Q3 2022 Sera Prognostics Inc Earnings Call
Our predictions would have outstanding performance for those that need them. The most.
Early on we made contact with the Gates foundation, knowing that creating cost effective biomarker solutions for preterm birth, and low middle income countries would also be very informative and helpful for the broadly diverse U S population.
We have subsequently conducted validation of biomarker prediction for preterm birth and populations located in U S. Europe Asia Africa.
In our Prime study recruitment efforts, we are currently including sites, where preterm birth rates may be as high as double the average U S. Pre maturity rates in order to better evaluate the extent of this problem and demonstrate the value of more proactive care solutions to underserved segments of U S populations, where the consequences of pre maturity our moat.
Severe.
A rigorous economic.
Ah clinical utility economic analysis on applying that preterm testing to a diverse population was recently completed we believe the data in this model will illustrate in the clinical benefits and cost effectiveness of the test and treat strategies across individuals with diverse racial and ethnic background. This work is undergoing scientific review prior to it.
Publication, and we will announce the results publicly when they are available.
As a consequence of all of these efforts serious preterm test is ideally suited to help make a difference in underserved patients who experienced healthcare disparities here in the U S. Our company is proud to have worked to create and now to commercialize the preterm tests that we believe can have substantial value and addressing the adverse cost.
Questions of prematurely in these populations who need it the most.
Now a word on the prime study recruitment.
As a reminder of the Prime study is a multicenter randomized controlled trial across 15 U S sites to demonstrate the impact of the preterm test and treat strategy on the consequences of pre maturity as enrollment continues we are confident of having sufficient numbers of subjects across sites to enable the interim analysis to take place.
In 2023 now.
Now some color on our pipeline and sample collection improvements.
Beyond our growing list of contracted contracted payers, we continue to make progress in developing new tests that will expand our robust biomarker pregnancy pipeline.
We have successfully validated prediction for preeclampsia.
Blood samples drawn at the same time as our preterm test we are looking forward to the public release of preeclampsia validation data before year end.
Serious pregnancy prediction pipeline is on track with validation of other biomarker signatures as well.
We believe that additional validated proprietary biomarker signatures will further demonstrate the value of our technology platform and be the basis for future products to benefit moms and babies over time, we expect that this growing body of pregnancy products will support our growth in the years ahead and are.
Our reputation as the pregnancy company.
We're also pleased now to have successfully validated and ambient temperature blood collection transport system for preterm testing, which is expected to facilitate a larger number of sites where patients can have blood conveniently collected and sent to <unk> lab. This should also reduce our cogs or cost of goods sold by eliminating.
<unk> the requirement to use dry ice.
I'll now turn over the call to <unk> for a review of our third quarter financial results Jay.
Thanks, Greg and good afternoon, everyone.
Today I'll briefly review our financial results for the third quarter and provide some general commentary for abused through year end.
For the third quarter of 2022, we reported revenue of $87000 compared to $23000 for the third quarter of 2021.
It is encouraging to see such a year over year increase we believe that the early adoption and traction Greg noted earlier, we will have a more significant impact next year.
Total operating expenses were $11 3 million from $9 5 million for the same period a year ago.
Research and development expenses for the third quarter of 2022 were $4 2 million compared to $2 1 million.
For the prior year period, due primarily to increased laboratory operation in clinical study costs.
Selling general and administrative expenses for the third quarter of 2022 or $7 million up slightly from $6 $7 million for the prior year period, due primarily to increased head count as we scaled commercial operations and general corporate infrastructure as well as increased.
Costs related to operating as a public company following our IPO in July 2021.
Selling general and administrative expenses for the third quarter of 2020 to significantly decrease from $8 5 million from the prior quarter due to steps we took to streamline our sales force during the quarter and focus our commercial strategy on early adopter systems. It is noteworthy that this.
<unk> decrease in SG&A did not negatively impact our revenue during the quarter.
Yeah.
Net loss for the third quarter of 2022 was $10 7 million compared to $9 9 million.
For the third quarter.
2021.
As of September 32022, the company the company had cash cash equivalents and available for sale securities of approximately $111 2 million.
We continue to believe this gives us an adequate runway into 2026 to pursue our strategy without raising any additional capital.
As we approach year end, we continue to believe that full year revenues will be less than $500000, particularly given that December tends to be a slow month for testing.
That said with a keen eye on controlling costs and what we view as improved testing volume in 2023, as we implement our early adopter system strategy, we anticipate accelerating revenue and lower cash burn overtime.
I'll now turn the call back to Greg Greg.
Thanks, Jay and thanks to all of you for attending our call today.
While the scaling of our revenue takes longer than we like were happy to see some exciting trends among early adopters systems customers, which is solid a solid proof point for our business. We believe this adoption will accelerate and that our conversations with early adopter systems customers will result in additional contracts being successfully executed.
We were very pleased given the current macro market conditions to have sufficient cash to execute on our plans over the years due to the excellent support of our investors. This helps us to achieve our vision to make a real difference in helping mothers and babies to lead better and healthier lives.
And with that we will now open the line for questions operator.
We will now begin the question and answer session to ask a question you May Press Star then one on your telephone keypad.
You are using a speakerphone please pick up your handset before pressing the keys.
To withdraw your question. Please press Star then two.
Okay.
The first question comes from Patrick Donnelly of Citi. Please go ahead.
Hey, guys. Thank you for taking the questions.
Greg maybe one for you just on kind of the.
Sure conversations that are happening now and it was nice to see some contracts with self insured employers things like that how do you think about the conversations currently how many are saying hey, we want to wait and see at least the interim data from prime and 23 versus those willing to move forward now with the data you've seen maybe just kind of pull.
That cutting back a little bit and kind of kind of tell us how much. So again, just trying to think about what that inflection could look like as prime comes out.
That's a great question Patrick.
There are clearly.
Groups now and we count the Ibms as being in this in this group who see the value of implementing clinically what can actually lead to cost savings and they are but they are convinced this is why we're seeing groups like banner.
Very receptive to the idea of establishing preterm testing among pregnant populations, but there are a number of them that are waiting to see additional data that's been something that we've been aware for some time.
And as Readouts occur as we have additional clinical data we believe the data Readouts will in fact.
Answer any remaining questions that anyone may have about about the strategy and its ability to.
To make differences in health and ultimately in economics. So we're on the right trajectory.
We see continued growth during next year.
And as we focus on systems.
Systems are in good shape to be able to implement changes, especially those that are more holistic in their outlook and where they are financially responsible for managing.
The.
Disease conditions and health conditions across populations those are the ones that really taken interest because the economic speaks to them as a result of improving health.
Okay. That's helpful. And then you guys, obviously talked about the cash side, a little bit extending that how do we think about the pace of hiring where you guys are how do you balance the need to preserve cash and then obviously kind of continuing to drive growth.
So you hit the right word it's a balance.
The fact is as we think about opportunities we deploy personnel, where we have identified opportunities that are there and that's clearly what we're doing.
As we scale our operations, we look for regions systems and customers.
Adopting that's where we go where there's opportunity.
And with our with the hiring that we anticipate happening we see growth in revenues occurring but doing it.
In an efficient and cost effective manner, that's why the earliest focus in.
Our commercialization is really centered on these on these systems on customer systems that are integrated to some degree that's where you get the best Bang for Buck.
Okay and last one for me just on Prime can you just talk about I guess, what hurdles are left in terms of things you have to do to execute on to until we see the interim data that just trying to think through.
You know the timeline risk of slippage and just that catalyst over the next couple of quarters as we approach it.
Yes.
As has been the case in all clinical studies, there are challenges because of impacts from Covid.
Staffs and universities have been reduced.
Lager to get things done, but I can happily report, but we are we are being very successful.
Successful in growing the number of sites and we are on track to reach our goal of having the interim look occur during during 2023.
You have to remember in pregnancy, you can enroll patients you can draw blood on patients in mid pregnancy as we do it as early as 18 weeks.
But you still have to wait for the babies to be delivered to see what the outcomes are and so.
We're very confident with the sites that we have and the additional sites that were in conversations with it we'll be able to to reach our goal of the interim look readout occurring.
Some time in 2003.
And thats that.
That's the good news.
This is being done in what is a very challenging environment for doing clinical research. Our team has done a great job and we're happy to see that we are on track.
Appreciate it thank you guys.
Yes, you bet Patrick.
The next question comes from Andrew Backman, and William Blair. Please go ahead.
Hi, guys good afternoon, and thanks for taking the questions.
Maybe to start here, Greg I think you mentioned that you should start seeing revenue starting to contribute a little bit more in Q4, and then as we move throughout 'twenty three especially from these <unk>.
Not asking you for specific guidance here, but can you maybe just sort of give us some guardrails around how we might be thinking about that revenue progression building throughout next year. Thanks.
Yes, I think yes.
You have to be really careful when you make projections early on.
As we are early on it.
It takes time when you sign on a new entity, let's say, let's say, we get another another integrated delivery system like like banner.
You have to you have to talk with the <unk>.
Constituents that are there you have to bring them up to speed and getting the contract is really the first step there are a number of things take place to be able to actually have doctors order the testing and to be able to penetrate the large numbers of patients that are extent in these systems and so that's the way we think about it.
We see revenue growth growing.
Given any guidance about the numbers that are there, but it's useful.
To understand what is the potential size.
<unk> of annual births, and then what is reasonable reasonable penetration occurs it takes several months to penetrate new systems, but once you do.
A large number of systems it can substantially contribute to revenue growth and that's what we see happening as we move into 'twenty three and beyond.
That's great and then some encouraging sort of commentary around the healthcare disparities and some data that it sounds like youre, making progress with their <unk>.
Can you just maybe talk broadly about how you might be starting to use this as you move throughout 'twenty three in negotiations with payers and sort of their receptivity to that.
I think batteries is an excellent example of first excellent first example, a large number of these.
Members of the banner.
The banner University Health system banner access system are actually Medicaid patients.
<unk> patients is a segment of the population that is.
Challenged and actually having a contract and working with those patients is a way that we can directly begin addressing health healthcare disparities. There. We also have conversations that are taking place with other managed Medicaid plans.
Listed that as one of the one of the types of organizations that we're really keen to work with and those conversations are occurring in real time.
Once we once we begin.
Begin implementing across Medicaid organizations.
That will be a very very strong a strong point of focus.
And a strong proof point as we move forward in the next few years.
I would say that banner is really a good first step there are many more to come after that.
Okay. Thanks, guys.
Yes.
The next question comes from Tom Stephens of Cowen. Please go ahead.
Hey, guys. Thanks for taking the question just to kind of follow up on Andrew's question kind of on the managed Medicaid plans I guess, what kind of data that people need to see before you can kind of we enter those kinds of plans does that is that maybe two years post.
Supposed to apply and weed out some somehow would be used for that and then just talk about the number of annual bus you could potentially be exposed to today, where does that sit after offsetting.
Series of <unk>.
And.
A self insured employer insured programs. Thanks.
Sure.
We previously talked about the large number of patients.
Pregnancies that occur in systems that are integrated that includes <unk> that includes.
Large large hospital networks and others.
The number of patients is extremely large it's well over 200000, if you look at those and <unk>.
Medicare Medicaid itself.
42% of Bruce occur in Medicaid patients. So a 42% of $3 million gives you a very sizable group.
Ah patients.
It can be.
It can be offered the preterm test.
I do not see it taking two years beyond.
The Prime readout again, we already have managed Medicaid plans that are interested one of them has already signed on with us and the implementation of that one as the first one is going to be an example for others. So.
I see it happening sooner than two years down the road.
After prime one.
Once the results are out once we have more implementations and by the way some of them. Some of the organizations that we're talking to the integrated networks are going to be publishing the results of applying the technology in there in there in their plans that will be additional evidence that will be out there that will convince other people.
The value of it.
The preterm strategy, what it can actually do in terms of of health improvements and economics.
Great and then just to follow up on that Doctor Education point I guess.
Sales team kind of goes out and speaks to the speed of the doctors. After these implementation idms, what's that may just sticking point for potentially not ordering the test and kind of how you guys are addressing that.
Well I think that what are the important things that needs to be done is to give.
The physicians.
The wherewithal to follow up with patients who are who have positive tests.
And there are efficient ways of doing this.
We're being explored not only by <unk>, but also by physician groups.
One of the questions of physicians asking.
How do we do this how do we incorporate this into our workflow.
There are ways to do this and we're finding ways.
Our implementable and there will be examples of these as we make some future announcements you'll see examples of how this happens.
The.
The field of pre maturity is a complicated field.
But theres no question that our stratification can actually find patients who have higher risk nearly 90% of spontaneous preterm deliveries are detected by our test and being proactive in managing those patients does have benefit and so people are looking for publications.
Show that intervening makes a difference there we.
We already have have proved from our first randomized controlled trial that reported out there are additional trials that we'll be reporting out and as those data become known.
Our belief is that people will be will not be hesitant and understanding the benefits of being proactive when you can actually identify the patients that otherwise are invisible to the way the medicines currently practice.
It's good stuff and then just one one so kind of I guess modeling point.
Talk about kind of carve outs for next year.
Have you given a number on the number of annual parts you would currently be exposed to just given the lives covered in the plans you have online today.
We haven't done that I'll, just give you the top of the topline numbers there are approximately $3 million.
Pregnancies that are candidates for a pre term tests slightly over $3 million okay.
So.
As we as we look at it what this will give us in modeling chip that will help you.
The U S birth rate is approximately <unk> 12 per 1000 individuals. So if you know the size of the organization in terms of insurance you can do rough estimates.
By using that the number of pregnancies that occur annually again.
We bring people on it's important to know that it takes some time once you get a contract actually penetrate that contract, but it takes time to do that and get the pull through that's required but that gives you an idea of the sizes. We some of the organizations that we've talked to.
We are happy to have us.
Happy to have publicized.
They've signed a contract with others arent.
From those.
We've actually mentioned you get a sense of the size of the number of people that are pregnant.
A year and that gives you some insights into how you can model this pretty carefully.
Great. That's very helpful I'll get back with you.
Yes, Thanks, Tom.
As a reminder, if you have a question. Please press Star then one.
The next question comes from Francois.
Chris <unk> from Oppenheimer. Please go ahead.
Hi, This is Dan on for Frank Thanks for taking the question.
You bet.
Early adopters.
That are coming onboard.
Robert are you starting to see an uptick in interest from peers.
As you anticipate the ramp up in 2020 are you seeing any commonality.
Yes, yes.
Yes, here's some color.
As you know with the effects of the pandemic and the current economic challenges that we face as a country.
There is intense competition for talented employees and having benefits packages that include that includes advanced benefits for pregnancy is a way to attract and to retain very talented women, but theres no question that the payers are attuned to the.
Self insured employers are attuned to this.
About 64% of U S companies have some form of self insurance and as people see these announcements.
Learn about others doing it the conversations are increasing.
There are we're having a number of conversations with self insured employers, who see the benefits of actually offering.
Offering superior care for women, who are pregnant.
That's clearly the case there.
<unk> each other in some ways some of them want to be leaders and Thats why you step out and do it before others, but clearly this has this has value for them.
Alright.
Maybe just another one on Brian you mentioned that 15 centers just wondering how the enrollment has been going on.
Do you still need to hit the target up to 800 by year end for the interim look in 'twenty, yes.
Yes. The key the key was to have approximately 2800 by year end and what I can tell you is the real the real important part of that was sufficient to enable the interim look to take place in 2023, and where we are on track with that and we're excited about that.
Great and just a last one on the pipeline.
Could you add some color I'm, sorry, if I missed it.
Missed this but could you add some color on the ambient temperature blood sample that you talked about.
Yes.
Yes.
The origin of the work that we did in the earliest days.
Was to see if we can build a predictor that would predict.
The event spontaneous preterm birth, we did not know, which biomarkers would work we collected specimens in a very pristine way.
And froze and snap pros the serum that was sent into the laboratory in the earliest days of Sarah that has been the process for commercial samples as well.
It's a process that required requires centralization followed by by freezing and then shipping.
Have a new way that we will be deploying and we're very excited about it we validated that the collection works. The results are equivalent and it's exciting to see this because the cost will go down and.
Dry ice is in shorter supply than it's ever been.
So some of that is because of the pandemic that has occurred and now going to ambient temperature collection. There are more offices that they can draw blood. There are more sites, who can do it they can do it more efficiently and it costs less money. So we're very excited about rolling that out and during 'twenty three you'll see our.
A bigger rollout of that technology as we make that the predominant way that samples are collected.
Great. Thanks for taking my questions.
You bet.
The conference.
This concludes our question and answer session I would like to turn the conference back over to Peter Denardo for closing remarks.
Thank you Danielle This concludes the call and we look forward to providing an update on our business. When we report fourth quarter 2022 financial results. Thank you and good afternoon everyone.
Okay.