Q4 2020 DermTech Inc Earnings Call
Ladies and gentlemen, thank you for standing by and welcome to <unk> fourth quarter, 2020 financial results Conference call.
At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer the question to ask the questions. During the session you will need to press star one on your telephone and stomach.
The pleasure to turn the conference over to MS. Caroline corner Ma'am. Please go ahead.
Thank you operator, and welcome to Derm Tech's fourth quarter and full year 2020 earnings call. Joining me on today's call are Dr. John <unk>, President and Chief Executive Officer, and Kevin Stein and Chief Financial Officer. This call will include forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995, all statements made on this.
Call that do not relate to matters of historical fact are considered forward looking statements forward looking statements made during this call including protection of the future performance are based on management's expectations as of today March 4th 2021, and and subject to various factors assumptions risks and uncertainties, which change overtime and.
For our results could differ materially from those described in such statements.
The factors that may contribute to our cause such differences are described in today's press release and <unk>. Most recent filings with the SEC, including <unk> quarterly report on form 10-Q for the quarter ended September 32020, and addition, you're encouraged to review of the companies to be filed annual report on form 10-K for the year ended December 31, 2020 for <unk>.
The revisions or updates to the information and that's release.
The Turnpike undertakes no obligation to update these statements except as required by applicable law.
The next press release with the fourth quarter and full year 'twenty 'twenty of adults is available under the Investor Relations section of the Genentech website Www Dot <unk> Dot com and includes additional details about the architects financial results also available on the Derm Tech website, our dermatology the latest SEC filings, which you are encouraged to review the recording of today's call will be available.
And the Turnpike website by five P. M Pacific time today, now I would like to turn the call over to John.
Thank you Caroline and thank you everybody for taking the time to join us today.
We believe <unk> presents a unique growth opportunity that is capitalizing on two of the biggest trends occurring and health care of today, the genomics Revolution and the in home delivery of health care and <unk> as a leader and the a new category of medicine, and we referred to as precision dermatology precision dermatology is the use of genomics to.
And accurate and objective diagnostic and treatment information for a variety of skin conditions and.
And is enabled by our noninvasive skin genomics platform based on our smart sticker the small.
Art stickers and adhesive patch collection method that provides pain free and scar free skin sampling for genomic testing.
Through precision dermatology, we can realize our vision to democratize access to high quality of dermatological care by allowing any health care practitioner and even the patient to accurately assess skin disease and health and so while we may be focused on the dermatologist today, our vision takes us beyond the dermatologist in the primary care and into the pace.
And as home via telemedicine, and while we may be focused on melanoma with our first product our platform allows us to address a wide range of skin problem.
<unk> Tech is at the forefront of bringing these fundamental mental transformational changes to dermatological care or.
Our lead commercial product the pigmented lesion assay or P. L. A is the first product to solve of decades old problem and dermatology, which is the need to enhance the early detection of melanoma by improving diagnostic accuracy and reducing unnecessary surgery melanoma is the most aggressive form of skin cancer and is diagnosed approximate.
200000 times, each year and results and more than 7000 deaths in the U S.
Early detection of Melanomas, how lives are saved because melanoma is 99% curable when found and the early stages with the current visual pathology standard. The early detection of melanoma is extremely difficult leading to a high probability of incorrect diagnosis, both missing early stage melanoma, <unk> falsely giving a pause.
<unk> of diagnosis about 4 million diagnostic surgical procedures are performed each year and the U S to diagnose melanoma and this represents the current served market. However, our opportunity exists not only within this current served market, but also in and expanded market one of the more important opportunities to find melanoma at the earliest day.
Ages is the use of our technology to immediately assess mold it would typically be photographed by the dermatologist and followed over time for change. It is in these malls where of melanoma diagnosis may be delayed or missed where the earliest stage melanoma is may be found and where our precision platform is ideally suited to provide early detection.
And importantly, and this expanded market, we do not directly compete with the surgical biopsy practice of the dermatologist. We believe the expanded market opportunity for these typically photographed of followed malls, maybe at least as large as the current served market of actual surgical biopsies.
And in addition to our initial focus on melanoma, we have built a robust pipeline of genomic products for most types of skin cancer, leveraging our smart sticker technology, we believe our skin cancer vertical of products address very large mark to the opportunities of more than $10 billion and the U S alone.
Our fundamental business model is to drive adoption and test volume of our products in the variety of distribution channels. The precision dermatology enables and then monetize this volume over time by obtaining payer coverage and are leveraging consumer pay options and key.
Key drivers of the business are the continued development of the professional dermatology commercial channel and the development of additional distribution channels outside of the professional dermatology, securing commercial payer coverage and launching new products and the next four to six quarters.
We made significant progress on these key drivers and the fourth quarter of 2020 and the product adoption component.
Steve the record number of billable TLA tests and grew our base of unique dermatology users. Despite limited access to physician offices and other pandemic headwinds we.
And we took a significant step forward and the build out of our commercial organization and we now have the team of approximately approximately 60, consisting of sales managers regional directors and science liaisons professional marketing inside sales and managed care personnel.
We expect to continue to expand our dermatology sales team throughout 2021 likely targeting approximately 50 sales managers and total as well as other additional ads to expand beyond dermatology.
We believe we can further boost the adoption of the BLA with the launch of our Pls plus second generation test and the second quarter of this year. The BLA plus launch was delayed last year due to COVID-19 testing related slot supply chain constraints.
The BLA plus incorporates a hurt mutation and biomarker, which improves the sensitivity for melanoma detection and is recognized as a key driver to the driver mutation for early stage melanoma.
Adoption of our PLE can also be further enhanced by educating and activating the patient to seek out dermatologists that use our test or to encourage non users to adopt the product our digital consumer awareness campaign, which was initiated last year continues to be very successful generating 6% to <unk>.
<unk> thousand and find the Doctor searches on our website. Each month. This indicates a strong consumer patient interest and our P. L. A and the desire to have more accurate diagnostic testing that minimizes patient discomfort scarring and risk of infection.
We're also beginning to make significant strides to expand beyond the traditional in the office dermatology sales channel. We continue to establish our strategy and primary care around integrated networks. We are currently working with some prominent networks to commercial to commenced pilot programs.
We are also profile of our existing primary care of users and found that they have some unique attributes that may allow us to target them with a focused sales effort. These attributes include having poor or limited access to dermatology specialists, having a significant portion of the depressed this involving dermatologic care and having familiarity with genomics.
Through the use of exact sciences' cologuard.
We have recently commissioned a study to identify primary care physicians in the U S that fit this profile.
Finally, and important part of our adoption strategy is expand and improve our telemedicine offering we continue to make progress and our streamlined store and for telemedicine solution, which will allow a patient to photograph allegiant and uploaded to the cloud for review by a dermatologist, who can then order our test if needed. This.
Solution relies on information technology and software applications.
Pandemic has catalyzed the shift toward remote health care delivery and we are well suited to capitalize on this trend as we believe we are the only company that can offer in home skin cancer diagnosis and the fourth quarter, we complete the development and beta testing of some key technology pieces and we recently hired leadership for the telemedicine effort.
We expect to pilot our solution over the next two quarters, and we will look to expand it commercially and the fourth quarter of this year.
Monetizing our growing sample volumes by obtaining commercial payer coverage is the second key component of our business strategy and the fourth quarter of 2020 and early this year, we made solid progress with commercial payers and announced several contracts with large blues plans, and California, Illinois and Texas.
We also received the coverage policy with Geisinger health of prominent leader and the adoption of genomic testing to improve patient care with these recent payer successes. We now have approximately 85 million contracted <unk> covered lives and the U S for the P. L. A.
We also have a number of ongoing developments that we believe will enhance our positioning with payers and this includes new evidence development with the results of our Trust study and PPV study of positive addition of our test of the NCC and cancer guidelines and our soon to be completed economic impact study with Optum insight.
The topline results from our trust study confirmed our 99% negative predictive value and of real world setting evaluations of the full cohort of PL and negative tested patients in the 12 to 20 months period prior to the study enrollment indicated and NPV of at least 99, 2% there were no deaths or late.
Stage disease identified in this patient cohort of 1781 tested lesions.
A cohort of 302 lesions objected to repeat PLO testing further confirmed the negative predictive value of 99%.
In January of 'twenty 'twenty, one we also published a paper on the positive predictive value of our test. This study demonstrated that the PLE identifies melanoma at a rate and is four to five times higher than the current visual standard alone. In addition, the BLA identifies lesions with higher risk pathologic features that are often.
The managed like early stage melanoma at a rate of approximately three times of the current visual standard the.
The combination of these two studies demonstrated the PLE offers enhanced early melanoma detection and is the significant improvement over the current standard of care.
Adding credibility to the clinical evidence we have developed for the PLE. We recently received a favorable inclusion and the national comprehensive cancer network or NCC and guidelines.
And the NCC and is it not prefer not for profit alliance of 30, leading cancer centers, the published guidelines to advanced high quality cancer care.
Payers and physicians often looked at the and see the CCN to justify adoption and coverage for new technology. We are optimistic that the uniform consensus recommendation for the use of our technology will facilitate payer contracting.
And coverage as well as physician adoption and utilization.
Lastly, we are close to completing a large economic impact study with Optum insight, which we believe will demonstrate the cost savings associated with our PMA products. While there is no silver bullet that ensures payer coverage. We believe we believe our cumulative effort to drive test adoption educate payers on the limitations of the current melanoma.
Diagnostic pathway develop additional clinical evidence ramp up denied claims appeals and demonstrate the cost savings are of test will ultimately ultimately lead to broad payer access over the next two to three years.
Turning now to the third component of our business strategy, we have been making significant advancements with our pipeline of skin cancer products.
In addition, we've identified some compelling product opportunities and inflammatory diseases of the skin.
We are now completed and the internal validation phase for our illuminate product, which will assess ultraviolet related gene mutations and normal appearing skin, which is which is related to skin cancer risk and photo aging.
A big focus and skin cancer with genomics over the last five to 10 years has been early detection. We think the future is detection of precancerous genomic changes and this is essentially what our illuminate product does.
If this internal validation studies and successfully completed as planned we will finalize development with an external validation study and the second and third quarters of this year with initial target for the product introduction and the fourth quarter of 2021 well.
We also launched a pilot digital consumer awareness campaign to assess demand for the product. This limited campaign and has thus far been successful and demonstrating reasonable customer acquisition costs and interest and the product. The there is still and the very early phases.
We're also making progress on the Carson on product and facilitate the diagnosis of basal and squamous cell skin cancers. This product is in the classifier verification stage, we believe that the stage will be completed by the third quarter of this year with validation testing beginning in the fourth quarter, our clinical study to enroll subjects.
For and samples for the validation study is fully up and running and we expect to have complete enrollment around the end of the third quarter of this year.
We are still targeting and introduction of this product and the first half of 2022 as and L. D T.
And Q3 of 2020, we hired Michael how ph D. A highly regarded immunologists specializing and inflammatory diseases of the skin and Dr.
Dr. Hal and his team of identified several areas of opportunity. The involves assessing the genomic subtypes of atopic dermatitis and other inflammatory diseases to predict response to biologic therapies, depending on the genomic subtype certain patients may respond poorly to some therapies, which can cost us.
Much of 30 to $40000 per year.
Identifying patients that are likely to respond to a certain therapy may improve patient care and reduce healthcare costs.
These opportunities may create a significant market opportunity for example, the prevalence of atopic dermatitis and the U S is reported to be approximately 12% and children and 7% and adults with approximately $6 6 million patients having moderate to severe disease, making them candidates for biologic therapy, we've recently initiated.
The clinical study to identify relevant genomic markers in atopic dermatitis and may predict response to therapies.
I will now close by discussing our recent financing activities, which have been very successful and will allow us to capitalize on all of the opportunities I just discussed and January 2021, we completed a public follow on offering of our common stock and generated $144 million and gross proceeds this offering was supported.
And by existing investors and brought in new high quality health care focused investors. In addition, we received approximately $20 million and gross proceeds from our ATM generating aggregate equity financing gross proceeds of approximately $164 million lastly, a significant portion of our outstanding public.
The warrants have been exercised which has yielded an additional $70 million and proceeds of.
Our cash balance at the end of February of 2021 was approximately $260 million.
Now I'd like to turn the call over to Kevin to go over our financial results.
Thanks, John and total revenues for Q4 of 2020 of increased 33% to $2 1 million compared to $1 6 million for the same for some of the 2019.
Total revenues for full year, 2020 increased 75% to $5 9 million compared to $3 4 million for 2019.
Assay revenue for the fourth quarter of 2020 increased 214% to $1 6 million compared to <unk> $5 million of the same period of 2019.
Due to higher billable sample volumes and revenue recognition of Medicare samples related to the final local local coverage determination that went effective in February 2020.
Assay revenue for full year of 2020 increased 202% the $4 2 million compared to $1 4 million for 2019.
Our potential assay revenue that could be recognized from having broader payer coverage is meaningfully higher than the actual reported revenue as we continue to monetize our billable sample volumes.
Billable samples for the quarter were approximately 8300 compared to approximately 4900 for the fourth quarter of 2019 for 69% increase and compared to approximately 6700, and the third quarter of 2020 or 24% sequential increase we.
We continue to see headwinds due to the pandemic and may see more fluctuations for our growth trajectory continued during the fourth quarter of 2020.
Billable samples for full year 2020 of increased 75% to approximately 24000 compared to approximately 13700 for 2019.
We continue to make progress with increasing awareness of the Pls and the Medicare population Medicare samples represented about 18% of our billable samples and Q4 of 2020 compared to approximately 14% and the same period of the prior year and 16% and Q3 of 2020 the.
The Medicare proportion grew about 1% per quarter during 2020 with an acceleration to of two percentage point increase during the fourth quarter.
We continue to increase clinician and patient education and awareness of the Pls is covered by Medicare as a reminder, approximately half of surgical biopsy for form for melanoma, each year and the U S. R and the Medicare population. So additional opportunity remains for us to monetize our sample volumes. However, we believe the growth and our Medicare proportion could continue to be impacted by Covid.
Since the Medicare patients are less likely to visit the dermatologist during the pandemic.
And with approximately 1700 unique order and clinicians during 2020, we penetrated 34% of our initial target market of approximately 5000, dermatology clinicians who account for a high concentration of the total annual surgical procedures. The diagnosis of melanoma and we are penetrated about 13% of our current overall target market.
Of approximately 13000 dermatology clinicians.
We had approximately 1040 unique ordering clinicians and Q4 of 2020 compared to approximately 950, and Q3 and 620 and Q2 and 900 and Q1 of 2020.
We continue to both increase the number of unique water and clinicians and increase the average number of tests ordered by each clinician each months, even though new ordering clinician and additions are heavily impacted by COVID-19 sales call volumes and the ramp trajectory for our new sales reps have both been affected by the pandemic due to reduced and office access to clinicians we estimate sales calls.
<unk>, depending on region are only about 20% to 40% of pre pandemic levels.
Our average quarterly utilization or average number of tests ordered per unique order and clinician continuing to increase and was 8.0 billable samples and Q4 of 2020 compared to 7.0 in Q3, five two and Q2 and $6 five and Q1 of 2020.
We continued to achieve record or near record highs during Q4, and key metrics, including billable samples, new order and clinicians average monthly utilization and number of ordering clinicians who order of 10 or more tests per month.
We believe as new ordering clinicians continue to understand our pls provides greater accuracy and minimize the patient discomfort scarring and risk of infection, along with efficiency for their practice they will increase utilization.
Contract revenue decreased 49% of <unk> 6 million for the fourth quarter of 2020 and compared to $1 1 million for the same period of 2019 contract revenues continued to be highly variable and is dependent on the pharmaceutical customers and clinical trial progress patient enrollment success and other factors, which had been affected by the pandemic.
During the quarter, we signed agreements with our pharmaceutical partners worth up to approximately $1 1 million and contract revenue for work related to those partners clinical trials as of December 31, and 2020, we had a maximum of $4 $7 million and potential remaining contract revenue related to our current agreements.
Gross margin for Q4, 2020 was 19% compared to 24% for the same period of 2019. The decrease in gross margin was largely driven by higher contract revenue during Q4 of 2019.
<unk> gross margin for Q4 2020 was negative 9%.
Sales and marketing expense increased 110% to $5 1 million for the fourth quarter of 2020 compared to $2 4 million for the same period of 2019.
The increase was primarily due to additional sales head count and the additional marketing investment to increase awareness of our PMA.
Research and development expense increased 194% to $1 9 million for the fourth quarter of 2020 compared to <unk> 6 million for the same period of 2019 the.
The increase was primarily due to higher compensation costs related to expanding the R&D team increased clinical trial cost and increased spend on laboratory supply and support new product development.
General and administrative expense increased 17% to $2 8 million for the fourth quarter of 2020 and compared to $2 4 million for the same period of 2019. The increase was primarily due to higher payroll related costs and higher stock based compensation offset by reduced legal costs.
Net loss for the fourth quarter of 2020 was $9 4 million, which included $1 4 million of noncash stock based compensation compared to a net loss of $5 1 million for the same period of 2019, which included <unk> 1 million of noncash stock based compensation.
At the end of the fourth quarter, our cash cash equivalents and marketable securities totaled $63 8 million.
Here in Q1 of 2021, we're confident that we'll continue to make progress with adoption and grow our sample volume over the fourth quarter of 2020. Despite some unique challenges this quarter, including the peak of the Covid pandemic and early July and the polar vortex of weather event in February that shutdown and much of the country. We are seeing continued growth and utilization of the PMA and the first two months of.
For the year.
We have recently initiated billing under a new payer contracts and as typical there had been some startup billing challenges related to claims and prior authorization processes. We are also working with Medicare to resolve a recently identified claims adjudication programming issue, which resulted in a reduced number of paid claims by Medicare Thus, while we expect revenue to grow.
It is somewhat challenging for us the projected growth at this time.
We estimate the Q1 2021 assay revenue will be between one six and $1 9 million we.
And we're not providing formal full year of 2021 revenue guidance due to the ongoing COVID-19 uncertainties and because of Covid and initially hit right at the beginning of our formal PMA launch with the late our sales force expansion, which affects the sales ramp period, and we're still working to get to the target sizing of the sales force to enable the proper deployment.
While the pandemic is still creating some headwinds we are optimistic about the declining case numbers and the vaccine rollout. We are pleased with the progress we've made and the current environment and believe we are well positioned and capitalized to execute on our near term and long term opportunities now I'll turn the call back to the operator for questions.
At this time, if you would like to ask the question. Please press Star then the number one on your telephone keypad again, if you have any question simply press star one on your telephone keypad.
Okay.
Your first question comes from the line of Brian Weinstein from William Blair. Your line is now open.
Hey, guys. Thanks for taking the question and.
For the real solid overview on the other thing going on there.
And maybe we could just start with kind of and update on some of these private payer negotiations as well as kind of your interest and a little bit and the prepared remarks, but efforts to better target CMS patients there because when we annualize your Q4 volumes and apply and ESPN.
And I don't know where you can take 600 simple one of the Medicare rate you guys are already kind of bit of organization of 20 million. So just trying to better understand when we might start to see this revenue ramp starting to show up here for in your results from from the pricing going up.
And as you deal with private payers and and also anything you can talk about as far as better efforts to target CMS patients, where you have that higher reimbursement.
Great. Thank you Bryan and I'm glad that you recognize that R. R.
Potential revenue is much higher based on our sample volume and will grow significantly as we increase the ASP.
It's hard for us to know exactly when payers will provide coverage since we don't really control. The process. We know historically the achieving about 80% coverage takes two to three years from your Medicare coverage.
We did have a delay and RF and RF for due to the pandemic because it literally hit the pandemic literally hit the month that we got our Medicare.
Coverage policy that went into effect, but we are seeing that the recent activity is picking up and we think we're back on track with the more typical timeline.
I would say that we are engaged with almost all major payers and they are critically reviewing our data package and this is a dramatic improvement from 12 to 24 months ago, when we really couldnt, even get them to thoroughly evaluate the test we believe that they are now starting to understand the problems with the current pathway, which they are not really aware of.
And of.
And so there's an education process there.
They do not seem to challenge the credibility of the data we've developed and I think the NCC and guidelines help that also.
And we do have 21 publications and thousands of patients studied and I think this economic impact study is going to also carry a lot of water with the the payers so and.
In general this constant pressure campaign, we're applying I think.
And I talked about and the opening remarks, I think is going to lead the broad payer access and will ultimately increase our ISP to monetize at significant sample volume.
As far as the Medicare goes.
We do our consumer campaign and digital cameras and can't be is actually targeted at the Medicare population and so we're trying to educate them and make them aware I think our biggest challenge.
Having them feel free to go into the office during the pandemic.
We'd like to see higher Medicare proportion and Havent match more closely with what the the payer mix is for biopsies for melanoma, which would be half and so we think it's an opportunity to grow that that will also help accelerate that asps and.
And we're doing everything to raise awareness among the the Medicare population and drive the utilization there.
Great. Thanks for answering that and then we noticed that there were some changes.
So some of them close for the abused.
The starting January 1st and you talk about the.
Those changes and.
The EMEA.
And are made that impact sort of the economics of start thinking about.
Jeremy I'm thinking about bringing this product and are utilizing more of them.
Sure.
There is always there is some concern about about.
We're taking biopsy revenue away from the dermatologist.
I would first start by saying that we're really not trying to position the product to compete directly with the biopsy practice and I discussed that in my opening comments, but I think it's important to kind of calibrate on the reimbursement dollars Interstate here, because we're really not talking about thousands of dollars of hundreds of dollars, but really tens of dollars.
The average payment for the most common biopsy procedure across Medicare and commercial Payors.
He is about $85 for the first biopsy sample the payment is reduced by about half for each subsequent biopsy to maybe approximately $40 $45. So and a typical use case with our product where the dermatologist likely surgically biopsies. The most a typical mall and then it's going to use our test on that.
Subsequent lesion the reimbursement differential the only about $40 and.
And you have to remember that that revenue potential revenue losses, offset by the fact that about 10% to 15% of our tests are going to come back positive and those lesions will undergo a full excision, which will offset that some of that revenue loss, maybe by a quarter two of third.
So I think what we hear from our high volume users. After they start adopting and the proud of is that my revenue and my biopsy revenue didn't change that much and if anything my overall billings are up because they do get some practice efficiencies when when the the PLE is deployed widely and their practice and so we just don't think and the long run.
And.
Debt.
And that the economic concerns are going to completely hindered adoption, we just don't think that the.
And the notion of foregoing dramatically better care of missing of melanoma is worth really what amounts to a couple of movie ticket and so.
We feel like we can overcome that and and still be successful and the adoption of the product.
Got it so the the coding changes really don't change anything on how you view it and I just wanted to make sure of that was clear.
And I don't think so.
I'm not going to.
It's a concern of the doctors, but we have a way to address that concern and I think it's working.
And then the last one from me is around the primary care.
All of addressing it a little bit more head on now than you had before.
The program to identify the appropriate clinicians here based off of the criteria that you laid out.
Can you talk about.
How impactful this can be up for you and the resources that you're putting to do this I think you mentioned that you were going to potentially add some some reps here and what not can you just be a little bit more specific about how how big primary care theoretically could be for you guys. How you would go about attacking it and the resources that youre going to need I mean, you mentioned cologuard, obviously, youre not going to be spending the cologuard kind of.
And here to kind of do anything so can you just give us some idea about how important primary carriers.
We think it's becoming a more important part for the business and this has really grown organically because over the last year. We've seen a lot of interest from integrated primary care networks, and what we're doing and these net worth sort of exist to avoid referrals to specialists and dermatology referrals are a clearer.
Pain point for these integrated primary care and networks.
And so they've taken and interest and as I mentioned, we're working with a number of them to commence and pilots.
I think that its nice for us because these are aggregated groups of of physicians primary care physicians. So we can get after that without having to make.
Tens of thousands of direct calls.
And so we think there's a meaningful opportunity and where we are.
Basically could shift some of the assessment of pigment and malls from the dermatologist and to that primary care group.
And I do also think that there is going to be and opportunities for do some direct calls on primary care and I think we're going to be able to figure out where those primary care doctors are that that meet that profile I discussed.
We do have some primary care users that the love the product and.
And and.
And we think we can find those those those primary care doctors and and then target them effectively with the with a more modest sales direct sales effort. So we're working on that and we'll have more on those plans.
The after the second quarter here.
But we do want to start laying the ground the foundation and primary care because of our other product the carcinoma for non melanoma skin cancer. We've done some market research there and those doctors are very interested and this product and tell us they see that cancer. All day long, it's extremely challenging for them to refer to dermatologists, they often don't follow through.
They want a way to assess those lesions either the rule them out so they don't have to make the refer or to urge the patient to get to the dermatologist to get and taken care of so when theres, a big opportunity there and and so we do want to lay some of that foundation and primary care.
Great. Thanks, guys.
Your next question comes from the line of.
Kevin <unk> from Oppenheimer. Your line is total.
And.
Hey, guys. Thanks for taking my questions and.
And I want to add my thanks for all of the detail on this call.
And so.
Thanks for the disclosure with regard to average number of orders per Doc per month up to around eight and the quarter. If you look at some of your.
In terms of a little more experience with <unk>.
Do you have of perspective as to where that kind of ordering our tests per model basis may begin to plateau out for what the reasonable near term.
A point of stabilization on that day.
Sure.
Yes, so we know that when you take an average of all surgical biopsy procedures across all of dermatologist, It's about 60 to 70 per months and.
And so we are already seeing certain.
Users do north of 20 per month, so we really measure debt three buckets. The users that have one or two a month, we call. The <unk> three to nine months of the middle Tier and then 10 or more of a month or the or the high volume users and so we're seeing great trends and the progression through those those.
Cohorts until again once they hit that Aha.
<unk> to where the performance of the test really kicks in and they figure out how to integrate it into their <unk>.
Work streams, they are using it more and theyre getting practice efficiency and being able to see more patients. So we think that we can penetrate a decent amount the exact number it's hard to say, but.
If we only penetrated say 10 or 20% of that 60 to 70.
Biopsies per month kind of volume that's still a very healthy business for us. We think we can certainly do more than 10%, 20%, but that just gives an example for our opportunity here and given how large the market is.
Okay great.
For context, and then as we think about the commercial and infrastructure build out.
And 2020, I think we've talked about previously there were a number of key geographic markets and states where are you focused share resources as we think about expansion of 'twenty, one and hopefully of lifting of some of the COVID-19 restrictions.
Can you.
Walk us through how to think about other either key geographic markets are I guess building on Brian's question with regards to.
The primary care.
Should we think about some of the the ads here of being.
Segregated the primary care versus the terms or is it sort of a geographic.
The geographic driven and build out where youll have reps calling on.
Both the arms out and primary care and certain markets.
Yeah. So Todd is going through some additional evaluations Todd our chief commercial officer to to assess not only that primary care opportunity, but where we're going to do some additions to our professional and dermatology channel and it's going to be a combination of both the opening up some new territories.
And as well as additional reps and existing territories likely where we can capture more opportunity where theres a dense concentration and.
And we're going through that process now and we'll have more on that at the second quarter I would expect debt on the the primary care targeting we may have some direct sales adds that we want to do the target those folks, but we also think that some of our our current sales reps are going to be able to tap into those opportunities.
As they are doing now when they present themselves. So it probably will be of blend.
But we are really and the planning phases, we need to understand where those doctors are and then what deployment against those primary care doctors looks like for.
And for that steady for the integrated primary care networks, that's a different type of sale of its more of an institutional type sale. It takes some time and there is a pilot and a lot of integration with.
The electronic medical records and things like that so we're at the slightly different team that is going to focus on that integrated primary care and network effort and sales cycle.
Great and then if I can say kind of one last question and I appreciate the the comments with regard to the impact of.
Certain of adjudication of processes on Medicare and in Q1.
At this point do you should.
Should we think about that dynamic is largely playing out and the first quarter or should we think about that as the.
Is the dynamic that May continue beyond Q1 and go through true.
Later into 2021.
Yes, it's hard to say, it's probably not going to be fully resolved and Q1.
And to get through various changes and updates and fixing things through through Medicare and all the different service providers that they rely upon takes time and they usually have some kind of like quarterly cycles and things like that so I don't expect of the fully flushed out in Q1.
Great. Thanks for taking my questions.
Your next question comes from the line of Alex Nowak from Craig Hallum Capital. Your line is now open.
For one maybe to start on the outlook for 2021.
The previously mentioned the run rate of 30 for 35000 tests exiting 2020, just roughly where do you think this run rate could go as you and 2021, just given what you know what you can control with the larger sales force for marketing spend.
So we're not giving formal guidance for 2021, just yet but.
As clearly are our testing volume new physician adds correlates directly with the with the pandemic and the cycles of new case loads of the related to Covid.
As the things way and we're seeing nice uptick in our sample volumes and we were able to grow despite those headwinds in 2020, we're excited to see how much better we can grow as this pandemic subsides and I think we're seeing that and.
In this first quarter that were were seeing upticks as the as the pandemic slows down and so we're excited that.
That run rate, we talked about at the end of 2020 based on December numbers is doable and I think.
We're going to grow beyond that based on what we're seeing currently today.
That's great and as you wait for the private Payors update their medical policies as the NCC and guideline inclusion and making it easier to appeal and of the incoming denials and and just thinking specifically about February are you starting to see the number of reimbursed test tick a little bit higher even though payers or have yet to officially issue cover.
Yeah.
So youre, absolutely right and we think that the Mtc and guidelines will help us with appealing claims that are denied.
But the claims appeal process Ism is a month long cycle, let's think of two quarter cycle to get through the appeal claims. So we can't we don't know just yet what the impact of that is going to be in terms of ours and our success.
And the getting denials appealed, but it's hard I think for of payer to justify with the typical <unk>.
Reason for denials that its experimental and investigational right. That's a very common way the payers will deny and claim I think it's hard for them to justify that denial when you've got and NCC and guideline recommendation. So I do think we're going to be much more successful and the appeal front. We just brought a person and a very senior person who's an expert at managing the.
Peel process and she is going to really ramp that up.
And the leverage that NCC and guideline.
Recommendation.
Alright, Thats, great and then just last question should we see any readouts or data releases from your pharma partners. This year and would you expect a similar sort of pharma activity just given what you see and the pipeline starting the year off as 2021 or could it be up slightly as COVID-19 started to abate and given the bigger backlog.
The we do have a lot of activity with the pharma partners and there are a lot of folks that were.
Putting.
Rfps out for two to provide the services to support their trials, Mike how is the leader and the inflammatory diseases and that's where most of our farm of partnerships exist. So he's doing a lot to help us out there.
I would say I don't think that the the enrollment and clinical trials is really back to pre COVID-19 levels and that's what's going to dictate when those readouts occur.
And the.
The pharma partners or not really.
Clearer to us are open to us about what their timelines are exactly so it's hard for us to say, but we do think there's an opportunity and even grow that opportunity with our pharma partnerships and we think debt like everything else, they're going to get better as the as the pandemic subsides and I'll just add debt. We are devoting more internal resources and addition of Mike how and some other team members that will be looking at.
The build the team to go proactively.
At some of these foreign partners, whereas historically, we've been kind of opportunistic as they've come to us for our technology of the fact that it's so unique so we do think it will grow but it's hard to say exactly how quickly and how much.
That's great. Thank you.
Your next question comes from the line of Thomas Flaten from Lake Street Capital. Your line is now open.
Great. Thanks, Thanks, guys for taking the questions.
And you Might've mentioned and as John in your prepared comments and I didn't catch. It did you did you mentioned when the Optum project was it going to be completed.
Yes, I think I'm optimistic that we'll have that done by the end of the first quarter.
Thereabout, so its progressing nicely and so I'm optimistic we'll have the done here around the end of the first quarter.
And as that data you think Youll your press release to us for will you embargo and effectively for publication somewhere.
I think we will release the topline data from that.
And we will release and in a way that it doesn't impair our ability to publish the ends of the data either so.
My plan is that we would put out some release on what that data looks like.
And then just a couple of on the DTC efforts. If I may how would you guys think about expanding the what's the.
And what seems to be very successful campaign.
Just and I was just in terms of dollars, but in terms of.
Geo locating it around are you thinking about where are we seeing the the fewest COVID-19 cases are you are you trying to use the search or find the Doc to help to help govern that and I'm. Just curious how you guys strategically think about.
Rolling that out over the course of the year.
No you're exactly right right now it is definitely a targeted area and now were.
We invest more heavily where we know there is some access to physician doctors and and Todd.
Tell you that the parking lot during the Covid and has become the new waiting room, and so we can actually geo locate some of our ads when the patients are in there and the.
And the parking lot waiting to see their dermatologist and we know it works because we've had dermatologists, calling and saying Hey, all my patients are coming in and asking about your test.
So it is effective and right now we do targeted and places where we think it can be affected because of the doctor's offices are open and we will continue to expand that effort because it is very successful the metrics of three or four times higher than typical medical technology.
The products that means we have a fairly low cost too.
Get the action from the digital campaign, and so we'll begin to expand even more as the as the country opens up more and the pandemic begins to wane.
And then just one one more thing on that so as you guys return of find the Doc result, I'm, assuming you're capturing that data have you been able to find even loose correlations between where you have find the docs and search results and where you see testing volume have you guys gone back and tried to do that math.
We are looking at debt, we are getting better at debt, it's hard to follow people down the final beyond the initial search for the Doctor, but we are starting to get some of those metrics and and we're building out more.
And CRM capabilities, it will allow us to capture more of that data. We do know we have looked at.
We have looked at and we know that doctors that participated in that find the doctor search feature they do grow more rapidly than the doctors that don't if you compare the sample volumes for example from a doctor. This non the find the Doctor page and one that is we see more sample volume growth through there. So we do think it is paying off and we'll continue to invest and that and we'll we're going to.
Get better at targeting.
What actually turns into a true order test at some point, that's the ultimate where we want to go right. How can we find the doctor test searches lead to an actual ordered TLA, we're not quite there yet, but that's where we went ahead.
Excellent thanks for taking the questions I appreciate it.
Again, if you have any question simply press star and the number one on your telephone keypad to ask the question. Please press star one on your telephone keypad.
Your next question comes from the line of Sandy Draper from true of Securities. Your line is now open.
Good afternoon.
Afternoon, and thanks for taking my questions.
A lot of them the already been asked and answered that.
And then maybe John just.
I think I know the answer and just want to confirm so it sounds like the the private payer discussions are your view of it really is the function of time, there is no more data or anything else. They need from you guys. He is just going through that time consuming process.
Of the meetings and the forms and everything else I just wanted to confirm there is not like some other steady results or something else they need to see.
And in our and our discussions of late with Payors and there hasnt been an issue, where we need to more evidenced development basically.
And now we do they do want to see obviously the results. The final published results of that trust debt. It because we released that topline data, but in general I would say the emphasis is not on do we have the evidence to support and it's more how do we integrate this and what's the right pathway, how should we write a coverage policy things like that.
And more taking of critical review and it is the time thing they do they do need to understand the problems with the current pathway and thats, taking some time they want to confirm that there really is a cost benefit associated with what we're doing the and that's what the optum insight steady.
We will do.
So.
We think that.
We think that will continue to make progress and I like what I'm hearing from the payers is very different and what we heard before they wouldn't even really entertain it because we didn't have enough volume. We didn't have enough data that discussion has changed now will generate and the volume for generating the data and I wouldn't underestimate the ability of appeals for us to drive action by payers as we.
Ramp up those appeals now and particularly around the earlier discussion about being able to counter that eni denial with the NCC and guidelines I think that's going to put more pain on the payers, which is going to.
Make them really want to take more action to give us some coverage.
Okay, Great. That's really helpful commentary and then my follow up on the sales force out of I think I heard you say that.
Due to Covid and some other things you sort of slowed down the hiring in terms of expanding the sales force I wasn't clear whether you've already started to re engage that and also I didn't know how much you had already sort of identified people maybe had initial discussions and do you think you can just reengage and so ramp it quickly or do you feel like youre.
Sort of starting back over and.
Terms of how youre thinking about and the timing of building out sales force. Thanks.
So we haven't quite started to add the additional head count the Todd that I mentioned for the direct professional channel and Todd is doing some work to figure out what the best strategy is there.
I don't think we're going to have a problem retaining good sales people, we have a lot of tremendous buzz around the company and enthusiasm by the dermatology and the professional and dermatology world.
And with what we're doing so I think we'll be able to find those reps as soon as we decide exactly where we want and place them I think we'll be able to find those representatives very quickly and there are good candidates and Todd has a tremendous pipeline of candidates and he can approach and go back to so I don't suspect there's going to be of real time element when we decided to start adding those.
Those additional head counts.
Okay. Thanks for taking my questions I appreciate it okay, great. Thank you.
Ladies and gentlemen. This concludes today's conference call. You may now disconnect. Thank you for your participation.
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