TrovaGene's (TROV) CEO Antonius Schuh on Q1 2014 Results - Earnings Call Transcript

May.12.14 | About: TrovaGene, Inc. (TROV)

TrovaGene, Inc. (NASDAQ:TROV)

Q1 2014 Results Earnings Conference Call

May 12, 2014, 05:00 PM ET

Executives

Stephen Zaniboni - CFO

Antonius Schuh - CEO

Mark Erlander - Chief Scientific Officer

Analysts

Sung Ji Nam - Cantor Fitzgerald

Yi Chen - Aegis Capital

Operator

Good day, and welcome to the TrovaGene First Quarter 2014 Financial Results Conference Call. All participants will be in a listen-only mode. (Operator Instructions). Please note this event is being recorded.

I would now like to turn the conference call over to Mr. Stephen Zaniboni, Chief Financial Officer of TrovaGene. Mr. Zaniboni, the floor is yours sir.

Stephen Zaniboni

Thank you for joining us on our first quarter 2014 conference call. As most of you know we are focused on developing and commercializing our precision cancer monitoring technology which can inform oncologists and guide treatment decisions by determining a patient's mutational status and tracking therapeutic response and resistance overtime. We are in the process of expanding the body of clinical evidence supporting our urine based cell free DNA mutation monitoring system through collaborations with major cancer treatment centers and integrated healthcare networks.

This year we expect that the benefits of our precision cancer monitoring technology will become more apparent in terms of its clinical utility and impact on patient outcomes. Our intellectual property estate protecting our technology is strong and growing and includes methods of extracting, purifying, preparing and detecting cell-free DNA and RNA mutations in urine.

Before moving on I must remind you of the risks inherent in our business and ask you to consider the following information regarding 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 risk associated with product and diagnostic test development, government regulation, market acceptance, limited commercial experience, dependency on key personnel, obtaining financing, and other factors discussed in the company’s periodic reports filed with the SEC.

With that said the format of this call will be as follows. First, our Chief Executive Officer, Tony Schuh will review the progress we've made year-to-date; Mark Erlander, our Chief Scientific Officer will give an update on our clinical collaborations and data presentation at medical meetings and finally I will summarize our financial results and review the company’s goals and objectives for the remainder of the year. A question-and-answer session will follow the call.

I am now pleased to introduce Tony Schuh, TrovaGene’s Chief Executive Officer.

Antonius Schuh

Thank you, Steve. Advancing additional oncogene mutations assays into our CLIA Laboratory and developing clinical evidence around our precision cancer monitoring technology remain our highest priorities. In the first quarter we made significant progress on our goals. Our most important news since the beginning of this year is the release of our first multiplex oncogene mutation assay, integrating the company's proprietary sample preparation and primary technologies with next generation sequencing as a mutation detection platform.

In addition we presented important clinical data at the American Association for Cancer Research meeting in April and announced two strategic operations with major integrated healthcare networks; U.S Oncology and Catholic Health Initiatives.

Our KRAS mutation assay is the first application of our precision cancer monitoring platform that uses NGS and we expect to leverage NexGen technology to scale the development of our oncogene mutation assay and assay panel programs. As a result we plan to expand our platform to cover a broader range of mutations for the end of this year. The poster that we presented at the AACR meeting in April was the first of a series of clinical study results that we expect to release throughout the year. The initial study conducted by both MD Anderson cancer center demonstrated 88% concordance between a patient's biopsy and the ability of our precision cancer monitoring technology to identify BRAF V600E mutations at any time point.

It's important to note that this was an all comer study with patients that had many different tumor types, multiple different treatment regimens and the timing of urine collection was variable from patient to patient. We believe that the 88% concordance is impressive and can be further improved in our ongoing studies which control for the timing of patient sampling and other study design elements.

Our clinical collaboration with US Oncology is focused on detecting and quantifying KRAS mutations to improve the care of metastatic pancreatic cancer patients, particularly when other methods to track those patients and the treatment progress fall short. As many of you know US Oncology is owned by McKesson and its wonderful largest network of integrated community based oncology practices in the country.

The collaboration that we recently announced with Catholic Health Initiatives' Center for Translational Research was another key milestone, particularly because clinical studies will begin shortly and execution on sample collection study coordination will be handled by a very capable organization within the CHI system. An important element of this collaboration is that validation of our precision cancer monitoring platform could lead to commercial implementation within the large Catholic Health Hospital System. CHI is the fifth largest integrated healthcare network in the country and provides care to about 22,000 cancer patients per year within its 90 hospitals.

We believe that to succeed at improving the standard of care for cancer treatment, strong clinical evidence and physician experience must be developed to support broad adoption of our technology in the U.S. and by international healthcare systems. Our cooperation with major cancer centers like MD Anderson and Sloan-Kettering as well as large integrated healthcare networks like U.S. Oncology and Catholic Health demonstrate that we are making great progress in this regard. We now have seven ongoing clinical programs, executing on our current collaborations and entering into additional agreements remain our top priorities at TrovaGene.

As we approach ASCO the largest oncology meeting of the year we expect to present data that can help us gain additional traction into clinical community. Our Chief Scientific Officer, Dr. Mark Erlander will review clinical results from the AACR meeting and will also provide insight into studies that could report out later this year. I am proud of the accomplishments we and our clinical collaborators have achieved so far and I believe that TrovaGene's molecular diagnostic platform is positioned to lead the industry in cancer monitoring by tracking cell-free DNA mutations in a completely non-invasive liquid biopsy.

We remain focused on the execution of our business plan and are dedicated to helping oncologists to improve care that they deliver to the cancer patients.

With that I'll turn the call over to Dr. Erlander.

Mark Erlander

Thank you, Tony. TrovaGene’s objective is to demonstrate with our precision cancer monitoring technology the clinical utility of non-invasive near real-time detection and monitoring of oncogene mutations for any tumor type. We continue to implement a clinical strategy that's based on our collaborations with key opinion leaders, integrated healthcare networks and leading pharmaceutical and biotechnology companies. With these collaborations we seek to further demonstrate concordance of mutational status between our urine-based diagnostics and tissue biopsy. Further we also seek to determine responsiveness and potential resistance to therapy by monitoring these patients longitudinally that is over time.

Our diagnostic platform has been designed to provide clinical important information that is beyond the current standard-of-care which primarily relies on repeated imaging. In addition to our urine-based BRAF V600E and seven plex KRAS applications which are available to our CLIA certified, CAP accredited, high complexity clinically lab we currently have ten active oncogene mutation assay programs in our pipeline, each of which is planned to be transferred into our CLIA lab and become available to clinicians when validation is complete.

Our plan is to develop these single mutation assays as well as several assay panels for the multiple mutations associated with certain tumor types. As Tony previously mentioned, developing our portfolio of assay and panels utilizing next-generation sequencing is highly scalable and this should allow us to broaden the coverage of oncogene mutations with our precision cancer monitoring platform later this year.

As TrovaGene moves forward with double clinical programs in parallel we recognize that physicians are highly appreciated of the clinical value that our cancer monitoring platforms offers. For instance our collaborators at MD Anderson saw an opportunity to use our BRAF V600E mutation assay in a group of patients with histiocytic diseases including Erdheim-Chester disease and Langerhans cell histiocytosis or LCH. More than 50% of these patients with these histiocytic disease harbor BRAF mutations and our collaborators on their own begin to test patients with our assay. In as many of 60% of histiocytic patients mutation [detection] is difficult if not impossible to detect in a tissue sample. Additionally most of those diagnosed with LCH are young children.

Because of these challenges physicians felt that our urine-based BRAF mutation assay could provide a robust solution for the diagnosis and monitoring of these patients for treatment response. These clinicians are investigating our technology in histiocytic patients and while the study is still ongoing in multiple centers we expect to report clinical data this year demonstrating the utility of our precision cancer monitoring platform in this life threatening group of diseases.

We believe that strong perform of our assay in this patient population has potential to become the first demonstration of clinical utility in a specific indication. We believe that proving urine-based detection of mutational status in this and in other studies will encourage adoption of our technology in the clinical practice.

With respect to data recently presented at the AACR meeting in April, our collaborator, Dr. Filip Janku from MD Anderson demonstrated a positive correlation between BRAF mutation monitoring and treatment response using our technology. The 88% concordance between biopsy and our urine-based BRAF V600E mutation assay at any time point showed once again that our assay is high sensitive for detecting the target mutation for a given patient, and a significant co-relation between treatment response and V600E mutation levels in the study also support favorable clinical utility with our technology.

The results thus far validate our platform and the ability to detect mutations of interest in urine samples with high sensitivity for the purposes of monitoring cancer treatment and response. We remain excited about the data we are developing in our ongoing clinical programs and with the ASCO conference beginning later this month we expect to have a presence at the meeting with two abstracts accepted. Once these study results have been presented we will update the investment community on the data and their importance.

Additionally we were recently notified that one of our clinical manuscripts had been accepted for publication in a peer review journal and two additional manuscripts are tracking for submission later this year. We believe that these papers have all the potential for publication before year-end which would help drive awareness and uptake of our available oncogene mutation monitoring assays.

Thanks for your attention. I will now turn the call over to Steve Zaniboni to present the financial results for the recent period.

Stephen Zaniboni

Thanks Mark. TrovaGene’s financial results for the first quarter are as follows: For the three months ending March 31, 2014 TrovaGene reported a net loss of $3.2 million or $0.17 per share as compared to a net loss of $1.1 million or $0.07 per share for the three months ended March 31, 2013.

Operating expenses were $3.4 million for 2014’s first quarter as compared to $2.5 million for the same period in 2013. Operating costs include non-cash expenses related to stock-based compensation of $600,000 and $500,000 in the respective periods. Also impacting the net loss was a non-cash change in the fair value of derivative instruments. For the three months ended March 31, 2014, the change resulted in a gain of $33,000 as compared to a gain of $1.3 million for the same period in 2013. The net cash used in the first quarter of 2014 was $2.9 million.

Shares of common stock outstanding used to calculate per share results increased to 18.9 million shares from 15.5 million on March 31, 2014. On March 31, 2014 TrovaGene had cash and cash equivalents of $22.9 million compared to $25.8 million on December 31, 2013. We believe that our current cash position will enable us to meet our operating needs into 2015.

For the remainder of 2014 our goals and objectives are as follows: conduct additional clinical studies at major oncology centers and through collaborations with integrated healthcare networks; present and publish clinical results for studies using TrovaGene’s precision cancer monitoring platform as they become available; complete CLIA development and release additional urine-based solutions for the detection and monitoring of multiple clinically actionable oncogene mutations in parallel; enter into additional R&D collaborations with pharmaceutical companies and expand and enter into new partnerships with strategic diagnostic and life science companies.

In conclusion TrovaGene is well positioned to leverage its investment and its intellectual property, scientific research and collaborations to build a better clinical pathway for cancer monitoring. We believe that upcoming data presentations at medical conferences and publications and peer review journals should begin to drive commercial adoption of our technology later this year.

This concludes our prepared remarks. Operator, we are now ready for questions-and-answer session.

Question-and-Answer Session

Operator

Thank you, sir. We will now begin the question-and-answer session. (Operator Instructions). The first question we have comes from Sung Ji Nam of Cantor. Please go ahead.

Sung Ji Nam - Cantor Fitzgerald

Hi, thanks for taking the questions. I was wondering if you could talk about now that you have several partnerships, as you kind of further your efforts in terms of clinical validation, how you are thinking about potential standardization of the TrovaGene's technology as a monitoring tool meaning are there -- are your partners establishing different kind of endpoints or some sort of cut offs or anything like that they are looking for or I am just trying to get a sense of as you are developing and validating and conducting clinical studies how we should think about, how this might be standardized kind of in a routine clinical setting if you will?

Antonius Schuh

Yeah, Sung Ji, this is Tony Schuh, if I may attempt to answer that first and then Mark you may be able to put color on this. But because monitoring mutational signals in cell free DNA is pretty recent ability and people know frankly little at this point in time about the genetics of cancer in a patient as they are treated, but the key questions will really be how often and at what point in times you want to sample the patient and again that has not been a question in the past, when all you had was a biopsy that you obtained prior to for example surgical removal of the cancer, you didn't need to think about timing of additional samples.

And when you are relying on blood samples you are also somewhat limited in frequency but as you realize that as urine as a sample offers you virtually complete freedom with regards to sampling when, how often, how much you realize that this is really what you want to optimize in order to get the best possible idea of the qualitative and quantitative changes of that mutational signal overtime. So that's what we are much focused on. Mark?

Mark Erlander

Well I think as you know we have a clinical laboratory, a CLIA lab and for our assays and this is a lab unlike any other clinical laboratory. One assay you have a cut line for detection, in this case, as Tony said there is a qualitative and quantitative aspect. There is a qualitative which is detection, no detection of a particular mutation and then there is quantitative which would be relative within a given patient for the relative change.

Now the standardization that you are talking about I think it's a great question because I think today as you sit here today most the way that's normally reported is really a percent of mutation over a denominator of wild-type DNA that's present in the patient's cell free DNA. So I think right now that's really the way that that's been done. This could change but I think right now that's really the accepted standardization of how we report a mutation in cell free DNA.

Sung Ji Nam - Cantor Fitzgerald

Okay. I guess just a clarification though, as you guys publish more data throughout the year you are talking about additional -- there could be additional customers and further adoption of the test. I am just trying to get a sense of are you referring to more partnerships or if there is clinical adoption and what kind of protocol would they be using based on the results you are publishing?

Antonius Schuh

Well said. So I mean we are publishing these results because obviously we want to drive clinical adoption and want to provide to the clinicians the required data that are necessary to understand how and when to use this test and to also justify it and then as far as standards are concerned all we need from the clinician is at the point in time in sampling a certain minimum volume of urine and the entire sample processing happens at our site and that there will be no other limitations, that there will be other specifications beyond that. I am not sure did we answer your question or are we not quite hitting it.

Sung Ji Nam - Cantor Fitzgerald

No, that's helpful. And then I guess in terms of the ten mutation assays in the pipeline, I had thought that you would -- I just, in terms of pacing of the clinical launches I thought that they would happen at a faster rate if you will. I was wondering kind of in terms of timing what your strategy might be around lunching these additional assays throughout for the rest of the year.

Antonius Schuh

So I mean first of all we view not so much as launching individual assays. We view this as launching a platform that can monitor the mutations that present themselves in a given patient, because for certain aspects, for example to track tumor dynamics any mutation provides you the same type of information to a degree and so we look at that as a platform.

Then the big hurdle for us it can be transition our sample preparation our pre-amplification approach to next-generation sequencing which would mean we then can very aggressively multiplex the detection asset of the assay and that we would have also improved quantitative performance. That's what we have achieved with the seven plex KRAS assay now and now we are literally in parallel developing a whole family of primer sets for these sample free amplifications and so we are not looking at this staging one test release after the next. We are really -- we have demonstrated that the platform can be successfully combined with next gen sequencing and now we want to broaden that as fast as possible to essentially those mutations that are known as having predictive and prognostics qualities. And we want to be very broad in our coverage at year end. Mark maybe?

Mark Erlander

Right. I mean I don't have anything to add further but the issue was really building that platform initially using an NGS approach.

Sung Ji Nam - Cantor Fitzgerald

Just a follow-up then as you are cultivating new partnerships, are your partners, do they have access to these other assays as well or are they interested in utilizing those assays, if not just the ones that you have clinically available currently?

Antonius Schuh

They do access and they are interested in using this. And again when you look at a mutation there are two pieces of information that are very important. First is quantitative changes that pertain to tumor dynamics and for that piece of information mutations are largely interchangeable.

The second piece, the second question is the emergence of mutations in a patient that are either indicating resistance to current treatment or that are suggesting that another treatment option might now be advised because its more promising that this will produce a response. So only for the lateral the specific mutation assays critical for the former you could say any mutation even mutations that are biologically not understood today would be interesting candidates to track tumor dynamics.

So as we now expand to specific mutations such as T790 and the like of course they are the specific treatment predictive aspects of driving clinical interest in the mutations and these assays are available to clinical studies and are available in clinical studies and these clinical studies are a part of the validation process.

Mark Erlander

I mean I think one thing I would say that our approach as you know has been really to go after what we consider to what was considered in the community as the actionable biomarkers and even with BRAF and now KRAS and as we now expand this whole portfolio with other mutations with NGS approach, this part of it we have entry simple because these are such actionable biomarkers. So we have and in the BRAF we have -- we have been talking histiocytic diseases but we have multiple collaborations in melanoma and colorectal and even lung, to even look at some of these because they are actionable. And so I think that that's part of it as well. In the pharmaceutical side or biotech side they have interest in what they are already doing, they of course have some of their biomarkers they are interested in and discussing with us. So there is actually there is a couple of different things going on with those conversations.

Antonius Schuh

And Sung Ji maybe I should make one comment why in this context next-generation sequencing was so important for us. In very simple terms when you design a PCRSA be it the conventional PCRSA or digital PCRSA you have to validate the assay for specificity because the analytical read out is a non-specific read-out, it's just a color if you want to. While next-generation sequencing gives you the specific sequencers also. So from the specificity aspect next-generation sequencing as a big detection platform is vastly easier to handle and just allows you to ramp up this assay design capacity significantly. And so we look as an individual mutation assay just an application of platform, right. They all run under the same analytical conditions if everything is standardized the only thing that varies is the primer pair.

Sung Ji Nam - Cantor Fitzgerald

Okay, great. Thank you so much for taking my question.

Operator

The next question we have comes from Yi Chen of Aegis Capital.

Yi Chen - Aegis Capital

Hi, thank you for taking my questions. My first question is could you give us some color on the timeline for completion of validating clinical studies?

Antonius Schuh

Do you want to say…?

Mark Erlander

Well, yes the timeline is 2014. We -- I think it's actually on our website, we actually show these things that continue -- it's a continuum of our assays that are going to be coming out based on as Tony was mentioning our NGS platform. And so we have series of those assays that are going to developed and offered in our CLIA lab throughout the end of 2014 and also into 2015 as well.

Antonius Schuh

But to specific for 2014 we expect for example release of clinical results, two sets of data to be released at ASCO. We expect this year three peer reviewed publications to be published for what the first manuscript has actually been already accepted for publication and two more are in preparation. So we expect in 2014, the release of a first set of clinical validations studies that we consider suitable to support adoption of these assays in clinical practice.

Yi Chen - Aegis Capital

Okay. And second question is, can you comment on the overall state of the molecular diagnostic landscape? Specifically do you believe that integrated testing modalities such as foundation medicines are better or do you think that single test for single disease mono is better such as cancer genetics or Genomic Health?

Antonius Schuh

Well, so maybe I'll try first and then Mark can give some color on that. This of course depends very much on the clinical question that you want to answer. If you take a test like Oncotype of Genomic Health this is very specific clinical situation you have a breast cancer patient post-surgery and you have an intermediary classified tumor and now you have make a decision whether you want to give this patient chemotherapy or not. So, when you want to answer such a specific clinical question I do not really see how you would able to answer this without developing a very specific assay.

On the other hand foundation medicine is entirely build on the realization of last decade that cancer is essentially a disease of DNA and that the common driver of all cancer are mutations and other genomic changes that are activating certain genes that are essentially driver genes of that cancer. So that is a completely different prospective, you come to this patient and ask what are the genomic drivers of your cancer that you then start with a very broad prospective and say I sequenced 400, 500 or 300 oncogenes to see what is driving that patient, it's only obvious.

So I think these two things co-exist that the question is now in the, how do you implement this in clinical practice. For example if I have this initial perspective so broad that I will obtain information on mutation set up today not therapy guidance. You could have an argument about whether that is helpful at this point in time. As a scientist or as a biologist you will always say well I may not understand that piece of information now, I may understand it at a later point in time and that's why it’s good to have it.

From a pragmatic clinical point of view and from the point of view of cost you may say, well kind of no, I want to obtain that information when it is established that I can understand that. So that's where the negotiation goes and we in our view we are trying to stick with clinical pragmatism because we believe the competition will be clinical. We say okay if the patient, if certain mutations have been confirmed in resected tumor material or in a biopsy and that is certain that it's interesting to track these mutations in that patient.

And also the type of cancer the patient has will educate us about certain other mutations that you want to be aware of because they either inform you of resistance or inform you of other treatment options and/or they are typical so that type of cancer and not so typical for others.

So we try to be more in this space and our argument is well as you manage that patient overtime do not optimize so much the width of the picture at one point in time, obtain a more focused picture overtime, so that your information richness comes from the qualitative and quantitative changes overtime and that's of course with cell free DNA is a superb analyze because the dynamic changes in a cell free DNA that you are observe in a patient's urine and of course [inaudible] they are real time, this is DNA signals from cell [drifts] that happened within the 24 hours prior to your analyzing.

So I guess that was a very long answer to very pointed question the answer that I would make that in a pointed answers it depends on the clinical situation, we all have to realize that these tests have to complete based on the clinical benefits, not based on the technology attractiveness.

Yi Chen - Aegis Capital

Okay. Thank you.

Operator

(Operator Instructions). There are no further questions at this time. We will go ahead and conclude the conference call. We thank you for attending today's presentation. At this time you may disconnect your lines. Thank you and take care everyone.

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