Q3 2022 OncoCyte Corp Earnings Call
[music].
Good day and welcome to the nice.
Conference call to discuss the third quarter 2022 financial results today's call is being recorded.
At this time I would like to turn the call over to Caroline corner Once week Investor Relations. Please go ahead.
Thank you operator, and thank you everyone for joining us for today's conference call to discuss third quarter 2022 financial results.
If you have not seen today's financial results press release, please visit the company's website on the Investor page.
Joining me on today's call are Ronnie Andrews, <unk>, President and Chief Executive Officer, and in each John Chief Financial Officer.
I'd 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 fact are forward looking statements.
You can review the company's SEC filings, including without limitation, the company's Form 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.
Certainties and the results of the clinical trials or regulatory approvals the capacity of Oncotype <unk> third party supply blood sample analytic system to provide consistent precise analytic results on a commercial scale 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.
By P rights risks inherent in our strategic transactions, such as failure to realize anticipated benefits legal regulatory or political changes and the applicable jurisdictions accounting our quality control greater than estimated allocation of resources to develop and commercialize technologies or failure to maintain any laboratory accreditation or circuit.
Occasion.
And uncertainties associated with the 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.
<unk> expressly disclaims any intent or obligation to update these forward looking statements, except as otherwise may be required under applicable law.
With that I'll turn the call over to Ronnie.
Thanks, Caroline and welcome everyone today I'd like to update you on the progress we've made against the strategic goals that we laid out on our last call is there are some of the important milestones we have ahead.
We streamlined organization has maintained our momentum against our most critical milestones and we're working hard to complete our product development and gain reimbursement for our transplant and for our oncology programs I'll start today with our transplant rejection monitoring opportunities.
We have two products in this 2 billion dollar U S market.
Autograph deliver and by the graph kidney if you recall both task of completed analytical validation and have been submitted for reimbursement we have active conversations with the team at <unk> is ongoing and this is very similar to what we experienced with the term of Rx a few years ago, when we gain that very important reimbursement.
And we expect to continue these discussions, but we do expect reimbursement for both by year end.
In Q3, we began accepting clinical samples at our lab in Nashville, as part of our <unk> liver early adopter program.
The goal to deliver EAP or engage key opinion leaders to refine our clinical utility and prepare the layout for full launch, which we expect to be in Q1 of 2023.
We're very encouraged by the positive response to our test.
And the wet lab workflow that is now under 36 hours for our initial patient work up to establish the personalized based Brian and only 12 hours for all the diagnostic monitoring tests thereafter.
A rapid turnaround time is necessary to serve patients and a four cost setting when their care team is seeing an increase in liver function test.
There are docs don't have time to wait on the long turnaround time for next Gen sequencing and so we're excited to serve this unmet need in liver transplant management in.
In Q4, we plan to open up the kidney early adopter program and began feasibility for the IBD versions of both assays.
While we do expect that our two lab developed tests will generate early revenues for our transplant monitoring program. As you know our primary goal is to disrupt the transplant monitoring market by delivering kits to democratize. These critical decisions that position to have to make for their patients.
Our market research and the ongoing key opinion leader interaction have provided strong indication that rapid turnaround time absolute quantification and the ability to participate in the reimbursement economics are powerful attributes that only by the graph.
Be able to provide for the foreseeable future. We remain on track for IBD trial to begin sometime in Q1 2023.
In summary provide a graph the key milestones to watch over the coming months are first we plan to continue Onboarding, new key opinion leaders from the liver transplant community as we open up our early adopter program.
We also anticipate the launch of our kidney test by year end to existing and new key opinion leaders, we expect reimbursement decision from CMS by year end and finally, we will begin a feasibility for the IBD kit product and site management for the important FDA clinical trial, which we expect to commence in $2000.
'twenty three.
Now, let's turn to our flagship oncology product determined Io to remind you. This is our 27 RNA gene expression test designed to help physicians access.
Patients that have a tumor and assess the tumor microenvironment and determine which patients are suitable candidates for immuno oncology therapies.
Our early adopter program continues to underscore to us the need for this test across the slate of cancers.
And as I mentioned on our last call we have compelling data now and early triple negative breast cancer late stage non small cell lung cancer metastatic bladder cancer, metastatic colorectal cancer and gastric cancer.
<unk> has now been validated and over 200 patients in six tumor types and across all four major of immune therapies.
The results to date have been outstanding and in all studies to date have outperformed the current test for predicting response to immune therapy.
Our early adopter program continues to provide valor, we use cases for CMS submission and market launch and our volumes have continued to double each quarter during our limited launch.
The early adopter clinicians are reordering to test for multiple use cases across multiple tumor types and we remain incredibly enthusiastic about the future of return of I O.
We also recently announced that the term Io was part of a large biomarker Grant award for the Swab clinical trial study group in breast cancer.
These awards were given by the National Cancer Institute and the process was highly competitive we are only a handful of clinical trial groups in National Cancer Institute sites were even allowed to apply even in each trial group was only allowed to submit two to three grand applications, which is a particularly small number when you consider all the variety.
In cancers that these groups are investigating all applications were reviewed by an independent committee of clinical experts. In addition to having extremely solid data, which determine Io has the grant application needed to provide evidence that won the test was not merely interesting scientifically but would actually change clinical practice.
In a very meaningful way for patients and two was ready to be used immediately within the clinic. We're very excited to say that determine meets both of these criteria.
We realize there are a lot of biomarker claimed claimed defined responders are patients who benefit from immune checkpoint inhibitors, but determined Io selection by the true experts in the clinical build show that the term of our Io is rapidly distinguished distinguishing itself from the comparative test and is a solid validation of the progress we've made on it.
Very short time with a term of I O as with our <unk> program. We're also working on a path to create a kit to make our oncology tests more accessible to physicians and to patients the.
The beauty of the term Io is that was developed from a large scale 2000 gene panel.
And the 2017 RNA algorithms can actually perform.
The multiple data sources, including samples that we'll run with RNA seek data, our PCR kit or even a nextgen sequencing targeted resequencing chip given that there are thousands of PCR and next gen sequencing systems and labs around the world. This allows us to be incredibly flexible.
And Mark with our market access in line with our new cash management strategies, we are planning for the regulatory process for a kitted version to start in mid 2023.
As we mentioned in our last call in order to reduce our overall burn we've moved to a concurrent development and clinical study to a more sequential product by process determined C&I are determined 90 blood based therapy. Modern test continues to be used in clinical studies in the EU, where the product has been effective in identifying disease progression across.
Several tumor types. The results today allow a physician to identify the failure of a treatment protocol weeks in advance of the current <unk> test on the market and a much lower cost given that a large majority of later stage patients do not get their tumor surgically removed current <unk> tests are often not an option to monitor.
Those patients since a large amount of tumor tissue is required for the upfront genomic panel to be completed the market feedback. So far has been overwhelming blood only monitoring test that can tell a position that our drug is not working by the second cycle of treatment is game changing for them and for their patients.
According to our plan the U S clinical validation will began working with academic institutions and with bio banks to complete blinded retrospective studies in the first half of 2023 and hopefully submit for reimbursement under the current blanket LCD for immune therapy monitoring shortly after that.
Finally, I'll turn to our progress with <unk>, our lung cancer stratification test since its launch in mid 2020. The terminal Rx is now touch well over 500 patients lives. These patients had stage one tumors and without our test information may have gone untreated and statistically then half of them would not be what.
This is right now so I'm pleased to report that our streamlined sales force and our current covered territories, which now make up about 30% of the market opportunity delivered third quarter growth in Rx sample volumes that were above 51% above prior year. This is a really strong testimony to the sales team.
And theyre growing reliance on the Turner Rx to identify patients that are high risk for recurring tumors.
And in need of treatment to improve their chance of living.
We're also able to expand our pool of onboard of physicians, which now numbers 596 practitioners, which is up 62% year over year.
As I close out my remarks, I want to reemphasize my confidence in our ability to bring oncotype through this challenging macro environment and emerge leaner and stronger than our Q2 call. We mentioned our intent to initiate several corporate development activities to evaluate the strategic alternatives, we have given our broad portfolio.
Oh.
We have engaged perella Weinberg partners as an advisor to assist us in identifying and evaluating a range of these possible strategic alternatives and we're actively engaged in several meaningful conversations on a parallel path. We continue to explore avenues to bolster our cash runway and to reduce our spend include.
<unk> the possible reevaluation of our clinical trial expenses potential.
Potential changes to our executive compensation structure, and reallocation of investments in our fixed capital and infrastructure.
While we can't speak to specifics on today's call due to the sensitivity of the various discussions we have ongoing we remain very confident that we'll be able to execute on one or more of our options to secure oncotype future.
So please stay tuned and also encourage you to work for some key milestones over the next few months, which include the reimbursement decisions provider graph kidney and liver, both which we expect this year and then the subsequent planned full market launches of our <unk> and transplant as well we're on path to submit to term Io for reimbursement.
Expect to do that before year end.
I'm grateful for your continued support and with that I'll turn the call over to our niche genre of your financials a niche.
Thanks, Ronny and Hello, everyone our.
Our consolidated revenues for the third quarter of 2022 or approximately $1 million, representing a slight increase as compared to the same period a year ago.
Versus prior quarter revenues were down $1 $1 million without the benefit of $1 million in licensing related revenues associated with the final burning rock milestone payments.
Third quarter revenues associated with the term of Rx were $1 million up 0.1 million sequentially and up <unk> 5 million year over year.
Our pharma services business.
Approximately <unk> 1 million in the third quarter, a decrease of 0.2 million both quarter over quarter and year over year.
As we've discussed previously revenues in pharma services depend on our partner's ability to enroll patients for trials, which continue to face headwinds and will likely to continue to fluctuate from quarter to quarter. We do have a pipeline of work from our diagnostic development partners Qiagen and Thermo Fisher, which we believe will grow and be more.
<unk> in future quarters.
Cost of revenues for the third quarter were approximately $2 2 million.
Including $1 $2 million from the cost of diagnostic tests and testing services, we perform for our determine of Rx and pharma services customers and $1 million and noncash amortization expenses of determine <unk> and pharma services related intangibles.
Research and development expense for the third quarter of 2022 was $4 4 million an increase of approximately $1 3 million from the same period a year ago.
The increase in R&D expense was related to site startup costs for our partner trial for determine Rx and.
And head count as we prepare to begin the IBD development in order to keep the term of Io and <unk> liver and kidney.
We also continued R&D activity to support ongoing clinical trials to gain statistical power with our current determined Io datasets as we submit to CMS for reimbursement.
Additionally, as Ronnie had mentioned earlier, we have successfully initiated our vital graft liver early access program.
And are on track for our full launch of our new <unk> product offering in Q1 of next year.
Sales and marketing expense for the third quarter of 2022 was $4 million an increase.
Greece, a $1 $1 million year over year.
The increase is primarily attributable to the growth of our portfolio and reflects increased investments in head count along with sales and marketing activities to prepare for commercialization of our transplant business and support the continued commercialization efforts of the term of Io and determined Rx.
General and administrative expense for the third quarter of 2022 was $5 8 million an increase of <unk> 3 million for the same period in 2021.
General and administrative expenses were relatively flat year over year.
non-GAAP operating loss as adjusted for the third quarter of 2022 was $9 8 million.
An increase of <unk> 4 million as compared to the same period a year ago.
GAAP operating loss as reported for the third quarter of 2022 was $9 2 million, an increase of 0.7 million quarter over quarter, and a decrease of $4 4 million as compared to the same period a year ago.
We've provided a reconciliation between these GAAP and non-GAAP operating losses in the financial tables included with our earnings release.
For the third quarter of 2022, we reported a GAAP net loss of $9 3 million or <unk> <unk> per share as compared to $8 3 million or <unk> <unk> per share an increase of $1 million quarter over quarter.
And $13 8 million or <unk> 15 per share a decrease of $4 5 million as compared to the same period a year ago.
Turning now to the balance sheet as of September 32022, we had cash cash equivalents restricted cash and marketable securities of $34 2 million.
Early in the year, we raised $32 8 million in net proceeds from an underwritten offering of common stock priced at market.
We're currently reviewing several options for non dilutive forms of capital, including equipment finance lease lines and as Ronnie has stated evaluating strategic alternatives, we have against our broad portfolio offering.
In addition, we continue to make progress on ways to further reduce our spend and ongoing burn rate from the beginning of the year or.
Our focus over the first three quarters was to re prioritize our investment investments in our product portfolio and Institute a more sequential approach to product development and test modules in.
In Q2, we had announced the right sizing of our organization to match the more focused priorities and had taken the definitive step to reduce our head count carrying costs estimated to be over $4 $5 million on an annual annual basis in Q3, we incurred <unk> 7 million in severance expenses.
As a result of this prior quarter action.
Net cash used in operations for the quarter was $11 3 million inclusive of zero point $3 million of severance payments.
Net cash used in operations decreased versus the first half 2022 quarterly average due to focused efforts to control hiring and optimize our use of cash primarily by reducing clinical trial spend and marketing investment.
In summary management has taken numerous actions in the first three quarters of 2022 to focused investments and reduce our cash burn without impacting the long term potential of enterprise value of Oncotype.
Outside of the range of strategic alternatives under consideration, we continue to evaluate what steps we can take to further reduce spend and ongoing cash burn in the coming quarters.
That concludes my remarks concerning our financial highlights operator, please open the call for questions.
And at this time, we will be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad.
Confirmation tone will indicate your line is in the question queue you.
You May press star two if he would like to remove your question from the queue.
For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
And one moment, please while we poll for questions.
Our first question comes from the line of David Westenburg with Piper Sandler.
Please proceed with your question.
Hi, Thank you for taking the question.
So I want to start with a current event, maybe maybe you haven't seen this yet so maybe catching off guard CMS I think has meeting next week to look at reimbursement in transplant I don't believe it.
Its heart and lungs, so not really overlap with what youre doing in in transplant.
Do you think that there is any concern if they find anything there for lowering price maybe that's a headwind or maybe is this an opportunity in the sense that.
Maybe it makes what youre doing a little bit more unique.
Yes, that's a great question. We are following this closely obviously than we.
We do have some insight that has been very helpful for us.
One of the challenges in the current LCD is somewhat.
Ambiguous.
Number of expected test to be monitored a year and that companies today that are out promoting their current kidney test and heart test.
Have a certain protocol that they believe is appropriate based on the data that they have released I think there is some discrepancy between that and what CMS actually believes that number needs to be and how many times. These need to be performed I don't know that it's the value of the test itself in terms of reducing the price as much as are we.
Overusing. This test is it necessary for that that number of many times, but we're going to follow this closely but your point about us as a good one and liver the utility is a real interesting question right.
Because today for everyone's edification and liver when do you get a liver transplant, unlike kidney and heart. There is a very low cost monitoring test called liver function test panel test, which includes liver enzymes and some other components and that test can be run are very rapidly and it can be run for <unk>.
And $100 and so what we realized in our conversations with CMS and our key opinion leaders is that theres not really a need for pure monitoring and liver and you may find that same knowledge too.
Come out around kidney, but what there is a real need to resolve elevated liver enzymes and to identify the patients with that they do not need a biopsy because right now the reply from the elevated liver. Many times is go to a biopsy and as you know those are painful and invasive.
Know that our tests now based on the results. So far of our EAP are very accurate in identifying a patient population that does not need a biopsy and so what this does do for instance is it reduces the total number of monitoring test a year, but it is a very unique indication that gives us a sort of.
Our first mover advantage and so while the numbers look like there was about 100000 or so patients that are living with the liver. They all get tested somewhere between four six some some some centers. We found are about eight times, a year and about 30% to 40% of those patients end up with an elevated ins that liver enzyme.
And liver function test that needs to be reflex for resolution and so if we can be that test at some let's say $2500 reimbursement our market opportunity for liver is not the size of kidney and heart, but it's still a $150 million to $200 million market will have a very appropriate utility data set in.
We think we'll have a very good opportunity to penetrate the market. So it's a great question. We're watching it closely I do think as CMS is concerned about the amount of money that's being spent to monitor using these more expensive tests. When there are cheaper enzymatic test that can be run to monitor function of in Oregon.
Got it thank you.
And apologies for the next one I just.
I'm trying to give it with tact and I realize I can't.
[laughter].
Energize upfront.
Your confidence level in a terminal or accident this isn't gonna be slipping into another quarter.
Just because we were we really like what the the reimbursement there.
Sorry to ask it that way, but [laughter].
You mean to tell the Io or even because the terminal Rx you mean, just from Ohio.
Yeah, sorry, sorry, yeah, Yeah, sorry, yeah determined Rx as everybody knows is reimbursed in right now at $31 50 by Medicare We did get identification of you saw in our press release, we did get a crosswalk to a higher A&P.
Is being reviewed today by public opinion, and if assuming everything goes well. The expert panel has said that they want to put that in a new category and that would give us about a 23% increase.
So to go from a 31, 50% to $38 73.
The time of Io, we are on path to the two to submit.
Just remind everybody we can't submit until we have papers that are published papers that are accepted for publication and.
And David we wanted to go with three indications and so we have two of those papers were waiting on the third that third one has been accepted so we are expected to be on track with a submission by the end of the year if not sooner.
Thank you.
Thank you.
Our next question comes from the line of Mark Massaro with BTG. Please proceed with your question.
Hey, guys. Thank you for taking the question.
I certainly appreciate the commentary about.
Pursuing strategic alternatives, obviously, we're living in.
They are pretty challenging times, just in general, but maybe Ronnie can you just share I know that you've been looking to find a of a kit partner.
For several months now so I imagine that these two items are probably related but is there anything you could share just about the types of things you are looking at strategically and to what extent, there's overlap between the kitting partner and other strategic alternatives.
Thats the great question and I'm actually glad you asked it.
Listen I think it's you know you know us Mark you've followed us and you've known us our history we.
<unk>.
We realize today that we're in a we're in unprecedented times in the marketplace and we.
As an optimist and someone that was very hopeful that the markets would get better. The reality is we know now that's probably not going to happen and so our effort. This year was to get all the products to a value inflection point that would give us optionality across the spectrum of our portfolio and so basically where we are.
Now as we are we are we have basically the tissue based.
Therapy selection tests, we have therapy monitoring test with determined C&I in oncology and we have the transplant monitoring portfolio and all three of the once we submit the term of Io the tissue based <unk>.
Cancer platform, our cancer test will be will be reach a value inflection point, because we will be heading towards reimbursable bio and we already have reimbursement for Rx. So that created a nice opportunity for partnering and licensing there we have transplant, which you know we've talked about is is at CMS today and assuming we get.
Those reimbursements, we will have another asset that is certainly.
Bailable for monetization either through partnering or licensing.
The kitted partner in transplant.
Has been a unique.
Learning experience for US we signed an agreement in the summer with a large platform company.
Only to find out that once we got in got really under the hood that their product wasn't going to be ready for a clinical market for some time and would have thrown us off our track. So what we did is we went back and began to look at the other platforms again and in doing that we realize that we can build these kits there's third party.
Manufacturers that will build these kits for us and so we would we can instead of sharing the economics with an instrument company, we can build the kits and sell the kits ourselves. Once they are approved and then we could own all of the economics and the kit sell and not have to share it and so once we understood that obviously, we've got a lot of expert.
And PCR here. So we said, let's move forward with that and so we are looking at validating the kit on a on a primary platform, but we are open to the flexibility of it being especially in Europe , a kit that can be used across any of our digital PCR instruments, so more to come on that but.
That does open up opportunities with some of the European digital PCR companies.
That have platforms and don't have content for them in one of those most recently said one of the biggest priorities in 2023 for growth as digital PCR menu. So you know.
The idea here is theres a lot of opportunity. We think both are the LDC partnering in the United States, but ultimately for the kit partnering for Europe , and so without getting any more specific those are the things that we've said publicly but all of those opportunities are in play today and.
To be candidly.
<unk> narrowed the focus to a few and we're pushing those to the go on as we speak.
Okay, great thanks for that color.
So the market leader in the MRM space.
Tara just got a.
$7489 bundle price from multi for signature Io.
I Wonder if that is a potential proxy for a term of Io.
It may not be but I guess, what I'm really asking I don't think natera knows yet how many tests they can run under that bundle.
But so can you just give us a sense for the number of tests, you think determined io could be done in a year and how youre thinking about.
The reimbursement rate of that and then.
Is it fair to say that that should be ordered on three clinical indications and maybe just walk through the pathway to expand that to multiple indications are pan cancer over time.
Sure absolutely so.
We believe given it's sort of a it's much like the tumor mutation tests that are run by foundation medicine, and garden et cetera today to identify the patients.
A responder for AR targeted therapy, and so because it does turn of Io is following that same decision point, we think will fall in line with that same value. So.
We're modeling.
Zero now reimburse under a blanket LCD of about $2500 a panel.
I would say that's a fair we'd like to obviously going to go for more we believe that we save a lot of money.
For selecting the appropriate patient and not over treating with immune therapy, but but we know thats an uphill battle with pharma. So the idea here is to go in and go in much like we did with the term of Rx and submit a dossier that show some significant health economic savings, while running our test before you give an immune therapy if.
We do that I mean determined <unk> as at $31 50, but but the other test and therapy selection not prognostic are in the $2500 range. So somewhere in that range is where I think we'll finish off.
On the other side of the coin, though that has that become a C&I and as you mentioned.
Tara.
LCD and the increase there for the bundle we're looking at the term of C&I being run two to three times, maybe four times Max because thats the second cycle of therapy without without the big genome panel, we can give a very appropriate result, looking at disease progression and so I suspect.
It'd be great to get to $7000 bundle and we'll certainly give it our best shot but the reality is our test cost significantly less than that and we would expect something in the neighborhood of I don't know, maybe 3500 or 4000 per bundle and I think the private payors that we've spoken to are much.
More.
Obviously, an inclined to look at us as a lower cost alternative and someone that can be we can turnaround result in later stage patients and we don't have to have a surgical resection, which also adds costs. So I think from that perspective, we think we've got a great play we just hired.
Really really talented lady as our market access person I think you guys know to manage costs, we had not really gone after that level of a person until we knew we were ready to get to get into the private payer world. We're ready to go now and she just started about a month ago and she is or where I seeing returns. There. So obviously, we're going to be working.
On the private pay where all we think that the large payer groups.
For the term of Io, if they understand that they could save hundreds of millions of dollars in the two to three year period on an better decisions around <unk> therapy, and then monitor it to identify if it's working.
Passed away, we think it's a great health economic story, so more to come on that we're just we're submitting now I'm gonna be actively out knocking on doors to talk about reimbursement for the term of Io.
Okay and then thank you for that last one for me just on C&I, what other data needs to be developed and I think I heard you say first half of 'twenty three was that for reimbursement.
Or was that for when the paper could be published and then maybe can you remind us on since.
C&I is a blood only test.
Remind us to what extent is this pan cancer versus certain indications.
Right Yeah, Yeah, let me be clear first because I want to make sure we're very clear.
We put it we had to put a pause.
Our organization in order and transplant determine Io and then C&I became the priorities for us.
Third and now fourth quarter, and we Couldnt do them all sequentially or concurrently anymore. So we aligned Omar.
Right now the premise C&I has under its under study and published papers around 200 patients in Europe .
And that is across multiple tumor types. If you look at the number of tumors that slot swap off.
Copy number variability, it's about 35 solid tumors about the top 16 tumors are the ones that we believe we can really effectively do we maybe I'll do the rest, but we are going to have the money for some period of time to go chase those so so right now we're looking at C&I to get indication.
In the United States to get a validation study under our belt and non small cell lung cancer, we'd like to follow that with breast cancer and then ultimately we'd like to follow that with colon cancer given determine <unk> recently published efficacy at identifying MSI negative patients that today have no option for immune therapy.
We assume that we're going to as we can identify a bigger population we would assume that pharma is going to want to invest with US there and then on the second part of that would be to monitor for Cowen. So our C&I effort in the U S. Because it does need to be validated through U S. Clinical studies not European is really going to be focused on.
Non small cell triple negative and then ultimately colon with the hope that we can prove out the thesis that it really is a pan cancer test given all the other data that shows that these copies copy number and stability is relevant across 35 solid tumors.
That's really helpful. Thanks, so much.
Sure Mark Thanks.
Our next question comes from the line of Mike Matson with Needham <unk> Company. Please proceed with your question.
Hi, guys. This is Joseph robotics for Mike.
Hey, so so.
So I guess, maybe just a handful of questions around the term of our excellence.
Break them up.
Okay, maybe to start off could you maybe give us some expectations around maybe volume growth.
<unk> base growth for <unk>.
2023.
I guess, maybe what's the strategy on here and maybe accelerate some of the volume there.
We'll start off with that.
Yeah, I mean, I think everyone knows we significantly reduced our sales force to cut back on some of the cash burn.
Sales reps it takes about a year for them to get to a point, where the revenue. They create covers their cost and so we we said we're going to take the six basically six top territories, which we now have and we were going to.
Keep those and then we're going to hold off on increasing the sales force until the term of Io got its draft LCD and then we would move forward with expanding at that point in time, which will probably sometime mid year to third quarter next year. So given that we have six heroes out there I'll say that.
With a lot of confidence these folks work hard and you can see that they were still able to grow the bids the number of samples at 50% year over year, even with just six people. So what we've started thinking about is mining the current territories. They have in the current accounts they have and now that obviously the pandemic is over and we can get.
It in and we can detail all the surgeons within an account that's on boarded that's a better more productive use of our sales reps time to try and create new accounts and onboard new people because that takes time and energy versus just continuing to do we call St.
Our world would be same store sales here, it's more same Doc Doc sales or same account sells and so with that the goal here is to continue to grow the current territories as best we can and that obviously is determine io makes its way through the reimbursement paces and we some of these other strategic alternatives come to fruition.
Hope to have the capital to go and add in a number of sales reps to really go after both Io and Rx in a meaningful way.
Okay. Thank you that's helpful.
So yeah, I guess just continue on with the termite alright.
Maybe on.
Potential NCC and guideline inclusion and I know you guys had a trial going on our registry.
And maybe reduce some of the spend in that if I remember correctly.
Greg could you maybe.
Talk about maybe timeline on there.
Maybe the next point, whereas it says you can come out.
And in terms of maybe the increased reimbursement.
Potential you said there.
Having the meeting I guess today is that something you would.
Send out a press release for and then lastly on that.
On the expanded coverage.
Could you maybe talk about how that could maybe increase the potential or I guess the tam around.
Annual volume for it to term Rx kind of where is it at right now and where could that growth.
Standard coverage.
Great Great questions I wrote them down we make sure I hit them, all if not all will be accountable my friend.
Listen the registry, we did we did close down the registry and the reason we were able to do that is we have a randomized clinical trial as well going we made the decision to run them concurrently because the randomized clinical trial in the early phases of it was very difficult to enroll and why was it difficult to enroll while not only was our pandemic going on.
Given the vast amount of data around the terminal or exit or has already been published in peer reviewed journals theres over 16, 100 patients and different studies that have been published pay.
Patients did not want to randomize. If you knew you had a 50% chance of dying if you did not get chemo or if you got chemo you had a 94% chance of living for five years and if our test is elevated we found patients did not want to randomize. So they really didn't want to.
Flip a coin to decide hey, I'm not going to work and I mean, I'll take the risk of not getting chemo and so it was very difficult in the early days, what we've done now by expanding the indication is the expanded indication allows us not to just indicate to physicians for chemo therapy.
The us and as always stay patients, but they can also use immune therapy and so in a targeted therapy. Its EBIT egfr positive and so what the expanded indication and change and that did was open up the playing field for any therapeutic decision and Thats significantly opened our chances to get the RCT populated and.
Hopefully reported out next year we.
We do have some ongoing.
Third party work, that's going on and we are hoping to revisit in CCN. They meet once a year and right. After <unk>, So and summertime, we do hope to revisit the NCC and team you've hit on a really important thing I mean right now what are the two things that are limiting Rx growth really it's the size of the sales force, we need about 20 reps.
To really penetrate 100% of the country.
And so given our cash situation, we're not going to hire those people today and the other thing is NCC and guidelines and so hopefully obviously getting <unk> will be a powerful indicator for us and that would drive a lot of revenue growth just because.
<unk> would it would be in guidelines of course and then.
The new price is really around the idea that.
We were our test care category, they crossed walked us from the original.
CPT code, we had to a new one that's expansive for prognostics and so thats why we are they recommended unanimously that we move from the old one of $31 50 to the new one which is <unk> 30.
<unk> 38, 47, 11, eight to 738 73, and and so that has to go public opinion that as all collected in either meeting as you said now so assuming there is no public pushback that final pricing guidelines will go in place and be effective in January of 2023.
And as we know that we'll certainly let the world know that.
Okay perfect.
Perfect. Thank you so much for all of that.
Yes.
And our next question comes from the line of Thomas Flaten with Lake Street. Please proceed with your question.
Hey, guys I appreciate you taking the questions Rodney anything on the VA.
Share with us in terms of penetration so far I know, it's only been a couple of months, but any any uptake or how are you managing that from a from a commercial perspective or a field force perspective.
Yes of course that contract gives us kind of a license to sell under the VA. Our reps are actually actively targeting targeting certain <unk> that we now have a high surgical rate of long, which we know which ones. Those are Thomas I don't know as I look at our I'm looking on our board as I look at the volumes for the.
<unk> I don't have it broken out by VA, but thats a great question and something that we can we can certainly start getting in and identifying for you Mike.
My experience, which as you know I'm old and been around a while is the VA contracts are really like I said, a license to sell and there'll be there'll be one off but the good news is once you close one they typically run these tests on everybody that goes through it becomes part of their protocol and so it is a very important contract.
For us and does represent a significant number of covered lives and so that along with some of the private pay efforts that are ongoing today I mean, we did we did see it we are continue to see an increase in our commercial <unk> commercial.
<unk> and Rx and <unk>.
<unk> right around 2000, and I think this last quarter and so our ASP for the quarter was was it was $33097. So the mix is still favorable for us.
Year to date, we're about $3058. So we're getting a really nice mix of Medicare and commercial that is starting to pay but as I said, we hired this.
Market access.
She is amazing and we.
To see some improvement in the commercial payer world now that she's here for Rx in one of our primary goals is to start paving the way for Io.
Got it. Thank you and then given that you're a downsize of the field team to support our X I know you diverted some of those head count to two.
To the transplant group how are you thinking about timing of building up the commercial infrastructure to really support that once once reimbursement is in place.
Yeah, you'd like transplant are determined.
Transplant.
Yeah, Yeah, well right now we've got as you know.
It's a pretty concentrated market, we know where our target centers are.
We have more of a business development approach to those target centers right now with the early adopter program and we are ready to enroll the next wave of early adopters and so we're we're close to doing that and we'll be onboarding those accounts.
We have one we hired one rep to date and that worth is targeting the region of the country that we believe we have the greatest chance to exercise our rapid turnaround time and have a key attribute that we can compete with so.
Once we get reimbursement and we start to see revenue and that transplant revenue can support the increase it's a very.
Profitable test so once we start seeing revenue that could support within that P&L. The addition of more head count, but we are going to be very deliberate about how we add head count given how concentrated the market is and we will add them as we have the money to do it.
Great and then if I might just flipping back to the.
The discussion of kidding.
Products yourselves and validating them as opposed to working with a partner just strategically I am assuming that you would have benefited greatly from from tapping into the commercial infrastructure.
Of a box partner suddenly.
I'm just wondering what that would look like from a commercial perspective and would you actually earn net income because you'd have to invest in the infrastructure to go out and sell those things yourselves as opposed to a piggy backing off of a partner I'm. Just curious if you could help us think of it that strategic decision making.
Yes, <unk> good question, because we that's where we were right in the summer. What we found out is there is not a lot of digital PCR equipment today in and some of the centers that are running the elevate the liver the liver function test or running the <unk>.
Kidney function test.
The immunosuppressive panels, those are more immuno chemistry, and clinical chemistry test and so once we understood that the companies that are out there a bio Rad thermo now has a new one qiagen is the closest to being a clinical company really if you look at it bio Rad, nor our thermo.
Fisher at least our digital PCR group.
Roche Digital PCR group and then Qiagen.
They all have ambition to be in the clinical digital PCR space, but none of them really have a validated.
<unk> necessarily for the digital PCR space in transplant or anything near transplant. So what we realized is.
All of them would be very eager for us to reagent rent a box. So we would lease it from them for the account. We would then create a reagent rental lease and then that instrument would go into the account and be serviced by that instrument company, but we would not we would we would be able to get our AEP I'm sorry, our Cogs on our kids at a <unk>.
Much lower price by going direct to a manufacturer than working through an instrument manufacturer and they get to mark up the kit and then.
Some level to us and then we would our profitability would go down so for US. We just made the decision that since we can run on multiple instruments, we are going to validate the IBD product, though on a we can't do every box to your point, Tom and so we have selected an instrument.
There was another company out of Europe , Thats interested so those I got to be careful those are the two things we're working on today and part of our strategic alternatives. So I can't say a whole lot more but there is interest in the IBD kit and there is interest in the LDC. The LDP, obviously is our shortest path to revenue and one that we're pressing hard on.
Got it I appreciate that thank you.
Sure.
Our next question comes from the line of Nathan <unk> with Stephens Inc. Please proceed with your question.
Hey, guys. Thanks for taking the question and how are you man I'm doing good I'm doing good Ronny I just wanted to circle back on some of your earlier comments just to make sure that I heard it right or I am thinking about it correctly for your liver test. The dynamics that you were calling out or were you, saying that the use of this test would be more for it or more for cause I would guess.
The four cause indication, where you're using it to detect and active and Jack and active rejection instead of surveillance monitoring.
Or would that decision largely based on the outcome of this small Dx meeting that's going on next week.
We have been ongoing discussions with multi X they've been extremely helpful.
Liver is an area as you know that that no one's kind of pioneered yet they are very interested and have been very interested in the utility in fact, the majority of the questions that go back and forth between our team and them have been around the utility and what is the true utility.
That their input along with our <unk>, we are working with the largest liver transplant center in the United States and the key opinion leader there is world renowned and that between he and the group at CMS and certainly our team we've really landed on a utility that is a reflex test for.
Our acute cases, where liver function test panel comes back above the normal range and they need to reconcile do they do a biopsy for that patient or not and we are a really nice adjunct to that and that seems to be where we've landed with our reimbursement upward our utility for reimbursement, but also.
The energy and the excitement around that from the other centers, we've been talking to is pretty high it's liver enzyme tests are cheap and they actually they function pretty well as a surrogate of an Oregon something going on with in Oregon, you. Just don't know what it is and then our molecular profile can be great at specificity.
As to what's actually causing the increase and so.
So for US again, it's.
Listen we went into this hoping it would be monitoring because it's a much bigger market. The reality is I think cms's current focus on kidney and heart with the current players led them to ask US a lot of hard questions about utility and I'll just say this.
I think it forced us to think about our opportunity and we've really landed I think in a pretty good place.
Got it that makes sense and then I didn't hear much on determine TX during the call our efforts to submit that tests for reimbursement still in progress and if so how are you thinking about the timeline for submission there.
Yes, Thanks, Imation determined key acts as a test thats very.
Kind of a need to test for everybody on the market.
We developed.
A prototype for the test, but it was going to cost about 700000 to validate it and we just decided to hold off on spending that money today and put it behind transplant and wait until we got the LCD for the term of Io and once we see the draft LCD and we know that we're going to get reimbursement for Io at that point.
We will pick back up or what we do around a targeted mutation panel.
There's folks that we could partner with for that as well and we could save ourselves the cost of development. So we're kind of looking where we're rethinking determine TX since it is a need to test and it's going to take a lot of money to validate it given the number of mutations that are on the panel.
Got it Okay, and then last one for me here could.
Could you run through your thoughts on the mix of patients Medicare versus commercial for the initial indications for determine what percentage of those patients may be for each indication is of Medicare age.
Yeah, it's changing Mason rapidly.
Yeah.
In the early days of Io. It was indicated mostly for late stage and salvage treatment because that was the easiest place for.
Pharma to get their indication.
So back then it was 60, 70% Medicare Medicare advantage, but what's happened is they've moved from stage four because those are typically people who are older and have later stage tumors. What we're finding now as they're moving their studies to move these drugs into stage two b <unk> <unk> B these patients.
Our younger and there was a younger cohort I only know this from my work I do with <unk> and are active with the team and the board at <unk> and I know from what they're seeing that we're starting to see that mix change I expect.
If I was that was guessing I would say may be somewhere in the 55, Medicare 45 private pay at some point.
But I think the big number to know I think I'll reiterate this number every time I speak publicly to conferences.
Now is estimated at $125 billion will be spent on immune therapy in 2025, 70 or 80 billion of that based on the current statistics will have zero impact on the patient outcome and so that's where the overuse of this therapy classes is going and I think it's only going to get worse as we can.
Move down into younger patients, who will come in and try it on demand that they get an immune therapy, because they've seen the commercials lets say im going to cure when we know that less than 25% of the patients actually have durable response, and so I think for us where that is.
While we are so excited about the private pay world because they are the ones bearing the brunt of that of course, Medicare as well, but the private pay.
Many of those folks are publicly traded and creating a product mix for them that reduces overall.
Drug spend and creates the efficacy of that spend to be better I think that that's a good story for us and one that will begin telling now that we have met our mark.
Get access person.
Got it that's helpful. Thanks, guys.
And our last question comes from the line of Bruce Jackson with Benchmark Company. Please proceed with your question.
Hello. Thank you for taking my question just a follow up on photographed.
Kathy early access programs on right now is the lab pretty much set for launch and are you prepared to scale for additional volume.
Great question right now the lab is ready we are accepting samples from our EAP accounts, we continue to refine our logistics and workflow and career services and things like that so that's been the notes while we do the VIP, but we are ready to go for market as I speak now we have hired the people, we need and we needed to hire.
To run multiple shifts and so we are we are appropriately staffed and ready to go to provide the turnaround times that I mentioned in my in my earlier comments. So I feel like we're good there Nashville is not small it's not a big lab, it's a small facility.
But we think that team with running a couple of shifts we think we can get that somewhere between $18 million to $20 million in revenue before we have to think about a third shift or are expanding the facility. So we've got some runway ahead of us there, but obviously, we hope to blow through that.
Quickly as we can as we can so we are having to look at that and think our long term planning about why do we do about expanding Nashville.
Okay, Great and then in terms of the other launch preparations and so fairly contact target market that we're going after so.
You can scale the sales force pretty effectively is there anything else that needs to be put in place prior to the launch.
Of transplant the only other thing that we really probably want to add or some net add folks and folks that can go in and educate the accounts on the utility of our test and how to use it and as you know that that's not a sales rep under the current compliance, where we live and that needs to be doctor to Doctor Assai.
As a scientist and so we have we have one of those but we will probably need to give up a few of those to be able to serve a broader market in transplant.
Okay, Great. That's it for me. Thank you for taking my questions.
Thanks Bruce.
And we have reached the end of the question and answer session I'll now turn the call back over to Brian Andrews for closing remarks.
Thanks to everyone I appreciate your time today, we certainly appreciate your patience with these long haul, but it's really important to a lot going on.
All of these products are making their way rapidly through the process and we're very excited about where we are in terms of the product development moving and transitioning to commercialization. So we look forward to chatting with you soon have a great week.
And this concludes today's conference and you may disconnect. Your lines at this time. Thank you.
The patient.
Yeah.
Yeah.
[noise].
Okay.