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BG Medicine, Inc. (NASDAQ:BGMD)

Q4 2013 Earnings Conference Call

March 20, 2014 8:30 AM ET

Executives

Paul R. Sohmer – President and CEO

Stacie Rader – SVP, Executive Operations & Human Resources

Stephen Hall – EVP and CFO

Analysts

Kevin DeGeeter – Ladenburg Thalmann

Operator

Good day, ladies and gentlemen, and welcome to the BG Medicine, Inc. Fourth Quarter 2013 Earnings Conference Call. At this time, all participants are in listen-only mode. Later, we’ll conduct the question-and-answer session and instructions will be given at that time. (Operator Instructions) As a reminder, this call maybe recorded.

I will now introduce your host for today’s conference, Dr. Paul Sohmer, President and CEO. You may begin.

Paul R. Sohmer

Thank you. Good morning, and welcome to the BG Medicine year-end 2013 earnings conference call. I’m joined today by Stacie Rader, our Senior Vice President of Executive Operations; Steve Hall, 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 Steve Hall, 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 of information for today’s call and forward-looking statements. Today’s call will be recorded, and a replay will be available on our website. The 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 uncertainties. The Company’s actual results may differ materially from these anticipated by our forward-looking statements. The risks and uncertainties are set forth and discussed in the Company’s most recent Annual Report on Form 10-K as well as updates to those risks and uncertainties that may be filed by the Company from time to time with the Securities and Exchange Commission or otherwise made public.

With that, I’ll now turn the call over to Steve Hall.

Stephen Hall

Thank you, Stacie. On this morning’s call, I will briefly highlight our key measures of financial performance for the year-ended December 31, 2013. Top line growth is our first key measure.

Total revenue was $4.1 million for the full-year 2013, compared to $2.8 million for the same period in 2012. The $1.8 million increase in revenues or 45% year-over-year results principally from growth in sales from our largest specialty cardiovascular laboratory provider and from our third-party clinical research organizations. Product royalties on European sales by our partners were not significant in 2013.

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 2013, these efforts translated into a 28% year-over-year decrease in operating cash burn.

Operating cash burn decreased by $6 million to $15.3 million compared to $21.3 million in 2012. Contributing in large part to the decrease in operating cash burn was the 31% decrease in operating expenses for 2013.

We ended the year with $7.75 million in cash. Concerning our bottom line, net loss for 2013 was $15.8 million, a 33% improvement from the $23.8 million net loss reported in 2012. Net loss per share at the year-end 2013 was $0.58, a 51% improvement from $1.18 in 2012.

Finally, for the full year, we expect to increase our revenues and decrease our operating cash as compared to 2013.

This concludes our financial review. I’ll now turn the call back over to Paul Sohmer.

Paul R. Sohmer

Thank you, Steve. Thank you, Stacie. In 2013, we addressed the fundamentals of our business. We prioritized our actions and investments around what we believe are the key drivers of adoption of our BGM Galectin-3 Test. We refocused our commercial strategy and restructured our clinical research and discovery programs.

In so doing, we grew our revenues by 45% from the prior year, reduced our operating expenses by 31%, reduced our loss from operations by 37%, and reduced our operating cash burn by 28%. We achieved critical market development milestones, including recognition of the BGM Galectin-3 Test in the American College of Cardiology Foundation and American Heart Association Guideline for the Management of Heart Failure. A 69% increase in the Medicare national limitation amount for galectin-3 testing.

The introduction of Automated galectin-3 testing outside the U.S., completion of our critical path tasks and support of the Abbott ARCHITECT Galectin-3 assay submission to the FDA, an extension of the commercial reach of our BGM Galectin-3 Test to primary care physicians, health care provider groups, hospitals, and regional reference labs, and we welcome the publication of 13 full-length clinical research and review articles related to the utility of our BGM Galectin-3 Test, as well as numerous oral and poster presentations that were delivered at both U.S. and international meetings.

In 2014, we expect to continue to develop market demand for galectin-3 testing, explore new indications and clinical claims for our BGM Galectin-3 Test, and advance the development of products in our pipeline. Notwithstanding these commercial and development activities, we will continue to aggressively manage our spending. For the full-year 2014, we expect to increase our revenues and decrease our operating cash burn as compared to 2013.

The primary goal of our commercial strategy is to drive the worldwide adoption of our BGM Galectin-3 Test, Automated galectin-3 testing, and to set the table for our future pipeline products. We have prioritized our actions and investments around what we believe are the key drivers of adoption of the diagnostic product that incorporates a novel protein biomarker. We believe that the actions taken and investments made in support of our efforts to drive adoption of our BGM Galectin-3 Test and Automated galectin-3 testing will create a commercial conduit for our future pipeline products.

We will continue to focus our attention on what we believe are the critical catalyst for driving market acceptance of our BGM Galectin-3 Test, including demonstration of the potential clinical utilities to response an independent clinical research studies, education of nurse practitioners, primary care physicians, cardiologist and heart failure specialist, and continued expansion of the adoption of galectin-3 testing by specialty laboratories both national and regional independent reference laboratories, hospital laboratories, and clinical research organizations.

We believe that Automation of our Galectin-3 Test will broaden its acceptance by laboratory customers, and as a result accelerate its clinical adoption. To this end, we completed our clinical – critical path tasks and support of the Abbott ARCHITECT Galectin-3 assay submission to the FDA. We look forward to making similar progress with our other Automated partners in the future. We believe that the clinical and commercial value of our BGM Galectin-3 Test may extend beyond its current indications for use.

Galectin-3 has been demonstrated to predict adverse events in chronic heart failure patients, as reflected in our product labeling and in other disorders as reflected in research studies. Several groups are pursuing Galectin-3 as a target for the development of new therapeutic agents. Others have suggested that testing for Galectin-3 may be used to identify patients who may or may not respond to certain therapeutic interventions.

Earlier today, we issued a press release of adding new patents that we were issued relating to the use of galectin-3 testing to help predict response to cardiac resynchronization therapy. We expect to explore new clinical claims and indications for galectin-3 testing for assessment of patients with heart failure, as well as in other disorders.

Expansion of the product label to include no clinical claims and indications for use will require additional clinical studies and clearance or approval by regulatory body such as the FDA and inclusion in our CE Mark for use in the EU. We expect to develop new patient selection tools that may incorporate new clinical indications for the BGM Galectin-3 Test, as well as other biomarkers or combinations of biomarkers that we identify from our analysis of the appropriate clinical cohorts, including the BGM Medicine sponsored BioImage Study.

We have exclusive rights to diagnostic inventions rising from our analysis of this proprietary observational and community-based cohort of over 6,800 individuals who have been followed since 2009. Baseline blood, serum, plasma, DNA and RNA samples collected from all participants have been stored and are available for our analysis.

In addition, insurance claims, including information regarding diagnosis, procedures, and therapies related to over 1,200 non-fatal cardiovascular events that were experienced by participants in the cohort over the more than four years since follow-up was initiated is available to us for data mining. We believe that this asset provides us with a unique and proprietary platform from which we may develop new diagnostic products.

In regard to CardioSCORE, a multi-analyte biomarker-based test that is designed as an aid in the assessment of near-term risk for significant atherothrombotic cardiovascular events, the previously discussed medical review and adjudication of clinical endpoints have been completed. We are currently evaluating this data as well as data relating to sample [availability] [ph] and other technical issues. This evaluation will guide our regulatory, commercial, reimbursement, and investment strategies for CardioSCORE.

As the patient population ages, the prevalence of post acute and chronic diseases such as heart failure rises. As the prevalence of these diseases raise so does the need for simple, accessible, affordable, and reliable tools to help guide decisions regarding the where, who, and how these patients are managed. We believe that for chronic heart failure patients, the BGM Galectin-3 Test may, in fact, be such a tool.

We further believe that there is a significant opportunity to apply the BGM Galectin-3 Test and other biomarkers or biomarker combinations that we develop to meet this need for chronic heart failure and other post acute and chronic diseases. Thank you.

Operator, that concludes our formal remarks. We are now ready to take your questions.

Question-and-answer session

Operator

Thank you. (Operator Instructions) Our first question comes from Kevin DeGeeter of Ladenburg. Your line is open.

Kevin DeGeeter – Ladenburg Thalmann

Hey, good morning, guys. Congratulations on some of the progress. A few questions, can you provide a little bit more granularity as to expected timeline for potential FDA clearance and launch of the Automated Galectin-3 on the ARCHITECT. And a little more color as to where some of your other Automated partners are and their efforts to seek a 10-K clearance?

Paul R. Sohmer

In regard to the Abbott ARCHITECT I can simply say that the submission is under review by the FDA and it’s Abbott submission and it is ongoing. Beyond that at this point I can’t really give any more specific timelines into their submission. And we think it is obviously a significant milestone that this submission has been made and obviously we’re delighted with that.

In regard to the others, we continue to make progress in terms of moving in the same direction. And I can’t give you any specific timelines yet as when the next submission would be made. But we are actively working to bring the next one to FDA.

Kevin DeGeeter – Ladenburg Thalmann

And with regard to launch in Europe on the Automated platforms and some of your partners, are there specific items here we should look forward to change the trajectory of adoption to make meaningful contribution. Just help us better understand really kind of the commercial positioning in Europe and what is it going to take to have the market make up a meaningful contribution for BG?

Paul R. Sohmer

So here is where we are. I think that request to purchase materials for clinical research projects along with increase from European-based independent laboratory suggest that there is ongoing interest. In addition, galectin-3 testing continues to receive support from European opinion leaders, and there is growing European awareness of the potential use of galectin-3 testing, particularly in the emergency room for assessment of heart failure patients prior to hospital admission.

However, sales generated by order Automated partners have been limited to-date. And this I think relates to the fact – a couple of facts; one is, the lack of outpatient reimbursement and that to-date Galectin-3 has not been included in European care management guidelines. These present significant obstacles, we have focused our attention on bringing the products into the guidelines.

We have a considerable amount of effort devoted on that right now and are optimistic that we could see its inclusion and at least one guideline, perhaps as early as late 2015. But this is a lengthy process. We have I think gathered a considerable data, we have considerable data. We’ll continue to consider, and so as an organization I think our primary focus right now is to get this into the guideline, which I think would facilitate uptake in Europe.

Kevin DeGeeter – Ladenburg Thalmann

Okay. Maybe two more quick questions from me then I’ll get back in the queue. With regard to CardioSCORE what’s your updated thinking with regard to the appropriate go-to-market strategy on CardioSCORE both in terms of positioning regulatory and also it’s just a program that BG is interested in making additional internal investment or is there something that in the near-term there maybe an opportunity to out-license to a third-party.

Paul R. Sohmer

Yes. I think the answer to that question is that as I said in my prepared text is that now that we have completed the medical review and the adjudication, we have those data in hand. We’re evaluating those data. In addition, we’re evaluating issues – some of the analytical issues and sample stability issues as well as at the same time that given the output from that I think we’ll have a clear sense of how we need to approach this going forward from a regulatory and commercial perspective.

I should say, there is considerable interest that has been expressed for CardioSCORE, so which really a matter of us bringing to closure our evaluation of the data, addressing some of the issues related to reimbursement as an example, and then moving from there. So we – the answer to your question is that, we’re currently evaluating that. We know there is interest and we hope over the next few months to have a clear pathway of how we’re moving forward with the CardioSCORE.

Kevin DeGeeter – Ladenburg Thalmann

Okay. And then just lastly really kind of the housekeeping item, I appreciate that you’re not providing 2014 financial guidance. But in general strokes can you help us appreciate your comments with regard to controlling operating expenses with the observations that additional clinical trials maybe useful in expanding the clinical utility of Galectin-3 both alone and in combination potentially with other biomarkers. How do we kind of square what looks like higher R&D activity with your comments on lower operating spend?

Paul R. Sohmer

So I think Kevin, you know since I walked through the door, this has been a matter of our prioritization and really addressing each investment that we’re making in terms of where we put salespeople, where we’re putting our research money, and the kinds of things that we’re doing to where we think will create the greatest value. And we do this on a almost by moment by moment basis.

So a lot of what we will be doing is addressing each of these potential opportunities in that context. That being said, I think we’ve become rather efficient in the way we approach both our development, in particular how we develop our products. We have developed a very efficient approach to data mining, so we can – we have lots of data available to us. We have cohort – patient cohort information that Aram and his team can analyze in a regular basis and it allows us to reduce risk and identify those things that maybe a higher opportunity for us.

And at the same time, I think we developed some fairly efficient ways to do testing and to support us. So, I think that, I believe that we have the opportunity to move ahead on them with these projects. We can’t do everything all at once, but we will certainly prioritize those sorts of investments based on the information and feedback we have from the marketplace for those products that may create the greatest value.

Kevin DeGeeter – Ladenburg Thalmann

Fair enough. I appreciate the clarity. Thanks so much, guys.

Operator

Thank you. (Operator Instructions) I’m not showing any further questions in queue. I would like to turn the call back over to management.

Paul R. Sohmer

Great. Thank you very much. Thank you all for participating this morning, your ongoing interest and support are greatly appreciated, and we look forward to updating you on our progress.

Operator

Ladies and gentlemen thank you for participating in today’s conference. This concludes today’s program. You may all disconnect. Everyone have a great day.

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