Cardiff Oncology Inc (CRDF) 2014 Q3 法說會逐字稿

Good day, and welcome to the TrovaGene third-quarter 2014 financial results conference call. All participants will be in listen-only mode. (Operator Instructions). After today's presentation, there will be an opportunity to ask questions. (Operator Instructions). Please note this event is being recorded.

I would now like to turn the conference over to Stephen Zaniboni, Chief Financial Officer of TrovaGene. Please go ahead.

Thank you for joining us on our third-quarter 2014 conference call. TrovaGene is focused on developing and commercializing our precision cancer monitoring technology which detects DNA mutations in urine and blood with very high sensitivity. Our technology provides oncologists with important clinical information that can guide treatment decisions by determining a patient's mutational status, response to therapy and resistance to treatment over time.

The body of clinical evidence supporting our cancer mutation monitoring platform continues to expand, as additional results from our clinical study collaborations with major cancer centers become available. These efforts will, in turn, support our commercialization program, which has begun this quarter and is expected to accelerate in 2015.

The benefits of our precision cancer monitoring technology are becoming apparent, with data presented at several major cancer meetings this year and two manuscripts published in peer-reviewed journals thus far. Our intellectual property estate protecting our technology is strong and growing, and includes methods of extracting, purifying, repairing, and detecting cell-free DNA in both urine and blood.

Before moving on, I must remind you of the risks inherent in our business, and ask you to consider the following information regarding forward-looking statements. Statements in this call about the Company's expectations, applications of its technology, markets, launch of tests, and other statements that are not historical facts, are forward-looking statements within the meaning of Section 27A of the Securities and Exchange Act of 1933 and Section 21E of the Securities Exchange Act of 1934, and are based on management's current beliefs, assumptions, estimates, and projections.

Actual results may differ materially from those projected in the forward-looking statements for various reasons, including risks associated with product and diagnostic test development, government regulations, market acceptance, limited commercial experience, dependency on key personnel, obtaining financing, and other factors discussed in the Company's periodic reports filed with the SEC.

With that said, the format of this call will be as follows. First, our Chief Executive Officer, Toni Schuh, will review the Company's recent achievements, and discuss TrovaGene's path to commercialization and potential to change the standard of care for cancer treatment. Dr. Mark Erlander, our Chief Scientific Officer, will provide an update on our assay pipeline and our clinical study collaborations. And finally, I will summarize our financial results, and review our goals and objectives for this year. A question-and-answer session will follow the call.

I'll now turn the call over to Dr. Toni Schuh, TrovaGene's Chief Executive Officer.

Thank you, Steve. This year, we've moved steadily forward to our goal of commercializing our precision cancer monitoring platform. We now have two manuscripts published in peer-reviewed medical journals, and have been referenced in treatment guidelines for the diagnosis and monitoring of patients with histiocytic disease. These conditions are often associated with the BRAF V600E mutation, and determining mutational status for these patients can be critical for the selection of potentially life-changing treatment options.

In addition to data presentations at ACR, ASCO and the International Histiocytic Society meeting earlier this year, we look forward to study results that will be presented at the ACR Molecular Targets Conference in November, and the ASH meeting in December, demonstrating the utility of our technology for tracking oncogene mutations in cancer patients. These data and our published manuscripts will be used to educate clinicians and help drive initial commercial uptake of our cancer monitoring platform this year and into 2015.

To prepare for the full commercialization of our platform, we have been conducting the following market development activities -- targeting key opinion leading physicians and early adopters; developing and executing on our investigator-initiated study program; encouraging adoption through collaborations with large integrated healthcare delivery networks; and conducting brand and market awareness, and physician education programs. With all of these precommercial efforts now in full swing, we expect to roll out our PCM platform in 2015, which includes hiring our initial oncology sales force.

As one might expect, we are first targeting clinicians that treat patients with histiocytic diseases, given the strength of the clinical data that we have generated in these disease settings. Importantly, several doctors with experience using our BRAF V600E assay have expressed interest in using our test in other BRAF-associated malignancies. We believe this response by physicians demonstrates a strong need in the market for determining and monitoring oncogene mutations using a noninvasive sample, and may indicate that use of our technology could expand rapidly once our platform is established.

As a result, expanding the mutation coverage of our physician cancer monitoring platform, and developing additional clinical data supporting its utility, remain among our highest priorities. In 2015, we expect to report clinical study results in key cancer types such as melanoma, colorectal cancer, pancreatic cancer, and lung cancer. And we expect to expand our platform to have the capability to detect and monitor many of the clinically-validated oncogene mutations and alterations.

In addition to our core cancer monitoring technology, in the third quarter, we announced two data presentations for our high-risk human papilloma virus assay for the noninvasive screening of cervical cancer from urine. Mark Erlander, our Chief Scientific Officer, will review these data and the importance. But I can say that the results are quite positive, and that we are focused on seeking regional partners or a large global partner to complete development of this assay, and commercialize the technology in areas where a noninvasive cancer screening method -- cervical cancer screening method is needed, such as in Asia and Latin America. Additional clinical data from a larger blinded study are expected to be reported at the EUROGIN Conference in February 2015.

We are proud of the accomplishments we have achieved so far, and believe that TrovaGene's molecular diagnostic platform is positioned to lead the industry in cancer monitoring by tracking oncogene mutations in circulating tumor DNA in a liquid biopsy. We remain focused on the execution of our business plan and are dedicated to helping oncologists improve cancer care.

With that, I'll turn the call over to Dr. Erlander.

Thanks, Toni. We continue to advance our development programs at TrovaGene in both the R&D lab and in our pivotal studies. With regard to new essay developments, we have made significant progress with our proprietary sample preparations and enrichment technologies, improving the limit of detection of our cancer monitoring platform, and achieving industry-leading levels of analytical sensitivity.

We've improved our assay design as well, which we believe will result in superb clinical performance. We expect to expand the mutation coverage of our platform and transfer new essays into the CLIA lab later this year and throughout next year.

By the end of 2015, we expect that our precision cancer monitoring platform will cover the most relevant actionable genomic alterations in clinically-validated oncogenes, such as BRAF, KRAS, EGFR, L-PIK3CA, HER2 and NRAS. These validated genomic alterations consist of multiple mutations, insertions, deletions that would track quantitatively, tempered by critical information to oncologists and help direct therapy.

On the clinical development front, we are now collaborating with eight top cancer centers and integrated healthcare networks. And those programs are expected to yield steady results through 2015, in important areas such as metastatic colorectal cancer, pancreatic cancer, melanoma and lung cancer. Additionally, we expect to expand our list of internationally-recognized collaborators in the future.

On October 16, the clinical study results for our assay to determine and monitor the BRAF V600E mutation was published in Cancer Discovery. This manuscript, which is authored by leading oncologists at Memorial Sloan-Kettering and MD Anderson, demonstrate that our assay performed significantly better than biopsy for detecting the presence of BRAF V600E mutation in histiocytic patients.

Our technology has enabled physicians to quantitatively track mutation levels over time in patients' determined response to therapy. The clinical utility of this study is a real-world demonstration of the value of our precision cancer monitoring platform. And importantly, the study outcome resolved an unmet medical need for patients suffering from histiocytic diseases.

In summarizing these results, we have demonstrated that tracking oncogene mutation load in noninvasive urine samples, longitudinally -- or, that is, over time -- is significantly correlated to radiographic response. Regardless of the therapeutic approach, oncogene mutation load remains relevant to assessing treatment response. And based on the study results here, responsive therapy can be determined in as little as one week by quantitatively monitoring oncogene mutation levels. This means that physicians using our technology can obtain a very early indication of responsive therapy and resistance treatment.

Now, it's known that several cancer types harbor the BRAF V600E mutation, and our assay, as well as several other essays in development, may become applicable in the treatment of multiple malignancies. The clinical study manuscript in cancer discovery, as well as the study published in Oncotarget earlier this year, should enable initial adoption of our technology for the treatment of patients with histiocytic diseases, as well as other cancers in which the BRAF V600E mutation is suspected.

In addition to these manuscripts, we are tracking to submit eight additional manuscripts to medical journals over the next 12 months, reporting results from our clinical programs. We believe that these publications will demonstrate compelling clinical utility for our precision cancer monitoring platform, and should help drive awareness and uptake of our oncogene mutation market solutions as part of our marketing and sales program.

We continue to implement a clinical study strategy based on our collaborations with key opinion leaders, integrated healthcare networks, and leading pharmaceutical and biotechnology companies. With these collaborations, we seek to further demonstrate concordance of mutational status between our urine-based cancer diagnostics and tissue biopsy, as well as responsiveness and resistance to therapy by monitoring cancer patients over time.

Turning to our assay for cervical cancer screening. In late August, results from two independent clinical studies were presented at the Annual International Papilloma Virus Conference. These studies demonstrated that our urine-based test for the detection of high-risk HPV had greater than 90% sensitivity for identifying women with high-grade cervical endothelial neoplasia. But before then, our assay was comparable to conventional HPV screening test that require a cervical exam and a tissue specimen for diagnosis.

In certain countries where HPV screening is less established, HPV-associated cervical cancer occurs at a much higher rate than in the United States. In fact, India, China, and certain countries in Latin America, have among the highest incidences of cervical cancer in the world. And our non-invasive urine-based test has potential to change the paradigm for cervical cancer screening in those territories, particularly because our technology can be utilized without a cervical exam in a local medical clinic.

We believe that high sensitivities seen in these initial clinical data sets will enable us to attract established global or regional partners to complete the development of our assays, and successfully commercialize the technology in international markets.

At TrovaGene, we are developing our diagnostic platform to improve the standard of care for cancer patients by enabling physicians to track the underlying genomic drivers of disease. The current standard of care for monitoring patients relies on cancer imaging, which can be a lagging indicator. And also, importantly, it does not provide specific information regarding tumor mutational status. The high interest from our collaborators and their colleagues remain a strong indicator that our cancer monitoring platform provides novel clinical utility and addresses an important need within the oncology community.

Thank you for your attention. I will now turn the call over to Steve Zaniboni to present the financial results for the recent period.

Thanks, Mark. TrovaGene's fiscal year ends December 31, and financial results for the recently ended quarter and nine-month period are as follows. For the third quarter of 2014, TrovaGene reported a net loss of $5.4 million or $0.28 per share as compared to a net loss of $4.4 million or $0.25 per share for the same period last year.

Operating expenses were $4 million for the third quarter as compared to $3.1 million for the same period in 2013. Operating costs included non-cash expenses related to stock-based compensation of approximately $406,000 and $969,000 in their respective periods.

Also impacting the net loss was a non-cash change in the fair value of derivative instruments. For the third quarter of 2014, this change resulted in a loss of $1 million as compared to a loss of $1.3 million for the same period last year. The net cash used in the third quarter was $3.5 million.

TrovaGene's financial results for the nine months ended September 20 are as follows. For the first nine months of this year, TrovaGene reported a net loss of $9.7 million or $0.51 per share as compared to a net loss of $10.8 million or $0.66 per share in the same period in 2013.

Operating expenses were $10.7 million for the first nine months of this year as compared to $8.1 million for the same period in 2013. Operating costs included non-cash expenses related to stock-based compensation of approximately $1.4 million and $1.9 million in their respective periods.

Also impacting the net loss was a non-cash change for the fair value of derivative instruments. For the first nine months of 2014, this change resulted in a gain of $1.2 million as compared to a loss of $2.9 million for the same period last year. The net cash used in the first nine months of 2014 was $9.1 million.

Shares of common stock outstanding used to calculate per-share results increased to 18.9 million shares from 16.3 million shares in the prior-year period. On September 30, 2014, TrovaGene had cash and cash equivalents of approximately $31.2 million compared to $25.8 million on December 31, 2013. Our current cash balance includes the $15 million debt financing that we completed at the end of the second quarter this year. We estimate that the current cash position will be sufficient to fund our operations well into 2016.

Turning to our goals for the remainder of 2014, we plan to conduct additional clinical studies at major oncology centers and through collaborations with integrated healthcare networks; present and publish clinical results for studies using TrovaGene's precision cancer monitoring platform as they become available; complete CLIA development, and release additional urine-based solutions for the detection and monitoring of multiple clinically actionable oncogene mutations in parallel; enter into additional R&D collaborations with pharmaceutical companies; and expand and enter into new partnerships with strategic diagnostic and life science companies.

In conclusion, TrovaGene is well-positioned to leverage its investment and its intellectual property, scientific research and collaborations, to build a better clinical pathway for cancer monitoring. We believe that upcoming data presentations at medical conferences and publications in peer-reviewed journals should begin to drive early adoption of our technology.

This concludes our prepared remarks. Operator, we are now ready for the question-and-answer session.

(Operator Instructions). Bryan Brokmeier, Maxim Group.

Thanks for taking the question. You've outlined your research programs, the eight collaborations after the introductions, and your publication expectations. Could you provide a little more details around your commercialization plans? What sort of your timeline we should expect for when you start spending more money on sales and marketing? And when we should start to see a little bit of product revenue trickling in?

So, Bryan, thanks for asking the question. This is Toni. So we expect that we'll ramp up our sales force to about half a dozen people, say, towards the end of the first quarter of 2015, and then release clinical data also around the KRAS assay in April. And would expect that from then on, we start to see increased traction of our assays and technologies in the market, which are -- I mean, frankly, at an early adopter level, starting to commence right now, as we speak. But we believe that in a material sense, we are going to see product traction -- yes, towards the second quarter of 2015.

Okay. And talk a little bit -- maybe Mark or Toni -- talk about the market opportunity that you see in histiocytic diseases?

Well, first of all, it's -- the histiocytic diseases, the market is -- as far as the number of patients, it is an underdiagnosed condition. But I think that roughly incidence of around 5,000 per year, and in that ballpark, when you add in the -- not only ECD but LCH. So it's a reasonable market, even though the disease is somewhat rare.

So I don't know if I answered your question or not, if you're wanting to hear more details.

Yes, it does. Is that 5,000, is that just in the United States? Or are you looking at it globally? And longer-term, how do you look at the market?

Bryan, yes, keep in mind that that's looking at United States. And I think that these -- it's not only the diagnosis or the status of the BRAF V600E, but it's also the monitoring these patients through their lifetime as far as the different therapies they receive.

So, Bryan, from the number of the patients -- 5,000 patient incidence -- it is still an orphan disease. But given that you want to look at each patient repeatedly, particularly if you change treatment, and also given that these patients show quite dramatic clinical benefit from BRAF inhibitors if they have been found to be BRAF-positive, means that this patient population is actually quite rapidly growing over time, simply because the patients will live longer.

Okay.

So, it's in itself a quite meaningful first-marketing opportunity for us, but it's still a model case. What's also -- I say, what's in addition advantageous for us is that the patients that are diagnosed with histiocytic disease, at least in the US, are highly concentrated within less than a dozen oncology centers that are specialized for these conditions. So we believe that we can reach these patients quite effectively, and at a very high level of clinical detailing and clinical understanding. So, at a very intense level for this -- yes.

And so, in terms of commercial, back to commercialization, you expect -- you'll start to ramp up the sales force to half a dozen in the first quarter. It will probably take a little bit longer to get any sort of material level of revenues; that we should probably start to see maybe a couple-million-dollars in revenues? Or might be a reasonable expectation in the back half of next year to see something -- really start to see some progress at that point?

I think if you look at how our -- if you look at the matrix to measure the commercial success, Bryan, I would first look at the number of top cancer centers that we have presence in, in the US.

Secondly, look at how the volumes are increasing and also developing how well we communicate this information. The volumes are developing in these centers because, frankly, many times, you might want to start in situations where you're giving some clinical experiences to these oncologists early on.

And then, thirdly, working through the process with the payors to build your health economic model. Then, in the fourth component of that leg of that chair, if you will, the revenues building up. So, I think we have very detailed plans and techniques to handle each of these four phases as we start to build the revenue. But I think if you're looking for a hockey stick, it's late 2014 -- 2015, excuse me. 2015.

Right, right, right. Okay, yes, that's what I was expecting. And just one last question. You said that you plan on introducing more assays. What are the next mutations that you're planning to target? I think you are planning over the next sort of couple of quarters, what's sort of the rollout plan for those?

Yes. I mean, beyond the KRAS and the BRAF, we're focused -- we're also narrowing the communications and deletions of these actual biomarkers with that of different cancer types. And so, really, our next really big will be the assay, the EGFR assay, associated with lung cancer. So that's really -- that's coming out very soon.

And then from there, we will move to looking at the -- filling out that for lung cancer, the ALK, the WAS, of the other rearrangements that are associated with lung cancer. So we're trying -- what we're doing is we are really -- even though those are applicable to a lot of other cancer types, we are building it into -- go for indications in lung cancer.

Okay. Okay, great. Thanks a lot.

(Operator Instructions). And I'm showing no additional questions at this time. This will conclude our question-and-answer session. We thank you for attending the TrovaGene third-quarter 2014 conference call. The conference has now concluded. You may disconnect your lines.