Q3 2022 Aspira Women's Health Inc Earnings Call
Good morning, ladies and gentlemen, and welcome to Aspire Women's Health incorporated third quarter 2022 conference call.
My name is David and I will be your coordinator for the call today.
At this time all participants are in a listen only mode. Following management's prepared remarks, we will open the call for your questions.
As a reminder, this call is being recorded today.
Leading the call today are Nicole Sanford, President and Chief Executive Officer, Bob <unk>, Chief Financial Officer, and Dr. Ryan Fan Chief Scientific Officer, and Chief operating officer. After their prepared remarks, we will open the call for Q&A.
Before we begin.
I would like to remind everyone that forward looking statements as defined under the private Securities Litigation Reform Act of 1995 will be made during this call including statements relating to aspire is expected future performance future business prospects and future events or plans, although the company believes that the expectations reflected reflected in such forward looking.
Statements are based upon reasonable assumptions actual outcomes and results are subject to risks and uncertainties and could differ materially from those anticipated due to the impact of many factors beyond aspire Womens health is control the.
The company assumes no obligation to update or supplement any forward looking statements, whether as a result of new information future events or otherwise except as required by law participants are directed to the cautionary note set forth in today's press release as well as the risk factors set forth in inspire his most recent annual report on form <unk>.
10-K, and quarterly report on Form 10-Q filed with the SEC for a description of factors that could cause actual results to differ materially from those anticipated in the forward looking statements.
At this time I'd like to turn the call over to Nicole Sanford President and Chief Executive Officer. Please go ahead ma'am.
Thank you operator, and thank you everyone for joining us today.
Very pleased to provide an update on our progress in the third quarter joining.
Joining me on the call today are Bob <unk>, our COO.
Chief Financial Officer, and Dr. Ryan Van <unk>, our chief scientific and Chief operating Officer.
I will begin with an update on our key strategic initiatives and provide an overview of our third quarter performance.
Brian will follow with an update on our product development pipeline before handing the call to Bob who will provide a financial update.
After our prepared remarks, we will then open the lines for a question and answer session.
In the third quarter, we continued to make sustained progress across our three critically important strategic dimension.
Innovation and operational excellence.
Let me start with an update on our innovation efforts and Overwatch and confirming today that we will launch overlap this quarter.
Our sales team is fully trained and ready to go and we have several well respected physicians signed on to become early adopters, including Dr. Gerard Riley of axial women's health and Dr. Nicole Williams, the Gynecology Institute of Chicago.
We applied for a unique P. L. A code for Overwatch in October and the C.
<unk> Advisory Committee reviewed the submission on November seven.
We expect to be notified by the end of 2022 regarding approval of our request, which would be effective on April one 2023.
We completed our managed script related to an Overwatch clinical validation study that will be submitted for peer review and publication this week.
We believe this study will drive additional provider and payer adoption public ones.
The laboratory practices have been tested or in the final stages of validation.
A complete and ready for distribution and we are waiting for New York State approval to launch the test in New York patients.
We have been receiving positive physician feedback on Overwatch and are excited by the pencil to change the practice of medicine for women with the Knoxville masses.
With care providers will now have access to a suite of noninvasive blood test that together with their clinical experience provide unprecedented confidence and their chosen medical management decision.
In recognition of the applicability of our offerings to a broader population of women are ovarian cancer portfolio will now be known as over suite.
For the first time ever health care providers that identify a pelvic mass and a female patient having overseen tool that will provide potentially lifesaving information whether the provider has decided to perform surgery or not this is a significant expansion of our patient population beyond over one <unk> are FDA cleared assays.
We believe the number of women, who undergo premature or unnecessary removal of their ovaries on a preventative basis, maybe meaningfully we do know that physicians have an opportunity to effectively assess malignancy risk and their initial assessment.
The launch of Overwatch will also provide an opportunity to expand the population of potential ordering physician beyond gynecologists and gynecological oncologists, who are the primary users of over one and all their attack.
Following the launch of Overwatch, our oversea products will be marketed more broadly to other women's and family health practitioners.
In fact, there is already some momentum in that direction.
On July 1st our policy and practice review article entitled Management of their Mexico, Mac considerations for the family Medicine Physicians was published by the family Medicine and primary care Journal.
The article clearly identifies over one as an effective tool available to family physicians for use in assessing ovarian cancer malignancy risk.
With all that said, we have updated and refreshed our marketing strategy, we will shift more of our marketing spending to high impact presentations at key conferences, where we can launch over suite to a larger physician population.
We expect to formally launch our physician Advisory board before the end of the year and plan to implement best practices for physician programs in the field based on approaches that have worked and our most successful territories.
This is just a snapshot of the new marketing strategy, which was developed as part of our Overwatch prelaunch activities.
Let's now turn to operational excellence, starting with our capital and liquidity position.
In September we closed a small public offering of $9 million of gross proceeds.
This offering was opportunistic or.
Our cash position has an impact on our ability to attract and negotiate with potential commercial or development partners, which is a critically important part of our strategic growth plan.
I believe the net proceeds of $7 7 million along with our aggressive cost containment efforts will provide adequate liquidity to sustain the company through the execution of our strategy.
Including the launch of Overwatch. This year, the implementation of an aggressive marketing campaign to drive provider and payer adoption of our suite of ovarian cancer risk assessment, and the development and commercial launch of Endo check.
We have a clear view of our capital strategy and I'm confident that we have the runway we need to achieve our key initiatives.
Moving to another key aspect of the operational excellence, our utilization of cash managing our usage of cash without sacrificing progress in growth and innovation has been a top priority our cash utilization this quarter was $8 $1 million, including an 852000 dollar payment to Harvard Dana Farber.
Answer Institute for the development of our endometriosis testing portfolio and 130000 in severance payments.
Our guidance for cash utilization in the second half of 2022 with 14 to $15 $5 million and we remain on track with that guidance.
Throughout the year, we have focused our efforts on taking a very close look at our organization and ensuring we have the right people enrolls that reflect the needs of our business at this point in time.
Started with the reorganization of the commercial team, which we announced in the first quarter.
Since then we move through the rest of the organization, eliminating redundancy and excess capacity.
We have reduced approximately 19% of our head count since March one when I became the CEO .
All other things being equal the actions, we will have taken by the end of this year will save over $3 million in payroll plus the related costs, the benefits and payroll related expenses in 2023.
I believe we are largely finished with head count actions and that we have the right team going into 2023.
As our business grows and we need critical milestones, we will continue to hire for key roles.
We are building a performance culture, one that stresses accountability and transparency at every level of the organization.
Our goal is to make sure every person in the company understands our strategy and their role in achieving it.
While this process takes time, we are proud of the work we've done to improve employee performance development and retention. Despite the difficult staffing decisions. We have made this year.
Turning to our progress on growth.
This quarter, we achieved $2 1 million in revenue with a volume of 5524 tests performed.
This represents a 29% increase over the same period in 2021.
As has been demonstrated with other companies in the diagnostic sector, we tend to see volume growth tapering from the second to the third quarter.
That was the case this year as well product volume increased 2% over the second quarter of 2022.
Our testing volume increased to 88 tests performed per day in the third quarter of 2022 compared to 83 tests performed per day in the second quarter of 2022, and 57 tests performed per day in Q3 of last year.
We're doing everything we can to drive a strong fourth quarter performance, including adding sales incentives.
And the first few weeks of the fourth quarter, we've seen some impact from Hurricanes and we are back on track in each of the last few weeks, we hit new daily highs for over one plus volume.
Looking at other achievements for growth. This quarter, we were pleased to officially launch our co marketing and distribution collaboration with bio reference laboratories for over one plus products.
Bio reference as a committed partner and shares our mission of improving health outcomes for women and closing health equity gaps with.
The sales team for both bio reference and inspire a trained and working together we are optimistic about the long term potential of this relationship.
As a reminder, we launched only a few weeks ago and as previously announced we expect a small impact on product volume in the fourth quarter as the commercial teams get started we are optimistic for 2023 and intend to provide more guidance themselves as our experience working together growth.
Finally, I want to provide an update on the genetics offering, including our technology transfer relationship with Axa Women's health.
As previously disclosed the actually agreement was intended to deliver genetic carrier screening to our favorite synergy platform.
Since we executed our agreement the genetic carrier screening marketplace has changed dramatically.
Even the largest industry players have seen massive disruptions in the genetic screening area and there are more high quality low test available to physician practices than ever before.
Developing an in house genetic carrier screening solution is far less attractive than it was when we signed our agreement.
As a result axial notified us of their intent to cease the development of their testing capabilities and provided us with a notice of cancellation of our related agreement.
As the platform has not yet launched the cancellation had no material financial impact in this quarter.
Our relationship with ask here remains strong and we do not believe the cancellation of the aspire energy contract will have an impact on actually as adoption of our current or future product offerings.
And considering the cancellation in the same market forces that caused that I took a close look at the genetics business and made the strategic business decision to walk away from all genetic testing effective as of September 32022.
Accordingly, we have discontinued the offering genetic testing and we will no longer provide our viral genetic products or genetic carrier screening on a virus synergy.
This has been a very small part of our business and it is difficult to see a path to achieve scale.
I feel our resources are better directed at developing differentiated products that will improve outcomes for women and drive the highest return for our shareholders as you've heard today, we are focused on much larger opportunities, including the imminent launch and commercial adoption of Overwatch and expected 2000, Twenty's relaunch of Endo check.
I want to make clear that we are continuing the distribution of over one plus two with virus synergies.
Envision eventually offering both overwatch and endo check through these virus synergy platform, we do not expect that our relationships with other aspire energy customers.
<unk> women's care in a number of regional labs will be impacted.
We've come a long way since the beginning of this year and we have been through tremendous changes in the organization, but the one thing that remains clear is a critical need for better ovarian cancer diagnostic tools for women and the resulting potential for our business.
We're taking all the steps we believe are necessary to position ourselves for success and remain steadfastly focused on growth innovation and operational excellence.
With that let me turn the call over to Ryan for an update on our product development pipeline.
Thank you Michael I am incredibly excited to announce that.
<unk> is on track.
This position to assist simply launch Overwatch, our non invasive next generation ovarian cancer assessment this quarter.
Polar watch what is part of our overall weak portfolio of diagnostic tools focuses on women with actual matches with initial clinical assessment.
In determinate for normal Lena.
Overwatch has appeared on negative predictive value of 99% given providers a higher degree of confidence in the clinical management decisions for their patients.
It was weak portfolio, we offer for the first time ever a comprehensive toolkit to providers to help assess ovarian cancer risk for women with an actual matches throughout all stages of their health journey.
Overwatch and over one plus we'd be available with a single test quickly you can pool, allowing clinicians to determine which test is appropriate for patients with a national mass.
As Luca mentioned, many providers, how much breadth of febrile restaurant through the launch of Overwatch, We believe addressable unmet medical need for the clinical management of women that would actually matches.
We believe Overwatch will represent a significant expansion of our potential patient population by including women.
So stage, who presented with initial masses of benign or indeterminate risk.
Utilizing a validated commodity algorithm incorporating patient features a menopausal status.
And an additional seven serum biomarker.
Overwatch bovine assess.
Assessment score with corresponding negative predictive value.
Our lower risk score, indicating a low probability of malignancy.
And our clinicians plan to manage and monitor.
Highest score does not indicate the presence of cancer, whether he provides information that may assist the clinician in considering additional claim question as men, especially constipation or surgery.
Together with our FDA cleared products over one <unk> better the soon to be available Overwatch, where the first home health care providers, we have a set of blood based test.
When combined with their clinical expertise imaging studies and the patient history.
Allow them to confidently do block of medical management plan and include a growing especially at the right time.
As a result of the broader intended use we expect the total addressable market for overwatch to be substantially larger than rush for market for over one plus.
At our last update.
Sure that we complete enrollment for our prospective study based on real world data in support of planned to launch over one <unk>.
The manuscript is being submitted for peer review publication.
We are confident that the data provided in the analytical and clinical evaluation study will be sufficient derive physician and payer adoption.
In addition, we plan to continue to support research related to the impact of race and ethnicity on the detection of ovarian cancer.
In June 2022nd a manuscript arising from clinical research efforts in the Philippines, which was posted by the company.
Shifted for publication in the International Journal of environmental issues and public health the data show that.
Clear or various huh.
A bit better overall performance in detecting ovarian cancer.
Menno post Guyana compared to CA 105.
Notably <unk> was shown to be more sensitive to CA 125.
In early stage disease for this population.
The study also showed that <unk> had the best overall performance OLED visual classifier.
Moving some of the most difficult to detect cancer cohort.
Pre menopausal women in early stage disease.
We expect that this study along with the results of ongoing study in Israel.
Why both provider and payer adoption for our products today Bush women in the United States and around the world.
Let's move onto our endometriosis product leave alone.
One of the first priorities or took on when they join us for what to review and understand the pilot at this time, we have collected throughout various phases of ambulatory development.
I have now completed that do divisions.
I learn a great deal about the science and the findings from the basis for our parents will want to do block a meaningful blood based assay supporting the diagnosis endometriosis.
In this regard I hope to be able to discuss our development status by the first quarter of 2023 in support of the planned launch of <unk> in second half 2023.
As a reminder.
Lee announced disposal of women would harvest being a photo cancer Institute.
And women's hospital and medical University of loss, while the generation of a multi omics noninvasive diagnostic to.
So identify endometriosis based on circulating micro Rnas and proteins.
We are pleased to report that the.
Development efforts with this group of scientists and collaborators are on track to meet our <unk> goal in 2023.
Based on the scientific progress to date, we have also commenced enrollment in our multi center clinical study for endometriosis.
This is a prospective observational study with a primary objective to confirm the clinical performance of ambulatory compared to laparoscopic surgical assessment.
But discipline are females older than 40 years of age who plan.
Undergo laparotomy, all laparoscopy secondary to chronic pain associated with endometriosis.
We are actively enrolling more study site and anticipate reaching the target enrollments for the second half of 2023 launch.
Circling back to Nikos statement of our goal of improving operational efficiency and decrease in cash burn.
I'm proud to share that inspire food and budget, we have to bring it forward and have made significant progress in our growth and innovation goals and we are continuing to help improvements woman gynecology help.
I will now turn to Bob Ritchie for a discussion of our financial performance.
Thank you Ryan truck revenue was 2.037 million for the three months ended September 32022, compared to $1 million 617000 for the same period in 2021 to.
26% product revenue increase was due to an increase in over one touch volume compared to the prior year, partially offset by a lower average unit price or <unk>.
Which decreased from $378 in the third quarter of 2021 to $369 in the third quarter of 2022.
The product revenue increase was also driven by an increased volume of tests performed by higher AEP payers, such as those for Medicare and commercial insurance carriers, partially offset by a higher percentage of lower Medicaid U P. <unk>.
Medicaid represented approximately 13, 6% of volume in the three months ended September 32022.
<unk> of $88. This is compared to 12% of volume in the same period in 2021.
<unk> of $94 or over one plus without Medicaid was $415 for the three months ended September 32022, compared to $415 for the same period in 2021.
The number of tests performed increased 29% to 5524 during the three months ended September 32022, compared to 4281 product.
For the same period in 2021.
The number of product touch performed increased 2% sequentially during the third quarter of 2022 as compared to the second quarter of 2022.
These increases are a result of increased access to provider offices and increase investment in our current commercial channel.
Gross profit margin for over one plus remained relatively flat at 57% for the three months ended September 32022, compared to 56% for the same period in 2021.
Research and development expenses for the three months ended September 32022 increased by 639000 or 42% compared to the same period in 2021.
Compared to the second quarter of 2020 to research and development expenses increased 747000 or 53%.
This increase was primarily due to clinical validity.
Product development costs related to Overwatch and costs related to our collaboration with Harvard Dana Farber Cancer Institute, and Brigham and Women's Hospital and medical University of watch, which involves our endo check product.
Sales and marketing expenses for the three months ended September 32022.
Decreased by $1 million 133000, or 22% compared to the same period in 2021.
This decrease was primarily due to decreased personnel in the marketing area as well as decreases in recruiting expenses and external marketing expenses.
General and administrative expenses for the three months ended September 32022 increased by 907000 or 24% compared to the same period in 2021.
The increase was primarily due to issuance issuance costs associated with issuance of warrants of $1 million 117000, partially offset by decreased consulting expenses and legal expenses of 102000.
As of September 32020 to <unk> 28 million in cash and short term investments, we raised $7 7 million net proceeds in a public offering during the third quarter of 2022, we utilized $8 1 million in operating activities during the third quarter of 2022 compared to <unk>.
$6 4 million in the second quarter of 2022 and $8 million in the third quarter of 2022 as Nicole mentioned the third quarter cash utilization include significant investments in Endo, Chuck development as well as severance costs.
As we previously disclosed on June <unk> 2022, we received a deficiency letter from the listing qualifications department of the NASDAQ stock market, stating that for the preceding 30 consecutive business days, the closing bid price for spot where common stock was below the minimum $1 per share.
Our requirement for continued inclusion on the NASDAQ capital market.
If we fail to regain compliance on or prior to November 28, 2022, we may be eligible for an additional 180 calendar day compliance period, which would extend the deadline until May 27, 2023, we are preparing to submit the application for the 180 day extension I.
I will now turn it back over to Nicole.
Thank you Bob before we take questions. Let me take a moment to acknowledge the news we released today that you'll be leaving us for another opportunity.
Personally grateful for your support during my transition and for your willingness to stay on in a consulting capacity to help us find an onboarding your successor on behalf of the executive team and the board of directors I want to thank you for your contributions to the company and to wish you all the backs in your future endeavors.
With that I would like to now open the call for questions David.
Thank you 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, a confirmation tone will indicate your line is in the question queue. If at any time you wish to remove your question from the queue. Please press star two for participants using speaker equipment.
May be necessary to pick up your handset before pressing the star keys once again to ask a question. Please press star one.
Our first question is from Ross Osborne with Cantor Fitzgerald.
Hi, good morning.
Hope everyone's doing well.
Bob It's been nice working with you in person in the future endeavors.
Thank you Ross.
So just looking at the quarter.
Maybe just the sequential growth was a little bit below what we were expecting.
Curious, how the quarter shaped up relative to your internal expectations.
The company can do to drive.
Better growth going forward.
Sure Good morning, Ralph Thanks for the question.
So we're now in our first full year.
Adoption of <unk> plus.
In a post Covid world. So we are learning about the patterns the ordering patterns of that test.
So we are and what we're doing to.
Drive growth for the rest of the year, we've instituted a number of additional thousand panels that we think will help pull through some additional growth in the fourth quarter, which is traditionally.
It was strong quarter for us and for other diagnostics.
As people sort of.
Have hit their deductibles and looking to get there.
Check ins with their doctors before the end of the year, so hopefully that answers the question.
Yes, it does.
And then I may have missed this I'm juggling a couple calls, but high school at health began offering a cost.
To what level and if not when do you expect them to begin offering.
I'm, sorry could you could you repeat the beginning of the.
The beginning of the question.
Yes, I was just asking about let's call. It health partnership obviously, we got off of that with us.
Yeah, so the Scarlet phlebotomy relationship as part of the overall bio reference.
Relationships. So that was also launched in the beginning of October .
Okay, great. Thank you proclaim quite yet.
Last one for me.
Just how the rollout of sort of ease progressing.
I guess, specifically with women scale.
Sure Yeah, we're very pleased with the rollout of women's care as I've talked about.
It is a multi layered.
So first you have to have the platform adopt it and then you still have to drive adoption with the physicians within the Super group. So we continue to drive that out without a number of very successful events with them too.
Enhanced understanding and knowledge of the test within the physician group, but we're quite pleased with the progress so far.
Okay, great. Thanks for taking my questions.
Sure. Thank you Ralph.
Once again to ask a question. Please press star one our next question is from Andrew Brachman with William Blair.
Hey, Good morning. This is Chris on for Andrew Thanks for your questions.
Just heard some liquidity so the operational burden of about $8 million in the quarter. If you back out those one timers that you mentioned closer to 7 million is that the right way to think about a baseline going forward in terms of operational Bert.
Bob do you want to jump on that one.
Yes, we expect that to compress marginally over time.
We reaffirmed our guidance for <unk>.
Cash utilization for the second half of the year and we're on track for that.
Together with the first quarter.
And as we drive topline will have kind.
Kind of incremental cost savings.
As we continue to execute on our operational initiatives.
Alright actions, but we have really taken we've taken the vast majority of the head count actions.
Nicole has mentioned.
We will see the full year.
Pay off payback on the reductions we've made as we go into 2023, and obviously as topline and adoption enhances we see a compression of that cash flow activity. So think in terms of kind of incremental cost streams and on top line traction will compress that.
Significantly more in 2023, and we have already given the fourth quarter guidance.
Okay.
To that.
Oh, sorry go ahead, and let me just add on to that a little bit thanks for that Bob.
We've said in the past that we do not believe that we will need to incur significant additional sales and marketing cost.
To drive overall.
Overwatch adoption.
A similar marketing strategy similar.
On the call point, so to Bob's point, we believe that we're going to continue to see enhanced sales efficiency.
Overall spend efficiency within sales and marketing so I do believe that we'll see compression.
Okay. Thank you and then just.
A few on Overwatch, maybe just your high level expectations on the revenue ramp.
I think that Tam is about three times larger than over one plus alone with the expanded label and you've got some existing education out there. So just how youre thinking about overwatch, nor should this be a meaningful growth driver next year.
Yes that certainly is the plan.
We have rebranded as <unk> suite, specifically, so that when we talk to physicians were not bifurcated the conversation between one or the other we're talking to the physician about this suite of products as a way for them to manage and make clinical decisions about any woman, who presents with a mask, which is very very different.
And then.
And then where we were when we were talking only about.
Over one plus which as you know is approved only for women, who they've already made a decision to treat surgically.
So it's a very different conversation, we expect that it'll be easier to drive.
A change in behavior, because doctors will see women with massive far more often than they will be a woman with a massive they've decided is.
Is ready for surgery, so that the early indications in our conversations with providers has been very positive. They're also seeing this as a.
A more comprehensive toolset, so certainly the plan would be to drive adoption of Overwatch.
Much faster than adoption of over one and they're right in the past.
Okay, and if I could just get two more than just quick ones on Overwatch embarrassment unique.
Unique CPT code application are you still thinking from a pricing perspective, and a crosswalk is overwhelming.
As most likely.
Yes.
Okay, and then last one on phase two of Overwatch. So phase one that one time risk assessment that you're launching here this quarter and then phase II will be some more of that serial monitoring is phase II expectation still.
A launch next year in 2020 here any update on a prospective study.
Yeah. That's still is the plan, but I'd ask Brian to comment on this study.
Sure good morning.
Yes, we don't see on a plan for that one currently the prospective study for this year.
Is on Lilly.
We don't have any reason to.
Onto our plan 2023.
Great. Thank you and best of luck Bob.
Thanks, so much for the question.
Yes.
Ladies and gentlemen, we have reached the end of the question and answer session I would like to turn the call back to Nikolas Sanford for closing remarks.
Thank you David let me wrap up by reiterating our focus on sustained execution during the third quarter and reaffirming our planned cash usage for the rest of the year at five 9% to $7 million with the imminent launch of Overwatch, we will be laser focused on driving payer and provider adoption of the <unk> portfolio.
Scaling our collaboration with distribution partners, including bio reference and accelerating the development and launch of Endo check.
The fire team is committed to achieving our goals through the disciplined allocation of resources and an eye towards the long term future of the company, we're energized and more focused than ever on our mission to transform women's gynecological health. We're looking forward to a strong finish to 2022 and our best year yet in 2023.
Thank you all so much for joining us today.
This concludes today's conference Aspire Women's health. Thanks, you for your participation you may disconnect your lines at this time.
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