Delcath Systems, Inc. (DCTH) Earnings Call Transcript & Summary

Thank you.

Good morning, ladies and gentlemen, and welcome to the Valcat Systems second quarter 2026 earnings conference call. As This time, online is in listen-only mode. Following the presentation, we will conduct a question and answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on Thursday, August 6th, 2026. I would like to turn the conference over to Mr. David Hoffman, Delcat General Counsel. Please go ahead, sir.

Thank you, and welcome to Delcat System's second quarter 2026 earnings call. With me on the call are Gerard Michel, Chief Executive Officer, Sandra Pinnell, Chief Financial Officer, Kevin Muir, Chief Commercial Officer, Boyo Vukovic, Chief Management Officer, and and Martha Rook, Chief Operating Officer. This statement is made pursuant to the safe harbor for forward-looking statements described in the Private Securities Litigation Reform Act of 1995. of historical facts may be considered forward-looking statements within the meaning of Section 27A, the Securities Act 1933, and Section 21E of the Securities Exchange Act of 1934. Although the claim is not completely correct, 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 Actual results may differ in a material manner from those expressed or implied in forward-looking statements due to various risks and uncertainties. In discussion of such risk and uncertainties, which could cause actual results to differ from those expressed 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 filed quarterly reports on Form 10-Q, and the following. 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. Press release with our second quarter 2026 results is available on our website under the Investors section and includes additional details. Our website also has our latest SEC filings, which we encourage you to review. The recording of today's call will be available on our website. Now I would like to turn the call over to Gerard Michel. Gerard, please proceed.

Thank you for joining us today, now well into our third year of commercial launch, to continue to deliver revenue growth and operate as a profitable business supported by a platform with the potential to address larger patient populations well beyond metastatic uveal melanoma. We delivered a strong second quarter driven by $27.2 million in HIPPSADO kit revenue, up 21% over the second quarter of 2025, a significant achievement given the introduction of 340B pricing in July of 2025. We activated two new treatment centers, bringing our total to 31, and sustained a healthy flow of new patients into our existing sites. Our commercial execution in metastatic uveal melanoma is now self-funding the investment needed to extend our liver-directed platform into other cancers where the liver is a dominant site of disease. We remain on track to activate approximately six additional centers by year end, which would bring us to 37 active centers. We are not simply opening more centers, we are opening the right centers. Most of our targets are part of one of two overlapping groups of institutions. The first is National Comprehensive Cancer Network Member Institutions, or NCNN, an alliance of 34 leading cancer centers that help define oncology standards of care. The second is the National Cancer Institute's Comprehensive Care Centers. 58 institutions federally designated for excellence in cancer research, clinical trials, and multidisciplinary patient care. approximately 80% of our active treatment centers hold NCI comprehensive designation. Nationally, we are now represented at 41% of the 58 NCI comprehensive care centers and approximately half of the 34 NCCN member institutions. Our 2026 activations continued that pattern. This year we added MD Anderson, UT Southwestern, Mayo Clinic Scottsdale, the Knight Cancer Institute at OHSU and the Herbert Irving Comprehensive Care Center at Columbia. All NCI comprehensive cancer centers with MD Anderson Pearson, UT Southwestern, and Mayo Clinic, also NCCN member institutions. These are among the nation's leading referral destinations for complex oncology care and liver directed therapy. By adding institutions with this level of academic influence and referral reach, we are building a network that supports both near-term growth long-term leadership in metastatic UV melanoma and in the additional indications we intend to pursue. Beyond activating new centers, we are focused on increasing physician awareness and consideration of PHP for appropriate patients through targeted medical education, peer-to-peer engagement, and continued evidence generation. New patient starts remained solid in the second quarter, averaging approximately 0.5 new patients per site per month. Because patients typically receive a series of hep-sido treatments over up to three quarters, second quarter starts generate volume that flows into the back half of the year and support our full year revenue outlook. The data from the Chopin trial, a randomized phase two study published in the Lancet of Oncology earlier this year, continues to accelerate broader adoption of combination approaches at leading centers. And at ASCO this year, investigators from Mapa Cancer Center presented a trials in progress abstract describing an ongoing phase two study of upset blood cells. followed by Keventfust in HLA-A2 positive patients with metastatic uveal melanoma. We believe this and future planned combination therapy trials will be critical to moving Hepzato more consistently to a co-first-line setting. Turn into clinical development beyond metastatic eulia melanoma. We remain confident in hep cytokine's potential in other liver-dominant cancers, and we continue to work with investigators to generate supporting data. At ESMO Breast Cancer in May 2026, independent investigators presented a retrospective analysis of 15 heavily pre-existing cancer-related cancers. pretreated patients with liver-dominant metastatic breast cancer treated with percutaneous hepatic perfusion. Nine of the 15 patients showed a hepatic partial response, supporting further evaluation of this approach in that setting. Turning to our sponsored trials, in our sponsored phase 2 trial in metastatic colorectal cancer, we now have 13 centers actively screening. Consistent with the acceleration we anticipated on our last call, recruitment has improved as we have added sites and applied specialized training and streamlined onboarding. We estimate that approximately 6,000 to 10,000 U.S. patients annually have liver-dominant disease in the third-line setting. In HER2 negative metastatic breast cancer, we recently dosed the first patient at the European Institute of Oncology in Milan. Direct sites are activated in screening with additional sites in the activation process. We estimate a similar sized addressable population in this indication. Beyond these two programs, we continue to evaluate additional liver dominant indications through our scientific advisory board and physician feedback. And we we are preparing for pre-IND meetings with the FDA later this year to discuss new potential indications. Based on our first half of results and trends early in the third quarter, we are raising our full-year revenue guidance. Sandra will take you through the numbers and our updated outlook. Sandra? Thank you, Jay.

Thank you, Gerard. Total revenue in the second quarter of 2026 is $29.1 million compared with $24.2 million in the second quarter of 2025. This includes $27.1 million of HEP-SATO kit revenue and $2 million of chemoSAT revenue. This represents 17% sequential HEP-SATO volume growth over the first quarter of 2026. and 30% volume growth versus the same period in 2025. Now turning to 2026 guidance, we are increasing our full year revenue guidance to range from $104 million to $108 million, which reflects at least a 28% growth in HEPs Auto Kit volume over 2025. Our decision to raise guidance is driven primarily by first half performance, particularly the pace of new patient starts. We've also modestly reduced the seasonal step down we had assumed for the third and fourth quarters. Part of last year's seasonality came from centers operating with a single REM-certified treatment team where staff absences translated directly into lost treatment capacity. We have since worked with centers to train backup teams, including some of our highest volume sites, which should ease that constraint. In addition, enrollment in ongoing clinical trials during 2025 reduce the number of patients available for our treatment. Growth margin for the quarter was 90% compared to 86% in the second quarter of 2025. We are guiding to full-year 2026 growth margin between 86% to 89%, and we also expect to report positive adjusted EBITDA for the full year. Research and development expense in the second quarter was $10.4 million compared to $6.9 million in the prior quarter. in the prior year quarter, driven primarily by continued investment in our clinical organization and ongoing phase two trials. Selling general and administrative expense in the second quarter was $13.4 million compared to $11.4 million in the prior year quarter, reflecting our investment into continued commercial expansion and increasing marketing activities. Net income for the second quarter in both 2026 and 2025 was $2.7 million. On a non-GAAP basis, adjusted EBITDA for the quarter was $7.6 million compared to $9.8 million in the second quarter of 2025. We ended the quarter with cash investments of $95.9 million, cash provided by operations with $5.7 million in the quarter, and we purchased a small amount of common shares in the second quarter under the company's approved $25 million ShareVect 5X program. To date, we have purchased approximately $9 million worth of common shares. I want to thank you all for participating today, and I'll ask the operator to open the line for Q&A. Thank you.

Thank you. Ladies and gentlemen, we now begin the question and answer session. If you'd like to ask a question, please press star, follow by number one on your telephone keypad. If your question has been answered, you would like to withdraw from the queue, please press star, followed by the number two. And if you're using a speakerphone, please lift your hands up before pressing any keys. One moment please while we compile the roster. The first question comes from Mary Thibault with Bancorp VTIC. Please go ahead.

Hi, thank you for taking the questions. I wanted to ask a question here just sort of on the referral pathway and some of the efforts I know that you've been making on the commercial side. So, you know, wanted to understand how the referral network efforts have been progressing. I know you've been working on for a few quarters. you know, are there ways to sort of describe, you know, the outreach that you've been making to the medical oncologist that is translating into incremental new patient starts? And then second, I'll just ask my follow-up here. wanted to follow up, I think there was an effort to try to mitigate summer seasonality, get you know second treatment teams trained at various centers. Just an update on how that has been progressing as well. Thanks for taking the questions.

Good to hear from you. In terms of the referral network, I would say about a third of the referral network is a CTO. static network and that is within the institutions we are currently part of. oncology networks that are part of that. So there we know who the oncologists are. They have a meaningful number of patients. Meaningful could be two, three, four, but on a relatively consistent basis. The other part of the referral network, and probably should be kind of a called a just-in-time referral, are the many, many doctors who just get one patient. Now, many of those patients eventually make their way to one of our treating sites or one of our targeted sites that will open in the next, you know, one month to two years as we continue to expand. But many of those are not. And what we have to do is find them in real time if we wanna get them first in line, if we don't wanna lose patients who progress too quickly. Our efforts there right now are multifaceted.

Thank you. Jeremy, can everyone hear me? We lost you for a while, Gerard. We lost you for a minute.

Okay, all right, so where did you lose me? The parallels of cell phones.

We were just past kind of talking about those folks that only see one patient. We got a little bit past that. Right. So what we need to do is get a just-in-time network. That's kind of the term I'm using internally with the team.

Right now we're using claims data that lags, but we generally know patients who've been recently diagnosed. Recently could be anywhere from a month to six months given claims lags. And we try to get in front of those doctors a number of different ways. We'd like to do better than that. We're investigating use of other forms of data that are refreshed more frequently. That's not in place yet, but we will get it in place. We recognize that we have, you know, a higher hill to climb in terms of execution than something like an Immunocore in that, you know, community oncologists can't use our product. But we have definitive plan. We are definitely working that right now. So we are actively finding patients who've had a recent biopsy and stuff. and we're working to improve that over time. It is and will be a core part of our strategy. Now, your second question, was about training additional docs at centers. We've had several centers, but I think our efforts led to backup teams. And at least one or more of those are very high volume centers that it was critical to do that in. I wouldn't say that we have backup teams everywhere we would like to, a meaningful percentage of our volume now is covered by centers of backup teams.

Thank you so much. Thank you. Your next question comes from John Newman with Canaccord Genuity. Please go ahead.

Hey guys, thanks for taking my question. Really nice execution on the quarter. I had a couple of questions here. So I'm curious as to how much of the increased guidance for the year could be related to better uptake, excuse me, due to the SHOPAN data. Also wondering if you can discuss your enrollment expectations for both colorectal and the breast cancer studies. And I'm wondering with those two studies if you're able to utilize overlap between existing centers that are already using Hep-SATL for liver meds due to uveal melanoma. Thank you.

All right, so first part of your question in terms of how much of the increase is from Chopin. You know, it's all anecdotal. The data, the claims data is rather thin. For some reason, our claims data comes in very slow relative to other treatments. But our anecdotal experience is that more and more of these patients are getting combination therapy, and that's undoubtedly a result of the Chopin data. In terms of site recruitment, which I think was your third question, we're not going to give guidance on that. I think the only guidance we're going to give is that we expect an interim readout for colorectal sometime late next year, and we're not providing guidance on breast. But we are encouraged by both, an uptick in both trials.

in terms of site activation enrollment. And there was a second question there, I'm embarrassed to say I lost it. Could you remind me, John, what it was? Sure, just curious if you're able to utilize existing centers that are using HEP-STATO in terms of also,.

signing them up for enrollment with breast and colorectal cancer? Yes, I would say the majority of centers in the US already were part of already REMS activated for mum. In Europe, it's a lower percentage. We're actually activating some new centers Can you guys hear me? I got another message that audio dropped. We can hear you. We also have a number of, in Europe, it's a smaller number of percentage that percentage of centers that were mums centers, I'd say, you know, maybe 60, 40. existing centers and new centers in the trial. Okay, great. Thank you.

Thank you. Your next question comes from Chase Knickerbocker with Craig Holland. Please go ahead.

Good morning. Congrats on a really nice quarter and thanks for taking the questions. I just wanted to dig in a little bit more on kind of the implied kind of second half. in your guidance. And so if we kind of look at that, it assumes a pretty meaningful kind of slowdown still. With that in mind, can you just maybe kind of talk through exactly when you started seeing that softness in kind of new patient starts last year, and then kind of what you've seen so far through July, early August. Have you seen any green shoots from some of the programs that you put in place to try to train additional treatment teams, et cetera?.