Q4 2020 OncoCyte Corp Earnings Call
Greetings and welcome to the Arcos <unk> Corporation fourth quarter and full year 2020 earnings conference call.
At this time all participants are in a listen only mode.
A brief question and answer session will follow the formal presentation.
If anyone should require operator assistance during the conference. Please.
Press Star Zero on your telephone keypad.
As a reminder, this conference is being recorded.
It is now my pleasure to introduce your host Bob yet. Thank you Sir you may begin.
Great. Thank you Victor.
And thank you everyone for joining us for today's conference call. It just caused by its fourth quarter and full year 2020 financial results.
And recent operating highlights.
If you've not seen today's financial results press release, please visit the company's website page on the Investor section.
Before turning the call over to Ronnie Andrews, <unk>, President and Chief Executive Officer, I would like to remind you that during this conference call. The company will make projections and forward looking statements regarding future events and.
Any statements that are not historical facts are forward looking statements.
We encourage you to review the company's SEC filings without limitation, the Companys forms 10-K, and 10, Qs which identify.
Risk factors that may cause actual results or events to differ materially from those described in these forward looking statements.
These factors may include without limitation risks inherent in development and our commercialization of potential diagnostic tests uncertainty in the results of clinical trials or regulatory per role.
Happy Ivanka say third party blood.
Simple analytic system to provide consistent and precise analytic results on a commercial scale the need to obtain third party reimbursement for patients use of any diagnostic test the company commercialize this from need inability to obtain future capital and maintenance of IP rights and.
Needs associated with the COVID-19, pandemic and its possible effects on our operations.
Therefore, actual results and results may differ materially from what is expressed or implied by these forward looking statements.
I'm going to say it expressly disclaims any intent or obligation to update these forward looking statements.
As otherwise may be required under applicable law with that I'd like now turn the call over to the CEO Ronnie Andrews Ronnie.
Hey, Thanks, Bob and welcome everyone to our conference call to discuss our fourth quarter and full year 2020 financial results and of course, our operating highlights joining me today are Mitch Levine, our Chief Financial Officer, Dr. Doug Ross, Our Chief Science Officer, and partner Sundog, <unk>, our chief commercial officer, and as always we'll be available.
And for your questions.
Over the past year, we've made great strides in advancing our mission to create a one stop lab a comprehensive molecular diagnostic operating that answer critical unanswered questions from physicians and patients for the management of solid tumors, we transformed from the ARCUS side of 18 months ago, a single asset development stage company to a commercial.
Stage revenue generating business advancing test that optimize cancer treatment decisions to improve patient outcomes and reduce the overall cost of care.
We accomplished a great deal in the last year strategically identifying and acquiring a portfolio of compelling test integrating these assets completing clinical development and ultimately launching two proprietary tests for critical decisions that previously lacked precision diagnostics.
Through these efforts we've emerge as leaders in early stage lung cancer management efficiently growing revenues with a concentrated sales effort in key markets bolstered by virtual programs that retailed care providers across the U S. Despite the global pandemic.
And there's more to come in 2020, one with important content per treatment response and for recurrence monitoring.
So together this means we're well on our way to becoming a one stop shop R&R World a one stop lab for oncologists and surgeons treating lung cancer patients, while I'll spend most of the time talking about our progress across each of our tests I'd like to dive a little deeper into our plan to become a single source of proprietary biomarker testing.
To inform patient treatment and monitor response to therapy as well as per Bob related standard of care oncology testing to drive incremental revenue at very attractive margins for those of you newer to our story, our four current products and services that make up our growth engines are first the tumor Rx the first and only commercially.
You may all predictive test for informing chemotherapy decisions in early stage lung cancer.
And is now reimbursed by Medicare and experiencing solid quarter over quarter volume and revenue growth. Our second test is determined higher.
Our proprietary test for predicting response and identifying incremental responders to first generation of immune checkpoint inhibitor drugs also known as IC is determined is currently available for use in clinical research in pharma trials and were on track for our clinical launch in Q4 of 'twenty 'twenty. One third we now have there.
Our share of C&I monitor test for immunotherapy response monitoring, which we plan to soon rebrand as determine C&I. This recent product addition represents our first move into the massive opportunity that is emerging merging to monitor cancer patients for treatment efficacy in real time.
Finally, our pharma services operating from a cap accredited CLIA lab in Nashville provide a comprehensive menu of test development and validation services for pharma and for diagnostic companies before we share the highlights from each growth engine, let me take a moment to explain why being a one stop shop. So important so that determined.
Rx the term of I O and eventually determine C&I are all proprietary test that will only be offered by orca sites. We're in a very strong position to become the preferred lab for clinicians who need answers to the important trading decisions that only oncotype can answer.
Once the hospitals on boarded and Oncotype customer.
As an anchor customer we can then create a same store sale opportunity and offer more traditional tests like the target therapy panel will ultimately brand as determined T X.
For some context physicians treating patients diagnosed with cancer need rapid biomarker testing to inform treatment selection, such as targeted therapy immune therapy and chemotherapy by combining a differentiated tests like the term of Io to inform the use of immune therapy with standard of care genomic testing per things like Egfr.
Ross one we will be able to offer oncologists best in class testing and deliver comprehensive information to make a treatment decision. This one stop shop strategy offers practical advantages. One currently the testing needs of physicians managing cancer are usually only able to be met by several special you up.
<unk>. What this means is that provider much split the sample and send it to several different labs, not only gives us consume a large amount of sparse patient biopsy sample, but it can take up to three weeks to deliver critical results of doctors need to drive important treatment decisions by consolidating all of the required test.
We facilitate more judicious use of precious precious patient biopsy samples and also expedite delivery a result to the ordering physician without within only 10 days a timeframe that our customer base continues to highlight as a target for optimizing therapy decisions.
So now diving into our highlights for the term of Rx the first and only predictive test for the identification of patients with stage one to two way non squamous cancer, who are at high risk for recurrence following surgery.
It's been a big year for Rx, we launched the test in February as an early access program was six reps that have made continue progress since.
We announced the final Medicare coverage determination, which secured national Medicare payment or determine Rx effective August 2020. This is significant as Medicare patients account for approximately 70% of eligible patients nationwide on top of that we received centers for Medicare and Medicare services Medicaid services.
Our CMS high value pricing.
In addition to Medicare coverage, we recently announced an agreement with multi plan network to expand patient access to determine Rx to approximately 60 million more covered lives at a negotiated price in line with our CMS pricing. Many of these patients have insurance with companies like United Healthcare multi plans roll.
Much like lab benefit managers and pharma is to negotiate a payment for diagnostic and other services with companies like Orca site. This represents our first major payor contract outside of Medicare We've.
We've now reached over 3000 health professionals to date and by year end, we by year end, we had on boarded 87 hospitals and have broad adoption at very prestigious national comprehensive cancer centers as well as National Cancer Institute Hospital sites.
Most recently, we added Virginia, Kansas cancer specialists, which is part of the U S. Oncology network a network of 900 positions treating over 1 million patients annually, Virginia cancer specialist includes Dr. Alex spear, a renowned medical oncologists and Dr. Sandy Condor thoracic surgeon to our growing list.
Of top position users.
We continue to grow test revenue and volume quarter over quarter. Despite a well established seasonal pattern of fewer oncology surgeries in the fourth quarter each year. Moreover, this seasonality. This year was exaggerated by the pandemic as certain oncologist chose to defer inpatient lung cancer surgeries that we need to trigger the use to determine Rx.
Despite all those headwinds, though our commercial team still delivered an impressive 30%, 36% quarter over quarter sample volume and a 58% quarter over quarter revenue growth, which reflects the carryover from claims we had in Q3.
We also recently completed the expansion of our sales team to a total of 10, which now gives us coverage of over 75 per cent of the surgeons performing early stage lung cancer surgeries. So when you add that to our improving macro environment and combine it with our continued Q4 momentum you can understand why we have confidence in our ability to achieve our 22.
One annual goals for samples and revenue for a term of Rx.
Also in December we were excited to announce our strategic agreement with bombing burning rock to distribute determined Rx in China.
Our agreement with burning rock biotech a $3 5 billion dollar market cap NASDAQ listed company aligns Arco site with one of China's fastest growing molecular labs focused on cancer therapy selection and provides entry into the world's largest early stage lung cancer market that was approximately six times the size of the U S market do.
Over 250000, surgical resections for lung cancer each year in short our progress with Rx over a short period of time has been tremendous.
Now moving along the continuum care less transition to determine I O. Our proprietary gene expression profile tests that we believe will propel us to a leadership position in the approximately 3 billion dollar immune therapy decision market.
Our cash is the only precision diagnostic test on the market today that evaluates the entire immune microenvironment and biopsies are surgical specimens from cancer patients in order to identify patients likely to respond to immune checkpoint inhibitors are test delivers a comprehensive picture of the immune microenvironment by <unk>.
And the so called hot signal derived from inflammatory sales in the tumor and cold signal coming from the womb response, along with the use of a proprietary algorithm that scores each patient result.
In addition to determine <unk> being an excellent predictor of response to checkpoint inhibitors. We also believe that the cold signal may identify key biologic signals targeted by second generation targeted therapeutics that are now in clinical trials as a result, the trauma Io may be an ideal biomarker to inform therapeutics.
Strategies that combine checkpoint inhibitors with these emerging next generation therapies.
The opportunity with determine Io is significant with more than 750000 patients eligible annually for immune therapy in the U S alone depending on reimbursement levels that translates to a $2 $5 billion to $3 billion market opportunity. In addition worldwide. There are currently nearly 5000 on ongoing clinical trials.
Weighting these drugs.
That represents another large opportunities to help the opportunity to help pharma companies identify patients for their trials and of course. This market is expected to continue to grow substantially as the reach of immunotherapy expands to new indications in earlier stages of cancer.
The term of Io clinical utility stems from the following one the identification of additional patients who may respond to treatment yet are missed by existing biomarkers like PD L. One two we enable improved treatment options such as second generation therapies for the estimated 60% to 85.
5% of patients who currently are not helped by immunotherapy drugs and three we inform the use of immune checkpoint inhibitors in combination with traditional cytotoxic chemotherapy to enhance response rates.
We have successfully completed our first announced immune therapy biomarker collaboration for the immune therapy, a tease out as it's commonly called call and we will be presenting these results in an upcoming scientific meetings.
This collaboration was with bond ASEAN, Michelangelo, a leading nonprofit cancer research organization headquartered in Milan, Italy. This work is for an investigator sponsored trial that evaluated the term Io as a biomarker of neo adjuvant checkpoint inhibitor response in triple negative breast cancer.
This is a very meaningful accomplishment given PDL, one IC fail just sufficiently identify responders in this setting.
The term of Io as.
As successful as if determine iowa's this is successful as a predictive biomarker for this drug it would expand a tease those indications from late stage treatment to neo adjuvant therapy, which will be a significant milestone for patients with this horrible disease as well as for determine iOS commercial development.
Over the coming months will present data at major scientific meetings and in peer reviewed via peer reviewed purple obligations that we anticipate will demonstrate the potential of determine io across a very broad range of tumor types, starting with well established clinical data across three different cancers lung breast and now our recently announced.
Bladder cancer data, we remain confident that determine io will allow us to address a fundamental challenge in immune therapy, which is identifying the right patients for treatment, but that's the only part of the immune therapy story and that's worth their share of C&I moderate clinical assay comes in with our recently announced intent to acquire <unk>.
<unk> biomedical, which by the way is on track to close within the next 30 days, we now have proprietary access to that their share of C&I monitor test a patented blood based assay that eases copper not copy number of instability or as we call. It C&I for immune therapy response monitoring.
So now Arco site is well positioned to enter the rapidly growing blood based therapy response monitoring market.
Our plan is to rebrand the test in the term of C&I and launches a pharma service in Q2 from our new molecular center of excellence in Germany for the European market and after tech transfer to our U S facilities, we plan to launch the test for farmers use in domestic immune therapy clinical trials in Q4 of 2021.
C&I differs from other test and that it is blood only our tumor naive meaning it does not require tumor tissue are expensive genomics scale sequencing prior to blood monitoring to accurately interpret tumor resistance and progression during treatment by.
By focusing on a test that can deliver results independent of tumor tissue genotype, we can deliver progression data for the tissue and form technologies, even have their custom assay ready for the first baseline test as well we can perform monitoring of cases, where tissue is inadequate for testing.
Tissue is extremely sparse in lung cancer, where a majority of the biopsies or bind needle aspirates rending rendering very little tissue for analysis.
Our new test will deliver important progression data with no tissue use by the second therapy treatment cycle are within six weeks long before imaging are competing tissue important technologies can deliver their results. As a reminder, our response monitoring will play an important role in patient management going forward, allowing physicians to.
Identify tumor that's becoming resistant to treatment early in the treatment cycle that insight can drive a change in treatment of second generation therapy or in combination with chemotherapy before disease progression improving the odds of long term survival and reducing the overall cost of care.
From a strategic perspective that there are share CNA C&I assay monitor not only helps us expand into the projected 3 billion and growing immune therapy response monitoring market. It also allows us ownership of IP that could help us establish a foundation a foundation to build additional applications for the over 6 billion dollar recurrent small.
Oratory market, a repeat testing opportunity to tell a patient that a new tumor may be forming long before it can be identified and imaging. These additions further solidify our position as a one stop yi for both immune therapy response prediction and now for monitoring bathroom offering both the term of Io and therapy.
Monitoring test Oncotype will be the first and only company to provide a comprehensive solution that addresses two of the biggest outstanding challenges in the field, knowing which patients to treat with immune therapy as stand alone or in combination.
As well as in forming with our treatment is effective through cost effective monitoring needless to say, we're very excited about the chronic <unk> acquisition and look forward to integrating their world class team of experts in blood based monitoring test as well as gaining a lab in Germany to use as a beachhead for our commercial entry into the EU with a.
Full menu of products and finally.
Touching upon our boutique pharma services business, we've made great progress on this growing source of revenue per acre site with contracts now executed for 16 clients across both pharma and diagnostic industry heavy hitters, including some companies like bearing with Ingelheim, ESI pharmaceuticals per Mega Qiagen Plex bio.
And Ono pharmaceuticals, as well as others, we successfully engaged with these clients to provide services such as sequencing for pharmaceutical development through the validation and verification for clinical use we see this as just the beginning of a successful business model that aimed to form true partnerships to support support pharma drug development.
With discovery stage projects and clinical trial support all the way through regulatory and commercialization support of companion diagnostics and partnership with molecular diagnostics companies.
As I've mentioned before pharma services revenue can be somewhat lumpy given our ability to recognize revenue is directly tied to completing projects for pharma our diagnostic companies before we can invoice and get paid get paid this means in quarters like Q4, when we face the difficulties of the pandemic surge when many potential trial patients.
We're told to stay away from treatment centers, our partners access to patients to enroll trials, who subsequently would need our test to move forward is slow which delayed our ability to close out forecasted projects and bill for them. The good news, though is these trials continue and as the world gets vaccinated in the pandemic subsides, we do.
Expect our pharma services business to become more predictable importantly, though we enter 2021 with a solid pipeline of contracted projects and some important developments in Q4 that give us confidence in our ability to grow. This line of business. In Q4, we were audited by a top 20 pharma company and a top three genetic sequencing comes.
<unk> and passed with flying colors and are now engaging in development and developing statements of work with both to become a lab of choice for key development projects, which we expect will strengthen our rich pipeline of work ahead. Another important advantage Q1 initiation of a project that was scheduled to begin in Q4 for a top 20 pharma company.
<unk> utilizing our proprietary blood based sales cycle test for monitoring assistance in our pharma partners Phase III trial. This is the first major trial using this new test application, which was developed in house by our team in Nashville, specifically for this indication.
As mentioned in previous calls our pharma services lab is incredibly efficient and with our current committed projects. We're set to deliver gross margins that can drive positive cash contributions to our P&L over the course of 2021, just like the tumor Rx our pharma services business provides an immediate and growing revenue engine, which will support our operations.
As well as our strategic development of future task for our sales channel.
2020 was clearly a milestone year Priyanka site, we believe we've weighted incredibly strong foundation with a diversified portfolio of Derisked growth engines for immediate near term and for long term growth, while establishing ourselves as leaders in early stage lung cancer, we remain confident in our momentum and look forward to sharing new exciting data.
Myles stones throughout 'twenty, one before I turn the call over to Mitch for a review of our financials I want to thank our entire oncotype team for their continued dedication and hard work in an unprecedented environment to ensure we stay on track for each of our strategic strategic initiatives. We've made incredible progress. Thanks to this team who remain committed to our <unk>.
Golar advancing novel tests that we believe will be transformative for patients physicians partners and for payers now I'd like to turn the call over to Mitch to review the financials Mitch.
Before I begin the review of our financials I'm pleased to note that earlier this quarter, we substantially strengthened the company's balance sheet with two offerings and.
In January we completed a $25 million registered offering led by long term holder of PURA Vida investments without the use of an investment bank and without incurring placement fees.
In February due to strong investor demand, we successfully completed an underwritten public offering with many leading health care dedicated and generalist investors, which generated net proceeds of $37.5 million at a higher offer and price than the prior offering and included the full.
Exercise of the over allotment option.
Prior to these two offerings, we sold shares in January under our ATM program, which netted an additional $6 3 million.
In aggregate these offerings and sale of shares added approximately $69 million in cash net of expenses to our balance sheet.
In February we completed the acquisition of razor genomics and paid the remaining $10 million cash portion of the purchase price. So we now own 100% of razor.
As of December 31, 2020, we had cash cash equivalents and marketable securities of $7 8 million as compared to $22 4 million at December 31, 2019.
With the continued rollout of determine Rx and the pharma services business from our Nashville lab.
Our consolidated revenues for the fourth quarter and year ended December 31, 2020 were approximately $503000 and $1 $2 million respectively.
As a reminder, although we continue to see a quarter over quarter increase increase in testing orders for our determined Rx test. We currently recognize revenues on an accrual basis only for Medicare eligible tests, we will continue to recognize revenues from our commercial and other payers on a cash basis.
Until we have reimbursement contracts with those payers at which point, we will recognize all day terminal Rx revenues on an accrual basis.
Operating loss as reported for the fourth quarter of 2020 was $6 3 million a decrease of $1 3 million as compared to the fourth quarter of 2019.
Operating loss as adjusted for the fourth quarter of 2020 was $6 $2 million.
A decrease of $500000 as compared to the same period in 2019.
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 in understanding our ongoing operations.
Cost of revenues for the three months and year ended December 31, 2020 were approximately 600 $716001 9 million respectfully.
As I mentioned on our last quarterly call, we incur cost of revenues for all determined Rx tests ordered irrespective of revenues recognized.
Cost of revenues also includes testing services, we perform for our pharma customers.
It is important to note that as we ramp up our testing volumes, we expect to see an improvement in our gross margins in future quarters.
The turmoil Rx test.
Research and development expenses for fourth quarter were $1.8 million as compared to $2 3 million for the same period in 2019, a decrease of $500000.
General and administrative expenses for the fourth quarter of 2020 were $3 4 million as compared to $4 2 million for the same period in 2019.
A decrease of $800000.
Sales and marketing expenses for the fourth quarter of $2021 9 million as compared to $1.0 million for the same period in 2019, an increase of $900000.
This increase was primarily attributable to ramp up in sales and marketing activities, including key hires for our commercialization efforts of determine of Rx.
For the fourth quarter of 2020, we reported a net loss of $6 3 million or nine cents per share as compared to 8.0 million or 15 cents per share for the fourth quarter of 2019.
Cash used in operations was around $6 $2 million for the fourth quarter of 2020.
We expect our cash burn to increase modestly in future quarters as we continue to develop our diagnostic tests.
And drive for increased adoption of our determined Rx test and other tests, we made commercialized license or acquire.
Furthermore, the first quarter is generally our largest cash burn quarter due to annual merit and bonus payments.
In summary.
I'm very pleased that our board moved decisively to strengthen the company's balance sheet, which we believe will allow us to fund our organic growth that.
That includes driving long term growth of <unk>, which is enjoying good commercial uptake the term, Ohio initially as a test for research use in the development of C&I monitor in the large and growing blood based monitoring market.
<unk> monitor is our newest asset, which we soon expect to acquire as we complete the chronic merger C&I monitors Aro is only latest addition, danke sides menu of cancer test overtime. Our team will continue to seek to license and acquire complementary cancer diagnostics tests to <unk>.
Inform better patient treatment decisions.
That concludes my remarks concerning our financial highlights I'd like to turn the call back to Ronny operator, we are concluded with our prepared remarks, so if you'd like to open the call for questions. We're ready to take questions from from our team.
Our folks on the call.
Thank you.
We will now be conducting a question and answer session.
If you would like to ask a question. Please press star one on your telephone keypad a.
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You May also present star too if you'd like to remove your question from the queue.
One moment, please vote now poll for questions.
Our first question comes from Mike Matson with Needham <unk> Company. Please proceed with your question.
Hi, Thanks for taking my questions.
I guess I'll start with a few on does the term of Rx. So.
Can you talk about your plans to expand that sales force in 2021 outflow, if youre willing to give us any targets on that.
Sure I mean, our partners launch you can add color commentary, but right now high level. We have 10 that we had planned to expand to already hired.
As we bring out the term of Io and determine TX and potentially C&I, we will actually at that point in time evaluate our need to add further representation just given the importance of detailing not only thoracic surgeons, but now.
Larger cadre of medical oncologists. So the plan is to to hold tight for until probably third quarter, and then evaluate where we are in terms of the need to add more reps for the launch of I O.
Okay and then.
You got the multi plan coverage of the term of Rx.
Do you have what you need to continue to chip away and get additional commercial payer coverage there.
Hey, Roger.
Yeah partners on point for that so, let's let Padma gave you all the color accounts, so much energy around that but we want to be artful in how we do it so that we negotiate good prices, which we've been able to do so for a partner do you want to add some color commentary to that.
Yeah. So obviously, we're doing it two ways one is the exciting sort of payments that have to be clean with it but he has actually mobile strategy and then in addition to multiple and we have several conversations going with other networks that our value proposition and publication of these evidence are strong. So we are going to continue to chip away and we hope to get additional.
Contract since you had and of course once they are in MCC and guidelines. That's when we'll get you believe they get 90% of the payers to pay for the test send them in good shape at that point, but even between now and then we do have several additional patents have been engaged in discussions with in addition to multiply and does announcement should be coming out during the course of the year.
Yeah.
Okay. Thanks very helpful. And then just finally on.
Can you can you talk about the turnaround time, youre expecting what determines CNI and determined IMAX.
Yeah in terms of the actual patient turnaround time are you talking about getting the product to market.
Oh, sorry, I think that the patient turnaround time, so like once you do that.
Like how long does it take to get the results.
Yes, so it's interesting that today, our goal will be to deliver determine io tell the physician that the patients eligible for immune therapy. The patient will go on immune therapy and will immediately at that point in time draw blood for our initial baseline that it'll take us about seven days or less to turnaround that <unk>.
Test and then every other week or every third week dependent we havent established that time line, yet, but that will be part of our work we will do this quarter and into I'm sorry in the second quarter as we prepare for fourth quarter pharma launch and what we'll do is see how often we have to run it but our turnaround time for C&I.
I will be less than less than 10 days, we think somewhere around seven days amex as a whole different approach.
And the reason we split these two is that today, while we're big fans of EMR day, and we've been in this space a long time and we'd use DMR D for various applications. Dr. Raj can comment but these two questions is the is the therapy working and now you're basically seeing disease free survival and from the next month.
In years to come we're going to monitor to see if the patient has a potential for recurring tumor those are two different questions and using one test to answer those.
Is not adequate, especially when you think about Amex, we believe amex and monitoring is best suited for democratization and and I always say that because I've spent the majority part of my early career and infectious disease and when we moved HIV viral load testing closer to the patient compliance.
<unk> monitoring doubled for these patients with that disease, and so we expect that creating a kitted product that can go into a an install base of a deep digital PCR or a PCR platform will allow us to create an ability to democratize. This test and bring you closer to the patient.
Dr. Ros is raising his hand, Dr. Raj do you have some color commentary for that important discussion a thing.
Yes, I think Rodney youre hitting the major points, but.
Really what we want to make clear is that we are distinguishing technically.
The requirements of this monitoring tests the thing that tells you whether or not when you put a patient on a drug whether or not it's working or not the distinguishing features of determined C&I is that it does not require information from the genome sequencing of the tumor and therefore, we can turn it around like any laboratory tests and a few day.
And repeat it two weeks later in two weeks later again, so it's a very different approach than the complexity of sequencing of tumor one and preparing a customized assay for that and then having to come back with that information when that test is ready for the Amex us because it's a very different.
Both clinical and technical requirement, we're focusing on something that's less complex again, something that has democratized level as Rami said that focuses on the ability to detect tumor very sensitively to know very early if it's coming back in and that's a program that's in development.
Okay, great. Thanks.
Thank you.
Our next question comes from Mark Massaro with <unk>. Please proceed with your question.
Hey, guys. Thanks for taking the questions and congrats on a good quarter.
Thanks Margaret.
I guess my first one is on Rx relative.
Relative to where you were on the Q3 call.
Do you have any greater visibility as to the probability of maybe getting into NCC and guidelines this year as opposed to sometime in 2022.
Mark I can never do this topic justice because the two folks that are on the frontline, Florida, Potman Doctor Ross and they've made tremendous progress. So Padma you want to start.
Yeah. So our goal is to submit the application certainly this year.
One of the things that although the and associate lung cancer guidelines.
Abated quite frequently.
The updates that they do with respect to Biomarkers typically happen only once a year. So even though we are ready to be submitted the application. This year for the summer meeting in July.
The public information on their decision.
Well, perhaps not be known until the end of the year in November.
So that's that's the strategy we submit the application this year, we should find out publicly by the end of this yard and so it should if favorable and should start impacting our need to make it public later this year Autonation site and pumping I want you. The following net in 2020, so that's the strategy and I wouldn't say that.
Because our expenses are widely available.
The committee members have become aware of the test from the data associated with day.
And they've gotten from some positive feedback that they like they understand the unmet medical need and no. There's nothing else out there that says that medical needs that they have been quite positive indeed.
Their reaction to the data that they've seen so far.
King.
No I mean, I think you hit most of the points I mean, candidly I'm cautious and don't want to speak for the committee for for reasons that it's an independent committee and so we don't want to project them. They they formally can't give us feedback until they give us feedback, but the conversations that we are continuing and we are aggressive about making sure that everybody knows about it and understands it and those.
Conversations have been very receptive and positive so.
That's not really new news, but it's.
It's an ongoing process that we're enthusiastic and optimistic about.
Hey, Mark let me refresh for everyone's edification. The important fact that we reclassified 48% of the in our the NCC and negatives and R. R.
Spectra trial, and what that meant is that their standard of care today called 48% of those patients low risk, which we flipped a high risk meaning that about 50% of those patients are only going to have a 40 or have a five year survival rate.
49% the rest without treatment are not going to make it and so the reality is that we offer.
I think a substantial opportunity to improve the current standard of care and that has been what we've received very positive feedback on.
Great and then on determined.
You've referenced the study in in Italy.
It appears that you have some data at ACR.
But can you just kind of and then of course <unk> coming up can you just.
Maybe help us think about the most influential data readouts that we might see over the over the course of the next couple of quarters.
Do you expect that to.
Influence your business.
Yeah, Doug Zone, Doug do you want to just walk everyone through the different papers, we have so many you're better at ESMO.
Yes, So we recently released the.
The press release on the bladder cancer data that we're going to be showing at ACR theres actually two things being shown there one is sort of our thinking about.
But coming out if you will of our approach to looking in a pan cancer.
So we believe that this.
We believe that this test is applicable across all different solid tumor types, we've established that through a true if youre looking at different tumor types from the classification function, we did get a symposium podium presentation for <unk>.
The bladder cancer data.
And this is a retrospective analysis of <unk> clinical study in bladder cancer and we're excited that that data is going to become public and then there's obviously a lot more than than what's in our press release or the abstract. So we're excited for that as we progressed to <unk>.
Obviously guided much on whats going to come down the line, but.
I would say that this year is about exposing data in more and different tumor types and so that's what I would expect across the year. We have talked publicly about the Italian data the neo trip data. Once again. This is a roche genentech clinical study thats ongoing.
And we've completed analysis of the clinical part of that of that study and are excited.
Two.
I'll be presenting that.
At ESMO later in the year, but that's to be determined.
And of course, all of this data is being put into peer reviewed publications, including the data that we've shown it at previous meetings and we'd like to have all of that.
<unk> by the end of the year, but of course for instance, the Italian study is in the hands of our academic collaborators who are.
Great partners in this and but we're also subject to the whims of the journals. So that's the plan.
Mark Let me just add this we have as you know already but for everyone's edification, we have to be guarded and how how much data. We give out. These these datasets are not ours there our investigators they're embargoed at times because they are waiting to be published in the last thing. We want to do is is is.
Get ahead of them because then we run the risk of not having it published because it's already news in the public so.
I do think we've got a rich opportunity this year to deliver some pretty exciting data and we look forward to to each one of these meetings. So that we can get more and more data out there proving the utility across pan cancer.
Okay, and then last question here.
So I just got it in force as well as he has reviewed publication.
Definitely.
The C O, which is coming from anything when they came back.
Thanks, and just my last question is really on the determined amex strategy.
Which I guess Ronnie could you clarify I think thats your recurrence detection or Mardi strategy today.
Today on the call you talked about the importance of democratization and kitting.
Can you give us a sense for when you think we might have an update on this strategy and how.
How should we think about that opportunity.
And as I said, Mark just to reiterate and be clear, we have determined C&I, which is a product thats already developed and just needs to go through its paces of clinical validation much like where we were a year ago with the term of Io. So this year is all about running net same playbook and getting determined C&I into.
You know into trials and started getting it closer to reimbursement and market.
<unk> is a is a development project we have.
Without have to be careful we have opportunities with certain partners that we have worked with through our years that half.
P around ways to make PCR more sensitive and to allow us to use surrogate markers in blood that would identify a recurring tumor and so while it's a little different than MLR D. Just looking for minimal residual disease. This opportunity we believe will look for.
<unk> sets of markers that we'll identify activity that will probably more than likely require a reflex test to a much larger blood based genetic panel to actually identify what's going on and what treatment to use and this is the right out of the playbook from monitoring across every other disease.
Most recently obviously across the.
Cross infectious disease, much like HIV, where we monitor HIV viral load at viral load changes, we reflex to a genotype in the genotype as what we pressed against the database of treatment protocols to know what patients are going to respond or what this patient will now respond to based on the failure of the current regimen and so our approach is very similar to that.
Approach and we suspect that by this time next year, we'll have data, we'll be able to talk a lot more about the data and hope we will be in the same position next year with papers being published are preparing book published papers and abstracts. So that we can speak more clearly to it.
At this point in time, given the partnerships, we're working with and the companies that we're working with to develop this we have to be a little bit guarded.
Cause obviously some of this will require patenting and we don't want to obviously tip, our hand until those patents or file.
Thanks, guys I'll hop back in the queue.
Thanks Mark.
Thank you.
Our next question comes from Steven Mah with Piper Sandler. Please proceed with your question.
Okay, great. Thanks, and thanks for taking the questions.
Steve.
Okay, Yeah, I just have a few on determine Rx.
So can you give us a sense on the reorder rate of our current <unk> physicians.
And maybe give us some additional color if you can on utilization in the 87 hospitals that are on boarded.
Yeah sure.
At the end of the year, we took a look back and and we were able to look at how many of our you know what percentage of our physician base ordered multiple times and that remains over 60%. So we're very excited about that I mean, as corollary and again, we keep referring to them, but it's the only sort of comparable we have orca.
Our Oncotype Dx from genomic health had about a 30 to 35 per cent reorder rate in its first two years and so we are excited about that and we can thank them. They paved the way a lot for this understanding of these gene expression signatures do help provide data on what patients need certain treatments.
Forego recurrence and so we do believe that we've been able to benefit from the knowledge of the industry that these things work. So we have about a 60 or over 60%.
Right right.
The order book for the whole year.
Pardon me you want to talk a little bit about sort of the different systems that were seeing in the adoption. We've got great anecdotal stories, there are low but about the folks that have put it in standard of care, where every time a patient pops up it comes up and some things like that I think that'll give Steve a chance to see how how the momentum is building.
Let me just say this.
It's hard as hard for any of us to sit here today in March and look at the last 12 months and not reflect on the challenges that the pandemic caused in lung cancer.
I scratch my head every day, how can a patient with lung cancer that data shows every month that they don't get surgical resection, they've got a 10% greater chance of recurrence to forgo it but a lot of it was because hospitals didnt have capacity a lot of it was because patients were afraid to go get treatment, but we.
Do hope and we saw this in fourth quarter as well that's why I like to think that that our work to get 36% core per quarter volume growth in Q4 was heroic and a lot of ways given how hard the surge was and.
We really haven't seen physicians face to face now probably an almost close to a year, except in certain parts of the country. So so that being said, we still got some great anecdotal stories about adoption.
From a real quick because I.
Know that we were running a little while but can you go ahead and answer because I think it's important for these guys to have some understanding of that.
Yeah. So I think I think I'm very proud of that.
A team that you have it.
Virtual connections alone.
We've exceeded that by.
But I will say this probably that Oncotype Dx did this index.
No one net.
Relatively small market. So this year.
<unk> nations.
Up.
Thank you.
Getting anecdotally is asthma.
Get vaccinated.
But to act.
Some of these dokken face to face and our strategy will be to move from from some of these smaller hospitals medicine again do about let's say one to two surgeries per month to some of the larger volume centers that the surgeons are actually doing three to four surgeries per month, so that will help drive volume and the second thing will be.
<unk> two <unk>.
He said to make this more and more part of the EHR per day.
<unk> automatically already announced chartered accounts, especially last year, we are close to becoming standard of care in part of the auditing menu and a few other health systems that do have.
About five to six surgeons. So I think the strategy that there will be to identify those health systems that have at least five to five to six surgeons doing at least three divorced from Geneva yard and it's automatically included in net EHR.
Those types of accounts that would be the drivers of volume and fully expect given the vaccination is going at a rapid clip at least the second half of the yard and then people will be able cash that's available just to have the face to face meetings and do this multidisciplinary conversion that's needed for the strength, meaning stock with the surgeon.
That's the oncologists onboard I didn't get the pathologists, Brian So that's the goal for this year.
Look forward to the growth.
One important note I think will be helpful. For modeling is this that.
We did see we heard and we validated that across certain regions of the country early stage patients were given radiation instead of surgery to prolong their need to come in for surgery till the day got vaccinated.
I had a couple of anecdotal discussions with surgeons, where in a guy that normally would do 10 of these of months' actually you did three last month and so we are not last month and in December. So so I think you'll see as we emerge out of this we do expect to see that our current installed base should pick up utility more importantly, we want.
Keep onboarding new accounts.
Yeah. Okay. Yeah. Thanks, Thanks for that color and maybe just to continue on that line. So it sounds like Theres, maybe a backlog of people postpone their surgeries, but.
Talk about the the finalized U S preventive preventative services task force lung cancer screening guideline change. So so that's final now so lowered the age of lung cancer screening to 50.
Does that does that guideline change change your total addressable market assumptions for our day.
<unk>.
You know what when we look at that market. When we modeled this before the acquisition of razor genomics. We believe there should be somewhere between 70 to 75000 patients eligible for our test every year, if we had robust screening programs in the United States like they do in China for instance.
But we don't have those so we are very we were very excited to see that and we the impact is yet to be seen but assuming those get implemented I do believe that will be a good very nice upside for our business.
Okay, Great and let me just sneak in one final one on on German T X the targeted gene therapy net.
Targeted therapy panel have you guys decided to off the shelf test youre going to onboard and how should we think about the margins on that tests since youre getting it off the shelf.
You know what is a great question that we're right in the middle of you know I think it was Yogi Berra said when you have a fork in the road take it we're kind of at that point the finger one out we've been doing a lot of analysis on this we have multiple options.
And I would say that when we launch our test internally that that we will launch a task that gives us margins that are commensurate with the other test we have.
Unless unless we choose to go a route today that that we're not planning on going maybe but that could accelerate TX. So we're really discussing that right now I think a lot of it comes to the timing Needless to say fourth quarter. This year, we're committed to launch a one stop shop for both Io and Todd.
Good therapy panels, and so I'll just ask you to be patient with US we'll give you as much granularity on that as we can when we get to the end of the first quarter call because that decision is in process now and needs to be made so we can be prepared to bring it up in September our development team in our lab teams are saying, we got to have them that information.
By the Middle of April So we're working on that now.
Okay, great. Thank you so much.
Okay. Thank you.
Our next question comes from Thomas Flaten with Lake Street Capital Markets. Please proceed with your question.
Thanks, guys for taking the questions.
Reflecting back on C&I.
And you know this idea that you might be doing. These these evaluations of these patients weekly or every three weeks or whatever you guys come up with can you help us think through what pricing for a product that's going to be used that frequently would look like.
We can I think we were looking at if you look at and we done exhaustive market research on what the pricing sort of tolerance would be for payers to actually be inclined to pay it.
If you look at other models of this and you obviously look at what some of the other companies with <unk> are now talking about we're thinking that the total processed has to stay within between three and $4000 across two to three.
Cycles, and so if we can we're thinking about $1000 per cycle for us and that would means by the end of the second cycle, that's where our we're almost 100%.
Data is on predicting progression, so far and the early data from C&I and the papers have been published so that's our goal is to try to deliberate for around $3000 with all three results.
Yet to be determine how close we come to that once we get through all the data, but 3000 seems to be the ceiling and if we can get that that would be at the similar gross margins. We've been talking about for other next gen sequencing test that we deliver.
Great and then.
With respect to services.
You guys noted in your press release, the revenues were down in the fourth quarter, primarily because of Covid, yet could you give us a sense of what the what the value is of what you guys have in the pipeline there what you're working on just to give us a better sense for what 2021 might look like.
Sure.
I'm glad you asked that because I asked our pharma team to deliver all of this to me. So I'd have I can't give you specificity around who's doing what but.
For instance, we had a large a large study that we were in the middle of that is for our proprietary tests that I mentioned, it's a proprietary sales cycle assay that we developed specifically for a pharmaceutical company, we were expecting a large bolus of samples and late Q3 early Q4 that would allow us to complete those stuff.
These.
We didn't get those done that's about that's about a 1000 close to 1000 samples that we received this week.
As an anecdote. So if you think about those types of studies that will be running somewhere right now, we typically run and I'm looking at the pipeline now we have a pipeline right now of somewhere around two and a half to $3 million in active contracted work and so as we talked before that expands.
Multiple years at times, and so as we've talked any given quarter, we think somewhere between.
10, and 15% of that we should be able to recognize as revenue and it is a little lumpy. Some quarters, we will get a lot more sample some we won't but.
But now we also.
In the prepared remarks, we talked about two very important audits. We had in Q4, one was an audit for a very large pharmaceutical company. The other was for one of the top sequencing companies in the industry that we have now become a captive.
Testing site for their CTX program with their pharma partners and so those S. OWS are in place and so right now we're very bullish on our ability to continue to see project growth in pharma, depending on samples the question will become <unk>.
Covid and stuff how quickly can we get enough samples. So we can close out the project and recognize revenue and doug's raising his hand on zoom, Doug you Gotta go ahead.
I just wanted to clarify for everybody may not understand what we mean by mean by lumpy and that as you know many of these pharma deals. Although we're doing many samples over time, they only pay out when we're done with everything so it comes in as a lump sum and so whether that's this quarter or next quarter. You know it was kind of spec aspect of it kind of varies and so that creates.
The Lumpiness, it's not like clinical service where are you.
A regular rhythm of samples coming in if we do a bunch of samples and we only get paid when we're done so that's what we mean by lumpy.
But Thomas I think your point's a good one and I think the important yes. The important thing for you guys to think about is we need to right now it looks like we got I don't know I'm looking at somewhere about 30 to 35 projects, we probably need 50 to 60 projects with two or three very large.
Captive trials to start to smooth this out so we're not there yet and and we'll see but Q1, we hope Q1, obviously gives us a little more predictability, but certainly after everybody gets vaccinated in all of these clinical trials ramp back up we'll start to predict better.
Excellent. Thanks, guys I appreciate it congrats on the quarter.
Yes, Thanks Thomas.
Thank you.
Our next question comes from Bruce Jackson with Benchmark Company. Please proceed with your question.
Hi, Thanks for taking my question.
The burning Iraq.
Looking at the burning Iraqi agreement the Tech transfer was supposed to start during Q1 and be completed by Q3 or are you still on track for that and then once the tech transfers complete when do you think the test is going to be available on the market.
Yeah. So we are we.
I'm very blessed to be surrounded by some of the best program and project managers in our industry and we are on track for that delivery of tech transfer the risk. The first pass at Tech transfer will be in the summer with the final.
Technical transfer validation and go to market in September that's the schedule. We have today, we expect them to be launching in in October and in taking the product to market then.
And then I don't know if you disclosed this or not it's a royalty agreement.
What's the range is just like a single digit rate double digit rate.
Yeah, it's around an average well a lot of it depends on the price obviously that they get from the public payers right now the private pay is about a 10% royalty.
Okay.
Thank you very much that's it for me.
But hey, Bruce It is I want to make sure I'm clear it is a fixed amount for the private pay group that we've agreed to at $100 per test.
And keep in mind, we front ended that with the $4 million upfront plus the $2 million for N C C and guideline acceptance and so as we've said before doing business in China as is as unique and obviously barring rock being a NASDAQ company is helpful. But we brought in.
Loaded some of that royalty so that we could de risk the potential for a competing product in that in that environment in the future years.
Okay got it thank you.
Okay.
Thank you.
Our next question comes from Paul Knight with Keybanc. Please proceed with your question.
Hey, Ronnie congrats on the quarter.
And on the acquisition, there's been a lot of acquisition activity in the industry in the last let's call. It two months based on your.
Long experience in the industry I mean, we should see both of ours.
But you know you have an insight into the into the sector from your work at the sales experience are you seeing an aging or.
The companies of the private sector, meaning.
It takes years to really get your data put together on a particular test are you seeing a different environment with firms that doesn't have a more mature.
Sure.
Program that you see out there that are making your M&A discussions more interesting, meaning better targets.
Yeah, Wow, what a great question a couple of things one.
There is really there are a number of products that have taken if you look at I mean determined Rx, obviously took from 2012 and Doug and I first got involved with the physicians at UCSF till really a year ago. It got traction and so as you know our methodology was to bring a law that knowledge with us to orca.
Site and to go and engage these companies that are there down the road either on technology platform development and our content development and so the answer to that is yes, we have a very active business development.
Portfolio of companies and technologies, we're looking at.
Obviously, though I think for today, we believe we have everything that we need with the chronic acquisition to deliver on the lung cancer continuum. So that's the beautiful part of this anything we add on top of that will be new tests for our sales force to add to their bag and to create more same store.
Sales are more same rep sales for them I will say this one of the interesting things that I've seen and you've seen is this interesting combination of content companies and platform companies and just so you know.
To be honest I'm really.
I'm surprised it took this long because as you move down market and try to democratize molecular platforms. Many of these companies like Illumina like Thermo I can just go down the list they have not been interested in developing content and they just believe that they can keep driving L. D. T usage, but the reality is the majority of the world.
To have these decision these tests in their hands. These results within a five to seven day period to make good treatment decisions and so I believe moves like Bonnie made at Vera site with nano strength I believe you saw Roche with Gen. Mark yesterday, I think youre going to see more of those combination of content companies.
With platform companies platform companies tend to spend all their money on this amazing engineering thinking if we build it they will come the problem what the clinical IBD market is you've got to validate content or that instruments worthless and so I do think and certainly youll see we have number of partnership discussions going on where our content good fit on plan.
One company so more to come on that but it's a very intuitive question and I do think it's a great way to go because it is the next step in our industry to democratize a lot of this complex molecular testing.
Thank you.
Yeah.
Thank you.
Our next question comes from Mark Massaro with BTG. Please proceed with your question.
Hey, guys just a quick clarifying question about the cadence of revenue for 2021.
So obviously most investors are thinking about your long term.
Opportunities call. It a $30 billion total addressable market, but just just for housekeeping for Q4 revenue did come in a little below consensus it looks like the per arm a piece of it a little bit lighter primarily due to COVID-19, but can you give a sense for how 2021 might come together and then related to that.
There is call.
Call. It 8 million dollar revenue number out there for consensus in 2021, so how should we think about our models as we go to update our models. Yeah. It's a great question and Mark we are not prepared to give we wanted to give guidance I think the uncertainty of the vaccination world and all of that is just making it a little leery to.
Two bold about that but I think the consensus is a very good number and one that we believe that we have confidence and so.
Like did not say more about that until the next earnings call, which is only a couple months away. When we have greater vision into what the year is going to be like but right now knowing what I know and seeing what's already happening in Rx and obviously with the pharma services world carrying over and things like that I think thats a good number.
To shoot for.
Yeah.
Thank you.
There are no further questions at this time I would like to turn the floor back over to management for any closing remarks.
Yeah. Thank you and guys. Thanks for staying with us on a long call. We have a lot going on as you guys know and it's important as we always we committed when I got here, we'd be transparent about all this and make sure you guys were always had what you needed to think through your investment. So we appreciate you joining the call 2020 was an amazing.
<unk> year's fascinating in many ways, but it turned out to be incredible year for us as we weather. The pandemic storm, we look forward to what's to come and we're confident that our momentum is strong and we look forward to giving you guys updates as we go through the year, So stay safe and we'll look forward to our Q1 call in just a couple of months.
Ladies and gentlemen. This concludes today's webcast you may now disconnect. Your lines at this time. Thank you for your participation and have a great day.