Nanosphere, Inc. (NSPH)

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Nanosphere, Inc. (NSPH)

Q1 2008 Earnings Call

May 13, 2008 5:00 pm ET


William Moffitt - President, Chief Executive Officer and Director

Roger Moody - Chief Financial Officer, Vice President - Finance & Administration, Treasurer, Secretary

Michael McGarrity - Chief Marketing Officer


Kristen Stewart - Credit Suisse

William Quirk - Piper Jaffray

Bruce Cranna - Leerink Swann & Company



Good day ladies and gentlemen and welcome for the first quarter 2008 Nanosphere Incorporated earnings conference call. My name is Eric and I will be your coordinator for today. At this time all participants are in a listen-only mode. We will facilitate a question-and-answer session at the end of the conference. (Operator Instructions).

Now Nanosphere would like to state that certain statements made during the conference call which are not based on historical facts, maybe deemed to constitute forward-looking statements within the meaning of the Private Security Litigation Reform Act of 1995. Because these following statements involved known and unknown risks and uncertainties there are important factors that could cause actual results, events or developments to differ materially from those expressed or implied by these forward-looking statements.

Such factors include those risks described from time-to-time in the Nanosphere’s filings with the United States Securities and Exchange Commission including without limitations the risks described in Nanosphere’s current filings with the SEC. Please note that Nanosphere undertakes no duty to update this information. I would now like to turn the call over to Mr. Bill Moffitt, President and CEO of Nanosphere; please proceed.

William Moffitt

Thank you Eric. Good afternoon everyone and thank you for joining us for Nanosphere’s investor conference call, covering the first quarter. In a few moments I will turn the call over to Roger Moody, Chief Financial Officer of the Company who will review the results we released this afternoon and to Mike McGarrity, Chief Marketing Officer of the Company who will provide an update on our sales and marketing programs. But before turning the call over to Roger and Mike I would like to discuss with you the progress we are making toward building Nanosphere into a leader and molecular diagnostics and specifically address some of the events of the first quarter.

First as you maybe aware we initiated a recall of certain lots of Warfarin Metabolism Test cartridges during the quarter. This was a Nanosphere initiated recall, which is now completed. As we continue to ramp customer placements during the validation process we noticed signals from some cartridges that were sufficiently high to have the potential to produce aberrant results. The rate of this occurrence was determined to be less than 1%; nonetheless we initiated the recall so we could recover all cartridges that could have exhibited the same characteristics, so we could test them to find the source of the issue.

We determine this to be the result of a specific step in the production process, which was subsequently adjusted and validated. During the course of this period of investigation we temporarily halted new customer validations. As a result we did not work completely through the original pipeline of 30 customers within the first quarter. However, we will achieve that milestone and more in the second quarter and believe we will meet our internal goals on a quarterly and annual basis.

As we all know new companies and new technologies get one chance to form a first impression and we are committed to delivering the highest levels of quality in everything we do. Ultimately this recall affected only eight customers and eight different lots of warfarin metabolism cartridges, but it was very important to us to react quickly, resolve the issue and ensure our customers received only high quality products and that we not continue new customer placements until we've resolved the matter. We are confident that this is behind us.

As you know we are working to commercialize an ultra-sensitive test for cardiac troponin. We have developed a comprehensive marketing program to begin to position our assay. We initiated the program during this years meeting of the American College of Cardiology, where we held a symposium with a panel of distinguished experts in the fields of cardiovascular, emergency and laboratory medicine. The panel discussed advances in diagnosis, risk stratification and treatment of patients with cardiovascular disease with an emphasis on the importance of even greater sensitivity in troponin assays; often the only two available to provide a definitive diagnosis.

As Doctor Frank Peacock, Vice Chief of Emergency Medicine and Director of Clinical Operations at the Cleveland Clinic observed 13.2 million people show up at emergency departments in the US every year with chest pain and shortness of breath, classic symptoms of a heart attack. However, only about 2% of these folks are having an ST segment elevation myocardial infarction or STEMI as it's known visible on an EKG. That leaves 98% of the patients to be diagnosed through longer-term continued observation of clinical symptoms, assessment of other risk factors and primarily a troponin blood test. This takes anywhere eight to 24 hours or more depending on the severity of cardiovascular damage and indeed many unstable angina patients go undiagnosed.

Doctor Peacock stressed the need for both an earlier diagnosis of non-STEMI patients and those with unstable angina to enable earlier therapeutic intervention to stop the loss of heart muscle. Most significantly for the emergency room he stressed the need for a definitive rule out test to enable rapid disposition of non cardiac patients. Dr. David Morrow from the Brigham & Women's Hospital, where he is Assistant Professor of Medicine at Harwood Medical School and a Researcher in the Timmy Study Group, presented data from an early clinical study using a research version of our troponin assay.

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