Nanosphere, Inc. Q1 2010 Earnings Call Transcript

May. 7.10 | About: Nanosphere, Inc. (NSPH)

Nanosphere, Inc. (NASDAQ:NSPH)

Q1 2010 Earnings Call

May 6, 2010 11:00 am ET

Executives

William P. Moffitt III - Chief Executive Officer

J. Roger Moody Jr. – Chief Financial Officer

Michael K. McGarrity - Chief Marketing Officer

Analysts

Bruce Cranna - Jefferies & Co.

Jeff Ares - Leerink Swann

Scott Gleason - Stephens Inc.

Bill Quirk - Piper Jaffray

Operator

Good day ladies and gentlemen and welcome to the first quarter 2010 Nanosphere, Inc. earnings conference call. My name is Carol and I'll be your coordinator for today. At this time all participants are in a listen-only mode. We will be facilitating a question-and-answer session towards the end of this conference. (Operator Instructions)

As a reminder ladies and gentlemen, this conference is being recorded for replay purposes. Before this call begins, Nanosphere would like to state that certain statements made during this conference call which are not based on historical fact may be deemed to constitute forward-looking statements within the meeting of the Private Securities Litigation Reform Act of 1995.

Because these forward-looking statements involve known and unknown risks and uncertainties, there are important factors that could cause actual results, events or developments to differ materially from those expressed or implied from these forward-looking statements.

Such factors include those described from time to time in Nanosphere's filings with the United States Securities and Exchange Commission. Please note that Nanosphere undertakes no duty to update this information.

It is now my pleasure to turn the presentation over to your host for today's call, Mr. William Moffitt, President and Chief Executive Officer of Nanosphere. Sir, you may begin.

William P. Moffitt III

Thank you, Carol. Good morning everyone and thanks for joining us for Nanosphere's investor conference call covering the first quarter of 2010. In a few moments I'll turn the call over to Roger Moody, Chief Financial Officer and Mike McGarrity, Chief Marketing Officer.

But first let me give you my perspective on our progress and the opportunities for growth we see over the next several quarters. We continue to make progress with all of the programs on a number of fronts, providing the foundation for our goal of building a global molecular diagnostics company with a primary focus on creating value through menu expansion and greater functionality and applicability of our Verigene System.

With that in mind, there are two key points I want to emphasize this morning. First, we're making progress against our timelines for expanding the test menu for the Verigene System in the areas of infectious disease, human genetics, pharmacogenetics and protein assays. These tests will increase the applicability of the Verigene System and will generate increased utilization resulting in greater disposable cartridge volume.

Second, the tests that we have in development address critical needs in the market ranging from faster, more accurate infectious disease assays to pharmacogenetic assays where testing at the point of care to enable timely and accurate therapy is becoming increasingly important. Although the abrupt decline in influenza-like illnesses late last year had a significant impact on the placement of new systems in the first quarter, as we had previously anticipated.

Mike will review with you in a few minutes the continuing development of a strong pipeline of customers seeking to implement molecular methods for diagnosing these illnesses. We are nearing completion of the development work on an expanded respiratory virus panel that will add subtyping to the current test panel and will also include a genetic marker for the resistance to oseltamivir, or commonly known by the trade name Tamiflu. We expect to commence regulatory clinical trials for this product during this quarter.

In parallel, we're working to develop a further expansion of the respiratory panel to include parainfluenza, adenovirus and human metapneumovirus. We expect to enter clinical trials and file with the FDA for this additional expansion later in the year.

At the same time, we're making good progress in the development of a bloodstream infection product which we continue to expect to move into clinical trials about the end of this year. In pharmacogenetics we have concluded clinical trials for our 2C19 assay for clopidogrel metabolism, more commonly known by the trade name Plavix, and expect to submit this to the FDA this quarter. In a few minutes Mike will update you on our work with thought leaders in this field and our overall assessment of the market opportunity for this product.

In cardiology we continue to work on additional testing in support of our intended response to the FDA on our troponin assay. As we have previously discussed, this effort has been complicated somewhat by the issue Beckman has had with its troponin assay, the predicate device for our submission. Until we fully understand this issue, complete the work to respond to the FDA and have a better perspective on this submission it will be difficult to forecast the timing of any market launch. We do intend to respond to the FDA this year.

As you know from previous discussions, we must submit new 510(k)s to the FDA to migrate human genetic assays from the original Verigene System to the Verigene SP. This includes our test for hypercoagulation, warfarin metabolism, cystic fibrosis and hemochromatosis, the latter two being assays we have chosen to introduce only on the Verigene SP.

While we're anxious to migrate these assays to the Verigene SP, the studies necessary to do this are a lower priority than the clinical trials for the respiratory assays 2C19 and troponin assay. We currently intend to commence these migration studies later this year.

In addition to menu expansion, we've initiated a project to further automate the Verigene System with the addition of an instrument we call AutoLab. This system will take advantage of the existing cartridge-based micro array format and the sample-to-result capability of the Verigene SP, adding further automation to create a higher throughput system that can be run under the direct control of the hospital's laboratory information system.

In other words, this will give our customers in the field of molecular diagnostics exactly the kind of automation and platform flexibility upon which they have relied for decades to build the infrastructure in chemistry, hematology, and immunochemistry, the core operations of their labs.

One of the great strengths of our technology is its breadth of applicability, but we're also mindful of the need to focus on deliverables that will drive near term growth and value creation. As you will hear from Roger, we have a good cash position but continue to be very conscious of the need to conserve capital with expenditures targeted to those projects that create significant customer and shareholder value.

We are building a broad-based molecular diagnostics company. This company is based on a breadth of menu enabled by our ability to multiplex, provide random access testing and conduct both genetic and protein tests on the same platform. As our test menu expands so will our business. The breadth of our capability and the depth of our research and product development programs mitigate the risk of a single product strategy. This is the strategic path to increase shareholder value. Now let me turn the call over to Roger.

J. Roger Moody Jr.

Thank you, Bill. This morning I'll review Nanosphere's first quarter 2010 financial results which are accompanied by today's press release and 10-Q filing, both of which are available on our website which I invite you to visit at www.nanosphere.us. In the first quarter we continued to focus on menu expansion which we believe is the key catalyst to driving future financial performance.

Revenue from product sales during the first quarter was $446,000 as compared to $255,000 in the first quarter of 2009 and $319,000 in the fourth quarter of 2009. In addition, revenue from grants and contracts was $380,000 driven primarily by our pharmacogenetic assay development project with Eli Lilly.

Total first quarter 2010 revenue was $826,000 as compared to $255,000 in the first quarter of 2009 and $828,000 in the fourth quarter of 2009. Costs and operating expenses in the first quarter were $9.2 million as compared to $8.2 million in the prior year.

The year-over-year increase was primarily driven by non-cash equity compensation expense. Investment and research and development in the first quarter of 2010 was $4.4 million as compared to $4.8 million in the first quarter of 2009. The reduction is a result of the completion last year of prototype material investments in the Verigene SP. SG&A expenses in the first quarter were $4.1 million versus $3.1 million in the same period last year. This increase is driven by the non-cash equity compensation expense I mentioned previously.

Our net loss was $8.6 million in the first quarter of 2010 as compared to $8.2 million in the same period in 2009. Cash used in operations was $7.7 million, debt repayment was $1.3 million and investing activity was $360,000 totaling $9.4 million used in cash in the first quarter of 2010. Our debt facility is scheduled to be repaid fully in the third quarter of 2010. Cash as of March 31, 2010 was $67.3 million.

We expect our current cash reserves will fund operations for approximately 2 years. Summing up, we plan to continue to focus our investments on new product development. As we further expand our test menu we will shift focus to ramping up field sales and service commensurate with demand. Now let me turn the call over to Mike McGarrity to provide an update on our commercial activities.

Michael K. McGarrity

Thanks Roger. The commercial organization continues to focus on building a pipeline in our key areas of menu expansion with our install customer base as well as expanding our footprint into infectious disease and cardio diagnostics. While our initial focus in infectious disease was unfavorably impacted by the decline and uncertainty associated with this respiratory season, we are encouraged by the opportunity ahead as we bolster our offering with subtyping, drug resistance and an expanded panel of targets.

The U.S. Pathology Journal recently highlighted high comp multiplex panels as the critical driver of respiratory conversion to molecular. More than a dozen key opinion leaders were aligned on the utility of such panels and timely diagnosis and treatment as well as vigilant opinionology. This is further confirmation of our market driven development efforts.

In addition, our continued development focus and the diagnosis and treatment of bloodstream infection promises to not only build our pipeline and revenue ramp, but to insulate us from seasonal variability. Our other key area of commercial focus is in the pharmacogenetics area related to hemodynamics.

We believe the recent addition of dosing recommendations and clinical data from the Mayo medical study, where readmissions were reduced by more than 30% in the genotype group, will aid in the understanding and adoption of warfarin testing. This development, coupled with the submission of our clopidogrel metabolism assay, will put us in a position to optimize the use of this critical therapeutic information in a clinically actionable way.

The recent black box warning sighting considerable data associated with outcomes, as well as our work with key opinion leaders, points to turn around time and multiplexing flexibility in a sample-to-result format as key drivers to acceptance and adoption. We are in collaboration with a number of cardiovascular centers of excellence to validate the value of appropriating this test into the clinical protocol, from both an economic and outcome perspective.

These sites are representative of the 1500 U.S. centers treating the 1.2 million PCI patients every year. In addition to ACS patients clopidogrel by primary care cardiologists, this pharmacogenetic application alone mirrors that of the U.S. troponin market opportunity and is well understood and arguably further in Europe and Asia Pacific.

Finally, we continue market development efforts in both Europe and Asia Pacific, where we've engaged key thought leaders in leading institutions. All have a validated interest in our approach to deliver diagnostic value in the area of infectious disease and pharmacogenetics. We look forward to advancing our install base and utilization through expanded menu in areas where we are best suited to provide clinically valuable and actiontionable diagnostic information. Now let me turn the call back over to Bill.

William P. Moffitt III

Thanks Mike. Before moving on to take your questions, let me summarize our key points this morning. We continue to make good progress with all programs aimed at menu expansion and system functionality. These programs and resultant customer value creation will drive growth in our business and increased shareholder value.

We are excited about our prospects and the product offering we are building in microbiology, virology, human genetics, pharmacogenetics and cardiovascular disease. We are equally enthusiastic about the research programs ongoing in autoimmune disease, allergy testing and oncology. We believe increased value for our customers will lead to increased shareholder value. Now we'd be happy to take your questions, and I'll turn the call back over to Carol.

Question-and-Answer Session

Operator

(Operator Instructions) Your first question comes from of Bruce Cranna - Jefferies & Co.

Bruce Cranna - Jefferies & Co.

I wonder if Bill, Roger, you can give us a little color on the revenue line. I'm kind of wondering if on the consumable side hypercoag's still driving things and what sort of equipment numbers, if any, you placed in the quarter.

J. Roger Moody Jr.

Sure. The consumables was the key driver for the revenue line, and it was almost all hypercoagulation. While we had ramped up and launched the respiratory assay, I still mentioned it was after H1N1 fell off, so utilization of the respiratory assay this season has been diminimus. We did have a few additional customer placements this quarter and so we had some system revenue, but most of it was driven by consumables and hypercoag.

Bruce Cranna - Jefferies & Co.

Can you give us that number Roger?

J. Roger Moody Jr.

Of the few placements there was one system outright sale.

Bruce Cranna - Jefferies & Co.

]. And then Bill, I'm kind of curious. I think on the migration study your language was that you're, I think, starting migration studies later this year. I'm just curious, so why is this not kind of full steam ahead? What's the delay? Why not start those studies sort of ASAP?

William P. Moffitt III

Bruce, it's simply because we've got so much else going on. With greater market opportunities and a need to get the timing in if you will. So for example, we have just finished the clinical trials to support the submission for the 2C19 Plavix metabolism assay. That occupies a lot of our time obviously.

We are just about now, we're moving some of the instruments from one clinical site to another. We're reinstalling in a couple of site. And we are getting ready to start the clinical trials for the expanded flu panel which includes the subtyping of H1, H3, the novel 2009 H1N1 we'll commonly refer to as swine flu and also the resistance market for Tamiflu.

Right behind that is another set of clinical trials for the further expansion of that respiratory virus panel to include the adenovirus, metapneumovirus and the parainfluenzas. And so that on top of all the work we're doing on troponin puts us in a position where right now we want to stay focused on exactly the things that we've got going on.

We do plan here a little bit later this year to then begin the migration studies. And it's all just totally new repeat 510(k)s for all of these other human genetic assays. And we'll do those as we get the time to do them. You can think of them as starting in the third quarter and ideally concluding sometime in the fourth. But our priority internally has been clearly the expansion of the respiratory, the 2C19 assay, and getting this troponin matter resolved

Bruce Cranna - Jefferies & Co.

I understand you're kind of triaging things, that's kind of where I was going. So your hierarchy is based upon a presumed, and your assessment of what's most important to your customers and what's most materially important for you from a revenue and an opportunity sense.

William P. Moffitt III

Absolutely.

Bruce Cranna - Jefferies & Co.

And just remind me again, in that list of migration studies you included HFE, right?

William P. Moffitt III

Right, we did. HFE is you know was submitted on the original Verigene System. The FDA came back with a number of questions about that. We've been in dialogue with the FDA about it. We submitted a lot of additional data. They've asked for some additional studies.

And by that time the conclusion we came to was it doesn't warrant finishing it off if you will, finishing off those studies only on the Verigene System, the original Verigene System. If we've got to turn right around and do another 510(k) for the assay migration over the Verigene 1. So all we're going to do is put it in right alongside the other assays and the migration studies, and that will provide the data to finish off that submission.

Bruce Cranna - Jefferies & Co.

And then lastly from me, I know you don't want to probably put too fine of a point on troponin. But I know you've had a bunch of questions from FDA. Can you give us some sense as to how far you've gone in answering those questions? And are you still from a rerunning a sample standpoint thinking, you're looking at 15% to 20% or so of samples that need to be rerun?

William P. Moffitt III

Yes. I think it's probably on the low end of that range, in terms of the number of samples we need to rerun with respect to the Beckman issue. With the assumption, and this is an assumption here, that the only effect ultimately of the Beckman issue is on the DxI. I mean you see the stuff that we see. Some of it says the performance issues are isolated to the DxI, but then there are other sort of lingering questions that we don't have the answer to about whether or not there's been any effect on the running of that assay on the Access itself.

So we're still going through a bunch of internal studies on our own assay, in addition to trying to determine exactly what tact we're going to take with respect to the Beckman matter. It's going to be either rerun samples where the volume of sample doesn't permit us to rerun it. Of course, those patients would have to be excluded.

We may have to come back and use some of the fast track, enroll patient samples as supplements to this. We're still working through a lot of this, and again, all of that against the backdrop of all this other work that's going on. That's why I say it's just very, very difficult to as you say put a fine point on the troponin timeframe.

Bruce Cranna - Jefferies & Co.

Did you ever have an idea as to what percent of those samples have been run on DxI versus Access?

William P. Moffitt III

Yes. It's around 12% to 15%. It didn't get as high as 20%. It was around 12%, 15% I believe that were run on the DxI.

Bruce Cranna - Jefferies & Co.

So that rerun number is really just specific to those that were run on DxI.

William P. Moffitt III

Right.

Operator

Your next question comes from Jeff Ares - Leerink Swann.

Jeff Ares - Leerink Swann

Going off the troponin question real quick. So you haven't rerun any of the samples yet, is that what you're saying?

William P. Moffitt III

That's correct, we have not rerun any yet. Because as you can imagine, if we are going to shift predicate devices for this filing away from Beckman to some other device, we do not want to use up the residual sample volume that we have.

Jeff Ares - Leerink Swann

And then just looking at the revenue for the quarter, I know you guys don't give guidance. It was little bit lower than we were expecting. And for the rest of the year we're kind of, the rest of us in the street are a little higher.

So can you give a little bit of color to help us to where you think it will be? Is this run rate kind of going to be a slower ramp up now that you kind of have a lot on your plate in terms of getting thins situated before more placements come out? Or do you kind of see it still accelerating through the back half of the year?

William P. Moffitt III

Well there's no question, our revenue will be driven by placements. And right now as you've seen, in the absence of the respiratory virus season, in the absence of the flu season, our placements fell off to a very, very low, low number. What's going to drive an increase in future placements will be a ramp back up on the part of customers or preparation for the next flu season and us getting our new subtyping panel into the FDA and getting that cleared.

So you can think of those events as at the back end of the year. Also, we believe the 2C19 Plavix metabolism assay is going to be well received in the market. But again, we're just getting to the point of submission on that. So I would expect to see that on the back end of the year. So although we don't provide, as you point out, financial guidance, I would not expect to see a return to a higher rate of placements until the back end of the year.

Jeff Ares - Leerink Swann

How have talks with future [inaudible] been going about the 2C19 assay? I know you said there's a lot of interest.

William P. Moffitt III

Yes, there's a lot of interest. There's very, very few folks you talk to who aren't aware of it. So I mean, and the positive way to say that is there's a tremendous awareness of this amongst the interventional cardiology community. There's a lot of publications in this area in the last 18 to 24 months. But I think maybe Mike can give you some better color, because he's been out in the field with more of these customers than I have. Mike, do you want to add to –

Michael K. McGarrity

Jeff, I would just comment that I think that there's definitely awareness. There's also, we've got a pretty good plan with a half a dozen of the sites that we refer to and are working with more. They're planning to generate pilot data. And I think 3 key things are driving a potential action plan based on the information.

And that's that there is now a therapeutic alternative to Plavix which gives them an option to do something with the information. Secondly, there's validation of potential dosing changes. And I think thirdly, there's really an awareness that the prevalence of these mutations, 25% to 30% really argue that there's almost a placebo therapeutic prescription given to that type of a patient population.

And regardless of what you're going to do therapy-wise it seems like clinicians are not arguing with the fact that we at least want to know which patients, even if they're just going to track them closer, similar to what you saw in the [mayomactus] study. So arguably it's early. The relabeling of the black box just came on 30 to 45 days ago, but the awareness in the market doesn't reflect that. It's clearly out there.

Jeff Ares - Leerink Swann

One last question. I think last quarter you were talking about your cash balance being enough to support operations for a few years and now it's 2. Is that really a change, or is that just kind of nitpicking or do you guys see more cash in the future given all these things you have going on?

William P. Moffitt III

Yes, last quarter I believe we used the same terminology of 2 years. And we try not to get too fine on this simply because the level of gross profit contribution over the next 2 years and the rate of revenue ramp is something that we don't one, make projections about and we try to be conservative when we look at our cash forecasting. So we've held steady in our last couple filings at approximately 2 years.

Operator

Your next question comes from Scott Gleason - Stephens Inc.

Scott Gleason - Stephens Inc.

I guess first, can you guys remind us the shelf life of existing assays when we think about the respiratory [inaudible] panel. Are those test kits, I guess, going to be available to be sold next year?

William P. Moffitt III

Well, the number of test kits we manufactured here really was consistent with demand. So the shelf life on this assay, I think to start with, is 90 days. But then we have real time studies ongoing. And we would expect the shelf life of that assay to get right up there with the rest of ours, which are in the 9 month and climbing toward a 1 year timeframe.

So Scott, if you were concerned about inventory, that sort of thing, there's no significant inventory here of the respiratory because we were making this stuff sort of on a demand basis. At the same time, any little that we might have had left has probably already been consumed as we continue to work on developing the additions to it.

Keep in mind that the microarray format here, unlike many companies, allows us just to add targets to the previously existing targets here. So any material that was left over would have been used in the development studies on the next expansion of this panel anyway.

Scott Gleason - Stephens Inc.

And then Bill, can you maybe talk a little about how you would kind of see the Tamiflu resistance product being used in concert with the rest [inaudible] products? And maybe a little bit just kind of in terms of thinking about incremental value from a dollar standpoint that you might be able to kind of garner from that?

William P. Moffitt III

Yes, you know it's interesting. The respiratory market here, Mike referred to this article that was in one of the pathology journals here in the last 6 weeks or so. And it was an article that had maybe a dozen or so of the thought leaders in respiratory virus. And almost the title of this thing was high count multiplex assays will drive the conversion from traditional methods to the molecular methods.

And the focus and the emphasis on that was, it's kind of nice to have a flu A, flu B RSB but what we, the laboratory community, really needs are these larger, broader panels. And that's where multiplexing gives us a tremendous advantage. And as you know, there's anywhere from 10 million to 15 million to 20 million or more flu assays run in this country every flu season. It really depends on the severity of the season.

And not all of those of course have been converted over to the molecular, precious few have. But the industry is in the process of making that transition. So we think the upside of the year for us in particular, with a multi-target, multiplexed assay with a fairly rapid turnaround time. We think the upside of the year for us is tremendous if this market converts over.

Albeit, it will make our business look a bit seasonal as the flu season comes and goes. The things that we think will add value in microbiology and take some of that seasonality out if you will, are things like the bloodstream infection or Sepsis assay, where we hope to get our clinical trials going by the end of this year.

We're making good progress in the development of that, so I'll stick with that timeframe of us getting started about the end of the year. The 2C19 one is an interesting one to me. It in and of itself could be a market in dollar value greater than troponin. It's about 5 million to 6 million new prescriptions for Plavix each year. But this is a test that will have a value price on it higher than what troponin will be in the marketplace.

So I would expect to see this and actually contribute significantly to us. The two don't really interplay in an individual hospital. The Plavix metabolism is going into interventional cardiology. The assay itself may be run in the molecular lab, but it's going to support interventional cardiology to start. Keep in mind, interventional cardiology PCI, percutaneous interventional use of Plavix is only a minor portion of the whole Plavix market.

There's another significant component of that market that's the office-based cardiologist. So we would expect to see laboratories, especially those in the larger hospitals that have outreach programs through their physician communities, really adopt this test. Not only to provide it for support of their PCI programs, but in their outreach programs as well. And then the flu test of course is largely run in microbiology.

The unique thing for the customer though, and I think this is one of the strengths of our technology and our platform, it is the exact same instrument that runs it all. And so the customer isn't buying multiple platforms to do this great breadth of testing. They're buying one single platform, modular in design, so they can put as many units as they need to in each specific location and then be able to run this broad menu of tasks. Mike, do you want to add something about the –

Michael K. McGarrity

No. My only comment, Scott, on the resistance marker would be that, and Bill touched on it, is the initial uptake in respiratory testing was in kind of the molecular labs. I think as we see that migration to core microbiology, they're much more familiar with and used to the susceptibility and resistance factor being incorporated into a diagnostic, whether it be culture or bloodstream infections. So they look for that information and we think that's part of the impetus for putting it on, that's feedback from our customer pipeline and we think it's a differentiating factor based on our ability to multiply.

Scott Gleason - Stephens Inc.

One last question, real quick, for Roger. I guess, can you just give us an idea of kind of where you guys are standing in kind of the terms of the capacity buildup from a system and a cartridge standpoint? And then also, maybe give us a little bit of guidance on the margin front. I guess if we start seeing revenues ramp up in the second half of the year here, kind of where you can kind of see the gross margins start progressing towards.

J. Roger Moody Jr.

Sure. As we entered this flu season, we had previously discussed increasing our capacity to meet an anticipated flu season that never really transpired. So we have in place, and have not taken back away any of that capacity that we've built into our system. In fact, we're using much of that capacity for development efforts currently.

So we feel as though we already have the capacity to meet the anticipated flu and 2C19 market from a cartridge manufacturing perspective. We have not yet invested heavily into building up a huge amount of inventory, but we'll do that over time as demand and customer validation dictates.

On the margin side of things, we're continuing to make good progress on a number of fronts. One is on the glass slide, which is one of the more expensive components of our cartridge. We're continuing to see some good downward movement, not only from our vendors on that, but we also have some additional opportunities that we think will contribute to further cost savings on the cartridge so that by the time we start to really ramp up volume you'll start to see some meaningful margin in the product sale.

On the royalty side, we also had a couple royalties that we've been paying that peeled off, one in December of last year and another one that will peel off by August of this year. So we'll start to get some relief in that area. And so we really do believe that we have an advantage here in terms of getting these costs down to a point where as the revenues scale up we'll start to see some healthy margins on the product sales beginning next year.

Operator

(Operator Instructions) Your next question comes from of Bill Quirk - Piper Jaffray.

Bill Quirk – Piper Jaffray

Bill, actually both questions are going to be on troponin. But you referenced the Beckman challenge they're having on the DxI, and I guess it's yet to be determined on Access. Having said that, when you take a look at your own data that you've run for the clinical trial are you seeing any differences in terms of the overall results when you compare it to performance vis-a-vis the DxI versus the Access?

William P. Moffitt III

I thought you were headed somewhere slightly different with that question. Let me answer a higher level question and then I'll get to your specific one. So when we look at how our assay performs compared to the Beckman assay, which the vast majority of the data of course being driven by the Access, not the DxI, right?

When we do our comparison studies we run the sample on the Beckman, we run it on our system. Or our customer ran it on the Beckman, we run it on our system, and then in determining the ability of the assay to make an appropriate call if you will, above an MI cut point or not above an MI cut point.

We then compare both systems to the adjuticator, which in this case was the cardiologist who reviewed, the discharge diagnosis. And so not only will we and Beckman be different, if you will. Just in terms of raw numbers versus cut points and what not. But we may also differ in whether or not we agree or disagree with the discharge diagnosis. And of course those discharge diagnoses aren't always perfect as well.

So there's an approach here that basically is referred to as concordance. And that's how well do you and the predicate device assay agree with the discharge diagnosis. And there are differences. In fact, you can take any assays out there and run concordances of them in the discharge and you're going to get a difference, so some of the work that we're doing is to understand those differences.

The specific question you asked is do we in our own data see a difference between the DxI and the Access. We didn't run the same sample on both the Access and the DxI. But the only way we would be able to see it is if in the subset of data that we saw greater differences or greater variability if you will between us and the DxI than we saw between us and the Access.

And since the DxI on the method comparison samples is about 12% or so of the samples, and on method comparison there were about 700 patients, 3 samples, 2100. There's about 200 comparisons there. I don't know that it's enough, don't know that it's not, but don't know that it's enough to draw meaningful statistics to a conclusion.

I will say this, that is the area. One of the things that we're doing in this review is digging and trying to understand just how different those things are because they are a part of the total concordance difference, our assay versus Beckman. Sorry for the long answer, but –

Bill Quirk – Piper Jaffray

No, no, no. That's a good answer Bill, and that's exactly what I was going after. Understanding that you don't have enough patients there, or I should say samples rather, run on the DxI to call that out statistically. Can you talk about any trend analysis? I guess what I'm trying to get at here, Bill, is the extent to which you might be able to catch a break from FDA.

William P. Moffitt III

Yes, yes. We haven't finished the analysis, so I don't know that there's any real trend there. I mean we can still think of it as even though it's not statistically of the right size, can you just eyeball and see a difference? We really haven't finished the analysis there.

We're doing a lot of work, believe me, every single day of the week we're doing a lot of work on this troponin assay. But we're also working on our own assay, making sure, because when you've got 3 variables and all you know is the things are a bit different here and there the question is which one is the real variable? So it would be imprudent of us to point our finger and say, "Aha, it's the Beckman." It's a difference between us and Beckman which it could be it them, it could be us, it could be a combination of the two

Bill Quirk – Piper Jaffray

And then still related to troponin, but a separate question. Can you just give us an update on fast track? If we completed enrollment should we still be looking for data to be published here roughly the end of this year?

William P. Moffitt III

Well we definitely completed enrollment. That was completed in December. And we are just standing by waiting to run all of the fast track samples. So again, think 1500+ patients, an average of about 4 blood collection times for each of those, so about 6000 or so samples there. They'll all be run in at least duplicate, if not triplicate.

They will be run on our system, but they will also be run on the system that we use as a predicate device for our submission. And therein lies a pause, if you will, because if we actually change predicate devices let's say over to the [Bear Ultra] [inaudible] for example, then we don't want to have consume those fast track samples having run them on the Beckman system. It was our full intent to run them on Beckman and our assay, but now we've got that on hold as well until we can sort this out.

So the right way to think about it is, the samples are there. They're just waiting to be run, for that data to be analyzed and then reported back to the investigators, the principal investigators here. But we have the running of that on hold until we figure out and resolve this issue of the predicate device in our filing.

Bill Quirk – Piper Jaffray

Just one last question and then I'll jump back into the queue. So basically, Bill, it sounds like either we have to pick a new predicate who presumably didn't refer to the [inaudible] as their own predicate assay. Or secondly, we just have to wait for Beckman to get things squared away with the FDA.

William P. Moffitt III

Yes. It would be nice if the FDA and Beckman came out and said, "Oh, here is the only problem we had. It was only this." You know, fenced the whole thing in and then we'd know exactly where we stand, right? That hasn't happened yet. So you're right, it's either we make a decision to move on, rerun everything on a different predicate, and one that didn't use Beckman as its predicate. Or we have to wait for the resolution.

Right now we're not at that decision point, simply because we've got another internal work to do here that we've got a little bit of time before we have to make that final decision, are we going to stick with Beckman or are we going to go to a different predicate device?

Operator

Mr. Quirk, if you'd like to continue with your questions you are the final questioner.

Bill Quirk – Piper Jaffray

I'm all set, thank you very much.

Operator

Ladies and gentlemen, this concludes your question-and-answer portion of your conference today. I’m now going to turn the presentation over to Mr. Moffitt for his closing remarks. Sir?

William P. Moffitt III

Thank you, Carol. Again everyone, thank you for joining us for our first quarter call. We look forward to speaking with you in the coming weeks and quarters. We feel very good about the progress we're making here at Nanosphere in building customer and shareholder value. We thank you for your support. Look forward to continuing to work with you. Have a good day everyone.

Operator

Ladies and gentlemen, this concludes your presentation. You may now disconnect your line, and have a great day.

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