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Monogram to Expand Oncology Franchise in '09 as '08 Revenues Rise 44 Percent

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Monogram Biosciences plans this year to add new markers to its HERmark breast cancer test, and will try to ink more collaborations with drug makers in order to embed its VeraTag assays in cancer drug trials, according to company officials.

"We're continuing our studies to confirm clinical utility of HERmark and plan to add at least one of these new assays to the product pipeline later this year, so in addition to providing a very accurate assessment of HER2, the assay will also identify patients with likely resistance," Monogram CEO William Young said during the firm's 2008 earnings call earlier this month. Total revenue for the 12-month period ended Dec. 31 swelled 44 percent year over year.

According to Young, over the past few months Monogram has been in discussions with a number of undisclosed pharma and biotech companies to embed its VeraTag platform in phase I, phase II, and phase III clinical-development programs for cancer therapies that target markers in the EGFR/HER family.

"These discussions have been greatly enhanced in the last few months" on the strength of data on the HERmark test (which is based on the VeraTag platform) that were presented at the San Antonio Breast Cancer Symposium in December, and promising preliminary data on investigational assays, Young said. "There are serious interests from a number of these companies," he added.

Last year, Monogram researchers presented clinical data at the American Society of Clinical Oncology's annual meeting in May and at the SABCS showing the ability of HERmark to accurately identify those patients with metastatic breast cancer most likely to benefit from Herceptin treatment, and to discern different degrees of response to the drug [see PGx Reporter 05-21-2008].

That study, led by Allan Lipton, professor of medicine and oncology at Hershey Medical Center/Penn State University, also showed that by quantifying HER2 and HER2 homodimer levels, HERmark can provide a better response assessment than existing IHC and FISH tests, and improve knowledge of HER2 biology in clinical specimens.

In addition to the HERmark breast cancer tests, Monogram's first CLIA-validated test on the VeraTag platform, the company is developing several cancer tests on the VeraTag system that are for research use only. Under a non-exclusive collaboration with Pfizer, Monogram also markets the Trofile assay, a companion diagnostic for the pharma giant's HIV drug Selzentry.

In 2009, Monogram said it plans to follow a cohort of 500 patients with the Dana Farber Cancer Institute to confirm the results of the Lipton study, and to further validate the clinical utility of HERmark as a predictor of response to Herceptin in patients with metastatic breast cancer.

In the coming months, Monogram said it also plans to conduct studies to validate additional markers interrogated by VeraTag assays, including HER1 total protein; HER3 total protein; HER1: HER1 homodimers; HER1: HER2 heterodimers; HER2: HER3 heterodimers; HER3: PI3K complex, a key downstream signaling complex in the Akt pathway; and p95, a proteolytically truncated form of the HER2 protein.

The current list price for HERmark is $3,350. Company officials have not yet decided whether to increase the price of the test after adding the new markers.

Meanwhile, the addition of new markers to HERmark could certainly become a catalyst for discussions with potential pharma partners.

In general, potential industry partners are interested in the insight Monogram's assays can provide into the HER2 and her2 resistance pathways in breast and other cancers, Young said.

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"In some cases we're conducting joint experiments with pharma companies, and are working to advance these discussions," he added.

For instance, Monogram also has developed an assay that measures activated c-Met, whose expression plays a role in many cancers. Many pharmas have drugs that inhibit c-Met and have expressed interest in assays that can measure activated c-Met, Young noted. As a result, Monogram has "accelerate[d] the development of these assays," he said.

"Just as we have done in our HIV business, we'll be able to generate revenues in oncology not just from patient testing but from support[ing] pharma company-driven drug-development programs," Young noted.

HIV Update

Pfizer used Monogram's Trofile assay to select patients for enrollment in clinical trials of its HIV drug Selzentry. In May 2006, Pfizer and Monogram announced a non-exclusive collaboration to make Monogram's Trofile assay available for patients worldwide. At that time, Pfizer invested $25 million in Monogram [see PGx Reporter 05-10-05].

In 2008, Monogram recorded revenues of over $16 million from its Trofile assay for selection of patients for Selzentry.

Last June, Monogram said it made enhancements to the assay that it claims increased its sensitivity 30 fold such that the "X4 virus can be detected in quantities as low as 0.3 percent of the virus population with 100 percent sensitivity."

Monogram was also able to validate the enhanced Trofile assay's ability to further optimize patient selection for CCR5 antagonist treatment in retrospective analyses of two clinical trials: the AIDS Clinical Trials Group 5211 phase II study of Schering Plough's CCR5 antagonist vicriviroc in highly treatment-experienced HIV patients, and the phase III trial of Pfizer's Selzentry in treatment-naive individuals with CCR5-tropic HIV-1.

Using the earlier Trofile version, the phase III trial of Pfizer's Selzentry had missed an endpoint. However, after retesting patients in 2008 with the enhanced Trofile version, Pfizer met that endpoint, Monogram reported.

"This opens up the possibility of an expanded label for Selzentry after submission by Pfizer and approval by FDA," Young said.

Monogram also introduced in August Phenosense HIV Integrase, a phenotypic resistance test designed to detect susceptibility to the new class of integrase inhibitors, such as Merck's Isentriss.

Revenue and Outlook

Monogram Biosciences also reported during the call that its fourth-quarter revenues increased 10 percent and it swung to a profit from a loss thanks to an adjustment to its convertible debt valuation and interest income.

The South San Francisco, Calif.-based pharmacogenomics test developer had revenues of $15.1 million for the three months ended Dec. 31, compared to revenues of $13.7 million for the fourth quarter of 2007. The results do not include deferred revenue of $2.2 million from sales of its Trofile assay to Pfizer as a companion diagnostic for Selzentry.

Monogram posted a profit of $512,000, for the quarter, compared to a net loss of $5 million for the fourth quarter of 2007. The results for Q4 2008 include a gain of $3.7 million attributed to a convertible debt valuation adjustment and interest income.

The firm's R&D costs increased around 2 percent to $5.2 million from $5.1 million, while its SG&A spending declined 11 percent to $6.4 million from $7.2 million.

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For full-year 2008, Monogram reported revenues of $62.2 million, an increase of 44 percent over revenues of $43.2 million for 2007. The 2008 results do not include deferred revenue of $5.8 million from sales of Trofile to Pfizer.

The firm more than halved its net loss to $11.7 million from $23.5 million. The benefit related to the convertible debt valuation adjustment and interest income for 2008 was $9.8 million compared to $4.7 million for 2007.

Monogram's R&D spending for 2008 was $23.8 million, up 23 percent from $19.4 million in 2007. Its SG&A spending inched up about 2 percent to $32.1 million from $31.6 million.

The company finished the year with $16 million in cash and cash equivalents.

Monogram has established revenue guidance for 2009 of a range between $66 million and $70 million, with deferred revenue from Pfizer expected to be between $4 million and $5 million.

Monogram CFO Alfred Merriweather said in a statement that the firm is taking a number of steps to reduce its use of cash. "These include reduction of costs related to personnel, programs and overhead activities. Additional steps will be taken if necessary to achieve our goal of cash flow break even. Together, our cost reductions have taken over $10 million out of our planned 2009 expenses."

He added that Monogram's goal is to reduce its use of cash to roughly $6 million to $8 million for 2009.

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