Cardiff Oncology Inc (CRDF) 2016 Q1 法說會逐字稿

Good day, and welcome to the Trovagene first quarter 2016 financial results conference call. (Operator Instructions) Please note that this event is being recorded. I would now like to turn the call over to Mr. David Moskowitz, Trovagene's Vice President of Investor Relations. Please go ahead.

Thank you, Gary. And thank all of you for joining us today on our first quarter 2016 conference call.

With me today are Bill Welch, Trovagene's recently appointed Chief Executive Officer; Mark Erlander, our Chief Scientific Officer; Rob Kelley, our Vice President of Marketing; and Beth Anderson, Vice President of Finance.

We'll start the call this afternoon with Bill introducing himself and speaking broadly about Trovagene and our corporate objectives. Then other members of the management team will review first quarter accomplishments and provide an update on their current business activities.

Before I turn the call over to Bill, I must remind you of the risks inherent in our business and ask you to consider the following 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 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, dependence on key personnel, obtaining health insurance reimbursement, obtaining financing and other factors discussed in the Company's periodic reports within the SEC.

With that, I'll turn the call over to Trovagene's Chief Executive Officer, Bill Welch. Bill?

Thanks, David, and hello, everyone. It's a great time to be at Trovagene, and I'm excited about the opportunity to lead the transition of the Company from the development of proprietary and clinically actionable oncology markers into a broader commercial company. Cancer detection and monitoring using liquid biopsy has great potential and is considered to be the leading diagnostic opportunity today. Several industry analysts forecast liquid biopsy to be a multi-billion dollar market by 2020.

I joined Trovagene because I believe the Company is in a great position to capture significant share of this market where our ultra high sensitivity assay technology and the use of using urine as a unique non-invasive specimen for CT DNA detection and monitoring.

As some of you may know, I've been in the molecular diagnostic business, as well as the biotechnology and life science industry for over 20 years and I've served in leadership roles from Vice President to Chief Commercial Officer to CEO positions. I've been fortunate to participate in some groundbreaking technology launches, including the development and commercialization of products on a non-invasive prenatal testing market, as well as in the companion diagnostics for immunotherapeutics.

Participating at the inflection point of commercialization is what I love to do. It's exciting to pull teams together, to work on common goals and to create new healthcare solutions. I believe that my experiences will help Trovagene to achieve its potential.

Now during my first couple of weeks at the Company, I've been busy meeting with all the functional team leaders and getting up to speed. I am impressed with the people at Trovagene and the desire to impact the global oncology market. I believe Trovagene's strong core of talented people and best in class liquid biopsy technology and I would like to thank all the employees at the Company for their hard work and dedication to our mission while the change in the leadership have been taking place.

I appreciate that these kinds of events can be difficult. I know because I've been there in previous experiences. I also know that the process can forge a stronger bond of commitment to success and that together I believe Trovagene will emerge as a leader in the liquid biopsy testing sector.

So with that said, let's get down to business.

Trovagene, as I see it, has three major objectives. First, to develop molecular assays or tests for the detection and monitoring of actionable cancer biomarkers using non-invasive or minimally invasive sample types, such as urine or blood. We've achieved this with our highly sensitive EGFR, BRAF and KRAS oncogene mutation assays with more on the way.

Second is to develop, present and publish clinical data to demonstrate the utility of our technology to positions in health insurance companies so that our platform can succeed commercially. Given our broad clinical programs with 27 ongoing studies and additional data to be published and presented at upcoming medical conferences, I believe Trovagene has the leadership position in the development of clinical content.

And third, we are engaged in commercial activities to embed our technology in the marketplace. As you know, we have begun commercializing our platform. Recently we announced contracts with seven major third party administrators for tests covering approximately 160 million lives.

And to support these objectives, our ongoing goals for 2016 are as follows. One, release clinical study results at major oncology meetings such as the AACR and ASCO and publish up to nine clinical manuscripts.

Two, increase the adoption rate of our assay platform by informing the medical community about the clinical data we have generated from our precision cancer monitoring technology.

Three, to gain traction with health insurance companies, demonstrating the clinical utility and cost effectiveness of our tests.

Four, enhance our technology platform and build on our intellectual property, including the refinements to our proprietary urine collection extraction and automation process.

And finally, five, engage in corporate development activities to further penetrate the US oncology market, advance our technology platform and broaden our geographic reach.

We remain on track to deliver on our key goals this year and I believe that achieving these goals will create significant shareholder value.

I'll now turn the call over to other members of the management team to review specific accomplishments in the quarter and update you on the progress we are making in our business. With that, I'll turn the call over to Mark Erlander, our Chief Scientific Officer. Mark?

Thank you, Bill. We started the year with several important achievements from our clinical program, including data presentations at the 2016 European Molecular Diagnostic conference and the Molecular Med Tri Conference, as well as the AACR annual meeting. These study results featured clinical data demonstrating the utility of our precision cancer monitoring platform as an important disease management tool in lung, colorectal and pancreatic cancer patients.

We also saw the first of up to nine manuscript publications this year with a peer reviewed paper in the oncology journal Cancer Discovery, which has a high impact rating among oncologists. This paper highlights the ability to confirm BRAF V600E mutational status and the ability to quantitatively assess changes in urinary circulating tumor DNA.

The author's primary conclusion is that our non-invasive assay can be used to determine response to novel therapy, combining both a BRAF inhibitor and a MEK inhibitor to treat colorectal neuroendocrine tumors.

Of the remaining eight potential publications this year, I'm pleased to announce that we have already submitted three and are working to submit two additional manuscripts in the very near term. These manuscripts highlight the clinical utility of our BRAF, KRAS and EGFR AQUA gene mutation assays with a high prevalence of these driver mutations in lung, pancreatic, colorectal and melanoma cancers.

Results from our studies and publications continue to demonstrate that our proprietary assays enable physicians to determine mutational status and to monitor treatment response in patients diagnosed with advanced cancer. Clinicians are finding utility in the use of our technology to determine responsiveness to therapy within days of treatment initiation.

And also to detect cancer progression up to three months prior to an observed radiographic progression. In essence, our highly sensitive and quantitative assays are changing the way oncologists assess response to therapy with the added benefit of using a truly non-invasive sample, that is the urine sample.

The second quarter is also shaping up well with data to be presented later this week at the AACR special pancreatic cancer meeting and also an oral presentation at ASCO in June. These data sets represent large prospective patient cohorts in areas of high unmet needs, such as pancreatic cancer and lung cancer, and will add to the body of clinical evidence supporting our liquid biopsy platform.

In addition to our study results, we continue to generate case reports from our commercial program that affirm the clinical utility of our tests in real world settings. As circulating tumor DNA increasingly becomes a specimen of choice for determining cancer mutational status and monitoring tumor dynamics, we believe that the competitive advantages of our platform will position us as the clinical performance leader and that our proprietary solutions will help significantly improve standard of care.

I will now turn the call over to our VP of Marketing, Rob Kelley, to review the commercial highlights in the recent quarter. Rob?

Thanks, Mark. Commercial goals in 2016 are to continue to gain market adoption of our liquid biopsy platform, increase awareness of our ongoing body of clinically meaningful publication data and expand payer agreements in order to establish our position as a leader in precision oncology using urine based CT DNA testing.

Our commercial efforts focus on the education of testing clinically actionable mutations to aid physicians in therapeutic decision making. This focused approach has been met with increasing physician interest and usage of our tests, particularly in the detection of resistance mutation to first and second generation TKI inhibitors for non small cell lung cancer.

While still early in our commercial launch, lung cancer currently accounts for approximately 58% of our total test volume. We're also beginning to see clinical interest in monitoring driver mutations for other cancers using our platform. Pancreatic cancer and colorectal cancer, for example, now constitute 24% of tests ordered.

In Q1 of 2016, we continue to execute on our strategy to establish the market for cancer monitoring using CT DNA with the expansion of our team of precision medicine executives. We increased our team from four field-based representatives last year to eight in the first quarter of 2016. To complement the sales effort and to expedite adoption and growth in all territories, we have expanded our medical affairs team to a total of four professionals with the addition of one medical science liaison and two clinical nurse educators.

This group of licensed medical professionals adds additional clinical expertise in the field. They're responsible for pull through of our commercial efforts, coordination within large medical groups and healthcare systems and key opinion lead development. We are pleased to see that our newly expanded commercial efforts have increased our foundation of sales qualified physicians from approximately 300 at the end of 2015 to nearly 550 physicians to date.

All have expressed interest in incorporating our products and services into their clinical practice.

Our strategy to increase the number of active ordering physicians and the submission of billable samples continues to gain traction. With regard to our sample volume, on our last call we reported that a total of 412 commercial samples were processed in our laboratory in 2015.

In Q1 of 2016, we saw an increase of 13% in test volume versus Q4 2015, but most notably, our billable samples grew approximately 50% quarter-over-quarter, demonstrating that physicians are seeing increasing value in our products.

At the end of February, we held our first virtual tumor board webinar, focused on non small cell lung cancer, to increase awareness of our lung cancer markers and data. In the webinar, two early adopting physicians shared their patient cases. The first demonstrated the use of our technology to detect T790M, an actionable mutation when tissue biopsy repeatedly failed.

The second case was for the monitoring of first line TKI treatment with our technology and subsequently detecting T790M resistance and demonstrating a response to third generation TKI therapy.

Additional patient cases are being curated that continue to demonstrate the clinical value and utility of our tests for cancer mutation detection and monitoring. Three of the most compelling patient cases have been developed into manuscripts and submitted for publication, the first of which was recently published in April.

Lastly, you may recall our plans to conduct a clinical advisory board meeting in the first quarter of this year. In February, we convened this meeting with 16 leading pulmonary oncologists and based on the success of this event, we plan to conduct a second meeting with this advisory group at ASCO in early June when we will be sharing our expanded dataset in lung cancer.

This growing body of clinical evidence supporting our technology should further accelerate our commercial momentum towards our goal of being the leader in CT DNA cancer detection and monitoring.

Thanks for your attention. I'll now turn the call over to our VP of Finance, Beth Anderson, to review the financial results for the first quarter.

Thanks, Rob. Financial results for the three months ended March 31, 2016 are as follows. We reported a net loss of $10.3 million or $0.36 per diluted share as compared to a net loss of $7.2 million or $0.33 per share for the same period in 2015.

Operating expenses were approximately $10.6 million as compared to $5 million for the same period last year. The increase in operating costs can be attributed to an increase in stock based compensation and the expansion of our R&D clinical and commercial activities.

The net cash used in operating activities in the first quarter of 2016 was $6.9 million. The weighted average shares outstanding, used to calculate the loss per share, increased to 30 million from 22 million shares in the prior year period primarily due to 2015 issuance of 4.6 million shares of common stock through an underwritten public offering.

As of March 31, 2016, Trovagene had cash and cash equivalents of approximately $60 million as compared to $67.5 million at the end of 2015. We believe that our current cash position is sufficient to fund operations into 2017.

With that, I'll turn the call back over to Bill.

Thanks, Beth. And that concludes our prepared remarks. Operator, we are now ready for question and answer session.

(Operator Instructions) Sung Ji Nam, Avondale.

Bill, I mean it sounds like in terms of your -- as you're kind of going through the transition -- management transition here, it seems like your corporate strategy is pretty much unchanged from before. Is that a correct assumption or just maybe if you could talk about if there are any changes or if you foresee making any changes on the commercial side or otherwise?

I just would temper it. I've been here two weeks and I'm excited in my short period of time to have a chance to interact with the senior leaders at Trovagene and get a better sense for the technology. I'm kind of interested from afar and I think using urine and then blood in terms of a smaller number, but clinically actionable markers I think is really important. So I very much support that theme.

But I would say it's a little early for me to say either way in terms of direction otherwise. Rest assured, we're looking to build a Company that has solid value and to commercialize our technology. That's probably the best I can say in this first few weeks.

And then my follow-up is I think to date you guys have presented data for over 1,000 patient samples. By the end of the year when you have the eight manuscripts submitted, how many patient samples will you have tested, I guess, using PCM?

I know that Mark will get into that. We've got a number of publications, so probably hard to get discrete on actual numbers, but there's a lot that's going on. So, Mark.

Yes, I mean clearly we have several studies that are -- I think when you add it all up, I think it gets close to 1,000. But obviously some of those studies have got a lot more patients than others and but yes.

I would just say it's probably not -- I mean we can get into numbers later. It's probably not so much a numbers game in terms of clinical content and utility and a lot of work's been done.

I mean I think it's important obviously, Sung Ji. Hi, nice to talk to you. I think it's important. Obviously numbers are important, but it's also, as you know, what are the studies and the number of patients within a specific study and making sure that that study's powered enough to be able to give a -- that results are basically powered enough is -- obviously is important as well. And so that's really what our focus has been.

Jason Kolbert, Maxim.

What I'd like to understand is you have $60 million on the balance sheet, you beautifully outlined in the bullets what you're going to do to execute. You also outlined that by going from four to eight specialists you jump numbers from 300 to 550. So help me understand how you're thinking to spend this money, how you're going to make your mark as the new CEO. And really what you're going to do to start producing some meaningful revenues on the top line.

And I guess the second part, if I could just ask another question, would be how do you pull the team together now that everybody's been through so much and get everybody kind of pulling in the same direction?

The latter isn't as complicated as one might think. Team building clarity and focus on common goals. The Company isn't that big where we're disparate, but we need to all be focusing on core execution. And I've been impressed in the first, again few weeks with the entire management team, including commercialization and development.

In terms of -- it's hard to look forward, especially for me who's been here a short time, to be forward looking, but I think the way you make any market is you have to have solid technology, have it in the hands of people who care and that they can replicate, understand what it does and drive that through the key opinion leaders and commercial adoption.

So the Company is doing great opportunities with certain markers in high quality tumor types. Publications are ongoing. AACR is like, what Mark, this coming -- this -- ASCO's coming up. And a number of things. And then after that I think you'll start to see better uptake.

But at this stage, as far as I can tell, and I'm not sure how it's presented or otherwise, but our sales and marketing team, the sale field team, is about introductions in market creation. It's not sized for high revenues, it's sized to try to get the KOLs in the marketplace to understand our technology and how it can be relayed commercially. And from that standpoint, I think it's doing a great job. I don't know, Rob, any other flavor you might give on the commercial side?

Yes, I guess if I'm reading into your comments, it's that 300 and 500 samples probably isn't moving the needle. I think the reality is that when you introduce a transformational product into the market --

Actually my comment is the opposite. I know why it's moving the needle pretty substantially, so I'm looking at boy, I'm going to be very tempted to want to increase the number of reps. I remember when Hank McKinnell of Pfizer was asked when will you start hiring reps? His answer was when they stop being accretive. So it seems like a very accretive area to spend on.

Let's get back to you on those kind of areas. I think we need to be -- at least I need to be cautious till I understand where we are on a variety of things. But I am buoyant that we're starting to get some market traction. It's just like -- and I would just say Jason, I've been here a few weeks.

And listen, we look forward to updates and really encourage you to be visible now. We want to see you pull this together. We believe in the platform and the technology and we just need to see the adoption kind of follow the words, right?

Understand.

Dan Leonard, Leerink Partners.

This question might be out of bounds as well, but Bill, when do you think you'll be able to talk about quarterly test volume numbers? I think I entered this quarter with an impression we might get a billable volume or a commercial volume number disclosed in Q1.

We did disclose some numbers, but I'd say, Dan, that you can see from the numbers that Rob went through, they're still kind of early as the market -- early stage in the market development. I think when they start to cross over much more material and we get a little more billing traction, we'll feel better about consistency. But I can't -- it's hard to know what exactly that is in terms of quarter-by-quarter since I haven't really had a chance to go through a detailed analysis. But it does feel like we're making good traction.

And then my follow-up. On the SG&A number in Q1, it jumped quite a bit sequentially compared to Q4. Is there anything one-time in that number or is that the new run rate we should think about going forward?

There is a one-time stock based comp hit, so it's a non-cash item that's described in detail in the MD&A in our form 10-Q.

And that goes away in Q2?

Yes.

Bryan Brokmeier, Cantor Fitzgerald.

So Bill, you had a lot of success with your prior firms, despite some challenges. Could you provide us with some more details of your past experience and how those relate to some of the tasks ahead of you at Trovagene?

Yes, I'd say the medical diagnostics industry is really the place to be. A lot of activity and the question is how you can hold and monetize and such. I guess when I was at Monogram, we were deep in companion diagnostics, a lot of therapeutic intervention with testing and that was real exciting. And I think when you're testing at the level of molecular, you kind of find out where the drugs begin to take effect and when they start to lose effect. And that's another attraction I have at Trovagene is some of the data that they've talked about in lung cancer that in the early phase you can actually start to see hopefully whether we're going to call it resistance or otherwise, early indications.

And I think the other is as you start to commercialize this in through a laboratory area, we need to be thoughtful about how we relay more information. The payers are looking for certain things and I'm excited that we've already had some contacts and others to get that, but I think it's important to get reimbursed for tests as much as just doing tests for tests sake. And in the NIBT early days we solved that by trying to get a lot of tests and change that.

So the other part I'm excited about in the liquid biopsy area is that it's a big market with many players. And competition I think breeds an ability to hopefully have this become more standard in the eyes of physicians and maybe payers. And if that does help, that helps everyone and hopefully that wave will carry Trovagene forward as well.

So there's a number of positive factors I think that go forward. But at the end of the day, Bryan, it's got to work. The tests need to make it and be measurable and have clinical utility. If they do, I think good things can happen to you. If they don't, change chair. Either way, I think they won't move the needle.

And given your background, do you feel that there's a need to hire a Chief Commercial Officer? Or are your resources better invested in areas where you don't have as strong of a background?

So for those who don't know, yes, I grew up in the commercial all the way up that direction. And not that I'm doing that role, I just have a better sense for some of the issues that pop up. And the team that we have really speaks that language well right now.

As a growth company, adding that other layer it seems that we don't need it today. We'll monitor company growth overall, but that money could be better spent from other things in the short term. So I'll just keep track of that. And frankly, I haven't had a chance to go through a deep resource dump on people to find out what the other key ones are, but unlike -- at least on that one I feel very comfortable having known that area real well.

And then just lastly, earlier this year you signed the TPA agreements. When are you going to start to see some traction now that those are in place? And maybe even signing some other payers? Have you had any discussions? And this is maybe either you, Bill, or to Rob. Have you had any discussions with managed care companies that seem to want to get more involved and maybe even in a trial type of situation?

Maybe just qualify the question. TPA for payer agreements, I assume that's what you mean, Bryan?

Right.

So we have a number of payer administrative agreements signed. And those span up to I think perhaps 160 million lives. And those are agreements in place and those are utilized by a variety of insurance companies to get broader reach. And I think that's going well. We need to then work with various insurance companies and the appeals process and pharmacoeconomical sites to embed it in a broad sense.

This is Mark. I can add to that. I think you might be going after what kind of health economic studies we're doing to demonstrate really the benefit. Is that kind of where you're going?

Yes.

So I think what I'd say to you there is that we've been pretty actively involved in the last quarter and we're not ready to make any announcements yet, but I think what I'd say is that we are very focused on driving at least two different health economic studies in the near future to start those. And we'll have more news later in the year regarding those.

Laura Sand, Piper Jaffray.

This is Laura Sand on for Bill Quirk. Given the recent management changes, can you talk about the evolving commercial team? And then given the departure of your Chief Commercial Officer, did any of the team leave along with him?

It's all gone pretty quickly for me and for the team here, but Matt Posard stepped away a few weeks ago just prior to me joining, and that definitely accelerated my decision to join the Company. I'm very excited having been here and have met the team that they put together. I think also the passion of folks and what they're doing is solid.

So as far as I can say at this point in time, it feels like the assets and the people are focused and we'll work to try to continue that focus going forward. We've not had any step away and as far as step away certainly from this. I can't say there'll never be things, but our job as a management team is to make this a successful, exciting place to be and that's the best way to keep people focused on what they want to accomplish in their career.

Caroline Ivennes Ventosas, Janney Montgomery Scott.

If I may go back to the publications a bit, I understand that you will have multiple publications and with different patient sizes, but could you at least mention if any of these publications will include monitoring in lung cancer given that you are currently seeing further interest in this testing?

This is Mark. Absolutely. Thanks for the question. You're absolutely right, one of our major focus or foci is lung cancer. And at ASCO we will have one disclosure there that will primarily be around detection. The monitoring component of that will be followed soon after that, but we do plan to have at least two publications regarding monitoring. One of them looking at monitoring response to therapy and the other one looking at the emergence of T790M prior to a third generation TKI.

So we are absolutely focused on this area and we also will be reporting monitoring as well with our KRAS assay in pancreatic cancer as well.

This concludes our question and answer session. I would like to turn the conference back over to Bill Welch for any closing remarks.

Thank you. And thanks to everyone for participating on the call. We thank you for your support and we look forward to speaking with you soon.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.