Q2 2020 OncoCyte Corp Earnings Call
Greetings and welcome to Oncocyte Corporation second quarter 2020 earnings Conference call.
So I'm all participants are in listen only mode.
Good question, an exercise and will follow the formal presentation.
If anyone should require operator assistance during the conference.
Press Star Zero on your telephone keypad.
As a reminder, this conference is being recorded.
Now my pleasure to introduce your host Bob Yedid, managing director of lifecycle Lifesize Pfizer's. Thank you you may begin.
Thank you Doug and thank you everyone for joining us for today's conference call to discuss our sites second quarter 2020 financial results.
And recent operating highlights if you've not seen today its financial results press release, please visit the company's website.
And look at the inductors page.
Before turning the call over <unk>, Ronnie Andrews, Microsites, President and Chief Executive Officer, I like to remind you that during this conference call at the company will make projections and forward looking statements regarding future events any statements that are not historical facts are forward looking statements.
We encourage you to review the Companys SEC filings, including without limitation, the company's form 10-K, and form 10-Q's, which identified the specific risk factors that may cause actual results or bats differ materially from both described in these forward looking statements.
These factors may include without limitation risks inherent in the development and commercialization of potential diagnostic tests uncertainty in the results of clinical trials or regulatory approvals the capacity of Oncocyte third party blood sample analytics system to provide consistent and precise and.
I'll, let Dick results on a commercial scale.
The need to obtain third party reimbursement for patients use of any diagnostic tests the company Commercializes.
Our need and ability to obtain future capital and maintenance of intellectual property rights.
And uncertainties associated with the Cobot 19 pandemic, that's possible effects on our operations.
Therefore actual results actual outcomes and results may differ materially from what is expressed or implied by these forward looking statements.
Oncocyte expressly disclaims any intention or obligation to update these forward looking statements, except as otherwise may be required under applicable law.
With that said, it's my pleasure to turn the call over to Rodney and first CEO Rodney.
Thanks, Bob and welcome everyone to our conference call to discuss our second quarter 2020 financial results and operating highlights joining me today on the call our middle name Chief Financial Officer, Our Parker, Chief Operating Officer, Dr. Dog, Ross, our Chief Medical Officer and partner Sundar, Our SVP of comes.
Actual we'll all be available during the question answer session.
The second quarter 2020, it's been an important chapter in the evolution of Oncocyte My goal for the call today is to do a brief high level review of the determine Dx technical overview perform since our call in June and spend the majority of our time sharing the tremendous progress we've experienced our two commercially available high impact task.
That are both at revenue generation phase and have significant revenue upside given the large untapped markets. They will start and to provide additional clarity around the term io and its value to oncocyte today.
When I agreed to step into the CEO role a year ago. The mission was to diversify Arca side by adding high value cancer tests were at commercial onstage to build multiple revenue streams and mitigate the clinical development risk and end up and the program to develop the test. We then called determine view.
As a background of molecular diagnostics industry I've got a lot of experience with biomarker research, it's challenging it's expensive and unfortunately early science does not always translate into vinyl products and this is exactly what we encountered with determined Dx. This strategy. We embarked on last year was to build a company with tests and answer creditor.
Cool unanswered questions for physicians, managing lung cancer, a cancer, that's not seen much improvement and outcomes over the last 50 years.
Instead of investing more in discovery research to buying such tests, we made a conscious decision to identify and acquired tests that have already been validated and well publicized tests that were well down the path to reimbursement and tests that were ready for kind of the market are for use by the emerging biopharma market for immune therapy trial.
Simply put our goal with a rapidly transform oncocyte <unk> commercial stage company and drive revenue and growth in test adoption of proprietary products well ahead of the 18 to 24 month window. It would have taken for us to finish the development and get reimbursement for determine Dx.
Over the last year, our focus on execution has allowed us to hit the timing of every milestone we laid out a year ago. Despite the challenging pandemic environment. However, hitting the timing does not mean that every effort has a successful outcome and we certainly share your disappointment that although we completed the clinical trial for determine Dx Bobby into second quarter two.
2020, the result of that trial was not strong enough to justify further investment in the program at this time, our decision will allow us to eliminate significant amount of determined the expanding in addition to the reduction in R&D spending will also not repeat the level of nonrecurring expense from Q2, therefore, we're targeting a quarterly cash burn.
In a go forward basis of under 5 million and then a further reduction of cash burn as our revenues from both the term Rx and Ohio continued to ramp up.
No we were all disappointed with the outcome of the blinded prospective clinical trial results for Dx and we have information for you today, our deep dive analysis from the trial, it's very important to understand that oncocyte strategy to diversify and de risk our product portfolio has been very successful today and we've now launched two.
Very powerful test into two high growth market opportunities, we are very different company today than a year ago and have an incredibly bright future. So before I share the encouraging news about commercial product momentum, let's spend a few minutes on the results of the Dx clinical validation post study analysis.
As we committed on our call in late June when we reported the initial results of the clinical validation trial. We spent the last three weeks doing a deep dive into each component of the trial. We have used independent third party exports for every major area. The testing process to ensure we effectively understand the result and identify.
Any components of the panel that may have value to other companies and the blood based screening market.
Based on results of our autopsy, we were able to confirm biological activity in a subset of the larger panel that made up the dx product, but were unable to power the endpoints sufficiently with our algorithm using this small markers that however, we believe the subset of already markers, maybe im interested companies pursuing a position and the enormous sky.
Finally market using cell free DNA in DNA methylation, you'll probably recognize that view of the companies like garden health Grail free non thrive et cetera, we've already had some inbound calls regarding the extremely valuable Irene bottled bank as well, which has over 3000 patient blood samples with patient outcomes, which could be a valuable tool box.
Alright clinical studies for other blood based screening efforts the decision to discontinue our work on the term of Dx program was not an easy one but when we balance the ongoing cost of the program with the time to market and risk in the product it became clear that reducing our burn and focusing on our two commercial products was in the best interest of all stakeholders.
So while we've made the decision not to continue to invest in markers got Reaper Dx given the risk profile, we will make efforts to pursue opportunities to monetize the marker set and our Irene biobank.
Looking ahead Oncocyte, we're now focused on driving adoption in revenue for our two commercially available products to turn the Rx, where the clinical market and the term I O for the rapidly growing market for patient selection to support pharma development and immune therapies with an eventual goal of rapidly advancing io to the clinical market for immune therapy response.
Prediction and selection.
Let's start with internal Rx, the first and only predictive test for the identification of patients with stage wanted to a non squamous non small cell lung cancer, who are revpar recurrence following surgery unlikely responsive to add to that chemotherapy. This is a very important task as you'll hear from an early adopters and the upcoming Kate.
Oil events, including the one scheduled for 230 Eastern time tomorrow as they share actual case studies today, a significant portion of these early stage patients are given default hope of a surgical cure when in fact, they have micro metastatic disease that remained on detected in routine pathology bar exam.
Apple molecular staging of breast cancer has been a standard of care for over 10 years, Thanks to genomic health, which pioneered a model for completing routine pathology with a molecular stage score to help physicians know went to add chemo to the fallout regimen to ensure patients will not have an unexpected recurrence if you bought.
All of our industry for very long, you'll know the success of that company and its test well until we launched a term Rx in late January there was no test to do the same thing in lung cancer. The road post the robust data published on our task has led to a rapid adoption by lung cancer experts, who understand the importance of identify.
Buying high risk early stage patients.
Molecular profile to identify patients who are high risk for micro mess metastasis and ultimately recurrence. After surgery is the only way to detect this progression before it happens while still curable with routine application of chemotherapy. The dramatic increase in the five year survival rate from 49% for high risk patients who do not.
Get chemo to 92% five year survival for those to determine Rx classified as high risk and then receive chemo is a staggering testimony to the importance of our test on patient survival. This quarter were excited report that commercial payers have forgotten the reimbursed determine Rx claims.
Building on that we also recently announced it noridian the centers for Medicare Medicaid services contract administrative contractor or Mac for laboratories in California has issued its final local coverage decision forward to turn the Rx meridians decision to lines completely with Palmettos criteria for the test and.
Establishes Medicare coverage for approximately 70% of eligible patients nationwide. This decision also establishes a new class a predictive test for Medicare coverage based primarily on a comprehensive clinical evidence presented in support of determine Rs determine Rx is the only test in this need cash.
Gory I'm incredibly proud of this accomplishment, we are driving change in cancer care and establishing ourselves as true pioneers in the long cancer diagnostics community.
Moving next to the rapid growth above physician adoption testing volume for the term Rx we have made what I consider to be significant headway in the adoption the term Rx and just a few months our test volumes doubled between Q1 in Q2, despite the challenging coated nightie macro environment and today, we served well over 100.
Or patients and that number continues to grow this summer despite the spike in the yen and pandemic.
There are currently 47 hospitals it made the test available for ordering bother surgeons and oncologists.
These ranged from major academic medical centers in high volume community Health centers, where most early stage cancer is treated I'm pleased to report. The addition of numerous health systems, including ones like you see Davis, Florida cancer specialist MD Anderson banner health and dignity health as a significant confirmation.
The important it's about cast a patient care, Florida cancer specialist a network of over 500 providers has integrated to Tom Rx into their standard test menu, which means the test is flag physician ordering for every eligible patient case, given the clear utility in are liable test performance it with no other tested payable for this.
Indication, we believe that determine Rx is well positioned to become the standard of care at many additional health systems. Another important metric to follow is the percent of physicians, who we order the test after their first patient order and position you studies from other molecular test typical companies were happy when they receive greater than three.
30% reorder rates and the initial launch phases. So we're very pleased where the reorder rate of 60% today. We believe this speaks to a high levels physician satisfaction and clearly demonstrates the utility and value. This test brings to patients and doctors as they navigate treatment decisions in early stage.
Page lung cancer.
Touching on more physician adoption, we've implemented a robust education programs now with attendance of over 1800 medical oncologist and thoracic surgeons through the end of Q2 as part of our virtual physician education program, we will be hosting a case oil weapon are on the term Rx tomorrow at 230, eastern time, showcasing new and.
Expanded predicted data, which reinforces the dramatic impact. This task. This test has one patient survival when used to guide patient treatment decisions events like these coupled with reception to pursue in person meetings with health care practitioners as permitted during cobot 19 restrictions will allow us to continue our current growth trajectory.
You know adoption and test orders, we encourage investors and analysts to join this event tomorrow.
The market for the term Rx is no means limited to the United States with an estimated 350000 patients potentially eligible for eligible for the test global each year. We believed the term Rx global total addressable market is estimated between 450 and $500 million subject of course ups.
Pricing at adoption rates were very uniquely positioned to access this market because there's no. Other test for this indication our strategy is to enter these markets with the right channel partner one is a dedicated oncology commercial channel to rapidly penetrate these market opportunities.
This is essential, especially in China, where the eligible patient population is approximately six times larger than the U.S. with an estimated 250000 surgical sections for lung cancer each year.
We recently announced a distribution agreement with pro genetics limited and exclusive distributor for multiple leading diagnostic test in Israel.
This agreement marks our second International agreement this year building upon our agreement with core diagnostics earlier in the quarter distribute determine rx throughout India, the middle East and Africa.
These agreements this year it should be clear that theres tremendous interest by partners to access to term Rx outside the United States since our launch Needless to say, we're actively pursuing relationships and other large markets like China and the E U and encourage investors look for completion of those milestones in the second half of 2020.
We're thrilled with our progress would determine Rx we got from acquisition in September 2019 to market launch in late January and now to solid market adoption all in less than nine months I'm incredibly fortunate to have an amazing team in place. We've worked tirelessly to achieve all of our recent success with reimbursement revenue generation fuzzy.
For the job adoption side, Onboarding and global expansion, we truly have done so much in an unprecedented market environment.
So moving next is there an io and while we're incredibly excited by the opportunities with this remarkable test.
We all know that Immunotherapies had been transformative for some cancer patients in select indications some immuno therapy, such as Merck's Keytruda, Bristol Myers, Opdivo and Yervoy and others are now among the top selling drugs in the world and have say thousands of lives, but identifying which patients are most likely to benefit.
When these therapies both for treating physicians and patients remains a major obstacle currently more than 750000 patients are eligible for immune therapy in the U.S. alone and there are close to 3000 ongoing clinical trials involving immune therapies. In addition, the use of immune therapies is only go.
Turning to increase as the next generation of immune therapies began to enter the market. According to Grandview research. The Io therapy market will reach approximately $130 billion by 2026 and today. There is no biomarker panel that is powerful enough to accurately identify patients who will have a sustained.
Response in fact, the current approximate treatment response rates around 45%, meaning that over $65 billion could be spent each year on immune therapy that does not benefit patients.
The molecular diagnostics market for testing to appropriately identify patients is also expected to grow to over $5 billion globally by 2026. This tremendous in growing market is why insight genetics was such an important and timely acquisition for Oncocyte and what the term Io as emerged rapidly as an.
Extremely important part of the Oncocyte story moving forward. So how does the term I'll make a difference as a reminder, determine io is our proprietary gene expression profile test that evaluates the entire immune micro environment in biopsies from cancer patients to identify cancers more or less likely to.
Respond to an anti PD, one anti PDL, one checkpoint immunotherapy.
As a term IR day that builds upon over 150 publications that explored the original triple negative breast cancer signature as a class a buyer.
Data from clinical studies performed by researchers at MD Anderson and West Clinic presented at recent major oncology meetings demonstrated that the test outperform the currently available biomarkers for immune therapy were smart prediction, namely PDL, one staining impo triple negative breast cancer, and both PDL, one and two in retail.
On burden in lung cancer.
We believe the strength of the test as of immune system classifier and its ability robustly identify tumors poised to respond to mean therapy may enable more accurate predictions of which patients will benefit and treatment regardless of the tumor origin. It's very important for current shareholders and potential investors to clearly understand.
The term I was way past the development phase and we are into the initial commercial phase of market development simply put the term Io is now commercially available for research use and biopharm and other research settings, and we believe we'll address some of the major shortcomings in appropriate targeting targeting of immune therapy treat.
And drug development.
So let me tell you about our strategy for exploiting this emerging market by positioning dot determine io to advance in three specific opportunities first and foremost. We believe this will be an important test for pharma as they look to expand checkpoint inhibitors into new indications, namely colorectal cancer prostate gastric soft geo indeed.
Drill and other cancers, expanding the potential market beyond PDL, one all AMR side positive patients. The second immediate opportunity is an emerging class a drugs designed to compliment checkpoint inhibitors to overcome a suppressive tumor microenvironment in short there's potential to convert a cold tumor into a hot tumor.
With the application of combination drug regimens. There also several companies interested in utilizing turn I owe to identify the cold tumors that could then be suitable for such comments oil trials, assuming success Oncocyte would take the term I O through the regulatory process as the companion diagnostic for these.
Drugs.
Third we plan on investing a maturing determine iOS, specifically and the triple negative breast cancer applications, where it has its origins. This is an emerging indication for checkpoint inhibitor therapy, but as complicated as triple negative breast cancer include a very diverse set of cancers that are extended classify our t. NBC type.
Is designed to distinguish we'll be working didnt did demonstrate that the term io can identify immune responses in triple negative breast cancer and are pleased to announce the term I O has already been selected as the predictive biomarker bright checkpoint inhibitor clinical trial for triple negative breast cancer in the early.
Stage, Neoadjuvant, setting, where PDL one failed to accurately identify responders.
How encouraged by the significant interest from numerous academic and pharma groups and expect to provide exciting updates in the near term and look forward to updating on our progress against these critical milestones for the Turner Io over the course of the next few months.
We also have continued momentum with our pharma services opportunity as a reminder, and our addition to our determine Rx and the Turner Io emerging commercial revenue streams, we have a successful boutique pharma services business with our certified lab located in Nashville, which allows us to immediately leverage our proprietary test in the pharma server.
As contracts, while also continuing to meet the additional needs a biopharma customers.
Our pharma services offering enables a full suite of molecular analysis services needed to support pharma drug development from discovery stage and clinical trial support through to companion diagnostics.
In addition, our commercially available to US we believe our robust pharma services pipeline is another important and immediate opportunity for growth and revenue at Oncocyte today, we gain numerous contracts in are already engaged and work with pharmaceutical companies like Beringer Ingelheim is site Ono pharmaceuticals.
T hockey and molecular diagnostics companies like Qiagen per Meg and Plex buyout.
I'm happy to report that the pharma services pipeline has grown rapidly in a few short months and currently have over 1.5 million in contracted projects in a pipeline of proposals that could take the business to an even higher run rate by year end and we're only getting started while the 2020 revenue recognition for all these contracts depends on how.
Yes, pharma partners enroll patients and collect samples the run rate is very encouraging and includes some very high profile projects. All in all we've accomplished a tremendous amount here at oncocyte over the last year and the effort of our small team has really been incredible we've moved from a single test on the R&D stage company.
No more diversified de risked commercial stage revenue generating company Oncocyte has never been stronger and we did an excellent position to execute and deliver on our goals are focused on driving adoption of our proprietary molecular diagnostic tests and growing revenue is evident in everything we do each day, the global markets for our test or large and grow.
We have a solid line of sight on how to penetrate our market opportunities in the U.S. and an important global markets through a network of partners before I turn the call to match for review of our financials I'd really like to thank the entire oncocyte team for their hard work and dedication do this intense journey. The first year together I hope that our strong execution.
Transparency leaves you confident in our strategic path forward. We thank you for your continued support and look forward to sharing our progress and at this point I'd like to turn the call over to our CFO Mitch Levine Mitch.
Thanks, Ronny I everybody.
The second quarter, we strengthened our balance sheet with the completion of a 10.7 million dollar registered offering of common shares priced ad market and without paying any commissions are placement fees.
As of June Thirtyth, 2020, we had cash cash equivalents and marketable securities of $17.1 million.
We expect annualized savings of approximately $3 million from the discontinuation of the determine Dx program and are now expecting a quarterly cash burn a 4.7 million to $5 million.
Cash used in operations was $7.0 million for the second quarter of 2020.
This cash spend includes about a million dollars of nonrecurring expenses, including transactional costs acquisition related costs.
Legal and business development costs.
Like to remind investors about our revenue recognition policies around the terminal Rx in light of the recent CMS and Noridian final LCD decision, which became effective June 14th 2020.
As a reminder, prior to January 1st 2020, we did not have any revenues more cost of revenues in our results because we did not have any commercialized products.
Your U.S. accounting principles, we will be able to recognize revenues on an accrual basis for determine Rx.
We have contracts reimbursement from third party payers or a history of experience a cash collections for the test we perform or both until that time, we expect to recognize revenue on a cash basis.
Accordingly, we will incur and a crew cost of revenues and other operating expenses related to determine Rx, which may not necessarily have corresponding revenues.
The final CMS approval decision makes our determine Rx test eligible for Medicare reimbursement.
After a final Medicare coverage price has been established we expect to recognize revenue when the determine Rx tests are performed for Medicare patients rather than on a cash basis.
For prior prior theaters, such as insurance companies, we expect to follow a similar policy.
As a reminder, our results of operations now include the consolidated results of our wholly owned subsidiary inside genetics, which we acquired at the end of January.
For the second quarter 2020, we reported a net loss of $9.1 million or 14 cents per share as compared to $5.4 million or 10 cents per share for the second quarter of 29 team.
Operating losses as reported for the second quarter of 2020 were $8.8 million, an increase of $3.3 million as compared to $5.5 million in the second quarter of joining 19.
Operating losses, as adjusted or $6.9 million, an increase of $2.2 million as compared to $4.7 million.
In the second quarter of 2019 on an as adjusted basis.
We have provided a reconciliation between GAAP and non-GAAP operating losses in the financial tables included with our earnings release, which we believe is helpful and understanding our ongoing operations.
Revenues for the three and six months ended in June 30, 2020 143000.
$158000 respectively.
We generated from pharma services.
As revenues from determine Rx tests were recognized only when we receive cash payment or the test rather than on an accrual basis when the test will perform.
Cost of revenues for the three and six months ended June 32020 were 365000 and $538000 respectively.
Primarily occurred from performing the did the terminal Rx tests and pharma services.
Research and development expenses for the second quarter of 2020.
$3.2 million as compared to $1.5 million or the second quarter of 2019, an increase of $1.7 million.
The increase was primarily attributable to personnel and lab laboratory related expenses for clinical validation activities.
He did to our determine Dx test.
General and administrative expenses.
The second quarter of 2020 were $3.8 million.
As compared to $3.6 million for the same period.
In 2019 relatively unchanged from the prior year second quarter.
Sales and marketing expenses for the second quarter were $1.6 million compared to $300000 for the same period last year, an increase of $1.3 million. This increase is primarily attributable to ramp up in sales and marketing activities for our commercialization efforts.
Of the term Rx.
That concludes my remarks included in our financial highlights.
Tony.
Operator, we can now open the call for questions.
Thank you ladies and gentlemen at this time, we will be conducting a question and answer session.
If you'd like to ask a question you May press star one on your telephone keypad.
Confirmation tunnel indicate your line is an a question Q.
You May press Star too if you would like to remove your question from the Q.
For participants using speaker equipment, it may be necessary to pick up your handset before pressing the starkey.
Our first question comes from the line of Thomas Allen with Lake Street Capital Markets. Please proceed with your question.
Hey, guys. Thanks for taking the questions.
Can you Thomas Kim I guess can you talk a little bit about your plans for expanding the Salesforce I know cobot remains a bit of a challenge, but as you have seen and commented previously there's been some increase in face to face interactions and I was just curious if you could comment a little bit on how you're thinking about that bounce here.
Yes, Thomas we were actually before the recent spike we were actually thinking about adding a few sales reps in September timeframe, I think given where we are now we will continue the virtual effort that we're on and we're seeing great progress there and we are going to began the interview process. We.
Do think there are three really important.
Regions of the country that we have been able to touch virtually that we probably need to drop reps end because when face to face Cape when we can get back face to face it's going be important that were there I mean, what we are seeing as people coming onboard and then we get the follow up med Ed meetings, but it's going to be real important that our reps continue to meet.
The teams in these early adopter side, so that we get the for the full pull from each account. So right now the plan is to hold off on those hires until we see how this spike calms down and to see when accounts opened but we are planning on adding three probably before the end of the year.
Hi.
Well I still think cell phone, we are continuing to act on that program. So as Johnny said the first the any that does.
That said, we had about 1800 surgeons and medical oncologists and working with that same organization didn't mean to launch and now that program, we couldn't be more interactive where doctors will be allowed in NOG and mid to upper quartile and engage with people like docket, and again that and I'm thinking kind of CRAD.
The outreach for that is 13000.
Position. So we are continuing to come.
Continue with their virtual engagement, and then and timely manner and kind of books on the ground.
Got it and then I don't know if you can comment with some specificity around what you've seen in July I know you hit the 100 sometime in the second quarter. What have you seen so far in and has the has the more recent spike.
In cobot faces, particularly in this in the southern States had an impact or are you still seeing pretty rapid growth.
You know it's interesting that I just saw a paper from ascos showing about a 40% reduction in patients that have cancer seeing their physicians, which makes us all in this industry nervous. However, we have continued to see month over month growth in our SAP.
Well volumes in so while we obviously are watching these spikes very carefully the one I think the one good thing to note is while we are seeing a rapid rise in infections of koby to not all areas of the countries are seeing that turn into I see you beds and actual hospitalizations to the point.
Were surgeries cannot continue so we'll watch it closely but so far we are seeing continued month over month growth.
I just add some commentary some of the states, where we see an unfortunate increase in the number of cases.
If we look at July dashboard actually not of the cases that indeed, coming from Florida, which in pleasantly surprising including from throttle back end specialists that already integrated in them.
Arming menu as that had some California so.
Yes, we have seen those cases common in July and these two cases and nickel. The 19 cases as banking so seems like although the surgeries may not be back at 100% don't recall that none of the are happening and Tom is one thing that we're watching very closely as well and this is just through nine network. At ASCO is you know because of coal that people are getting chest.
X rays in the incidental findings of earlier stage tumors are definitely increasing we have no idea how many yet but were but at the last meeting I was out with my ASCO colleagues that was part of the discussion so we'll monitor that and see it in.
We hope to we hope to continue our month over month growth rate despite the spike.
And so just a final question.
Are you are you willing at this point to provide some guidance on testing volumes for the balance of the year. How you think it's going to evolve from where you are today.
Yes, let me, let me say this here's what I'd say.
No in the first year of their existence genomic health had 20 reps and did 500 cases in the first year with no co bid.
Yeah, and they had three times the market size and we we right now while we don't think weaken achieved that number given the co the headwind.
The progress we're going to make is going to be.
Fairly significant given six reps and the headwind we have and so.
It's hard to believe that we could get to half or their volume in the six months and have co bid was six reps something like that would be I think a pretty impressive ramp up given what we're all going through but does certainly you know certainly we believe it that number's reachable and we'll we'll know more we would not that were.
Rhonda.
Hedge our bets here, we just we need to get through the spike in see like you're seeing it all we going to continue to see the ability for these people to get surgeries or not thats. The real challenge to given a final number for the year boat. We are in a very close track to at least deliver half of what you know gel might help that in a four year with 20 reps no co goodwill.
Deliver at least half of that in and about three quarters of the year was six reps in covance. So it's an impressive ramp right now.
Great. Thanks, so much for taking the questions I appreciate it.
Yeah of course.
Our next question comes on line of Steve longer with Needham. Please proceed with your question.
Hi, Thanks.
Rounding a candidate.
Hi.
You can look in the comment regarding the term a higher on the clinical trial for triple negative breast and I was just wondering if you could provide more color.
For us.
Yes, you know we right now we one of the things you guys on see us.
The challenge with as we enter these trials with these big pharma is especially if it's a failed trial and we are really precluded contractually from sharing the names of the companies and the actual specifics of the trial because obviously, it's already a failed trial and we want to make sure that if we resuscitated that would be.
Pretty phenomenal achievement for the pharma company and so unfortunately, I'm not able to say anything more than we are actively receiving samples and we hope to be able to at least see results from that within 90 days.
Is that revenue generating or is that more of what I would bet pilot.
Yes in phase you hit the nail and ahead I think we will be very clear about this and transparent when we're getting involved this early with our test we will run inclined the samples for these companies in sort of the resuscitation mode are we will get there are silico day that we'll get that.
From aren't a seek in some cases and we'll be able to run our outerwear them against that and so those are the two avenues will approach for these sort of early these failed trials, we want to take a quick early shot to see if we can resuscitated once that happens we will be billing for the samples.
One thing I Wanna get added sentences in any high profile and if you take right Andy entered in the new engine I think one one that data it one way to think about it is it directly revenue generating the other way to think about it is one of the data is available and it's presented at a medical meeting it create.
An excitement around the platform itself to attract other interest from other pharma.
Okay.
Yes.
Sure.
In terms of this from the Rx you know your Medicare priced yet.
We do not and I'm going to give you some high level thoughts.
Thoughts partners right across from me I'll, let her add color we.
We have given everything we needed to give to them to render a surprise. The noridian blessing was very important because now that's our local Mac and that could have firm date on when we have to have a price. So we know those two things.
We do know that there is a new affair. It was apparently methodology that they were trying to use and we are we're waiting to see all of US all the companies I've talked a number of several Ceos and in my space, who were also waiting on pricing and we're all under the impression that there was a there's an evaluation right now of what's the.
Procreate method the price. These these panels I reiterate that there because the noridian as effective August when did they have to Panther acclaimed after that yes, right right right in that the exact pricing has not been determined and the reason for that as a management change at all night.
So any sort of trying to introduce a new algorithm for pricing and what we've heard is it and that is a then is there a dynamic as to whether that you algorithm should be adopted or whether they should be pricing using the old algorithm and those other discussions the iron.
Well I've been and that's the reason it's got delayed so by the whatever the issue they have to be as far claimed option on best ideas, because it's effective on that date and we've already been we've been submitting claims since we got the approval so.
We're obviously going to adjudicate all the older claims once we know the price.
Yes that was my last question I just wanted to the 100 patient samples that you've tested how many of those are eligible for reimbursement either by private payers or or Medicare.
Thank you the sample volume it closely tracking to actually the market number until about 70% of those patients had Medicare or Medicaid advantage and 30% have commercial engine, which we are building and getting paid to come over time. We will we are already submitted to pass claims can read.
Again, and we will be making an appeal, although not guaranteed via making in appear to get those claims paid because if you remember the evidence between the draft LCD and the final LCD was unchanged. They didn't change anything. So we've made the case of the Mediconnect as it really in that we should be paid for the past game.
We'll keep you updated as they progress with those negotiations.
Good. Okay. So then worst case scenario is you start getting paid after August twentyth for examples after gasoline right worst case. So we will we will have revenue in Q3 four Rx.
I think as Mitch has described in terms of our revenue recognition, it's going to be on a cash only basis.
In Q3 in Q4, most likely in then as we get more and more traction in more and more history, we'll be able to move to an accrual methodology, but for now to be cash only so we'll continue to provide volume growth and then revenues at the quote that they feel coming quarterly conference calls.
Perfect Great. Thank you appreciate it.
Sure.
Our next question comes from the line of Steve Martin with Piper Sandler. Please proceed with your question.
Hey, Thanks for taking the questions and congrats on the earlier you determine our extraction.
Yes, Thanks, Steve.
Yes, I'm looking forward to the kalo call tomorrow as well.
Asking me Goldman and you're going to hear some really fascinating really good case studies from Foxconn doll.
Okay, that's great.
So my question third largest follow up questions from prior our people, but can you give us a sense for the number of physicians ordering it looks like you're at 100 test right. Now was 47 available hospitals and then of those.
Numbers of physician you guys mentioned, 60% reorder rate, but could you give us a sense for how many surgeries are done per physician.
Maybe looking at per month or per quarter time frame.
Yes, So Bob do you just correct me if I get out a lot here, but Steve the with the way to think about it is our early path was to look at community try to get into these community centers of all the cancer specialists things like that.
And also go after the key opinion leaders as you might imagine those larger accounts are harder to penetrate and hard to bring up on board. So the early returns for us have been in these smaller community centers and we now have 47, onboarded and about 60% when you onboard and account you have to get them up in onboard and then you have to.
The med Ed for the dock. So we're on boarding accounts every week. So there is a trail of who orders versus the number of accounts, we have and so pardon I don't know if you have the latest I think I said that it's important to highlight that he had the first step as you onboard an accountant roughly it can be anywhere from two to five dockers auditing firm.
John.
And then the whole basically you thought it accounted specialists as an example, you start with those two docs and ordering today and then you the med Ed program that you add doing next week, we thought it accounted specialists. So then you can go in that number from two to 10, and 25 and hopefully get too and Keasling 30, 40% off the doctor. So that's how it will go.
And that's the pattern yep.
So roughly in the beginning to five months I would say the range can be anywhere from two to five and then you expand within the logical comp.
Okay, all right that's helpful.
And then.
Next question is on.
Determine rx billing.
My understanding is there's going to be a look back period that noridian will allow.
Yes, how far back lives I look back.
Theoretically it goes back to the original LCD and so.
Which we got from Palmetto, which was in April I believe so it's it's about should be about I don't know a 70, 80% of the volume should be eligible based on that LCD, but we were going to pursue all way back to when we launched it but those will be the hardest one to adjudicate we have submitted the claim.
All the lean back to Nvfives snipes submission is that its onboard with them.
And it's not a guarantee but to be at an active discussion with them that that coverage pharmacy did not change from draft, LCD, which was last year and to find and CD and therefore, NSN thankless covered so it's a negotiation and best case scenario as we get paid into place kits in the June we don't yet.
That okay.
Okay, yes that makes sense.
Let me sneak in one last one on pro genetics is it going to be similar to core de exports to sample logistics or is there going to be tech transfer.
Yes go ahead exactly the same which is which is pretty nice actually because.
The price per test is more is quite attractive we haven't disclosed that yet.
Yes.
They generate that volume to that oncology channel they send the sample and listen that's report back.
The path, but that's report ultimately Steve once we get.
Once we get these all established the goal is going to be to transfer the wet were to some of these countries laboratories, and we'll just get an algorithm fee, which will be the exact same price we get today, but they'll take on the wet work and so as you might imagine in the early days of these types of launches its really important.
As to maintain the consistency of the that testing.
We want to make sure that we own the workflow, but ultimately we will be able to reproduces speak more kit like approach and we'll be able to then charge for the algorithm and let them do the wet work locally which will turn to improve their turnaround time significantly.
Okay, great. Thank you so much.
Yes, Thanks, Steve.
Our next question comes from the line of Bruce Jackson with the Benchmark Company. Please proceed with your question.
Hi, good afternoon. Thank you for taking my questions.
It varies Jay Bruce.
So I want to I'm, just talking about determine Io first second and about the road to a clinical use so.
If he can give us a little bit more information about.
Yes, I know you have to do conscious choice, but how big do those studies have to be how long do you think it's going to take you to assemble the data.
And then what year do you think that you might have the test actually available for clinical use in what indication do you think it's going to be for.
Well, let me do this let me, let me start and I want to pitched the Doctor Ross, who is here and then I'll pick up the because you asked kind of a few questions within one.
Today, we have 71 long patients, we have 55 brass triple negative breast.
Dog and you guys met with CMS and indicated that we probably need about 200 250 more patient something like that and at that point, we would be able to submit our dossier. So Doug you want to do you want to just give an update on what you think the type of trials, we might get to do that yes. So there's really.
Two different paths to get the product to market. One is working directly with a pharma company with specific drugs, where we would be developing it as either a complimentary or companion diagnostic Enron you've talked elegantly about.
The path towards that with a checkpoint inhibitor or this emerging classic therapeutics that are designed to stimulate the immune system for those tumors that are cold, but not poised if you will need some boost to their immune response to get them over the hump.
So we're trying to work with both the checkpoint inhibitor candidates as well as a few classic candidates.
In terms of the conversations with CMS.
We understand and they understand that the current biomarkers predominantly PDL, one, but also tumor mutational burden and MSR and some tumors are not performing up to the standards are there the desires that either oncologists are patients hope for him. So theres plenty of room for improvement in the discussion centered around.
Providing incremental value to PDL, one and tumor mutational burden and indicate that PDL one right now at least in non small cell lung cancer pretty much all patients are getting access to the drug either as single agent when they expressive strongly oros combination therapy, when they expressed that weekly.
But the response rates are really not very discerning.
However, it is there any in in terms of picking responded so there's plenty of room to demonstrate incremental improvement in Ronnie suggested that two to 300 patients and that sort of indication is the target and that's about right theres other tumor types, where the drugs have not penetrated as much and so in that.
And we would be looking towards a complimentary diagnostic company must not on the label of the drug but instruct for use of the drug and so those would be sort of de novo applications and so that's the other route to market. It I don't think we've guided in terms of days over a year of launch so our defer that factor on it picked up so Bruce to answer your question.
We are actively pursuing data sets where samples have already been Ron using our and they seek.
We developed our test in aren't they seek and therefore, even though now it's a 27 gene PCR panel, we can use our algorithm against all in a C and we could rapidly once we gained access to one was dataset we could rapidly produce the data that we could then take the publication once its accepted for publication.
We would have enough samples that would meet the CMS requirements. So we are actively pursuing you're going to here and I. My highlights the look bar in the second half is we want to we want to obtain access to one or more of those types of datasets. So that we could indeed be prepared for a publication and then submission.
The CMS hopefully into early 2021, and then it will be up to gave and team to figure out how how far we can progress with that data set. So in terms of your question on the indications, obviously tiny and not have talked about non small cell lung cancer, where we already have data and triple negative breast cancer. So those are the indication.
And that we are pursuing right, but one thing I want to highlight and I'm sure. If you want to Scandinavia Deemphasized story is in order for them to go from colorectal to a pan cancer claim. They had at correct me. If my numbers are down about 70, 80 samples and colorectal cancer, but then for them to add on the Pancancer claimed bad.
Five other cancers my dad samples in the pen and that allows them to then submit pancancer package. The CMS. So one could envision at two phase efforts to go in lung and triple negative breast cancer, and then you could run out any seek data on several other cancers and forget show and of utility but.
Anthony but upon council claims strategy. So Bruce the plan is to aggressively go. After these data sets and do the best we can to have one dossier in CMS next year.
Okay.
Okay, that's great.
[music].
He I guess to follow up question that was we've got some some meetings coming up and the tail into this year any new publications lined up for either determine rx or to Toronto, there should be looking forward to.
Yes, one of the other key milestones Great News Bruce is you're you're making me foresaw milestones into this part versus the my closing, but yes. So the other milestone as we have as you might imagine we have a pervasive commercial effort and we have quite a few what I would call key opinion leaders in academic center interested and such.
Affording us with papers and so we are working to to pursue.
Those types of abstracts and papers and as you know there are several meetings this fall and.
We are eager, especially around our I O panel to complete the patent filing and then from there will be able to think about releasing a lot more information around it including some manuscripts that future meetings and we are targeting.
In terms of submission that can not American lung cancer meeting and via that had been apathy that on that tomorrow not more as the kilos of toward me and then there is the one longer and then it also add coming up so they had we are looking at all of those meeting opportunity also Bruce just stay tuned on that and as you know we have to be careful.
What we say because a lot of these studies are embargoed, but yeah I think that I think that we are you know I think you know me well enough we will have a very assertive.
Publication strategy from here forward so.
Okay. That's great. That's it for me thank you very much.
Thanks Bruce.
There are no further questions in the queue I'd like to hand, it back to run and used for closing remarks.
Well, thanks, everyone I know the call when a long today, but I think it's important information that we wanted to share with you guys.
I want to close by giving them the key highlights some of which Bruce.
Got us to elucidate already but for the term Rx we want to you'll see continued sample volume and revenue growth over the second half consistent onboarding of New hospital systems, including some of the larger academic partners that were targeting as well as global expansion via some additional partnerships for the term Io it's going to be.
Continued access to clinical trials, when we can get the data we need as I mentioned to get us prepared for CMS dossier for commercial launch in clinical markets also publications of additional data and multiple cancers and then ultimately we want to continue to grow our pharma services business, which we believe as a really really good operating.
Only for us in the short term to drive revenue growth as well as they help us with that revenue to reduce the overall burn of the company. So again, we appreciate the support of our investors. We appreciate especially the support of the team here. It's been a it's been an intense year since I got here and I'm, just really excited and proud of the team where we are in.
We have a really bright future for the company and excited to two to continue to update you guys in future quarters. So thanks for taking the time today and we'll look forward to further opportunities.
Ladies and gentlemen, this does conclude todays teleconference. Thank you for your participation you may disconnect. Your lines at this time and have a wonderful Doug.