Spectral Medical Inc. (EDT) Earnings Call Transcript & Summary

Greetings, and welcome to the Spectral Medical Corporate Update Conference Call. [Operator Instructions]. As a reminder, this conference is being recorded. It is now my pleasure to introduce Ali Mahdavi, Head of Investor Relations and Capital Markets. Thank you. You may begin.

Thank you. Good morning, everyone, and thank you for joining us for Spectral Medical's year-end corporate update conference call. Joining me this morning are the company's Chief Executive Officer, Chris Seto; and Chief Medical Officer, Dr. John Kellum. Following management's remarks, we will conduct a Q&A session. [Operator Instructions] Before we begin, we are required to provide the following statements regarding forward-looking information, which is made on behalf of Spectral Medical and all of its representatives on this call. Remarks and answers to your questions today may contain forward-looking information about future events or the company's future performance. This information is subject to risks and uncertainties that may cause actual events or results to differ materially. Any information regarding forward-looking statements is made as of the date of this call, and the company does not undertake to update any forward-looking statements. The company will not provide guidance regarding future events or earnings during today's call, and management does not anticipate providing guidance in future quarterly or interim communications with investors. I'll now turn the call over to Chris.

Great. Thank you, Ali, and good morning, everyone. This morning, Dr. Kellum and I are here to provide an update on the Tigris trial, specifically enrollment activity, key Tigris clinical and regulatory milestone timelines and the company balance sheet. After our prepared remarks, we will open the floor to a Q&A session. So as we close out 2024, we are currently at 138 patients enrolled. This caps a very robust year of enrollment into Tigris and puts us within striking distance of our full enrollment milestone. As we ended the third quarter of 2024, we were ahead of our projected timeline and believe that we would hit the full enrollment mark sometime around the end of 2024. Subsequently, in October, we experienced a slowdown in enrollment. This slowdown was due to issues within the medical supply chain caused by Hurricane Helene, specifically a U.S.-wide saline shortage, which impaired enrollment activities since early October and they do persist today. That being said, our understanding is that production and allocation issues should be resolved by end of 2024 or early January 2025. As such, we expect Tigris enrollment to revert to the normalized levels experienced throughout the first half of 2024, and do project full enrollment by the end of Q1 2025. I'll now hand the call over to Dr. Kellum who will provide an update and some more color around the Tigris trial in these timelines.

Thanks, Chris. So I guess we'll start with screening and enrollment. I think it's important to acknowledge that our screening activity actually has remained very strong. We've missed some enrollments as mentioned about the saline shortage, and I'll talk more about that in a minute. But I have to say that sites remain very excited about applying this technology. We've had no sites withdrawal from the trial despite its vintage. And I would say that the PIs are eager to finish the trial and have continued access to this technology in its commercialization phase. However, the shortage -- the saline storage has been an issue, and it has impacted enrollment over the last couple of months. As you know, Hurricane Helene hit in the end of September and it disrupted supply chain of fluids, particularly saline, and that's had an impact on our trial. Each of our PMX devices requires 5 liters of saline flush prior to use. This is to remove residual fluid in the material related to storage. And since each patient requires at least 2 cartridges, we're talking about 10 or even 15 liters of saline, which is quite a lot. And to allocate that has been a challenge for certain sites, in fact, for most sites in the middle of this shortage. Although other fluids could be used, the manufacturer specifications really, say only saline and because the product is still investigation, we're really bound to these specifications. Site PIs are understandably frustrated about this as our lead and the shortage issue has been an ongoing problem. However, I do think that we're starting to see a light at the end of the tunnel. The December numbers are improving. We've had about one a week enrollment in December. And so we're optimistic that is now easing. Another updated concerns our target enrollment, which has always been 150 evaluable patients. What this effectively means is that we have to enroll 100 patients in the PMX arm and 50 patients in the standard of care arm who actually received the assigned treatment. For standard of care, this is obviously pretty easy, although it's theoretically possible to fail here with, for example, withdrawal within the first 24 hours of randomization. For PMX, it's much easier to run into staffing or logistic issues around the product and between randomization and treatment. And therefore, we have, over the course of the trial, experienced a few patients -- that 6 in total that have not received the intervention and therefore, need to be effectively replaced. We will enroll another 6 patients, therefore, in the PMX arm and given the randomization schema, this means that we'll have to be enrolling somewhere around 7 to 10 patients in addition to the bare minimum of 150. This is important for our safety analysis and some of our secondary analyses and [ absolutely ] patients. What does this mean for the overall timeline between the saline delay and the additional patients? We assume that the saline -- assuming that the saline shortage issue will be resolved, we do still expect for enrollment by the end of the first quarter of 2025, which will mean that top line release of data will occur approximately 120 days from the last patient enrolled. So call it early Q3. FDA submission will occur somewhere around the end of Q3 with trial publication sometime shortly thereafter, and complete FDA review expected by the first quarter of 2026. And with all of that, I'll turn things back over to Chris.

Thanks, John. Now before we wrap up and move on to the Q&A session, I'd like to address Spectral's balance sheet liquidity. With existing cash on the balance sheet, we have cash runway to complete enrollment of Tigris as we've stated previously in prior corporate updates. We will look to execute a financing to fund our regulatory phase. To that end, we have had discussions with several of our key stakeholders, and we'll look to find constructive pools of capital as we've done over the last three funding [ grounds ]. We feel very good about our prospects to fund Spectral and attract the right pools of capital as we enter the home stretch of this trial and enter into the regulatory submission phase. With that, I'll hand the call back over to Ali.

Daryl, if you could open the call to questions and -- questions, please?

[Operator Instructions] Our first questions come from the line of Scott McAuley with Paradigm Capital.

Obviously, the IV fluid shortage issue has been frustrating, I can imagine. I don't know if you have a sense, maybe Dr. Kellum, of how many -- we're at 138 now. The potential -- like impact of the IV fluid shortage, like how many patients could have been recruited if it wasn't for that shortage at the moment, if you have an idea?

Well, Scott, thanks for the question. I think if you look at where we've been sort of running and even if you take a more conservative estimate of sort of the average enrollment of 6 or 7 patients a month, there's really no particular reason why October and November, even with the Thanksgiving holiday again here in the states, we've historically had a strong November in the past. So my guess is we would have had 6 or 7 patients enrolled each month. And so what does that mean? That means that were probably down, call it, a dozen patients would have been at or around 150 now if it wasn't for the [indiscernible].

Yes. And how about the -- you'd highlighted that the screening rates remain robust, which is fantastic to hear. In terms of -- are there sites -- is it essentially the sites that have been strong throughout the trial, they continue to remain strong? Are you seeing some of the sites that maybe had been underperforming, starting to pick up now that we're seeing the light at the end of the tunnel in terms of enrollment, and then wanting to get in other patients or two, if they had been underperforming during the year? Like talk a little bit about that, those kind of underlying screening dynamics.

No, I would say that the pattern of screening and the pattern of enrollment has largely been the same through the course of the trial. I mean we have not had some ups and downs with certain sites that were strong initially and maybe faltered a little bit, and then some of the sites have picked up a little bit. in recent months. But it's hard to say. I mean obviously, there are external factors. We do have a PI going on the [indiscernible] now, and I would expect that, that site won't be enrolling. We have other sites that have had external factors, which have impacted the availability of staff, et cetera, staff turnover. All those sorts of variables, which over the course of the trial, do impact enrollment. But I would say, overall, the high-performing sites remain high performing and not as high-performing sites are pretty much exactly where they've been. So I don't see much of a change there. And frankly, I don't really anticipate very much. I mean is this sort of trial maintenance 101 in the sense that a majority of patients are actually enrolled by, call it, 25% of the sites.

Yes, definitely. And on the number of patients. So good to get some info out there on the need for more than the 150. Is there any update on the Prismax sub study kind of enrollment on that? How that's going? Do you think this is going to impact whatever the final number is, if it's 155, 160, what have you?

Yes. Yes. No, we've enrolled 12 patients into the sub study. So we're really in good shape in terms of getting to, at least, 15 patients enrolled. So I think we're pretty much -- I won't say we're in the clear with regard to that trial yet, but I think it's looking pretty good that we should be able to achieve complete enrollment in the sub study. So I think we had some concern previously that we might run out of patients before we got that study fully enrolled, but I don't think that's much of a concern anymore.

That's great. That's great to hear. And I know in the past, the EDEN sub study had been something that kind of interested in, in highlighting is there any expected updates on that in the coming months?

Yes. We're obviously focused primarily on getting the Tigris trial completed, but the EDEN data or lock are undergoing sort of -- and I guess, primary analysis is completed. We've actually got some abstracts that will be presented at the our upcoming Society of Critical Care Medicine Meeting in February. And we anticipate having the publication submitted the manuscript submitted for publication prior to that. And I would say the target of January at this point to wrap that process up.

That's great. That's great. And then lastly, I'm sure there's other questions in the queue. Maybe just switching over to Vantive. I know I think we're expecting that Carlyle potential acquisition to close in the coming month or two. Has that impacted the interactions that you guys have been having with your kind of colleagues over Vantive? Have you noticed any shifts? And is there any tangible movement on reimbursement or marketing or any of the other kind of prelaunch activities that you guys have been working on that you can kind of point to or talk to?

Well, I'll let Chris comment on this as well. I would say from the clinical perspective, it really has been full speed ahead with that relationship. I haven't seen any change at all. It's been strong and aggressive and I think we're on track with -- on all of the fronts that you -- that you've mentioned. And I would anticipate that, that will continue as it has. I don't know if, Chris, you have any more specific details you want to offer?

Yes. Thanks, John. Scott, I would just characterize the relationship as progressing -- progressively stronger every week. The activity that's being undertaken by Vantive is an incredible workload, especially on the marketing side and looking forward to -- as they look forward to uptake, how they market this, how they brand this. There's a ton of field work going on, including the addition of incremental Vantive bodies now, if you will, towards this project. So I don't think that, once again, and I'll reiterate this. I don't think we could have asked for a better partner. And in fact, I feel that this Vantive carve-out has been quite good, at least, I'm speaking for Spectral. I think this has been quite good for the prospects of PMX and the focus on PMX is a strategic priority for Vantive.

Our next question has come from the line of [ Kevin Veenstra ] with -- private investor.

Yes, thanks for the information update. Can you hear me okay?

Yes.

Yes. Thanks, Kevin.

Great. Super, super, okay. Just a few questions. My first question was around the saline solution. I do appreciate the fact that's a difficult situation. I'm just wondering, is there any opportunity just to ensure things do finish up on the revised time schedule to purchase saline, and dedicate it to the sites that are higher enrollment so that we're not waiting and maybe back of the line for other uses of saline within a given hospital?

I'll address that. Kevin, it's not really possible. It's a nationwide shortage. And so we can't dedicate volumes specifically for the trial. And I do -- unfortunately, despite the fact that this is an intervention that's designed to improve survival, it's still considered to be a research application as opposed to someone who needs surgery, for example. So we're always going to be a bit behind the eight ball with respect to that. However, Baxter has actually been very helpful to us, in terms of helping to get solutions move around, helping to free up solutions that -- for example, expired lots and things like that, that's been set aside for purposes of use in the priming as opposed to other uses and have offered other solutions that different sites are [ lined ]. So I think people are doing what they can do. And I think there's really not an opportunity to specifically buy solutions in the setting of a nationwide shortage. But I do think everything that can be done is being done. And I do have a good sense now that things are starting to ease. We really have seen an increase in enrollment. And although I'm still hearing from the sites that they're on a case-by-case basis, having difficulty. It does seem like it's starting to subside. And I do think, certainly, by the end of this month, we hopefully start the first of the year back on the usual timetable.

Yes. Kevin, just to add to that. So my understanding is that production issues have been resolved or will be resolved by the end of this month. I think there's a clear -- a much clearer view on that. Allocation issues will take, at least, a couple of weeks to work through. So there's the production side and allocation but production certainly sounds like it's been solved. And it's just -- allocation just takes 1 to 2 weeks following the resolution of the production issues to work through the system.

Okay. That's fair. Next question is around the 2:1 randomization. Is that done? Or was that done at the start of the study? What I'm trying to get at here, I guess, is, is it 2:1 randomization at each trial site? Or is it overall kind of top -- top going down? And so every time a new patient gets enrolled, it's really counting down from 150 down to 0. I don't know if that makes sense. But I'm just trying to get a sense if it's 2:1 at the trial site level or at the overall kind of trial level?

Yes. It's a block randomization. So each of the sites are out of 2:1 randomization. So yes, it's at the site level.

So if you have some sites that are very, very low, you may have to wait to get that [indiscernible].

No, no, we don't have a specific number. Yes, we don't have to -- we just have to get -- I misunderstood your question, I guess. We just have to get to 100 evaluable patients. It doesn't have to be any kind of equal distribution across sites or anything like that.

Okay, got you. And then with respect to the 50 standard of care, are you able -- or were you able to fill those, I guess, faster because even though there's a saline solution, you don't really need saline for the standard of care? Or is that...

No. Because unfortunately, you got to be -- no, unfortunately, because you have to be able to know that you can -- we have what's called allocation concealment where we don't know where -- the patient is going to be randomized to, until they're randomized. So if they were to randomize the patient and not have saline and need it, then that would be another patient randomized not treated, which is obviously a problem. So no, they can't randomize unless they know they can proceed with the treatment, if they're randomized to the treatment arm.

Okay. Got you. And just one last question. In terms of cash, this is probably a question for Chris. How much cash do you think you need to be -- end in terms of additional raising or capital raise.

Yes. So Kevin, I think we've addressed this in the past. In terms of the funds on hand, today, we have enough to finish full enrollment. And I think we've been resolute on that. And now listen, we had a little more room when we executed the financings last year. Certainly, we've been backed up a couple of months, I think, from our projected time line. But that being said, we did have buffer. In terms of -- to get to FDA approval, we've talked about anywhere from a number of, call it, CAD 10 million to CAD 12 million to get the FDA approval from thereon.

Thank you. There are no further questions at this time. And with that, that does conclude today's conference call. We do appreciate your participation. You may disconnect your lines at this time. Enjoy the rest of your day.