TrovaGene (TROV) Posts Wider Q4 Loss on Higher Expenses - Analyst Blog

TrovaGene Inc TROV reported loss of 25 cents per share in the fourth quarter of 2014, wider than the Zacks Consensus Estimate of a loss of 22 cents and the year-ago loss of 5 cents per share. The wider loss was attributed to higher operating expenses and a change in the fair value of derivative instruments related to warrants.

Financial Details

Revenues surged 19.1% to $0.6 million in the quarter. TrovaGene continues to focus on developing and commercializing its Precision Cancer Monitoring (PCM) technology which detects DNA mutations in urine and blood with very high sensitivity.

In order to achieve this goal, TrovaGene presented and published clinical data and study results at several platforms, which includes the likes of the 56th American Society of Hematology Annual Meeting and Exposition, the EORTC-NCI-AACR International Symposium, ECD Global Alliance's Second International Medical Symposium, and the American Association for Cancer Research annual meeting.

TrovaGene is currently part of 15 clinical collaborations, which aim at evaluating the efficiency of the company’s PCM system in detecting and monitoring different mutations related to pancreatic, melanoma (advanced skin cancer), colorectal and lung cancer.

Operating expenses soared almost 57% year over year to $4.5 million, driven by higher research & development (R&D), selling & marketing (S&M) and general & administrative (G&A) expenses. R&D, S&M and G&A were up 42.7%, 176.7% and 35.5% respectively, on a year-over-year basis. As a result, TrovaGene reported loss of $4.5 million from operations.

Significant Clinical Study Results

In November, TrovaGene unveiled clinical study results that reflected the capability of its PCM technology in detecting and monitoring KRAS mutation in circulating tumor DNA (ctDNA). The company expects to release additional clinical data related to KRAS mutation study in mid-2015.

The study showed that relationship between the changes in quantity of mutational cells in all the samples is highly correlated. Of the plasma and urine samples evaluated, 95% and 92%, respectively, displayed features similar to tumor tissues. The correlation between urine and plasma was also significantly high at 94%.

KRAS gene mutations are quite common in pancreatic, lung, and colorectal cancers. A high level of KRAS mutation suggests that EGFR-inhibiting drugs, such as cetuximab (Erbitux) and panitumumab (Vectibix), will not be effective in treating these types of cancer. Hence, monitoring of KRAS mutation is of utmost importance to determine the right course of treatment.

Moreover, data from two recent clinical studies presented at the 2015 Gastrointestinal Cancer Symposium held in San Francisco demonstrated the effectiveness of TrovaGene’s PCM system in detecting and quantifying KRAS mutations in cell-free DNA (cfDNA) obtained from colorectal and pancreatic cancer patients.

Apart from its PCM technology, TrovaGene is also looking for partners around the world to develop and commercialize its urine-based High Risk Human Papillomavirus (HPV) Assay technology solution.  

In 2014, results from two independent clinical studies showed that TrovaGene’s urine-based assay for the detection of high-risk HPV demonstrates high sensitivity (greater than 90%) for identifying women with high grade cervical intraepithelial neoplasia (CIN) grade 2/3.

In early 2015, TrovaGene announced clinical results from the PREDICTORS 4 trial, which demonstrated high sensitivity for its non-invasive, urine-based HPV assay when determining high-risk HPV types and cervical lesions or CIN Grade 2/3.  

Our Take

Although TrovaGene’s financial result disappointed us, we believe that the PCM technology has significant growth opportunity. In this regard, the company’s assay technology has already portrayed its ability in monitoring patients with BRAF gene mutations that are found in skin, colon and rectum, ovary and thyroid gland. We believe the addition of the KRAS mutation monitoring capability will boost patient base for the company in the long run.

Moreover, TrovaGene’s growing relationship with leading cancer centers (top 20) serves as a key catalyst for top-line growth. The partnerships with Genomac Research Institute, City of Hope, and University of California-San Diego Moores Cancer Center are encouraging in our view.

Additionally, collaboration with Illumina to evaluate the potential of integrating TrovaGene's urine-based nucleic acid technology with Illumina's gene sequencing technology can be a game changer going forward.

We believe TrovaGene has strong growth potential from geographic expansions, partnerships and kit manufacturing. Based on its urine-based HPV Assay solution, the company holds significant growth prospects in the HPV testing market that is forecasted to be worth $9 billion by 2020. TrovaGene’s growing patent portfolio is also a key growth catalyst, in our view.

Zacks Rank

Currently, TrovaGene has a Zacks Rank #3 (Hold). Better-ranked stocks include Acorda Therapeutics ACOR, Affymetrix AFFX and ANI Pharmaceuticals ANIP. All the stocks sport a Zacks Rank #1 (Strong Buy).

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