Q2 2021 OncoCyte Corp Earnings Call

[music].

Greetings and welcome to the uncles State Corporation second quarter 2021 earnings conference call on.

At this time all participants are in a listen only mode. A 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 of Bob yet it of life on advisors. Thank you you may begin.

Great. Thank you Jessie and thank you everyone for joining us for today's conference call to discuss Aqua sites second quarter 2021 financial results and recent operating highlights.

Have not seen today's financial results press release.

Please visit the company's website on the investors page.

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 any statements that are not historical facts are forward looking statements. We encourage you to review of the.

The company's SEC filings, including without limitation, the company's forms 10-K, and form 10-Q, which identify specific brass growth factors that may cause actual results or events to differ materially from those described in the forward looking statements. These factors include without.

Asian risks inherent in development <unk> commercialization of potential diagnostic tests uncertainty in the results of clinical trials on regulatory approvals the need to obtain third party reimbursement per patients use of any diagnostic tests of the company commercial licenses, our need and the ability to obtain the future capital.

<unk> and maintenance of IP rates.

Risks inherent in strategic transactions, such as value to realize anticipated benefits legal regulatory or political changes the applicable jurisdictions accounting on quality controls.

And other and greater than estimated allocations of resources, developing commercialize technology, where failure to maintain any laboratory accreditation or certification and uncertainties associated with the COVID-19 pandemic and its possible effect on our operations.

Therefore, actual outcomes and results may differ materially from what is expected or implied by these forward looking statements on.

<unk> expressly disclaims any intent or.

Or obligation to update these forward looking statements, except as otherwise may be required under law with those prepared remarks, it's my pleasure to turn the call over to Ronnie Andrews CEO Ronnie.

Hey, Thanks, Bob and welcome everyone to our conference call to discuss our second quarter 2021 financial results and our operating highlights joining me today on today's call are Mitch Levine, our CFO, Dr. Doug Ross, Our Chief Science Officer, and <unk>, Our Chief commercial officer will all be available at the end for questions and answers today's call I'll review.

Significant progress we continue to make across our initial 4 growth engines, which together aimed abroad of single solution to answer key outstanding questions for patients and physicians regarding the treatment of solid tumors throughout the patient journey I'll also introduce an emerging fifth potential growth engine in the transplant rejection monitoring market.

Which we believe has the potential to rapidly drive an unexpected additional revenue stream out of Europe the opportunity in transplant stems from our acquisition in April of chronic <unk>, biomedical, which was driven by the opportunity to use their technology to enter the blood based monitoring world of oncology.

But recent developments, which I'll dive into the weight on the call have opened up of new market opportunity and the high value European transplant market.

Our execution through the first half of 'twenty, 1 continues to be solid with all of major initiatives on track. Despite the ongoing challenges in the macro environment I'm extremely proud of how our professional program management process and dedicated teamwork are bringing us closer to commercializing multiple innovative molecular tests that together.

<unk> have a total addressable market of over $10 billion.

We believe we are extremely well positioned for short and long term growth and I'm excited to share with you our progress for the quarter starting off with the term of Rx the first and only commercially available test for predicting where the risk of recurrence and informing the chemotherapy decision for early stage lung cancer patients.

The continued challenges associated with the COVID-19 pandemic, our progress remains solid with the 23% sequential test volume growth in Q2.

In the first half of 'twenty, 1 our test volume has already exceeded our volume for the full year of 2020.

We have continued our expansion into new hospitals with a total of 176 on boarded hospitals at the end of Q2 that represents an approximate 43% growth over what we reported for Q1.

At the end of Q2, we have a total of 317 on board of positions, which is of 45% increase over what we reported for the first quarter.

Continuing to grow our population of accounts and physicians is a good metric and it gives us continued confidence that as the effects of the pandemic begins to wane, we will see early stage surgeries for lung cancer get back the pre pandemic levels and our volumes grow an even faster pace.

Right now between 60, and 70% of our samples come from patients with Medicare and Medicare advantage, which are covered by CMS and paid within the prescribed amount of time. However.

However, our private payer samples are slower to pay but we are making progress. These efforts combined with increased sample volumes the anticipated increase in surgeries as more people get vaccinated and our sales force back in the field securing new accounts leave us confident that our growth with the terminal rates will continue over the coming quarter and years.

Along with this growing traction of the U S market, our agreement with burning rock to distribute the term of Rx in China, the world's largest market for early stage patients is also advancing well in fact, we recently completed the technical Knowhow on software transfer milestone on schedule bring along with it a $1 million milestone.

Payment this remarkable execution, taking place virtually due to Covid is a testament to the incredible team. We built here on Orca site. We completed are we completed tech transfer.

Yeah, I'm, sorry, <unk> completed the transfer remains on track for year end, which will drive further revenue from burning rock in 2021.

This important progress is just the beginning of our entry into China and will be of solid source of both near and long term revenue growth for Oncotype.

Let's now turn to term of Io are differentiated and proprietary tests for immune therapy response prediction, which is the only precision diagnostic test today on the market that evaluates the entire immune microenvironment in biopsy and surgical specimens to identify patients likely to respond to immune checkpoint inhibitors.

And excitingly the opportunity with the term Io goes beyond improving treatment decisions for individual patients by facilitating the development and clinical validation of next generation of immune therapies by partnering with Biopharma and pharmaceutical companies.

It is clear there is of tremendous need and market for a better solution to immunotherapy response prediction and we've been running full steam to advance the term of Io as fast as possible.

In terms of data we've had a steady cadence of data that together provides compelling evidence that the term of Io has a broad potential across a range of tumor types. We are very pleased to announce that the results from the neo trip randomized clinical trial in triple negative breast cancer has been accepted for an oral presentation.

<unk> at the ESMO annual meeting to be held in this upcoming September. This extremely important study was a randomized clinical trial, which evaluated the term Io as a predictive biomarker for immunotherapy response when administered prior to surgery.

Evidence from these randomized clinical trials studies provide further evidence of the predictive utility of of biomarker and we look forward to being able to publish this important trial data is.

This past quarter, our presentation at ACR demonstrated clinical utility in bladder cancer. In addition to our previous data, which showed utility of both non small cell lung cancer as well as triple negative breast cancer.

And a presentation of the Vasco in June extended the utility of the <unk> toy for tumor type of renal cell carcinoma.

As we previously reported in addition to validation across tumor types of studies of also demonstrated the applicability of this test across all 4 approved immunotherapy keytruda opdivo to centric and in ANZ.

Gather these data provide a strong foundation of clinical data that support the pan cancer and immunotherapy utility of our test.

In Q2, we also announced the the solid relationship with the team in Milan for the Neocart trial led to a new collaboration with Grupo Oncologic <unk> del Norte of <unk> or <unk> for short there are leading clinical trials group the conduct independent investigator sponsored clinical trials for targeted and for immune therapies.

Across several tumor types. Our initial work with this prestigious group is in colorectal cancer and important solid tumor to day that only has 1 biomarker per treatment decisions MSI, which only identifies less than 10% of patients eligible for I O treatment of <unk>.

Successful this will validate the term of Io and its fifth tumor type further strengthening the potential for pan cancer utility <unk>.

Together this progress brings us closer to launching the only precision diagnostic that can accurately predict sustained response across 5 major solid tumors and builds the case for the term Io as a pan cancer predictive test and the $3 billion immune therapy patient selection market.

Importantly in addition to our progress in the research setting the <unk> remains on track for our clinical launch this fall precision oncology treatment options of rapidly expanding to all solid tumors and across all solid all stages of cancer. Our goal is to become the single and trust the diagnostic company.

On to inform the optimal usage of these treatments for more than 1 million patients diagnosed with solid cancers every year in the U S alone to that and we'll be operating the most comprehensive and differentiated comprehensive molecular test on the market determine on TFS on Nextgen sequencing based comprehensive genomic profiling.

File of over 500 genes, which meets industry, leading gold standards for minimal tissue requirements and rapid turnaround time to expedite the time per treatment for patients. This test combined with both the term of Io test per immunotherapy and the term of Rx with chemotherapy decision whereby the powerful Reese.

The worst of patients and physicians.

Moving now to our pharma services growth engine.

Our pipeline of comp.

Attracted pharma services projects continues to grow and we're excited to be a trusted partner for our growing number of top pharma and molecular diagnostic platform companies. While we've made great progress in securing projects, we remain reliant on trial enrollment for our pharma partners to generate samples to run because of the dependence on external project Terra.

The lines on sample delivery, we often face lumpy revenue cycles the.

This has been exacerbated this year by Covid, because all of enrollment because of enrollment in all types of trials have been impacted but despite these headwinds I'm still pleased to report that our pipeline remains solid and so far in Q3, we're starting to see samples from some of our delayed projects beginning to come in to our lab in Nashville.

A very noteworthy accomplishment and pharma services for the quarter was closing a master services agreement with 1 of the largest global molecular diagnostic platform companies, which makes our Nashville lab, a primary facility for test development and for verification and validation studies for this company's full family of <unk>.

PCR and next Gen sequencing instruments across several disease areas. The agreement was signed in June and our lab has already received and installed several different molecular diagnostic platforms and work on our first statement of work under the services agreement began in early July.

Gaining barge long term agreements like this will go a long way to improve the predictability of revenue timing for our pharma and molecular diagnostic services business in.

And finally in second quarter, we closed 4 of the term of Io companion diagnostic pilot projects and samples for 2 of the studies of already starting to come in obviously, gaining the companion diagnostic contract is an important milestone for the term, Ohio and we look forward of sharing an update on those studies in future calls.

Finally, moving to our newest growth opportunities, which come from our acquisition of chronic biomedical.

Last call we provide on an in depth review of that their share of C&I monitor clinical assay a patented blood based assay that uses copy number of instability or C&I for immunotherapy response monitoring in oncology.

Let me highlight the important Differentiators board of Thomas C&I book.

First off unlike the emerging minimal residual disease, or <unk> technologies, which require large amounts of tumor tissue, our C&I test as blood only and it can be run on all solid tumor cancer patients.

Because of the large tissue required by <unk> technologies. They remained limited to post surgical samples only which today is a relatively small population of late stage patients that are eligible for immune therapy because of the vast majority of later stage solid tumors are treated with neo adjuvant protocols, which are pre surge.

And therefore, no large amount of tissue available determine of C&I as the best choice from managing these pre surgical patients because C&I does not require a tissue based genome panel and thus can provide information of disease progression with blood only sampling at the second cycle of immune therapy weeks before the.

<unk> methodology can even start their monitoring efforts plus C&I will save payers and patients significant cost over other methods entering the market today too.

To accelerate C&I the market. We're currently applying the same playbook, we successfully used over the last year with the term of Io first by rebranding of the test is determined C&I and second by preparing for expanded commercialization with planned validation studies and publications to support of U S Research and pharma services.

<unk> launch later this year in the near term we've established the clinical study plan for the term of C&I and will complete tech transfer to our lab in Nashville, and start marketing the pharma companies in the U S. Later this year.

However, immediately upon the closing the deal on April our team began working closely with the <unk> team in Germany and have already made significant progress on on advancing studies across several tumor types in the EU and have well over 1000 patients under study across several solid tumor types.

The acquisition also provided us with ownership of IP that could help develop a foundation for our test for the estimate of 6 billion plus recurrence monitoring market a repeat testing opportunity that tells a patient and their oncologist.

Tumor may be forming long before it can be identified by imaging.

Work on what we will brand is determined amex is already underway and we're actively exploring several technology platforms to help us achieve our goal of delivering our current modeling test for cancer that is extremely sensitive cost effective and can be performed on digital PCR platform in the community hospital setting where.

Patients are most likely to get monitor.

The addition of these new tests bring oncotype the distinct competitive advantage as the first and the only company to offer a continuum of tests from selecting patients for immune therapy to monitoring for the effectiveness of treatment and.

Finally from monitoring for recurrence of disease.

Let's now switch gears to of new testing opportunity that we believe will become our fifth revenue growth engine the.

The IP will be used for the term of Amex was actually developed by chronic for use in transplant rejection as the chronic they're assure transplant rejection monitoring test.

We inherited the tests already developed and a numerous studies in Europe to the tech rejection reactions of organ transplant recipients like the term amex that their share transplant monitor test uses only of simple blood draw, making it as easy to administer and potentially much more economical to perform than current tests that require a tier.

<unk> biopsy the.

The recent CMS coverage policy for transplant rejection monitoring side of digital PCR methods for solid, Oregon Allograft rejection as its titled sites 3 peer reviewed publication of the chronic <unk> on the performance of our test in solid organ transplant monitoring. This is a huge validation of the chronic technology.

<unk>.

Prior to the acquisition the chronic team completed several large clinical studies and published over 20 papers in peer reviewed scientific journals, including the most recent publication in nature that validated the test across the top 3 solid organs.

Art kidney.

And in liver, where we have an uncontested opportunity. Since currently there is no tests for early detection of organ rejection and liver transplants.

Diving in a little deeper the studies completed to date show that transplant rejection is associated with increased release of graph DNA known as donor derived DNA into the bloodstream. The chronic state of presented to date shows distinctly the donor derived DNA monitoring using digital Pcr.

Can facilitate a personalized immunosuppression treatment plan and potentially decrease premature graft loss by detecting injury before clinical manifestations. This allows treatment of acute rejection and other causes of graft injury, which have the potential to significantly improve organ transplant outcomes in patients.

<unk>.

As we've learned more about the differentiated approach and heard feedback from the market in Europe, We took a pause on our previously planned approach to sell the IP and began a deep dive at of the viability of bringing the test the market under the Oncotype banner.

Our work of illuminated. The this is clearly an enormous revenue opportunity Frank site.

But to ensure we stay focused in the U S on our product development in oncology with numerous critical milestones for the term of Io determine TX and determines C&I on the horizon, We will focus our launch for the <unk> assay for transplant rejection in the EU, where we already have of contract relationship with the lab partner.

There are about 41000 transplants annually in Europe with over 150000 people on waiting list and a rate of 48000, new registrants added each year.

Our estimates of the total available market for Europe is approximately $1 billion and we have a head start given chronic says European IP and work to date with key opinion leaders, who are interested in working with us to bring the test of fruition across Europe.

We've already begun the process of standing up of separate business unit per transplant and given the concentrated network of transplant centers in the EU and our approach of using established molecular labs, we do not expect it to significantly increase our quarterly burn.

Our strategy is simple bring the test up and launches in the LDC in the first half of 2022 with carefully selected partners in Europe and concurrently expedite the process to find an instrument current partner to help complete the digital PCR kitting and platform studies under the prescribed regulatory.

As for the EU and submit for regulatory approval in Europe by late 2022.

We've covered a lot of ground today. So let me close by summarizing I continue to be extremely enthusiastic about the continued progress we've made to date.

And what.

What we expect.

To see over the next 4 quarters, including rising sample volumes and revenues from the term of Rx in pharma services and at least 3 major product launches.

The term of Io determined TX for the U S clinical market in early Q4 and determine of C&I in the U S for pharma clinical trial market in Q4.

And the very short time, we built the compelling and powerful portfolio molecular diagnostic test assets with a total market opportunity of well over $10 billion and we of proprietary positions in some of the fastest growing areas of molecular oncology and now in transplant rejection monitoring we continue to attract the attention of the.

Leading pharmaceutical and Biopharma companies and molecular diagnostic tool platform providers and look forward to important contracts on the horizon with these global partners to strengthen our market position the.

The progress we've made over the last 18 months. Despite the headwind of a global pandemic has been nothing short of amazing and in the Testament to our dedicated and experienced team. We built a world class organization that I am proud of and thankful for every day as we advance our comprehensive diagnostic platform for cancer and beyond I'd now like.

To turn the call over to Mitch Levine to review, our Q2 financials Mitch.

So on it.

Everybody.

As of June 30 of 2021, we had cash cash equivalents.

<unk> securities of $47.5 million.

This represents 1 of the strongest cash positions in <unk> history.

On puts us in excellent financial position to fuel our 5 growth engines, 1 determine rx.

Reimburse lung cancer recurrence predictor.

The term of Io, our immune therapy response predictor.

Free the term of C&I blood.

Blood based immunotherapy response monitoring assay, we acquired with our recent acquisition of chronic biomedical.

For sure transplant assay for the early detection of transplant rejection also part of the chronic acquisition and 5 on our pharma services offering which has a significant pipeline from several pharma companies undergoing trials and as Ronnie pointed out.

MSA from 1 of the largest platform companies.

Our consolidated revenues for the second quarter of 2021, or approximately 2.0 of $3 million up sequentially from Q1.2021 combined revenues from the first half of 2021 or $3 million $154000.

During the quarter, we completed the first of 2 stages of technology transfer with burning rock biotech and achieved and received.

A $1 million milestone payment.

I am clear the incredibly proud of our team at all of the site as well as the team at Boenning rock for their extraordinary efforts.

On completing this complicated process. Despite the challenges presented by COVID-19.

The process of technology transfer, enabling <unk> to run test independently and producing the accurate occasion report is underway. The next milestone payment of $3 million will be received once putting rock begins to use the term of Rx channel, which.

Which we expect will occur by the end of this year.

Rock has significant aspirations for the use of <unk> in China, a market of approximately 6 times larger than the U S and onto the site will receive a royalty on every test.

On by burning rock.

As Ronnie mentioned on project progress with determine of Rx remained solid with 23% sample growth in Q2 versus Q1, we rely on sample growth of the best measure of the term Rx adoption by physicians.

We on boarded 93 additional doctors in the second quarter of 45% increase from Q1, so our growth trajectory continues.

Revenues associated with the term of our ex were $645000 an increase over Q1, and now have received $1 million to $5 million on revenue from the Terra the term Rx thus far in 2021.

I'd like to remind everyone about revenue recognition for the term of Rx as we accumulate payment history and experience we are able to progress from recognizing revenue on a cash basis to an accrual basis.

The core revenue in the period debt test will perform.

Payments from Medicare advantage are a good example of assets during the first quarter of 2021, we transitioned to the accrual basis for test covered by Medicare advantage insurance plan the <unk>.

Modest increase in determining <unk> revenues from Q1 to Q2 can be explained by this movement to an accrual basis accounting, which boosted our revenues in Q1 as the result, comparably recognize revenue increased significantly faster in Q2 than it may appear.

We will continue to recognize revenues for commercial and other peers on a cash basis until we have reimbursement contracts with those payers.

At that point those contracts will also progressed of accrual basis for the term of Rx tests.

From our acquisition of chronic biomedical we received $252000 of revenues, mainly from a marketing agreement with <unk> of Homburg, Germany, which provides for exclusive the in prepaid royalties.

This renewable contract calls for immediate to market and sell of chronic transplant in C&I and process samples and the Germany, Austria, Switzerland, and Belgium markets exclusively and the things contract continues to be renewed could provide off the site with the minimum of 95 million.

And revenue is over 12 years for our meetings to maintain exclusivity of the product portfolio.

Our pharma services business also made a modest contribution of about $133000 on the quarter and as we have discussed previously revenues in this business are lumpy as we define the we depend upon sample volumes from Biopharma clinical trials.

We believe there is the slowdown in clinical trials because of the ongoing COVID-19 challenges, which means we received fewer samples from our pharma partners for testing.

Anticipate that higher vaccination rates in Europe, and the U S will spur of clinical trial enrollment.

Moreover, as we grow our base.

The <unk> pharma clinical trials that use our lab services and add a companion diagnostic to the FDA approved Io drug, which we expect over time, our pharma service revenue will grow and be more consistent.

And as I mentioned, we expect additional revenues in the coming quarters from our recently signed Master services agreement with a large platform company.

Cash used in operations for the quarter was around $7.5 million from normal operating burn plus approximately $600000 in nonrecurring legal and business development expenses.

Paid in the quarter.

Excluding these nonrecurring items, we expect our base operating cash burn to increase modestly in the future quarters as we continue to invest in clinical studies for the term of Io and determine the C&I as well as investments in sales and marketing to drive increased adoption of our determine Rx test.

GAAP operating loss as reported for the second quarter of 2021 was $13.6 million, an increase of $4.8 million from the second quarter of 2020.

Non-GAAP operating loss as adjusted for the second quarter of 2021 was $10.3 million.

And the increase of $3.4 million as compared to the same period from 2020.

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 from the current quarter was approximately $2.4 million, which.

$1.1 million in non cash amortization expenses from our razor asset acquired in February.

Cost of revenues also included testing services, we performed we performed for our pharma customers. It is important to note that as we ramp our testing volume, we expect to see an improvement in our gross margins in future quarters because of the term of Rx test.

Research and development expenses for the second quarter, 2021 was $2.5 million as compared to $3.2 million from the same period in 2020.

General and administrative expenses for the second quarter of 2021 were $7.9 million.

As compared to $3.8 million for the same period in 2020, due primarily to increase the personnel and related expenses, including $2.5 million.

Of the assumed liabilities incurred from the chronic merger, which we anticipated.

Sales and marketing expenses for the second quarter of 2021 with $2.7 million as compared to 1.6 for the same period in 2020, primarily attributable to ramp up in sales and marketing activities for our continued commercialization efforts of determine of Rx.

For the second quarter of 2021, we reported the net loss of $10.5 million.

Or <unk> 12 per share as compared to $9.1 million or <unk> 14 per share for the second quarter of 2020.

We have a good history of making timely thoughtful strategic investments in clinical studies and additional sales of marketing initiatives, which has helped us build momentum in 2021, we will continue to evaluate key studies or the term of Io and now determined C&I that will help us accelerate these 2.

Norton products towards market launch and uptake.

We will also be investing thoughtfully behind the launch of their insured transplant tests for transplant rejection monitoring.

We have several new relationships with Biopharma and molecular platform companies that may require some capital investment to get the revenue streams flowing from the service opportunities.

On our pharma services infrastructure remains extremely lean and we expect these types of investments will lead rapidly to new and additional revenue streams from the second half of 2021 and.

And beyond.

We are pleased with the growth of the turmoil of Rx and positive developments with the term Io and determine of C&I.

We believe that these tests ivanka site of distinct competitive advantage as 1 of the first and only company.

Canceling offer of continuum of tests from selecting patients for immune therapy treatments to monitoring the effectiveness of the treatment.

That concludes my remarks concerning our financial highlights I will turn the call back to Ron. Thank you Mitch operator, we'd now like to open the floor for our the phone lines for Q&A. Please.

Thank you, ladies and gentlemen, we will now be conducting a question and answer session. If you would like to ask a question. Please press star 1 on your telephone keypad. The confirmation tone will indicate your line is in the question queue. You May Press Star 2 if you would like to remove your question from the queue from participants using speaker equipment. It may be necessary the pickup your handset the floor.

And with Star Keys, 1 moment, please let me call for questions.

And I am showing our first question is coming from the line of Mark Massaro with BTG.

Please proceed with your question.

Moving on from Mike Thanks for taking the question.

I'm wondering if you could discuss what steps need to be taken to ready the launch of the <unk>.

The next action packed.

Could you elaborate on the validation day you mentioned.

And without the wondering is that cash R&D capable now on on what additional work.

Sure.

Yes. Good question, let me answer that today, when we acquired chronic they were way down the road on commercializing in Europe.

And so they have an arrangement as Mitch said with the.

The molecular lab in northern Europe called <unk>.

Are actively engaged with the <unk> and believe that they are the right low for northern Europe to launch the test as an LDC.

We are venturing to Europe and of.

A month or so and we're going to be looking for and have identified a few potential partners for southern Europe. So our goal is to launch it as an LDC in the European market.

Immediately as we bring the test up for those accounts to go on began active marketing in the various countries that they will be they will be responsible for the kitted process is a process that's been identified and to be candid. The test has to be put through that same process today to be <unk>.

1 is in <unk>, so for us it's going to be more about documenting under design control. The process and then running studies that will correlate the kitted product to the LDP studies that are already published as I said, there's over 20 of those today out there and so we feel pretty confident that.

We will be able to have a kitted product dossier ready to submit for IBD or which is the European version of the FDA by late 2022 of our goal between now and then as to also find the platform partner. There are several of those bio Rad Thermo Fisher and Roche.

Who have indicated interest in potentially being our platform partner and we'd like to secure that partnership as we go into fourth quarter. So that when we start the design control studies to get our dossier ready for submission we will be doing it on a single platform.

With a partner that already has a pervasive install base in Europe.

Okay, great. Thanks, so much.

If I could just out of follow up what are your dollar amount of expectation and the reimbursement in Europe.

For the transplant assay.

Yes.

Yeah, you know what we haven't we haven't publicly given those yet, but we do know the market is large and depending on when we actually are able to take the product to market. We do believe there is a pent up demand based on our discussions with key opinion leaders are chronic had done a really nice job of of fostering relationships.

With some of the top transplant centers in Europe, who seem to be extremely interested in the product given its going to improve the turnaround time versus sending the test out being able to do it on site will significantly improve the turnaround time, which is we're hearing from our market voice is the real critical attribute of our test versus the current test debt.

That are being offered in Europe and that these centers when it's kit it and make it run the test the same day the patient comes in there'll be able to have given the immediate feedback to the patient.

The whether there is a potential oregon rejection, and so given that and given the we expect the reimbursement levels in the Europe, the pn market to be less than the U S. We do still believe it's about $1 billion market versus the 2.2 plus billion dollars market here in the U S. So we are excited about the opportunity and as we.

Start to get the test into the market, we'll be able to give you a better forecast of when revenues will start and what they'll look like.

Okay awesome. Thanks.

Steve talked about working with the third party per kidding free therapy selection panel.

On around what time would you expect to announce day.

Is it possible that this could include a co promote.

On a commercialization agreement from.

The third party to tell at this time.

Yeah. Good question. So we have completed our decision on the term of TX company that decision was made that test is in process of being brought up on the platform. We chose we are obviously interested in and of potential platform relationship globally with that company. So we're going to leave it on named today because we're in.

Negotiations, but I think the idea is that we are we will have of TX test in the fourth quarter to complement the term of Io and we are working with that debt vendor of 4 potential broader kit opportunity ex U S.

Thank you. Our next question is coming from the line of Mike Matson with Needham <unk> Company. Please proceed with your question.

Yes, I think thanks for taking my questions.

So you've got the 3 tests of the here and be launching in the fourth quarter the term Iot ex in C&I.

Just wondering what the outlook is for those as we get into 2022, I know youre not going to give any specific guidance, but.

Which of those do you think can kind of ramp the fastest and why.

Yes, it's a great question partners here, so on the EBIT will high level Ronnie thoughts of network partner give you a little more of the details about how we're going to market, but we are going to launch the 2 in tandem the feedback from the voice of customer has been.

We want a 1 stop shop, we don't want to split the tissue sample and send 1 to 1 company 1 to another so if youre, bringing up of targeted panel and on Io panel, we want to be able to go to you and your lab to get that and we want that turned around and 7 to 10 days, which is our commitment to the these clients and so our strategy is to launch in fourth quarter with.

A series of key opinion leaders and part of why don't you take it from there and just give a quick thumbnail of the go to market strategy of what we expect in terms of when we expect to go to CMS for reimbursement of our Io yeah.

We are on track on launching this 1 stop shop. That's the idea behind this is that we would have a large comprehensive bond out of with over 500 genes. So best in class comparable to the lead panels by companies like foundation in cabinets and the idea is for the.

The same amount of cash you limit of fast act on it out.

Net everything you get from other targeted pan out, but the differentiator of which only we will offer on that same sample will be the determine the island. We believe that will be a winning strategy. The idea is to go to market in Q4, starting with an early access program with some of the key early adopter the sites that the already know tanks for the time on our ex China and then.

Drive adoption ahead of CMS reimbursement to debt early access program and that's the strategy for 2022.

And I've been actually traveling since the market has opened up a little bit in the northeast and the south and Thats a big interest make as doctors are very intrigued by the day time, Io data and day, saying instead of sending into the bigger companies. If I can get all of the answers from the bigger companies plus I O why not use encore site.

On the CMS CMS coverage path part of <unk>, it's pretty clear because there's a clear path for Ngls and what they're looking for is just analytical validation and once you complete the satisfactorily then you'll get the coverage within 90 days to 6 months of submitting that package and the coverage of ranges from $2200 a ton.

$900, Brent NGF panel from the time of Io Theyre looking for us to again.

A couple of peer reviewed publications in lung and breast cancer, we've had conversations with them. Once we have the peer reviewed publications.

On the path to reimbursement for that.

Test is quite similar to what we had for Alex on quite clear so that.

On the path to launching the test, but lets go lets the gate adoption in 2022, and then submit the dossier in the Dx data, even though first followed by the data on the iron dossier, so that the liquid position to get paid so I think 2018 for both the debt.

Okay. Thanks Thats helpful.

And then you of course of couple of questions on <unk>.

China, the burning rock day.

So I understand youre getting the milestone payments in the near term but.

When do you expect to really start to see some revenue from royalties from the sale of the product. That's the first part of the question I got the second part of <unk>.

Is there a potential for burning rock the distributed any of these other products like TX our C&I in China.

Yeah. So.

Quick answer is that we expect they are very.

Being very aggressive with the plans to launch <unk> into the China Chinese market. So we expect that we'll see royalty revenues from that in 2022, obviously they'll be launching at the beginning of the year. So by mid year with their they have a very pervasive <unk>.

<unk> force in China, we expect to see meaningful revenue by mid year.

And growing over time, obviously.

In response to the second question.

Sure.

We determine io is a different animal than the term of Rx because its pan cancer and we believe we can kill it and it may be most advantaged advantageous for us in China, given the broad use of immune therapy.

And given that burning rock has of lab had may have limited penetration potential that we might either take a 2 pronged approach, which would be partner with burning rock and the platform company or we might just partner with the platform company. If we got the right deal and they had the right install base in China. So new.

The jury is still out on that but if we launched Io we'd want to launch it with the term of C&I as well keep them on our go to market strategy is to be the only company in the industry that can offer a predictive test for determining sustained response in mean therapy and then following that right up with a blood test to monitor whether the therapy is actually working really.

At nuance and we believe Thats best exploited on our platform.

We're a lab can run both test simultaneously with the patient to start the the monitoring of immediately upon therapeutic initiation.

Okay got it thank you.

Thank you we'll move onto our next question, which comes from Steven Mah with Piper Sandler. Please proceed with your question.

Steven Your line is <unk> you May proceed with your questions.

Once again, Steven you may be on mute.

I apologize, we'll move onto our next question, which comes from the line of Thomas Flaten with Lake Street Capital markets. Please proceed with your question.

Hey, Thanks for taking the questions Hey, Ronny I'm wondering if you still get back to the to the theory of shared decision about focusing on Europe, which which makes a lot of sense could you kind of walk us through your thinking around the U S. Given given the benefit around the the LCD that already exists.

<unk> and just some more color on how youre thinking about that.

Absolutely Europe's already has an infrastructure of chronic had it to move rapidly.

The U S. So we're going to move on that of that makes a lot of sense.

We're still a small team and we are trying to effectively execute a lot for a small team and when we sat around and talked about the timing of some transplant in the U S.

It really we decided would be instead of an LDC approach. We felt like is probably best in the U S to launch as a kid of strategy and therefore, we need to execute this relationship with a platform partner hopefully 1 that's already in the transplant World are has pervasive deployment of instrument platforms.

Either an HLA are in other types of testing done in transplant world. So that we could have a partner to go to market in the U S. Without hiring a sales force to go have to attack. This but that that decision is still open Thomas we just decided that given all of its on our team's plate and I can't afford the distraction.

4 because oncology as our franchise. It is the biggest growth engine, we got and its powerful so for US we want to make sure I have all of the wood behind the the tip of that Arrow as we go into the market with Io and C&I.

<unk>, TX, but we'll get back to you as we enter the third.

The by the third quarter call hopefully, we'll have a solidified the relationship with the platform player and at that point, we can give you a better estimate of when we might be in the in the world of kidding, it and bringing it to market as of democratize tool for transplant centers in the United States to provide same day turnaround time of this important information.

<unk>.

That's great appreciate that and just 1 quick 1 for <unk> could you give us a quick update on the sales force, where you are and where you are in terms of hiring et cetera.

Yes, so we havent added to our sales force this quarter. So we still have 10.10 reps that cover about 70% of the addressable market. Once they've actually done is we've been able to get some outstanding analytical data that talk that the purchase that direct net sales force even more efficiently that highlights the top.

Surging by volume and in those regions and also on maps out there that total oncology network. So the fellow that came out with that database at the recently purchased on CNS data.

To have given armed our sales reps with more with more of leads that they can point of view now in terms of adding more sales of that I think of great opportunity to do that going to be as the launch on index products into medical oncology, we're going to be very weak.

We're going to after the optimize how we do that because like we've said before our cash.

Current sales reps do have the medical oncology connection, especially in lung and 2 of that in some of these large community systems that many of these doctors from multiple cancers of the and be able to reach out to oncologists will be not on the non but other cancer types and we have the time the Io data. So we feel that we can launch day.

<unk> in the fourth quarter and maintain sort of momentum with a modest increase in sales plus about 3 to 5.

And Thats the strategy for this year of.

The next year.

Excellent I appreciate the response thanks guys.

Hey, Thomas we May add a few sales folks in Europe for transplant, they would be not direct force there'll be more.

What I would call med ad type, but but so just.

We'll talk more about that in third quarter, but I, certainly think that that's probably an option for us to accelerate our to market for transplant.

Thanks Ronnie.

Yes, I appreciate it.

Yes.

Thank you at this point I would like to turn the floor back over to Mr. Andrews for any additional closing comments.

Okay, everybody well. Thank you very much for your time today again, we appreciate your patience as we go through the the incredible work that's going on here and giving you an update.

Really appreciate of as I've said to the team here they continued to be heroic in their efforts. Despite what's going on around us and the environment. We look forward, obviously to our solid Q3 and the chance to give you an update on some of these projects as we go into Q3 on through Q3 as well as at our Q.

The call so everybody stay safe and we look forward to connecting with you. We have a number of investor conferences coming up through the quarter and we look forward to seeing many of you at those take care and how about half of great day.

Ladies and gentlemen, this does conclude today's teleconference. We thank you for your participation and you may disconnect your lines at this time.

Okay.

[music].

Okay.