Q4 2019 Earnings Call

Hi, Good program will be starting in July.

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Good day, everyone and welcome to today's call to discuss this acuity of at least a fourth quarter fiscal year 2019 financial results. All participants are in listen only mode.

Later, you'll have a chance to ask questions. During the Q1 day session.

No today's call will be recorded.

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It's now my pleasure to Kinda program <unk> CEO, Brian Sullivan. Please go ahead.

Thank you and good afternoon, everyone. I know most of you are probably shell shocked about what's going on in the market.

But we must press on.

We announced financial results for our fourth quarter and your ended December 31, 2018, a few minutes ago.

Before I begin now I'd like to remind listeners that our comments today includes forward looking statements. These statements involve a number of risks and uncertainties, which are outlined in today's press release as in our reports and filings with the FCC.

Actual results may differ materially from those in the forward looking statements on this call will also refer to non-GAAP financial measures you could buy table reconciling the non-GAAP financial measures to GAAP financial measures in our earnings release, but the three months in 12 months ended December 31, 2019, which was included in todays press release.

Today's press release is also available on our website www acuity dot com under the investors section.

I'm pleased all sort of have with me today on the call behind our CFO.

I'd like to make some comments on our fourth quarter results as well provide a general outlook.

Particular, I'll review the status of our product development projects, our collaboration discussions at our clinical trial.

I think he will follow up with more details on a few items and then we'll open the lines of questioning.

Well today only a small proportion of cancer patients are benefiting from the baskets made over the past 20 years or so and molecular based medicine.

So reports estimate that roughly 80% of cancer patients slack and actionable biomarker typically a molecular mutation that an oncologist could use to guide selection of a targeted therapy for their cancer patients.

There's a huge unmet need for new diagnostics with 80% of cancer patients, who today are not eligible for targeted therapies.

We found itself acuity to address this unmet need ourselves take me out, which we previously called Celex platform diagnosis, Dysregulated oncogenic cycling, which is the underlying cellular activity driving many cancers.

The patience, we diagnosed with a dysregulated signaling pathway have a disease mechanism it directly corresponds to a matching targeted therapies mechanism of action.

Our strategy is to help pharmaceutical companies obtained new indications for their targeted therapies to treat the patients I sell signet tests identify since this regulate it seems like it's too complex, where molecular tests to characterize we can leverage the capability of ourselves signet platform to create a proprietary business strategy.

So I figured our strategy our R&D team is working hard to expand the applications for ourselves signal platform, new tests expand the number of patients who they positively impact and increased the number of potential pharmaceutical collaboration as we can pursue.

I'm excited to report.

That we made significant progress advancing additional cell signaling a tests in fourth quarter 2019.

As we reported in December.

We presented results from preclinical studies, where our new cell signaling <unk> three K test at the San Antonio breast cancer Symposium.

The studies, we presented demonstrate how using ourselves signet platform.

No matter P.I. three candlestick like.

May provide a more sensitive and specific method, then pithree K mutational status to identify patients most likely to benefit from P.S., we can't hepatitis.

Okay. I think had test provides an excellent case study of unique insights our sell signet platform can obtain by analyzing secondly activity on living tumor cells.

Today breast cancer only patients with certain people, who can mutations are eligible for treatment with the P.S., we can editor.

Her recent clinical trial results on that less than 20% theatrically mutated late stage breast cancer patients responded to epilepsy.

Recently approved theatrical inhibitor.

They suggested to us that measurement of T. I M. K involve signaling activity, maybe more important to measure npis weekend mutational status to identify patients eligible for P.I.T.K. inhibitors.

We knew that cancer researchers had identified I like between Pithree K signaling activity and G protein couple of receptors or GPC ours, and some breast cancers.

Right, it's not possible using molecular tests to apply this discovered that the clinic.

But I felt like me a platform we can confirm this linkage first we identified tumors with this regulated GPCR sigley and second we developed methods to identify whether certain pathway nodes known to play a role in promoting cancer such aspect as we get we're also involved.

Ultimately our unique ability to analyze complex signaling activity involving multiple pathways allowed us to develop a P.I.T.K. test that can identify new patients for treatment would be at Teekay inhibitors.

This is our third sell seeking a test for breast cancer cell Qt now has the potential to identify dysregulated signaling activity on diagnosis will buy molecular tests for up to one of the three hertwo negative breast cancer patients [laughter].

That's the patients diagnosed by if we sell signet tests are ones current molecular tests cannot identify.

He just out of offers a potential opportunity for pharmaceutical companies to expand the number of patients eligible for their targeted therapies.

Or to obtain new indications.

We're successful and working with pharmaceutical companies to gain a pool for new drug indications to treat these groups.

We will have an incredible impact on the outcomes for breast cancer patients.

Consistent with our Saturday, we're continuing our efforts to develop additional tests for breast cancer patients.

Element of our fourth test for breast cancer also at that during the quarter Oh, we helped to complete the preclinical studies for this new test in 2020.

In addition to maximize the number of tests, we can perform in breast cancer. Oh, We're also committed to offering sell cigna tests for a range of all the solid tumor types.

Hi, breast cancer research has given us valuable insights into another cancer that uniquely effects one ovarian cancer.

As to what else. It we will report the preclinical study results, where a person so I'll take me a test for ovarian cancer.

Its 2020 annual meeting of the American Association for Cancer Research. This meeting was originally scheduled for late April but it has been postponed because of October 19 related concerns out there doing new date has not been sat.

The Anita isn't tended to identify a subgroup of ovarian cancer patients, whose tumors have and diagnose hyperactive oncogenic signaling activity.

Only 15000 woman or your die from ovarian cancer.

Disease that has less than a 50% by the recent Bible rate and a limited range of targeted therapeutic options.

That's a significant unmet need for additional therapeutic options for ovarian cancer patients.

As a companion diagnostic I still think me a test for ovarian cancer well they intended to help pharmaceutical companies obtain new drug indications and expand treatment options for this challenging tumor type we would expect to initiate discussions with pharmaceutical companies about collaborating on Twitter clinical trials later in 2020.

[noise] our efforts to finalize several clinical trial collaborations with pharmaceutical companies and clinical sponsors continues to progress Oh, we're in active discussions with a number of companies a prominent oncologist and centers our goal to evaluate the efficacy of various targeted therapeutics in breast cancer patients identified by ourselves Cigna test.

These potential collaborations would if idolize enable us to study a range of drugs, either a single or combination agent.

If successful we believe these collaborations could ultimately lead to helping these therapies gain after approval to treat the patient populations are tested identified.

Oh, we remain very confident that woo closed several collaboration this year, but that's these collaborations and both acuity the clinical sponsor and in some cases to pharmaceutical companies.

That's good times required.

Finalized the related agreements between these three or four parties.

I'd like and I'll turn to an update on our clinical trial up and I say BP. The group that is fostering our clinical trial of genetic.

As largely completed the addition of new clinical sites to the fact, one trial or we are up 27 active activated sites participating.

Expect several more would get activate it soon but but the activity of adding sites is largely completed.

We expected that these new sites would immediately increasing enrollment rate for the trial.

Oh today. However, these insights have not yet impacted the enrollment rate as we ran a C. D P expected.

As we previously discussed early stage cancer patients are more difficult to enroll in clinical trials and later stage patients and its makes it hard a friend of Citi pizza projected much accuracy or the enrollment right.

So as a result, given the slower than expected enrollment from these new sites. We now expect interim results will be available from this trial in early to mid 21 and final results approximately nine months later.

Oh, the fact, two clinical trial, well, that's evaluating safety and efficacy of Paula Biotechnologies Pan her inhibitor in neuro links chemotherapy is progressing I. We expect interim results from this trial in mid 2021 and final results approximately 912 months later.

And finally.

In conjunction with our efforts to collaborate with pharmaceutical companies to feel clinical trials.

We expanded our scientific advisory board or essay be over the past few months, we're pleased to announce it several nationally recognized medical oncologists have joined our city over the past few months.

I know what they'd be members include Dr. been park, a co leader at the breast cancer Research program and director of precision oncology at Vanderbilt University Medical Center.

Dr. Phillip Janko medical director of the clinical and translational Research Center at MD Anderson Cancer Center, and Dr. Boral them, a assistant Professor MD Anderson cancer Center.

We're excited about the opportunities to gain their insights as well as potentially collaborate with them on future clinical trials.

The recent addition of Dr., Richard a bueller farmer VP of translational medicine at Pfizer to our board of Directors also provides great clinical and translational medicine experience to our company.

So overall, what we're disappointed in the slower than expected enrollment rate of our first trial.

We remain excited very excited about the progress we made during the quarter. So now I'd like to turn it over to Vicki to review our financial results [noise].

Thank you Brian.

Fourth quarter net loss was 1.81 million or 18 cents per share compared to 1.83 million net loss or 18 cents per share for the fourth quarter of 2018.

Net loss for fiscal year, 2019 was 7.36 million or 72 cents per share compared to 7.48 million or 74 cents per share for the fiscal year 2018.

Because these quarterly net losses included a significant noncash item, which is 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 1.4 or 5 million or 14 cents per share for the fourth quarter of 2000.

As a 19.

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

R&D expenses decreased approximately <unk> point sixmillion during fiscal year 2019 compared to fiscal year 2018.

This was primarily due to <unk> 0.3, 1 million decrease in compensation expense.

Merely in payroll taxes, resulting from utilization of research and development tax credits as authorized by the path Act and a decrease of 0.1 6 million in noncash stock based compensation.

This decrease was offset by <unk> 0.4, 1 million increase in clinical validation and laboratory studies legal expenses related to patent costs and operational and business development activities.

The approximately 8.07 million decreasing gene aid during fiscal year 2019, compared to fiscal year 2018, primarily resulted from a decrease in professional fees associated with being a public company.

[noise], we ended the quarter with approximately 18.7 million of cash cash equivalents. The net cash used in operating activities for the fourth quarter of 2019 was 1.7 million.

This was the result of non-GAAP adjusted net loss of 1.4, or 5 million and 0.3 5 million of working capital changes in prepaid assets and payroll tax receivable.

Offset by depreciation expense of <unk> point 1 million.

Thank you Vicki operator, we'd like now to open the lines for questions.

Certainly if he would like to ask a question today. Please press Star then one on your touched on telephone.

Fine to your question has been answered you name it yourself on the Q bypassing the <unk>.

Once again, that's star one if you'd like to ask a question.

Well take our first question from Yi Chen with H.C. Wainwright. Please go ahead.

Hi didn't bother linear.

I have two question. So that's like the enrollment Scott and I know you briefly mentioned, but maybe you can you elaborate little bit more on dot. So what's the current endoglin status or the backbone and back to study and Oh by the that I've seen any disruption due to the Corona virus outbreak.

Oh, well I think I summarize the enrollment activity slower than we expected and we project based on the enrollment rate what we expect the.

Availability of reportable data would be.

We've not heard from our sites are about any impact Oh, yeah covert 19.

Iris.

As you would expect cancer patients.

Treatment, we pretty much has to continue.

Without delay so I I wouldn't expect although I could be wrong, but I wouldn't expect a treatment for cancer patients to be disruptive it may be the cancer patients because they're the particularly vulnerable to covert 19 are.

But that's more cautious and yeah generally more concerned about a the risk of Cowen 19 to to their health because there you know immune compromised.

But but I'm I'm speculating I haven't heard that directly from from folks.

Okay, and so maybe I'll, then then could you announced the collaboration.

Based on that show significant that's.

Right.

So.

We expect to announce yeah at least a couple of collaborations before the end of the year and so we were engaged in discussions with a variety of different pharmaceutical companies and and leading medical centers and.

Yeah, those discussions require us to get a lot of different documentation finalized before a the collaboration itself can be finalized and there are lot of different groups and that's these within these organizations that needs to sign off on them. So it's a process, but we're far enough along and have enough of them in process that allows us to be.

We're confident that we've got several that we think would be a very important to Austin and we think Barry.

Impactful for the long term future the company.

By the end of year.

Right. Yeah. One final question letting Scott you mentioned, that's pretty exciting maybe all I'm curious whether you have any additional oh.

Thank you got signaling tends to be presented doing 2020.

Well, we referenced the addition of a fourth test for breast cancer.

We are working towards being able to complete the characterization of that's asked by the end of this year or so that would.

Be.

The other.

Test that Uh huh.

We would expect that data for before the end of the or.

Okay. That's it for me. Thanks, so much so you got you're welcome. Thank you.

And next well go to per Ostlund with Craig Hallum. Please go ahead.

Thanks, Good afternoon brining Vicki.

Sure.

Hi, I'm I'm going to follow up too I just to the first question on on fact, one and I.

I know you've dealt into it I know that.

There are certainly frustrations around.

You know the ability to predict enrollment cadence and that sort of things, but just thinking in terms of number of sites I kind of went back to the third quarter call and I think at that time there were.

26 enrollment ready sites and in a handful mourn probably progress.

It did any sites fall off and and then I guess than that.

Did that is in terms of going from 26 to 27, if none fell off in there were a few in process.

Kind of the gating factors to that to the IR bees in any other.

Iraq or see that they've got to get to in order to get enrollment ready.

Right. So I mean, typically you've got to committees internally that need to review and approve these some of them do them in parallel someone in a sequence, but it's an oh and the institutional review board, which reviews the.

The ethical considerations for a feeling the trial and met most sites also have a scientific review committee.

Essentially reviews, the scientific solidity of the hypothesis that is being proposed per study.

Then once you get that approval or you need to go through a series of steps with each of the investigators who may be participating you know fits with the center that has a lot of oncologists that want to participate.

You got paperwork and training done with no all of them and you know center as 30, you can't activate the trial until you have all 30 oncologists train. It. So in some ways. You you have these very small items. They can gate your ability to get the trial going you there's typically a.

Extended process to negotiate were finalized the contract with the institution.

Even though you know there's a template that.

That can be used to hopefully facilitate nice most cases those.

Discussions.

Lawyers do a lawyers do and so it's never a straightforward as you know you would hope.

And.

And so those are the main items and as.

Some of these committees only meet once a month, depending on the institution ER and so you know the process of just getting an IR be approval. You know can can take as I think we've discussed previously six months just you know from the time they review the materials indicate whether or how to submit it who will be the sponsor.

You know their internal documentation they have to prepare not just <unk> trial protocol.

And so that's that's the type of thing that that takes place and me on some cases I alluded to this I mean, there there is let's really paper work on one dock at a major center [laughter] holding up the whole trial and and and yeah. We tell them, we're willing to get going with 29 docs.

[laughter], well well take a 97%.

Rather than zero or to get things going but but these sites got to decide that they like everybody has to be able to go all at once that's the seller organized for some reason.

There's not anything you know and if maybe you can do about that.

Sure, Okay that makes sense I guess speaking of.

People can do and I I I know, we've talked about this and <unk> in past calls and so.

I'd hazard that the answer is no different from from the standpoint of.

Oh activating the enrollment so let's say that the arby's are all in place in the sites.

From a promotional standpoint your hands. So qt seasons are pretty well tide, Besides just being able to have documentation about.

Your test.

And for that the clinicians.

What about the clinicians and what about your farmer.

Where can they step and.

Well the collaborators the pharma collaborators typically don't get involved you know because they're really not supposed to be involved you know these these things to maintain.

The proper.

Yeah. This is an institutional the losses in a city b trial until there's certain.

Guardrails that are that are put off that's why you know we're kind of hands somewhat kept it at arm's length planets ATP with some of the stuff.

But what we try to do we have materials, we have a patients.

Brochure, which attempts to help the patient I understand the potential benefit to them up but that's what benefit to all women with breast cancer, if the trial successful.

There is limited amount of promotion, though you can do.

Because yeah. There are no guarantees for these patients and you can't unduly pressured on their vulnerable.

People are vulnerable state.

It's it's a lot of complexity. So you can't make the Claritas statements. So so lot of as I think I've mentioned, what you can communicate to these patients is is very watered down.

And ER and you're really limited and promoting it you you can you can educate but you can't sell you can appreciate that thanks.

You're dependent really as well and how effectively the the nurses who do they are in many cases manage the a the patients and kind of get them up to speed how engaged to take oncologist is and bringing patients in the loop I'm about a clinical trial. So there are a lot of variables that we do not control.

And actually most of those variables, we don't control it back up so we're doing a weekend yeah, we we've gone out and ER and we'll continue to go out where we are able to connect with the docs and the nurses at these sites to meet with them give them a presentation. If we can yes, I try to get to.

Top of mind to the extent you can.

But you know along complaint again I'm just rehashing, what I think many people, they're pretty they're familiar from other one of the nuclear challenges and medical research is the challenges of getting patients to participate in clinical trials.

And that's particularly challenging when you've had a new technology were drugs that doesn't have a proven outcome and to point to.

If you're a evaluating a drug that has already been evaluated and has favorable clinical results. It's lot easier to enroll patients because you can point to that data. When you don't have that data you know you're really speaking to a concept a and you're pointing to other data, but it's certainly not as threat.

As a.

The data from a clinical trial.

Again, I am I'm, just giving people a sense of.

They did dynamic I'm, yeah, we were aware of that dynamic going into this trial. So it's nothing that surprised us if it's just I think the surprise has been.

So the slow a general uptake or inability to get patients onboard I think because it's a clinical trial as well.

The criteria of patience is is fairly well, it's very strict which which limits you know the range of patients. They can participate in patients have to kind of fit certain set of criteria that don't necessarily represent you know the range of woman, who ultimately would be eligible for the tester for the drugs.

If we you know what do you make it to that stage. So so the trials it kinda, you're you're dealing with an hour group of patients early stage. It will have the same sense of urgency and you're executing through.

Number of folks who you have in our case, we haven't really no data they contact with so we can affect the.

The visibility very easily.

Although we do what we can wherever possible.

Okay that makes sense.

Real quickly on too much.

As of the last call there had been the the delay getting access to turn or like spread I think that that had been remedied at that point. So is this just also kind of enrollment is similar dynamic yeah, we're talking to them about possibly adding.

Some sites that trial.

You know west Atlantic is a very significant clinic that covers.

Yeah.

Yeah, good talk of Tennessee.

And.

But yeah, we think there's some sites that we've had discussions with the we'd like to participate. So so we might be able to essentially a effect that enrollment rate by adding sites, but again, that's that doesn't happen overnight either so in that case, because you know we were working directly with the principal investigator.

We can communicate a little bit more directly and.

But again you know the similar type of.

I don't know say restrictions, but just.

Challenges because you know again limited patients necessarily qualifying and ones that may have no other considerations that prevent them from.

Yeah, not participating et cetera.

Last one real quick and anything as you look into 2020 from an expense standpoint, the deviates from.

Three steady cadence who've been on the last handful of corridors.

Not that not that we expect no Oh, we think a.

Or where as you as you know we've talked about we want to be good stewards of the capital and we have very focused R&D projects and we got everything through a pretty good job.

Budgeting, a those and have a pretty good to have you know very good handle on all the other expenses. So we feel.

Very comfortable with our.

Cash burn rate.

Staying about where it is no.

Okay. Thanks, a lot Brian I appreciate it.

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And as a reminder trial audience that star one if you'd like that's my question today.

Last for just under one that's my questions did you.

Oh no further questions. If he went this time.

Okay, well I appreciate everybodys participation on the call look forward to speaking with you again, a few more must take care.

Thank you. This will conclude today's program the keeping your participation you will now discuss another wonderful day.

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