Q4 2021 OncoCyte Corp Earnings Call
Greetings welcome to the Arkansas Corporation fourth quarter, and full year 2021 earnings conference call.
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. Please note. This conference is being recorded I will now turn the conference over to your host Troy Williams of lifestyle Advisors you may begin.
Thank you Kyle and thank you everyone for joining us for today's conference call to discuss <unk> fourth quarter and year end 2021 financial results and recent operating highlights.
Not seen today's financial results press releases. Please visit the investors page on the company's website.
Or 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 the company's SEC filings, including without limitation, the company's forms 10-K, and 10, Qs, which identify the specific 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 the development <unk> commercialization of potential diagnostic tests.
Uncertainty in the results of clinical trials or regulatory approvals the need to obtain third party reimbursement for patients use of any diagnostic test the company commercializing.
Our need and ability to obtain future capital and maintenance of IP rights risks inherent in strategic transactions, such as failure to realize the anticipated benefits legal regulatory or political changes and the applicable jurisdictions accounting and quality controls greater than estimated allocations of resources.
To develop and commercialize technologies for failure to maintain any laboratory accreditation or certification and uncertainties associated with COVID-19, pandemic and its possible effects on our operations.
Therefore, actual outcomes and results may differ materially from what is expressed or implied by these forward looking statements pockets that expressly disclaims any intent or obligation to update. These forward looking statements, except as otherwise may be required under applicable law.
I'll turn the call over to Ron Andrews Ronnie.
Hey, Thanks, Troy and welcome everyone to our conference call to discuss our fourth quarter 2001, and year end financial results and operating highlights joining me today is Mitch Levine, our Chief Financial Officer. Following our prepared remarks as always we'll be happy to take your questions today and won't be barely hearing a few slides, which we believe will be instrumental in bringing.
Clarity to our progress against our strategic milestones as well as provide a thorough overview of our Q4 achievements I hope all of you were able to either join in or listen to the replay of our Investor day that we had in December .
I'll use a few of the slides today to review our 2022 strategy. The key milestones for this year and provide updates on all our products during today's call for those new Dharma site two years ago, My team and I stepped in to reposition the company for the future.
And laid out a compelling strategy to bring a market to bring to market a portfolio.
That would complement each other and deliver answers to clinical questions to physicians and patients face today that large scale genomics continue to fail to answer.
We believe two major decisions still face every physician managing cancer patient, what's the best treatment option and is the therapy working for my patients.
The advancement of targeted immunotherapy options have been rapidly with a clinical problem pipeline full of promising drugs across all major solid tumors.
The options for mono or a communist oral therapy expand a new treatment paradigm has emerged we're understanding the tumor biology of each patient's tumor is becoming a central to answering these questions.
Confidence I can say that in two short years and in the face of a global pandemic T. Marker side has made several important strategic advances that have moved us rapidly to the forefront of precision oncology diagnostics and positioned us well to capitalize on the opportunities in this emerging paradigm.
The next slide is an overview of the determine platform strategy, that's really been our playbook for the last few years.
We came in with the ambitious goal of bringing four.
Our major products to market to.
To complete the patient care continuum by our third anniversary as a management team.
We remain on track to have the term Io for immunotherapy optimization, and Detroit, TX our comprehensive molecular profiling tests joined determine Rx to complete our treatment selection menu by the end of the first half of 2022 and by this summer. We also plan on launching determine C&I our blood bag.
Just only monitoring test as a research only product for post cancer treatment monitoring and various types of clinical trials.
This will fulfill our commitment to concurrently brain the complete menu to market and will begin to initiate the reimbursement process for these exciting products in the second half of 2022.
We're enthusiastic about our product offering and look forward to being the first company our industry to offer the complete testing menu needed by physicians to manage their patients cancer patients throughout the journey from diagnosis, all the way through to therapy monitoring.
And as you've heard by now we're not stopping there with our acquisition of chronic biomedical in April of 2021 regained a powerful task for transplant rejection monitoring there sure.
After CMS issued a blanket coverage decision for this technology.
Typically, citing our papers and patents last April we made the decision to allocate a small team to stand up a transplant monitoring business and rapidly tech transfer and validate the test and our Nashville CLIA lab, we remain on track to complete the work and have our lab developed tests completed for commercialization by the end of <unk>.
March we continue to believe that our decision to establish a transplant monitoring business will create significant revenue opportunities Bronco side. Beginning later this year as we hopefully getting access to coverage under the blanket LCD granted to our technology.
Platform partnership discussions are on schedule from their insurer as well and we've opened new avenues to generate non dilutive working capital for the company.
In our December Investor call I shared the milestone scorecard break.
For each product for 2022, and as you will see in the next slide we have identified the critical success factors concurrently, bringing our major products through the development process to commercialization.
We exited Q4, 2021 with momentum to execute against our milestones and we'll use the milestone slide throughout 2022 to ensure you our ambassadors have a good understanding of how we are progressing against the major milestones.
Booming with each of these milestones we will exit 2022 with all major products launched at least two with high value reimbursement of gaming revenue traction in two more with reimbursement dossier submitted awaiting CMS approval.
We will have dedicated global platform garners for oncology and for transplant ambient for clinical trial mode to gain the data necessary for regulatory submission for the term of Io in Europe , and very short transmit monitoring here in the U S.
Bottom line is this our ambitious strategy of developing and launching a full continuum treatment selection and blood based <unk> products will be almost complete in 2022 and the subsequent revenue growth is on the horizon.
Now for a short update on the progress in each progress area for.
But in term of Rx Q4 of 2021 saw returned to double digit quarter corner grow as the pandemic affected regions open backup and surgeries began to pick up again.
Teachers are still behind pre pandemic levels for early stage non small cell lung cancer surgery. This was welcome news for Orca side, our commercial team delivered a strong 152% growth in revenues for Q4 of 'twenty, one compared to Q4 of 2020 Needless to say this was a welcomed outcome given the.
Under the pandemic, which has slowed our revenue growth in the term Rx throughout 2021.
We continue to see solid quarter over quarter growth in the number of sites and physicians onboarding at 16% and 17%, respectively and now have a solid onboard and based on positions of 429 surgeons and oncologists that are trained to order and utilize our test I remain encouraged with the fact that we have.
You need to build an onboard physician base every quarter since we launched the product.
Clearly we saw the benefit of that large installed base in our fourth quarter sample volumes.
Q4, our tech transfer team successfully completed the transfer of the trauma Rx to our Chinese partner Bernie Brown and we're happy to report that the terminal Rx is officially on the market in China as of this call as Nick will discuss Omphacite earned an important milestone payments as a result of this accomplishment.
Normally the challenge of transforming a complex molecular profile and successfully validating for market readiness within 12 months should not be underestimated. The two teams worked heroically to very restrictive pandemic conditions and the successful outcome is a testimony to the incredible professionals on both sides of the Pacific.
On the determine I O Brien, we launched the test we launched the test in our early access program in November and late stage non small cell lung cancer and early stage triple negative breast cancer. We now have our seven early adopters sites up and running.
All of the medical oncologists in the Permian today have acknowledged the significant unmet need for precision immunotherapy biomarkers and have chosen to participate in the program because of the strength of our clinical evidence to date during the EAP. The physicians are getting a firsthand experience of the test and our pricing providing feedback.
Back on the real world utility of the test and optimizing immunotherapy, which is a challenge. They face every day for patients who are eligible for this treatment. There is also significant interest in this test and alternative tumor types, which suggests or the broad demand, but the test across solid tumors. So we will continue to pursue clinical stuff.
These to validate the test across many solid tumors.
<unk> borrowings from data from the program are this there is significant interest in understanding the tumor immune microenvironment across solid tumors. There is a growing body of evidence to support the tumor immune microenvironment or as we call. It at the time as a way to assess the biology of the tumor can provide valuable information to follow.
And trading positions.
None of the currently commercialized clinical cash used for treatment decisions today assess the microenvironment of the tumor.
There are now numerous papers showing that the microenvironment plays a critical role in response and resistance to immune therapy.
The term of Io has a growing and very impressive data set across four tumor types and continues to show the ability to effectively quantify the time and identified tumors that are poised to respond to immune checkpoint inhibitors. In Q4, we had abstracts in both Sydney and San Antonio Breast Conference is high.
The term of our precision and identifying ICI response in both <unk> and lung cancers are too early launch indications.
We now have over 1000 patient study and data published in the abstract or papers supporting the use of determined.
The next step the next steps are to make our time test broadly available across additional tumor types to pathologist and to treating physicians via full market launch of our non small cell lung cancer and triple negative breast cancer indications as well as to imply CMS for coverage starting with those tumor types, where we have strong.
Peter reviewed clinical evidence.
Now turned and determined TX our comprehensive gene panel for answering the question what targeted drug is not patients tumor eligible for.
In Q4, we completed the in Silicon design and received our first custom panel and began work on the actual development of the test. We are now in full clinical validation phase to validate performance across the various genes of known significance and to establish our test reproducibility.
Just like for transplant, there's already an existing LCD in place for next Gen sequencing test and our validation data should enable us to get coverage for this test for patients diagnosed with advanced solid tumors.
Turning now to determine C&I. The second question I mentioned, a moment ago. The decision space that remain unanswered for the majority of tumor types is this is the therapy working it provided early in disease cycle. This information could allow changes in therapy that we made in real time, it does potentially off.
Or better outcomes for more patients while they're companies beginning to offer tests that help identify minimal residual disease or <unk> D to answer whether patients are adequately treated by surgery alone. They can only serve a subset of patients whose tumors can be adequately remove our biopsy to obtain sufficient tissue samples.
These tests are complicated to execute because the EBIT personalized individual patients and required genomic sequencing of the resected tumor assessment prior to the monitoring tests being performed this takes time and the extra tissue required for these tests is not always available. Moreover, the fact is that the majority of.
Decisions in solid tumor treatment monitoring happen without a surgical resection of the tumor meaning these patients have no option today since the MLR D tests can typically not serve them. When we acquired chronic biomedical earlier. This year, we acquired patents and proprietary methods that allow a blood only report approach to therapy.
Be monitoring this allows immediate initiation of testing upon the starting therapy and interpretation test result, without requiring prior knowledge of the tumor genome our therapy monitoring product determines C&I was launched in the European Union and the summer 2021 for research use and we're on track to compete.
<unk> Tech transfer to the U S. In the first half of 2022.
As a reminder, our test is a blood based test and does not need respected tumor tissue.
Operating position and option for the majority of patients. They serve in fact, we not only saw the tumor tissue requirement issue determined C&I also provides results on disease progression at the second cycle of treatment and it is not limited to immunotherapy since we havent data as well on target and chemotherapeutic options.
Our ability to deliver this information this second cycle of treatment provides important disease progression information weeks earlier that M R&D or imaging to provide thereby allowing oncologists the opportunity startup more effective treatment regimen much earlier, so very exciting opportunity for Arca site to participate in.
The board of $6 billion global therapy monitoring market with a term of Io now in its launch phase our development team's efforts can now focus on getting more clinical studies for determined C&I under our belt. So we can submit for reimbursement in early 2023 and move this highly differentiated test closer to clinical market release.
In the U S.
When we offer determined C&I, we will then become the only diagnostic company to offer a solution to informed for REIT treatment selection upfront with a proprietary tumor immune microenvironment assay for immunotherapy amortization and a blood only monitoring of patients on that same treatment.
To detect progression early.
The Q4 update or determine C&I has hit this we now have more than 200 patients under study across several tumor types. We have a major paper published in cancer in late December showing outstanding results in ovarian cancer. This paper put our number of patients under study well over five.
Andre.
With many more papers to come in 2022.
Taken as a whole are monitoring capability rounds out a very robust offering that represents the only comprehensive set of tests to answer every question facing patients and the physicians who treat them throughout the patient journey. The bottom line is this while the pandemic has slowed other company's development efforts I am excited to say that we stay focused and are now Paul.
To deliver the full complement of test and our current oncology portfolio to the market over the next four quarters with these products launched and honor side will now enter a very large market market opportunity with a unique and proprietary capabilities based on our current momentum within the next 12 months all of the current tests and our.
Portfolio will be on the market, receiving reimbursement and driving the rapid revenue growth. We envisioned when we laid out our compelling strategy a few years ago.
Next I'd like to spend a little time on transplant.
Through the acquisition of chronic biomedical we acquired access there sure transplant moderate tests for early transplant solid organ rejection monitoring. This is an extremely large market of $2 billion in the U S alone with an established reimbursement rate of 2700 and <unk>.
$2800 per patient depending on the Oregon time give.
Given the repeat testing modality for monitoring of our transplant rejection. This is a recurring revenue stream and represents a very large and very exciting revenue opportunity Bronco site.
As discussed at our Investor Day call. It December we're on a fast track to launch an L. D T in the United States by the end of Q1 2022. So we can begin our efforts to gain access to the current reimbursement that is offered by CMS one of our key milestones for transplant is identifying and contracting with <unk>.
Large global digital PCR platform company, we're very close to an agreement and continue to work on non dilutive investment approaches for the development kit rights for parish sure to decentralize that technology into transplant transplant centers in the U S and in Europe , We know from our extensive market research that.
Providing transplant centers the ability to deliver same day turnaround time on important monitoring results as well as participate in the economics from the reimbursement is a game changer in this exciting market. We remain incredibly enthusiastic about the potential of donor derived cell free DNA testing deliberate cost effective precise.
Surveillance of transplant recipients, which will decrease premature ground loss, resulting in the need for re transplantation Consol Marine our differentiated approach is more specific cost effective and can provide same day turnaround time of important information for patient management as well as provide quantitative result for longitudinal boardwalk for the <unk>.
<unk> for the Oregon attributes only anchor sites theory sure can deliver for the foreseeable future.
In summary, I'm very excited for our team and our investors who supported us through the development phase of our comprehensive offering we're continuing to make progress on each product area or in a good market position with solid momentum toward our goal of launching a compelling and powerful portfolio of molecular diagnostic test assets with a large combined market opera.
Kennedy of well over $10 billion and when we get the portfolio launch web proprietary positions in some of the fastest growing areas of molecular oncology and transplant.
We continue to be amazed by the dedication of our incredible team, particularly during the relentless challenges of the pandemic and I'm incredibly proud of how organizations respond to it keeping all major programs on track I can say within Cromwell conviction than T. Marcasite believes we have the potential to transform treatment decisions in oncology and transplant.
And their unwavering commitment is evidenced now I'd like to turn the call over to Mitch to review our financials Mitch.
Hi, everybody thanks for joining our call.
<unk> revenues for the fourth quarter of 2021 were approximately $3 $6 million.
Representing an increase of 614% year over year.
Revenues for the full year of 2021 or $7.7 million.
Representing an increase of 535% year over year.
Progress with the term of our extra remains solid.
Fourth quarter revenues associated with the turmoil Rx or $821000, an increase of 152% year over year and an increase of 104% from Q3.
For the full year to turmoil Rx revenues were $2 5 million, an increase of 354% from the previous year.
In the quarter, we promised we processed 444 samples an increase of 54% over the third quarter.
As I have mentioned on prior calls we track adoption growth for the terminal Rx by the number of physicians, we have onboard or trying to use the test as well as by adoption in community cancer treatment centers and hospital systems.
In the fourth quarter pool of Onboarding prescribing physicians increased by 17% from Q3 and 202% year over year.
Similarly, ordering hospital account sites increased 16% from Q3 and increased 184%.
Year over year.
We received $2 $3 million in licensing revenues in the fourth quarter from licensing our proprietary molecular tests to third parties in Europe , and China, including a milestone payment of $2 million from burning rock Port technology transfer of the deep pharma Rx diagnostic test.
Our pharma services business generated $493000 in the fourth quarter, an increase of 180% year over year, and an increase of 75% quarter over quarter.
As we have discussed previously revenue in pharma services will likely fluctuate as we receive samples from Biopharma clinical trials.
We incurred we are encouraged by our ramping more diagnostic companies and.
And we would expect an increasing predictable level of pharma services revenue.
Cost of revenues for the fourth quarter was approximately $2 2 million, including $1 2 million.
From the cost of diagnostic tests and testing services, we performed for our pharma customers and $983000 noncash amortization expenses related to our two acquisitions.
Cost of revenues for the full year was approximately $7 5 million, including $3 $4 million of non cash amortization expenses of the acquired intangibles.
It is important to note that as we ramp our testing volumes, we expect to see continued improvement in gross margins.
Future quarters for both the terminal Rx test.
Research and development expense for the fourth quarter, 2021 was $4 $6 million as compared to $1 8 million for the same period in 2020.
R&D expense for the full year was $13 6 million as compared to $9 8 million.
One in 'twenty.
The increase in R&D expense was related to increased head count and investment in clinical trials as we continue to build out our pipeline of diagnostic tests.
General and administrative expense for the fourth quarter was $4 1 million as compared to $3 $4 million for the same period in 2020.
G&A expense for the full year was approximately $22 3 million, which increased versus the prior year.
Primarily due to personnel and related expenses.
During 2021, we incur professional and legal fees as well as the other acquisition and business development related costs, which we account for as one time items.
Sales and marketing expense for the fourth quarter was $3.3 million as compared to $1 1 million a $1 $9 million for the same period in 2020.
For the full year sales and marketing expense was approximately $11 $2 million.
The increase year over year was primarily attributable to an increase in head count and continued ramp in sales and marketing activities to support the commercialization efforts of our diagnostic tests.
Now I would like to turn to our GAAP and non-GAAP analysis.
We believe the non-GAAP , which are cash based metrics provide a more meaningful measure of our underlying operating performance.
non-GAAP operating loss as adjusted for the fourth quarter was $5 $3 million, a decrease of $859000 as compared to the same period in 2020.
GAAP operating loss as reported for the fourth quarter was $35 $7 million, an increase of $29 $4 million from the fourth quarter of 2020, the increasing GAAP losses actually due to a piece of good news.
We estimate that our forecasted revenues for determine C&I is higher than our.
Our original forecast when we acquired chronic biomedical about a year ago.
We now see greater revenue potential and lower commercialization, whereas for the term of C&I. So that increases the fair value of our acquired asset.
non-GAAP operating loss as adjusted for the full year was $33 2 million, an increase of $6 7 million as compared to the prior year.
GAAP operating loss as reported for the full year was $74 2 million, an increase of $44 $5 million from the prior year.
For the fourth quarter, we reported a GAAP net loss of $35 $9 million or 39 cents, a share as compared to $6 $3 million or nine cents a share for.
For the fourth quarter 2020.
For 2021, net loss was approximately $64.1 million or <unk> 72 per share.
As compared to $29 $9 million or <unk> 46.
<unk> per share during 2020.
We have provided a reconciliation between the GAAP and non-GAAP operating losses in the financial tables included with our cruising with our earnings release.
Turning now to the balance sheet as of December 31, 2021, we had cash cash equivalents and marketable securities of $36 $5 million.
We are considering several non dilutive forms of financing from potential strategic partners and capital providers as we navigate our business and capital strategy.
Net cash used in operations for the quarter was $7 1 million.
A level, which we expect to me given the approximately maintained.
That concludes my review of our financial highlights and I'll return the call Giovanni.
Thanks, Mitch operator, we can now open the call for questions.
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One moment, please while we poll for questions.
Our first question is from Mark Massaro with BT I G. Please proceed with your question.
Hey, guys congrats on the quarter, thanks for taking my questions.
I guess the first one maybe Ronnie can you expand on what you're seeing in the end markets. I think you know a lot of other companies.
Companies have talked about things opening up.
Maybe just the hospital access.
And what your expectations are.
And maybe if you could kind of characterize what you saw at the end of Q4 with with Omicron and where you are now in March we're almost done with Q1, but like what you saw in January and February .
Yeah, so happy to do that Mark.
I think we all win and you'd probably hear this from a lot of my colleagues.
It's just right now it's hard to predict when and where we're going to see markets open up what we did see in the fourth quarter and we had sort of forecasted this at our third quarter earnings call in early November but its surely played out through the quarter is that there was a lot of pent up demand for these early stage lung cancer surgeries and we started.
<unk> surgical suites open up obviously, the Omar Khan variant became <unk> was certainly scary it became more of a common cold and did not really.
It did not really impact a lot of the surgical suites as much as I think people thought it was going to and clearly what we saw was in people taking advantage of their paid up deductibles as they had at the end of December and we're eager to get these procedures done anecdotally lots of brands that are that are surgeons and they are they.
Basically you had not worked a lot during the summer and early fall and so they worked through Christmas and new year holiday. So we anecdotally heard a lot of those stories our reps in certain areas were able to get in to see.
Dogs I will say this mark we also did see and hear reports of positions.
Basically it's still having a hangover ups just from seeing reps from the summer end and that was still wanted to two I have those happen virtually so we were able to accommodate that of course, but we would like to see our reps, there's nothing better than a face to face opportunity for our reps to detail our products into <unk>.
The business, but.
So January always starts out slow and our industry people, but like I said, you spend the deductibles and a lot of the surgeries that are picked up in Q4 get done in November and certainly we saw a very strong December which to be candid I didn't necessarily expect in my career, typically ECM or you've seen a lot of holiday lull, but we didn't see that so January .
It was.
Was good for us, but it certainly wasn't as strong as December February of course had a fewer number of actual days for those for surgeries and then March is obviously remains on track with that same pace. So.
It looks like we're in a position to see a very steady.
Access to more and more positions and now, but we'll know more as we get through March typically in our industry and I can relate this back to my days of anatomical pathology with Clariant all the way through to the days of selling genome equipment genomic equipment.
Typically January slow February is a short month, but have some some good weeks, but March is really where things started to happen in Q1, So jury's still out but we certainly believe that we're on track for more and more access in 2022 than we saw in 'twenty one.
Okay, Great and then on your court determined Rx.
Grew 54% sequentially I was modeling, 11% so that was a really big beat.
Can you just speak to what you saw that drove the demand I don't think you've increased your sales force that I'm aware of but maybe can you just give us an update on where you are now with reps and where you think you might go over the next year or two.
Absolutely Mark the real testimony to the metric we've been using really since the beginning of the launch which was in the middle of the pandemic was this onboarding positions, which we knew that once surgery started back in onboarding position that found a patient there was early stage and perform surgery that was already <unk>.
Train would use the test and we saw that in Q4, we certainly saw the benefit of our over 400 what.
What I call install base of physicians and we certainly saw that and so we did not add the reps in Q4. We did we are in the process of adding three new reps that we will have 13 in Q1 of this year and actually we've already hired them. So we have 13 right now in Q1, so we will be.
We will be going forward with 13 reps for the year and the key territories, but we do we do believe that this onboard and physician number becomes more important as things open up.
In terms of the sort of the folks that are trained to use the test and as they have surgeries and are able to get their surgical suite opened they're able to run the tests. So we're very hopeful and bullish on that as we head into the middle of the year and certainly through the fall.
Okay great.
I want to move to transplant. So you indicated that you are planning to launch their ashore as an L. D. T. Later this month.
We also talked about you know.
You're sort of in late stage talks with a potential partner.
Can you just walk us through.
Are you planning that higher any of your own people or should we think of it entirely through a commercial partnership and then second part of that you've talked about you know liver will be the first indication and you're sort of on track with your Medicare submission.
But can you just give us a sense for when you think you can get.
Reimbursement for liver and then when do you think you can get reimbursement for kidney.
Yeah, absolutely we are going to launch at the end of March.
We will we will launch as the L. D T and with that launch we will start the process too.
Complete the samples that we already have in house for a liver submission to CMS.
We also have a line of sight for kidney as well our goal is to have both of those submitted to CMS before the end of Q2, obviously, we have already been in touch with CMS, but we arent sure you know the timing of our submission.
We think will be will be sooner than we thought but we arent sure is what will the docket look like at CMS and how quickly they will they be able to review our submissions, but obviously our goal and our hope is that with a 9100 day review that we would see reimbursement sometime in the fall.
Okay, Great I will hop back in the queue.
Yeah, and you know what Mark I didn't answer the platform question. So I owe you that let me, let me finish that I forgot.
The platform discussions are ongoing we are going to hire a small sales force to sell the L. D. T. We believe we can provide very rapid turnaround time, given our test has a digital PCR test and.
And so we are going to have a small sales force targeting key areas that are geographically adjacent to where our lab is and we think that will be a nice start for us, but our long term goal. As you know is to is to have a one or maybe two new platform partners, depending on how the how the non dilutive inverse.
But that they are willing to make plays out but the goal is to have both of those one or at least one of those maybe two of those nailed and announced in Q2.
Okay. Thanks Ronny.
Thanks Martin.
Our next question is from Mike Matson with Needham <unk> Company. Please proceed with your question.
Yeah. Thanks.
So I want to ask about I guess the term Io. So can you maybe just talk about how the early access program is going there and kind of what kind of feedback you're getting from the clinicians are using it.
Sure.
Right now we have seen some good steady used by the EAP physicians, we are collecting feedback on things like the report lay out do they like the report.
We changed the report.
We found out very quick my bet that the indications that we have which are non small cell and triple negative breast are not the only places people want to see what need help if you will in selecting patients for response. So we understand quickly that we need to think about not.
Only determine io as a as a predictor of response in non small cell and in triple negative, but potentially also look at marketing.
L D T for assessing the tissue already I'm, sorry, the tumor immune microenvironment and other tumor types. So we're certainly going to look at that as a way to engage more.
Tumor types and as a way to get more facilities up and going and may be engaged with our medical affairs team. So that we can begin to expand the clinical indications. So so far it's been a really positive response, it's incredibly additive to what they have today, which as you know as PDL, one and we're learning a lot about the task to wear off.
And candidly learning a lot about the need to have pathology involvement because the medical oncologist, while incredibly capable of selecting the therapy and knowing what therapy to slag. They don't always understand how these tools inform biology of the tumor and so we are going to began to weigh in on some programs to educate.
Jane and train our pathology as well so those have been the key learnings so far and again, we're early but it's been it's been a good launch and we're excited about where we are with the term Io at least in the two indications that we have clinically validated today.
Okay got it and then on to term Rx did you say that you completed the tech transfer to burning rock. So I think I heard you say that its commercial in China now is that right.
It is I think there is another part of the milestone that you're expecting there or something but 1 billion or is that right.
It is so yeah. It's a great question. We it is on the market. It's launched they are actually selling it. So we were excited for that that was as I said it's.
No I think emotionally for us it was a big victory because it was such a hard lift during the pandemic, but there was great energy on both sides to get it done and we were able to do it.
We did successfully complete the milestone however, there was in the combination made burning rock they needed to add a synthetic control.
So they didn't have to create their own controls, which allows them stronger reproducibility.
And in China, and so we as a good good colleague and good partner, we wanted to accommodate that because obviously, we'd like but there is not to be the only opportunity. We have together as a company as partners and so we accommodated that so we we are we have recorded a 2 million of the $3 million miles.
Sterling in Q4, and we will deliver that synthetic miles synthetic control in Q1, and so we are hopefully, it's obviously too early but we hope to make to be able to collect the cash and record that as revenue in Q1, but.
Q1 is not closed and we will have to weigh do we get to the audit to make sure that's applicable.
Okay got it.
One for Mitch So I want to clarify something I think I heard you say, so when you're talking about the cash flow from operations or cash.
Cash Consumptions right word, but we think he said it was $7 million.
In operations in the fourth quarter and did I hear you say that that was kind of the.
Right you expected for the rest of the this year for 2022 quarterly kind of rate or $7 million.
Yes.
It's the net cash burn so it is inclusive of our revenue et cetera, and so that's that's a level that we.
Hope to maintain throughout the year.
Around 77 million net cash burn Mike I can say this.
We understand the world is different today than it was six months ago, and and we have a fiduciary responsibility to our shareholders as well as to our internal team to to be.
A little more thoughtful of your mind and pig studies that we might have to put on the back burner for a while just to make sure that we manage cash a little tighter than we have in the past because we were in a full full court press. If you will since its March madness season to get all of our products to market as fast as we can and therefore, we really loaded up on <unk>.
Studies in 2021 and coming into 2022, depending on how the capital markets begin to either.
Settle down or not and what we want to be able to manage that that cash burn more appropriately. So youll see those those types of things come out of us this year and it may mean, we slowed some studies here and there but.
But we will we do plan to obviously deliver with our revenues growing we think we can manage the cash burn.
More effectively in 2022, especially given that we think the revenues will be more predictable with the pandemic behind us.
Okay got it thank you.
Okay.
Our next question is from David Westenburg with Piper Sandler. Please proceed with your question.
Hi, and thank you for taking my question.
That's on some good determine.
New numbers here. So it's obvious to me that need to combine profiling in I O.
How much do you anticipate physicians will order bulk determine io and and determined T acts at the same time.
Yes.
We actually think it's going to be a high percentage of folks that if they order.
Oh, I'm, sorry, if they order T X they will almost always order Io. We don't expect every Io order to come in with ATX ordering and the reason being there are folks that are using blood based liquid biopsy comprehensive profiling that don't need to send the tumor tissue to us.
But they still need to term of Io because as you probably know the blood based panels do not allow for <unk>.
Certain things like T and b, it et cetera, and so for us.
We are a nice adjunct if you will or a complement to the companies like garden in search of a gene you have the blood based versions of that but where there's tissue and it needs to be conserved that's where we think we will see the combination of determined TX into term of Io and as you imagine in our early in our earliest <unk>.
Indicators early indications of triple negative breast cancer and <unk>.
Most importantly, non small cell lung cancer as you know biopsies are sparse in non small cell. So we expect that either a blood comprehensive panel plus io will be used or they will send it to us because as you know from determined T X. We are going to have the we believe the lowest tissue requirement and the industry.
Tree for a large comprehensive panel Nio together.
Got it no. Thank you very much.
I know I realize it's still early but any thoughts too.
Order frequency of the 200 and 492 physicians that have been on boarded can you give us any kind of flavor for.
How long between Onboarding and actually ordering and then a continuation of marks question on in terms of like opening up did you see more ordering frequency.
In the back quarter of the year I mean in the back half of the quarter.
I'll stop there yeah, Yeah, we did see that.
And we saw that primarily I think.
Just anecdotally talking to folks is that they felt like that with the surgical suites opening in the scare of the omicron variant going getting lower that people were more eager to use their deductibles that were already paid for to go get their surgeries and we probably don't appreciate that as much in our industry.
As we should but obviously patients have to pay these out of pocket cost as if they're already paid off that most cancer patients have Max their deductible by November December than then they want to get the surgery. So that is one of the unique phenomenon of what we do.
Would say this that I do think that.
The 429 base, our install base are Onboarding base that we have most of these are community positions that was our target audience. When we went to market. So if you can imagine there's about 40000 early stage lung cancer patients each year.
That are eligible for our test some of those get Egfr first in the Egfr is positive they won't get to tomorrow Rx and so if you think about the total numbers that would be associated with those 400 plus positions, you're probably looking at maybe somewhere in the neighborhood of two to four patients per quarter.
<unk>.
That they would see.
And so we'll monitor that and more closely now that we're getting back to pre pandemic surgical levels, we'll have a better number for you probably at the end of Q1, or maybe Q2, but but we'll monitor that very closely as well.
Actually that was very helpful. So thank you very much I'll hop off.
Yeah.
Thank you thanks Nick.
Our next question is from Mason Carrico with Stephens. Please proceed with your question.
Hey, guys, thanks for taking them.
Maybe just one or two quick ones from me first.
Could you talk a bit about the primary ordering physicians for determine Rx and determine give.
Given that one of the indications for Io as long as their percentage of those onboard of dispositions that could also order the Io test.
Absolutely and that was always part of our strategy was to go after long because of Rx.
The target audience for our acts as the surge in thoracic surgeon first in the oncologist second and obviously been storm Io. It's the oncologists burst. So we believe that it's complementary and non small cell lung cancer and so we think that that will be helpful. For us as we go in to meet with our current position.
Base and looking forward to a what we would call a full market launch we're not quite ready for that we're still have the EAP base, but hopefully by the time, we are ready for Doug Detroit T X launch and we'll be ready for the full market launch of determine Io and then like I said once we get out there, we'll see how complementary it actually is but our.
Our projections and our belief is it's going to be very complementary triple negative breast cancer is a different story as you might imagine and so since today, we're calling on oncologists that and thoracic surgeons, we aren't calling on breast surgeons and we're not calling on medical oncologist that our journey.
Our specific to breast cancer, unless you get into the community setting a small community where you have a generalized who can do boat. So.
The T M. D. C type is a smaller market opportunity and so we will certainly go after it but we're going to if you go to places like Florida oncology are our Georgia oncology.
Across the Hall, you ended with you with the lung cancer Doc in across the hall is the breast cancer Doc so its easier in those larger practices to do a same store sell than it is if you're on a smaller community where you have to go find the breast surgeon and breast cancer arc versus the long long. So again more to come we got a small cells.
Forrest and so our focus will be on non small cell lung cancer and we believe that's where the biggest upside is for us and a rep from a revenue perspective long term.
Got it that's helpful.
For determine I own the early access program how is the operational side of that gone could you remind us of your expectations for turnaround time and have you been able to maintain that time during during the early access program.
So our turnaround time is less than 10 days, we have been able to maintain that so far obviously, we monitor that closely we have learned a lot. So there there will be and continue to be logistical tweaks to make sure that we have.
Better tracking of the sample once it leaves the position side or the hospital side our website.
Into our facility because the clock for our clients start when they put it in a package the clock for us can't start towards enters the door because we can't run it if we don't have it. So our team has been working on ways to attract at know what's coming in and to plan the various operational cycles to access.
To access the sample and then put it in the queue for running so so far so good but obviously the volumes are low right now to get us some <unk>, but as we ramp up the good news I can say and I can say this with incredible confidence.
The person we have running in the team that's running that lab. They are world class. They they've been with me and our team for a long time and they were the stewards of the highest volume immuno Histochemistry lab single day volume.
The country for years, when we were at Clarient and ran.
They outperformed all the competitors, including quest and Labcorp. So we have a lot of confidence in jaap and his team and their ability to deliver their turnaround time with the greatest amount of operational efficiency.
Got it that's it from me thanks, guys.
Thank you take care.
Our next question is from Paul Knight with Keybanc. Please proceed with your question.
Brian as you look at the upcoming Ash.
We're going to see go commercial what are your thoughts on pricing.
Yeah. So you know determined T X is pretty well said because the current.
AEP or current reimbursement for those larger panels today is around 24, $2500 and that's kind of what the industry is getting now but that blanket LCD.
If you look at.
For instance, if you look at the transplant assay. Those are already said at 2700 for kidney in 2800 for heart and we hope somewhere 2800 for liver once we get levered in front of them. So those are nice.
And really nice gross margins for us.
One we arent sure about is obviously determined Io when you look at the health economics, Paul of a test that can identify response and non response to into a drug tight we're only 15% to 25% of the people respond or patients respond with durable response.
You know you can you can probably do calculations quickly that the health economics are strongly in favor of determine I O. So we will go with the dossier much like we did with the term of Rx and determine rocks. As you know is in the low three thousands and we hope to get somewhere in that range for determine Io.
We've got work to do there to get that in front of CMS and documented.
Okay.
How about C&I.
Yes, C&I is already there is already a blanket LCD for C&I in.
There's a billboard for immunotherapy monitoring Theres, a blanket LCD somewhere in the 'twenty four 'twenty 500 dollar range. So you know if you look at.
C&I with three assays you can imagine.
You know you can somewhere we hope to get somewhere between the 2500 $4000 per patient event.
In the initial phase and then obviously each month for depending on the Oregon type it'll be seven or four times in year, one and then four times in year, two and four times in year three so we.
We calculate Paul for modeling, we calculate somewhere between 40 and $50000 per patient over a three year monitoring wives.
Okay.
Thank you.
Thank you Paul.
Our next question is from Thomas Flaten with Lake Street Capital markets. Please proceed with your question.
Hey, Thanks for taking the questions guys back to the question about the installed base Ronnie.
429, do you have a sense of.
The 40000 early stage lung cancer patients what kind of coverage you have of that end and as the new reps get out there with 13 reps how much of that market and capture with a relatively small sales force.
Yes, it's great question right now.
It's somewhere.
And this is really a part of the question and she's not on the call. Today. So maybe we can get her to follow up with you, but some are under 10% of the total available more total served market is being served today with our current the current sales force and the surgeons that we have on board. So.
So we've got we've still got plenty of upside in terms of new surgeons in new docs that we can onboard so that's the good news.
So we'll again, we'll continue to monitor that and we'll get more specific answer from pod months. She can she can give you those data.
And then sticking with the sales force as and I think you mentioned in your prepared comments that you had the 13 that you would stick with them throughout the year.
So is the implication there that once you launch Io and TX.
That footprint of 13 will stay or is there a a.
This expansion that will take place in the field team to support those launches.
Yeah, Thomas we're looking at two avenues, one is obviously to expand our own sales force and that is our approach we can take and certainly.
If the if the markets calmed down a little bit unclear off and we would probably forge ahead in her own team. If not then we might look to some of these platform partnerships to get ahead of the platform launched to use some of their sales team is lead generators. So theres. Some some creative things we can do to create.
Engagement with physicians.
Maximize our 13, we have but more than likely as you know we're gonna have to tap.
Salesforce is going to have to reach somewhere between 20 to 25 reps.
In early next year, so that we can maximize.
The performance of determine Io and T X as Io gets reimbursement.
And then just one final one and I know the data is limited but have you seen from the early access program with I O have you gotten any feedback that treatment decisions have been changed on the basis of the Io results.
You know.
Since since it's this early in the day that we're still in the infant stage stages of the data being published across multiple tumor types. What we are hearing and what they're using it for is really to look at case cases, where you have a PD L. One that's in determinant and they want to give them.
Patient immune therapy, and we can identify that there's a high probability of response.
We anecdotally the doctors feeling much more confident in giving that immune therapy because of our result.
Got it appreciate it guys. Thank you.
Thanks, Don.
As a reminder, if you'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue.
Our next question is from Bruce Jackson with the Benchmark Company. Please proceed with your question.
Good afternoon, and thank you for taking my question.
It shows the pain.
So to round up the.
There sure discussion you've got the clinical data and reimbursement in place.
Can you tell us about physician adoption and are there any.
Clinical guidelines or educational programs that need to happen in order to get adoption.
Yeah. The good news for US as you know there's already too you know very competent competitors in the market selling in nexgen sequencing central lab product and they've done a terrific job of getting out and beginning the education for US we think our education is going to be centered around educating.
On wine digital PCR is a more accurate result, why absolute quantification matters. So that you can monitor small log would be changes as a predictor of potential organ failures. So for us it's more taking what's already been done and really narrowing it down to the differences between our.
Our technology and our capabilities and what's already being used in the market and as you know the good news is that even though those two companies have done very very well. They still don't you know we're still about 60% of the market that is not using molecular monitoring for for donor with <unk>.
<unk> and so we still think there's a lot of I call Blue Ocean opportunity to go in and educate so much like we did Bruce with oncology with our virtual programs, we're going to do a very similar virtual program with with transplant and we certainly believe that when we're able to name the platform partner I think you'll you'll.
See that the power of that partner will be to touch and reach more and more physicians as well as these transplant centers.
Okay.
And then a question for Mitch on burning rock after you get the last milestone payment.
What's the a continuing revenue stream, that's going to come from that agreement in terms of licensing or are going to be selling those some synthetic kelsen controls to them as well.
Yes, we will get some revenue from the materials that they'll purchase from US and also we'll get a royalty stream of double digits low double digit royalty stream from every time they sell one of the samples. They began commercializing in October and began ramping up really right about now.
Okay, Great. That's it for me thank you.
Thanks Bruce.
We have reached the end of the question and answer session and I will now turn the call over to Ronnie Andrews for closing remarks.
Okay, well, thanks, everyone for being patient today, obviously lots to talk about we appreciate your support and I certainly want to always acknowledge the amazing effort of our employee base. So thanks, everyone have a great day.
This concludes today's conference and you may disconnect. Your lines at this time. Thank you for your participation.
Yes.
Okay.
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