Cardiff Oncology Inc (CRDF) 2016 Q2 法說會逐字稿

Welcome to Trovagene's second quarter 2016 earnings results conference call and webcast. (Operator Instructions). Please note that this event is being recorded. I would now like to turn the conference over to Ms. Beth Anderson, Vice President of Finance and Administration at Trovagene. Ms. Anderson, please go ahead.

Thank you for joining us today on our second quarter 2016 conference call. Joining me today are Bill Welch, Chief Executive Officer; and Mark Erlander, Chief Scientific Officer. We will start the call this afternoon with Bill reviewing our Q2 results and commercial activities. Then Mark will provide an update on our clinical and technology activities and I will review our financial results.

Before I turn the call over to Bill, I must remind you of the risks inherent in our businesses 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 filed with the SEC.

With that, I would now like to turn the call over to our Chief Executive Officer, Bill Welch. Bill?

Thank you, Beth, and hello, everyone. I'm excited to report on my first quarter here at Trovagene. As you might imagine, I spent a great deal of time during the quarter assessing our core technology, key development, and commercial programs and debriefing our clinical collaborations. Most importantly, I was able to spend significant time with my team reviewing our 2016 goals and activities and solidifying our strategic vision for success.

Trovagene is an oncology technology company. Our vision remains clear: to broadly enable access to our low-cost, highly sensitive and quantitative urine and blood-based liquid biopsy tests and technology. We see three broad categories for commercialization of our technology: clinical laboratory services, pharmaceutical collaborations, and technology transfer.

On our last earnings call, we said that in 2016 we would use our phase 1 field sales force representatives, medical affairs, and national accounts executives as our controlled launch team to increase the adoption rate and use of our Trovera tests in clinical practice. We also said we would leverage our scientific and medical affairs group to collaborate with leading key oncology investigators to demonstrate the value of our technology with presentations by key opinion leaders at conferences and publications. And, finally, we are working towards development of a second generation urine collection kit and multiplex panels for urine and blood. I am pleased to say that we continue to make progress towards these goals.

As our long-term investors appreciate, Trovagene has significant technology and intellectual property in areas outside of oncology, such as in HPV. We continue to monitor and tactically invest in these assets to advance the programs for potential strategic partners and for ourselves. We will provide more information on these programs as becomes available. During the second quarter, our strategy to increase the number of sales qualified physicians and submission of billable samples continues to gain momentum. We are pleased to see that our current commercial efforts have increased the number of sales qualified physicians from approximately 300 at the end of 2015 to over 700 to date in 2016.

In addition, we more than doubled our new ordering physicians in the second quarter over the first quarter of 2016, and we are beginning to expand our customers from academic and research institutions to the community-based oncologists. This growth in customer base has translated into nearly double the sample volume in the second quarter over the first quarter. We now have over 160 million lives covered by health plans. While early, but as anticipated, we are seeing reimbursement for our tests. We expect collections will continue to grow and the timing of reimbursement to continue to improve as we expand our testing volume. However, we know it takes significant time to establish reimbursement trends.

We believe Trovagene is leading the way in providing evidence validating the clinical utility of both urine and blood liquid biopsies for the management of patients with late stage cancer. At ASCO, the premier annual oncology conference, Doctor Heather Wakelee of Stanford University shared in an oral presentation unblinded data demonstrating the high sensitivity of our Trovera urine-based tests to detect EGFR, T790M mutations in patients with non-small cell lung cancer.

We also hosted a clinical advisory board with 18 leading thoracic oncologists, where our expanded data set in lung cancer was presented and discussed. Based on this data, these advisers expressed their support for the use of a liquid biopsy as a first line diagnostic tool to determine the presence of a resistance mutation in patients with non-small cell lung cancer. We are seeing increasing adoption of our Trovera test for lung cancer patients. We believe this is based on the data presented at the conference as well as the growing support from key opinion leaders and a recent publication of our data in the Journal of Thoracic Oncology.

We have a number of active clinical collaborations in other cancers using our platform. Data was presented at the American Association for Cancer Research, or AACR, special conference on pancreatic cancer, showing the superior detection sensitivity of our KRAS liquid biopsy test. Building upon our initial data in the pancreatic cancer, we achieved another critical milestone in the second quarter with the announcement of a clinical research collaboration with the University of Michigan Comprehensive Cancer Center. Our Trovera urine and blood tests will be studied as a noninvasive diagnostic to enable early detection and rapid monitoring of patients -- or response to therapy in patients with pancreatic cancer.

We also entered into a clinical collaboration with the University of Southern California Norris Comprehensive Cancer Center. This collaboration is intended to establish a standardized framework for the use of our liquid biopsy technology, as well as to define practical considerations and best practices for liquid biopsy testing from urine. We anticipate announcing additional agreements with other leading cancer centers to further validate our technology in a variety of cancers at different stages. The progress we are making to expand the body of clinical evidence supporting our technology platform and tests should further accelerate our commercial momentum towards our goal of being the industry leader in ctDNA detection and monitoring.

With that, I will now turn the call over to Mark Erlander. Mark?

Thank you, Bill. As Bill stated, clinical study results for Trovera were shared in an oral presentation at ASCO by Dr. Heather Wakelee of Stanford University. These unblinded results from a prospective trial of 230 patients demonstrate the clinical utility of our noninvasive, urine-based liquid biopsy test to determine the presence of the EGFR T790M mutation and aid in the selection of third-generation tyrosine kinase inhibitor targeted therapy for the patients with non-small cell lung cancer.

Additionally, this data validates that urine liquid biopsies are a viable alternative to plasma and/or tissue biopsies. A subset of this data was recently published in the Journal of Thoracic Oncology, which is the flagship journal for the International Association for the Study of Lung Cancer. The co-authors concluded that are ctDNA technology in both urine and plasma from non-small cell lung cancer patients can be used for the detection and monitoring of EGFR activating mutations and the T790M am resistance mutation. We plan to submit a second manuscript that includes the new data presented at ASCO to be published later this year.

Trovera data was also presented at the AACR Special Pancreatic Cancer Meeting. In this large prospective data set of 210 patients with unresectable pancreatic cancer, 93% were positive for the KRAS mutation using the Trovera ctDNA liquid biopsy assay. This detection rate closely matches the published prevalence of KRAS in pancreatic cancer, thereby demonstrating very high sensitivity for our assay. Additionally the data indicated that our KRAS ctDNA testing offers treating physicians a new diagnostic tool for assessing the patient's prognosis and subsequently early prediction of therapy response.

Continuing our work in pancreatic cancer, we recently entered into a clinical collaboration with the University of Michigan Comprehensive Cancer Center. As part of this research, our ctDNA urine and blood-based tests will be utilized as noninvasive diagnostic tools to enable early detection and rapid monitoring of patient response to therapy. This important collaboration is being led by Dr. Diane Simeone, who is the director of the Pancreatic Cancer Center at University Michigan Comprehensive Cancer Center, and is also an internationally recognized expert in the field of credit cancer. The overall objective of the collaboration is to demonstrate the utility of Trovagene ctDNA KRAS tests to assess early patient response to a given therapy, thereby quickly determining the most effective individualized therapy.

Bill mentioned our agreement with the University of Southern California Norris Comprehensive Cancer Center. This is a broad collaboration to further demonstrate the robustness and reliability of our technology in the identification of cancer mutations from urine. We plan to conduct several studies that have potential to improve the standard of care for cancer treatment and to accelerate adoption of our noninvasive tests into clinical practice. Through these investigational studies, we will also explore the development of clinical treatment protocols to standardize the how and when of liquid biopsy testing.

Results from all our research collaborations with leading cancer centers and subsequent publications continue to demonstrate that our technology enables physicians to determine [patiental] status and to monitor treatment response in patients diagnosed with advanced cancers. The overarching purpose of these collaborative studies is to leverage the performance of our technology to demonstrate the value of routine monitoring of patients.

We also continue to develop patient case reports across multiple cancer types to demonstrate the clinical utility of our tests in real-world settings. A case in which our Trovera BRAF urine test was used to determine early response to therapy was published earlier this year in Cancer Discovery. This particular patient case supports using ctDNA from urine -- from a urine sample to evaluate early response to combinatorial therapy of BRAF-MEK inhibitors in BRAF mutant high-grade colorectal neuroendocrine tumors.

More specifically, this case highlights the use of our technology to quickly determine responsiveness to experimental treatment based on the genomic profile and of the tumor. A second patient case report was recently accepted for publication in the Journal of Experimental Hematology and Oncology. This case highlights a common clinical scenario in which a patient with metastatic non-small cell lung cancer underwent multiple tissue biopsies that failed to obtain critical genomic information.

Targeted mutation analysis using the Trovera EGFR urine liquid biopsy test identified the mutation that was missed by tissue. The co-authors concluded that using our Trovera test earlier in treatment would have provided critical information sooner, and could have eliminated the need for multiple uninformative and invasive tissue biopsies. Presentations and publications this year have featured clinical data demonstrating the clinical utility of our precision cancer monitoring platform and Trovera tests as an important disease management tool in patients with lung, colorectal, and pancreatic cancer.

With that, I will now turn the call over to Beth to review financial highlights from the second quarter. Beth?

Thanks, Mark. Financial results for the three months ended June 30, 2016, are as follows. Trovagene reported a net loss of $10.2 million or $0.34 per diluted share during the second quarter of 2016 compared to a net loss of $10.2 million or $0.41 per share for the same period in 2015. Total operating expenses were approximately $10.1 million in the second quarter, slightly down from $10.6 million in Q1 of 2016.

When compared to the second quarter of 2015, operating expenses increased by $3.4 million. This year-over-year increase in operating costs can be attributed to the expansion of our R&D, clinical, and commercial activities. R&D expenses increased as we continued to invest in the development of a second-generation urine sample collection kit and multiplex gene panels that we believe will result in broader adoption and application of our tests.

Additionally, we continue to focus on completing our current clinical studies and developing new studies. These studies, which aim to result in publications in peer-reviewed journals, provide the evidence that supports the use of our technology to make clinically actionable decisions.

Sales and marketing expenses also increased during 2016 when compared to the prior year due to the initial build-out of our commercial team to include field sales representatives, medical affairs, and national accounts executives. In addition, targeted marketing campaigns, such as the launch of our new Trovera brand and sponsorship of clinical advisory boards, contributed to the overall increase in costs.

The net cash used in operating activities in the second quarter of 2016 was $8.1 million. Total cash used in the first half of 2016 was $16.9 million. The weighted average shares outstanding used to calculate per-share results increased to 30 million, from 25 million shares in the prior year period, primarily due to the 2015 sales and issuance of 4.6 million shares of common stock through both underwritten public offerings and controlled equity offerings. As of June 30, 2016, Trovagene had cash, cash equivalents, and short-term investments of approximately $50.6 million.

I will now turn the call back over to Bill.

Thanks, Beth. We believe the noninvasive liquid biopsy market is large and that we are well-positioned to capitalize on this opportunity. We expect to continue making progress towards over 2016 goals. I look forward to providing more updates regarding our progress and achievements in the near future. Thank you for participating in the call. This concludes our prepared remarks.

Operator, we are now ready for the question and answer session.

Yes, sir. (Operator Instructions). Jason Kolbert, Maxim Group.

Good afternoon, guys. This is Gabrielle Zhou on behalf of Jason Kolbert. My question is, what challenges are you facing now as the new management team to build sales traction to the existing customers? And also, other than the quarterly revenue, what other specific catalysts should be watching? Thank you.

Thanks, Gabrielle. The big focus of 2016 has been in publications and connecting with key opinion leaders and drivers of the community for our technology. I think in my short time here I've been very impressed, both the level of the collaborations that were in and the data that we got out. We had an oral presentation at ASCO, and it's very rare to have technologies in the oral presentation. So I think we are making great progress, especially in non-small cell lung cancer arena.

At the same time, you need to get out in the marketplace and have a presence. And so our phase 1 commercial team I think are doing an excellent job interfacing with the academics, key opinion leaders, as well as the local community leaders in oncology. So we are starting to make inroads there. The big drivers, we think, is continuing the goals we set out. It is on our most recent corporate slide deck on 2016 goals, which are the goals that the management team has; and that includes publications, helping to drive quarter over quarter unit growth.

We have internal goal to grow, of course, but measured growth. And that's through quarter over quarter unit growth. And then some major programs which is, one, the ability to get out a second-generation urine collection device; and also bring forward a more multiplexed, multimarker gene panel. And those two goals we are certainly working strong to achieve. I think that probably hits most of the points you asked, unless there's another question you might have, Gabrielle.

No, that answered my question. Thank you.

Bryan Brokmeier, Cantor Fitzgerald.

Would you please further discuss -- you just mentioned some of the goals. And I know one of the goals that you have is the second-generation urine sample collection kits. Could you further discuss those? And additionally, when does the IP on the current kits start to expire?

Sure, Bryan. Maybe stepping back, Trovagene is much -- to me and the team and the vision, has all come together. We are an oncology technology company. I think that the broad span of that is we certainly have a beachhead, so to speak, in the ability to detect DNA out of urine and both very -- at very high sensitive levels. And the goal from doing these very deep and sensitive markers is to make them available. I think the idea of urine is the noninvasive collection device. And so, we are working to get a second-generation one out. And that's one that we think that device could be useful for a US regulatory, international regulatory and broadly available. So that is a key goal for us this year. We think that's a key driver.

And the second is to get out more markers. We think that will be helpful, both for our current sales force as well as our pharma business; people would love to use our technology, see the use, and would like to see a few more markers. So we are working on that. Our IP is pretty broad. I know we have a big IP that is one of the broadest, which is a couple more years. But followed on is a whole series of IP that's just probably more relevant, that talks about the markers and how we extract, and the like. And some of that information also is a slide that is on our corporate slide deck, too. I might refer you to that. (multiple speakers)

Sorry, did Mark have (multiple speakers) something else?

No, I just think that our focus and our IP has been really about the extraction and isolation and the use of urine transrenal derived or systemically derived DNA. The second generation urine cup is really our first real urine cup that is totally a one -- you don't really need to add anything to it. It's all encompassing. And our intellectual property really is focused on this next generation for -- because of what we have talked to you about. So, that maybe might answer your question.

And I think just to enforce the -- well, the clinical laboratory services we do at San Diego, certainly -- what we are today, we think the broad opportunity is in the framework of collaborations and broad technology transfer around the globe for our technology.

Yes. And the collection kit we are building now would basically allow us to enable us to do what Bill just talked about, those type of contacts, those type of businesses.

Okay. And are you seeing any positive impact on reimbursement from the TPA agreements that you signed?

It's early, Bryan, but yes, we are seeing reimbursements coming in at the levels that we think. But these things take time. I think that our overall objective is to get the best reimbursement for our technology, and to establish potentially a Medicare rate that both we and others could use as this technology goes forward.

Okay. Thanks a lot.

(Operator Instructions). Sung Ji Nam, Avondale Partners.

This is actually Laetizia in for Sung Ji. So first, in terms of reimbursement, could you tell us what your next steps are, especially with the significant data from AACR and ASCO? And maybe does your strategy change in any way with the final policy on PAMA?

Well, we haven't put out our broad reimbursement strategy, but I think it still remains the same. We are working to get the best value for our technology and currently using miscellaneous and adjudicating these primarily with the commercial payers and working with the commercial side. On the Medicare side, we would work to have a couple publications and probably partner within the Palmetto system. We have not yet done that. I think that's a big reason why we are driving publications this year. And we see that progress going well.

And the other is we are working toward health economical type studies showing the benefit of a noninvasive technology over existing technologies. I think the data will come out pretty strong just because it is an noninvasive way to get very accurate data. A lot of the goals this year, as you can see, are built around technology and publications. Those are what ultimately gets you through reimbursement and adoption with the clinical groups.

Okay. Thanks. And then could you maybe give us some update on the new multi-gene panel that is in development, maybe like the timeline for that next year, or beyond that?

That's -- we are working hard. All I would say is that is a corporate goal to get that out this year. And we don't see, as far as I can tell, technology. But we do see a lot of work. So it's a hopefully it comes out this year, but that's one of our goals. And it would be a technology that could hit multiple different tumor types. And I would say it's focused on key actual markers. But again, I might point to one of the slides we have in our corporate slide deck; gives a little more color to that, but internally, we are just working hard to make that happen. Anything else you might add, Mark?

No. I think that covers it. Yes.

Okay.

Thank you.

I am showing no further questions. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.