Q2 2020 Biocept Inc Earnings Call
Welcome to the bias second quarter conference call.
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I'd now like to turn the conference over to Jody Cain. Please go ahead.
This is charity care naturally Jay Thank you for participating in today's conference call. Joining me from Biocept, Michael No President and Chief Executive Officer, Tim Kennedy Senior Vice President operations and she is.
Sir <unk> senior Vice President of commercial operations. During this call management will be making a number of forward looking statements within the meeting all the private Securities Litigation Reform Act of 1995 forward. Looking statements include all statements that are not historical facts and generally.
Be identified by terms such as anticipates estimates the lead could expects intends me plans potential predicts projects should well would or the negative for those trends forward looking statements involve known and unknown risks uncertainties and other factors that may cause.
Actual results performance, where cheez it was to be materially different from those statements as well as performance or achievements are expressed or implied by forward looking statements.
In particular, there's significant uncertainty about the duration been contemplated impacted the cope with 19 pandemic. This means results could change at any time in the contemplated impact to cope with 19 on bio soaps operations financial results and outlook is the best estimate based on the information.
Today's discussion.
For details about these risks please see the Companys FCC filings.
The content of this call contains time sensitive information that is accurate only as of today August 12, 2020, except as required by law bias up disclaims any obligation to publicly update or revise any information to reflect events or circumstances that occur. After this call.
Now I'd like to try to the calls were to Michael No Mike.
Thank you Jody and good afternoon, everyone.
Our decision to initiate cobot 19 testing is paying off with overall commercial testing volume up for the quarter one person from the prior year, even with the impact of the pandemic commercial volume in our core oncology business was down 16% year over year, which was significantly better than the up to 40% decline we had anticipated in our forecasts.
We reached a low point in oncology volume early in the second quarter, which progressively improve through June however, with the resurgence of the pandemic positions report the patient office visits have not yet returned to pre cobot levels, which is continuing to affect oncology testing volume.
Development testing volume was down 29% year over year and comprise a smaller percentage of our business than commercial testing and generally are billed at a lower rate. The decline is not surprising as these assets or use mainly by pharma and biotech companies in drug development and clinical trials.
During the pandemic many clinical trials came to a halt and some remain on hold today.
Volume from Cowen testing, while modest during Q2 helped to make up some of the decline in oncology business. Cobot 19 testing is built at a significantly lower rate per sample than either commercial or development oncology assays, so with slightly higher commercial volume revenues for the quarter were down 23% from the prior year do the.
Impact of lower oncology volume and the lower billing rate per our cobot 19 testing.
Revenues for the first half of 2020 were up 7% over the prior year. This increase reflected our strong first quarter performance prior to the full impact of the pandemic.
Moving on to cope with 19 testing. We believe this testing is an important part of our business for the immediate future.
After validating testing in or high complexity, CLIA and Bcl two safety level Laboratory, we were challenged along with other labs in securing cobot 19 specimen collection kits. We overcame this hurdle by initially by tapping into our supplier to secure kit components, and then assembling them in house.
Volume has increased exponentially in the weeks since we began distributing cobot 19 specimen collection kits and we have received over 11000 samples to date the.
The average reimbursement for this testing as approximately $100 per specimen.
And with testing volume ramping up we expect koeppen 19 test seem to have a significant impact on third quarter revenue.
To accommodate the robust demand for this testing, we have increased staffing and implemented automation to support our ability to process. The high levels of covered 19 samples we are seeing.
Importantly, we are processing Coburn 19 tests quickly.
The vast majority of test resulted sent to help providers within 48 hours of receiving a sample.
We also were making good progress in developing our own cobot 19 specimen collection kits and remain on track for launch later this year.
These specimen kits will be used to collect samples from patients who wish to be tested for the viral cobot 19 testing such as Biocept offers.
These kids will also be validated on a number of platforms for potential sale to other labs.
In addition to cover 19 testing services. We are excited about our agreement with a geo biotechnologies to develop an ultra high sensitivity assay to detect the virus at very low copy numbers of viral our anyway.
The agenda assay under development will utilize the patented switched blocker technology, which has the potential to be applied to infectious diseases, such as covert 19.
In addition to molecular diagnostics in oncology as Biocept currently users.
The higher level of the sensitivity could potentially detect viral load at much lower levels than conventional PCR based coven 19 assay.
If successful these tests could have an important differentiating feature such as detecting lower levels of virus in asymptomatic patients who are able to infect others. This code Nineteena Assai would also allow for superior specificity and its ability to identify the different strains of the virus.
This agreement provides us with new incremental revenue for R&D development services, and if an asset successfully developed a geo has granted biocept an option to expand our covered 19 testing capabilities with this next generation Cowen 19, PCR assay with these potential competitive advantages.
We strengthened our core oncology business, even during this challenging period, having announced several significant developments that support this business near term.
For growth post pandemic.
Among these in a contributor to our second quarter results was our newly launched testing to detect and analyze cancer biomarkers circulating tumor cells are ctcs.
As well as circulating tumor DNA or ctdna founded cerebral spinal fluid in order to help patients whose cancer has metastasized to the brain and central nervous system.
In a relatively short time this offering drove commercial testing volume and expanded our customer base into neuro oncology. We are among the few national CLIA labs can analyze and identify important alterations in cerebral spinal fluid, which helps these patients qualify for therapy that may extend their life.
We're also benefiting from an increase in sales of our seizure blood collection tubes and research use only or are you all kits.
Revenues for these products more than doubled from the first half of 2019 topping $100000.
We introduced our first combined tissue and liquid biopsy are your kids in March for IGI up our mutations.
This are you kit has been awarded see IBT, mark, allowing us to commercialize it in the European Union as well as other geographies that recognize the CE Mark.
Egypt bar is among the most frequently evaluated biomarkers for lung cancer.
Our second tissue and blood are you. Okay. This one for the biomarker be rap was launched in May and we're working toward CE IBT Mark for this kit as well mutations in the B RAF gene are an important factor in determining treatment for melanoma lung and other cancers and are a great interest to researchers and physicians.
To be clear are are you all molecular kits and our blood collection tubes are different from the covered 19 specimen collection kits. We are currently developing.
Are you all kits allow molecular laboratories around the world to utilize our proprietary target selector oncology assets. This business has a higher margin than our services business and expansion in this area is an important strategic objective for us.
Free Cobot 19 uptick is encouraging for future growth.
Another key development as our recently announced provider agreements mentioned second largest integrated health delivery system, Highmark health, which is a bluecross blueshield affiliated organization.
The agreement was earned after a positive review by her remarks, Vitals program, which evaluates new technologies for the clinical utility and health economic benefit.
And with that I'll now turn the call over to Timken, a due to review our financial results Tim.
Thanks, Mike and good afternoon, everyone for Q2, 2020 reported revenues of 917000, compared with 1.2 million in Q2 2019 with a decline attributable to the impact of the coven 19 pandemic.
As mentioned previously commercial oncology volume declined 16% from the prior year.
Commercial reimbursement based on historical mix and test for accessing isn't the 1400 dollar range up from the $1100 range in the prior year period, we continue to launch new assays and improve operational processes, leading to increased testing capabilities and physician ordering.
In Q2 2020, we performed the 1399 total exceptions.
Compared with 1340 total exceptions in Q2 2019.
Commercial volume in Q2, 2020 was 1079 comprised of 897 accessions from our core oncology business and 182 Coven 19 test importantly, we have now received more than 11000 coven 19 specimens.
Today.
This compares with 1066 successions from our core oncology business in Q2 2019, we believe that the decrease in core oncology exceptions is due to the impact of covered 19.
Total cost of revenues was 2.5 million compared with 2.7 million for the prior year period.
R&D expenses for Q2, 2020 were 1.6 million compared with 1.1 million during Q2 2019.
The increase was primarily due to the costs associated with the launch of covert 19 testing certain laboratory automation projects and ongoing development and validation of liquid biopsy panels.
DNA expenses for Q2, 2020 were 1.9 million versus 1.7 million in Q2 2019, with the increased mainly due to higher insurance costs and higher legal fees, primarily related to lease negotiations warrant exercises.
And other matters.
Sales and marketing expenses were 1.3 million down from 1.6 million a year ago with a decrease primarily attributable to lower sales and marketing activities through the pandemic related travel restrictions.
Other expense net for Q2, 2020 was 56000 compared with 1.9 million and the prior year period, which included 1.8 million and warrant inducement expense.
Net loss for the second quarter of 2020 was $6.5 million or five cents per share on 127 million weighted average shares outstanding.
This compares with a net loss for the second quarter of 2019 of 7.8 million or 38 cents per share on 21 million weighted average shares outstanding.
Now turning to our year to date numbers.
Our revenues for the first six months of 2020 increased by approximately 149000 or 7% to 2.4 million compared with the first six months of 2019, even with the impact of the pandemic.
Cost of revenues for the first half of 2020 were 5.5 million R&D expenses were 2.9 million sales and marketing expenses were 2.8 million and Jna expenses were 3.8 million.
Cash and cash equivalents were 24.1 million as of June Thirtyth 2020, compared with 9.3 million as of December 31, 2019.
In addition to the 2.3 million a net proceeds from the warrant inducement offering during Q1, we received an additional 700000 from the underwriter exercising its overallotment warrants from the December 2019, underwritten financing transaction.
In March 2020, we completed two registered direct offering raising net proceeds of approximately 14.7 million in April we raised net proceeds of approximately 9.6 million from a registered direct offering and based on our historical and planned cash usage.
We believe our current funding will support operations through most of 2021, however, with the uncertainty introduced by covert 19 on revenue and collections, our cash runway maybe shorter.
Now I'll turn the call over to Corey Don to provide an overview of our commercial progress Corey.
Thanks, Tim and I am delighted to be speaking with all of you today as mentioned.
Hi, Mike commercial volume gains momentum as the second quarter progressed in lock step with the lifting of shelter in place restriction that said commercial testing continues to be dynamic given the pandemic resurgence is across the country. It's understandable that some cancer patients are for going and postponing physician office visits.
Yes that is pleased to fill in niche for patients and physicians alike, particularly during the pandemic with oncology testing through a simple blood sample rather than a more invasive tissue biopsy.
As always our customer service oriented approach is working well to support our business niche and example, ascending in mobile for bottom is to perform the blood draw the patient home, allowing patients to continue to shelter in place.
Furthermore, we also benefited by profiling to liquid biopsy testing of individual gene testing rather than more expensive large gene panels. During this very cost conscious time.
Our introduction of assay performed on cerebral spinal fluid in patients with advanced lung cancer and breast cancers, well timed in that this testing during the pandemic provide valuable information for the sickest most advanced cancer patients.
These patients are more likely to see their physicians during the pandemic.
The target selectors cerebral spinal fluid assay is help results provide results to help identify potential treatment options targeted at tumors that metastasized to the brain or the spinal fluid where timely treatment is critical.
Testing cerebral spinal fluid for Biomarkers is key in physician selecting the best treatment option for the approximately one third of patients diagnosed with breast and lung cancers, who may develop brain metastasis.
Our sales force is productively working from home using virtual web offsite meetings and other creative approaches to connect with positions while in person meetings are restricted in healthcare facility.
Notably, we've been able to connect with neuro oncologist, who otherwise would be very difficult to reach the ability of our sales team to engage with these physicians often do meetings along with members of our medical staff has been effective.
The numbers are still modest, but we saw steady increase throughout the second quarter in a number of cerebral spinal fluid assay processed in the lab and we continue to see this trend.
After starting in the last week of quarter to covert 19 testing has been growing significantly the vast majority of customers to data from California, and we and now are serving customers in multiple today.
Our nimble lab size works to our advantage in being able to quickly delever over 19 specimen collection test and to provide test results in a timely manner within 48 hours a majority of the time.
Our customers are able to securely obtain patient testing results online and to access biocept personnel throughout the testing process.
All of these bias up services are particularly helpful for skilled nursing facilities to care for their residents and stay compliant with state requirement.
So in summary, the commercial team continues to support the execution of our strategic initiative to build our oncology core business. During this challenging time will also serving public health efforts with Covance 19 testing with that I'd like to turn the call back to Mike.
Thank you Tim and thank you both for your outstanding leadership during this challenging time.
Foremost concern during the pandemic is the safety and well being of our employees, we're providing safe working conditions for our lab technicians through social dispensing and staggered shifts while delivering the same excellent quality in turnaround time without interruption or delay, notably we have maintained our full staff a bias up with no layoffs or furloughs havent.
Implemented work from home policies and strategies designed to emerge from the pinned to make in a strong position.
Like everyone. We were looking forward to a day when the pandemic is under control and returning our business to more normal operations.
Our longer term corporate priorities remain unchanged.
These include increasing market penetration with a focus on neuro oncology urology breast and lung cancer.
Growing sales of our target selector molecular assay, our yield kits and our seizure blood collection to.
Increasing market penetration of our target selector ngs lung and breast panels under our collaboration with Thermo Fisher and securing Medicare coverage.
Entering into additional strategic commercial and technology partnerships, both global and domestic.
Signing more agreements with third party health plans, including Capitated plans.
And expanding our relationship with Bluecross Blueshield.
Publishing clinical case studies and presenting data scientific conferences that further validate our targets electric testing.
Launching additional assays.
Launching our bias up developed cobot 19 specimen collection kits.
And using switch Walker technology to develop the next generation Cobot 19, PCR assay in collaboration with the Jia.
Importantly, we are positioned to weather the pandemic and for returned to growth. We are in established leader in liquid biopsy and our target selector testing provides critical information to assist physicians in determining treatment decisions for their patients diagnosed with cancer.
Our assays are based on our differentiated platforms that leverage information for both Ctcs and ctdna, both in blood and cerebral spinal fluid.
To date, we have tested approximately 25000 patient samples with our proprietary oncology biomarker assays and over 11000 co with 19 samples.
We fully expect our test volume will gradually return to more normal levels as dependent mix as sites.
We're particularly pleased to have a strong balance sheet, which we expect will support operations through most of 2021 and as Tim mentioned with the uncertainty of Coven 19 brings to revenue and collections our cash runway maybe shorter.
And in closing I'd, especially like to thank our entire team at Biocept for their hard work and dedication during this challenging period with that overview, we're now ready to take questions operator.
Thank you we will now begin the question and answer session.
To ask a question you May Press Star then one on your Touchtone phone.
If you're using a speakerphone please pick up your hands up before pressing the key.
So what is your question. Please press Star then too.
At this time, we'll pause momentarily to assemble a roster.
While we're waiting for the first question I'd like to mention that bias up we'll be presenting at two virtual conferences next month. These include the LD Micro 500 conference on September 2nd and 10, 40 am Pacific time, and the H.C. Wainwright, 22nd annual Global investment conference being held September 13th through 15.
Webcast of our presentations, we posted to our web site at Biocept dotcom.
Okay, operator, we're ready for the first question.
Thank you I first question will come from Jason Mccarthy with Maxim Group. Please go ahead.
Hey, Thanks. The question. This is Michael accumulated on the line for Jason.
Oh, Hey, Michael.
So I'd like to see quite a bit more color on the Colby testing so you're doing a 11000 test the date.
And based on your previous announcement on the third.
4000, those run like the last month to 10 days doing some back napkin.
Ladies and that's about 3000 per week. So my question is do you have the supply or the ability to produce the supply.
To continue this runway about Q3.
Yes. The team has done a great job here and I. Appreciate you know you're doing your diligence there on the math on things are growing fast around here and then perspective folks should understand if they are newer to the story that as an oncology provider you know, it's a smaller volume type of testing that you do in some ways a more comprehensive test.
Just one thing you're looking for and so we were doing 20, plus specimens per day, and we rapidly ramp now to well into the upper hundreds and soon to be probably caution that threshold.
Even greater in the future, but I'll, let Tim weigh in on some of our supplies both for our reagents for the kit as well as the capacity we've grown here lately, maybe some of our automation issues as well as the collection kits that we haven't made sure. Thanks, Mike. So it was a great question as Mike mentioned in his.
His remarks previously we actually have secured.
50000 collection kits.
Currently while we're still in the process.
Of.
Finalizing the preparation surrounding our in house collection Kit, which Mike also mentioned that we'll be releasing later on this year.
In addition to that we are in a fortunate situation to be on a standing order with our suppliers associated with the reagents that we require and in our CLIA laboratory to actually perform covet 19 testing. So I would say that those two things combined.
We've been able to.
Effectively overcome the.
The supply chain challenges that we experience and I think a variety of other folks have experienced earlier during the pandemic. So I think we're in very good shape there.
Being able to continue to do co vid 19 testing here at Biocept and what Mike was alluding to also with automation were also in the process of implementing a variety of different things in our CLIA lab.
So for ordering of Coven 19 testing more efficiently with our clients, but also be able to process those tests.
And I'm much more efficient manner as well once.
There are into ours, our process stream in CLIA.
We are doing implementing liquid handlers.
What we call the cap or is to eliminate potential.
Issues with people constantly doing repetitive motion.
And I think with our clients, having the ability to order in a much more efficient process on the front end and also as providing results to them in a more efficient process on the back end is positioned biocept very well to be able to continue to ramp up our covenant 19 testing volume.
Thanks, Tim.
Alright, Thank you and then.
I'd also like to see if you get discussed on the factors, which enable you to refine results within 48 hours because that's pretty impressive I know wait time, particularly out here in New York.
Ben as much as a week, which renders the information basically outdated so could you comment on that at all.
Yes in fact, some of the National Labs had been running at two weeks, which is really.
Challenging for people that are waiting for those results, but this is critical for us we.
This is a test is vitally needed by those that are having in both rather odell, but of course society in general So we're committed to maintaining that turnaround time and the team has been very working very hard to make sure that the through automation initiatives, we're putting in there the Tesco right into the lab Asap. We've also increased our.
Staffing here at the lab and we now are seven day, a week operations. So test that arrive on Saturday, you're going to get to run on Saturday night, or Sunday morning, and results back Sunday night, or Monday morning to the referring physician. So that's critical for us. It I think important for any provider I don't know folks all saw the article by Bill Gates, where he you mentioned that he.
Will that should be paid for if there beyond 72 hours. So as a lab representative that might not be the greatest thing, but at the same time I think in this case, it's relevant and important to make sure you meet that that guidance.
Alright, thank goodness several items one more on the.
On the PCR tells us being developed with GE.
And what are the main differences that are going to be seen with a with a more.
With a lower limit of detection.
Test how much lower of a limit would you expect to see if you can you use and technology as a model and then how would you expect this actually translate into practical results.
Well I think the way to look at it is oncology as model at this point, it's premature for us to make any claims about.
The performance of the test because we're not at that point of the developer yet where fee.
The designs would lead you to expect similar results with what we've seen oncology, but to give you an idea standard molecular assays and oncology that are done on PCR would have sensitivity is anywhere from one to five down to 1% to 5% prevalence of the target and our current target selector has you can go down 2.03%.
The zero, 5% so.
And more sensitive.
Performance with oncology assays versus standard PCR assay is if you will that would be the goal of the developers here as well as Dr. Arnold who provides much of the designs for the assays and so.
We will keep folks the breadth.
With our partners at a Jia.
Along the way as we make progress there.
Alright, Thank you very much congratulations on the progress.
Thank you.
Our next question comes from Sally Hansen with Brookline capital markets. Please go ahead.
Hi, good leading the call high.
Just wondering when you did you have any.
Expectations to win the traditional liquid biopsy.
Physician visits or business.
Rebound I mean.
I know it varies regionally around the U.S., but.
Well when do you have any do you have any expectation when that's going to pick up again, well people are still getting cancer of course, and so this high concern, it's not amongst us, but among many of the physicians, we serve and the industry as we talk about this is we've made so much progress as healthcare.
Arena with early detection and getting hands early which is critical theres a lot of concern about patients avoiding physicians visits and stuff and are we going to have a problem and I think it's going to dovetail as Corey mentioned earlier with.
With the you know.
I guess pandemic.
Subsiding somewhat whereas it's kind of spotty now as we said it started to come back when everybody started going back to work and then once people started to.
Fearful of this resurgence it started to slow down just a bit we.
I haven't seen it can go down that was when everybody was shelter in place and like you say different regions or a different points in its variable one region will be in business and then everybody has to slow down again, because [laughter] pandemic came back right. So it's kind of hard to predict now. We're also though you know gaining new clients in neuro oncology with CSF and probably maybe you can tell.
Talk a little bit about our underwriting credit positions with do right. So it's been we have such a nice unique niche with with three will final fluid biomarker testing, we have been able to you and especially going after a very small and targeted sector of oncology, which is neuro oncology. It served us well to be so so targeted in specialty.
Hi, I'm hearing that my time, so we've been able to connect with them remotely.
More so I think last time I mentioned to folks that we just started that and we were having good luck, so far and Thats continued and you know the only advantage of the oncologists not having quite the patient load as they used to have is that they're more available normally they're very difficult see any case folks don't understand the selling price.
[laughter], there's a shortage of medical oncologist and a surplus shortage of neuro Oncologist America and they normally scheduled morning, New Tonight with patient visits so it's hard to get their time, well they've had a lot more time and they've actually got on zoom call, sometimes for one or two hours with our sales team and our medical staff learning about our testing so that's been a side benefit.
Yes, the ability to really get the message across okay, Oh interesting okay.
And then do you expect.
So you didn't you spent 1.6 million in R&D. This quarter is that like a quarterly run rate you look going forward or is it going to very lucky for them this year and into next.
I'll, let him address that I will say that in our R&D expenditure is not just pure our work like you're thinking of like developing our cobot assay is that's also going to include like the validations of covert kits and the too soon the collection kits everything done a CLIA lab has to be validated so thats reclassed over to R&D, but Tim can address your.
Your question, where do you actually I think Mike just answered it very well but.
The second quarter did they certainly have.
A few hundred thousand dollars of of Covance 19 validation.
Costs in there so.
When you say do I expect it to continue at that level certainly not for profit 19 related validation, but but to the extent that we could as I've said we are constantly.
And continuing to launch new.
Testing capabilities that where our physicians good order those tests that they deem it necessary for patient care.
So from time to time, we've all we've always done that with with new tests that come out, but Q2 I would say was was somewhat unique and that there was a lot of heavy lifting to be done with launching.
The coven 19 testing gone okay.
And then what about next year, you think you'll continue at the 2020 level or.
With cobot 19 testing or overall overall R&D yeah.
Overall R&D.
It's hard to say keep in mind that every time, even uncovered 19, if we with if the Geo test wear to work out we would exercise our option to perform this as we'd have to have a revalidation there with our own collection kits will have to revalidate. So as long as we develop new improvements to this process, there's going to be some expenditure, but certainly I think most folks would agree that there.
Revenue that potential with over 19, right now probably just worth it yet yeah, absolutely yeah.
Okay, Alright, thank you very much thanks.
Sure.
This concludes our question and answer your question.
Let's turn the conference back over to Michael now for any closing remarks.
Well, thank you operator, and thank you to everybody for attending today.
On behalf of our board of directors in our hard working team of Biocept you want to thank everybody for participating today and for your interest in our company.
Forward to providing an update on our next conference call. When we report I believe it or not third quarter financial results and provide an update on our progress in November thanks, again and have a great day.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.