SOUTH SAN FRANCISCO, Calif., May 8 /PRNewswire-FirstCall/ -- Monogram Biosciences, Inc. today reported financial results for the quarter ended March 31, 2006.
First Quarter Results
The Company had revenue of $13.2 million for the first quarter of 2006, which was 33 percent higher than revenue of $10.0 million for the first quarter of 2005. Driving this increase was revenue from the Company's HIV testing products, which was $12.2 million in the first quarter of 2006 compared to $8.9 million for the same period in 2005. Revenue from oncology and eTag(TM) collaborations was $0.5 million for the first quarter of 2006, unchanged from the same period in 2005.
For the first quarter of 2006, a net loss of $3.4 million, or $0.03 per common share, was recorded, compared to a net loss of $7.4 million, or $0.06 per common share, for the same period in 2005. Included in these results were substantial non-cash items related to the Contingent Value Rights (CVRs) and stock-based compensation, which are described below under "Proforma Results." On a proforma basis, adjusted for these non-cash items, the net loss was $1.5 million, or $0.01 per share, in the first quarter of 2006 compared to a net loss of $4.1 million, or $0.03 per share, in the same period of 2005.
Cash Resources
The Company had $67 in million cash resources (comprising cash, cash equivalents and short-term investments) at March 31, 2006. On a proforma basis, including the $25 million investment to be made by Pfizer, these cash resources would be approximately $92 million. During the first quarter, cash resources increased by $2.4 million, including the favorable impact of $3.0 million in proceeds received on exercise of stock options during the quarter.
Recent Corporate Highlights
"The $25 million investment by Pfizer announced today will provide a substantial injection of capital to facilitate our continued growth and development and also represents a huge endorsement of our role as the partner of choice for companies with significant HIV development programs," said William D. Young, Chairman and CEO of Monogram. "Our tests have continued to play an important role in the Phase III clinical trial protocols for Pfizer's CCR5-inhibitor drug, and now with the collaboration we have announced today with Pfizer, we are preparing for the use of our Co-Receptor Tropism Assay in potential additional Pfizer clinical programs and in potential commercial use after regulatory approval."
"In oncology, we are hard at work analyzing data generated through collaborations aimed at identifying clinically meaningful correlations between measurements of activated proteins and protein complexes and objective response and survival," said Young. "Much of our clinical work has been conducted in breast and lung cancer. We are encouraged by the relationships we have uncovered in initial studies and intend to evaluate their predictive capability over the second half of this year. In addition, over the last few months, since we began routinely running the eTag assay in our South San Francisco laboratory, we have made substantial improvements in optimizing and improving the signal strength of the assay and we believe we are well on the way to having an assay that can be readily validated in the CLIA setting."
Corporate: * Received commitment for a $25 million investment by Pfizer, Inc. through a 3% Senior Secured Convertible Note, due in 2010. * Ended the first quarter of 2006 with total cash and cash investments of $67 million, or, on a proforma basis, including the anticipated proceeds from the Pfizer investment, of $92 million. * Recorded record quarterly revenue of $13.2 million. HIV: * Signed a multi-year collaboration agreement with Pfizer to provide worldwide availability of Monogram's Co-Receptor Tropism Assay for patient use. * Signed an extension of the existing services agreement with Pfizer for support of potential additional Pfizer clinical programs through December 31, 2009. * Provided testing services in the Phase III clinical trial for Pfizer's investigational CCR5-inhibitor drug. * Provided testing services in support of a first-in-class integrase inhibitor compound in a Phase III trial by Merck & Co. * Confirmed a renewal of our existing services agreement with GlaxoSmithKline through 2007 for the continued use of Monogram's phenotypic and genotypic assays across part of its research portfolio, including Monogram's assays for co-receptor tropism and drug susceptibility testing. * Provided testing services, including assays for co-receptor tropism and drug susceptibility, to Schering Plough to support the clinical development of vicriviroc, Schering Plough's investigational CCR5 receptor antagonist. * Increased HIV revenues by 38% in the first quarter of 2006 as compared to the same period of 2005. * Presented the results, at the European Resistance Workshop in March 2006, of a study demonstrating the superiority of phenotypic approaches over genotypic approaches for entry and tropism tests. * Established clinical cutoffs for the entire class of boosted protease inhibitors. Oncology: * Advanced the clinical development of the eTag technology for the measurement of activated signaling pathways in several EGFR pathway-driven solid tumors -- primarily breast cancer and non-small-cell lung cancer. We have engaged in collaborative studies using formalin-fixed paraffin-embedded specimens taken from patients treated with Herceptin(R) and Iressa(R), and are busy establishing, confirming, and validating observed relationships between receptor tyrosine kinase interactions and clinical response and survival. * Established routine operation of the eTag assay. * Validated the priorities of our development efforts in breast and lung cancer through initial market research. Outlook
"Sophisticated molecular diagnostics are becoming increasingly important to the management of serious diseases," said Mr. Young. "As we build on our leadership position in infectious diseases by expanding our business into the much larger opportunity of guiding cancer therapy, the following are the key objectives on which we are focused."
HIV: * Continue to grow annual HIV testing revenues, driven by the use of our assays in support of our pharmaceutical company customers' HIV drug development pipeline, including current and anticipated clinical trials of CCR5 entry inhibitors and integrase inhibitors. * Prepare for possible use of our Co-Receptor Tropism Assay with Pfizer's maraviroc and other CCR5 entry inhibitor drugs in potential early access programs as well as in commercial use of the drugs if approved by the FDA. Oncology: * Validate the eTag EGFR/HER test panel in our CLIA certified clinical laboratory for clinical application to breast cancer, non-small-cell lung cancer and other EGFR pathway-driven tumors. * Demonstrate the clinical utility of the eTag assay by developing predictive algorithms of patient response to targeted inhibitors of the EGFR/HER pathway in breast and lung cancers. * Develop clinical data in support of the anticipated introduction of our first commercial eTag assay in oncology, a test panel measuring activated EGFR/HER family receptors related to approved targeted cancer therapies. * Establish and extend research and clinical collaborations with pharmaceutical and biotechnology companies for application of the eTag technology to drug development.
Following the financial statements below, Monogram has provided supplemental information to help investors and media gain further insights into its business.
Proforma Results
There were several non-cash items that affected results for the quarters ended March 31, 2006 and 2005 and were recorded as follows:
* "Mark-to-market" adjustments to the liability established for the potential payment on the CVRs issued as part of the merger consideration for ACLARA are reflected as non-operating income and expense in the statement of operations. These adjustments are based on the actual closing price of the CVRs on the OTC bulletin board, which was $0.63 per CVR at both December 31, 2005, and March 31, 2006. This revaluation led to no adjustment in the first quarter of 2006 and a $5.3 million unfavorable adjustment in the first quarter of 2005. A further revaluation will be done when the CVR liability is determined on June 10, 2006. * An unfavorable adjustment of $2.0 million and a favorable adjustment of $2.0 million for stock based compensation are reflected in operating expenses for the first quarter of 2006 and 2005, respectively. These items include the net impact in 2005 of variable accounting on all former ACLARA stock options as a result of the CVRs, recognition of expense based on the value of CVRs related to former ACLARA stock options that vested during the period in 2005 and 2006, and charges in the first quarter of 2006 for stock-based compensation in accordance with SFAS123(R) which was adopted by the Company effective January 1, 2006.
The Company is reporting proforma results excluding these items to provide a clearer view of ongoing expenses without the impact of merger-related costs and non-cash stock-based compensation. A reconciliation of these proforma results to GAAP results is included with the Statement of Operations data attached to this release.
Capital Structure and Contingent Value Rights
At March 31, 2006, there were no shares of Preferred Stock outstanding, warrants outstanding were exercisable into 1.7 million shares of Monogram Common Stock and a total of 130.2 million shares of Common Stock were outstanding. At March 31, 2006, there were 64.8 million Contingent Value Rights (CVRs) outstanding. During the first quarter of 2006, 2.2 million shares of common stock were issued upon exercise of stock options, for which cash proceeds of $3.0 million were received. Related to certain of these option exercises, 2.2 million Contingent Value Rights were issued.
The maximum amount payable in connection with the CVRs, based on CVRs outstanding at March 31, 2006 is $57 million, of which $32.4 million would be required to be paid in cash and the remainder of $24.6 million could be paid in cash or stock at our option. The amount of any payment will be determined in reference to the volume-weighted average price of our common stock in the fifteen trading days commencing Friday May 19, 2006 and ending on Friday June 9, 2006.
Conference Call Details
Monogram will host a conference call today at 4:30 p.m. Eastern Time. To participate in the live teleconference please call (888) 802-2275, or (913) 312-1267 for international callers, fifteen minutes before the conference begins. Live audio of the call will be simultaneously broadcast over the Internet and will be available to members of the news media, investors and the general public. Access to live and archived audio of the conference call will be available by following the appropriate links at http://www.monogrambio.com and clicking on the Investor Relations link. Following the live broadcast, a replay of the call will also be available at (888) 203-1112, or (719) 457-0820 for international callers. The replay passcode is 2433298.
The information provided on the teleconference is only accurate at the time of the conference call, and Monogram assumes no obligation to provide updated information except as required by law.
About Monogram
Monogram is advancing individualized medicine by discovering, developing and marketing innovative products to guide and improve treatment of serious infectious diseases and cancer. The Company's products are designed to help doctors optimize treatment regimens for their patients that lead to better outcomes and reduced costs. The Company's technology is also being used by numerous biopharmaceutical companies to develop new and improved antiviral therapeutics and vaccines as well as targeted cancer therapeutics. More information about the Company and its technology can be found on its web site at http://www.monogrambio.com.
Forward Looking Statements
Certain statements in this press release and attached supplemental information are forward-looking. These forward-looking statements include references to the planned investment in the Company by Pfizer, the expected financial impact of that investment, plans for further development of the eTag technology and anticipated validation in a CLIA setting, activities expected to occur in connection with the Pfizer collaboration, the statements under "Outlook", and the potential impact of the Contingent Value Rights. These forward looking statements are subject to risks and uncertainties and other factors, which may cause actual results to differ materially from the anticipated results or other expectations expressed in such forward-looking statements. These risks and uncertainties include, but are not limited to, the risk that the planned Pfizer investment may not be completed when expected, or at all; risks related to the implementation of the collaboration with Pfizer; risks and uncertainties relating to the performance of our products; the growth in revenues; the size, timing and success or failure of any clinical trials for CCR5 inhibitors, entry inhibitors or integrase inhibitors; the use of our Co-Receptor Tropism Assay for patient use in the event of approval of any CCR5 inhibitors; the ability of our eTag assays to predict response to particular therapeutic agents, our ability to successfully conduct clinical studies and the results obtained from those studies; whether larger confirmatory clinical studies will confirm the results of initial studies; our ability to establish reliable, high-volume operations at commercially reasonable costs; expected reliance on a few customers for the majority of our revenues; the annual renewal of certain customer agreements; actual market acceptance of our products and adoption of our technological approach and products by pharmaceutical and biotechnology companies; our estimate of the size of our markets; our estimates of the levels of demand for our products; the impact of competition; the timing and ultimate size of pharmaceutical company clinical trials; seasonal effects on revenue due to holiday periods which often affect the first and third quarters; whether payors will authorize reimbursement for our products and services; whether the FDA or any other agency will decide to further regulate our products or services; whether we will encounter problems or delays in automating our processes; the ultimate validity and enforceability of our patent applications and patents; the possible infringement of the intellectual property of others; whether licenses to third party technology will be available; whether we are able to build brand loyalty and expand revenues; the potential impact of cash and or stock payments by us on the Contingent Value Rights issued to former stockholders of ACLARA; and whether we will be able to raise sufficient capital in the future, if required. For a discussion of other factors that may cause our actual events to differ from those projected, please refer to our most recent annual report on Form 10-K and quarterly reports on Form 10-Q, as well as other subsequent filings with the Securities and Exchange Commission. We do not undertake, and specifically disclaim any obligation, to revise any forward- looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements.
PhenoSense and eTag are trademarks of Monogram Biosciences, Inc. Herceptin is a registered trademark of Genentech, Inc., Tarceva is a trademark of OSI Pharmaceuticals, Inc., Erbitux is a trademark of ImClone Systems Incorporated and Iressa is a registered trademark of AstraZeneca plc.
contacts: Alfred G. Merriweather Jeremiah Hall Chief Financial Officer Feinstein Kean Healthcare Tel: 650 624 4576 Tel: 415 677 2700 amerriweather@ jeremiah.hall@ monogrambio.com fkhealth.com MONOGRAM BIOSCIENCES, INC. SELECTED STATEMENT OF OPERATIONS DATA (In thousands, except per share amounts) (Unaudited) Three Months Ended March 31, 2006 2005 Revenue: Product revenue $12,246 $8,853 Contract revenue 1,003 1,141 Total revenue 13,249 9,994 Operating costs and expenses: Cost of product revenue 5,681 4,339 Research and development 4,575 4,034 Sales and marketing 3,378 2,508 General and administrative 3,581 1,702 Total operating costs and expenses 17,215 12,583 Operating loss (3,966) (2,589) Interest and other income, net 599 535 CVR valuation adjustment 14 (5,306) Net loss $(3,353) $(7,360) Net loss per common share, basic $(0.03) $(0.06) Weighted-average shares used in computing basic net loss per common share 129,614 117,353 Reconciliation of Proforma Results to GAAP Net loss $(3,353) $(7,360) Adjustments for non cash items: CVR valuation adjustment (14) 5,306 Stock based compensation under APB25 - (2,006) Stock based compensation under SFAS123(R) 1,874 - Proforma net loss $(1,493) $(4,060) Proforma net loss per common share $(0.01) $(0.03)
Management believes that this proforma financial data supplements our GAAP financial statements by providing investors with additional information which allows them to have a clearer picture of the company's operations, financial performance and the comparability of the company's operating results from period to period as they exclude the effects of costs related to our merger with ACLARA that we believe are not indicative of our ongoing operations and the impact of stock-based compensation. The presentation of this additional information is not meant to be considered in isolation or as a substitute for results prepared in accordance with GAAP. Above, we have provided a reconciliation of the proforma financial information with the comparable financial information reported in accordance with GAAP.
MONOGRAM BIOSCIENCES, INC. SELECTED BALANCE SHEET DATA (In thousands) (Unaudited) March 31, December 31, 2006 2005 ASSETS (Note 1) Current assets: Cash and cash equivalents $5,978 $7,616 Short-term investments 61,445 57,398 Restricted cash - 50 Accounts receivable, net 8,048 9,063 Prepaid expenses 722 1,107 Inventory 1,278 1,170 Other current assets 868 790 Total current assets 78,339 77,194 Property and equipment, net 8,437 8,580 Goodwill 9,927 9,927 Other assets 1,982 1,977 Total assets $98,685 $97,678 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $1,446 $1,751 Accrued compensation 2,036 2,271 Accrued liabilities 4,313 4,116 Current portion of restructuring costs 1,270 1,417 Deferred revenue 908 383 Current portion of loans payable and capital lease obligations 361 596 Contingent value rights 42,735 42,676 Total current liabilities 53,069 53,210 Long-term portion of restructuring costs 1,667 1,916 Other long-term liabilities 732 781 Total liabilities 55,468 55,907 Stockholders' equity: Common stock 130 128 Additional paid-in capital 272,213 267,526 Accumulated other comprehensive loss (485) (514) Deferred compensation - (81) Accumulated deficit (228,641) (225,288) Total stockholders' equity 43,217 41,771 Total liabilities and stockholders' equity $98,685 $ 97,678 (1) The balance sheet data at December 31, 2005 is derived from audited financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2005 filed with the Securities and Exchange Commission. MONOGRAM BIOSCIENCES, INC. SUPPLEMENTAL INFORMATION
To provide additional insights to investors, the following information is provided in a question and answer format.
HIV 1. What is the collaboration agreement with Pfizer about? The collaboration agreement announced on May 8, 2006 provides a framework in which Pfizer and Monogram will collaborate to make Monogram's Co-Receptor Tropism Assay available globally. The agreement runs through December 31, 2009, but is renewable by Pfizer for five separate one year terms after that date. Monogram will be responsible for making the Co-Receptor Tropism Assay available in the U.S. Outside the U.S., Pfizer will take the lead in commercializing the assay. The agreement is subject to certain performance standards by Monogram and a Joint Steering Committee will oversee the collaboration. Also on May 8, 2006, we extended the existing co-receptor tropism assay services agreement with Pfizer to provide support for potential additional Pfizer clinical programs through December 31, 2009. 2. What is the status of the CCR5 class of HIV drugs and what has been the impact of the CCR5 clinical trials on your business? The initiation of phase III trials for the first in the new class of CCR5 inhibitor drugs in late 2004 was the primary factor in the 31% increase in our total revenue in 2005, compared to 2004. This continued in the first quarter of 2006, with total year-over-year revenue growth of 33%. One trial, being conducted by Pfizer, has been ongoing during 2005 and is continuing. Pfizer has indicated in February 2006 that its CCR5 compound, called maraviroc, is on track for submission to the FDA in an NDA by the end of 2006. However we cannot be assured that this will in fact occur. A second planned phase III trial, by GlaxoSmithKline (GSK), was cancelled in October 2005 as a result of unfavorable phase II results. While the immediate testing opportunity presented by that particular trial is no longer present, we continue to work with GSK under a recently renewed services agreement in support of its continuing HIV programs. A third program, by Schering Plough, is ongoing although it is not clear when, or if, a phase III trial may be initiated. We continue to provide testing services to Schering in support of the ongoing clinical development of vicriviroc, their investigational CCR5 inhibitor. Our testing services are used in clinical programs of CCR5 entry inhibitor drugs, for patient selection and monitoring utilizing our Co-Receptor Tropism Assay, and for optimization of patients' background treatment regimens utilizing our PhenoSense GT test. The CCR5 inhibitor class of drugs has been the major driver of our revenue growth in recent quarters. While the large phase III programs are significant to our revenue, we have a total of over 60 pharmaceutical, biotechnology and research organizations for which pharmaceutical testing has been routinely conducted. In addition, other types of entry inhibitors, as well as a new class of integrase inhibitors, are progressing though the drug development pipeline and may provide additional opportunities for our pharmaceutical testing services. 3. What will be the future impact of new HIV drug classes on your business? The most immediate opportunity is represented by the CCR5 inhibitor class. This class of drug blocks the use by HIV of the patient's CCR5 co-receptor, if this co-receptor is being used for entry by HIV into cells. Accordingly, knowing whether the CCR5 co-receptor is being used by HIV in a particular patient is critical for drug efficacy, and potentially for drug safety. The relevance of our tests will be determined in large part by how these drugs progress through their clinical trials and through FDA review and approval, although in the current Phase III trials our Co-receptor Tropism Assay is being used for patient selection and our PhenoSense GT assay is being used for optimization of background therapies prior to initiation of treatment with the investigational CCR5 inhibitor compound. There is always the risk that the drugs will not be successful in their trials, that trials will not be completed, that the drugs will not be approved by the FDA, or that if the drug is approved, our tests will not be deemed necessary. If the drugs are successful, however, then it is possible that our tests will be used in conjunction with the drugs in clinical use after FDA approval. Also, new HIV drugs are often made available in "early access programs" after completion of phase III clinical trials but before approval for marketing. In both of these circumstances, we believe the provision of testing services in support of the CCR5 inhibitor class of drugs could provide a meaningful increment to our HIV business over the long term. But this is not the only area of current drug development for HIV. There are other types of entry inhibitors, including Fuzeon(R) from Roche (the only currently approved drug in its class), as well as many others in earlier stages of development. For these drugs, we have our PhenoSense GT test that can be used for optimization of background therapy, and our PhenoSense Entry assay that can be used to assess resistance to this class of drugs, both in clinical trials and in commercial use. Also there is an exciting new HIV drug class, integrase inhibitors, the first of which has recently entered Phase III trials. For this class of drugs we can also provide our PhenoSense GT test for optimization of background therapy in clinical trials, and our PhenoSense Integrase assays that can be used to assess resistance to this new class of drugs, both in clinical trials and in commercial use. So new classes of drugs add both to the richness of potential treatment options for patients and also to the potential testing opportunity for Monogram. For us, this means opportunity not only for our current genotypic and phenotypic tests but also for our new class-specific tests that are made available initially to pharmaceutical companies and over time, as these new drugs are approved, to physicians. 4. What is the status of your agreement with Merck for its phase III trial? In February 2006, we announced that our tests are being used in a phase III trial of an integrase inhibitor by Merck & Co. This is the first phase III trial for a drug in this new class. We believe the initiation of this trial is indicative of a robust drug development pipeline, both in terms of new drugs being developed and new classes of drug being pursued by our pharmaceutical company customers. The selection by Merck of our tests for use in this trial is consistent with the leadership position that we have established as the partner for over 60 pharmaceutical, biotechnology and research organizations, including almost every company with a significant HIV drug development program. There are over 60 drugs in development, more than half of which are in the new classes of entry inhibitors, integrase inhibitors and assembly inhibitors. 5. How unique and proprietary are your tests for tropism and HIV entry? Our Co-Receptor Tropism Assay and our HIV Entry Assay offer unique and proprietary advantages over other potential approaches. Regarding the technical advantages of these tests, in February 2006, we presented the results of a study detailing the difficulties inherent in genotypic methods for predicting co-receptor tropism and assessing the resistance of HIV to entry inhibitor drugs. The study entitled "Challenges in Predicting HIV-1 Co-Receptor Tropism from V3 Region Genotype Data" was presented by Monogram scientists at the 4th European HIV Drug Resistance Workshop in Monte Carlo, France. The study used patient-derived virus sequences representing multiple subtypes of HIV-1, and found that sensitivity for detection of viruses using the CXCR4 co-receptor varied widely depending on viral sub-type and on the interpretation system used. In comparison to phenotypic analysis which accurately and directly measures co-receptor usage, genotypic measures, on average, were only approximately 65
