SOUTH SAN FRANCISCO, Calif., Feb. 8 /PRNewswire-FirstCall/ -- Monogram Biosciences, Inc. today reported financial results for the quarter and year ended December 31, 2006.
Fourth Quarter Results
The Company had revenue of $10.2 million for the fourth quarter of 2006, compared to revenue of $12.7 million for the fourth quarter of 2005. Revenue from the Company's HIV testing products was $9.7 million in the fourth quarter of 2006 compared to $11.5 million for the same period in 2005, reflecting the substantial completion in mid-2006 of testing for Pfizer's phase III trial of maraviroc.
"With the NDA for Pfizer's maraviroc, now submitted to the FDA and EMEA, we are moving ahead with preparations for commercial introduction of Trofile(TM) (our co-receptor tropism assay) after approval of maraviroc," said William Young, Monogram's chief executive officer. "The phase III trial boosted our revenues in 2005 and the first half of 2006 and we look forward to Trofile and maraviroc moving into the commercial phase later this year."
For the fourth quarter of 2006, a net loss of $7.0 million, or $0.05 per common share, was recorded, compared to a net loss of $21.3 million, or $0.17 per common share, for the same period in 2005. Included in these results were substantial non-cash items which are described below under "Non-GAAP Proforma Results." On a non-GAAP proforma basis, adjusted for these non-cash items, the net loss was $5.5 million, or $0.04 per share, in the fourth quarter of 2006 compared to a net loss of $3.6 million, or $0.03 per share, in the same period of 2005.
Annual Results
The Company had revenue of $48.0 million for the year ended December 31, 2006, compared to $48.3 million for 2005. Revenue from the Company's HIV testing products increased to $45.2 million in 2006 from $43.5 million for 2005.
For the twelve months ended December 31, 2006, a net loss of $38.7 million, or $0.30 per common share, was recorded, compared to a net loss of $37.6 million, or $0.30 per common share, for 2005. On a non-GAAP proforma basis, adjusted for non-cash items, the net loss was $15.4 million, or $0.12 per share, in the twelve months ended December 31, 2006 compared to a net loss of $13.0 million, or $0.11 per share, in 2005.
Cash Resources
The Company had $31.1 million in cash resources (comprising cash, cash equivalents and short-term investments) at December 31, 2006. Subsequent to this date, in January 2007, the Company closed a financing in which it received net proceeds of approximately $21 million through the sale of a 0% Convertible Senior Unsecured Note. Taken together, these sources of cash provide approximately $52 million in cash resources.
Recent Corporate Highlights
"This has been an extremely positive year for Monogram," said Young. "We have greatly strengthened our cash position, we are poised for an exciting commercial launch of our Trofile Assay after the approval of Pfizer's CCR5 antagonist maraviroc, and our first eTag assays are ready for clinical validation in predicting clinical outcomes in breast cancer patients."
"With the investment by Pfizer earlier in 2006, coupled with the recently completed convertible financing, we can look forward to 2007 with over $50 million in cash resources with which to execute on two very exciting opportunities - Trofile and eTag," continued Young. "With Pfizer's first-in- class CCR5 antagonist, maraviroc, now the subject of an NDA submission to the FDA, we are preparing, with Pfizer, for availability of our Trofile Assay in support of Pfizer's expanded access program early in 2007 and commercial use after approval by the FDA and international regulatory authorities. While the results of the phase III trial are not yet known, we believe having been used for patient selection in the trials, it is likely that our tests may be used for patient selection after regulatory approval of maraviroc."
"Our oncology program is making excellent progress," added Young. "We believe that our first assays are now quite robust and we are proceeding to obtain patient samples in which to confirm initially identified correlations between assay measurements and clinical outcomes. At the same time we are continuing to work on expanding our portfolio of EGFR/Her assays to include a broader range of EGFR/Her markers."
Following is a summary of recent key accomplishments. Corporate: -- Closed, in January 2007, a 0% Convertible Senior Unsecured Note financing, with proceeds of $22.5 million (approximately $21 million, net of estimated fees and expenses). -- Ended 2006 with total cash and cash investments of $31.1 million. Taken together with the estimated net proceeds, received in January 2007, of the financing described above, these sources of cash provide approximately $52 million in cash resources. -- Executed a lease termination agreement related to the former ACLARA facility in Mountain View, reducing prospective future cash expenditures by approximately $2.2 million. HIV: -- Continued planning under our multi-year collaboration agreement with Pfizer to provide worldwide availability of Trofile for patient use. Planning is in process for the first 31 countries determined by Pfizer, of which 5 are in an advanced stage of planning. -- 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 our Phenosense HIV Integrase Assay in support of Gilead's Phase II study of their novel integrase inhibitor, GS-9137. -- 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. -- Submitted and received acceptance of 16 abstracts for presentation at CROI in February 2007 related to our HIV resistance and patient screening assays. Oncology: -- Completed the internal development work on our first EGFR/Her assays, with significant enhancements to assay sensitivity, and initiated preparations for CLIA validation. -- Completed the analysis of activated signaling pathways in two clinical cohorts of breast cancer patients, with consistently identified relationships between EGFR/Her family receptor interactions and clinical outcomes. -- Initiated plans to obtain access to additional patient samples to evaluate these correlations in independent cohorts of both early and late stage breast cancer patients. -- Submitted several abstracts for presentation at ASCO. Outlook The following are the key objectives on which we are focused: HIV: -- Continue to grow annual HIV testing revenues. -- Introduce Trofile (our co-receptor tropism assay) commercially for use with Pfizer's maraviroc following regulatory approval of maraviroc. -- Continue planning, through our collaboration with Pfizer, for use of Trofile in international markets. -- Achieve CLIA validation of our tests for assessing resistance to the integrase class of HIV drugs. Oncology: -- Obtain additional breast cancer patient samples to clinically validate the initially identified correlations between assay measurements and clinical outcomes. -- CLIA validate the first eTag EGFR/Her assay in our certified clinical laboratory. -- Present and publish clinical and operational data on the EGFR/Her assays. -- Complete the development and clinical validation of additional EGFR/Her receptor and receptor dimer assays. -- Establish 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.
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 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 December 31, 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 $6.9 million (unfavorable) and $1.8 million (favorable) for 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 third and fourth quarters of 2006 or for future quarters. These adjustments were $16.4 million (unfavorable) and $26.3 million (unfavorable) for the years ended December 31, 2006 and 2005, respectively. Capital Structure
At December 31, 2006, a total of 131 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. 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.
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) 289-0726, or (913) 981-5545 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 8864983.
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, 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 regulatory authorities may not require or recommend 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 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 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; 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, Trofile and eTag are trademarks of Monogram Biosciences, Inc. ~financials to follow~ MONOGRAM BIOSCIENCES, INC. SELECTED STATEMENT OF OPERATIONS DATA (In thousands, except per share amounts) (Unaudited) Three Months Ended Twelve Months Ended December 31, December 31, 2006 2005 2006 2005 Revenue: Product revenue $9,732 $11,474 $45,150 $43,468 Contract revenue 498 1,232 2,808 4,784 Total revenue 10,230 12,706 47,958 48,252 Operating costs and expenses: Cost of product revenue 5,396 5,281 22,703 20,001 Research and development 4,560 5,272 18,981 18,996 Sales and marketing 3,471 3,672 14,735 12,588 General and administrative 3,802 2,535 15,042 10,200 Total operating costs and expenses 17,229 16,760 71,461 61,785 Operating loss (6,999) (4,054) (23,503) (13,533) Interest and other income, net 17 554 1,250 2,243 CVR valuation adjustment - (17,803) (16,450) (26,296) Net Loss (6,982) (21,303) (38,703) (37,586) Net loss per common share $(0.05) $(0.17) $(0.30) $(0.30) Weighted-average shares used in computing net loss per common share 130,976 127,270 130,447 123,527 Reconciliation of Non-GAAP Proforma Results to GAAP Net loss $(6,982) $(21,303) $(38,703) $(37,586) Adjustments for non cash items: CVR valuation adjustment - 17,803 16,450 26,296 Stock based compensation 1,470 (56) 6,900 (1,752) Non-GAAP Proforma net loss (5,512) (3,556) (15,353) (13,042) Non-GAAP Proforma net loss per common share $(0.04) $(0.03) $(0.12) $(0.11)
"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 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 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) December 31, December 31, 2006 2005 ASSETS (Note 1) Current assets: Cash and cash equivalents $8,263 $7,616 Short-term investments 22,867 57,398 Restricted cash - 50 Accounts receivable, net 6,849 9,063 Prepaid expenses 1,234 1,107 Inventory 961 1,170 Other current assets 378 790 Total current assets 40,552 77,194 Property and equipment, net 7,463 8,580 Goodwill 9,927 9,927 Deferred costs 1,783 - Other assets 1,120 1,977 Total assets $60,845 $97,678 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $1,271 $1,751 Accrued compensation 2,258 2,271 Accrued liabilities 4,720 4,116 Current portion of restructuring costs 1,128 1,417 Deferred revenue 404 383 Current portion of loans payable and capital lease obligations 6,355 596 Contingent value rights 2,813 42,676 Total current liabilities 18,949 53,210 Long-term convertible promissory note 25,000 - Long-term portion of restructuring costs 868 1,916 Long-term deferred revenue 1,783 - Other long-term liabilities 337 781 Total liabilities 46,937 55,907 Stockholders' equity: Common stock 131 128 Additional paid-in capital 277,892 267,526 Accumulated other comprehensive loss (124) (514) Deferred compensation - (81) Accumulated deficit (263,991) (225,288) Total stockholders' equity 13,908 41,771 Total liabilities and stockholders' equity $60,845 $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 status of the CCR5 opportunity for Monogram? 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. 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 CCR5 antagonist that is the most advanced in clinical development is Pfizer's maraviroc, for which our Trofile Co-Receptor Tropism Assay has been used for patient selection in the phase III clinical trial. The phase III clinical trial for maraviroc was completed during 2006 and Pfizer has announced that it has submitted an NDA to the FDA and that it intends to initiate an expanded access program to make maraviroc available under an FDA approved protocol prior to approval for commercial use. Pfizer has also indicated that the clinical results of the phase III trial will be presented in a future scientific forum. The use of our tests in Pfizer's phase III trials caused a substantial increase in our revenues in the second half of 2005 and first half of 2006. While the results of the phase III trial are not yet known, we believe that because our tests were used for patient selection in the trials, it is likely that our tests may be used for patient selection after regulatory approval of maraviroc. This could result in an increase in our revenues after such approval. Other CCR5 antagonists are in development, including Schering Plough's vicriviroc, which is in 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 Co- Receptor Tropism Assay, and for optimization of patients' background treatment regimens utilizing our PhenoSense GT test. 2. 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 Trofile (our 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 or recommended 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. 3. 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. 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 obligation, is not expected to place a burden on our cash flows. For the third and fourth quarters of 2006, such costs, reimbursable by Pfizer, amounted to $1.8 million. 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. 4. What will be the future impact of new HIV drug classes on your business? There are several new classes of HIV drugs in development. 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, as these new drugs are approved, to physicians. The CCR5 class, described above, has a potentially significant impact on Monogram. Unlike the resistance tests that have provided much of our revenues since the initiation of commercial sales, the Trofile Assay has application in patient selection in advance of prescribing the drugs. Our resistance tests are used after therapy failure to inform decisions about suitable therapies. In addition to the CCR5 class, there are other forms of entry inhibitors, of which one, Fuzeon(R) from Roche, is currently marketed, although others are in earlier stages of development. The class of integrase inhibitors has four compounds in clinical development, including one, from Merck, that is in Phase III trials. In earlier stages of development is the assembly class, which targets the exit of HIV from infected cells. For these new classes of drug, we have assays, available and in development, that will assess resistance to these new classes of drug just as our current Phenosense and GeneSeq tests assess resistance to the current classes of HIV drug. As the range of therapeutic options becomes more varied and complex, we believe that the need for sophisticated testing will increase. 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 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. 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. One of these patents has subsequently issued. Monogram's tests measure co-receptor tropism and
