SOUTH SAN FRANCISCO, Calif., Oct. 26 /PRNewswire-FirstCall/ -- Monogram Biosciences, Inc. today reported financial results for the quarter ended September 30, 2006.
Third Quarter Results
The Company had revenue of $11.1 million for the third quarter of 2006, compared to revenue of $13.1 million for the third quarter of 2005. Revenue from the Company’s HIV testing products was $10.4 million in the third quarter of 2006 compared to $12.1 million for the same period in 2005.
For the third quarter of 2006, a net loss of $6.6 million, or $0.05 per common share, was recorded, compared to a net loss of $9.6 million, or $0.08 per common share, for the same period in 2005. Included in these results were substantial non-cash items, which are described below under “Proforma Results.” On a proforma basis, adjusted for these non-cash items, the net loss was $5.1 million, or $0.04 per share, in the third quarter of 2006 compared to a net loss of $2.8 million, or $0.02 per share, in the same period of 2005.
“As expected, revenue and operating results in the third quarter reflect the completion of Pfizer’s phase III trial of maraviroc,” said William Young, Monogram’s chief executive officer. “With enrollment in the trial now complete, testing levels have been reduced. This was a natural and expected transition and we are excited about the progress we are making with Pfizer in preparing for possible early access programs and commercial sales after FDA approval.”
Nine Months’ Results
The Company had revenue of $37.7 million for the first nine months of 2006, up from $35.5 million for the same period in 2005. Revenue from the Company’s HIV testing products grew 11 percent to $35.4 million in the first nine months of 2006 compared to $32.0 million for the same period in 2005.
For the nine months ended September 30, 2006, a net loss of $31.7 million, or $0.24 per common share, was recorded, compared to a net loss of $16.3 million, or $0.13 per common share, for the same period in 2005. On a proforma basis, adjusted for non-cash items, the net loss was $9.8 million, or $0.08 per share, in the nine months ended September 30, 2006 compared to a net loss of $9.5 million, or $0.08 per share, in the same period of 2005.
Cash Resources
The Company had $36.2 million in cash resources (comprising cash, cash equivalents, short-term investments and restricted cash) at September 30, 2006.
Recent Corporate Highlights
“We’ve made steady progress in both our HIV and oncology programs this quarter,” said Young. “As Pfizer’s first-in-class CCR5 antagonist, maraviroc, approaches the end of its phase III clinical evaluation, we are working with Pfizer to plan for worldwide availability of our Trofile assay, which measures HIV-1 co-receptor tropism, especially in the key HIV markets identified by Pfizer outside of the U.S. where the assay may be required to support sales of maraviroc.”
“In recent months, we have set out to implement enhancements made to our eTag assay and demonstrate its ability to predict response to Herceptin in the setting of metastatic breast cancer. We are very encouraged by correlations of eTag measurements and Herceptin treatment outcome in two unique cohorts of patient samples and are now seeking to confirm our observations in additional independent datasets,” continued Young.
Corporate: * Closed a $10 million revolving credit line with Merrill Lynch Business Financial Services Inc. * Ended the third quarter of 2006 with total cash and cash investments of $36.2 million. HIV: * Four studies presented at the XVI International AIDS Conference affirming the significance of Monogram’s Trofile(TM) HIV co-receptor tropism assay. Trofile’s negative predictive value was demonstrated in a phase III study of Pfizer’s maraviroc and the assays’ positive predictive value was demonstrated in a phase II study of Schering Plough’s vicriviroc. * Continued planning under our multi-year collaboration agreement with Pfizer to provide worldwide availability of Monogram’s Trofile co-receptor tropism assay for patient use. * Provided testing services in the Phase III clinical trial for maraviroc, Pfizer’s investigational CCR5-antagonist drug. * Provided testing services in support of a first-in-class integrase inhibitor compound in a Phase III trial by Merck & Co. * 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. Oncology: * Continued optimization and implementation of the eTag assay for routine operation, incorporating previously identified assay enhancements. * Continued the analysis of activated signaling pathways in clinical cohorts in breast cancer to establish and confirm observed relationships between EGFR/Her family receptor interactions and clinical response and survival. Consistent patterns have been identified in two cohorts of breast cancer patients and we now intend to evaluate these correlations in additional independent cohorts of both early and late stage breast cancer patient samples. Outlook 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 numerous entry inhibitors and integrase inhibitors. -- Continue planning, through our collaboration with Pfizer, for use of our Trofile co-receptor tropism assay with Pfizer’s maraviroc in early access programs and worldwide commercial use following regulatory approval. * 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 directed at the application of the eTag technology to drug discovery, development and clinical evaluation.
Following the financial statements below, Monogram has provided supplemental information to help investors and media gain further insights into its business.
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 stock-based compensation. A reconciliation of these non-GAAP proforma results to GAAP results is included with the Statement of Operations data attached to this release.
There were several non-cash items that affected results for the periods ended September 30, 2006 and 2005 and were recorded as follows:
-- Adjustments reflected in operating expenses for the following items of stock-based compensation: the net impact in 2005 of variable accounting on all former ACLARA stock options as a result of the contingent value rights, or 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 2006 for stock-based compensation in accordance with SFAS 123R which was adopted by the Company effective January 1, 2006. These adjustments were $1.5 million (unfavorable) and $0.5 million (favorable) for the third quarter of 2006 and 2005, respectively. -- “Mark-to-market” adjustments to the liability established for the 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 for each period in 2005 and in the first two quarters of 2006. As the outstanding CVR’s were settled in the second quarter of 2006, adjustments are not relevant for the quarter ended September 30, 2006 or for future quarters. Capital Structure and Contingent Value Rights
At September 30, 2006, a total of 130.8 million shares of common stock were outstanding. Stock options and warrants are outstanding on 19.2 million shares and 0.8 million shares of common stock, respectively. The principal amount of Pfizer’s $25 million convertible note is convertible into approximately 9.2 million shares of common stock.
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) 817-4887, or (913) 981-4913 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 3470325.
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 potential for an HIV drug that requires a molecular diagnostic for patient selection, plans for further development of the eTag technology and anticipated validation in a CLIA setting, expected protection provided by recently allowed patents, the ability of the Company 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 regulatory authorities may not require a molecular diagnostic for patient selection for an HIV drug, 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 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 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; 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, Trofile and eTag are trademarks of Monogram Biosciences, Inc. ~financials to follow~ Three Months Ended Nine Months Ended September 30, September 30, 2006 2005 2006 2005 Revenue: Product revenue $10,415 $12,136 $35,418 $31,994 Contract revenue 687 1,002 2,310 3,552 Total revenue 11,102 13,138 37,728 35,546 Operating costs and expenses: Cost of product revenue 5,962 5,406 17,307 14,720 Research and development 4,638 4,776 14,421 13,724 Sales and marketing 3,819 3,095 11,264 8,916 General and administrative 3,377 2,808 11,240 7,665 Total operating costs and expenses 17,796 16,085 54,232 45,025 Operating loss (6,694) (2,947) (16,504) (9,479) Interest and other income, net 90 585 1,233 1,689 CVR valuation adjustment - (7,249) (16,450) (8,493) Net Loss (6,604) (9,611) (31,721) (16,283) Net loss per common share $(0.05) $(0.08) $(0.24) $(0.13) Weighted-average shares used in computing net loss per common share 130,694 126,526 130,223 122,265 Reconciliation of Proforma Results to GAAP Net loss $(6,604) $(9,611) $(31,721) $(16,283) Adjustments for non cash items: CVR valuation adjustment - 7,249 16,450 8,493 Stock based compensation 1,505 (449) 5,430 (1,695) Proforma net loss (5,099) (2,811) (9,841) (9,485) Proforma net loss per common share $(0.04) $(0.02) $(0.08) $(0.08)
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 the Company’s merger with ACLARA that management believes are not indicative of the Company’s 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, management has provided a reconciliation of the proforma financial information with the comparable financial information reported in accordance with GAAP.
September 30, December 31, 2006 2005 ASSETS (Note 1) Current assets: Cash and cash equivalents $8,030 $7,616 Short-term investments 28,115 57,398 Restricted cash 50 50 Accounts receivable, net 7,225 9,063 Prepaid expenses 1,527 1,107 Inventory 1,245 1,170 Other current assets 486 790 Total current assets 46,678 77,194 Property and equipment, net 7,956 8,580 Goodwill 9,927 9,927 Deferred costs 953 - Other assets 2,032 1,977 Total assets $67,546 $97,678 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $2,827 $1,751 Accrued compensation 2,112 2,271 Accrued liabilities 5,473 4,116 Current portion of restructuring costs 1,609 1,417 Deferred revenue 637 383 Current portion of loans payable and capital lease obligations 5,824 596 Contingent value rights 2,769 42,676 Total current liabilities 21,251 53,210 Long-term convertible promissory note 25,000 - Long-term portion of restructuring costs 990 1,916 Long-term deferred revenue 953 - Other long-term liabilities 607 781 Total liabilities 48,801 55,907 Stockholders’ equity: Common stock 131 128 Additional paid-in capital 275,839 267,526 Accumulated other comprehensive loss (216) (514) Deferred compensation - (81) Accumulated deficit (257,009) (225,288) Total stockholders’ equity 18,745 41,771 Total liabilities and stockholders’ equity $67,546 $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 nature of the collaboration agreement with Pfizer? The collaboration agreement announced in May 2006 provides a framework in which Pfizer and Monogram will collaborate to make Monogram’s Trofile co-receptor tropism assay available globally. Trofile has been used for patient selection in Pfizer’s phase III trial of maraviroc, its CCR5 antagonist drug for treatment of HIV. Having been used for patient selection in the clinical trials, it is possible that the test will also be required in clinical use after drug approval. 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 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 Trofile 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 oversees the collaboration. Also in May 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 are the economic aspects of the agreements with Pfizer? There are two separate aspects to the arrangements with Pfizer. The first is a $25 million financing and this is described in the Financial section of this Q&A. The second is a collaboration that is designed to make Monogram’s Trofile co-receptor tropism assay available globally. With regard to the U.S. market, we intend to make our tests available through the same direct channels that we have used successfully in the past. 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. Outside of the U.S. Pfizer will lead the commercial effort and so will be responsible for, and incur the costs of, sales, marketing, 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, will not place a burden on our cash flows. 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. 3. 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 antagonist drugs in late 2004 was the primary factor in the 31% increase in our total revenue in 2005, compared to 2004. This strong revenue contribution continued in the first and second quarters of 2006. The most advanced CCR5 compound in clinical development is Pfizer’s maraviroc, for which a phase III trial has been ongoing throughout 2005 and is continuing in 2006. Enrolment is completed and Pfizer has indicated a goal of submitting an NDA for maraviroc to the FDA by the end of 2006. However we cannot be assured that this will in fact occur. With the completion of enrolment in Pfizer’s trial, testing volumes have been reduced in the third quarter of 2006. 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 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 antagonist. Our testing services are used in clinical programs of CCR5 entry inhibitor drugs, for patient selection and monitoring utilizing our Trofile co-receptor tropism assay, and for optimization of patients’ background treatment regimens utilizing our PhenoSense GT test. The CCR5 antagonist class of drugs has been a significant element of our revenue in recent quarters. However, 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. 4. What will be the future impact of new HIV drug classes on your business? The most immediate opportunity is represented by the CCR5 antagonist 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 Trofile 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. This 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. 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. 5. 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 drugs 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. 6. 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. 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 allowed patents is able to directly and accurately assess the susceptibility or resistance of a patient’s HIV to entry inhibitors, and to determine to what extent a patient’s virus is able to gain entry into cells via one or other, or a mixture, of the two major co-receptors, CCR5 or CXCR4, that are used in conjunction with the virus’ primary receptor, CD4. The allowed patents cover an approach that is able to directly assess resistance to entry inhibitors, the identification of co-receptor usage, screening for new entry inhibitor compounds and an antibody response capable of blocking infection.
