to be published in a peer-reviewed journal. Liver-dominant metastatic disease is a significant therapeutic challenge and an area of high unmet medical need for many solid tumor types. To support additional clinical development in some of these areas, it is important for the company to build a strong commercial foundation in metastatic uveal melanoma in the U.S., both for purposes of funding trials as well as creating a network of treating centers. We are well on our way to accomplishing this. While the interest level from interventional radiologists in investigating the use of Hepzato and Chemosat to treat other liver-dominant cancers has been high for many years, this has not necessarily been the case for oncologists outside of metastatic uveal melanoma. The launch of Hepzato in major cancer centers is increasing the level of interest from a broader set of oncologists to study Hepzato use in treating other cancers, such as colorectal, intrahepatic cholangiocarcinoma, and breast cancer. As mentioned in the previous quarterly update call, we plan to initiate one or more clinical trials of Hepzato in other tumor types within approximately a year, and we'll provide further updates on those activities later this year. The CHOPIN trial, which is evaluating the effect of sequencing immunotherapy with Chemosat liver-directed therapy, is expected to be fully enrolled by the end of 2024. As CHOPIN is an investigator-initiated trial, we do not control the timing of data release. However, our understanding is that the study results, including the primary endpoint, are still planned to be presented at a major oncology conference in the second quarter of 2025.... In summary, the company continues to activate centers consistent with our center activation guidance. In addition, while the treatment of metastatic uveal melanoma patients will support significant growth for the foreseeable future, we are planning to pursue additional indications given the tremendous unmet need for patients suffering cancer of the liver. I will now hand the call over to Sandra to share some details on our financial position. Sandra? Thank you, Gerard. We ended Q1 with $27.2 million in cash investments, and cash used in operations were approximately $9.6 million in the first quarter. The change in cash from year-end is due to the use of cash required primarily for launch and center activation, offset by the 2024 private placement financing of $7 million. It is important to note that this financing was supported entirely by Delcath senior executives, board members, and existing institutional investors. We believe that our current financial resources are adequate to fund operations until the company achieves $10 million in U.S. quarterly revenue, which would likely trigger a warrant exercise resulting in $25 million in proceeds. This $25 million should be sufficient to fund the company until we become cash flow positive. As Gerard previously mentioned, we remain confident we will achieve $10 million in quarterly revenue in the US no later than the fourth quarter of this year. Revenue from our sales of HEPZATO were $2 million, and Chemosat was $1.1 million for the three months ended March 31st, 2024, compared to $0.6 million for Chemosat during the same period in 2023. Gross margins were 71% in the first quarter of launch. Cost of goods sold did include a positive adjustment for standard cost revaluation, a non-recurring item. Without the adjustment, gross margins would have been approximately 60%. For the three months ended March 31st, 2024, research and development expenses were $3.7 million, compared to $4.7 million for the three months ended March 31st, 2023. The change in R&D expense is primarily due to a decrease in clinical trial activities, offset by an increase in personnel-related expenses. For the three months ended March 31st, 2024, compared to the same period in 2023, selling general and administrative expenses increased to $8.8 million from $4.2 million. The increase is due to activities to prepare for commercial launch, including marketing-related expenses and additional personnel in the commercial team. Thank you. Back to you. Moderator, can we now, look for questions? Yes. Thank you. We will now begin the question and answer session. To ask a question, you may press star then one on a touch-tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. The first question is from the line of Bill Plovanic from Canaccord Genuity. Please go ahead. Good morning, and congrats on the strong early launch. I have three quick questions for you. So first one, looking, just thinking through, realized revenue per kit. I know you've said before that you're selling direct, so you expect to there to not be a gross margin. So, just quickly looking at the math here, did your revenue for first quarter reflect 11 kits sold? Is it that simple math? Second question is on your EU revenue. Obviously, in absolute terms, it was a modest tick-up, but in percentage terms it was a very noticeable tick-up in first quarter. So is that sustainable growth we're seeing or just some quarter-to-quarter variability? And then finally, at scale, what do you expect gross margins to approach? Thank you. All right, let's tick those off one at a time. Eleven kits, that's your math, yep, you're pretty good at math. There is, you know, we're shipping direct, so it's a fairly simple analysis, given our pricing is $1,825. Second question, in terms of Europe, we actually finally got a rep in Germany established. So that's, and she's been out there for about a year and change, but she's really finally getting some traction. Germany is the only market in Europe where there is really a consistent form of reimbursement. It's a Z- scheme where the hospital has to actually budget for the use of the product and estimate how much they'll use in the prior year. So it's taken this rep a good year to, you know, get things built, get in front of the hospital, say, "Hey, you need to budget for this." So, I think we'll continue to see a fair amount of growth out of Germany, given, I think probably at best we have maybe 15% penetration. So I think there's a way to go- ways to go there as well. And lastly, in terms of gross margins, I think that, you know, at peak revenue, I would expect we should be closing in on perhaps close to 90% gross margins. It'll take us, you know, a good year and change probably to get to that point, but I think that'll probably be peak in terms of gross margins. Okay, and a quick, quick follow-up as I was thinking through that answer. The $10 million in a quarter that triggers the next tranche, is that just U.S. Hepzato, or is that worldwide revenue? Just U.S.. Okay, thank you. The next question is from the line of Marie Thibault with BTIG. Please go ahead. Hi, good morning, Gerard and Sandra, and congrats on a really strong, start to your commercialization here. Wanted to ask a little bit about the patient profile of, of treated patients you're seeing so far. How are they doing? Are they coming back for additional cycles? Are you seeing any first-line treatments? Just any characterization of those first 11 treatments, if you can. Yeah, I think since the end is fairly low, it'll be hard to give specific trends. But Kevin, why don't you, you know, comment on, on the variety that we've been seeing? Sure, Gerard, thank you. Marie, we've seen we've kind of seen them all. To this point, with 11 treatments, we do have first-line treatments, as first-line patients, as well as patients that have received other treatments. You know, when you launch a cancer drug, they just don't stop, the patients just don't stop the current treatments. They go through their current line of treatment, and then when they progress off that, they go to the next line. So we're seeing a combination right now of first line and second and third line patients. And I would add, Marie, that we, we're seeing patients who are coming off tebentafusp, coming off Opdivo. And then, yes, we are getting returning patients. They are, we have seen no trend of patients dropping off early in terms of not coming back for retreatment. However, early days, so, you know, can't quite take that to the bank, but encouraging in that patients are coming back for retreatment. Yeah, encouraging indeed. Okay, and then I wanted to ask about reimbursement. Are you seeing any, you know, pushback or any hurdles to getting those payments? It doesn't look like it so far. I just want to hear how that's trending. And then with the J-code and TPT status going into effect in April, what you've noticed so far here in your second quarter, if customers are having success with that J-code, if everything's going smoothly. Thanks for taking the questions. Yeah. Obviously, we're on, you know, we're not sitting there submitting for reimbursement. The hospitals are submitting, you know, we know stuff anecdotally, and I'll ask Kevin to comment on that for a moment. I will say, though, the hospitals are paying us. We are getting checks from them, so that's encouraging from our end. But Kevin, why don't you talk a little bit about, you know, the change you've seen in front of the various formulary and finance committees since the J-code's been in place? Sure. I'll echo Gerard's view from his statement. We are aware that the codes or the claims from the first quarter, which were using temporary codes or miscellaneous codes, were accepted and were paid. That's great news. And when you look at the J-code, it has just simplified matters for the hospital for their claims. So for the hospitals that are open and have patients that are treating, claims have been much easier. And I think the biggest thing for us through this launch has been the formulary process. It's a much easier process and much more predictable for the hospitals that we are attempting to open right now. So the formulary process has been much smoother. J-code and the HCPCS approval, as well as the pass-through approval, has streamlined things, and it's just made the process for the hospitals much more predictable. There's a fee schedule. They can look at it, and they can understand all of those things, and they can make their financial decisions and their revenue predictability in the future much easier. And it's really helping us as we go through our hospital activation. Thank you, Kevin. You're welcome. Thank you. The next question is from the line of Sudan Loganathan with Stephens. Please go ahead. Yes, thank you, Gerard and Sandra, for taking my questions. So real quick, first question. Curious if the physicians are seeing patients that have been treated on KIMMTRAK or, you know, coming on first line, and then even, you know, how the physicians are viewing the treatment landscape now that HEPZATO KIT is available and launching at this point, as the treatment landscape also develops in the coming years. And then secondly, whenever you're looking at future developments in R&D, is that something that will be funded through the outcomes of the revenues of HEPZATO KIT? Or is there... Just want to see your views on that for future R&D development and how you would support that. Sure. First off, first off, Sudan, welcome to the fold. Appreciate the coverage. Thank you. In terms of, you know, are we seeing patients post KIMMTRAK? I think the answer is yes. I can't tell you how many, but we saw patients post KIMMTRAK in the clinical trial, and, we've seen patients post KIMMTRAK, you know, in the commercial setting. You know, given HIPAA, et cetera, we can't say: Hey, what's this patient been on? But we do have, someone from the company in every treatment, and, they occasionally the physician will share with the rep or the clinical support specialist, you know, the history of the patient. So the answer is yes on that. In terms of, you know, how the treatment regimen and how, you know, how people view the landscape, how that's changing... I think that varies by doc. Some of them are trying to figure out, do they use liver-directed first, with us approved now, with a specific product approved? Or do they go with systemic first? And I think there's a variety of opinions out there. So I think it varies dramatically. But these patients, unfortunately, for the patients, all progress. It's very rare you get someone who has a complete response that at least lasts for a decade or so. And, you know, unfortunately for the patients, companies such as us and Immunocore will, for their subset of patients, probably will have a shot at most patients in terms of a line of treatment. Gotcha. That's great. And then, you know, and secondly, just in terms of the your R&D, you know, future- Oh, yeah. -plan. Yeah. Yeah. Sure. I can give you that. How are we gonna fund that, is the question, huh? Yeah. You know, the hope and plan is to fund it off the P&L. Okay. You know, I don't want to be a serial fundraiser. I think most people who have spoken to me know I'm sensitive, as sensitive to dilution as any investor. Now, if the stock works dramatically and there's, you know, tremendous opportunity in other indications, yeah, we'll never say never. But our preference is not to have to raise a lot of, you know, equity capital to fund this, to do it off the P&L, and we think that's feasible. It really depends on how much share or penetration we get in this indication. But if, you know, if we get a meaningful penetration into it, I think the capital should be there to fund a robust development program. Gotcha. Thank you. And, again, congrats on the great launch here. Thank you. Thank you. Next question is from the line of Yale Jen with Laidlaw & Company. Please go ahead. Good morning, and thanks for taking the question, and my congrats on the strong launch as well. Just quick, few three questions here. First one is that, giving the first quarter revenue of treatment, mostly predominantly from Moffitt and the, let's say, 11 cases, should we consider Moffitt still be a dominant contributor predominantly going forward for the remaining of the year? And okay, so that's first question. Yeah, I think Moffitt, I think is probably gonna be something in the, on a run rate basis, if they continued as they are to date, you know, something 40+ a year, again, if they continue as they have to date. There will be other centers that, you know, although we hope for more, may only do one every 4 or 5 weeks, and that's kind of where the average comes from, that I've given in terms of guidance. But yeah, Moffitt's probably gonna be one of, you know, a handful of players that are doing, regularly doing 1 a week, if we, you know, fast forward in a year. Okay, great. That's very helpful. And the second question is that, just follow up the pre- the first one, ask, I just wanted to know that in terms of European revenue, would that be... I mean, this quarter's revenue, would that be something we should sort of base upon as a base moving forward? Or again, maybe just a just a fluctuation or just a fluctuation quarter- over- quarter. Yeah, no, I think we'll continue to see some. I don't want to say growth at that level, 'cause even though it's a small number, that type of growth would compound rather quickly. But I think we'll continue to see growth, primarily driven by Germany. But I think, you know, this level that we're seeing now is more of a realistic level than we had in the past. You know, for reasons, it doesn't really matter to get into, the territories were fairly empty. And right now we only have one rep in all of Europe, and she's in Germany. Hiring somebody to start in the U.K. shortly, with the mindset reimbursement might be coming there in the next year or change. But yeah, I think this is a good baseline to work from, Yale. Okay, great. Maybe the last question here is that one of the important piece of your growth is to getting more general oncologists as a referral and approaching them. So any updates in terms of the current status, and what do you anticipate over the next 12 months in terms of this endeavor? And, thanks. Yeah, if I, if I kind of tiered the commercial efforts, it would be, first, let's get these sites open. And then, you know, let's talk to the oncologists at those sites and make sure they're referring their own patients to the, you know, to, for treatment. And that's probably a larger part of the activity of our oncology reps, the reps who are meant to call on oncologists and try to get referrals going. It's probably been focused to a large extent on the sites that were opened or are pending opening, and they've been trained. We have been successful in getting referrals. We've gotten patients referred to Moffitt's, one, for example, but we've gotten, you know, patients referred to other sites. I think, you know, 6-12 months from now, getting referrals going will become increasingly critical and probably the primary driver of growth. But it's early days right now because our focus more is on opening the centers, and then secondarily, let's get the patients at those centers treated. Okay, great. Thanks a lot. Again, congrats on the progress. Thank you. Thank you. The next question is from the line of Sean Lee with H.C. Wainwright. Please go ahead. Hey, good morning, guys. Congrats on a solid quarter, and thanks for taking my questions. I just have two quick ones. Firstly, you mentioned 50 sites as your initial goal. I was wondering whether it's how easy is it to increase the rate that you are getting these sites active? And also, what percentage of the U.S. patient base do you expect the 50 sites will be able to cover? Okay, how many sites did you say? I'm sorry, did you say 50 sites? I believe you said you were in, you previously said that your initial goal was the 50 sites in the US, but, Yeah, I think the number's probably gonna be 25-35, is our current kind of window that we're thinking about. Okay. Of course, claiming full license to change that significantly if we believe it's worthwhile to go beyond that number. The 25-35 treating centers, you know, if you looked at just the patients being treated there, it's probably half or maybe a bit under half. But most, a lot of patients get a single consult or 2 consults at one of those sites and then go and have their local oncologist kind of manage their treatment, based on what they learned in the consult. We will need to, you know, to get a bite at the full market, we will need to be able to generate referral patterns. But again, I think that's quite doable, given that, you know, with payer data nowadays, you know who has these patients. So we'll be very focused on that, and as I mentioned before, that importance of that growth driver will really come to the fore probably sometime next year. You know, right now, it's get the sites open and get the patients treated that are already being seen by the oncologist at that site. I see. That's very helpful. Thanks. My second question is on reimbursement. I was wondering, would you be needing to seek additional reimbursement from private payers, or is that not a big portion of the overall patient population? No, it's a significant portion of the patient population, I think probably a little bit over half, based on our research. But what happens, you generally don't get medical policy developed for an ultra-orphan product such as this. The payers, you know, depending on the size of the payer, you know, and as you know, it's highly fragmented. Some of them might not see a claim for, you know, every two years. Another one might see one, two a year. But it's not gonna be the volume or the level that it's gonna take to, you know, need to develop medical policy. And generally, you know, we have not seen any pushback from any commercial payers, and, you know, based on my own experience, I don't expect to see that for this ultra-orphan indication. It's on label. There really, there's very little options for these patients. The only other option for a subset of these patients, and they're not necessarily competitive, is tebentafusp, and we're essentially in the same ballpark as them, they are in terms of pricing. Great. Thanks for that, and that's all the questions I have. Thank you. Okay, I guess that's it for the questions. Go ahead. All right, I'll just close up here. So thank you, everybody, for your time today. I look forward to, you know, giving another update in August. And until then, enjoy your summer. Take care. Thank you. The conference call has now concluded. Thank you for attending today's presentation.