Q3 2019 Earnings Call

Your program is about to begin.

Good day and welcome to the cell Qt release of third quarter 2018 financial results conference. At this time all participants are they listen only mode. Later, you'll see opportunity tough question started a question answer session to register to ask your question. Please press the star and one on your Touchtone phone.

It's now my pleasure to during the quarter over to Mr., Brian Sullivan. Please go ahead.

Good afternoon, everyone. Thank you for joining our call we announced the financial results for our third quarter ended September 32018, a few minutes ago before we begin though I'd like to remind everyone that our comments today will include forward looking statements. These statements involve a number of risks and uncertainties, which are outlined in today's press release.

And in our reports and filings with the FCC.

Our actual results may differ materially from those in these forward looking statements on this call will also refer to some non-GAAP financial measures.

I can find a table reconciling the non-GAAP financial measures to GAAP financial measures in our earnings release for the three months in nine months ended September Thirtyth 2019.

It was included in todays press release.

Today's press releases available on our website www dot so acuity dot com under the Investor section.

I'm also pleased to have with me on the call today, Vicki Han our CFO .

I'd like to their first back some comments on our third quarter results as well as provide out the general outlook.

Secular I'd like to review the status of our product development projects, our collaboration discussions and our clinical trials.

Thank you will follow with more details on a few items and then we will open the line up for questions.

Yeah, Let me talk in the past that I think many of you understand our satellite platform gives us the unique ability to identify patients whose tumors have hyperactive oncogenic signaling pathways. Despite the absence of corresponding to know the biomarkers and this enables us to discover new cats or sub types that to translate those discoveries into new.

Ignostic test.

Our goal as for our cell likes to say golf cycling function tests to diagnose the singling dysfunction driving up the 40% of the cancers in the solid tumor types our tests evaluate.

Each of the new cancer, sometimes to discover kinda naval multiple new brought drug indications and expand the treatment population for a number of targeted therapies. Most importantly, no indications offer the potential for significantly better outcomes for the patients our test diagnose.

Our R&D teams continue to advance development of several new satellites test to diagnose patients with breast cancer sub types not identifiable I with genomic tests in December we'll report preclinical study results for our next cell signaling function test for breast cancer at the San Antonio Breast cancer Conference.

This test will identify new subgroup of Hertwo negative breast cancer patients with tumors that are currently on diagnosed hyperactive oncogenic secondly activity will incorporate this test endorse Alex multi pathway signaling function test.

I would say subgroup well increase the proportion of Hertwo negative breast cancer patients are celex multi pathway test can diagnose and that's what our first two tests are there are approved targeted therapies in London late stage clinical development. They can treat the cancer subtype. This test diagnosis.

Each of these therapy this represent a potential collaboration opportunity for south acuity to provide a companion diagnostic that would expand the treatable population for the partner therapies.

We would expect to initiate discussions with pharmaceutical companies about collaborating on clinical trials beginning in the first half of 2020.

We're also advancing development of a fourth test for Hertwo negative breast cancer that we hope to complete in 2020.

Successfully developed.

Oh this fourth test would create additional potential opportunities for pharmaceutical companies took 10, new indications and expand the treatment population for a number of targeted therapies.

The development of tests for two new tumor types also progressed during the quarter.

Expects to complete preclinical studies for cell signaling function test in a second tumor type in the first quarter 2020 and present, there's right, resulting they these studies that have cancer research conference in the second quarter.

At least one of the preclinical data packets for the second tumor type well further increase our opportunities to provide companion diagnostics that we believe will enable pharmaceutical companies took 10, new drug indications for the catch sub types our tests diagnose.

Our efforts so that's development of singling function test in a third tumor type also made significant progress this quarter.

We hope to complete development obsessed with a solid tumor type sometime in 2020.

The approach, we're taking for developing tasks and these new tumor types mirrors in many ways. The approach we use for breast cancer tests with these new tissue types, who can leverage the pathway studies, we've conducted in breast cancer and this experience and data we hope will enable us to offer tests for multiple pathways in the initial version of the test when we announce it the multi pathway test is available at the.

Outset will potentially broaden the scope of collaborations we could pursue.

We also continued to progress towards finalizing several clinical trial collaborations with pharmaceutical companies and clinical sponsors to study breast cancer patients identified bio Salix MP test. These potential collaboration is what they finalize enable us to study a range of drugs either as single or combination agent. If successful we believe these collaborate.

It was could ultimately lead to helping these therapies gain FTC approval to treat the patient population our tests identifies.

Since the cooperations, we're pursuing involves the acuity the clinical sponsor and in some cases to pharmaceutical companies significant time is required to finalize the related agreements between the three or four parties. However, we're very confident that we will close several collaborations in the next several quarters.

The efforts by annotated B P to add new clinical sites to the fact, one trial successfully continued this quarter six new clinical sites obtained an institutional review board or IR be approval and activated the trial I went out of 26 sites, where our enrollment ready and another four sites that are at various stages of obtaining I or be in other related approvals.

We're hopeful that most if not all of the four remaining sites that are in the midst of a pool related activities will be enrollment ready by year end just as a reminder, the fact, one trial is evaluating with safety and efficacy of genentech's drugs Herceptin upper Jetta and chemotherapy in early stage breast cancer patients selected with Acuities Celex Aegis F test.

Well. The addition of these six new sites and for pending sites would double the number of activated sites enrolling patients for this trial compared to the end of 2018.

Since most of these new side only began participating recently.

Oh, they haven't had yet a significant impact on the patient enrollment rate for the trial. We expect interim results will be available from this trial in mid 2020 and final results ultimately nine months later.

The fact, two trial that is evaluating the safety and efficacy of pull that technologies Pan her inhibitor neural links and chemotherapy in early stage breast cancer patients selected with our Silex ages that test is also progressing we expect interim results from this trial in mid 2020 and final results approximately 12 months later Oh there.

<unk> and its ATP and pull about biotechnology to evaluate tissue samples from a phase two study evaluating promos pan her inhibitor mnner links genentech's her to anybody Herceptin and Bristol Myers Squibb, Egypt far inhibitor.

Erbitux and metastatic colorectal cancer patients also continued to progress.

Finally, I'm very excited to haven't Eric Linquist join our team as our Chief business Officer fleets Acuities efforts to establish collaborations with pharmaceutical companies in the foster.

Ah relationships with oncology thought leaders, we announced as previously but I just wanted to comment on it Eric's nearly two decades of experience in that companion diagnostic industry brings critical expertise to sell acuity.

During his tenure at several leading diagnostic companies.

He developed companion diagnostic relationships is nearly every major pharmaceutical company.

Prior to joining us Eric was most recently.

The global Vice President of oncology in rare disease front, a tariff leading genetic testing diagnostics company.

He was responsible when he was there for launching their oncology diagnostic product signet Terra to the pharmaceutical industry and executed more than 32nd Terra related agreements <unk> within the first year of its launch.

And so that concludes my remarks overall, we're very excited about the progress we made during the quarter and now I will turn it over to Vicki to review our financial results. Thank you Brian .

Our third quarter, not last was 1.98 million or 19 cents per share compared to 1.87 million net loss or 18 cents per share for the third quarter of 2018 net loss for the first nine months of the year was 5.55 million or a 54 cents per share.

Compared to 5.66 million or 56 cents per share for the same period in 2018.

Because these quarterly net losses included significant noncash item stock based compensation. We also included in our press release.

non-GAAP adjusted net loss for the quarter, our non-GAAP adjusted net loss was 1.68 million or 16 cents per share for the third quarter of 2019.

Compared to non-GAAP adjusted net loss of 1.57 million or 15 cents per share for the third quarter of 2018.

[noise] R&D expenses increased approximately 2.08 billion during the first nine month of 2019 compared to the first nine months of 2018.

This was primarily due to 0.3 7 million in clinical validation and laboratory studies legal expenses related to patent costs and operational and business development activities.

This increase was offset by a decrease of <unk> 0.1, 9 million in noncash stock based compensation and point 1 million decreased in payroll taxes, primarily resulting from utilization of research and development tax credits as authorized.

By the path Act tax prevent [noise].

The approximately 8.15 million decreasing DNA for the first nine months of 2019 compared to the first nine months of 2018.

Merely resulted from noncash stock based compensation and professional fees associated with being a public company.

We ended the quarter with approximately 20.4 million of cash cash equivalents and investments.

The net cash used in operating activities for the third quarter 2019 was 1.48 million. This was the result of the non-GAAP adjusted net loss of 1.68 million offset by depreciation expense and working capital changes in prepaid and accounts payable of <unk> point 2 million.

Thank you Becky and operator, we'd like now to take question.

Thank you as a reminder, at this time if he would like to ask a question. It is the star in one on your Touchtone telephone.

So first of this site of Chen from H.C. Wainwright. Please go ahead.

Good afternoon. This is Ed remarks on free I appreciate you taking the questions.

Just looking at the time frame. So you had laid out here for the multiple collaborations I'm. Just wondering if you give a little more detail most of them are laid out here, but for the.

Gross collaboration.

Into collaboration I'm wondering if you can provide any more granularity on.

The timing for the trial maybe.

But as we indicated I think we.

In mid 2020, that's a specific as we can get.

And then the final read out roughly nine to 12 months after that.

And so you know, it's essentially a function of the enrollment and.

That you know, we hope will be augmented by the addition of the new sites that are coming online now.

Okay. Thank you.

And then you also mentioned just in the next several quarters you anticipate having some additional collaborations I'm just wondering if you could break these down into the different indications or if you were going to have just these conversations in the near term.

Do you anticipate within the next three or four.

Quarters to be able to announce them.

Well, we don't really want to preview the deals until they happen just.

Because we don't don't don't think that is practical but I can't say that we've had and had ongoing discussions with.

Five or six different pharmaceutical companies, yeah, we're pursuing a lot of potential different indications are different drugs and you know were as a result of those conversations.

And the stage confident that.

We will have collaborations to announce but as I indicated in my remarks, or you know these are multi party agreements and.

Those just take a longer time to get done they are.

In some cases is just a lot of do all time getting feedback on agreements or haven't follow up meetings.

Cetera, <unk>, you know just reality and up the pharmaceutical world because of the the nature of the collaborations themselves.

But regardless I mean were.

Have you know number these discussions.

So far enough along for us to you'll have a great confidence that.

We will have a number of them to a announced in 2020 and we think that some of those will be in the next few quarters.

Understood. Thank you and that's all for me. So I appreciate taking the questions Oh, you're welcome. Thank you.

And again that is the star in one to ask your question.

Well go next to this line of per Ostlund from Craig Hallum capital.

Good afternoon, Thanks for taking my questions Brian Vicki.

Hi, there.

Wanted to ask I guess since we're talking about future collaborations and specifically the pan her she met.

Test.

If if I'm.

If I'm right the multi pathway test is essentially.

In the in the sense that you'll continue to add and test for additional sometimes choose a multi pathway test I assume there's there's nothing that hold you back from.

You know striking collaborations as you add tests along the way in other words, you can have a C met pan her collaboration and then when you add something else to it with your third and fourth test coming down the road you can strike fresh exact fresh collaborations okay.

That makes sense and that's what I expected, but figured I would clarify because clearly you do have a lot that you're working on their.

You you brought up Hi, Eric Eric hiring in your prepared remarks, Brian and I know, it's only been a couple of months, but kind of love. Your early take I guess on on what he's bringing to the table for you from a business development standpoint.

Are you, having more conversations with pharma partners or or is it a matter of those conversations just being a little bit deeper because you've got another.

Another high level executive at the table alongside and then maybe just bigger picture how did his background standout.

Sure well Eric is listening in on this call. So no I'll Oh I'll have to bring it back down to Earth. After the call, but no. We didn't extensive national search and found a lot of very good candidates were very interested in working with us the companion diagnostic industry over the past 10 years is really exploded there a lot of companies that offer.

Molecular tests.

That are important for drug companies get approvals.

To select their patients and so there's a good pull people out there who spent their careers.

Collaborating with pharmaceutical companies to coordinate a clinical trials.

FDA approvals and in the process develop relationships with senior executives.

Across a range of disciplines in the pharmaceutical area, whether its translational medicine metal Medical Affairs biomarker group.

Or even though the Scott the discovery group and preclinical phase one groups.

And so I had the chats in the national search to evaluate a lot of candidates and that's all I had I think a pretty good take on the talent available in the experience Oh available to us and error stood out you know I really was fortunate to to have the opportunity to swap amongst.

A number of very very capable people and what was most intriguing about Eric what's that he's he's been at the forefront of a lot of or the most advanced companion diagnostic technologies. He was involved in helping launch the first her two tests.

And involved in and advancing the development of next generation of her two tests you know focusing on her to amplification using Fisher ish.

His most recent experience in a Tara.

Was very.

[noise] impressive to me and I think be very helpful to us.

Because he was directly involved in launching a new technology and new task.

I could directly impact how pharmaceutical companies evaluate their drugs.

Corporate those tests into the development of their programs and because of the nature of.

No the the read out from that test.

It it gave him entree.

To meet with very very senior people at most of the major and minor pharma companies out there.

And yeah as you know in most industries, it's it's a lot better to Oh start up a dialogue with somebody that you know a then with a stranger and so the benefit of having our join our team is that he knows the people that we should get to know and he brings credibility of having delivered.

New technologies to those companies in the past and I think he has a great reputation as a result is discerning and the companies that he has worked with them is credible because he understands it you can't over promise.

You have to be a you know very honorable and how you're presenting the data from your company [noise].

So in terms of how it helps us directly.

Well, we've we've made progress as a company getting a relationships with whom onto it intact.

But there's a lot of companies out there and you know we may have focused on certain areas of pharma, Eric allows us to broaden our reach within the pharmaceutical also get at higher levels than than maybe we were able to get to before.

So I think overall, we hired him for a reason to help advance.

Our ability to collaborate or established these collaborations and ideally overtime deepen.

Our relationships with these companies and so.

So far so good yeah, we spend a couple of days at a conference where.

We were the only non pharma company at the conference invitation only conference and were able to.

No engage in a very with very high level folks talk you know in a very strategic way above the type of work that we do so again I would say it was he's been here for 60 days, but.

He's reinforced.

My decision. So so Eric you and I will talk after this call and [noise].

I will have to.

[laughter] certain things out exactly.

No. He sees great gotta have on onboard and and you really fits the profile exactly that I set out when I was a initiating search.

Perfect very good to hear.

Last question and and I realize this might be just a little bit early to telegraph, but is there anything.

Early as you as you look to turn into calendar 2020 from an operating plan standpoint that would.

Deviate from from your kind of expense flash investment levels of 2019.

No no I mean, I think you know 2019, yeah, we were always very budget conscious [laughter] or frugal and to the extent that you know we spend more money and 20 it'll be because we're doing some good things that are advancing the ball, but but I, we're not changing our overall.

I'll direction or guidance vis-a-vis our spending.

Okay. Thanks Brent.

You're welcome thank you.

Thank you and again that is Ses dart and want to ask your question and we'll pause for any further questions or follow secure.

[noise].

Okay I have here, we have any further questions at this time Sir.

Okay, well. Thank you everyone for joining the call look forward to speaking with you in the future I'll talk to let goodbye.

We'd like to thank everybody for their participation on today's conference. Please feel free to disconnect. Your line anytime and have a wonderful day.

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