SOUTH SAN FRANCISCO, Calif., May 2 /PRNewswire-FirstCall/ -- Monogram Biosciences, Inc. today reported financial results for the quarter ended March 31, 2007.
First Quarter Results
The Company had revenue of $9.4 million for the first quarter of 2007, compared to revenue of $13.2 million for the first quarter of 2006. Revenue from the Company’s HIV testing products was $9.1 million in the first quarter of 2007 compared to $12.2 million for the same period in 2006. Overall revenue was affected by a reduction in our revenue from Pfizer. Due to Pfizer’s successful completion in mid-2006 of the phase III clinical trial for maraviroc, our revenue from Pfizer, which was $4.3 million in the first quarter of 2006, was reduced to $1.0 million in this year’s first quarter. With the trial completed, testing activity was greatly reduced pending completion of the FDA’s review of Pfizer’s NDA for maraviroc. Last week, an advisory panel unanimously recommended to the FDA that maraviroc be approved and we are looking forward to the new revenue opportunity that the anticipated approval of maraviroc provides for our Trofile(TM) Assay.
In preparation for the commercial launch of our Trofile Assay, we have been gearing up our organization and programs in anticipation of FDA approval of maraviroc as well as continuing to advance our oncology development program. As a result of both these factors and the reduced revenue, we incurred a net loss of $9.8 million, or $0.07 per common share, in the first quarter of 2007, compared to a net loss of $3.4 million, or $0.03 per common share, for the same period in 2006.
The Company had $42.3 million in cash resources (comprising cash, cash equivalents and short-term investments) at March 31, 2007.
Monogram’s Trofile Assay and Pfizer’s maraviroc
“The opportunity for our Trofile Assay took a significant step forward last week when an FDA advisory committee voted unanimously to recommend that Pfizer’s investigational CCR5 antagonist, maraviroc, be approved for use with treatment-experienced patients with CCR5-tropic HIV-1,” said William Young, Monogram chief executive officer. “Trofile is the only diagnostic proven in clinical studies to identify whether patients are CCR5-tropic and has been used in all clinical trials of CCR5 antagonists to date, including that for Pfizer’s maraviroc. We believe the advisory panel’s recommendation is a very significant development for Monogram, as well as for the tens of thousands of patients who may soon be able to benefit from a new and exciting therapeutic option as a direct result of Monogram’s molecular diagnostics.”
Although not bound by the advisory committee’s recommendations, the FDA usually follows them. Information provided by Pfizer to the FDA’s advisory panel indicates that “the results in treatment-experienced patients with CCR5-tropic versus non CCR5-tropic HIV-1 provide clinical data validating Monogram’s Trofile Assay as an effective and appropriate means to identify patients with CCR5-tropic HIV-1 and who are therefore likely to respond to maraviroc.” Pfizer has previously reported clinical data that confirms that patients, when properly selected with Monogram’s Trofile Assay, respond well to maraviroc and achieve a significant reduction in viral load.
“Our plans for commercializing Trofile in the U.S. are well in hand,” continued Young. “Operationally, our clinical laboratory is prepared for commercial testing, with a proven track record derived from performing over 23,000 Trofile Assays since 2004, and tens of thousands of phenotypic and genotypic resistance tests annually, including the PhenoSenseGT(TM) assay that was used to optimize background therapy in the clinical trials of maraviroc.”
“We are ready to make our Trofile Assay available commercially as soon as maraviroc is approved,” said Monogram CEO William Young. “We intend to bring Trofile to the HIV physician community through our existing sales, marketing and distribution channels throughout the U.S. We believe that our sales force is well positioned to communicate the benefits of our technology to physicians, payers and medical providers and we have held initial meetings with several of the larger public and private payers,” continued Young. “We believe that payers and providers have a positive view of the ability to select suitable patients for therapy and our goal is to obtain reimbursement as soon as possible after maraviroc is approved.”
Assays for Oncology
“We continue to make progress toward our initial goal of commercializing assays for predicting patient response to targeted therapies in breast cancer,” added Young. “Less than 50% of patients selected for treatment with Herceptin by currently available tests (IHC and/or FISH) respond, so we believe there is a clear market need for the kind of information that we believe our eTag(TM) assays can provide.”
“We intend that our portfolio of assays for the EGFR/Her pathway will ultimately include assays that quantitate the levels of individual receptor monomers (Her1, Her2 and Her3), homo-dimers (Her1:1 and Her2:2), and hetero-dimers (Her1:2, Her2:3 and various modified forms of these receptors including p95/Her2). We are developing this portfolio of assays to provide information that will not only allow physicians to identify susceptibility to individual drugs but also to identify appropriate combinations of drugs based on resistance pathways that are activated in particular patients.”
Recent progress includes: -- Abstracts detailing our findings in the first two clinical cohorts have been accepted for presentation at ASCO. These studies examine correlations between eTag assay measurements and clinical outcomes. -- An abstract describing patterns of homo- and hetero-dimers in cell lines with resistance to Herceptin has been accepted for presentation at ASCO. -- Manuscripts describing the eTag methodology and initial results in two clinical cohorts of patients with metastatic breast cancer are in preparation and nearing submission for publication. -- An additional cohort of metastatic breast cancer patients has been tested and analyses are ongoing. Preliminary data appear consistent with prior observations. -- Multiple additional collaborations involving clinical cohorts in both the metastatic and adjuvant settings are in progress. -- The first assays in our planned portfolio are undergoing technical validation in the Company’s CLIA certified clinical laboratory in preparation for commercial introduction of a first product in breast cancer.
Capital Structure
At March 31, 2007, a total of 131.8 million shares of common stock were outstanding. Stock options and warrants are outstanding on 21.6 million shares and 0.8 million shares of common stock, respectively. The principal amount of Pfizer’s $25 million convertible note, issued in May 2006, is convertible into approximately 9.2 million shares of common stock. The $30 million principal amount of our 0% Convertible Senior Unsecured Notes, issued in January 2007, is convertible into approximately 11.9 million shares of common stock.
Non-GAAP Proforma Results
The Company is reporting non-GAAP proforma results which exclude certain items to provide a clearer view of ongoing expenses without the impact of merger-related costs and non-cash valuation adjustments related to our convertible debt. A reconciliation of these non-GAAP proforma results to GAAP results is included with the Statement of Operations data attached to this release.
In prior quarters, we have reported non-GAAP proforma information that excludes the effect of stock compensation, since there was a lack of comparability in the information reported in our statement of operations for stock compensation under different accounting rules in 2005 and 2006. However, since for 2007, the statement of operations for the current year and the immediately preceding year are both presented on the same basis in accordance with SFAS 123R we are no longer excluding these non cash items from proforma net loss. Stock-based compensation in accordance with SFAS 123R was $1.2 million in the first quarter of 2007, compared to $1.8 million in the prior year’s first quarter.
The following non-cash items that were reflected in non-operating income and expense for the periods ended March 31, 2007 and 2006 are excluded from proforma net loss:
-- “Mark-to-market” adjustments to the 3% Senior Secured Convertible Note and the 0% Convertible Senior Unsecured Debt. There were no such adjustments in the prior year and a charge of $16,000 in the quarter ended March 31, 2007. Such adjustments could be substantially higher in future quarters in certain circumstances, such as if the Company’s common stock price is higher than the March 31, 2007 level of $1.94 per share. -- “Mark-to-market” adjustments in 2006 to the liability established for the payment on the CVRs issued as part of the merger consideration for ACLARA. As the outstanding CVR’s were settled in the second quarter of 2006, adjustments are not relevant for third and fourth quarters of 2006 or for 2007. These adjustments were $14,000 (favorable) in the first quarter of 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 (800) 565-5442 or (913) 312-1298 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 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 4138334.
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 anti-viral 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 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 potential for an HIV drug that requires a molecular diagnostic for patient selection, FDA approval of maraviroc, plans for further development of the eTag technology and anticipated clinical validation and laboratory validation in a CLIA setting, expected protection provided by recently allowed patents, our ability to advance its opportunities in HIV and oncology, activities expected to occur in connection with the Pfizer collaboration, and the statements under “Outlook.” 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 maraviroc will not be approved by the FDA; the risk that regulatory authorities may not require or recommend a molecular diagnostic for patient selection for maraviroc or other HIV drugs, risks related to the implementation of the collaboration with Pfizer; risks related to our ability to recognize revenue from activities under 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 Trofile 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 obtain additional cohorts of patient samples for additional studies, 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 payers 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 the draft guidance on Multivariate Index Assays recently issued by FDA applies to our current or planned products; 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; restrictions on the conduct of our business imposed by the Pfizer and Merrill Lynch debt agreements; the impact of additional dilution if our convertible debt is converted to equity; and whether we will be able to raise sufficient capital in the future, if required. For a discussion of other factors that may cause 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, PhenoSenseGT, Trofile and eTag are trademarks of Monogram Biosciences, Inc. MONOGRAM BIOSCIENCES, INC. SELECTED STATEMENT OF OPERATIONS DATA (In thousands, except per share amounts) (Unaudited) Three Months Ended March 31, 2007 2006 Revenue: Product revenue $9,099 $12,246 Contract revenue 318 1,003 Total revenue 9,417 13,249 Operating costs and expenses: Cost of product revenue 5,705 5,681 Research and development 5,331 4,575 Sales and marketing 3,943 3,378 General and administrative 4,228 3,581 Total operating costs and expenses 19,207 17,215 Operating loss (9,790) (3,966) Interest and other income, net 45 599 Convertible debt valuation adjustment (16) - CVR valuation adjustment - 14 Net loss (9,761) (3,353) Net loss per common share, basic $(0.07) $(0.03) Weighted-average shares used in computing basic net loss per common share 131,582 129,614 Reconciliation of Non-GAAP Proforma Results to GAAP Net loss $(9,761) $(3,353) Adjustments for certain non-cash items: CVR valuation adjustment - (14) Convertible debt valuation adjustment 16 - Non-GAAP Proforma net loss (9,745) (3,367) Non-GAAP Proforma net loss per common share, basic $(0.07) $(0.03)
Management believes that this non-GAAP proforma financial data supplements the Company’s 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 in 2007 of revaluation of the Company’s convertible debt and the effects in 2006 of revaluation of the contingent value rights issued in connection with the Company’s merger with ACLARA that management believes are not indicative of the Company’s ongoing operations. 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, management has provided a reconciliation of the non-GAAP 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, 2007 2006 ASSETS (Note 1) Current assets: Cash and cash equivalents $28,336 $8,263 Short-term investments 13,942 22,867 Accounts receivable, net 7,006 6,849 Prepaid expenses 1,092 1,234 Inventory 948 961 Other current assets 415 378 Total current assets 51,739 40,552 Property and equipment, net 7,302 7,463 Goodwill 9,927 9,927 Deferred costs 2,498 1,783 Other assets 2,781 1,120 Total assets $74,247 $60,845 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $1,536 $1,271 Accrued compensation 2,503 2,258 Accrued liabilities 4,151 4,720 Current portion of restructuring costs 807 1,128 Deferred revenue 1,029 404 Current portion of loans payable and capital lease obligations 4,112 6,355 Contingent value rights 2,834 2,813 Total current liabilities 16,972 18,949 Long-term 3% convertible promissory note 23,457 25,000 Long-term 0% convertible promissory note 24,102 - Long-term portion of restructuring costs 723 868 Long-term deferred revenue 2,413 1,783 Other long-term liabilities 466 337 Total liabilities 68,133 46,937 Stockholders’ equity: Common stock 132 131 Additional paid-in capital 279,790 277,892 Accumulated other comprehensive loss (56) (124) Accumulated deficit (273,752) (263,991) Total stockholders’ equity 6,114 13,908 Total liabilities and stockholders’ equity $74,247 $60,845 (1) The balance sheet data at December 31, 2006 is derived from audited financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2006 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 status of the opportunity for Monogram’s Trofile Assay with Pfizer’s maraviroc? On April 24, U.S. Food and Drug Administration’s (FDA) Antiviral Drugs Advisory Committee voted unanimously to recommend that collaborator Pfizer, Inc.'s investigational HIV medication, maraviroc, be approved for use along with other antiretroviral agents for treatment-experienced adult patients infected with CCR5-tropic HIV-1. Although not bound by the Advisory Committee’s recommendations, the FDA usually follows them. If approved, maraviroc would be the first member of a new class of oral HIV medicines in more than a decade. Monogram’s Trofile(TM) Assay has been used to select patients for the clinical trials of maraviroc. The CCR5 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. In later stage patients, the CCR5 co-receptor is in use only in approximately half of patients. 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. Information provided by Pfizer to the advisory panel indicates that “the results in treatment-experienced patients with CCR5-tropic versus non CCR5-tropic HIV-1 provide clinical data validating Monogram’s Trofile Assay as an effective and appropriate means to identify patients with CCR5-tropic HIV-1 and who are therefore likely to respond to maraviroc.” Following the FDA panel recommendation, we anticipate that maraviroc may be approved by the FDA by summer, although this is not assured. While the ultimate drug labeling will not be known till maraviroc is approved, there was extensive discussion in the FDA panel meeting regarding the Trofile Assay and we believe there may be a role for our test in clinical use of maraviroc after approval. We have begun working with public and private payers to achieve coverage and reimbursement by these payers. Operationally, our clinical lab is prepared for the potential commercial introduction of Trofile. Over 23,000 Trofile Assays have been performed since 2004 in Monogram’s CLIA certified laboratory. After approval, all Trofile Assays will be run in this same clinical laboratory. Currently our turnaround time in performing the Trofile Assay, like our phenotypic resistance tests, is approximately two weeks. Trofile is the only diagnostic proven in clinical studies to identify whether patients are CCR5-tropic and has been used in all clinical trials of CCR5 antagonists to date. In addition, Monogram performs tens of thousands of phenotypic and genotypic resistance tests annually, including the PhenoSenseGT(TM) assay that was used to optimize background therapy in the clinical trials of maraviroc. We are ready to make our Trofile Assay available commercially as soon as maraviroc is approved. We intend to bring Trofile to the HIV physician community through our existing sales, marketing and distribution channels throughout the U.S. These channels have been used successfully for our phenotypic and genotypic resistance tests and we believe that this existing sales and marketing organization, comprising 66 sales, marketing and support personnel, is well placed to communicate the value of Trofile to physicians. Additional studies are underway to determine maraviroc’s effectiveness in treatment-naive patients. The panel’s recommendation is the latest in a series of benchmarks in recent months for maraviroc, and Trofile including: -- completion of the phase III trial and submissions by Pfizer for regulatory approval of maraviroc in the U.S., Canada and the European Union (December 2006) -- acceptance of the marketing approval applications for accelerated review by the FDA and by Canadian and European Union regulatory agencies (February 2007) -- presentation by Pfizer of the phase III clinical trial results indicating good safety and efficacy profile for maraviroc (February 2007) -- initiation by Pfizer of a worldwide expanded access program for maraviroc (February 2007) -- unanimous recommendation by an FDA advisory panel for maraviroc to be approved (April 2007) 2. What about the CCR5 class as a whole? Other CCR5 antagonists are in development. The most advanced of these is Schering Plough’s vicriviroc, which is in ongoing clinical development. Our testing services have been used in all clinical programs of CCR5 antagonists conducted to date, for patient selection and monitoring utilizing our Trofile Assay, and for optimization of patients’ background treatment regimens utilizing our PhenoSenseGT test. 3. What is the nature of the collaboration agreement with Pfizer? The collaboration agreement announced in May 2006 provides a framework in which Pfizer and Monogram are collaborating to make our Trofile Assay available globally. This collaboration puts in place arrangements that are designed to make sure that the test can be available in countries outside of the U.S. where Pfizer, after regulatory approval, wishes to commercialize maraviroc. The agreement covers commercialization of Trofile outside the U.S., where Pfizer will take the lead in commercializing the assay. In the U.S., Monogram will be responsible for all aspects of commercializing Trofile. 4. What are the economic aspects of the agreements with Pfizer? There are two separate aspects to the arrangements with Pfizer. The first was a $25 million financing that is described in the Financial section of this Q&A. The second is a collaboration that is designed to make Trofile available globally. Outside of the U.S. Pfizer will lead the commercial effort and so will be responsible for, and incur the costs of marketing, sales, reimbursement and regulatory matters. We will be responsible for logistics and medical education in those countries where Pfizer elects to market maraviroc. However, Pfizer will reimburse us for all of our costs incurred in these activities. These costs are potentially substantial, but, due to Pfizer’s funding obligation, is not expected to place a burden on our cash flows. Through the first quarter of 2007, such costs, reimbursable by Pfizer, amounted to $2.5m. Pfizer will also buy tests from Monogram. For details of how revenue and expenses will be recognized for this collaboration, refer to the Financial section of this Q&A. 5. How does the collaboration with Pfizer affect the U.S. market? While we may work collaboratively with Pfizer’s commercial organization after approval of maraviroc, we will have full control over our U.S. marketing activities. We will independently set our commercial price for the Trofile Assay and obtain reimbursement for the assay. We have already had initial discussions with some of the larger public and private payers to introduce Trofile and its potential value in clinical use of CCR5 antagonists. Our goal is to achieve appropriate coverage and reimbursement as soon as possible after drug approval. Refer also to question 1 above. 6. What is the significance of the integrase class of HIV drugs to Monogram’s business? Our tests have been used in the clinical development programs of the new integrase drugs for optimization of background therapy, prior to addition of the new investigational drug. We also have an assay available for research use in assessing resistance to integrase inhibitors. This assay will be available as a CLIA approved test when clinically relevant after the potential approval of the drugs. Monogram’s current resistance tests assess resistance of patients’ virus to the existing classes of drugs, including the one currently marketed entry inhibitor, Fuzeon(R) from Roche. The advent of CCR5 antagonists and integrase inhibitors 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 resistance tests for these classes. As the range of therapeutic options becomes more varied and complex, we believe that the need for sophisticated testing will increase. 7. What is the proprietary nature of your tests for tropism and HIV entry? Our tropism and entry tests are covered by our fundamental patents for phenotypic analysis. In addition, in May 2006 we received four notices of allowance from the U.S. Patent Office related to the use of Monogram’s PhenoSense(TM) technology for assessing the likely efficacy of entry inhibitors, a new class of drug that prevents HIV from entering cells. Two of these patents have subsequently issued. Monogram’s tests measure co-receptor tropism and the susceptibility or resistance of HIV to entry inhibitors, critical elements in the development and use of these new drugs. The phenotypic approach covered by these al
