DermTech Inc. Q1 2023 Earnings Call
Yeah.
Good day, and thank you for standing by welcome to the Derm Teck's first quarter 2023 financial results call.
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I would now like to hand, the conference over to your Speaker today, Steve <unk> head of Investor Relations. Please go ahead.
Thank you welcome to <unk> first quarter 2023 earnings call.
Turning me on today's call, our Doctor, John <unk>, our President and Chief Executive Officer, and Kevin Sun, Our Chief Financial Officer.
Our call today will include forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995.
Statements made on this call that do not relate to matters of historical fact are considered forward looking statements.
Forward looking statements made during this call, including projections of future performance are based on management's expectations as of today and are subject to various factors assumptions risks and uncertainties, which change over time.
Actual results could differ materially from those described in such statements.
Several factors that may contribute to a cost such differences are described in today's press release and our most recent filings with the SEC.
We undertake no obligation to update the update these statements except as required by law.
Our first quarter 2023 earnings press release, and SEC filings are available on our Investor Relations website.
According a transcript of today's call will be available on our website later today.
That let me turn things over to Jonathan.
Thank you Steve and thank you everyone for joining us in March we attended our most impactful and Energizing American Academy of dermatology or AAD annual meeting our booth had incredible traffic with more than 1000 visits visitors and we generated approximately 300 sales leads our booth was also a fixture for key.
The opinion leaders or Kols and health care practitioners throughout the event our momentum at the AAD again demonstrated that precision dermatology guided by noninvasive skin genomics is being integrated into the melanoma care pathway, it's inspiring to see customers and industry leaders independently carrying our vision forward.
We also completed our CLIA laboratory move in March This was a two year project marked by the tremendous planning effort and execution of our team. We are now in a state of the art facility that brings together all of our San Diego colleagues in one location I'm proud of our entire team and what this means for <unk> future.
Our capital and energy remain aligned against a few important priorities expanding coverage for the derm Tech melanoma test or a DMT monetize the existing dam demand around strong sales execution and state sustaining our cash runway. We're steadily pushing ahead towards these goals.
First the steps, we've taken to stabilize our average selling price or ASP, including generating more volume from reimbursed tests are exhibiting positive signs.
Courage that DSP for the DMT support at 27% sequential increase.
In our test revenue to $3 4 million, we continue to emphasize the DMT is clinical value proposition and an enhanced customer experience, including electronic ordering of our test regional billing concierge services and health care provider training programs. Our sales effort is structured to pull through test volumes in geographies, where we've.
Currently picked up insurance coverage and we are exploring additional tactics to maximize our ability to generate reimbursed volumes.
We continue to believe the best way to reach a topline inflection point is to bring on more commercial payers. We've added 35 million covered lives since the end of 2022, roughly the equivalent of the second largest national commercial insurance provider. We now have approximately 126 million covered lives in the U S, which breaks down as nearly six.
$88 million for Medicare and Medicare advantage and $58 million from a broad mix of regional and governmental payers.
We've also begun to sign agreements with commercial payers in cases, where positive coverage policies policies have recently been issued or contract announcement with the major Blues plan in North Carolina is a good example.
By having both a policy and an agreement in place, we strengthen our connection with insurance providers and further reduce barriers to access because our tests becomes available as an in network benefit.
Following closely behind many of the positive coverage policies, we announced in the first quarter. We also expect to sign agreements with Tricare and several other large regional blues plans.
Overall pricing for the contracts. We have recently added remains in line with our long term targets.
In addition, a countrywide alliance it serves national accounts and more than 10 blues plans to service to self insured and employer populations.
<unk> issued a positive coverage policy for the foundational assay of the DMT, we are eager to gain access to the millions of members served by this national platform. Furthermore, we anticipate finalizing agreement with the National Association of independent locally operated Blues plans. This organization has.
Substantial influence over many regional blues and National commercial plans and we believe it could bring in additional policies and contracts.
We're also making good headway bring on Medicare, which is California's Medicaid program. We are nearing the end of a long onboarding process that includes several procedural steps and getting in line and pricing for the DMT. We already have solid test volume with this patient population and look forward to improving access for meta.
Cows more than 12 million members.
We intend to further leverage the test firm, we've already have by pursuing Medicaid coverage in several other states.
It is important to remember that these Medicaid programs are amongst the largest governmental payers.
Yes.
Our effort, bringing on integrated delivery networks, our idea and is gaining traction as well, including the large nationally recognized payer provider with which we are conducting a successful pilot we expect to move to the contract negotiation phase later in the year.
As you heard our momentum with payers remains strong across a broad mix of organizations. We continue to work closely with nationally recognized payers, although two of them reiterated negative coverage policies. In recent weeks, we still have multiple opportunities this year to achieve and that nationally recognized payer wins.
<unk> two independent economic assessments are being performed by the affordability groups related to national plans. The outputs from these assessments are looking favorable and we believe they could positive positively influenced coverage.
One of the chief ways that our visibility with payers goes up is through advocacy channels, including professional societies physician and legislative efforts in individual states. It's important to note that bill's mandating insurance coverage of genomics testing or so called a biomarker bills are expected to be effective in multiple states in late 2010.
Three in early 2024.
These states are just the latest in a growing list.
<unk> recognized the importance of improving access to potentially life say lifesaving genomic tests.
Additionally, our visibility with payers has also improved through independent assessors of healthcare technology. As noted previously we have already received the favorable policy from the second largest lab benefit manager in the U S. We also recently received a favorable recommendation from a well recognized.
<unk> technology assessment firm, the conductor technology evaluations to improve the safety quality and cost effectiveness of care across all health care settings.
We believe this favorable recommendation could influence coverage by commercial payers.
In addition, a large regional payor conducted their own economic assessment using the framework from the Optum economic steady this payer discovered their cost for adjudicating pigmented lesions were even higher than the Optima study.
We believe these independent efforts affirm the robust clinical validation and health economic data that has already been published for the DMT.
Our trust II study, which we initiated in 2022 should provide additional evidence in support of our payer discussions. This is a prospective study designed to follow a cohort of two to 3000 patients with negatively tested lesions for up to one year. This study also assesses the histopathologic diagnosis of up to 1000 lesions that test.
Positive with the DMT and includes the analysis of the add on test we expect to release top line results in the second half of 2023, the resulting data if positive may potential allow us to reengage with the two national payers that <unk> recently reiterated their negative policies.
Overall, we're pleased with the progress we've made since the end of 2022 and as we've expanded coverage for that and we've expanded coverage for the DMT by nearly 40%.
Our sales team also executed well into the first quarter and coming out of the a and AA D. We were on track for healthy total sample volume growth. However, we have begun to shift our focus to driving reimbursed volumes and asps.
Versus driving total test volumes driving Asps is one factor, which helps preserve our cash runway. This change in prioritization aligns with our strong payer progress as an example of the steps we've taken to implement this strategy, we have realigned our support infrastructure, including concierge.
<unk> in territories, where we have insurance coverage for the DMT. In addition, we have dissolved certain sales territories to align our focused on reimbursed samples.
Further given there are recent increase in covered lives. We've also equipped our sales team with payer mix data to allow them to target providers with reimbursed billable samples.
Lastly, we recently stopped testing samples from pediatric patients in certain Fitzpatrick skin types based on guidance from our lab Accrediting organization. We are working on a plan to re and do introduce testing for these patient cohorts with an extremely low incidence of melanoma.
Due to all these factors, we expect billable sample volume for 2023 to be relatively flat compared to last year, but ASP improvement should increase revenue.
I want to emphasize that we continue to look for additional cost savings to preserve our cash runway and optimize our operational and organizational.
<unk> footprint.
In closing, we've made great progress, bringing on payers and executed well to drive fundamental demand for the DMT were now prioritizing generating reimbursed tests versus overall demand growth.
We're also aiming to be on the first best foot impossible with two national payers that we still expect to hear from later in the year substantially all of our capital and energy is focused on the DMT to expand reimburse test volumes and commercial coverage and boost asps.
We believe these steps are important as we look to sustain our cash runway and capitalize the business going forward as.
As a final note we are in the late stages of identify my successor, and we expect to announce something soon this may very well be my last earnings call and if it is I've enjoyed working with you all.
With that I'll turn the call over to Kevin for a more detailed financial review, Thanks, John and good afternoon, everyone I'll start by summarizing our key financial and operating metrics for the first quarter. Then recap how we are thinking directionally about our 2023 outlook I'll wrap up by outlining our liquidity profile and cash runway targets.
Billable sample volumes were up 24% year over year, and 2% sequentially for the first quarter to approximately 17800 test revenues dipped, 3% year over year to $3 4 million largely due to a <unk> 5 million download revenue adjustment due to changes in collection estimates for samples reported in prior periods, but was up <unk>.
7% sequentially.
Contract revenue was <unk> 1 million during the first quarter down from <unk> 2 million in the year ago period contract revenues remain uneven as it is closely linked to the clinical trial progress of our Biopharma customers.
Total revenue for the first quarter fell 6% year over year to $3 $5 million, primarily on lower contract revenue.
Total revenue was up approximately 16% sequentially.
So that's more closely examine our test revenue drivers first ASP was $192 per sample in the first quarter down 22% year over year, but up 25% sequentially Medicare.
Medicare Asps continue to trend higher due to last year's code added update non.
The non contracted commercial payers continue to reduce their payment rates, leading to the downward adjustment for the quarter.
Normalizing for these adjustments first quarter Asps would have been $219.
We still expect variability going forward, primarily due to the lag in recognizing financial benefit from new payer coverage and fluctuating payments from non contracted commercial payers. It's important to remember that in all cases, where we are awarded coverage the financial benefit could be delayed by one to two quarters or more as additional administrative contracting and billing steps need to be.
Taken by both parties.
Second we had approximately 2550 unique ordering clinicians in the first quarter up 5% from the fourth quarter.
With approximately 4340 unique ordering clinicians during the last 12 months, we've penetrated 48% of our current total market target market of 9000 dermatology clinicians.
Third our average quarterly utilization or average number of tests ordered per unique ordering clinician was 7.0 billable samples in the first quarter versus $7. Two in Q4 and 7.0 in the year ago period.
Fourth our Medicare proportion of total DMT volumes was 23% during the first quarter compared to 24% for both the year ago period in the fourth quarter of 2022.
Focusing next on operating expenses.
Cost of test revenue was $3 8 million or 7% year over year increase yielding a test gross margin of negative 11% the.
The increase in cost of test revenue was primarily due to increased test volume.
The reduction in test gross margin from zero percent in the year ago period was primarily the result of lower Asps.
Sales and marketing expenses were $15 4 million, which was essentially flat compared to the previous year.
The largest component for this opex line is employee related costs.
Research and development expenses were $4 4 million, a 30% decrease from the year ago period, primarily due to lower lab and clinical study costs.
G&A expenses were $11 9 million, 39% higher compared to the first quarter of 2020 to the.
The increase was driven by higher infrastructure cost for a new building and increased employee related cost for head count added throughout 2022.
As John noted, we're targeting additional demand based and discretionary savings to cash operating expenses in 2023.
Net loss for the first quarter was $31 3 million, which included $4 7 million of noncash stock based compensation expense compared to a net loss of $30 1 million for the same period of 2022.
Which included $3 9 million of noncash stock based compensation expense.
Moving now to our outlook for 2023.
We expect the empty volumes during 2023 to be relatively flat compared to last year Asps have stabilized and we're starting to see payments from recent coverage wins, but ASP remains difficult to forecast due to potential additional delays related to recent coverage wins as a result, we're not providing revenue guidance until we have better visibility on these factors.
And lastly, a review of our liquidity profile and balance sheet.
At quarter end, we had cash cash equivalents restricted cash and marketable securities of $108 4 million.
Just unexpected additional operating efficiencies in our revised forecast, we believe we have sufficient cash resources for our planned operations through the third quarter of 2024.
Now I'll turn things back to the operator for Q&A.
As a reminder to ask a question. Please press star one one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one one again.
Please standby, while we compile the Q&A roster.
Okay.
The first question will come from Mark Massaro with BP AIG. Your line is open.
Hey, guys. Thank you for taking the questions.
John again, you'll be missed.
And it was great hanging out in La Jolla, I guess would you be willing to share what you and the board.
<unk> are looking for in the next CEO I mean, what types of characteristics.
Do you think would be.
Expected of the.
The new CEO .
Hey, Mark Thanks for the question I think we'll leave that to win we announced.
The final candidate and I'll, just stick with what I've said now and our comments from the prior periods.
Understood.
So I would love to kind of dig in a little bit to the the commentary about going after reimburse volumes.
Maybe can you walk us through how many territories where dissolves.
And.
Is the total number of reps, where they allocated for the territories that were disrupted.
Where those folks redeployed into another territory or.
Maybe was that a source of cost savings.
We had approximately 70 sales reps were down to approximately 65 and the way. We're looking at these things are sometimes we can merge it territory and we might continue with somebody in that territory in the larger merged or we might just cut the territory hole, we're still going through the process. It's early days in this we've just kind of.
We started in this in the last few months. So we have more to look at doing that but but right. Now we think thats divest effective way to go to raise our asps.
And as you all know we do a lot of non reimbursed test and that costs us money and now with since we've broaden this footprint of Payors, we really think that we can start to target more reimbursed samples and although our total volumes may be not quite as robust as they have in the past.
It should yield a higher ASP and better revenue and that's fundamentally why we're looking at this.
Kevin.
We consistently evaluate the sales deployment to optimize their ROI and to execute our strategy and we'll continue to do that as we see necessary, but by focusing on asps and revenue growth versus overall demand growth that will help with our cash runway.
Excellent and I know youre, not providing 2023 revenue guidance. However, if volumes are roughly flat and asps are up is it reasonable to think that we should aspirational you'd be thinking about revenue being slightly up for the year.
That would be the reasonable assumption, but again, we're not comfortable yet giving guidance on exactly what that would be we are seeing some good payments from recent wins with the regional blues plans on the lab benefit manager policy. We received and we are also near kind of the expected implementation date of key procedure.
Steps with Tricare and that should allow us to receive payments from them more consistently we're just not prepared to give definitive guidance on ESPN revenue until we've got more data on the actual payment rates for these recent wins, we talked about that last year, Mark we kind of got burned with the ASP.
Forecasting and so we just wanted to see the numbers, we do like the trends that we're seeing and we do think that the recent payer wins are improving those trends, but we just want to see them before you till we tell you guys anything because we just don't want to get into where we were last year.
Excellent maybe last one you talked about two large payers that you're hoping to hear from later in 2023 can you give us a sense for.
Timing is it Q4 or do you think some of that could be sooner and.
I would say how advanced are you in those discussions.
The timing, we can't put out a timing that's more more.
Closer than just towards the second half of the year, because we've talked about we don't often know exactly when these.
Reviews take place, but I would say what's happening with these payers, which is different from the other two that happened earlier in the year as they've really taken a deep dive into the economic analysis and they are doing their own claims analysis through their affordability groups and so theres been a fair bit of activity on that front. The analysis they are doing.
Are looking favorable we think that will be influential and thats really the big difference in what's happening with these these plans that these national plans in the back half of the year.
So.
We're looking forward to the final output of those affordability group analyses and what they might do to influence things and that's very different than the other plans.
I would also say.
We think that we have some publications coming out we also expect to hit that trust study done and get that published and that's more data to go back with the payers that we've already talked to.
And they.
They can always re look at things because of the new data and we think those are going to be.
Publications coming out are going to be impactful.
Alright, Thanks, guys I will hop back in the queue.
Please standby for the next question.
The next question comes from Thomas Flaten with Lake Street Capital Markets. Your line is now open.
Hey, guys I appreciate you taking the questions just to dig into this strategy revision on the field force if I understood. It correctly, you're going to overlay territories with those geographies that have good or better a.
Payer coverage, if I understood that correctly could you just maybe drill into the details a little bit or are you sending reps into asked for specific business kind of what you were trying to do with Medicare and then how do you how do you judge the success rate from a penetration perspective, particularly given the.
<unk> with asking for Medicare business.
So we're.
We're not going to try to get the doctors to use a test on any specific patient that's too difficult, but we can identify as I mentioned in the prepared remarks doctors that have payer mixes that are aligned with our payer coverages and so we can have our sales force go after those accounts, where the payer mix more aligns with our R. R.
Current coverage and that's the tactic we now have that data. We now have with all of those payer wins, we can start to do that and do that meaningfully.
Are the vast majority of ever usage is in commercial Payors and I know, we've talked about having in commercial patients I know we've had some challenges in growing the proportion of Medicare as high as we would like but because the test is already used more significantly in commercial payers. We don't think it's going to be quite the same challenge that's where the Doc.
Like to use it in that younger cohort that's on the commercial side. So we think that by targeting the right doctors.
And in going after those covered reimburse samples will yield a better asps and.
And help our revenue growth and we can also use the overall commercial efforts to really target and in those covered areas as well. So you could be you know things between conference attendance to raise awareness it could be around the speaker programs to again raise awareness, we have already restructured and <unk>.
We configured our concierge services, so that they have the areas that do have reimbursed and coverage have higher levels of support and service. So it's really it's not just sales reps. It's really the entire commercial effort that we would go focus on these covered areas to generate better asps.
Got it that's super helpful and out of curiosity, what is the Venn diagram look like between your historically, most productive physicians and the re mapped territories.
Well a lot of our volume as we've stated before our in Sunbelt areas and then along the eastern Seaboard and so we're going through that process now of kind of re mapping things in and seeing how they overlay. So the recent coverage wins that we've announced in the Carolinas.
Those are helpful. Obviously, we had a smaller plant in New York, which we have good volume in New York.
We've got the historical or older coverage policies of say, Texas, and California, and Illinois, So as more plans start coming onboard as Arizona is another.
State, where we've recently.
Announced coverage and we actually have good historical volume, it's we're going through the process now to make sure that we can best and most efficiently target the right physicians and drive the Asps as best possible.
And then one final one for me Kevin.
The sequential increase in sales and marketing and G&A was pretty pronounced.
Were there any kind of one timers in there stock based compensation bonuses from last year or anything like that we should that we should be cognizant of or is this a new is this a new base of spending for those two line items.
There were some one time items from a sequential basis, our bonus was one where we.
We did not achieve our corporate goals in 2022, and therefore, there was a negative.
Bonus adjustment in Q4, and as we're now have revised goals for 2023, and we are accruing for those bonus payments as well also the move to our new headquarters triggered higher rent expense April will be the last month that we have to pay for two facilities as our lease expired on the old facility and it is important to note that book expense can.
Different than cash outlay based on accounting rules.
Cash burn for Q1 was under $22 million the lowest in the last four quarters and compared to a cash burn of over $26 million in Q1 of 2022. So so again year over year, we generated 24% higher volume with 18% less kasper demonstrating our commitment to improving efficiency.
Going through our forecast process to find additional savings throughout the year and it's to align with our re prioritization and our updated operating plan.
Excellent I appreciate you taking the questions. Thanks, guys.
Please standby for the next question.
The next question comes from Daniel Brennan of Cowen. Your line is now open.
Great. Thank you thanks for taking the questions.
I just wanted to follow up on the last question.
Just regarding Europe , the negative gross margins and kind of the opex so what.
What is the plan like as it currently stands for this year in terms of.
Getting gross margins positive and kind of what kind of opex kind of stemming can we assume I know you've talked about.
Cash sustaining yourself through the third quarter of next I'm, just wondering how does that look for 2023.
Yeah from a from a Cogs basis, we said previously that we expected Cogs to increase in the near term.
For a couple of main reasons as we get into the New laboratory. It's a larger laboratory that has more capacity and so we'll obviously have to start absorbing into that capacity to reduce the per unit Cogs. We also had inflationary items around wages and inventories and supplies to run the test that typically.
Happened at the beginning of the year so.
Our plan will be as we get more absorption with volume and efficiencies throughout the lab, we can reduce the per unit cost that way and then the ASP again, the ASP is going to be the biggest factor by increasing it it'll be the biggest factor to improve our overall gross margins, which is why again, we are focusing on ASP.
And driving reimbursed demand this year.
In terms of Opex. We have previously said that we expect opex to be down slightly compared to last year and given the progress. We've made thus far in Q1 from a cash Opex perspective, we are continuing to find additional savings and we will continue to find.
Better runway, there, but we arent, giving specifics around opex.
Guidance for the year yet.
Got it.
And if you kind of map your covered lives. It sounds like it's not necessarily easy thing to do where <unk> got coverage across the United States It might different regions, but if you were to map those covered lives to 126 million covered lives.
Like where could pricing go to apps and getting these national payers I mean, if you look out over the next 18 months and I'm sure you've kind of done the math, what's what's kind of a realistic if you.
Our successful at really restricting a lot of zeros and focusing on where you guys get paid.
Yes, as we mentioned there is a lot of in and outs around Asps and again, our long term targets for ASP would be to maintain Medicare pricing as much as possible as we have been able to maintain that with contracts. We've recently received we are still.
Favorable on our ability to do that in the long run.
How quickly now the contracts, we have approach and get towards that Medicare rate, it's hard to say so what we do know is that the areas that we will focus on again think of where we have high volume and think of what are we've got the coverage. Those are the areas. We're going to focus on first to try to drive that ASP as much as possible, but we're just.
We're not going to give any asps kind of guidance yet until we see some of these data trends play out.
And in terms of the plan if you don't get national contract signed in the next.
15 months or it's unclear from our vantage point, not knowing like where that's realized ASP can go to.
How much leeway do you have to cut further I mean, if the cash gets you through third quarter of next year like how are you contemplating.
What the options or is it just further cuts is it.
Highly dilutive equity offerings.
Yes.
It's not that far away. So I'm sure you've got contingency plans, how do investors think about those contingency plans.
I'll just make a general comment that there are a lot of covered lives out there outside of the nationals and as we've talked about on the call. We've got a tremendous amount of momentum across all of that broader payer mix and will continue to grow that covered lives and the more we can focus on those covered billable sample.
The higher we can grow that ASP, which will.
Obviously improves our revenue and the cash runway and that's the most important thing I mean, we wanted to get a national payer win because it's it's an example of.
Obtaining coverage in that group of players, but there are a lot of lives like we talked about the Medicare and the Medicaid that's a huge number right. There are about 60 to 70 million Medicaid patients out there and we're already have volume in those areas and now we're finally getting momentum in that group of payers. So there are a lot of lives to get out there that can still help.
US grow that Asps, particularly as we focus on those reimbursed samples Kevin do you have anything to add yes, yes. So I mean again, the first focus would be focus on improving asps, which will help preserve the cash runway as we mentioned, we're targeting additional demand based and discretionary savings in our cash operating expenses and we do expect to deploy the ATM is needed in the future.
<unk>, while being mindful of the cost of equity capital in the current environment and we're also evaluating other options as it relates to capitalizing the business in a thoughtful way and extending our cash runway.
Got it and then maybe just final one just on that even though John to your point there is a lot of opportunity for ASP realization here as you execute them.
Monetize what's in front of you so the national payers are helpful. But.
It sounds like you've got a lot of opportunity, but just on the national payer since you did bring up that you've got the negative decision from two of them and you have this.
Trial upcoming like how pivotal do you think that trial is like how does how should investors view this trial outcome at the potential lever.
What's occurring one of these national payers or not.
Look I think it's.
It is.
Large trial, it's a real world data and it's a prospectively designed trial.
Some of the criticism of one of the first Trust day was if there was a there was a retrospective cohort in there but in this case it will be all prospective so we're going to put down that criticism. We believe it will reaffirm our very high negative predictive value in the real world.
And it will also reaffirm the fact that we are finding the high risk lesions.
That our melanoma melanoma related debt in those positive samples. So we do think it will be an important publication that will that payers will pay attention to more data is always good.
So I do think it will be.
Be helpful and.
Okay.
We're frustrated with with what the nationals, how they look at our test in our opinion.
Purposely ignore key data and the merits of that data. So we've got to keep putting more data in front of them I think they also mischaracterized the way the test is used in the obvious Gatorade and CCN. So.
We'll keep working to clear that up but this is their tactic right. They like to delay and it's part of their omission bias, but we think all of this momentum with all these other broad payer mixes coming on board, it's going to ultimately forced their hand for those that want to play that game and.
So.
Again as I said, the fact that the other nationals are really taken a deep dive on the economics, we think thats a very differentiating feature from the other ones and that's why we're more optimistic there.
Great Alright, guys. Thank you very much please standby for our next question.
The next question comes from Mason Kericho with Stephens. Your line is now open.
Hey, guys.
Thanks for taking the questions a lot has been asked so I'll, maybe only ask one or two here.
Thinking about.
The technology solutions, an EMR integrations that strategy that you guys have talked about.
Any updates on where that stands today or how things are going there and any framework or metric you can give us to help us understand the progress on that.
Yes, hey, thanks, So we have implemented what we call kind of a phase two of that EMR integration, which is the.
The EMR that's used by the most dermatologists and that integration allows us to more easily get medical records from the physician and relieves the burden of the physician's offices of having to do that so that obviously plays into the strategy, where the more medical records, we get the more appeals that we can file and have a higher likelihood of.
Success of those pills and it lays into our desire to try to go after a better ASP and improving asps now.
Now if those appeals are something that is for non contracted payers.
We don't always win those appeals, but at least gives us that opportunity to do it and again it puts pressure on the payers that they have to deal with these appeals. So all of that is going really well.
Got it thanks, Kevin.
On the national payers, who issued the negative policies.
Is there any additional color you can you can give behind their decision do they provide detail on on the reasons behind that they cite.
A specific study or what they are looking for is there any incremental detail you can give us on that.
I mean, you can look at the policies. They are online they are not that different from the policy they've issued before which shows they didn't really meaningfully updated.
They tend to omit key pieces of data as opposed to criticize.
The data that we have which is the most frustrating part I mean in one case.
We spent all this time educating the payer that this is a rule out test and the first thing that comes out is that this is a rule in test for melanoma, which is a complete miss characterization how it how it works. So those are things that we're dealing with them. There's nothing you can hang your hat on and say Oh, if we just did this that's it but I think it's just about more data more payer wins.
It's going to force their hand.
This is just a tactic a delay tactic that.
The national payers pool will often employ.
Okay got it thanks, guys appreciate it.
As a reminder to ask a question. Please press star one one on your phone and wait for your name to be announced.
Please standby for the next question.
The next question comes from Alex Nowak with Craig Hallum. Your line is now open.
Hey, guys. This is Jason on for Alex Thanks for taking the questions. A lot has been asked but I guess kind of teasing that asps a little bit with with these 34 million covered lives added since the start of the year here.
How much benefit from those did we see in Q1, the sequential increase in Q1 of <unk>.
And I guess, what kind of should we expect in Q2, I mean is there obviously additional more benefit from those 34 million lives that still needs to come into the model.
Yes, the recent payer wins had very minimal benefit to ASP in Q1, but we are starting to see more payments in April and we do expect to see additional benefits throughout Q2, there will still be some variability that we expect going forward related to fluctuating payments from non contracted commercial payors.
But the.
As I mentioned Theres things that are coming up here, whether it's Medicaid whether it's.
Being able to process Tri care, whether it's being able to monetize some of the VA volume.
All starting to hit but its just starting to hit mostly in Q2 and again until we can really get some data behind us to see what that trend really looks like.
We're just not ready to give guidance around asp's beyond that but it is all positive signs of these all of this hard work that's taken many many months in many many years to get those wins and then again like we said it does take a quarter or two to get the benefit we are starting to see it now and we're hoping to kind of accelerate those benefits here as we go forward.
Yes, that's fair Kevin that makes sense.
And I ask that question again, John and maybe a little bit of a different way I mean is there any feedback that you heard from those two payers that reaffirmed negative coverage decision that I guess kind of informs your data generation strategy to maybe kind of re attack them at some point.
Any color there would be would be helpful.
Okay.
I wish they could tell us what what's the one study they want us to do.
That.
Would put any issues to rest, but we really just don't get that.
I think one plan talks about we havent done a mortality trial and we've explained to them that there is no way to do mortality trial in this area and early stage melanoma. When we founded the survival rates, 99%, even the current pathway has never done a prospective mortality trial and what that is.
Tells us they're just trying to find some reason no matter how unreasonable just so that they can kind of justify their position they aren't saying we have to do one but those are things they might allude too so.
Sure.
We don't think that's realistic there are very few tests to do mortality trials in this area and in any kind of genomic tests. So we don't think that's going to happen but.
We wish we had we could we could find out what is the one one study we could do.
We do think the trust day the way, it's designed now theres always been pushed back that.
A chunk of that study had a retrospective cohort smaller prospective cohort and the fact that we now have a large prospective cohort in that trust II that will put down.
Some of the comments that we've seen around that study.
Yep got it Thats helpful.
I think Kevin just last one for me I just want to put a finer point on that G&A increase it sounds like that kind of remains in the model at that somewhat current levels do you get a little bit of relief.
Turning after April with with that kind of additional rent payment coming off the P&L is that does that kind of a fair way to put it.
Yeah, again, we're not giving specific guidance on any line item, but our efforts to try to find more cost savings will help overall and I'd say there is there is some catch all in G&A to that just don't fit in other areas. So as we start utilizing certain systems or certain spaces.
<unk> or things like that then those costs get allocated around but again, there's a big piece of that that's really the difference between accounting expense and cash usage and.
And again, specifically related to the building right I think most people understand that you've got a straight line the expense, even though when you have a rent cash rent obligation that increases over the life and we have a 10 year life, we're taking much more book expense today than a cash outlay and then by the later terms of the lease it's more.
<unk>.
Cash outlay than it is book expense. So that is a big driver and that's why we would say focus more on the cash burn metric versus the overall opex, but regardless, we are working to get all of the Opex line items.
To find savings on all of them and improve the cash runway as well.
Got it thanks, Kevin Thanks, guys.
Please standby for our next question.
Yeah.
The last question comes from Andrew Bachman with William Blair. Your line is now open.
Hey, guys. Good afternoon, thanks for taking the questions John since in the last call best of luck, it's been fun.
Maybe we could just start on the shift in strategy here and it.
Somewhat but maybe just to be more specific.
Maybe just talk a little bit about the any change specific changes in rep incentives moving forward and how might those be changing with this new.
This new plan.
Yeah, historically, we've incentivize reps on just overall demand growth and what we've implemented recently is a focus on some of the other key drivers to drive the relevant needs of the of the overall plan.
And we're continuing to add valuation changing the incentive structure going forward as well, but we want to make sure. There's good alignment with the strategy and the prioritization of covered samples reimburse samples and driving ASP growth, but we haven't implemented anything on the incentive side other than what we've done just recently.
Okay. Thanks for that and then maybe more of a technical question here as it relates to actually running those non reimbursed tests.
How should we be thinking about your guys efforts to maybe.
Steel does away from actually being run when they get to the lab or would that be more.
Upfront and the funnel, where you're trying to incentivize those being first thanks.
Well I mean, we're going to have to run the samples at the doctor's order, even if theyre non reimbursed, but that just wouldn't be good from a customer relation perspective, I think the better way to approach that is what we've talked about is trying to target physicians that have a payer mix that aligns more with our reimbursement profile. So that we increase our proportion of.
Covered samples that we're running but.
We just can't not.
Not run tests that are are provided we don't want to do that that's just not good.
Form with our customers.
Yes.
Okay. Thanks for that clarification, and then Beth thanks for the question.
This concludes today's conference call.
Thank you for participating you may now disconnect.
Okay.
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Okay.
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