Full Year 2022 MDxHealth SA Earnings Call
In summary, our results reflect a clear focus on growth and execution is evidenced in the following.
As communicated with the launch of resolve Mdx, we validated the opportunity with our sales channel and customer base. Following many months of diligence and a clear set of criteria to substantiate the fit with our current menu.
Call patterns and relationships.
Yeah.
We also evaluated the product's opportunity to generate accretive contribution to our gross margin from day, one and dollar one.
After 12 months on the market we.
We can confidently state that this process has been validated.
And can be applied to source additional channel opportunities that do not require material investments.
The acquisition of the GPS test represents a clear and compelling opportunity to expand our existing customer base and leverage the acquired customer base.
Cross selling complementary prostate cancer diagnostics in our offering.
We now are the only company that can provide a clear and clinically actionable precision diagnostic for risk stratification.
It's positive.
Or negative initial biopsy.
We are confident that our ability to partner with our urology customers with an unmatched menu based.
Based on our reputation for excellence and laboratory services and allow improved efficiency through standardization.
We continue to execute on our integration of the GPS test.
Complex and all consuming process from both a sales and operating perspective.
We have been focused in Q4 and into Q1 to transition all aspects of the business.
Yeah.
In Q4, we completed the restructuring of our sales team with additional reps from exact.
Being territory realignment.
Alignment of performance based incentive compensation and cross selling cross training of product offerings.
We are confident that these efforts will provide for a high performing sales team in 2023 and beyond.
We have also been intensely focused on the customer experience.
<unk> transfer of physician portals.
New pathology lab sample procurement and market access contract payer coverage.
All of which are critical in the laboratory model to efficiently receive.
I saw some report.
Within the turnaround time expectations of our customer.
I will provide further view forward and outlook for 2023, but first let me turn the call over to Ron for a review of our financial and operating results for 2022.
Yeah.
Thank you Mike.
As Mike mentioned, we are pleased to report our first consolidated quarter.
The Mdx health business with our revenue growth in the fourth quarter and full year 2022.
Revenues for the fourth quarter ended December 31 2022.
Increased by 114% to $12 9 million.
Versus $6 million for the same period last year.
Excluding GBS fourth quarter revenue increased 15% to $6 $9 million versus Q4 2021.
Total revenues for 2022 with $37 1 million, an increase of 67% as compared to total revenue of $22 $2 million for 2021.
Excluding GPS total revenue for 2022 with $27 7 million, a solid increase of 25% versus 2021.
2022 revenues were comprised of $21 $8 million for confirm nine.
<unk> $9 3 million for GPS.
$4 9 million for resolve our <unk> with.
The remaining revenues from select and all that.
Gross profit for 2022 was $19 2 million.
As compared to $10 6 million for 2021.
Gross margins were 51, 9% for 2022 as compared to 47, 5% for 2021.
Representing a gross margin improvement of 440 basis points.
Not really related to our product mix and the addition of GPS or product menu.
Operating expenses for 2022 were $57 1 million up 53% from $37 4 million for 2021.
Primarily related to additional field sales personnel associated with the GPS business as well as nonrecurring transaction related expenses of $3 $2 million.
Excluding noncash expenses, such as depreciation amortization and stock based compensation.
As well as the nonrecurring transaction related expenses of $3 $2 million, our operating expenses for 2022 were $48 1 million an increase of 45% over 2021.
Operating loss and net loss for 2022 were $37 9 million and $44 million, respectively and.
An increase of 41% and 52% respectively over 2021.
Net loss also included one time financial expense of approximately $1 $2 million related to replacing the company's debt facility. So.
So in total nonoperating nonrecurring expenses totaled $4 4 million.
Cash and cash equivalents as of December 31, 2022 were $15 $5 million.
Our balance sheet was strengthened recently from the February 2003, 2023 equity raise of $43 million.
Which includes gross proceeds of $3 million from the underwriters over allotment option.
Including net proceeds of $40 $4 million from this offering our pro forma cash balance was $55 9 million for year end 2022.
Total cash collections during 2022 amounted to $32 3 million.
An increase of 50% compared to 2021, excluding collections from GPS total cash collections in 2022 increased by 20% versus 2021.
This concludes my brief overview of the results I will now turn the call back to Mike.
Thanks Ryan.
Last four years, we have been focused on driving execution and operating discipline across the organization.
We have restructured our sales team our revenue cycle management processes and advanced coverage with payers through our commitment to market access.
As evidenced by the recent GPS coverage decision by United Healthcare.
The largest commercial health plan in the U S.
We have also seen positive developments with respect to treatment guidelines is the national comprehensive cancer network oriented CCN recent.
Recently issued updated guidelines expanding the GPS indication too.
To include high risk patients.
<unk> prostate cancer.
This expanded criteria to address high risk patients further validates the clinical utility of GPS and making prostate cancer treatment decisions.
And it enables us to more fully serve our targeted patient population.
Finally, I'd like to provide a brief update on the state of our end markets now that effects of the pandemic have begun to recede.
At the end of 2021.
We noted the headwinds of decreased patient flow and sales rep access to urologist office from the pandemic.
Entering 2023, we are expecting a gradual but steady return to normalized testing dynamics and access to providers.
As noted previously screenings for prostate cancer were down approximately 15% during the pandemic.
Not surprisingly this.
The unfortunate effect of increased rates, a positive biopsy and diagnosis of prostate cancer.
In fact source estimates site positive biopsy rates have increased from 50% to 65% over this two year period.
With this pressure on both our select Mdx post elevated Psa and.
And confirm Mdx post negative biopsy.
We believe this underscores the efforts of our sales team during the pandemic to deliver consistent volume trends.
All of these factors provide visibility to and confidence in the following guidance for 2023.
Yeah.
And you'd expect revenue of between 65 and $70 million.
Which would represent revenue growth of between 75% and 89% over our 2022 revenue of $37 1 million.
We expect our select test to be issued a final Medicare coverage decision by mid year and.
And contribute to revenue growth and gross margin accretion in the second half of the year.
We expect our gross margin to continue to accelerate as we experienced in the back half of 2022.
And correspondingly reduce our operating use of cash.
Finally.
I believe that our current and expanded offerings will drive our growth based on our earned reputation for laboratory service accuracy turnaround time and menu that.
That will drive standardization to Mdx house offering for more urology customers.
So as we look forward.
<unk> is committed to driving sustainable growth, which will service the foundation for value creation for all of our stakeholders.
Including patients customers and shareholders.
Thank you for your interest in and support of.
Mdx health and.
And now I'll turn the call back over to Schmila for questions.
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.
You May press Star two if you would like to remove your question from the queue. So participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys.
Mhm.
Our first question comes from the line of Francois.
Do I with Oppenheimer. Please proceed with your question.
Hi, Thanks for taking the question just a couple here I was wondering in terms of.
He wanted to share metrics or maybe some qualitative color around.
Cross selling since the acquisition here.
Yeah.
Hi, Frank we will be providing our revenue by product as we go forward by quarter in 2023, and I think as we begin to report that we'll be able to comment specifically on the progress.
Progress, we're making there you know one clear.
Example, that I referred to as our tissue based combination of GPS and confirm where our sales reps are standing on the other side of that biopsy and we're.
We're really the only ones that can provide an answer to that initial biopsy either way positive or negative.
And we think that.
As I noted, we believe that partnering with our urology customers with with this expanded menu.
It's a real benefit and we're in the process as you know through the integration of putting together best in class support for our customers through.
Portals EMR in all of the integration aspects coming from exact so yeah. We're confident it will drive cross selling in and the sales forces in position now beginning in Q1 to drive that.
Great and then just last one here in terms of the United win can you just maybe give a little color on the impact that can have an and should we be expecting any more wins and there there may be their impact may take a little while on.
On the on the top line.
And then.
In order for you guys to get the United win it seems like there was a competitive process.
Given how differentiated you are.
Can you maybe just discuss a little bit more about what made you differentiate it for United to go with you guys.
Yeah, I think the differentiation is on the.
Low risk patient population, where GPS has the.
The more the most data clinical utility.
Of the three products that are cover that area. So that clearly was singled out for that patient population.
And then secondly to the first part of your question we feel one.
One of the things we have with our with our business that we've really put in place as it is.
A patient friendly and practice friendly approach too.
Revenue cycle management, and payer management within the practice. So we you know.
Driving the impact of the of the of any new market access contracts, we got is likely to more influence and.
And provide impact to our revenue through average sale price.
Increases, which we've seen.
As reported over the last two years.
With the work that we've done internally and operationally and well as well through our market access managed care teams. So we're confident that that will continue as we add additional payer coverage for our full menu.
Including picking up the payer coverage contracts with with GPS.
Thank you.
Thanks Ryan.
Our next question comes from the line of Mark Massaro with BTG. Please proceed with your question.
Hey, guys. Congrats on a strong 2022 and outlook for 2023.
I guess my first one is maybe a big picture question for you Mike.
If prostate biopsy results.
Our now turning positive about 65% of the time versus 50% pre Covid I think you said.
Can you just give the generalists some.
Practical ways as to how that becomes.
Sort of.
A positive for the demand for your tests going forward.
Yeah. Thanks, Mark so we've.
I wanted to make sure I have found a way to communicate the dynamic that we've seen so pre pandemic.
This is an average right there's always exceptions and practices that are dependent on mix, but in general pre pandemic. We saw positive rates a biopsy of about 50% positive negative on initial biopsy, what we saw through the pandemic.
And as cited is that.
Reduction in screen and the delays in screenings by 50% of PSA and patients putting off their Psa screenings.
Clearly led to an increase in positive biopsies upon coming back into the system now whether that settles back to a normalized rate of 50% is to be determined, but we think it kind of masks I don't want to say an over performance during the pandemic, but clearly my comment was.
Our sales force was to keep our volumes steady during that with that pressure on if for instance, if a rep had 100.
A customer with a 100 initial biopsies and they were expecting 50 confirms to come out of that so these are just general terms to your point of the high level view.
You know that.
That goes to 35, and that's a clear impact on our business now the positive is with the pickup of the GPS. We can now cover that patient population as that dynamic either.
Stays in that range for a while and comes down we believe obviously that.
Patient flow will return.
And it'll just be over time, which we're okay with right those headwinds will be turning to tail winds of patient flow coming back through.
The system capacity wise, its a fixed capacity system. So they can absorb that all through a couple of quarters, but that probably normalizing back toward pre pandemic rates as we go forward.
Okay. That's helpful. And then second question is on select.
Reimbursement just to make sure I understand.
I think you guys are subject to the new umbrella foundational LCD LCD process with <unk>.
Is it right that you think you submitted your technical assessment to mall backs.
They had an opportunity I believe to respond to it.
Just curious if you can provide any color whatsoever about any conversations you might be having with mall decks that would support your confidence in.
This reimbursement going live.
For the second half of 2023.
Yes, Mark So you noted with the new foundational process is very different so I don't want to say, it's interactive, but it's iterative iterative, where we submit our technical assessment and then they have a period to either rejected or respond with questions.
And that's been the.
A couple of turns we've had with them.
Without giving specifics here, we think the trend of the questions and clarifications is going in the right direction by guiding to mid year, what we're essentially doing is allowing for another turn right. So we don't have to adjust.
It could come sooner.
Getting paid in Q2.
But we're just allowing for that process to play out based on the fact that.
We were one of the first to go through it and what we know is that it.
It's becoming maybe a little bit more like the FDA from our interactive on a PMA.
PMA or five 10-K, so that gives us the based on our view of where it's headed we.
We like mid year.
Okay, Perfect and then my last question.
For either of you guys.
Nice to see the con firm volumes accelerate.
<unk> increased from 14% in Q3 to 21% in Q4.
I'm curious if you can maybe speak to some of the underlying drivers.
To the extent that you can parse it out but.
But I also wanted to ask.
Select volumes I think were down 6% in Q4.
When do you think we can return back to growth on select and what are some of the drivers that that are contributing to confirm growing faster than select on the volume side.
Yeah. So I think a couple of things there right I don't want to say we.
We may have taken a little bit off the gas on select just because probably in some respects based on the impact to the P&L right. We absorb all of that cost. So if we drive volumes up.
We continue to eat the Cogs until we have coverage.
We are confident that we have a base of customers and ability to drive adoption of select but candidly the the priority over the first.
We're about 120 days into this integration and the focus we want.
As you would expect to be on GPS and confirm.
Combination cross selling cross training.
So we expect that to but our reps clearly are able to represent the full menu in the process of bringing on 23 additional reps and cross training.
Mdx reps on the GPS test and vice versa has been our focus and then I would also add that.
We're pretty encouraged as you as you probably noted on the on our resolve.
Our our team the key to that was we're not just looking at throw products and our reps bag or.
It was very clear that we had to.
Really in <unk>.
Rigorous process eliminate the fact that it would.
Create a focused challenge from our primary prostate cancer menu, what we've confirmed as it reads exactly on as I noted, our calpine call pattern relationships and customer base.
Okay. It sounds great I will let some others ask some questions.
Thanks Mark.
Yeah.
Our next question comes from the line of Thomas Rankin with KBC Securities. Please proceed with your question.
Oh, Thank you for taking my questions two from my side.
The first one is with regard to the commercial sales force actually so I am just <unk> grown quite a bit from <unk>.
Towards about 64 reps, how do you look into that for next year do you anticipate to further grow that commercial force in the coming year.
Yeah, Hey, Thomas again, thanks for staying up late yeah, no one of the strengths that we have on our view forward as we feel our opex can be held pretty straight away here right our sales team.
At this point, we have 70 people on the field 54 direct reps that is clearly the strongest channel into urology and in this space focused on are our area. So.
That is very very right sized for our business and still allows for additional channel opportunities. So we think particularly from a SG&A perspective, our opex can be held.
Very very steady as we go forward, we do not have you know our goals.
Become a $100 million business with a 65% gross margin and profitable.
Those are in our view and I think that we're very confident that this sales channel.
Can take us there as currently constituted in that any expansion on it on the Opex would be driven by scale.
The volume through our laboratory.
Okay, that's very clear thank you.
With regards to the second question I wanted to zoom in on the monitor.
Thank you that you have in the pipeline could you perhaps provide some color on where you stand with that and is there already.
Any indication of what the timelines might look like that.
Yes Thomas.
Probably still being conservative there I think that were.
And it's still in the biomarker.
Basically developing the assay from the right mix of Biomarkers in bioinformatics.
We expect we would expect to have visibility to that moving from that stage into verification and validation and then beginning to follow up on the go to market process with regard to reimbursement and coverage. So.
We think 2023 and 24 will not.
Reflect any impact from monitor in our business from a P&L perspective.
And we will just update accordingly, as we go forward.
Alright, Thank you very much.
Thanks Thomas.
Okay.
And we have reached the end of the question and answer session and also this concludes today's conference and you may disconnect. Your lines at this time.
Thank you for your participation.
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