Q2 2022 Biodesix Inc Earnings Call
Yep.
My name is Joanne and I'll be your conference operator today.
At this time I would like to welcome everyone.
To the biotech Essex.
Second quarter 2022 earnings conference call.
All lines have been placed on mute to prevent any background noise.
After the Speakers' remarks, there will be a question and answer session if.
If you would like to ask a question. During this time simply press star followed by the number one on your telephone keypad.
If you would like to withdraw your question again press the Star Starwood.
Chris Brinci you may begin the conference.
Thank you operator, and good morning, everyone. Thank you for joining us today for a discussion of Biodot fix second quarter 2020 to business highlights and financial results.
Leading the call today will be Scott Hutton, Chief Executive Officer, He will be joined by Robin Harper Kelly Chief Financial Officer. After the prepared remarks, we will open the call for Q&A.
An audio recording and webcast replay for today's conference call will also be available online as detailed in the press release announcement for this call.
Today, we issued a press release announcing our business highlights and financial results for the second quarter of 2022.
A copy of the release can be found on the Investor Relations page of the company website.
Actual events or results may differ materially from those projected as a result of changing market trends.
<unk> demand and the competitive nature of biodiesel industry.
Such forward looking statements and their implications involve known and unknown risks uncertainties and other factors that may cause actual results or performance to differ materially from those projected.
The forward looking statements discussed on this call are subject to other risks and uncertainties, including those discussed in the risk factors section and elsewhere in the company's annual report on Form 10-K for the year ending December 31, 2021 filed with the Securities and Exchange Commission on March 14th 2022.
As well as subsequent quarterly reports on Form 10-Q filed during 2022 as applicable.
Additional information concerning factors that could cause results to differ materially from our forward looking statements are described in greater detail in the company's press release issued today and in the company's filings with the SEC.
With that I would now like to turn the call over to Scott Hutton, Chief Executive Officer Scott.
Thank you Chris.
As a reminder, bioethics is our patient centric mission driven lung disease diagnostic company with a mission to unite biopharma physicians and patients to transform the standard of care and improve outcomes with personalized diagnostics.
In our last call in May we were excited to share that towards the end of the first quarter. We were experiencing strong sales growth in our core long diagnostic testing driven in part by sales access returning to pre pandemic levels.
I'm thrilled to say that that strength continued through the second quarter. We finished Q2 with total revenue of $11 million, which includes core long diagnostic testing revenue of $7 3 million, reflecting a very strong 52% year over year growth and 56% growth or.
For the first quarter of this year.
This was a record quarter in terms of revenue and delivered test volumes.
As we begin to put many of the challenges of adapting to a post pandemic world behind US. We are confident that this momentum will carry through the end of the year and beyond.
Stepping back for a moment, we believe we have one of the most comprehensive suite of diagnostic test with five blood based test available to support clinical decision, making across the lung cancer continuum from initial risk assessment of lung nodule with notified lung testing strategy to post cancer diagnosis treatment guidance.
And monitoring with the IQ lung testing strategy.
The notified long testing strategy consists of two blood based proteomics test notify CDP and notify XL too which are used by physicians to assess the risk of malignancy of a lung nodule.
This helps prioritize higher risk nodules for invasive diagnostic procedures, while also helping avoid unnecessary procedures on very low risk nodules.
In June we announced that Medicare began covering the notify CDT lung nodule test at a price of $649. This is a significant milestone for <unk> and insurers access and availability to notify testing for patients with lung nodules.
Last year at this time, we had four test three of which were covered by Medicare just one year later, we're not only launched a new test, but we have Medicare coverage for all five diagnostic test.
Overall as physicians gain more experience with our notified lung testing strategy. We continue to receive positive feedback reflected in increased adoption, which we believe demonstrates the clinical relevance and utility of these test and validate that we are only beginning to realize the full potential for notified want to chase.
<unk> the standard of care in lung nodule risk assessment.
In addition, we also announced a collaboration with Philips to incorporate the notified lung test into the Philips lung cancer Orchestrator patient management system.
We've observed a growing demand for digital integration in hospitals as an important factor to streamline logistics and create diagnostic efficiency by incorporating proteomics radiologic and patient history data in one place to support treatment decisions.
We believe integrating our notify test into the Philips lung cancer Orchestrator will help facilitate digital ordering of the test following detection of a lung nodule with the ultimate goal of improving patient care and outcomes.
As the integration progresses, and rolls out we will provide updates over the coming quarters.
Moving to our IQ lung test, we started the year with a full commercial launch of the <unk> NGF test, increasing our treatment guidance portfolio to three blood based tests, including the genus threat targeted DD PCR genomic test and the various <unk> proteomics test.
Offered as options within IQ lung testing strategy. These tests are used to inform treatment decisions and monitor for the rise of resistance mutations while patients are on therapy.
The addition of NGF testing means we can now offer physicians the option to detect a broader range of less common genetic alterations.
<unk> test is still early in its product launch, but we're pleased with the feedback and interest not only in the Genesis Ret NGF tests, but also the full portfolio of IQ long treatment guidance testing.
We continue to support and invest in data generation to demonstrate and reinforce the clinical utility of our tests as well as looking to sign meaningful collaborations to further drive adoption and growth of our entire core lung diagnostic testing suite.
For example in May we presented a poster assessing the impact of the notify XL to test in a real world clinical setting at the American Thoracic Society International Conference.
Data presented highlighted the impact of the noted by XL to test on clinical management decisions and investigators showed the notify XL to test was able to support a decrease and chest imaging outpatient clinic visits and additional invasive procedures without misclassified benign lung nodules.
At the upcoming International Association for the study of lung cancer 2022 World lung meeting. This month, we will be presenting data demonstrating that the various stress test is predictive of progression free survival and overall survival in patients testing low or negative for PDL, one when treated with immune checkpoint.
<unk>.
We know there is a need for additional testing beyond PD lone alone to better identify who is likely to respond to immunotherapy and we believe this data shows that <unk> has the potential to play a role in this decision making.
Beyond this we have multiple other clinical studies being conducted and we expect the upcoming full data readout and publication of our Oracle study of the notify XL to test to further support our sales and reimbursement efforts for the test.
Additionally, we look forward to providing further updates on our ongoing insight study for the IQ lung testing strategy the.
The altitude study of our notified test and the Beacon study for primary immune response or immunotherapy guidance test and our further development efforts for our pipeline risk of recurrence test.
Moving to our biopharmaceutical partnerships and services business, we reported revenue of $7 million for the quarter, which continues to rebuild and rebound more slowly than we would like.
While we are beginning to see enrollment pick up from the serious disruptions of the pandemic, we have seen numerous studies extended.
We've continued to experience challenges in logistics delays and sample shipment and therefore have not delivered on the timelines we originally anticipated.
Yet we continue to maintain a backlog of prospective and retrospective studies that we plan to work through over the rest of this year and into 2023.
Adding to our confidence here is that we continue to receive positive feedback and interest in the bioethics diagnostic cortex proprietary AI and machine learning platform and our broad multimodal and multi omics service offerings.
Our ongoing efforts in advancements and explain ability and transparent AI will provide unique insights and clarity to health care professionals and research teams by providing the ability and potential to identify key biological mechanisms driving specific outcomes for patient subgroups that may require a different approach or different tree.
<unk>.
Overall, we remain confident that in the near future, we will see growth in revenue from increasing demand for our service offerings.
Lastly, we continue to look for ways to broaden our product offering enabling us to capture a larger percent of the $29 billion total addressable market.
In June we announced a new research agreement with one of the top cancer centers in the U S Memorial Sloan Kettering Cancer Center <unk>.
Our existing partner bio Rad laboratories to help develop a new novel minimal residual disease test.
Also we plan to utilize our array of genomics proteomics artificial intelligence and machine learning capabilities with the aim of developing additional biomarker assays in collaboration with MSA.
We've said it before and cannot reiterate enough lung cancer kills more people in the U S annually than the next three cancers combined and time matters when treating these patients.
We pride ourselves on bioethics ability to discover develop and commercialize a broad range of tests that can quickly provide critical results and insights back to health care professionals with best in class testing turnaround times for all of our tests to help improve patient care.
With a comprehensive suite of tests, all with Medicare reimbursement and the ability to offer diagnostic solutions across the continuum of care. We believe we've just begun to scratch the surface of this $29 billion market opportunity and that we have both the team and the products to drive growth in 2022 and beyond.
Now, let me turn it over to Robyn to review the first quarter 2022 financial performance Robin.
Thanks Scott.
We're pleased with our second quarter total revenue and core lung diagnostics revenue, which exceeded consensus estimates.
Overall total revenue was $11 million compared to $11 9 million for the second quarter of 2021 and represented an increase in revenue from our five core long diagnostic tests and offset by an expected decrease in COVID-19 testing as testing move more towards agile rapid antigen testing.
Our second quarter core long diagnostic testing revenue was $7 3 million from total volumes.
<unk> thousand 600 tests versus $28 million from total volumes of approximately 4000 tests for the second quarter of 2021.
This represents 52% revenue and 40% volume growth over the second quarter of 2021.
And 56% revenue and 30% volume growth over last quarter.
The growth in test volumes, primarily driven by our notified cdti notify XL two tests and the recent launch of the Janie and Jack.
Biopharmaceutical services revenue was <unk> 7 million compared to $1 2 million in the second quarter of 2021, a decrease of 29% as.
As we've said before this business can fluctuate due to several factors, including contract timing and project execution, but in this instance reflects the continued impact of the pandemic has had on extension of prospective clinical trial timeline and shipping samples needed to complete the project and recognize revenue.
We ended the quarter with $7 8 million contracted but not yet recognized $2 2 million of which is currently on the balance sheet as deferred revenue as we have already collected the cash.
Covid testing revenue was 3.0 million in the second quarter 2022 versus $6 1 million in the year ago quarter, and anticipated decrease which we discussed in our May earnings call.
The increase in the second quarter over the prior quarter was due to a contract with the state of Colorado to handle the surge in testing required due to the army <unk> seen over the last couple of months.
This contract expires by the end of August and should not be modeled to continue will contribute significant revenue into the second half of the year.
We have consistently projected that COVID-19 testing as a percentage of revenue would drop off significantly as compared to the prior year as testing shifted to readily available wipe it at home antigen testing.
We expect this dynamic will continue through 2022, and therefore do not expect any significant COVID-19 revenue.
The latter half of 2022.
Gross margin as a percentage in the second quarter 2022 was 64% versus 40% in the second quarter of 2021 and 51% in the first quarter of 2022.
The improvement in gross margin was primarily a result of growth in our core long diagnostic business and Medicare coverage for our modify CDT test.
We expect the overall gross margin as a percentage to remain approximately in the mid sixties, perhaps with a small increase over the course of the year as a result of several factors, including the decline in Covid testing revenue expectation, which has a lower margin than lung diagnostics plus the benefit of Medicare.
Coverage for notify CDT tests, and the expanding scale of our Gen <unk> testing.
Overall operating expenses, excluding direct costs and expenses were $18 6 million in the second quarter 2022.
<unk> to $15 4 million for the same period of 2021.
The year over year increase seen in the quarter was primarily driven by increases in sales and marketing expense.
As a cost maintaining measure we effectively kept the size of our sales organization from the first quarter of 2022, but the main difference in expense was that the team had access to physicians for in person meetings, requiring travel for the full quarter versus limited access in the first quarter.
While the impact of physician access and deflation contributed to an increase in travel costs within our sales and marketing expense. The sales team delivered increased productivity over the first quarter.
Operating expense for the second quarter 2022 includes $7 4 million in non cash expenses.
<unk> stock based compensation as compared to $2 one move during the second quarter 2021.
The net loss for the second quarter, 2022 was $15 8 million compared to a net loss of $11 $4 million.
The second quarter of 2021.
The increase in net loss is attributable to the restructuring of our contingent consideration arrangement with integrated diagnostics. The decrease in revenue from COVID-19 testing in 2021 and the growth of the commercial organization in 2021.
Turning to our overall liquidity, we ended the quarter with $28 7 million in cash and cash equivalents.
The $5 1 million and restricted cash an increase from prior quarter, primarily due to net proceeds of $14 5 million from our private placement and aftermarket offerings and net proceeds of $12 8 million from the securities purchase agreement entered into with <unk> capital LLC.
The offset partial repayments of our SBB 2021 term loan and the milestone payment of $3 4 million and $2.
Respectfully.
Yes.
In addition to the successful liquidity enhancements during the second quarter 2022, we have taken a variety of steps to access to additional funding and reduce our cash burn all while focusing on continuing to grow revenue in 2022 and 2023.
We will continue to focus on liquidity enhancements that will enable us to maintain focus on revenue growth and accelerated our time to profitability.
As of June 32022, the company had remaining available capacity for share issuances of approximately $29 9 million under our aftermarket facility and up to $49 2 million under the LPC facility.
In 2022, you will invest in projects and hires that result in near term revenue growth, while implementing additional cost savings measures that will impact the second half of 2022 and 2023.
Turning to our outlook for 2022, we are reaffirming our previous guidance and anticipate 2022 total revenue to be between 37 $5 million and 39 5 million.
Let me turn it over to Scott Scott.
Thank you Robyn.
As you've just heard its been a busy productive and rewarding quarter I'm extremely proud of the <unk> team and excited for us to continue to grow as we progress through 2022.
The bioethics team remains steadfast in our commitment to one improve the lives of patients impacted by lung disease.
To integrate bioethics testing into physician practices, providing all the testing needed for our lung patient through the continuum of care one patient one trusted company multiple test personalized results.
<unk> discover and develop new diagnostic tests like our risk of recurrence test primary immune response test and the newly announced molecular minimal residual disease test.
For <unk>.
Lead the way with AI explain ability and transparency.
Five conduct numerous clinical studies to demonstrate and reinforce the real world performance of our test and six grow and expand our biopharmaceutical partnerships to aid in their research drug development clinical trials and development of companion diagnostics.
In closing I'd like to thank all bioethics teammates for their dedication to the Bioethics mission vision and culture, which revolves around our collective commitment and daily contributions to positively impact patients lives with that I'll turn the call over to the operator for questions.
At this time I would like to remind everyone in order to ask a question Press Star then the number one on your telephone keypad, we'll pause for just a moment to compile the Q&A roster.
Your first question comes from the line of Brian Weinstein with William Blair. Your line is open.
Hey, guys good morning.
Hi, Brian .
So we start to stall.
Some questions on the guidance in particular can you help maybe break that down a little bit between the.
Core around the Covid in the Biopharma, there's obviously a lot of moving pieces Robin I think you talked about COVID-19 really trailing off not sure how to think about Biopharma and then on the core alongside.
What that would look like I mean, it would appear to us that given the momentum that you guys are seeing it sounds like access is pretty open.
Talk about that if you want certainly but.
Now the CVT reimbursement coming in at a higher level than I think what we would have anticipated, which you might get that core lung franchise should have some pretty good momentum behind it. So can you just talk about how you thought about all of that with with the guidance and breaking that down for us.
Sure Good morning, Brian .
Yes, well, obviously, we're very pleased with the.
Gross momentum in the core loan diagnostics and with the.
Price for notify CDT.
We do expect to continue to have strong growth, but I think as I mentioned earlier we've been.
Very cautious about adding new heads in growing the size of the organization. This year trying to maintain or reduced our expected spend and burn which could potentially temper.
Some of that higher level of growth.
Versus if we just continue to wholesale expand the sales team.
<unk>.
From Covid and Biopharma.
We expect COVID-19 to drop off.
Due to the expiration of the contract with our state of Colorado partner.
And with the Biopharma.
Delays in shipping and extension of the timelines for those studies.
We sort of look at Covid and Biopharma is offsetting each other.
We think with our our lung diagnostics, we're on track as we've talked about over the course of the year.
And with Covid and Biopharma somewhat offsetting each other.
That's how we got and remain at our revenue guidance of $37 five to $39.
Yes, it just feels as if there may be some conservatism thats built into that core language.
I guess I understand.
Just given.
Prior uncertainty.
And you guys just kind of getting back on your feet a little bit.
An appropriate characterization that there's some conservatism that's sort of built in here.
Because again I would just given the higher CVT.
Reimbursement than what we would've thought and the momentum that youre seeing that it would seem that those numbers could could actually be a bit higher I just want to make sure that there's nothing that you are seeing in the end market, that's concerning or anything like that that would kind of put a lid on that growth or it's just conservatism being.
Just given what we've seen over the last couple of years.
Youre absolutely right, Brian it's conservatism, we're trying to plan.
And anticipate that we could potentially have another COVID-19 wave that sneaks up on us.
<unk>.
What we've learned over the last couple of years as nobody really can predict COVID-19 or how it impacts hospitals and physicians in their general population. So yes, there is absolutely conservatism built into the lung diagnostic forecast okay.
Okay. Thank you and then on.
On the loan portfolio.
Scott maybe you can talk a little bit about the sales cycle, there what youre seeing in terms of.
A physician willingness to engage with you guys and how long it takes to kind of close an account and what kind of utilization youre seeing youre not providing physician metrics that you are providing test volume, which we appreciate certainly but can you just talk about.
Sales cycle, how long it takes to close people kind of just feedback that you're hearing in general.
Yes, Thanks, Brian Great question as a reminder, we launched notify <unk> and notify CDT.
Both right into the pandemic headwind.
So the way we look at this as we went into Lockdown. We launched these two products we were doing the best we could remotely so now with our returning to our pre pandemic state of access.
Out there really educating and informing physicians on these two new products in many cases, we're introducing them to bioethics in our full portfolio of products and test capabilities.
We are being received and welcomed exceptionally well and as <unk> seen it results in the strong and significant growth we've experienced.
It really depends from our individual sales rep perspective on the prior history experience with the bioethics sales reps pre pandemic in some cases as youll recall.
We're out introducing ourselves because we've expanded the sales force significantly.
Pre IPO.
We stated that we would double the size of the sales force in 2021, we did that.
We continue to focus on expanding the sales force given the current market and economic environment, We're more mindful of where we expand and when we expand and we prioritize those areas that are underpenetrated with a high incidence and prevalence of lung cancer, where we think we can go in and make a significant pause.
<unk> impact in patient care with the major society meetings.
<unk> Pulmonologists coming up in the fall, we think we've got a great opportunity to continue to increase those face to face interactions and if you think about it when I state that we launched notify CDT and <unk>.
Prepay are going into the pandemic headwind, we have not attended chest.
Since the launch of those two meetings in person. So we're looking at this as a huge opportunity to continue to build on the momentum that we've got already.
Is that helpful. Brian .
Yeah appreciate that and then one last one for Robin Robin can you just talk about operating cash flow expectations for the year, obviously youll have access to.
Different sources of.
Of capital so.
The financing side, but just in terms of the cash flow from operations or how should we think about the burn for the full year there.
Okay.
Yes.
We anticipate as our revenue grows obviously operating cash flow will improve in our burn will reduce across the year.
Noted in the in the remarks today that this quarter included $7 million of noncash expenses.
I believe I noted last last earnings call that due to the changes in our debt structure. The reorganization of the Indy milestone payments and all of the other movements. We've made we had more expense hitting the interest expense line.
And so we saw that for sure in the second quarter and will continue to see that as we move forward.
Through the rest of this year and into 2023.
We plan to utilize the.
The liquidity options, we have over the rest of the year and into 2023.
We also will continue to look at other options.
And other facilities that could further enhance our cash position to get us to cash flow breakeven.
Okay, Alright got it.
A bunch more but.
We'll deal with those offline. So thank you guys for taking the questions.
Your next your next question comes from the line of Max Masucci with Cowen Your line is open.
Hi, Thanks for taking the questions.
Great to see the continued momentum in the lung cancer diagnostics business.
So first one.
Based on today's release commentary from prior calls, yes, it's safe to say that XL too in the CVT volumes continue to ramp nicely.
Curious is there any detail you can provide around the <unk>.
Amount of notify CVT volumes.
You were processing and you are taking in before the Medicare coverage hit but not getting paid on.
And so.
With the CVT reimbursement is starting to flow and during June going forward I'm, just trying to understand if there is potential for a near term revenue boost if you do start getting paid on some CVT volumes that you have that you have been taking in previously but not getting paid on prior to the coverage one.
Good morning Max.
Yes, we're very pleased obviously with the Medicare coverage and the pricing that we received we have received some payments on tests that we brought in prior to the coverage.
And through as we move through the appeals process.
As with Medicare, you're never 100% certain how.
How all of the claims volumes and the timing of those will flow. So we're not projecting.
Any any major backlog or large numbers here, but just really looking to the future and projecting.
Full coverage at the test at six.
649 moving forward.
Okay great.
Even before CDT are in Medicare coverage.
Understanding that it was frequently being ordered in tandem with XL too, but maybe can you just remind us what the frequency is up.
Of both CVT, an XL to being ordered together universes on a standalone basis.
Then just given the bundled approach of the risk assessment strategy.
How do you expect the notify CVT Medicare coverage to influence the frequency of XL to ordering and just that bundled type approach.
Hey, Max Great question, Yes, as we stated in the past what we've seen as physicians become comfortable and knowledgeable on the benefits of notify testing is both tests being ordered together physicians really see both of the benefit of a rule in test in a rule out test and so with notify.
CDB and run first.
It really falls in line with physicians thinking right as they're trying to find those patients with a likely malignant nodule. So that they can intervene we all know that since we're dealing with the deadliest of all cancers early detection in diagnosis increases the likelihood of a positive outcome.
So with a with the <unk>.
Positive or likely malignant result, those positions then no to intervene at that point in time, we do not run the exel two tests because there is no need so we've seen them ordered predominantly together and then it really just depends upon whether XL to is run and those percentages will vary based upon each.
Individual physician practice, and how theyre targeting and selecting.
Patient populations, we do anticipate and expect coming out of the pandemic because physicians told those at risk patients to stay away and stay healthy as they come back out they're prioritizing the high risk patients and so when you referenced the Medicare coverage for CDT, We think there is upside.
And a positive impact as we see more utilization.
We're positive likely malignant test results for for notify CDT.
Great.
I appreciate that color and maybe one final question for for Robin just around Biopharma.
Is there any update or detail around just the size of the biopharma backlog and where it stands or even maybe the growth in the Biopharma revenue backlog is if some of the conversion has occurred a bit yes.
Slower due to factors that are not.
Specific to <unk>, we've seen it for many other companies playing out detail around the size of the backlog.
Growth in the backlog and then maybe even the percentage of the backlog that's coming from prospective versus retrospective studies.
Sure happy to.
We currently have $7 8 million.
In backlog currently signed contracts that are not yet recognized revenue.
We are pleased with that number and really pleased actually with the funnel for contracts.
Number of contracts and the size of the contracts that are under negotiation.
And moving forward.
Well it gives us confidence in.
Our long term biopharma business.
Youre exactly right that the conversion factor is really hard to calculate right now due to the outside factors.
We have three timeline tiers that are sort of pre COVID-19. The two years of Covid and now hopefully what is post COVID-19 and.
They really all are very very different so it's hard to compare each other.
The larger portion of the backlog is in prospective studies.
The retrospective studies tend to be shorter timelines because the samples are already collected.
The biggest factor for us in getting those done is sample shipments. So we've mentioned and I've seen others mentioned as well delays in getting samples in the door. So that does push off some of the retrospective projects from being completed.
But.
The larger portion of our of the business right now is prospective.
Any any delays or.
Extension of timelines really does impact.
Really it does impact the <unk>.
The revenue in the current quarter.
Great Super helpful. As always thanks again.
Your next question comes from the line of Kyle mixing with Canaccord. Your line is open.
Hey, Thanks, Congrats on the quarter, so Rob I want to start with the CPT reimbursement 649 solid rate.
It's not on the CMS AT&T list at least when I last checked I guess, maybe it will be an option for CVT. Obviously many of your tests have been granted Danielle D status and enjoy those higher payment rates that could CVT joined that group and if so when could that happen.
Great question, Kyle and good morning.
There is a potential for a DLT.
But I would not expect an increase in the price.
For <unk> LTE category, a which is CDP where to receive that status and.
That's the category it would be under.
The price for the test.
For the first nine months is actually the list price on the FERC test has offered and that list price for us is $649.
So we actually did receive our original list price from.
From Medicare already so we're already above where we had expected to be so.
I would not expect any any change to that question.
And I also can't really comment about <unk> timelines.
If we were able to get that status.
Sort of at the at the Mercy of CMS.
Okay, alright, thanks, so on gross margins mid <unk> through the second half of the year.
Does that basically mean that the fourth quarter gross margin it could be like flat at <unk> levels I'm, just wondering like why that would be just given.
You would assume volumes would increase you have the reimbursement here in the back half. So maybe could you just walk through the puts and takes Robyn gross margins.
Sure I would expect a couple of points.
Uptick so.
But just not major increases.
In the mid <unk>.
Mid sixties.
That's up to the 67% by the end of the year I think it makes sense.
The biggest drag right now on gross margin is the jet.
<unk> NGL launch.
As with every test as Youre ramping and scaling getting to scale is really.
Critical factor for.
Strong positive gross margin contribution.
Okay that was great and then just thought it would be meaningful various rat was found to be predictive of PFS and OS could you just walk through the path to develop.
Ill give eris rod companion diagnostic and I'm wondering if the biopharma partnerships are in place today that could look in April .
Yes, good morning, Kyle Great question, Yes, we do offer all of our commercial test as available options for Biopharma partnership continued research and so we have.
A significant amount of data that they could support.
But we're not capable at this point in time of disclosing any of that I think what I would focus on is kind of connecting the dots to what we said a few months ago related to kind of cracking or breaking the black box, we know that historically a number of diagnostics couldnt clearly communicate what they were measuring.
And what quantities are abundant and we've broken that black box and so our efforts with transparent.
And explain ability.
Feel strongly that we'll have the ability to highlight exactly what proteins and what abundance in combinations, we're measuring with various threat and we think that leads to renewed conversations that will allow us to build hopefully towards companion diagnostic opportunities and then the same that'll build towards the introduction of primary.
Immune response and risk of recurrence, we think it's critically important that as more and more.
Clinical interest shifts towards proteomics that we'd be the leader on the ODT and commercially available proteomics test front to highlight exactly what proteins are being measured and most importantly continue to invest in data development and we've got our Insite trial, which you may recall, we've got over 4500 patients enrolled.
And that where we have the ability to highlight.
<unk> response to different real world treatments.
Combination with the various stress test result.
So much more to come there Kyle, but youre thinking about it exactly how we are and how the conversations with physicians and Biopharma are going.
Okay that sounds promising thanks, Scott if I could just ask another one before I hop off there is obviously a lot going on at <unk> right now a lot of good things of MSCI. So what's congrats on all of those.
Kind of updates what are you doing guys to ensure you can kind of thoughtfully contribute to all your projects like all the current test the pipeline tests, while still executing business as usual and continuing to improve performance as you have done obviously in the recent quarters.
We're all excited for anyone we're confident in biodiesel just the company is not great.
Very large obviously just kind of being a question worth asking thanks.
Yes, it's a great question and thanks for the kind words, Kyle we appreciate that.
We take all of that to heart.
We think we punch above our weight class, it's taken a little bit of time for people to start to see that but we don't want people to think is that we're not mindful and intentional with our time energy effort and expenses. So for us. It really is about the greatest impact we know that our notify testing strategy.
Has the largest market opportunity. We also know that we can have the most significant impact there since those are the two tests that we've commercialized most recently.
Prior to the pandemic pandemic and then Ngls to follow the pandemic, we're going to focus on notify.
On the sales front, we think that that's the the introduction kind of that warm handoff as a patient comes into.
With some concern to assess whether they have a malignant nodule or not so for us that's top priority we mentioned it on the call.
Very mindful of Salesforce expansion, we're going to continue to expand opportunistically, but we're going to pull back. If we don't think we can get a near term return I think the same applies to our product pipeline and R&D efforts, we really want to be focused on near term return.
We're proud to share that we believe we're the only company focused in lung with five on market test that all have reimbursement.
That benefits us as Robin said, as we strive to get closer to profitability.
So we may pull a few levers here and shifts and things in our product pipeline cadence as we progress.
But the nice thing about that is.
We've got many shots on goal again, we continue to punch above our weight class. If you will and we think that this opportunity will continue to fuel us.
But more to come in the future quarters as we continue to make progress and as Robin said, we will start to highlight and tease out when we think we can get to profitability, but we feel really good about where we're at today.
Great. Okay that was all set thanks, Scott Thanks Robyn.
Okay.
Again, if you would like to ask a question Press Star then the number one on your telephone keypad.
And the next question comes from the line of <unk> with Morgan Stanley . Your line is open.
Hello. This is Hugo on for Ross. Thank you for taking our questions.
Could you elaborate on the scope of the research partnership with MSCI on developing novel MRV.
And what are the financial implications from the agreement.
Yes, great question and good morning.
We didn't disclose the specific details, but what we can tell you is really it's a broad research discovery and development agreement.
So we.
We highlighted <unk>, because thats, the first and the highest priority.
We will look forward in future earnings calls and quarters to highlight progress being made and give greater detail as we progressed through that but we think this is critically important to Kyle's question. When you think about our shots on goal and opportunities. We think it says a lot about not only who we are our culture and our.
Abilities to have someone like memorial Sloan Kettering.
Partner with us and so those type of relationships and partnerships gives you great access.
Physicians that are treating patients and in an integrated system you have got the ability to align and focus on a common goal and so we think that the product development efforts in partnership with them. There is potential to accelerate timelines when compared to a diagnostics company going at it alone. So we're very.
Very excited about that it's very promising and again, we think it says and speaks volumes about who we are and we expect to have more partnerships and collaborations like this in the future.
Great. Thank you for that color and then some of the company's notice staffing shortages in hospitals and physician offices are you seeing the same and if so does that represent a headwind for the lung diagnostic products.
Yes, it's a great question and I think I think all of us experienced that in our day to day lives. We're all consumers of something and we've seen delays.
Don't think that health care is insulated from that I think we all read the press clippings, we are starting to understand that there is potential for increase in nursing.
And in physician shortages.
For us I Wouldnt state that we're insulated from it but at this point in time, we're not seeing a significant impact we continue to monitor it obviously, we're focused on building strong relationships with those health care professionals their practices and their teams.
The way we look at it is if theyre scheduling patient visits.
We know that they've got the staffing to support that.
We're offering blood based testing, we really don't see any constraints at this point in time, but again, we're watching it closely we want to be mindful of the different challenges that health care professionals have gone through not just in the last few weeks and months, but over the last few years.
They're tired, they're overworked, they're frustrated most importantly, they're excited to get back to a prepaid demick state to treat those patients.
But they have dedicated themselves to treating and positively impacting.
We will keep you posted.
We progress through future quarters, if and when that becomes an issue but at this point in time, we don't see that being a rate limiter.
Got it that's great to hear and then a quick one for Robyn.
With the interest expense.
By interest rates going up should we anticipate any changes in our interest expense line and then could you also provide color on how we should think about opex trends for the remainder of the year with ongoing inflationary pressures.
Okay.
Yes.
I would say that our interest expense should remain fairly similar to what we had in the second quarter.
For the remainder of the year.
Because of increase in interest expense because.
Our current platform.
On what we have.
Those contracts are already in place, but more from the restructuring.
Facilities, we put in place in the second quarter.
As for Opex.
I would anticipate.
Slight increases in Opex of call the.
The rest of the year.
<unk>.
Anticipating further cost pressures.
From inflation.
Travel and as Scott mentioned.
We're very excited for the second half of this year to have actual in person conferences again this will be the first time since 2019.
Our conferences are all in person.
<unk> will be there.
For the first time in two years three years or so.
Anticipate some slight increases in opex as we move forward.
Great. Thank you so much.
There are no further questions at this time. This concludes today's conference call you may now disconnect.
Okay.
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