Celcuity Inc. (CELC) Earnings Call Transcript & Summary

Greetings. Welcome to the Celcuity-Pfizer License Agreement Conference. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to your host, Brian Sullivan, Chief Executive Officer and Co-Founder of Celcuity. Thank you. You may begin.

Good afternoon, everyone. Thank you for attending this call. We have quite a news to report. We issued 2 press releases today, one announcing a global license agreement with Pfizer for a small molecule inhibitor, gedatolisib; the second press release we issued provides additional details about results from a Phase Ib trial, details about our team and updates on debt financing that we closed today as well. So turning to Page 2 of the presentation, if you're on the webcast. I'd first start off with the background about the rationale and how we arrived at the decision and ultimately, to license gedatolisib. I'd like to provide an overview of gedatolisib's mechanism and its advantages relative to some other PI3K/mTOR inhibitors that have been brought to the clinic in the past. Then I'd like to review the data that we have from the Phase Ib trial, introduce you to clinical development team. And then just briefly touch on the debt financing agreement that we signed today. So turning to Page 3, you can review our forward-looking statements. This webcast will be available after this call, so you'll have a chance to review those further at your leisure. Turning to Page 4. I thought I'd just level set everyone since some of you may not be familiar with Celcuity, but we started Celcuity to develop a new way of identifying patients who might be responsive to targeted therapies. And we do this by harnessing insights that we can generate from live patient tumor cells and identify the particular disease mechanism that's promoting their cancer. And if you were to talk to oncologists or patients, you'd learn that the biggest unmet need in cancer is identifying the right need for more patients. And despite the advantages that have accrued with the advancements in molecular techniques, both in development of drugs as well as identification of different mutations or signatures. Relatively small minority of cancer patients are benefiting from these drugs. And so we're a long way from reaching the goal that we've all had. The lack of as much progress was expected with molecular techniques really reflects just the inherent complexity of aberrant pathway signaling, which is the process -- cellular process that drives cancer. And it's simply not possible to assess that, in most cases, effectively with a molecular test. Signaling activity is simply too complex to conclude its status using the snapshot you obtain with molecular analysis using cell fragments. We founded the company to fill that void, and we developed a platform called CELsignia that uses a patient's live tumor cells to create a movie of pathway signaling activity. And so we can actually see the disease process, whether or not the disease process is present in the patient cells. We made a lot of progress with the platform so far. With the companion diagnostics we've developed, we can identify the aberrant pathway that's promoting a patient's cancer and the therapy that can treat it for roughly 30% of breast cancer patients. Implications for the standard of care would be profound if we're able to progress these to the clinic. And just as significantly as the impact that would occur for the pharmaceutical companies and driving incremental billions of dollars of revenue for those drugs in a sense helping these drugs have a greater impact than they're able to have currently. Turning to Page 5. You can see right on this slide, the different programs that we have underway with 6 different targeted therapies. We began our first trial with Genentech's HER2 antibodies, Herceptin and Perjeta, and we're evaluating those drugs in early breast cancer patients in neoadjuvant treatment setting. And we have a similar trial with Puma in that setting with their approved HER2 inhibitor in Nerlynx. We announced 3 studies in metastatic breast cancer over the past 3 months. We're working with Pfizer to evaluate Xalkori and Vizimpro to approve drugs for lung cancer to assess patients who have abnormal c-MEt and HER2 signaling. We're also collaborating with Novartis on a study with their newly approved c-Met inhibitor with Nerlynx for patients who have abnormal c-Met pan-HER signaling as well. And then another study with Nerlynx and fulvestrant to evaluate, again, patients who failed their prior therapies. So we think with our current approach, we can have a big impact on breast cancer. But we think we can have a bigger impact by integrating our third-generation platform with a first-in-class drug. CELsignia gives us powerful insights into the biology promoting in particular patients' cancer, but also allows us to understand how different pathways are cooperating so that you get insights into different ways or different drugs that could be combined to most effectively address particular patient's cancer or a group of patients. Leveraging this platform with a first-in-class drug like gedatolisib is simply a logical extension of our mission. Because we're in the business of promoting options for cancer patients that can extend their lives. We're also uniquely positioned to maximize the potential for gedatolisib, not only because of CELsignia points us in the direction of which patients will benefit. But that allows us to identify the subgroups that will most likely benefit without us having to give up the opportunity to pursue all-comer indication. Gedatolisib's initial indications are focused on breast cancer, which is where our initial focus has been. So we think there's significant synergy and value to be created by having a relentless focus on creating additional options for breast cancer patients. And ultimately, that's our goal to improve the standard of care for every line of therapy breast cancer patients may receive. And ultimately, we think an integrated strategy where we combine our companion diagnostic platform with first-in-class drugs can maximize the value that gedatolisib can offer to the treatment landscape for cancer patients in general. So now turning to Page 6. You can see then what our pipeline looks like when we integrate them. And you see that combined, we could have a substantial impact over time if our programs are successful on the therapies that are available to breast cancer patients. So turning now to Page 8. I wanted to provide an overview of gedatolisib, and we'll go into some more detail. But gedatolisib is a very potent small molecule that targets PI3K and mTOR that is administered intravenously. It's a pan-PI3K inhibitor, which means it inhibits all 4 Class I isoforms as well as mTOR at low or sub-nanomolar concentration. So it's a very potent, effective inhibitor. Pfizer began the development of this drug about 5 -- 7 or 8 years ago in patients. 457 patients have received the drug, either as a single agent or in combination with other drugs. The program today is focused on breast cancer patients, in particular, ER+/HER2- metastatic patients. A Phase Ib study that evaluated different groups of patients was -- has fully enrolled, and we'll be discussing some of that data in a bit. But the top line result is that in patients that received gedatolisib in combination with a CDK4/6 inhibitor, palbociclib, an endocrine therapy, either letrozole or fulvestrant, received a 60% response rate, 53 of the 88 patients that had measurable tumors had an objective response. 75% of patients received a clinical benefit, which corresponds to receiving either a confirmed partial response or having stable disease for more than 24 weeks. Gedatolisib was, I think, universally considered to be very well tolerated by patients, by the investigators who participated in the Phase I study. Less than 10% of patients discontinued gedatolisib treatment on this study. And we think the primary driver of that is that the IV formulation enables much lower hyperglycemia-related adverse events than is typical with an oral PI3K-alpha inhibitor. The market we're going after is quite significant. We'll be focused on breast cancer initially, although we certainly will be looking at other tumors that involve PI3K. But we think potential opportunity on breast cancer is significant with potential peak revenue approaching $1.5 billion to $2 billion, if we are able to get the drug approved and with some of the indications we're focused on. I'd like to turn now to just the details about the license agreement itself. So please turn to Page 9. We paid Pfizer $5 million of cash and issued them $5 million of shares of Celcuity's common stock. We -- and Pfizer is eligible to receive up to $330 million of milestone payments that are triggered upon achievement of FDA or international approvals as well as sales-based targets. The milestone payments are very back-end weighted. We won't have any milestones due until an FDA approval is obtained and the sales objectives are very weighted towards very significant sales targets. The royalty structure is typical for license agreements like this, tiered royalty, that starts off low teens and then increases at higher sales levels to the mid-teens. The license is an exclusive one for -- it gives us global rights to pursue and commercialize and develop the drug. It has broad protection for a variety of different formulations in addition to the composition of matter. The loss of exclusivity at a minimum would occur, we believe, at the end of 2034. So we think we have a long runway. We think there's a potential to extend that period, exclusive period to end of 2039. I'll turn now to Page 10. And I thought it would be helpful, particularly to people who've followed us so far and discussed the strategic rationale for us doing this. One of our observations when we started the company from the get-go was that we understood that we were going to create tremendous value for ourselves, we hope, but ultimately, tremendous value and more value for pharmaceutical companies. And so in some ways, we think taking steps to capture some of that value is just a natural strategy for us to consider and is very consistent with our overall approach. There are unique circumstances that drove this timing. And while we may have thought, ultimately, we would end up developing our own drugs in not prescribed future or a well-defined future. As it turns out, when we were developing our PI3K test, we discovered gedatolisib, we evaluate all the compounds that are in the clinic when we're developing our tests: a, to help us develop the CELsignia test for that pathway, but also to give us a sense of which drugs or ones we should focus on for collaborations. And we found that with our assessment that gedatolisib was far superior to the other PI3K drugs that either are approved or under investigation. And that it -- because of its mechanism offers better synergy with other targeted therapies, which we thought meant that there would be additional opportunities for additional indications. So in the process of evaluating gedatolisib and thinking about our strategy, we approached Pfizer about collaborating similar to the way we're collaborating with them already in -- with 2 of their other drugs. And as it turns out, Pfizer had decided to out-license the drug. And so they weren't interested in collaboration. And it became clear from our conversations that we thought we could add unique value to gedatolisib. And we finally concluded that this was just a unique opportunity to leverage CELsignia. First-in-class drugs are rare, especially when they have encouraging Phase Ib data, and they're incredibly valuable. PI3K/mTOR pathway has been one of the -- considered one of the most important pathways in cancer. If you have PI3K/mTOR drug that can address this incredibly important pathway, you have something that could become very important in the treatment landscape. We think CELsignia gives us an opportunity to maximize the likelihood of obtaining an FDA approval. While the initial trials have been -- demonstrated effectiveness independent of PI3K status, we would be able to create subgroups of patients, co-primary endpoints that -- with CELsignia selected patients. That we think would have a higher likelihood of -- ultimately and would maximize as a result, the chance for us to get an approval. So essentially, our CELsignia for initial indication may provide a backup for us, for an all-comer study if that endpoint was not to make it. And then finally, we open up, we think, additional indications that wouldn't otherwise be available to any other developer of gedatolisib because of the unique insights CELsignia makes available to us. So the summary was, we felt this was a very unique opportunity that was a direct result of the proprietary insights we're able to develop about the pathway and the mechanism in this drug, and we felt that, ultimately, we were the company that could best develop it, have the biggest impact on helping as many cancer patients as possible. I think the next question people always ask, so I may as well answer is why is Pfizer outlicensing gedatolisib? And I think folks -- if you've invested in biopharma and companies that have in-licensed drugs for major pharma, no, this is very common for major pharmaceutical companies to reshuffle their portfolio. But there's always circumstances behind it. In this case, the key leaders at Pfizer, who championed gedatolisib, both from the development side as well as the clinical -- the research side as well as the clinical development side, they left Pfizer in 2019. And in fact, the drug lost their champions. Pfizer made the decision to outlicense this before the data that I'm about to discuss was available. And so they had a decision process that, unfortunately, I think, ultimately, did not include the most recent data. And their initial development focused on studies with chemo, in different solid tumor types as well as some Phase II studies with colon cancer. And those studies didn't support advancement in those indications. The chemo did not prove to be a good way to pair the drug. They did have a favorable study with endometrial cancer, but that study wasn't followed up. And so the opportunity arose as the drug essentially was left without a champion. And data ultimately wasn't available in the breast cancer, which created an opening for us. If you look at -- and now please turn to Page 12. We thought it would be helpful for folks to see some of the other drugs that major pharma have out-licensed, Merck out-licensed Niraparib to Tesaro, which ultimately drove the sale of Tesaro to GSK several years ago for over $5 billion. Lilly out-licensed Taledegib to Ignyta, a number of years ago, which ultimately led to Roche's acquisition for about $1.7 billion in 2017. Similar dynamic with Sanofi and Fedratinib, Celgene played $1.1 billion upfront, but significant payments upon achievement of certain milestones. And then finally, most recently, Lilly acquired Loxo for $7.2 billion, and that was an out-licensed drug from Array. And so again, the pharmaceutical industry often is akin to musical chairs where a great drug will succeed with the second owner. I'd like to turn now to Slide 14 and address or just introduce you in more depth to gedatolisib and as PI3K/mTOR inhibitor. PI3K/mTOR's the most frequently altered pathway in cancer and can be thought of as a junction box in some ways because it's involved in many critical cellular regulatory pathways. And if it becomes disregulated or overactivated, it can promote hyperproliferation. And if you look across the cancer landscape, you can see that at least the mutations are present and reasonably prevalent in a wide range of solid tumors, 17% of all cancer patients, so -- which represent roughly 2.5 million patients, have PI3KCA mutant tumors. Now as it turns out in breast cancer, we think PI3K/mTOR plays a more fundamental role and its importance is not necessarily related to the PI3K status. Now targeting this pathway, which was discovered has -- its role was discovered as a promoter of tumor genesis about 15, 16 years ago, has been difficult because of the multiple roles that PI3K and mTOR play, the cells have adapt to inhibition. And feedback, feed forward loops, cross-talk with other pathways, essentially mean that without an effective shutdown of all the isoforms of PI3K and mTOR, you can create immediate resistance, which limits the effectiveness of the drugs. One of the other challenges is because of the role PI3K plays in metabolism, results with at least oral inhibitors, a fairly narrow therapeutic window, which means that being able to dose patients at a level required to inhibit the pathway without inducing significant toxicities is a challenge. And the toxicity, in many cases, was the factor that led many promising PI3K/mTOR inhibitors from not advancing to the clinic. And so you have to thread a needle in addressing this pathway. Well, gedatolisib is unique. It is a first-in-class inhibitor. It inhibits all Class I isoforms. And if you were to look at the other drugs, probably of most relevance to us from a competitive standpoint, you'd see that they're either alpha isoform specific drugs, alpelisib, which is PIQRAY, owned by Novartis. It targets high specificity for alpha, the mutant or alpha wild type. It really has no effect on mTOR or the other 3 isoforms. Inavolisib is a PI3K-alpha specific inhibitor, but basically targets primarily only the mutated form of PI3K. And it's 100-fold more selective for the mutated form compared to the wild type. And then it has nominal activity, relatively speaking, against the other isoforms and no activity against mTOR. Everolimus, that's another drug owned by Novartis as an mTOR inhibitor. It's very effective mTOR inhibitor. But again, given the relationship between mTOR and PI3K in hitting just 1 part of that pathway is -- can have a limited ability to blockade resistance mechanisms that could be induced by endocrine inhibition. And so what does this mean? Well, there's significant advantage of this approach. Alpha isoform inhibitor can -- maybe have effect with a particular isoform, but the challenge is that many of these isoforms interact and can, in fact, confound the benefit that you might get from inhibiting one isoform. The end result is with an alpha-specific inhibitor, the situation can occur where you have your foot on the gas and the brake at the same time. And just as importantly, because of the varying roles PI3K inhibitors play, a pan-PI3K inhibitor can address a broader population effectively. The data suggests that. The second factor that we think creates an advantage we get over the other inhibitors in this class, is that by inhibiting mTOR, you are preventing -- rather by inhibiting mTOR and PI3K simultaneously versus just mTOR, you prevent PI3K from being activated. And ultimately, that's one of the potential disadvantages of mTOR inhibitors is that they can reactivate activity on PI3K. And then finally, and this is actually just as important factor. Gedatolisib data from the Phase Ib trial suggests it's better tolerated by patients than oral PI3K and mTOR inhibitors. Gedatolisib is administered intravenously, whereas the other drugs that have been focused on breast cancer are orally administered. The IV administration allows the drug to stabilize at lower concentration levels compared to orally administered PI3K inhibitors, which internally leads to less toxicity, but also enables effective inhibition at those concentrations of the signaling of interest. Just one data point. Hyperglycemia is the primary adverse event that occurs when the alpha isoform is inhibited. And with the approved drug, alpelisib, 39% of patients had a Grade 3 or 4 hyperglycemia, which is challenging to manage. Gedatolisib, though comparison only had 7% of patients have Grade 3 or 4 hypoglycemia, which means it's exposed patients to a lot less risk of serious hyperglycemic event. I'd like to turn now to Page 18 and just provide an overview of the treatment landscape for metastatic breast cancer. Patients in the first-line setting, these are patients who haven't been treated for metastatic cancer, have a number of options. The primary backbone of any treatment for first-line patient in the metastatic setting is receiving a CDK4/6 inhibitor, such as palbociclib, plus an endocrine therapy, depending on how much time has passed from when they were last treated. They either receive letrozole or fulvestrant. Women receiving palbociclib plus letrozole or other inhibitors can expect to have on a median basis, progression-free survival period of over 2 years. So a very effective treatment strategy. The challenge occurs when these patients fail. And so if you look at the second-line data, you'd see that the median progression survival period for patients who are receiving standard of care is between 4 and 7 months based on various studies that have been published on these patients. And so that's where the biggest unmet need is. It's patients who have progressed following CDK4 endocrine treatment therapy and don't have necessarily therapies available that will extend their progression-free survival period much longer, and that's a setting that we're particularly interested in. I'd like to turn now to Page 19. There are drugs out there treating PI3K/mTOR. The drug I mentioned, Novartis' drug PIQRAY, is only approved to treat patients with PI3K-alpha isoforms, and that represents roughly 35% to 40% of breast cancer patients. That generated about $320 million of revenue this most recent fiscal year. And the mTOR inhibitor that Novartis owns generated about $800 million, mostly in the breast answer. And so there's a significant market that's already been created dragging this pathway. But we think there's an opportunity to expand the size of that market by creating an indication that would have a longer duration of treatment and that could potentially address all comers. So our focus then will be to lay the groundwork as soon as possible for a Phase II study, treating ER+/HER2- breast cancer patients who have progressed on CDK4/6 therapy. Our goal would be to have a trial treating patients in the first half of 2022. Our initial thinking is that it will be an all-comer strategy, PI3K mutated as well as wild-type patients that where we'll also incorporate a CELsignia subgroup. We have preliminary designs. And one of our first activities will be to set up a meeting -- formal meeting with FDA to review our trial design and our registration strategy for the drug. We would expect that to happen in the next quarter or so. There are also several other indications. It's premature for us to say which ones we're going to focus on, but just 2 indications where there's some data that points to possible opportunities with -- one is in HER2+ metastatic breast cancer, where there's some data that we'll review that suggest that gedatolisib combined with trastuzumab biosimilar is very active. And there was also a study Pfizer fielded 4, 5 years ago with recurrent endometrial cancer patients, and gedatolisib was evaluated in a single-agent trial and found a reasonable level of activity, antitumor activity. The question that we have is we think that could be a setting that would benefit from combination with additional targeted therapies. And so we'll be following up on reviewing from a life cycle management standpoint, the next steps in that category. I'd like now to turn to Slide 22 and just review the strategy. The most important pathway in HER2+ driven disease is obviously the estrogen receptor pathway. Tremendous progress was made when palbociclib and then subsequent CDK4/6 inhibitors were approved because it had been found that there is a linkage with cyclin D and that basically patients became resistant to estrogen receptor drugs with the application of a CDK drug. Significantly doubled the progression-free period for cancer patients. It was a fantastic result. But ultimately, these patients and their tumors adapt. And it is clear from at least the preclinical and clinical data to date, the PI3K/mTOR plays an important role as a resistance mechanism and that blockading PI3K/mTOR can essentially resensitize patients to androgen and CDK4/6 inhibitor by preventing the cells adapted -- from adapting to PI3K activation. I'll turn now to Page 23. The study, B2151009, not the catchiest name. It was a Phase Ib study. It started off with a dose-escalation arms to determine the maximum tolerated dose with letrozole and fulvestrant, combined with palbociclib and gedatolisib. Once the MTD was determined, study shifted to an expansion phase and evaluated patients who had received 4 different prior treatments. The first arm focused on patients who were treatment naive in the metastatic setting, they received palbo and letrozole and gedatolisib. Second arm evaluated patients who had not received CDK4/6 inhibitor but had received prior endocrine therapy. And after declining number of patients because of what is now the fact that the majority of patients received CDK4/6 inhibitors. Arm C and Arm D focused on patients who had received CDK inhibitors. Arm C focused on patients who may have received intervening therapies after CDK whereas Arm D focused specifically on patients whose prior therapy was just a CDK4 inhibitor, which is probably the most representative patient group evaluated. The overall results were encouraging and suggested significant antitumor activity. 60% of the patients who received triplet achieved objective response and evaluation of mutational status. Correlation analysis didn't reveal correlation between PIK3CA status and response. I'd like now -- and I was just referring to Slide 24. I'd like now to turn to Slide 25, where we compare the results from studies that have been done evaluating palbociclib and an endocrine therapy. The primary objective of the study was to determine the effect of adding getadolisib to palbociclib and endocrine therapy and to determine if a superior objective response compared to the response observed with palbociclib and endocrine therapy alone. And in this study, each of the fully enrolled arms met the endpoint target. Arm B didn't meet the enrollment target, so the ORR threshold -- didn't meet the enrollment target but the ORR threshold was met. Probably the most interesting data I would point you to is the far right column, the second line, third line prior CDK column, where in this setting, patients who had received a CDK4 inhibitor, received a 60% response rate. That compares favorably to patients who were CDK naive and receive palbo + fulvestrant. And the ORR reported and PALOMA-3 study was only 25%. In addition, the progression-free survival for the patients on this arm that's described in that right-hand column was significant for this setting and compare favorably to the current treatment that patients receive even on a CDK-naive basis. So again, the kind of data you would hope to see in a Phase I study, but clearly, additional data is needed. Turning to the next slide. I would highlight here the difference seen in the objective response rates compared to the current standard of care treatments available to breast cancer patients. For patients, studies were done on the CDKi -- CDK inhibitor-naive populations. And alpelisib, which is a PI3K-alpha inhibitor, was able to achieve about a 36% response rate together. Interestingly, and again, the arm with gedatolisib, 60% response rate was observed. So across the board, when the response rate in this Phase Ib study, this data suggested a favorable comparison to the current standard of care therapies, which, again, is suggestive of antitumor activity with a drug that warrants follow-up in Phase II and subsequent studies. Another way of looking at this data is just to look at the comparison on Slide 27, where if you look at the bottom set of rows, you can see how gedatolisib with palbo and fulvestrant compares to the current standard of care for patients who've received CDK4/6 inhibitor. Again, the PFS reported in this arm of the study was about 13 months, and that compares favorably to studies either done directly, which occurred without alpelisib and fulvestrant, that was the BYLieve study, are these patients who were selected on the basis of their mutational status, they were PI3K mutant positive at a 7-month progression-free survival period, 7.3 months. And then patients were evaluated who receive the current standard of care and who are not PI3K mutated, the wild-type PI3K. Flatiron analysis showed that they're only achieving on average or median PFS of about 4 months. So clearly, a need for better alternatives for these patients and the data with gedatolisib is encouraging. In this setting, the safety and tolerability of the drug is important. I'm now on Slide 28. In a Phase I trial that established the maximum tolerated dose, the drug demonstrated a fairly limited set of toxicity. The most frequent Grade 3 adverse event, stomatitis, which is a result of inhibition of mTOR, that's a fairly easily addressed side effect, steroid mouth rinses have been used and have been found effective reducing severity of that side effect. But overall, the profile of Grade 3 or Grade 4 events was fairly narrow and not significant. When it's combined, if you look at the table on the right, with gedatolisib and fulvestrant, you got a combination of the adverse events associated with those specific drugs. But it was not observed any overlap of these toxicities. And so the major Grade 3 events, neutropenia, leukopenia and anemia are consistent with the adverse events related to palbociclib. And the proportion of Grade 3 or 4 adverse events for those -- adverse events was consistent with the reported data in the different studies that used palbociclib. Stomatitis, again, was the most significant one. But again, all of the investigators we've spoken to, and as it turns out, many of the investigators who participated in the study were ones we already knew, we're able to have in-depth conversations about their perspective on the drug. They were overwhelmingly positive on the drug and the tolerability and what they viewed as the very favorable efficacy that they saw. So now I'd like to turn to Slide 29 and just quickly touch on a study that was investigator-initiated study that combined gedatolisib, trastuzumab biosimilar called Herzuma. And the patient studied here were ones who had received 3 or more lines of prior HER2 therapy that also had a PIK3CA mutation. The -- and I'd like to turn to Slide 30. 56% of the patients who received this combination gedatolisib with trastuzumab biosimilar had an objective response, which is encouraging, given the number of lines of therapy that these patients had received. And the direction of response was also encouraging. This is preliminary or interim data, and so we expect more data will be reported out in the next year or so. I'd like now to turn to the team that we've built to help us pursue this. I ask you to turn to Slide 32. We're very fortunate. We were able to identify to initially help us perform the due diligence, but then as we work with them, realize that they would be great people to help drive the development of this drug. Our Chief Medical Officer, Art DeCillis, has been in the industry, pharmaceutical industry for well over 20 years. He was a former CMO for 11 biotherapeutics and VP of Clinical Research, Medical Affairs at Exelixis, and he's been involved in approval of a number of important drugs, including AFINITOR, which is an MTOR inhibitor. Senior VP of R&D, John MacDonald. He was essentially the senior clinical person, while he was at MGI Pharma, which was ultimately sold to Eisai, and was very successful as it turns out Minnesota-based pharmaceutical company. Our Head of Clinical Operations, Sheri Smith, served as the senior clinical operations person at MGI Pharma. And she's grounded in a variety of different experiences, and she currently as a CRO and manages early-stage clinical trials. Our Head of CMC, Bernhard Lambert, who was a former Executive Director of Pharmaceutical R&D at Chimerix. And he's got a wide-ranging background that's incredibly well suited to what we need to accomplish here. And our Head of Regulatory -- headed up Regulatory Affairs at 3M Pharmaceuticals, has a very broad background in general of all the issues that certainly we'll need to address as we're developing the drug rate from a regulatory perspective. I'd like to point you to Slide 33. We've been fortunate to have the opportunity to work with some of the country's leading key opinion leaders in cancer research. Actually, I was just on the phone with Mark Pegram talking about different issues. Mark heads up Breast Cancer Center at Stanford. Sara Hurvitz is one of the leading HER2+ researchers, and Ben Park chairs breast cancer at Vanderbilt. And along the lines, we have folks who are involved in some of the most important studies in breast cancer and have very, very good insights that they're willing to share with us and help us think through clinical development issues. I'd like now just to turn to the debt financing, and then we'll move on to questions. We close today -- I'd point you to Slide 35. We closed today a $25 million debt financing agreement with Innovatus Capital. This agreement will leave us with $44 million of cash on hand after we've made the Pfizer upfront payment. And so we believe we're in a very strong financial position. The agreement is structured so that we received the first $15 million tranche at closing, which was today. And then we're eligible to receive incremental $5 million or -- actually an incremental $10 million in 2 different tranches upon achievement of different clinical and financing milestones. We'll only be making interest payments for -- interest-only payments for the first 36 months, which we like. It reduces cash burn and term is 5 years. Innovatus does have ability to convert 20% of the principal into shares of common stock of Celcuity, and then it included various customary warrants, which were not significant. So I'd like -- so right now, then I'd like just to wrap up and ask you to turn to Page 36. And just to wrap up. Our technology, CELsignia, gives us a very unique ability to identify new indications for targeted therapies. And we as a result of that, have had an opportunity to begin collaborations with some important pharmaceutical partners to help them get better utilization of their targeted therapies. Applying CELsignia to our own compound leverages the potential of CELsignia. We think it's a fantastic way to help more patients. The data that we have from this Phase Ib trial is very encouraging. The Phase II ready asset showed significant antitumor activity is well tolerated, which is exactly what you would like to see at this stage of a drug's development. We brought on a great team. So we're confident we have the people on board to help us advance the drug in the clinic. And then we think we have the resources necessary to pursue this aggressively. And that concludes my remarks. So if you're still on the call, thank you. And operator, we'd be happy to take questions at this time.

[Operator Instructions] Our first question is from Alex Nowak of Craig-Hallum Capital Group.

Brian, congrats on this deal, it looks like a very interesting way to leverage the technology you built out there with CELsignia. You did provide just a great overview on how this deal came together. But just maybe to start at a high level from the question. Speak to why is now the right time to pursue this drug development angle, just as the clinical campaign diagnostic programs are really getting going? Or did it really just come down to the right time at the right place?

I think it's the latter. I think we weren't looking for drugs to in-license. We hadn't shifted our strategy and said, oh, let's start in-licensing drugs. It really wasn't organically developed opportunity because of the research we had done on gedatolisib as part of our development of PI3K. In fact, we'll be presenting a poster tomorrow at AACR or rather Saturday at AACR that describes results from studies we did with gedatolisib and comparing to PI3K-alpha inhibitors. So that research included us in about the superiority of gedatolisib. And it was only after we heard that Pfizer was out-licensing the drug, and that we stepped back and said, "huh, well, that would potentially take the drug off the board for a while, I mean, who knows what will happen to it. We thought this was a great drug". And then we also thought about the way we could leverage CELsignia to advance the development of this drug. And as we dug into the treatment landscape and thought about the potential importance that this drug could play in that landscape if it was successfully developed and got approved, we just felt that we'd be, to be frank, derelict in not pursuing it. Because these types of drugs, first-in-class drugs, where you've got data to review, human data to review are rare, and they're potentially incredibly valuable because of the impact they can have on standard of care treatment. So really, it was a function of the circumstances lining up. Not a predetermined decision to say, now is the time to pursue an opportunity like this. The corollary is also true. We felt that it was very consistent with what we're doing. Our goal, our whole business is geared around advancing treatment options for patients. It just happens to be that this will be one that we advance ourselves.

Now that makes a ton of sense. And there's a lot of data to look over here from your prepared remarks and the presentation here. But one thing, I guess, I just wanted to make clear, the performance from the drug so far in the Phase Ib look very good. Good response rate from a toxicity standpoint looks good. And that's even before applying the Celcuity secret sauce, if you want to call it the CELsignia. Yes. Maybe speak to in the Phase II or the next couple of programs that you'll be doing, do you expect that this is going to be an all-comer sort of drug? Do you think it will be ultimately CELsignia-informed drug? Just maybe help us out there.

Sure. No, I think it will be both. I think the data that we have from the Phase Ib suggests the nature of the activity associated with PI3K/mTOR is activated by androgen and CDK4/6 resistance. Now we will build into a Phase II study, a subgroup of patients selected with CELsignia to serve as a backstop. If the hypothesis as well, our patients would do much better, which we think is a reasonable hypothesis. Then that would suggest we would have an easier time of getting an approval. At the same time, while the CELsignia patients may be better, the other non-CELsignia positive patients may also do very well, maybe not as good, but compared to the current standard of care, substantially better. So it's the kind of drug that potentially should be made available to all patients, where even though some might benefit more, it doesn't preclude getting approval for all comers. But in the event an all-comer strategy, and that data is not successful, we think having a sufficiently powered subgroup of CELsignia positive patients essentially provides a backup. And we think given our understanding of the pathway and the important -- the function of this drug and our ability to detect patients who have disregulated PI3K signaling, we think we would have maybe a higher probability as we -- than an all comer. And so at the end of the day, we -- by having 2 bites at the apple, we think we have a higher probability of getting an approval. Now other indications, we may say, depending on what the standard of care results are, we would want to use only or only select patients who are CELsignia test positive. And it somewhat depends on the setting and the nature of the prior treatments.

No, that's great. During the due diligence process, were you giving access to these patient samples from the Phase Ib to kind of run some of that testing ahead of time? Can you talk due diligence...

No, unfortunately. So no. No, we weren't able because there aren't fresh tumor samples available from those types of studies. But we were able to look at each patient's result and look at their mutational status. And find, there wasn't a correlation with the mutational status. And given the overall favorability of the data, it certainly suggests that in this case, with these patients, there's a more fundamental role that PI3K/mTOR is playing. And that's why PI3K/mTOR has been such -- of such interest to pharmaceutical companies because it is incredibly important in the overall -- regulating the overall cell health and proliferation. And if it is activated, in this case, potentially by blockading estrogen or CDK4/6 inhibitors, it could make -- potentially makes the mutation, I don't want to say irrelevant but less important than might have otherwise played.

Okay. No, that makes sense. Maybe speak through the time lines here for the next study? And just to be clear, the next phase is going to be a Phase II, just how long would that take the fully run number of patients that you're playing on targeting? And then also just on more of a business or company-wide manner, what else needs to be added to make this transition or add this capability to go after drug development now?

You mean from a team standpoint? Or just from...

From a team standpoint or additional investments that are necessarily, yes.

Yes. So no, we'll need to augment the team further. Just to be able to manage these trials and develop additional life cycle indications. So there'll be a buildup of the team beyond the folks we have here. But won't require 100 people. I mean so it's a very focused team that can be built given the stage of the drug. As far as the time line, our goal would be to design a study that we could be fully enrolled in a year, and there are different ways of driving that. But one of the primary ways is including enough sites. And so we would anticipate as we've done some of our preliminary designs of the study and having a significant number of sites that are U.S. as well as ex-U.S. We -- as our next step, since our goal would be to identify the registration path for this drug and the expectations by the FDA will have a formal Type C Meeting with them to get their feedback and hopefully buy-in on what our approach is or find what approach will be acceptable to them, that's an important step. And that step hasn't been taken by Pfizer. So it's a necessary gating item for us to get through. And that will inform us. And when we have that, then we'll share that with folks what the actual specifics are with the design.

Our next question is from Yi Chen of H.C. Wainwright.

My first question is, do you intend to develop this candidate towards registrational trials and eventually commercialize it? Or do you eventually want to find a partner -- a commercial partner for this candidate? And do you think there is even an opportunity for Pfizer to license it back in the future?

Well, so our goal is to take this to registration. We would like to if the data supports it, get all the way through to an approval. Now there's clearly a number of milestones between today and that ideal outcome. And there's a lot of different things that can happen as you hit those milestones and anticipating or projecting which outcome will occur is premature at this point. But certainly, the value of a company is a function of -- a company like ours is a function of the clinical data. And if favorable data continues to be obtained, that creates a lot of different options for the future.

Okay. Is the company looking to potentially in-license additional drug candidates for breast cancer?

Well, again, I think it would most likely be a case where similar to the situation here where we developed unique insights about the pathway and a drug candidate. And if the stars aligned in the same way, we would consider it, sure. But we aren't making the decision just to go after different targeted therapies. We think we can add value to certain types of targeted therapies. And so our focus will be on leveraging that value, putting us in a unique position to maximize the value of the drug, which, to the extent that we're competing with other companies to in-license compounds, if it gets to that point, we think we have a compelling story because, again, we think we can offer the company that might be out-licensing a compound, an approach that maximizes the probability of getting an approval while also maximizing the number of indications that might be available to it.

Got it. And could you comment on your projected operating expenses for 2021, now that the company has become a clinical stage oncology company?

Right. Well, so I guess one way to think about that is that we're not going to reach a steady state of expense for the clinical development side for probably 3 quarters. And so I think you could look at us eventually ramping to quarterly sales -- quarterly expenses, any Rx side up to roughly $4 million over the next 3 to 4 quarters, whereas our Dx expenses will hold in the $2.5 million to $3 million range that we've been -- that we've guided you to over the next couple of years.

[Operator Instructions] Our next question is from Matt Phipps of William Blair.

Just curious, as far as the treatment landscape, as Verzenio moves, I think, potentially in the adjuvant setting, how you think that changes any kind of development or commercial opportunity, development path or commercial opportunity? And is that a reason to kind of stick with palbociclib and CDK refractory population, thinking most will get Verzenio upfront?

Well, I think 2 things. We have data with palbociclib and to start over with a different CDK inhibitor would create some practical problems because it would significantly extend the development period. But from a strategic standpoint, whether extended use of that CDK inhibitor affects the treatment landscape in a metastatic setting, I think that's hard to say because most of the women who are treated in a metastatic setting go for extended periods of time from when they last received an adjuvant treatment. And it's at least for 75% of women a year or more. In many cases, it's 5 years. The average disease-free period for women is over 5 years from early-stage at least or even greater than that. So I think it would be speculative, and I'm not sure well supported to suggest that patients that have received a CDK4/6 inhibitor in adjuvant setting, I think the data suggests they get a better -- higher likelihood of a disease, longer disease-free interval. So that's favorable. And long term, women will have longer periods of time between when they may have been initially diagnosed and when they may be diagnosed with metastatic cancer. So I guess the net-net is, I think, it would be hard to project it. And my gut says that if you were, you would say it wouldn't have much of an effect, the adjuvant treatment because of the time distance.

Okay. And I guess when you meet with the FDA, do you think there's potential to -- are you going to bring everything, such as [ fact check a break ], do you think that's a possibility?

We'll have a lot of different items on the agenda. So we'll try to tick all the boxes when we're talking to them, yes.

We have reached the end of the question-and-answer session. I will now turn the call back over to Brian Sullivan for closing remarks.

Well, thank you all for participating in the call. I look forward to providing more information over time. And certainly, if you had additional questions, feel free to reach out to me directly. Thank you, and goodbye.

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation, and have a great day.