BG Medicine's CEO Discusses Q3 2013 Results - Earnings Call Transcript

Nov. 6.13 | About: BG Medicine, (BGMD)

BG Medicine, Inc. (NASDAQ:BGMD)

Q3 2013 Earnings Conference Call

November 06, 2013 08:30 AM ET

Executives

Paul R. Sohmer – President and Chief Executive Officer

Stacie Rader – Senior Vice President, Executive Operations and Human Resources

Charles H. Abdalian, Jr. – Executive Vice President and Chief Financial Officer

Analysts

Jeff T. Elliott – Robert W. Baird & Co.

Operator

Good day, ladies and gentlemen, and welcome to the BG Medicine, Inc. Third Quarter 2013 Earnings Conference Call. At this time, all participants are in a listen-only mode. After our prepared remarks, we will conduct a question-and-answer session, and instructions will follow at that time. (Operator Instructions) And as a reminder, this call is being recorded.

I would now like to turn the conference over to Dr. Paul Sohmer. Please go ahead.

Paul R. Sohmer

Thank you, Pablo. Good morning, and welcome to the BG Medicine third quarter 2013 earnings conference call. I am joined today by Stacie Rader, our Senior Vice President of Executive Operations; Chuck Abdalian, Chief Financial Officer; Howard Rosen, Vice President of Marketing and Sales; and Aram Adourian, Chief Scientific Officer.

I will now ask Stacie Rader to read the brief statement, and then introduce Chuck Abdalian, who will review our financial performance for the quarter. Stacie?

Stacie Rader

Good morning and thank you for joining us today. Before we begin our formal remarks, I will cover a few administrative details regarding the replay information for today’s call and forward-looking statements. Today’s call will be recorded, and a replay will be available on our website. And information to access the replay is available in our press release, and also on the company website.

As a reminder, today’s call contains forward-looking statements regarding events that involve risks and other uncertainties. The Company’s actual results may differ materially from those anticipated by our forward-looking statements. The risks and uncertainties are set forth in the Company’s 10-K as filed with the SEC, as well as any updates to those risks and uncertainties filed from time-to-time with the SEC.

With that, I will turn the call over to Chuck.

Charles H. Abdalian Jr.

Thank you, Stacie. On this morning’s call, I will briefly highlight our key measures of financial performance, and full year guidance. Revenue growth is our first key measure. Revenue from our BGM Galectin-3 Test was $1 million in the third quarter compared to $600,000 last year. The $400,000 improvement results primarily from growth in sales from clinical research organizations, and from our largest specialty cardiovascular laboratory provider.

In the third quarter, product royalties on European sales by our partners were minimal. On a 2013 sequential quarter basis, revenue growth in the third quarter increased by 4% over the second quarter, which was in line with our expectations. The growth rate was similar to last year and reflects seasonality in our business.

Cash burn is our second key measure of financial performance. Operating cash burn continues to decrease as a result of our focused efforts to align spending with our revenue growth strategy. During the third quarter, these efforts translated into a 27 year, a 27% year-over-year decrease in operating cash burn.

Operating cash burn decreased by $1.5 million from the third quarter of 2012 to $4 million. The third quarter net loss was $3.7 million, a 46% improvement over the $6.8 million reported last year.

The $3.1 million year-over-year improvement results from a 42% reduction in operating expenses primarily in the areas of R&D, and sales and marketing. We completed the quarter with $11.3 million in cash.

Earlier this morning, we reaffirmed our financial guidance for the year ending December 31, 2013. Revenues are expected to range between $3.8 million to $4 million for a year-over-year increase of 48% to 56%. Operating cash burn for the year is expected to range from $15.5 million to $16.5 million for a 23% to 27% year-over-year improvement, and finally, 2013 principal payments on our term loan are expected to be $2.5 million.

This concludes our financial review. I will now turn the call over to Paul.

Paul R. Sohmer

Thank you, Chuck. Thank you, Stacie. We are continuing to make significant progress as we address the fundamentals of our business. To this end, we grew revenues from the sale of the BGM Galectin-3 Test by 65%, reduced operating expenses by 46%, reduced our net loss by 42%, and reduced our cash burn by 27% from the same period of 2012.

Subject to its final determination by year end and anticipated overall adjustments to the Medicare Clinical Laboratory Fee Schedule for 2014, The Centers for Medicare and Medicaid Services, CMS announced their preliminary decision to set the 2014 Medicare payment rate for testing for Galectin-3 at the amount of a crosswalked test whose 2013 national limitation amount is 70% higher than the current national limitation amount for Galectin-3.

This milestone follows within one quarter, publication of the American College of Cardiology Foundation, and American Heart Association 2013 guideline, the management of heart failure in which Galectin-3 testing is recognized for the role it may play in predicting adverse outcomes including hospitalization in heart failure patients.

As reported earlier today, we’ve begun to expand the network of clinical laboratories that offer the BGM Galectin-3 Test to better support the demand from physicians, healthcare provider groups, hospitals and integrated healthcare delivery networks.

We have also begun to expand adoption of the BGM Galectin-3 Test among the accountable care organizations and community health collaboratives. These healthcare provider groups will utilize the BGM Galectin-3 Test as part of their post acute patient management strategies to help identify chronic heart failure patients who have risk for unplanned hospital admission and readmissions.

In addition to these critical market development achievements, two independent clinical research studies published this quarter attest to the potential clinical value of the BGM Galectin-3 Test. First, the published results of a study conducted by researchers at the Massachusetts General Hospital affirm the significance of repeat Galectin-3 testing for assessment of the near-term risk of adverse events including hospitalization in subjects with chronic heart failure.

This clinical research study obviously adds to the body of literature that recognizes the potential utility of the BGM Galectin-3 Test as an aid in the assessment of the risk for adverse events in chronic heart failure patients. The findings from this research study applied directly to our near terms priorities.

Second, the published results of a research study conducted by the National Heart, Lung, and Blood Intramural Research Program, and the Framingham Heart Study reveal that elevated levels of Galectin-3 in blood were significantly associated with increased risk of the rapid loss of kidney function, and of incident chronic kidney disease.

Indeed, the office noted that their finding suggest that Galectin-3 testing may detect kidney injury years before the clinical onset of kidney disease, and may afford early and targeted strategies aimed at disease prevention. The results from this research study applied directly to our longer term priorities.

As healthcare delivery migrates from the traditional fee-for-service model to a value based system in which healthcare providers and institutions compete based on quality and price and are incentivized or penalized based on outcomes, but need for simple readily accessible affordable and reliable tools that will help to guide decisions regarding the where, who and how patients are managed has become clear.

We believe that for chronic heart failure patients, the BGM Galectin-3 Test may in fact be such a tool that could be used to treat all those patients across the continuum of care by leveraging its well established utility as an aid in the assessment of the risk of adverse events including hospitalizations.

The value proposition described by this application for our BGM Galectin-3 test clearly informs and defines both our near term commercial and our longer term development strategies and plans.

In the near term, we expect to drive adoption of the BGM Galectin-3 blood test, and grow revenues by leveraging the new CMS payment rates, the demand from physicians, healthcare providers, such as accountable care organizations and community health improvement collaboratives, hospitals and integrated healthcare delivery networks, the expanding network of laboratories offering Galectin-3 testing, the utility of our current FDA cleared and CE marked indications for use, and clinical research data that affirm the utility of Galectin-3 testing of patients with chronic heart failure.

The intent of these near term commercial activities is two-fold. First, we obviously hope to grow our near term revenues, but second in so doing, we hope to establish and then leverage our presence at the call point to create a commercial conduit for other patient selection tools that we will develop overtime.

Longer-term we expect to grow revenues from the future introduction of new patient selection tools that may incorporate new clinical indications for the BGM Galectin-3 blood test as well as other biomarkers or combinations of biomarkers that we identify from our analysis of the appropriate clinical cohorts, including the BG Medicine sponsored BioImage Study.

Notwithstanding our ongoing commercial and development activities, we will continue to aggressively manage our spending and expect to continue to reduce our operating expenses. In fact, we believe that operating expenses in 2014 will be approximately 33% lower than what we are currently forecasting for the full year 2013. In addition, we will now consider options for external financing.

For the remainder of 2013, we will continue to one, drive the adoption of Galectin-3 testing of chronic heart failure patients with healthcare provider groups and laboratories in which Galectin-3 could create the most value, such as accountable care organizations, hospitals, integrated healthcare delivery networks, and regional clinical laboratories.

Two, assist Abbott Diagnostics with its resubmission for 510(k) clearance of its ARCHITECT Galectin-3 assay. We currently believe that Abbott remains on track for submission by year end. Three, complete the medical review of data generated in support of BG Medicine’s previous submission to the FDA for 510(k) clearance of the CardioSCORE test. We’re currently on track to complete this review by year end, and four, rigorously control our investments.

We are following the roadmap that we outlined during last quarter’s earnings conference call. We believe that in so doing, we are setting the table for our success. Thank you.

Pablo, we are now ready to take questions.

Question-and-Answer Session

Operator

Great, thank you. (Operator Instructions) And our first question in queue is from Jeff Elliott of Robert W. Baird. Your line is open.

Jeff T. Elliott – Robert W. Baird & Co.

Good morning, guys, and thanks for all the color. Can you provide any comments or I guess timelines around the Abbott resubmission, I guess how long would it take from the time that they complete the resubmission until that can trend in the revenue for you?

Paul R. Sohmer

So, let me answer the question this way. So by statute, once it is submitted, there is a 90-day period. And of course, that stops – the clock stops and it restarts based on questions and interplay between the submitter and the FDA review team. And we would anticipate and hope for a process that would result in clearance within nine month – six to nine months period, which would then I think, following that allow for a quarter of upscaling and getting ready to launch the assay. So that’s how I would look at.

Jeff T. Elliott – Robert W. Baird & Co.

Got it, okay. And then on CardioSCORE, following your data review, I guess, what are your next steps, and how should we think about timing there?

Paul R. Sohmer

So once we have completed the review, which we’re on track to complete by the end of the year will then review those data, and this will guide our next steps regarding regulatory, commercial, reimbursement and investment strategies for CardioSCORE. Ron, do you want to add anything to that?

Stacie Rader

No, I think having said that’s accurate. So the review is internally ongoing at the Mt. Sinai School of Medicine New York and that is on track to be completed by the end of this year.

Jeff T. Elliott – Robert W. Baird & Co.

Got it, okay. And then the comments on the financing, I mean, can you provide any additional color there in terms of kind of what you are thinking, and I know, I look at the cash burn and definitely you’ve made a lot of good progress there, good comments on brining the OpEx number another 33% next year, that’s impressive, but I guess what are your additional thoughts on the financing plans?

Paul R. Sohmer

Jeff, now that – you can see our strategy, it’s gaining traction, and we’ve received an increase in our reimbursement rate on a preliminary basis for 2014, we are beginning to address our 2014 financing needs. And at this time, we’re not prepared to share our plans as we explore different alternatives.

Jeff T. Elliott – Robert W. Baird & Co.

Okay. Thanks for the color.

Operator

Thank you. (Operator Instructions) And at the moment I’m showing no further questions in queue. I’d like to turn it back to Dr. Paul Sohmer for any further comments.

Paul R. Sohmer

Thank you, Pablo. Thanks to you all for participating this morning. Obviously, your ongoing interest and support, we greatly appreciate it. We look forward to updating you on our progress. Have a good day.

Operator

Thank you. And again thank you ladies and gentlemen for joining today’s conference. You may now disconnect. Have a great day.

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