Cardiff Oncology Inc (CRDF) 2014 Q4 法說會逐字稿

Good day and welcome to the Trovagene fourth-quarter and year-end 2014 financial results conference call. (Operator Instructions) Please note this event is being recorded.

I would now like to turn the conference call over to Mr. Stephen Zaniboni, Chief Financial Officer of Trovagene. Mr. Zaniboni, the floor is yours, sir.

Thank you for joining us for our fourth-quarter and year-end 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 liquid biopsy platform 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 monitoring platform continues to expand as additional results from our clinical study collaborations with major cancer centers becomes available. These efforts will, in turn, support our commercialization program which is expected to accelerate in 2015.

The benefits of our Precision Cancer Monitoring technology are becoming apparent, with data to be presented at several major cancer meetings this year as well as additional manuscripts to be published in peer-reviewed journals. Our intellectual property estate protecting our technology is strong and growing and includes methods of extracting, purifying, preparing, and detecting cell-free DNA in both urine and blood.

We recently received notification of a European patent allowance for our ultra-short DNA sequencing technology with claims pertaining to cancer. This additional broad patent coverage in Europe will support our continuing efforts to ensure long-lived protection of our proprietary, molecular diagnostic assays.

Before moving on, I must remind you of the risk 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 Act of 1933 and Section 21e of the Securities and 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 regulation, market acceptance, limited commercial experience, dependency on key personnel, obtaining health insurance reimbursement, maintaining 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 commercialization efforts and the potential for our technology to change the standard of care for cancer treatment. Dr. Mark Erlander, our Chief Scientific Officer, will provide an update on our clinical development programs. And, finally, I'll summarize our financial results and review our goals and objectives for 2015. 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. In 2013, we refined and advanced our technology platform and in 2014 we released data from several important clinical pilot studies, demonstrating the ability of our PCM platform to detect and monitor cancer mutations quantitatively with very high sensitivity. Today, the medical community, drug companies and investors are beginning to recognize the promise of using cell-free DNA as the specimen of choice to track cancer.

In this regard, we are ready to deliver first and best-in-class diagnostic tests to improve the standard of cancer care. We view 2015 as our coming out year as we broaden the mutation coverage of our platform and release clinical study results in major cancer types. Large cancer indications that we are targeting include lung cancer, colorectal cancer, pancreatic cancer, and melanoma.

We anticipate having novel, non-invasive monitoring tests available in our CLIA lab for clinically validated driver mutations in all of these cancer types by year-end. We remain focused on developing the clinical evidence for the utility of our assays, which is necessary to drive physician adoption and reimbursement.

In histiocytic disease, for example, we are already gaining traction as our BRAF mutation assay has proven to outperform biopsy and becomes a valuable noninvasive tool to guide physicians in selecting therapy. Our assay has already been referenced in the clinical treatment guidelines for this malignancy and we believe that the utility of our tests may lead to rapid adoption in other oncology indications as our clinical programs progress.

The primary focus for Trovagene is lung cancer and we now drive four clinical programs with leading cancer institutions that are expected to enroll a total of more than 500 patients in this condition. We believe that our quantitative assays will offer significant utility, given the high probability of resistance mutations to arise during lung cancer treatment, and the ability of our PCM platform to quantitatively monitor changes in mutational status. In cases where lung biopsies are not recommended by the oncologist, our cell-free DNA assays have potential to offer an alternative to this risky and high-cost procedure.

As the clinical evidence evolves, we believe that clinicians and health insurance providers will value the ability of our assays to rapidly determine whether a selected therapy is working or whether a change in therapy is necessary. I've chosen to highlight lung cancer because in April we will present clinical results at both the European lung cancer conference in Geneva and the AACR conference in Philadelphia for this indication. We are looking forward to presenting the first clinical data for our T790M mutation assay to the oncology community.

I should add that the abstract we submitted to the European Lung Cancer meeting was designated as one of the top three abstracts and was also selected for oral presentation at this medical conference.

We believe that this will be an exciting year for Trovagene as the value of our Precision Cancer Monitoring platform becomes widely recognized. This year, our commercial team will begin leveraging the clinical study results that we present at upcoming medical conferences. Armed with these data, our sales team will call on national and regional top-tier cancer centers in order to gain traction with early adopters in the second half of this year.

Turning to our balance sheet, our recent capital raise enabled quality institutional investors to enter our stock and our strengthened cash position ensures that our R&D programs and commercial launch activities will be properly resourced. I want to thank our internal colleagues for their hard work and also I would like to thank all of our shareholders for their support.

With that, I'll turn the call over to Mark Erlander, our Chief Scientific Officer.

Thank you, Toni. Trovagene's objective is to demonstrate the clinical utility for non-invasive, near real-time detection and monitoring of oncogene mutations for any tumor type with our platform. Toward that end, we continue to advance our clinical study program by collaborating with key opinion leaders, healthcare networks, and leading pharmaceutical and biotechnology companies.

Under these collaborations, we seek to further demonstrate concordance of mutational status between our urine-based molecular diagnostics and tissue biopsy. We also seek to determine responsiveness and potential resistance to therapy by monitoring tumor mutations longitudinally, that is over time, for each patient. In essence, our diagnostic tests are being designed to produce clinical information that can become part of a new standard of care for managing cancer patients.

We currently have two urine-based oncogene mutation tests available through our clinical laboratory. One to detect the BRAF V600E mutation, which is commonly associated with melanoma, histiocytic disorders, and other cancers. And the other for the detection and monitoring of KRAS mutations, which is important for determining the disease state to patients diagnosed with colon, lung and pancreatic cancers, among others.

We have 10 additional, active oncogene mutation assay programs in our pipeline, each of which is planned to be transferred into our clinical laboratory and become available to clinicians when assay validation is completed.

As Toni mentioned previously, we have a robust calendar of clinical data presentations at medical meetings as well as potential manuscript publications throughout the year for major cancer types. Our oral presentation at the European lung cancer meeting will be followed by three poster presentations at the AACR meeting in April and we have submitted five abstracts to ASCO for potential presentation in June.

At the ASCO GI cancer symposium earlier this year, we presented clinical study results supporting the utility of our PCM platform in both colorectal and pancreatic cancer patients. Data demonstrated that our proprietary KRAS assay enables physicians to determine mutational status, monitor treatment response, and use genomics to aid in predicting patient prognosis.

Currently, we have numerous ongoing clinical studies with 15 top-tier cancer treatment centers, which should give rise to multiple opportunities for data presentations in the back half of this year as well as throughout 2016.

In terms of manuscript publications, our plan is to have three submitted to major cancer journals by the end of 2015. Given our vast clinical study program, our physician collaborators are recognizing the value of tracking cancer treatment at the molecular level and several have expressed interest in using our assays in multiple cancer types. We remain focused on developing our assay pipeline and expect to expand the mutation coverage of our platform to address the relevant clinical actionable driver mutations in lung cancer, colorectal cancer, pancreatic cancer, and melanoma by year-end.

Before turning the call to Steve for the financial review, I would like to briefly highlight clinical results supporting our urine-based HPV assay for cervical cancer screening. In February, clinical results from the Predictor4 trial were orally presented by an independent investigator for our novel assay at the Urogen Conference in Spain.

Results from this blinded prospective 500-plus patient study concluded that our urine-based assay has over 90% sensitivity for the detection of cervical lesions, performs better than conventional Pap cytology, and represents a viable alternative for screening women who currently do not get annual cervical exams. This is the first time that a urine-based assay for the detection of high-risk HPV has demonstrated very high sensitivity and clinical results that are comparable to traditional invasive, HPV cervical screening methods.

Approximately 80% of women in developing countries do not have an annual cervical exam and our test has potential to save millions of lives in areas like China, India, Russia and in Latin America. There's also an unserved segment of the United States market with millions of women domestically that do not get screened regularly.

Given these strong clinical results and their consistency with prior data sets presented for our assay last August at the IPV conference, we continue to pursue potential partnerships with commercial stage diagnostic companies. We have ongoing discussions with multiple potential partners and we hope to advance this program through a partnership later this year.

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. Financial results for the fourth quarter and 12-month period are as follows. For the fourth quarter of 2014, Trovagene reported a net loss of $4.7 million, or $0.25 per share, as compared to a net loss of $1 million, or $0.05 per share, for the same period last year.

Operating expenses were $4.6 million for the fourth quarter, as compared to $2.9 million for the same period in 2013. Operating costs include non-cash expenses related to stock-based compensation of approximately $685,000 and $321,000 in their respective periods.

Also impacting the net loss was a non-cash change in the fair value of derivative instruments. For the fourth quarter of 2014 this change resulted in a gain of $200,000 as compared to a gain of $1.8 million for the same period last year. The net cash used in the fourth quarter was $3.9 million.

Trovagene's financial results for the 12 months ended December 31, 2014, are as follows. For the year, Trovagene reported a net loss of $14.3 million, or $0.76 per share, as compared to a net loss of $11.8 million, or $0.70 per share, for the same period in 2013.

Operating expenses were $15.2 million for the year as compared to $11 million for the same period in 2013. Operating costs include non-cash expenses related to stock-based compensation of approximately $2.1 million and $2.2 million in their respective periods.

Also impacting the net loss was a non-cash change in the fair value of derivative instruments. In the year, this change resulted in a gain of $1.4 million as compared to a loss of $1.1 million for the same period last year. The net cash used in 2014 was approximately $13 million.

Shares of common stock outstanding used to calculate per-share results increased to 18.9 million shares from 17 million shares in the prior-year period. Given our recent public common stock offering, our shares outstanding are expected to increase by approximately 5 million in 2015.

On December 31, Trovagene had cash and cash equivalents of approximately $27 million compared to $25.8 million on December 31, 2013. In February, the company raised approximately $23 million in gross proceeds through a common stock offering. Our cash balance as of the end of February 2015 was approximately $46 million, and we believe that our current cash position is sufficient to fund operations well into 2016.

Turning to our goals for 2015. We plan the following. Drive adoption of the Company's PCM platform in top cancer centers and integrated healthcare delivery networks; present and publish clinical study results in major cancer types; expand applications of Trovagene's PCM platform by completing CLIA development of additional non-invasive assays to detect and monitor clinically actionable oncogene mutations; enter into additional clinical 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 in its intellectual property, clinical study programs and its 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 year.

This concludes our prepared remarks. Operator, we are now ready for questions and answers.

(Operator Instructions) Bill Quirk, Piper Jaffray.

Multiple questions here for me. I guess, first off, Toni, can you talk a little bit about -- remind us, I should say rather, about the associated timelines with the Illumina partnership. And I guess what I'm kind of going after here is when do they reach a point where they have to either continue and pick up the collaboration from a commercial standpoint or decide they've terminated the project? And also, just whether or not there's potential for another extension there. Thanks.

With Illumina the key objective is -- so we obviously use their platform for mutation detection. And the key objective here is now to also expand the cell-free DNA in urine as a specimen for sequencing of mutations from a cell-free specimen like what companies like Ardent do. And that's a feasibility project that is going on with Illumina as we speak. It's progressing as of today well, but we have not released any further details around this.

The objective around this would, of course, be to have a kit product available that would allow to observe a certain number of genes for mutations that are more of a discovery nature that are not established yet as response or resistance mutations, but just tumor markers for the given patient. And -- yes.

Okay, that's very helpful. Then just shifting over to the commercialization side; should we think about some of these commercial collaborators as kind of seed accounts for future commercial adoption? And if so, any insight into the timing of flipping some of these collaborations into customers? That would be great, thanks.

So I think that would be a good way to do that, to think of these accounts as seed accounts. And for us, 2015, is I would say the market development year where we -- where our commercial effort is more business development type or market development type effort where we target larger institutions that provide oncology care to start to integrate our cancer monitoring solution in their clinical routine.

This will initially happen by early adopters and it will initially happen in clinical indications where our clinical utility has been demonstrated in a very profound manner. And we then expect that as people learn how informative and how enabling clinically these data are that clinicians will then quickly adopt that in a broader scale.

And that's kind of like our roadmap. Start with this very high level, but not frequent condition -- not high level, high-value condition, histiocytic disease where we have enormous clinical benefit. Move from there to lung cancer to colon cancer to pancreatic cancer to melanoma. So expand this utility to the larger cancers over the year.

Okay, perfect. Then just two, I think, pretty short ones from me. The revenue, how much of that was actually clinical-based versus, say, research revenue? And then secondly, just help us think a little bit the salesforce evolution over the year. Thank you.

I'd say, for 2014, we have yet to develop any revenue from the clinical side. The revenues that we see are based on, call it, legacy intellectual property licensing that the Company has had and you see that over the last few years.

But I think, that said, 2015 we will start to see that. However, we'll begin with recognizing our revenue on a cash basis until we can develop some history with private payers and also the insurance companies. So that's the composition of the 2014 revenue.

In terms of the salesforce rollout, I think we've been talking about, Bill, for at least a year now that as we reach this transition, where we're expanding beyond just the validation with the histiocytic disease of which we have commercial business already, and start to get into these larger cancer types, where Mark talked about these upcoming presentations, that the salesforce would need to be built. And we are doing that right now.

So I think you can assume that certainly some this quarter and as we roll into next quarter, there will be a pretty active field force out there. I think we've even actually talked about six folks in the field including the internal sales and marketing business development support. And that all remains on track.

And view this not so much as a -- when Steve says six people, don't do that as six sales representatives in the field. These will be very senior individuals that are, as I mentioned the term before, will be more like market and business development individuals that will be out in the field, but they will be operating at a more institutional level. Not on the basis of identifying, if you want so, individual prescriptions.

Got it. Very helpful, thanks guys.

Bryan Brokmeier, Maxim Group.

Stephen, you talked a little bit about T790. Given that there are a couple of drugs that are set to hit the market this year, it's getting more and more attention. Could you talk a little bit about the benefit that you've seen in urine-based -- on your urine-based assay and the benefits it may have over imaging or blood-based tests that may also be introduced onto the market?

Brian, we have released preliminary data on our T790 assay and I think we can state today that we actually -- just like we do in histiocytic disease, outperform the biopsy by a significant margin in recognizing patients that emerge as T790 positive under EGFR inhibitor treatment. So that's a significant accomplishment in itself.

We have already, from these preliminary data, been able to show that we typically see T790 mutations emerging about three months before an imaging study will reveal that the patient is now de facto progressing. And to be, in terms of positive concordance, the measure that we have to compare ourselves with other platforms. So if the T790 mutation is observed in the biopsy, we see it also in urinary cell-free DNA. Our assay performance is perfect, it's 100%.

And all these observations combined are illustrative of the fact that our superior analytical performance, in combination with a sample that is not input limited for all considerations, really results in superior clinical performance. I personally assume that that may be one of the reasons why our preliminary abstract has been nominated as a best abstract at the lung cancer conference in Europe. But that is for us now a common theme that we observe very, very high positive concordance between biopsy and cell-free DNA and just also excellent quantitative performance and excellent clinical sensitivity.

So, Mark, you may want to (multiple speakers).

Only thing I would add is just that with these new drugs coming later in the year, the T790M inhibitors, I think that there is going to be a real need to be able to assess which patients who are on the EGFR TKIs at this point, like erlotinib, whether or not they will -- when they do progress whether they do have the T790M mutation.

As you probably know, 50% to 60% of patients who are progressing on erlotinib have the mutation. Of course, the others don't, so it's very important to find out who does and who doesn't. And so this is really an opportunity, particularly in lung cancer, where a tissue biopsy is considered to be quite invasive as well as very costly.

So this is really one of the reasons why we focused on this and really went after this, because the urine really offers a totally noninvasive assay or test to be able to assess the mutational status of that patient.

And we, of course, appreciate the fact that our first set of clinical data showing our very strong asset performance will be released publicly before these drugs will become available.

Right, right. That's our focus.

Okay. I think next question is probably for Steve. You guys just raised, as everybody knows, some money. You have a number of publications that you talked about that you're planning as well as presentations.

How should we think about the spend in research and development? Should we start to see that tick up a few hundred thousand or could it be quite a bit higher than that?

I think you can -- if we talk about, call it the use of proceeds from the fundraise, I think given the fact that with the excellent results from our clinical programs that kind of allows the R&D organization to now think beyond the CLIA laboratory and start preparing an IVD* strategy in the company.

So the R&D spend will likely tick up. You can see it's not too material, because I stated today that that current cash flow lasts us well into 2016. So that's one major use of proceeds is to build a small, effective IVD group within the R&D organization. And the other one was what we already talked about; is now rolling out that commercial engine in the company.

So those will be the two drivers, Bryan, of the uptick in the spend, but I think you'll see that relatively gradual.

Okay, thanks a lot.

(Operator Instructions) Sung Ji Nam, Cantor.

I think, Toni, you talked about with the focus on lung cancer and over -- targeting over 500 patients in aggregate. Just trying to get a sense of four -- I think you guys have tested over 3,000 patients, right, cumulatively? How many of those samples have been part of published papers or have been presented?

I'm just trying to get a sense of, as you're starting your conversation with these integrated healthcare delivery networks or maybe potential early adopters, what they are looking for. I mean for them to feel compelled that you have sufficient data. Because I recognize that obviously more is better, but trying to get a sense of what kind of magnitude should we be looking for?

The high level answer to this is clinical trials or clinical studies that are supposed to support changes in treatment have to be statistically powered to demonstrate your findings with significance, and ideally high significance.

Our early clinical trials were actually more pilot studies that would show that you actually do see mutational signals in urine when they are present in the patients, in the patient's biopsy. That actually quantitative changes do correlate with outcomes, but critical aspects that you would need to specify in the label of every assay.

For example, how often do you sample? Do you sample daily? Do you sample weekly, you sample daily for a period of a week and then weekly for a month and then monthly for half a year?

These details -- is it morning urine or does it not matter whether it's morning urine or evening urine? These details have to be assessed in clinical trials that are powered to support the observed clinical reading with high statistical significance.

And when you look, for example, at our histiocytic disease program, the publication in cancer discovery was powered with 30 patients because the readout was discreet. It was yes or no, so you achieve statistical power very quickly.

In lung cancer, we assume that there will be quantitative interpretations necessary. So the number of patients are becoming a little bit larger, but we believe these four study programs that we are running with, in total, 500 patients will deliver -- are statistically powered to deliver significant readings to support adoption. So that's the size of trials you will typically see.

Okay. And then I guess related to that, I think you guys had mentioned that your -- initially for your platform you can -- you go after the hard-to-biopsy sample or cancer patients. And from that standpoint, if we pick lung cancer for example, what kind of market size is that, just out of curiosity. Just trying to get a sense of what the near-term potential might be.

The market size for non-small cell lung cancer for Stage 4 disease is around 80,000 to 90,000 and so that would be your first line of where you would -- in the United States, only.

Per year, annually in just the United States.

Yes, and that would give you -- that gives you kind of an idea. It's actually quite a large patient population that would require -- basically require a mutational status determined. And then from there, I'd say that if a patient is EGFR positive and goes on erlotinib as first line, that would probably be 20% of those patients. And then those, all of those, would have to be tested once again at progression for T790M.

So that gives you kind of a ballpark of the initial market size as we've calculated it.

Okay, great. Then maybe could you talk about what type of conversations you are having, if you are at all, with maybe the payer community, and how you're looking at Medicare versus private-pay segment and what type of feedback you might be getting from this point? Or is it still very much educating each other on what's going on within this industry -- within the liquid biopsy market?

We've done quite a bit of research in this to determine the health/economic benefit in particular in lung cancer. We do believe -- we actually have been accepted for a presentation at one of the well-known reimbursement meetings in May of this year talking about our EGFR assays in urine.

And also, I think that where we are now is really in the point of building the clinical evidence argument for reimbursement for both Medicare and private payers. I think we are still in the mode of educational and reaching out to medical directors and being able to have that kind of conversation. We are starting to do that now with the -- armed with the health economic models that we've actually built. So that's the stage we are in right now.

Okay, thank you so much.

Welcome.

You're welcome.

(Operator Instructions) At this time there appear to be no further questions. We will go ahead and conclude our question-and-answer session.

I would now like to turn the conference call back over to Dr. Antonius Schuh for any closing remarks. Doctor?

Well, thank you very much and thanks, everybody, for your interest in Trovagene. Keep watching us. As stated before, 2015 will be our coming out year where we believe that we can introduce our technology for clinical use and where I think it will be recognizable to a broader community that we are really delivering incredibly strong performance in monitoring tumor dynamics from, unbelievably, a urine sample. And watch us.

Thank you.

Thanks, everyone.

And we thank you for your time today, everyone. This conference call is now concluded. At this time, you may disconnect your lines. Thank you and have a great day everybody.