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BG Medicine Inc. (NASDAQ:BGMD)

Q1 2014 Earnings Conference Call

May 14, 2014 8:30 am ET

Executives

Paul Sohmer – President, Chief Executive Officer

Stephen Hall – Chief Financial Officer

Stacie Rader – Senior Vice President, Executive Operations

Analysts

Kevin DeGeeter – Ladenburg Thalmann

Operator

Good day ladies and gentlemen and welcome to the BG Medicine Q1 2014 Earnings conference call. At this time, all participants are in a listen-only mode. Later we will conduct a question and answer session and instructions will follow at that time. If anyone should require operator assistance during the program, please press star then zero on your touchtone telephone. As a reminder, today’s conference is being recorded.

I would now like to introduce your host for today’s conference call, Mr. Paul Sohmer. You may begin, sir.

Paul Sohmer

Thank you. Good morning and welcome to the BG Medicine first quarter conference call. I am joined today by Stacie Rader, our Senior Vice President of Executive Operations; Steve Hall, our 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 a 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 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 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 will now turn the call over to Steve Hall.

Stephen Hall

Thank you, Stacie. On this morning’s call, I’ll provide a summary of our financial performance for the first quarter ended March 31, 2014. Total revenues were $739,000 for the first quarter of 2014 compared to $888,000 for the same period in 2013. The decrease in total revenues reflected an $81,000 decrease in product revenues and a $68,000 decrease in service revenues. The decrease in product revenues resulted from a decline in orders due to inclement weather in the eastern half of the United States where our clinical laboratory customers are concentrated, and in purchases relating to independent research studies which typically vary from quarter to quarter. The reduction in service revenues resulted from the planned completion of the high-risk plaque initiative in 2013 and our decision to close our research facilities in 2013.

Operating expenses for the quarter declined by 54% or $2.9 million from the prior year quarter. Operating expenses were $2.4 million for the first quarter in 2014 compared to $5.3 million for the same period in 2013. Research and development expenses decreased $816,000. The decrease was primarily attributable to the closure of our research facilities, reduced professional fees, and completion of the CardioSCORE medical adjudication process. Selling and marketing expenses decreased by $1.5 million. The decreased expenditures were primarily due to a shift in focus from market education to commercialization and reductions in sales and marketing-related personnel and travel expenses. General and administrative expenses decreased by $631,000. This decrease is primarily due to reductions in personnel, travel expenses and professional fees.

Net loss per share in the first quarter was reduced 60%. Net loss per share was $0.08 per share in 2014 as compared to $0.21 per share in 2013. The net loss was $2.2 million in Q1 2014 versus $5.4 million in 2013.

Operating cash burn for the quarter decreased by $1.9 million, a 44% decrease to $2.4 million compared to an operating cash burn of $4.2 million in the first quarter of 2013. As of March 31, 2014, we had $4.25 million in cash. On April 8, 2014, the company closed a follow-on underwritten public offering of its common stock. The net proceeds received by the company were approximately $9 million.

Finally, for the full year 2014 we want to reiterate that we expect to increase our revenues and decrease our operating cash burn as compared to 2013.

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

Paul Sohmer

Thank you Steve. Thank you Stacie. Our performance in the first quarter of 2014 reflects the rigor and discipline that we introduced in 2013. Notwithstanding an unexpected decline in revenue, we reduced our net loss by 60% and cut our cash burn by 40% in the first quarter of 2013, and made considerable progress toward delivering on the critical catalysts that we expect will drive our growth. Thus far this year, the nearly 70% increase in the analyte-specific CPT code for our BGM galectin-3 test first took effect. We raised $10 million through a public offering of common stock. We regained compliance with the requirements for continued listing on the NASDAQ Capital Markets. Patent claims were granted to us by the United States Patent and Trademark Office for methods predicting responsiveness to cardiac resynchronization by the measurement of galectin-3, and we made progress in advancing the automation of galectin-3 tests.

In addition, during the first quarter the clinical utility of our galectin-3 test was demonstrated in presentations made at the annual meeting of the American College of Cardiology, and in a well-received publication that reported on an analysis of aggregated data from three large multi-center research trials involving 902 heart failure patients in the United States and in Europe in which elevations of galectin-3 levels in blood, as measured using the BGM galectin-3 test, were significantly predictive of re-hospitalization for heart failure as early as within the first 30 days following discharge from an initial hospital stay. We were also pleased to report that the results of 20 additional research studies of galectin-3 have been accepted for presentation at the forthcoming 2013 European Society of Cardiology Heart Failure Congress.

Having recently increased our financial resources through our April public offering, we believe that we are now in a strong position to continue to transform our company and to grow our business while aggressively managing our operating costs. To this end, we are restructuring and expanding our sales organization in order to accelerate the development of market demand for our BGM galectin-3 test. We expect that by the end of the second quarter, our U.S. field sales organization will be approximately twice the size that it was in the second quarter of 2013 and will include sales professionals who are experienced in the clinical and laboratory introduction of new diagnostic products. Outside the U.S., we expect to engage a regional distribution network to replace the EU-based direct and contract sales organizations that we eliminated in the first quarter of this year.

We expect to continue to work with clinicians to ensure that testing for galectin-3 is recognized in clinical practice guidelines and consensus recommendations and is integrated into nursing and medical education and practice. We believe that this effort will accelerate the development of market demand worldwide and is essential to ensuring adequate reimbursement for galectin-3 testing outside the U.S. We will continue to support ongoing and new clinical studies designed to demonstrate the utility of our product. We believe that generating, publishing and publicizing data derived from clinical research studies will accelerate clinical adoption of the BGM galectin-3 test and, when available, automated testing of galectin-3.

We will also continue to explore new claims and indications for galectin-3 testing for assessing patients with heart failure as well as in other disorders. Our pursuit of expansion of the product label to include new clinical claims and indications for use will require additional clinical studies and clearance or approval by regulatory bodies, such as the FDA and inclusion in our CE Mark for use in the EU. We will continue to advance the development of our product pipeline. We are actively leveraging the BG Medicine sponsored bioimage study to develop new patient selection tools that may incorporate new clinical indications for the BGM galectin-3 test, as well as other markers or combinations of biomarkers that we identify from analyses of the appropriate clinical cohorts, including bioimage.

In summary, we are continuing to follow the roadmap that we outlined during our year-end conference call and have prioritized our actions and investments around what we believe are the key drivers of success. Thank you.

Kevin, this completes our formal remarks and we’re now ready to take questions.

Question and Answer Session

Operator

[Operator instructions]

Our first question comes from Kevin DeGeeter with Ladenburg.

Kevin DeGeeter – Ladenburg Thalmann

Hey, good morning guys. Thanks for the update. A few quick questions here. Can you just—one of them sort of housekeeping. You talk about doubling the U.S. field sales force. Can you put some numbers on that – where were we in 2Q ’13 and what’s the target for 2Q ’14?

Paul Sohmer

Yeah, we expect to be at approximately 10 field sales people in the field by the end of the quarter.

Kevin DeGeeter – Ladenburg Thalmann

Okay, great, and with regard to the clinical trials to add additional label claims for the galectin-3, have you identified retrospective cohorts that could be used for that work, or should we think about these as being prospective cohorts?

Paul Sohmer

I think that we are actually considering it from a number of angles. Obviously we have identified prospective cohorts and we are giving consideration to opportunities for prospective studies as well.

Kevin DeGeeter – Ladenburg Thalmann

And can you provide an update on Abbott’s submission for the automated galectin-3 and how we should think about that timeline?

Paul Sohmer

I can’t really give you a timeline except to reiterate what we’ve said previously – the submission has been made, and that’s obviously Abbott’s submission and any comments regarding the timing really need to be left to them.

Kevin DeGeeter – Ladenburg Thalmann

Fair enough. Just lastly from me, any update on the program we formerly thought of as CardioSCORE, the re-adjudication and just general positioning of that asset going forward?

Paul Sohmer

Yeah, so let me give you a brief update on that. The adjudication process which was conducted by the Mount Sinai School of Medicine in New York is completed. The prevalence of cardiovascular events identified in the bioimage study cohort is broadly in line with what we would expect in a U.S.-based epidemiological cohort of this composition, so we are currently reviewing results and the categorization of these adjudicated events and concurrently are reviewing our regulatory strategy for potential indication on assessing cardiovascular risk.

Kevin DeGeeter – Ladenburg Thalmann

Great, that’s it for me. Thanks guys.

Operator

Again ladies and gentlemen, if you have a question or a comment at this time, please press star then the one key on your touchtone telephone.

I’m not showing any further questions at this time.

Paul Sohmer

We thank you all for participating this morning. Your ongoing interest and support are obviously greatly appreciated, and we look forward to updating you on our progress in the future. Thank you.

Operator

Ladies and gentlemen, this does conclude today’s presentation. You may now disconnect and have a wonderful day.

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