Trofile(TM) Assay Ready for Commercial Introduction after FDA
Approval of Pfizer's Maraviroc; SOUTH SAN FRANCISCO, Calif., July
26 /PRNewswire-FirstCall/ -- Monogram Biosciences, Inc.
(NASDAQ:MGRM) today reported financial results for the quarter
ended June 30, 2007. Second Quarter Results The Company had revenue
of $9.7 million for the second quarter of 2007. Monogram's
Trofile(TM) Assay, which has been used for patient selection in the
phase III trial of Pfizer's CCR5 antagonist, maraviroc, is ready
for commercial introduction and is expected to contribute to
revenue growth for Monogram after maraviroc is approved by the FDA.
Total revenue in the second quarter of 2006, when Pfizer's phase
III trial for maraviroc was still in process, was $13.4 million.
The net loss was $3.9 million, or $0.03 per common share, in the
second quarter of 2007, compared to a net loss of $21.8 million, or
$0.17 per common share, for the same period in 2006. Included in
these results were substantial non-cash items which are described
below under "Non-GAAP Proforma Results." On a non-GAAP proforma
basis, adjusted for these non-cash items, the net loss was $8.3
million, or $0.06 per share, in the second quarter of 2007 compared
to a net loss of $5.3 million, or $0.04 per share, in the same
period of 2006. Six Month Results The Company had revenue of $19.1
million for the first six months of 2007, compared to revenue of
$26.6 million for the first six months of 2006. The net loss was
$15.4 million, or $0.12 per common share, in the first six months
of 2007, compared to a net loss of $25.1 million, or $0.19 per
common share, for the same period in 2006. Included in these
results were substantial non-cash items which are described below
under "Non-GAAP Proforma Results." On a non-GAAP proforma basis,
adjusted for these non-cash items, the net loss was $18.1 million,
or $0.14 per share, in the first six months of 2007 compared to a
net loss of $8.7 million, or $0.07 per share, in the same period of
2006. The Company had $36.6 million in cash resources (comprised of
cash, cash equivalents and short-term investments) at June 30,
2007. Monogram's Trofile Assay and Pfizer's maraviroc "We are
encouraged by the outlook for maraviroc and our Trofile Assay,"
said William Young, Monogram chief executive officer. "Pfizer
reported in June that it received an approvable letter for
maraviroc from the FDA and is continuing to discuss labeling
issues. We look forward to Pfizer resolving these issues so that we
can commercialize Trofile in concert with Pfizer's launch of
maraviroc." Earlier this week, Pfizer reported positive clinical
results from a separate phase III trial of maraviroc in
treatment-naive patients. These latest data follow the positive
safety and efficacy data presented by Pfizer in February 2007 at
the Conference on Retroviral and Opportunistic Infections (CROI)
and the unanimous recommendation in April by an FDA advisory panel
that maraviroc be approved for use in treatment-experienced
patients with CCR5- tropic HIV-1. The data presented by Pfizer at
CROI was based on 24 week follow up in the phase III trials of
maraviroc, and Pfizer has now reported that these results have been
confirmed by the 48 week follow up data. "Our Trofile Assay is
primed and ready for commercialization in the U.S. as soon as
Pfizer's maraviroc receives FDA approval. Our national commercial
organization of over 50 people, including a 33 person national
field force, has been trained and is ready to communicate the value
of Trofile," continued Young. "For many years, we have served the
HIV physician and patient communities by providing resistance tests
that have become an integral part of managing HIV therapy. We now
look forward to providing the only assay that has been clinically
demonstrated to identify a patient's tropism and thereby guide
decisions about the use of Pfizer's maraviroc as a relevant
addition to the patient's therapy." Monogram believes that tens of
thousands of patients each year in the U.S. potentially could be
candidates for new classes of HIV drugs such as maraviroc. Outside
of the U.S., Pfizer reported last week that the Committee for
Medicinal Products for Human Use (CHMP) of the European Medicines
Agency (EMEA) has issued a positive opinion recommending marketing
authorization for maraviroc. A final decision from the European
Commission, which has the authority to approve medications for the
European Union, is expected within months. VeraTag(TM) Assays for
Oncology "In June, at ASCO, we presented the first clinical data
generated by our novel assays in oncology," added Young. "As we
move into a new phase of the evolution of this technology we have
adopted the brandname VeraTag, for our proprietary platform
formerly known as eTag. Monogram made three presentations at the
American Society of Clinical Oncology (ASCO) in June. Two
presentations involved VeraTag testing in two separate clinical
cohorts of Herceptin-treated patients with metastatic breast
cancer. These presentations demonstrated the ability of the VeraTag
assay to identify different sub-populations of patients with
different clinical outcomes on Herceptin, whether they were
selected by IHC or FISH. The third presentation demonstrated the
ability of the VeraTag assay to identify elevated heterodimer
levels that correlated with Herceptin resistance in cell lines. "We
believe that these studies suggest the power of our VeraTag
technology to significantly improve the information available to
physicians in making treatment decisions and also provide direction
for our first VeraTag product opportunities," added Young. "We
expect that our first VeraTag products will be directed at
predicting response in metastatic breast cancer patients to
targeted drugs such as Herceptin(R). Less than 50% of patients
selected for treatment with Herceptin by currently available tests
(IHC and/or FISH) actually respond. In addition, based on data
presented at ASCO by other investigators, there is growing concern
that currently available tests may miss some patients who can
benefit from Herceptin. Tests that can more accurately identify
which patients are likely to benefit from Herceptin are needed. The
data we presented at ASCO suggest that the VeraTag assay can help
solve this problem, and we are hard at work generating more data to
confirm these observations. We have now reported two cohorts, with
a total of almost 150 patient samples, in which we have identified
consistent relationships between VeraTag measurements and clinical
outcomes. A third cohort has been analyzed and showed similar
results. Building on these three clinical cohorts involving a total
of nearly 250 patients, we are obtaining additional samples for the
purpose of validating clinical cutoffs that can be used to improve
patient selection for Herceptin and enhance the management of HER2
positive breast cancer." "Our specific goals now are to publish
these initial studies and to test the predictive ability of the
VeraTag assay in additional cohorts of metastatic breast cancer as
we move toward commercialization," continued Young. The assays on
which the recent presentations at ASCO were based are undergoing
technical validation in the Company's CLIA-certified clinical
laboratory and CLIA validation is expected to be completed during
the third quarter of 2007. Capital Structure At June 30, 2007, a
total of 132.2 million shares of common stock were outstanding.
Stock options and warrants are outstanding on 21.8 million shares
and 0.7 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 non- cash valuation
adjustments related to our convertible debt in 2007 and to our CVRs
in 2006. 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 years, 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 SFAS123( R ) we are no longer
excluding these non- cash items from proforma net loss. Stock-based
compensation in accordance with SFAS123( R ) was $1.1 million in
the second quarter of 2007, compared to $1.5 million in the prior
year's second quarter. The following non-cash items that were
reflected in non-operating income and expense for the periods ended
June 30, 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. Favorable
adjustments of $4.5 million and $0.4 million were recorded in the
three and six months ending June 30, 2007, respectively. There were
no such adjustments in the prior year, although a favorable
adjustment of $2.2 million was recorded in the first quarter of
2007 for the cumulative effect of the change in accounting
principle at January 1, 2007. Such adjustments could be significant
and unpredictable in future quarters depending on several factors,
including the level of the Company's common stock price. --
"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. An unfavorable adjustment
of $16.5 million was recorded in the three and six months ended
June 30, 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) 817 2743 or (913) 981
4915 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 3750409. 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 availability of our Trofile Assay for
commercial introduction, the potential need for our Trofile Assay
for patient selection for maraviroc, potential FDA and European
Commission approval and labeling provisions for maraviroc, the
outlook for maraviroc and our Trofile Assay, the number of patients
each year in the U.S. who potentially could be candidates for new
classes of HIV drugs such as maraviroc, the ability of VeraTag
technology to significantly improve the information available to
physicians, plans for further development of the VeraTag technology
and products and anticipated clinical and laboratory validation of
VeraTag in a CLIA setting, expected protection provided by patents,
possible regulation of Trofile and our other products by the FDA,
and activities expected to occur in connection with the Pfizer
collaboration. 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 risk that our Trofile Assay may not be utilized for
patient use in the event of approval of any CCR5 inhibitors; the
risk that our VeraTag assays may not predict response to particular
therapeutic agents; the risk that we may not be able to obtain
additional cohorts of patient samples for additional VeraTag
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; 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, including Trofile; whether the draft guidance
on Multivariate Index Assays issued by FDA will be subsequently
determined to apply 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, Merrill Lynch and other 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, VeraTag and eTag are trademarks of Monogram
Biosciences, Inc. Herceptin is a registered trademark of Genentech,
Inc. MONOGRAM BIOSCIENCES, INC. SELECTED STATEMENT OF OPERATIONS
DATA (In thousands, except per share amounts) (Unaudited) Three
Months Ended Six Months Ended June 30, June 30, 2007 2006 2007 2006
Revenue: Product revenue $8,907 $12,757 $18,006 $25,003 Contract
revenue 485 620 803 1,623 License revenue 300 - 300 - Total revenue
9,692 13,377 19,109 26,626 Operating costs and expenses: Cost of
product revenue 5,327 5,664 11,032 11,345 Research and development
5,176 5,208 10,507 9,783 Sales and marketing 4,159 4,067 8,102
7,445 General and administrative 3,629 4,282 7,857 7,863 Total
operating costs and expenses 18,291 19,221 37,498 36,436 Operating
loss (8,599) (5,844) (18,389) (9,810) Convertible debt valuation
adjustment and interest income/ (expense), net 4,727 544 717 1,143
CVR valuation adjustment - (16,464) - (16,450) Net loss before
cumulative effect of change in accounting principle (3,872)
(21,764) (17,672) (25,117) Cumulative effect of change in
accounting principle - - 2,242 - Net loss after cumulative effect
of change in accounting principle $(3,872) $(21,764) $(15,430)
$(25,117) Basic and diluted net loss per common share before
cumulative effect of change in accounting principle $(0.03) $(0.17)
$(0.13) $(0.19) Cumulative effect per share of change in accounting
principle $- $- $0.01 $- Basic and diluted net loss per common
share after cumulative effect of change in accounting principle
$(0.03) $(0.17) $(0.12) $(0.19) Weighted-average shares used in
computing basic net loss per common share 132,026 130,348 131,805
129,983 Reconciliation of Non-GAAP Proforma Results to GAAP Net
loss after cumulative effect of change in accounting principle
$(3,872) $(21,764) $(15,430) $(25,117) Adjustments for certain
non-cash items: Cumulative effect of change in accounting principle
- - (2,242) - CVR valuation adjustment - 16,464 - 16,450
Convertible debt valuation adjustment (4,463) - (408) - Non-GAAP
Proforma net loss (8,335) (5,300) (18,080) (8,667) Non-GAAP
Proforma net loss per common share, basic $(0.06) $(0.04) $(0.14)
$(0.07) 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) June 30, December 31, 2007 2006 ASSETS (Note
1) Current assets: Cash and cash equivalents $14,712 $8,263
Short-term investments 21,853 22,867 Accounts receivable, net 7,991
6,849 Prepaid expenses 1,080 1,234 Inventory 1,073 961 Other
current assets 634 378 Total current assets 47,343 40,552 Property
and equipment, net 7,661 7,463 Goodwill 9,927 9,927 Deferred costs
3,687 1,783 Other assets 876 1,120 Total assets $69,494 $60,845
LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts
payable $1,849 $1,271 Accrued compensation 3,420 2,258 Accrued
liabilities 3,994 4,720 Current portion of restructuring costs 637
1,128 Deferred revenue, current portion 689 404 Current portion of
loans payable and capital lease obligations 5,607 6,355 Contingent
value rights 2,828 2,813 Total current liabilities 19,024 18,949
Long-term 3% convertible promissory note 21,959 25,000 Long-term 0%
convertible promissory note 21,136 - Long-term portion of
restructuring costs 579 868 Long-term deferred revenue 4,106 1,783
Other long-term liabilities 375 337 Total liabilities 67,179 46,937
Stockholders' equity: Common stock 132 131 Additional paid-in
capital 281,620 277,892 Accumulated other comprehensive loss (16)
(124) Accumulated deficit (279,421) (263,991) Total stockholders'
equity 2,315 13,908 Total liabilities and stockholders' equity
$69,494 $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 in the U.S. for Monogram's Trofile Assay with Pfizer's
maraviroc? Pfizer received an approvable letter from the U.S. Food
and Drug Administration (FDA) for maraviroc on June 20. This
followed a unanimous recommendation, from the FDA Antiviral Drugs
Advisory Committee that maraviroc be approved for use along with
other antiretroviral agents for treatment-experienced adult
patients infected with CCR5-tropic HIV-1. Pfizer indicated that it
was in continuing discussions with FDA regarding open questions and
labeling, and that no additional clinical data was being requested
by FDA. 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." Pfizer's
submission to the FDA was based on the clinical results from two
phase III trials, for which 24 week follow up results were reported
in February, 2007. Pfizer has reported in July, 2007 that 48 week
follow up data has confirmed the previously reported results. We,
and Pfizer, await FDA action on maraviroc. We anticipate that
maraviroc may be approved by the FDA soon, 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 demonstrated 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 direct sales and marketing
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 over 50 sales, marketing and support personnel, is well
placed to communicate the value of Trofile to physicians. While the
pending FDA submission for maraviroc relates to its use in
treatment-experienced patients, an additional phase III study (the
MERIT study) has been conducted by Pfizer in treatment-naive
patients and in July 2007, Pfizer reported the results of this
study in Sydney at the International AIDS Society Meeting. Pfizer
reported favorable safety and efficacy data in the MERIT trial. The
primary analyses of the 48 week data indicate that treatment na�ve
subjects treated with a maraviroc-containing regimen as a first
course of therapy responded well, as measured by suppression of HIV
replication and gains in CD4+ T-cell counts. The results of the
MERIT study also reinforce the favorable safety profile of
maraviroc that was previously demonstrated in the treatment
experienced population. 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. In July 2007 at the International Aids Society meeting
in Sydney, Schering reported that that results from a Phase II
clinical trial showed that vicriviroc, demonstrated potent and
sustained viral suppression through 48 weeks of therapy in
treatment-experienced HIV patients. Schering also stated that based
on results from its Phase II clinical trials, they will select a
dose of vicriviroc to move forward into Phase III clinical
development in treatment-experienced patients. As with Pfizer's
studies of maraviroc, Schering used our Trofile Assay to select
patients and our phenotypic tests to optimize background therapy
for their studies of vicriviroc. 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 second
quarter of 2007, such costs amounted to $3.7m. 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 are working collaboratively with
Pfizer's commercial organization, we 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
status of the opportunity internationally for Monogram's Trofile
Assay with Pfizer's maraviroc? In the European Union, Pfizer made a
submission to the E.U. authorities for regulatory approval
simultaneously with the FDA submission. Pfizer announced in July
2007 that the Committee for Medicinal Products for Human Use (CHMP)
of the European Medicines Agency (EMEA) issued a positive opinion
recommending marketing authorization for maraviroc for use in
combination with other antiretroviral agents for treatment-
experienced patients infected with CCR5-tropic HIV-1. The CHMP's
positive opinion will be reviewed by the European Commission, which
has authority to approve medicines for the European Union. Pfizer
anticipates a final decision from the Commission in the coming
months. In our collaboration with Pfizer described above, we have
been engaged in planning for commercial availability of Trofile in
those countries identified by Pfizer for commercial launch. Our
responsibility is to implement the logistical arrangements for
blood samples to be delivered from local markets to our lab in
South San Francisco for processing. Pfizer is responsible for
reimbursing us for all of our costs incurred in establishing and
operating the logistics infrastructure. We are well advanced in the
initial countries identified by Pfizer and expect to be ready to
make Trofile available in as many as eight countries outside the
U.S. by the end of this year, should regulatory approval be
obtained. Planning is under way in 40 additional countries. 7. 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. 8. 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. All four 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. 9. Is there published data
available related to your Trofile Assay? In February 2007, Pfizer
reported the results of its phase III studies of maraviroc in
treatment-experienced patients 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. Pfizer has reported in July 2007 that the 48 week follow up
data has confirmed the previously reported 24 week results. In July
2007, Pfizer reported the results of its phase III trial (the MERIT
trial) in treatment-na�ve patients in Sydney at the International
AIDS Society Meeting. Pfizer reported favorable safety and efficacy
data in the MERIT trial. The primary analyses of the 48 week data
indicate that treatment na�ve subjects treated with a maraviroc-
containing regimen as a first course of therapy responded well, as
measured by suppression of HIV replication and gains in CD4+ T-cell
counts. The results of the MERIT study also reinforce the favorable
safety profile of maraviroc that was previously demonstrated in the
treatment experienced population. 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. 10. 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 a
revised draft was issued in July 2007. This is also 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 combined using an interpretation function to yield a
single patient-specific result whose derivation is non-transparent
to end-users. 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, genotypic
HIV tests are explicitly mentioned as not being covered by the
draft guidance * 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. FDA has verbally concurred with our assessment that Trofile
does not fall within the draft guidance. However, because of the
significance of Trofile to use of maraviroc, the FDA, during the
advisory panel meeting, expressed an interest in the regulatory
status of 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. It remains unclear what
action the FDA may take in this regard. With regard to our
potential VeraTag 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 VeraTag 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 11. What is VeraTag technology? How will VeraTag assays be
used? Our VeraTag 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. 12. What is the status of your clinical studies for the
VeraTag EGFR/HER test panel? In June 2007, we presented the first
clinical data generated by our novel VeraTag assays in oncology at
the American Society of Clinical Oncology (ASCO). Two presentations
involved VeraTag testing in two separate clinical cohorts, for a
total of almost 150 Herceptin- treated patients with metastatic
breast cancer. These presentations demonstrated the ability of the
VeraTag assay to identify different sub-populations of patients
with different clinical outcomes on Herceptin, whether they were
selected by IHC or FISH. A third presentation demonstrated the
ability of the VeraTag assay to identify elevated heterodimer
levels that correlated with Herceptin resistance in cell lines. We
believe that these studies suggest the power of our VeraTag
technology. Our goals now are to publish these initial studies and
to conduct and publish analyses of additional metastatic patient
cohorts. One of the planned additional cohorts, involving almost
100 metastatic breast cancer patients, has already been tested and
the results are consistent with prior observations. These three
cohorts, totaling almost 250 patients, suggest that VeraTag Assays
can significantly improve the information available to physicians
in managing patient therapies in metastatic breast cancer.
Additional samples are targeted to confirm these observations. 13.
What is the CLIA status of your VeraTag assays? The assays on which
the recent presentations at ASCO were based are undergoing
technical validation in the Company's CLIA certified clinical
laboratory and CLIA validation is expected to be completed during
the third quarter of 2007. 14. What will your first commercial
oncology product be? We expect that our first products will be
directed at predicting response in metatstatic breast cancer
patients to targeted drugs such as Herceptin(R). Less than 50% of
patients selected for treatment with Herceptin by currently
available tests (IHC and/or FISH) respond. In addition, there is
growing concern that poor implementation coupled with the
insensitive nature of these currently available tests leads to some
patients being incorrectly identified as HER2 negative and being
denied Herceptin, when in fact they may be appropriate candidates
for the drug. We believe there is an important clinical need for
enhanced information such as that demonstrated in our presentations
at ASCO. 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:HER1, and HER2:HER2); and hetero-dimers
(HER1:HER2, HER2:HER3), and assays for various modified forms of
these receptors, (e.g. 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, 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. 15. What
happened to "eTag"? We view the presentation of our first clinical
data at ASCO in June 2007 as a very important event in the
evolution of the technology, and as we move into a new phase of the
evolution of this technology we felt it appropriate to evaluate the
appropriate brand for our proprietary platform. The brandname we
selected is VeraTag. Financial 16. What has been your use of cash?
The following table summarizes elements of cash flow in 2006 and
the first half of 2007. 2006 2007 $ millions Q1 Q2 Q3 Q4 Q1 Q2 Cash
provided by (used in) operations (1) $0.3 $0.2 $(4.6) $(5.9) $(7.4)
$(6.7) Cash used in CVR settlement - (57.1) - - - - Cash provided
by (used in) investing activities (2) (0.6) (0.8) - (0.2) (0.3)
(1.0) Cash provided by financing activities 2.7 25.4 5.6 1.0 18.9
2.0 $2.4 $(32.3) $1.0 $(5.1) $11.2 $(5.7) (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. 17. What is your current cash
position? At June 30, 2007 we had cash resources (comprising cash,
cash equivalents, short-term investments) of approximately $36.6
million. 18. What are the details of the two convertible notes on
your balance sheet? Pfizer financing 0% Convertible Senior (May
2006) Unsecured 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 per share $2.7048
$2.52 "Autoconversion" $4.06 for 20 out of $3.15 for 20 out of
feature if common 30 consecutive 30 consecutive stock trades at
trading days 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. 19. 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 $4.1 million and deferred
costs of $3.7 million. Additional details will be included in our
SEC filings on Form 10Q and 10K. 20. 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 $5.4 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 June 30, 2007, approximately
$5.4 million was outstanding under the revolving credit line. 21.
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. 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 and unfavorable.
$ millions 2006 2007 Q1 Q2 Q3 Q4 Q1 Q2 GAAP Net Income (Loss)
$(3.3) $(21.8) $(6.6) $(7.0) $(11.6) $(3.9) Contingent Valuation
Rights Adjustment Included in Non-operating Income/Expense (1) -
16.5 - - - - Cumulative effect of change in accounting principle -
- - - (2.2) - Convertible Debt Valuation Adjustment (2) - - - - 4.1
(4.4) Non-GAAP Proforma Net Loss $(3.3) $(5.3) $(6.6) $(7.0) $(9.7)
$(8.3) (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. contacts: Alfred G. Merriweather
Chief Financial Officer Tel: 650 624 4576 Jeremiah Hall Feinstein
Kean Healthcare Tel: 415 677 2700 DATASOURCE: Monogram Biosciences,
Inc. CONTACT: Alfred G. Merriweather, Chief Financial Officer of
Monogram Biosciences, Inc., +1-650-624-4576, ; Jeremiah Hall of
Feinstein Kean Healthcare, +1-415-677-2700, , for Monogram
Biosciences, Inc.
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