Trofile(TM) Assay Commercialization Plans moving ahead with FDA
Advisory Panel recommending approval of Pfizer's maraviroc; SOUTH
SAN FRANCISCO, Calif., May 2 /PRNewswire-FirstCall/ -- Monogram
Biosciences, Inc. (NASDAQ:MGRM) today reported financial results
for the quarter ended March 31, 2007. First Quarter Results The
Company had revenue of $9.4 million for the first quarter of 2007,
compared to revenue of $13.2 million for the first quarter of 2006.
Revenue from the Company's HIV testing products was $9.1 million in
the first quarter of 2007 compared to $12.2 million for the same
period in 2006. Overall revenue was affected by a reduction in our
revenue from Pfizer. Due to Pfizer's successful completion in
mid-2006 of the phase III clinical trial for maraviroc, our revenue
from Pfizer, which was $4.3 million in the first quarter of 2006,
was reduced to $1.0 million in this year's first quarter. With the
trial completed, testing activity was greatly reduced pending
completion of the FDA's review of Pfizer's NDA for maraviroc. Last
week, an advisory panel unanimously recommended to the FDA that
maraviroc be approved and we are looking forward to the new revenue
opportunity that the anticipated approval of maraviroc provides for
our Trofile(TM) Assay. In preparation for the commercial launch of
our Trofile Assay, we have been gearing up our organization and
programs in anticipation of FDA approval of maraviroc as well as
continuing to advance our oncology development program. As a result
of both these factors and the reduced revenue, we incurred a net
loss of $9.8 million, or $0.07 per common share, in the first
quarter of 2007, compared to a net loss of $3.4 million, or $0.03
per common share, for the same period in 2006. The Company had
$42.3 million in cash resources (comprising cash, cash equivalents
and short-term investments) at March 31, 2007. Monogram's Trofile
Assay and Pfizer's maraviroc "The opportunity for our Trofile Assay
took a significant step forward last week when an FDA advisory
committee voted unanimously to recommend that Pfizer's
investigational CCR5 antagonist, maraviroc, be approved for use
with treatment-experienced patients with CCR5-tropic HIV-1," said
William Young, Monogram chief executive officer. "Trofile is the
only diagnostic proven in clinical studies to identify whether
patients are CCR5-tropic and has been used in all clinical trials
of CCR5 antagonists to date, including that for Pfizer's maraviroc.
We believe the advisory panel's recommendation is a very
significant development for Monogram, as well as for the tens of
thousands of patients who may soon be able to benefit from a new
and exciting therapeutic option as a direct result of Monogram's
molecular diagnostics." Although not bound by the advisory
committee's recommendations, the FDA usually follows them.
Information provided by Pfizer to the FDA's advisory panel
indicates that "the results in treatment-experienced patients with
CCR5-tropic versus non CCR5-tropic HIV-1 provide clinical data
validating Monogram's Trofile Assay as an effective and appropriate
means to identify patients with CCR5-tropic HIV-1 and who are
therefore likely to respond to maraviroc." Pfizer has previously
reported clinical data that confirms that patients, when properly
selected with Monogram's Trofile Assay, respond well to maraviroc
and achieve a significant reduction in viral load. "Our plans for
commercializing Trofile in the U.S. are well in hand," continued
Young. "Operationally, our clinical laboratory is prepared for
commercial testing, with a proven track record derived from
performing over 23,000 Trofile Assays since 2004, and tens of
thousands of phenotypic and genotypic resistance tests annually,
including the PhenoSenseGT(TM) assay that was used to optimize
background therapy in the clinical trials of maraviroc." "We are
ready to make our Trofile Assay available commercially as soon as
maraviroc is approved," said Monogram CEO William Young. "We intend
to bring Trofile to the HIV physician community through our
existing sales, marketing and distribution channels throughout the
U.S. We believe that our sales force is well positioned to
communicate the benefits of our technology to physicians, payers
and medical providers and we have held initial meetings with
several of the larger public and private payers," continued Young.
"We believe that payers and providers have a positive view of the
ability to select suitable patients for therapy and our goal is to
obtain reimbursement as soon as possible after maraviroc is
approved." Assays for Oncology "We continue to make progress toward
our initial goal of commercializing assays for predicting patient
response to targeted therapies in breast cancer," added Young.
"Less than 50% of patients selected for treatment with Herceptin by
currently available tests (IHC and/or FISH) respond, so we believe
there is a clear market need for the kind of information that we
believe our eTag(TM) assays can provide." "We intend that our
portfolio of assays for the EGFR/Her pathway will ultimately
include assays that quantitate the levels of individual receptor
monomers (Her1, Her2 and Her3), homo-dimers (Her1:1 and Her2:2),
and hetero-dimers (Her1:2, Her2:3 and various modified forms of
these receptors including p95/Her2). We are developing this
portfolio of assays to provide information that will not only allow
physicians to identify susceptibility to individual drugs but also
to identify appropriate combinations of drugs based on resistance
pathways that are activated in particular patients." Recent
progress includes: -- Abstracts detailing our findings in the first
two clinical cohorts have been accepted for presentation at ASCO.
These studies examine correlations between eTag assay measurements
and clinical outcomes. -- An abstract describing patterns of homo-
and hetero-dimers in cell lines with resistance to Herceptin has
been accepted for presentation at ASCO. -- Manuscripts describing
the eTag methodology and initial results in two clinical cohorts of
patients with metastatic breast cancer are in preparation and
nearing submission for publication. -- An additional cohort of
metastatic breast cancer patients has been tested and analyses are
ongoing. Preliminary data appear consistent with prior
observations. -- Multiple additional collaborations involving
clinical cohorts in both the metastatic and adjuvant settings are
in progress. -- The first assays in our planned portfolio are
undergoing technical validation in the Company's CLIA certified
clinical laboratory in preparation for commercial introduction of a
first product in breast cancer. Capital Structure At March 31,
2007, a total of 131.8 million shares of common stock were
outstanding. Stock options and warrants are outstanding on 21.6
million shares and 0.8 million shares of common stock,
respectively. The principal amount of Pfizer's $25 million
convertible note, issued in May 2006, is convertible into
approximately 9.2 million shares of common stock. The $30 million
principal amount of our 0% Convertible Senior Unsecured Notes,
issued in January 2007, is convertible into approximately 11.9
million shares of common stock. Non-GAAP Proforma Results The
Company is reporting non-GAAP proforma results which exclude
certain items to provide a clearer view of ongoing expenses without
the impact of merger-related costs and non-cash valuation
adjustments related to our convertible debt. A reconciliation of
these non-GAAP proforma results to GAAP results is included with
the Statement of Operations data attached to this release. In prior
quarters, we have reported non-GAAP proforma information that
excludes the effect of stock compensation, since there was a lack
of comparability in the information reported in our statement of
operations for stock compensation under different accounting rules
in 2005 and 2006. However, since for 2007, the statement of
operations for the current year and the immediately preceding year
are both presented on the same basis in accordance with SFAS 123R
we are no longer excluding these non cash items from proforma net
loss. Stock-based compensation in accordance with SFAS 123R was
$1.2 million in the first quarter of 2007, compared to $1.8 million
in the prior year's first quarter. The following non-cash items
that were reflected in non-operating income and expense for the
periods ended March 31, 2007 and 2006 are excluded from proforma
net loss: -- "Mark-to-market" adjustments to the 3% Senior Secured
Convertible Note and the 0% Convertible Senior Unsecured Debt.
There were no such adjustments in the prior year and a charge of
$16,000 in the quarter ended March 31, 2007. Such adjustments could
be substantially higher in future quarters in certain
circumstances, such as if the Company's common stock price is
higher than the March 31, 2007 level of $1.94 per share. --
"Mark-to-market" adjustments in 2006 to the liability established
for the payment on the CVRs issued as part of the merger
consideration for ACLARA. As the outstanding CVR's were settled in
the second quarter of 2006, adjustments are not relevant for third
and fourth quarters of 2006 or for 2007. These adjustments were
$14,000 (favorable) in the first quarter of 2006. Conference Call
Details Monogram will host a conference call today at 4:30 p.m.
Eastern Time. To participate in the live teleconference please call
(800) 565-5442 or (913) 312-1298 for international callers, fifteen
minutes before the conference begins. Live audio of the call will
be simultaneously broadcast over the Internet and will be available
to members of the news media, investors and the general public.
Access to live and archived audio of the conference call will be
available by following the appropriate links at
http://www.monogrambio.com/ and clicking on the Investor Relations
link. Following the live broadcast, a replay of the call will also
be available at (888) 203-1112, or (719) 457-0820 for international
callers. The replay passcode is 4138334. The information provided
on the teleconference is only accurate at the time of the
conference call, and Monogram assumes no obligation to provide
updated information except as required by law. About Monogram
Monogram is advancing individualized medicine by discovering,
developing and marketing innovative products to guide and improve
treatment of serious infectious diseases and cancer. The Company's
products are designed to help doctors optimize treatment regimens
for their patients that lead to better outcomes and reduced costs.
The Company's technology is also being used by numerous
biopharmaceutical companies to develop new and improved anti-viral
therapeutics and vaccines as well as targeted cancer therapeutics.
More information about the Company and its technology can be found
on its web site at http://www.monogrambio.com/. Forward Looking
Statements Certain statements in this press release and attached
supplemental information are forward-looking. These forward-looking
statements include references to the potential for an HIV drug that
requires a molecular diagnostic for patient selection, FDA approval
of maraviroc, plans for further development of the eTag technology
and anticipated clinical validation and laboratory validation in a
CLIA setting, expected protection provided by recently allowed
patents, our ability to advance its opportunities in HIV and
oncology, activities expected to occur in connection with the
Pfizer collaboration, and the statements under "Outlook." These
forward-looking statements are subject to risks and uncertainties
and other factors, which may cause actual results to differ
materially from the anticipated results or other expectations
expressed in such forward-looking statements. These risks and
uncertainties include, but are not limited to: the risk that
maraviroc will not be approved by the FDA; the risk that regulatory
authorities may not require or recommend a molecular diagnostic for
patient selection for maraviroc or other HIV drugs, risks related
to the implementation of the collaboration with Pfizer; risks
related to our ability to recognize revenue from activities under
the collaboration with Pfizer; risks and uncertainties relating to
the performance of our products; the growth in revenues; the size,
timing and success or failure of any clinical trials for CCR5
inhibitors, entry inhibitors or integrase inhibitors; the use of
our Trofile Assay for patient use in the event of approval of any
CCR5 inhibitors; the ability of our eTag assays to predict response
to particular therapeutic agents, our ability to obtain additional
cohorts of patient samples for additional studies, our ability to
successfully conduct clinical studies and the results obtained from
those studies; whether larger confirmatory clinical studies will
confirm the results of initial studies; our ability to establish
reliable, high-volume operations at commercially reasonable costs;
expected reliance on a few customers for the majority of our
revenues; the annual renewal of certain customer agreements; actual
market acceptance of our products and adoption of our technological
approach and products by pharmaceutical and biotechnology
companies; our estimate of the size of our markets; our estimates
of the levels of demand for our products; the impact of
competition; the timing and ultimate size of pharmaceutical company
clinical trials; seasonal effects on revenue due to holiday periods
which often affect the first and third quarters; whether payers
will authorize reimbursement for our products and services; whether
the FDA or any other agency will decide to further regulate our
products or services, whether the draft guidance on Multivariate
Index Assays recently issued by FDA applies to our current or
planned products; whether we will encounter problems or delays in
automating our processes; the ultimate validity and enforceability
of our patent applications and patents; the possible infringement
of the intellectual property of others; whether licenses to third
party technology will be available; whether we are able to build
brand loyalty and expand revenues; restrictions on the conduct of
our business imposed by the Pfizer and Merrill Lynch debt
agreements; the impact of additional dilution if our convertible
debt is converted to equity; and whether we will be able to raise
sufficient capital in the future, if required. For a discussion of
other factors that may cause actual events to differ from those
projected, please refer to our most recent annual report on Form
10-K and quarterly reports on Form 10-Q, as well as other
subsequent filings with the Securities and Exchange Commission. We
do not undertake, and specifically disclaim any obligation, to
revise any forward-looking statements to reflect the occurrence of
anticipated or unanticipated events or circumstances after the date
of such statements. PhenoSense, PhenoSenseGT, Trofile and eTag are
trademarks of Monogram Biosciences, Inc. MONOGRAM BIOSCIENCES, INC.
SELECTED STATEMENT OF OPERATIONS DATA (In thousands, except per
share amounts) (Unaudited) Three Months Ended March 31, 2007 2006
Revenue: Product revenue $9,099 $12,246 Contract revenue 318 1,003
Total revenue 9,417 13,249 Operating costs and expenses: Cost of
product revenue 5,705 5,681 Research and development 5,331 4,575
Sales and marketing 3,943 3,378 General and administrative 4,228
3,581 Total operating costs and expenses 19,207 17,215 Operating
loss (9,790) (3,966) Interest and other income, net 45 599
Convertible debt valuation adjustment (16) - CVR valuation
adjustment - 14 Net loss (9,761) (3,353) Net loss per common share,
basic $(0.07) $(0.03) Weighted-average shares used in computing
basic net loss per common share 131,582 129,614 Reconciliation of
Non-GAAP Proforma Results to GAAP Net loss $(9,761) $(3,353)
Adjustments for certain non-cash items: CVR valuation adjustment -
(14) Convertible debt valuation adjustment 16 - Non-GAAP Proforma
net loss (9,745) (3,367) Non-GAAP Proforma net loss per common
share, basic $(0.07) $(0.03) Management believes that this non-GAAP
proforma financial data supplements the Company's GAAP financial
statements by providing investors with additional information which
allows them to have a clearer picture of the Company's operations,
financial performance and the comparability of the Company's
operating results from period to period as they exclude the effects
in 2007 of revaluation of the Company's convertible debt and the
effects in 2006 of revaluation of the contingent value rights
issued in connection with the Company's merger with ACLARA that
management believes are not indicative of the Company's ongoing
operations. The presentation of this additional information is not
meant to be considered in isolation or as a substitute for results
prepared in accordance with GAAP. Above, management has provided a
reconciliation of the non-GAAP proforma financial information with
the comparable financial information reported in accordance with
GAAP. MONOGRAM BIOSCIENCES, INC. SELECTED BALANCE SHEET DATA (In
thousands) (Unaudited) March 31, December 31, 2007 2006 ASSETS
(Note 1) Current assets: Cash and cash equivalents $28,336 $8,263
Short-term investments 13,942 22,867 Accounts receivable, net 7,006
6,849 Prepaid expenses 1,092 1,234 Inventory 948 961 Other current
assets 415 378 Total current assets 51,739 40,552 Property and
equipment, net 7,302 7,463 Goodwill 9,927 9,927 Deferred costs
2,498 1,783 Other assets 2,781 1,120 Total assets $74,247 $60,845
LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts
payable $1,536 $1,271 Accrued compensation 2,503 2,258 Accrued
liabilities 4,151 4,720 Current portion of restructuring costs 807
1,128 Deferred revenue 1,029 404 Current portion of loans payable
and capital lease obligations 4,112 6,355 Contingent value rights
2,834 2,813 Total current liabilities 16,972 18,949 Long-term 3%
convertible promissory note 23,457 25,000 Long-term 0% convertible
promissory note 24,102 - Long-term portion of restructuring costs
723 868 Long-term deferred revenue 2,413 1,783 Other long-term
liabilities 466 337 Total liabilities 68,133 46,937 Stockholders'
equity: Common stock 132 131 Additional paid-in capital 279,790
277,892 Accumulated other comprehensive loss (56) (124) Accumulated
deficit (273,752) (263,991) Total stockholders' equity 6,114 13,908
Total liabilities and stockholders' equity $74,247 $60,845 (1) The
balance sheet data at December 31, 2006 is derived from audited
financial statements included in the Company's Annual Report on
Form 10-K for the year ended December 31, 2006 filed with the
Securities and Exchange Commission. MONOGRAM BIOSCIENCES, INC.
SUPPLEMENTAL INFORMATION To provide additional insights to
investors, the following information is provided in a question and
answer format. HIV 1. What is the status of the opportunity for
Monogram's Trofile Assay with Pfizer's maraviroc? On April 24, U.S.
Food and Drug Administration's (FDA) Antiviral Drugs Advisory
Committee voted unanimously to recommend that collaborator Pfizer,
Inc.'s (NYSE:PFE) investigational HIV medication, maraviroc, be
approved for use along with other antiretroviral agents for
treatment-experienced adult patients infected with CCR5-tropic
HIV-1. Although not bound by the Advisory Committee's
recommendations, the FDA usually follows them. If approved,
maraviroc would be the first member of a new class of oral HIV
medicines in more than a decade. Monogram's Trofile(TM) Assay has
been used to select patients for the clinical trials of maraviroc.
The CCR5 class of drug blocks the use by HIV of the patient's CCR5
co-receptor, if this co-receptor is being used for entry by HIV
into cells. In later stage patients, the CCR5 co-receptor is in use
only in approximately half of patients. Accordingly, knowing
whether the CCR5 co-receptor is being used by HIV in a particular
patient is critical for drug efficacy, and potentially for drug
safety. Information provided by Pfizer to the advisory panel
indicates that "the results in treatment-experienced patients with
CCR5-tropic versus non CCR5-tropic HIV-1 provide clinical data
validating Monogram's Trofile Assay as an effective and appropriate
means to identify patients with CCR5-tropic HIV-1 and who are
therefore likely to respond to maraviroc." Following the FDA panel
recommendation, we anticipate that maraviroc may be approved by the
FDA by summer, although this is not assured. While the ultimate
drug labeling will not be known till maraviroc is approved, there
was extensive discussion in the FDA panel meeting regarding the
Trofile Assay and we believe there may be a role for our test in
clinical use of maraviroc after approval. We have begun working
with public and private payers to achieve coverage and
reimbursement by these payers. Operationally, our clinical lab is
prepared for the potential commercial introduction of Trofile. Over
23,000 Trofile Assays have been performed since 2004 in Monogram's
CLIA certified laboratory. After approval, all Trofile Assays will
be run in this same clinical laboratory. Currently our turnaround
time in performing the Trofile Assay, like our phenotypic
resistance tests, is approximately two weeks. Trofile is the only
diagnostic proven in clinical studies to identify whether patients
are CCR5-tropic and has been used in all clinical trials of CCR5
antagonists to date. In addition, Monogram performs tens of
thousands of phenotypic and genotypic resistance tests annually,
including the PhenoSenseGT(TM) assay that was used to optimize
background therapy in the clinical trials of maraviroc. We are
ready to make our Trofile Assay available commercially as soon as
maraviroc is approved. We intend to bring Trofile to the HIV
physician community through our existing sales, marketing and
distribution channels throughout the U.S. These channels have been
used successfully for our phenotypic and genotypic resistance tests
and we believe that this existing sales and marketing organization,
comprising 66 sales, marketing and support personnel, is well
placed to communicate the value of Trofile to physicians.
Additional studies are underway to determine maraviroc's
effectiveness in treatment-naive patients. The panel's
recommendation is the latest in a series of benchmarks in recent
months for maraviroc, and Trofile including: -- completion of the
phase III trial and submissions by Pfizer for regulatory approval
of maraviroc in the U.S., Canada and the European Union (December
2006) -- acceptance of the marketing approval applications for
accelerated review by the FDA and by Canadian and European Union
regulatory agencies (February 2007) -- presentation by Pfizer of
the phase III clinical trial results indicating good safety and
efficacy profile for maraviroc (February 2007) -- initiation by
Pfizer of a worldwide expanded access program for maraviroc
(February 2007) -- unanimous recommendation by an FDA advisory
panel for maraviroc to be approved (April 2007) 2. What about the
CCR5 class as a whole? Other CCR5 antagonists are in development.
The most advanced of these is Schering Plough's vicriviroc, which
is in ongoing clinical development. Our testing services have been
used in all clinical programs of CCR5 antagonists conducted to
date, for patient selection and monitoring utilizing our Trofile
Assay, and for optimization of patients' background treatment
regimens utilizing our PhenoSenseGT test. 3. What is the nature of
the collaboration agreement with Pfizer? The collaboration
agreement announced in May 2006 provides a framework in which
Pfizer and Monogram are collaborating to make our Trofile Assay
available globally. This collaboration puts in place arrangements
that are designed to make sure that the test can be available in
countries outside of the U.S. where Pfizer, after regulatory
approval, wishes to commercialize maraviroc. The agreement covers
commercialization of Trofile outside the U.S., where Pfizer will
take the lead in commercializing the assay. In the U.S., Monogram
will be responsible for all aspects of commercializing Trofile. 4.
What are the economic aspects of the agreements with Pfizer? There
are two separate aspects to the arrangements with Pfizer. The first
was a $25 million financing that is described in the Financial
section of this Q&A. The second is a collaboration that is
designed to make Trofile available globally. Outside of the U.S.
Pfizer will lead the commercial effort and so will be responsible
for, and incur the costs of marketing, sales, reimbursement and
regulatory matters. We will be responsible for logistics and
medical education in those countries where Pfizer elects to market
maraviroc. However, Pfizer will reimburse us for all of our costs
incurred in these activities. These costs are potentially
substantial, but, due to Pfizer's funding obligation, is not
expected to place a burden on our cash flows. Through the first
quarter of 2007, such costs, reimbursable by Pfizer, amounted to
$2.5m. Pfizer will also buy tests from Monogram. For details of how
revenue and expenses will be recognized for this collaboration,
refer to the Financial section of this Q&A. 5. How does the
collaboration with Pfizer affect the U.S. market? While we may work
collaboratively with Pfizer's commercial organization after
approval of maraviroc, we will have full control over our U.S.
marketing activities. We will independently set our commercial
price for the Trofile Assay and obtain reimbursement for the assay.
We have already had initial discussions with some of the larger
public and private payers to introduce Trofile and its potential
value in clinical use of CCR5 antagonists. Our goal is to achieve
appropriate coverage and reimbursement as soon as possible after
drug approval. Refer also to question 1 above. 6. What is the
significance of the integrase class of HIV drugs to Monogram's
business? Our tests have been used in the clinical development
programs of the new integrase drugs for optimization of background
therapy, prior to addition of the new investigational drug. We also
have an assay available for research use in assessing resistance to
integrase inhibitors. This assay will be available as a CLIA
approved test when clinically relevant after the potential approval
of the drugs. Monogram's current resistance tests assess resistance
of patients' virus to the existing classes of drugs, including the
one currently marketed entry inhibitor, Fuzeon(R) from Roche. The
advent of CCR5 antagonists and integrase inhibitors add both to the
richness of potential treatment options for patients and also to
the potential testing opportunity for Monogram. For us, this means
opportunity not only for our current genotypic and phenotypic tests
but also for our new class-specific resistance tests for these
classes. As the range of therapeutic options becomes more varied
and complex, we believe that the need for sophisticated testing
will increase. 7. What is the proprietary nature of your tests for
tropism and HIV entry? Our tropism and entry tests are covered by
our fundamental patents for phenotypic analysis. In addition, in
May 2006 we received four notices of allowance from the U.S. Patent
Office related to the use of Monogram's PhenoSense(TM) technology
for assessing the likely efficacy of entry inhibitors, a new class
of drug that prevents HIV from entering cells. Two of these patents
have subsequently issued. Monogram's tests measure co-receptor
tropism and the susceptibility or resistance of HIV to entry
inhibitors, critical elements in the development and use of these
new drugs. The phenotypic approach covered by these allowed patents
is able to directly and accurately assess the susceptibility or
resistance of a patient's HIV to entry inhibitors, and to determine
to what extent a patient's virus is able to gain entry into cells
via one or other, or a mixture, of the two major co-receptors, CCR5
or CXCR4, that are used in conjunction with the virus' primary
receptor, CD4. The allowed patents cover an approach that is able
to directly assess resistance to entry inhibitors, the
identification of co-receptor usage, screening for new entry
inhibitor compounds and an antibody response capable of blocking
infection. Monogram's assays utilizing these methods include the
PhenoSense Entry Assay that assesses resistance of HIV to all
classes of entry inhibitor drugs and the Trofile Assay that
identifies the ability of a patient's HIV to enter cells using
specific co-receptors such as CCR5. We believe these patents are
important because the envelope region of the virus (the area
involved in cell entry) has a particularly heterogeneous genetic
sequence. This renders genotypic methods significantly less
effective for measuring co-receptor tropism and resistance to
specific viral entry inhibitors, giving Monogram's phenotypic
methods significant advantages. 8. Is there published data
available related to your Trofile Assay? In February 2007, Pfizer
reported the results of its phase III studies of maraviroc at the
14th Conference on Retroviruses and Opportunistic Infections
(CROI). A 24 week analysis showed that approximately twice as many
patients receiving maraviroc with an optimized background regimen
achieved undetectable virus in the blood than if an optimized
regimen was given alone. In addition, patients receiving maraviroc
and an optimized regimen saw an increase in CD4 cells nearly twice
that seen in those receiving optimized regimen alone. Adverse
events in the group receiving maraviroc plus an optimized regimen
were similar to those receiving an optimized regimen alone when
adjusted for duration of exposure. Pfizer reported that the data
from the two identical studies are remarkably consistent and
demonstrate significant decreases in viral load and increases in
CD4 cells when maraviroc is added to the standard optimized
treatment regimen. These results were obtained by utilizing
Monogram's Trofile test to confirm in advance whether a patient is
infected with CCR5-tropic HIV. Previously, four studies
demonstrating the utility and clinical significance of our Trofile
Assay were presented in August 2006 at the XVI International AIDS
Conference in Toronto. The first study, presented by Monogram
scientists, confirmed that the Trofile Assay can accurately
characterize the tropism of a panel of diverse HIV strains. Our
scientists used the assay to evaluate the co- receptor tropism of a
panel of 46 well-characterized strains of HIV-1 that included
multiple subtypes (CCR5, CXCR4, or dual/mixed tropism (DM)). The
assay accurately measured the tropism of all 46 strains. The assay
also was accurate when tested against three clonal viruses (CCR5,
CXCR4 and DM). When CCR5 and CXCR4 clones were mixed together, the
assay was able to detect minor variants down to 10 percent in all
samples tested, and to 5 percent in 83 percent of samples tested.
The data show that Monogram's Trofile Assay is an accurate,
precise, sensitive, reproducible and robust assay for the
measurement of tropism and support its use as the standard assay
for patient screening and monitoring in the development of
co-receptor antagonists. The second study, also presented by
Monogram scientists, compared the abilities of V3 sequencing and
Monogram's Trofile Assay to accurately characterize tropism. V3
sequencing examines the genetic sequence of only the V3 region of
the envelope gene of HIV taken from a patient and uses algorithms
to predict co-receptor tropism. The Trofile Assay uses the entire
envelope gene taken from the patient's virus to measure viral
tropism directly. The study used patient-derived virus sequences
representing multiple subtypes of HIV-1, and found that sensitivity
for detection of viruses using the CXCR4 co-receptor varied widely
depending on viral sub-type and on the interpretation system used.
In comparison to phenotypic analysis with Trofile, which accurately
and directly measures co-receptor usage, genotypic measures, on
average, were only approximately 65% accurate, and in many cases
were even less accurate. These results demonstrate that genotypic
approaches are inferior for assessing tropism when compared with
Trofile. This is because the region of the virus involved in
cellular entry has a particularly heterogeneous genetic sequence,
which renders genotypic methods significantly less effective. In a
study presented by scientists from Pfizer, Inc., the negative
predictive value of Monogram's Trofile Assay was assessed in an
ongoing Phase III trial of Pfizer's investigational CCR5
antagonist, maraviroc (Study 1029). Results showed that patients
identified by the assay as having virus using BOTH the CXCR4 and
CCR5 receptors (dual/mixed tropic) did not respond to the
investigational (CCR5) therapy. These data suggest that screening
patients with the Trofile Assay will allow physicians to avoid
treating patients with expensive drug therapy who are unlikely to
respond to that therapy. A study presented by investigators from
the AIDS Clinical Trial Group 5211 study team and Schering Plough
demonstrated the positive predictive value of the assay in patients
participating in a Phase IIb trial of Schering-Plough's
investigational CCR5 antagonist vicriviroc. In this study, patients
identified by the assay as having virus utilizing only the CCR5
co-receptor demonstrated clinical responses to the investigational
therapy. These two studies involving Pfizer's maraviroc and
Schering Plough's vicriviroc, suggest that the Trofile Assay is an
effective method of identifying appropriate patients for treatment
with CCR5 antagonists. By virtue of its high positive and negative
predictive values, the Trofile Assay is highly capable of ensuring
that individuals receive treatments that are most likely to provide
them with clinical benefit. 9. What will be the impact of possible
FDA regulation? In September 2006, the FDA issued draft guidance
related to the regulation of certain kinds of test provided through
CLIA labs. This draft guidance was subject to public comment and
may be revised before being finalized. We do not believe that the
guidance is intended to regulate all CLIA-based lab tests. Rather
it appears to be focused on a subset of tests referred to as IVD
Multivariate Index Assays where multiple variables are analyzed,
using complex statistical proprietary algorithms and the reported
results may not be readily understood by physicians. With regard to
our HIV business, we do not currently believe that our products
will be affected by this draft guidance for the following reasons:
-- First, our phenotypic resistance tests and our co-receptor
tropism test are all direct biological measurements and are not the
kind of "black box" algorithms on which the draft guidance appears
to be focused -- Second, the FDA is familiar with genotypic HIV
tests and, to our knowledge, has made no indication that it intends
the draft guidance to be applied to these tests. In addition, gene
mutations in HIV have been widely published in medical literature
and are well understood by physicians such that they do not seem to
fit the "black box" algorithm characterization -- Third, with
respect to our Trofile Assay, because of the role of our Trofile
Assay in the phase II and phase III clinical evaluation of CCR5
antagonists, we have had direct interactions with the FDA and in
2004 filed a Master File on our Trofile Assay with the FDA which
provided the agency substantial performance characteristics and
validation data on the Trofile Assay. However, because of the
significance of Trofile to use of maraviroc, the FDA may have an
interest in the assay and it is not clear what regulatory approach
the FDA may take. The FDA has, however, indicated that it does not
intend to take precipitous regulatory action that would delay the
availability of maraviroc to patients. With regard to our potential
eTag products for oncology, we will continue to monitor the
evolution of the regulatory situation and will be actively engaged
in the process both through direct interaction with the FDA and
through trade groups. Our eTag assays are currently designed to
make direct biological measurements of proteins and protein dimers
and facilitate predictions based on a clear biological rationale.
As such, they may be viewed as different from the "black box"
algorithm based tests that the draft guidance is intended to reach,
though at this time we cannot make this determination. However, in
the evolving area of molecular diagnostics, it is not clear when or
what delineations will be made in determining applicability of the
draft guidance once finalized and we are currently unable to
predict the applicability of such final guidelines or whether any
additional regulations will be proposed which might impact our
current or future products. Oncology 10. What is eTag technology?
How will eTag assays be used? Our eTag assays enable detailed
analysis of activated protein drug targets and signaling pathways
in cancer cells, including FFPE samples, which is the standard
format in most pathology labs. The unique capability of eTag assays
is the ability to directly measure, quantitatively and precisely,
activated pathway status by measuring protein complexes, not just
indirect measures such as gene mutations and gene expression
levels. The assays are designed to provide information on a drug's
mechanism of action, selectivity and potency in a biological
setting in pre-clinical research, and enable enrichment or
selection of clinical trial populations later in a drug's
development. In addition, we believe these assays may ultimately be
used to help physicians better determine whether certain therapies
are more appropriate for individual cancer patients, and whether to
combine therapies with different mechanisms or properties for such
patients. 11. What will your first commercial oncology product be?
We intend that our portfolio of assays for the EGFR/Her pathway
will ultimately include assays that measure the levels of
individual receptor monomers (Her1, Her2 and Her3); receptor
homo-dimers (Her1:1, and Her2:2); and hetero-dimers (Her1:2,
Her2:3, and assays for various modified forms of these receptors
including p95/Her2). In time, we plan to have a broad portfolio of
assays that provide comprehensive information for drugs targeting
individual protein components of the EGFR/Her pathway so that
physicians will be able to detect resistance early and make better
choices for their patients. These choices may involve not only
decisions about individual drugs, but also about combinations of
drugs. Our initial focus has been breast cancer where Herceptin has
been marketed for several years and Tykerb has recently been
approved, and other drugs are in development. In breast cancer,
there may be two opportunities based on evolving treatment settings
for Herceptin. One is the opportunity for a better test to support
the design of treatment regimens, for advanced disease, that
contain Herceptin, chemotherapy and potentially other agents. A
second and potentially larger opportunity may be for an improved
test (in relation to existing FISH and IHC tests) to support the
design of treatment regimens in patients with early stage disease,
again looking at likely efficacy of targeted agents like Herceptin
and chemotherapeutics. The details of these products, however, are
still dependent on the nature and timing of clinical data that is
being generated in our clinical studies. 12. What is the status of
your clinical studies for the eTag EGFR/Her test panel? We continue
to make progress in seeking clinical validation of our first assays
in breast cancer patient samples. The initial correlations that we
have identified in two separate patient cohorts will be the subject
of poster presentations at ASCO and are also the subject of two
manuscripts that are in preparation for submission to scientific
journals for publication. Our principal focus remains that of
obtaining the additional patient tumor samples that are necessary
to validate the clinical correlations identified in these first two
patient cohorts. We are working with a number of institutions to
gain access to patient samples from both the adjuvant and
metastatic settings. A first set of additional metastatic samples
has been received and a preliminary analysis appears to be
consistent with our earlier observations. We await a larger number
of samples to more definitively confirm the correlations between
assay measurements and patient survival. Financial 13. What has
been your use of cash? The following table summarizes elements of
cash flow in 2006 and the first quarter of 2007. 2006 2007 $
millions Q1 Q2 Q3 Q4 Q1 Cash provided by (used in) operations (1)
$0.3 $0.2 $(4.6) $(5.9) $(7.4) Cash used in CVR settlement - (57.1)
- - - Cash provided by (used in) investing activities (2) (0.6)
(0.8) - (0.2) (0.3) Cash provided by financing activities 2.7 25.4
5.6 1.0 18.9 $2.4 $(32.3) $1.0 $(5.1) $11.2 (1) Cash used in
operations in 2006 excludes the payment on the CVR liability. (2)
Cash used in investing activities excludes purchase and
maturities/sales of investments. 14. What is your current cash
position? At March 31, 2007 we had cash resources (comprising cash,
cash equivalents, short-term investments) of approximately $42.3
million. 15. What are the details of the two convertible notes on
your balance sheet? Pfizer financing 0% Convertible Senior
Unsecured (May 2006) Debt (January 2007) Amount $25m $22.5 m ($30m
face value) Due date May 2010 December 2011 Interest 3%, payable in
cash Zero coupon or common stock Conversion price $2.7048 $2.52 per
share "Autoconversion" $4.06 for 20 out of $3.15 for 20 out of 30
feature if common 30 consecutive consecutive trading days stock
trades at trading days specified level Security HIV assets None
Greater details on these debt arrangements can be found in the
notes to our financial statements in our Form 10K filing with the
SEC. 16. How will revenue and expenses be recognized in relation to
your collaboration with Pfizer? The collaboration involves a number
of elements, including supply of the Trofile Assay in additional
clinical studies (including Pfizer's announced expanded access
program for maraviroc) supply of the Trofile Assay for clinical use
outside of the U.S., reimbursement of costs for the establishment
and operation of supply infrastructure outside of the U.S. and
potential assistance to Pfizer in the establishment and operation
of a second facility for processing of tropism assays. Under
applicable accounting rules, each of these deliverables has to be
separately analyzed to establish an appropriate fair value. Absence
of an established fair value for any undelivered elements requires
a deferral of all other revenue in the arrangements. The
application of these accounting rules requires us to defer all the
revenue until the expiry or termination of the contract, or earlier
completion of the deliverable, due to the absence of an established
fair value for the potential assistance to Pfizer in the
establishment and operation of a second facility for processing of
tropism assays. Costs associated with deferred revenues to date
have also been deferred. The deferrals are included in the balance
sheet as long term deferred revenue of $2.4 million and deferred
costs of $2.5 million. Additional details will be included in our
SEC filings on Form 10Q and 10K. 17. What are the details of the
Line of Credit with Merrill Lynch? In September 2006, we entered
into a Credit and Security Agreement with Merrill Lynch Capital, a
division of Merrill Lynch Business Financial Services Inc. This
revolving credit line provides the Company with a $10 million line
of credit, with borrowings limited by the amount of eligible
accounts receivable, currently approximately $5.5 million. The line
is secured by our accounts receivable, inventory and intellectual
property related to our oncology testing business and is subject to
certain covenants related to the conduct of our business. The
Agreement expires in March 2010. As of March 31, 2007,
approximately $3.9 million was outstanding under the revolving
credit line. 18. What are the trends in your net losses? Our net
loss includes adjustments to fair value for (i) in 2007, our
convertible debt, and (ii) in 2006, the CVR liability for quarters
prior to the June 2006 CVR maturity date. The effects of these
items have caused and may cause significant fluctuations from
quarter to quarter in net loss. The table below shows the net loss
both in accordance with GAAP and on a non-GAAP proforma basis,
adjusted for these non-cash items. The convertible debt is stated
at fair value as a result of a requirement to bifurcate, and value,
certain derivatives that are embedded within the convertible debt,
such as the option on the part of the holder to convert the debt to
equity. This arises because of certain provisions of the two
convertible debt securities. The adjustment to the fair value of
the convertible debt was small in the first quarter of 2007.
Several assumptions will affect future valuations, with the
principle one being the price of our common stock. In the event
that our stock price increases, the future adjustments to fair
value of the convertible debt could be significant. $ millions 2006
2007 Q1 Q2 Q3 Q4 Q1 GAAP Net Income (Loss) $(3.3) $(21.8) $(6.6)
$(7.0) $(9.8) Contingent Valuation Rights Adjustment Included in
Non-operating Income/Expense (1) - 16.5 - - - Convertible Debt
Valuation Adjustment (2) - - - - - Non-GAAP Proforma Net Loss
$(3.3) $(5.3) $(6.6) $(7.0) $(9.8) (1) Reflects the adjustments to
fair value in respect of CVRs outstanding and in respect of CVRs
associated with vested ACLARA options as of the closing of the
merger with ACLARA on December 10, 2004. (2) Reflects the
adjustments to fair value in respect of the 3% Senior Secured
Convertible Debt and the 0% Convertible Senior Unsecured Debt.
These generated a net adjustment of $16,000 in the first quarter of
2007, but could be substantially larger in future quarters, for
example if our stock price increased. 19. What are the trends in
your operating expenses without the impact of stock compensation?
Our operating expenses include stock-based compensation, primarily
stock-based compensation in accordance with SFAS 123R which was
adopted by us on January 1, 2006. The table below shows for each
operating expense category the amount that represents stock
compensation and the balance that represents expenses excluding
these items." $ millions GAAP Expenses 2006 2007 Q1 Q2 Q3 Q4 Q1
Cost of Product Revenue 5.7 5.7 6.0 5.4 5.7 Research and
Development 4.5 5.2 4.6 4.5 5.4 Sales and Marketing 3.4 4.0 3.8 3.5
3.9 General and Administrative 3.6 4.3 3.4 3.8 4.2 17.2 19.2 17.8
17.2 19.2 Stock Based Compensation 2006 2007 Q1 Q2 Q3 Q4 Q1 Cost of
Product Revenue 0.2 0.1 0.2 0.1 0.1 Research and Development 0.5
0.8 0.3 0.4 0.4 Sales and Marketing 0.4 0.5 0.4 0.4 0.3 General and
Administrative 0.8 0.6 0.6 0.6 0.4 1.9 2.0 1.5 1.5 1.2 Non-GAAP
Proforma Expenses 2006 2007 Q1 Q2 Q3 Q4 Q1 Cost of Product Revenue
5.5 5.6 5.8 5.3 5.6 Research and Development 4.0 4.4 4.3 4.1 5.0
Sales and Marketing 3.0 3.5 3.4 3.1 3.6 General and Administrative
2.8 3.7 2.8 3.2 3.8 15.3 17.2 16.3 15.7 18.0 contacts: Alfred G.
Merriweather Jeremiah Hall Chief Financial Officer Feinstein Kean
Healthcare Tel: 650 624 4576 Tel: 415 677 2700 DATASOURCE: Monogram
Biosciences, Inc. CONTACT: Alfred G. Merriweather, Chief Financial
Officer of Monogram Biosciences, Inc., +1-650-624-4576, ; or
Jeremiah Hall of Feinstein Kean Healthcare, +1-415-677-2700, , for
Monogram Biosciences, Inc. Web site: http://www.monogrambio.com/
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