MDxHealth SA Q1 2023 Earnings Call
Greetings and welcome to the Mdx Health first quarter 2023 earnings call.
This time all participants are in a listen only mode. A brief question and answer session will follow the formal presentation.
If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad as a reminder, this conference is being recorded.
Before we begin I would like to remind everyone that we will make forward looking statements during today's call whether in prepared remarks.
These forward looking statements are subject to inherent risks and uncertainties.
And uncertainties are detailed in the risk factors section of our filings with the Securities and Exchange Commission specifically the company's annual report on form 20-F.
It is now my pleasure to introduce your host Michael Mcgarry, Chief Executive Officer. Thank you Sir you may begin.
Thanks Kyle.
And thank you all for joining us for our first quarter 2023 release of results for Mdx health.
With me today is Ron Chalcis, Chief Financial Officer.
2022 was a transformative year for Mdx health.
And we are confident that our first quarter 2023 results reflect this transformation.
As well as our continued commitment to operating discipline and commercial execution.
When I joined Mdx health in 2019.
We set out to build the leading growth company exclusively focused on precision diagnostics and urology.
To accomplish this we have been thoughtfully putting in place the fundamental pieces needed to generate long term sustainable growth and value creation.
And now we are confident that we have an uncommon set up drivers to consistently deliver this growth overtime based on.
Our recent receipt of coverage from Medicare for our select test.
Which now allows for a full menu of revenue generating tests with select confirm and G. P. S. All included in the gold standard National comprehensive cancer network or M. C. C N guidelines.
Our sales channel fortified by the acquisition of the GPS Test, we believe is best in class.
And capable of additional growth opportunities in evidence with our resolve mdx test introduced in 2022.
Our gross margin is beginning the expected trend of growth and allows for the corresponding reduction in cash used for operations.
And finally, we have clear visibility to operating profitability.
Before I turn the call over to Rob for a review of our operating results.
Let me first comment on our business focus and progress.
Our Q1 2023 revenue grew by 141% over Q1 2022.
And when excluding the acquisition of G. P S. Our revenue increased 39%.
We continue to execute on our integration of the D. G. P. S test acquisition.
Specifically, we have completed the restructuring of our sales team with.
With additional routes from exact sciences, including territory realignment alignment of performance based incentive compensation.
And 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.
Including transferring customers to our Mdx health physician portal.
Streamlining our sample procurement process and market access and payer management.
All of which are critical in the laboratory model to efficiently receive process and report within the turnaround time expectations of our customers.
Finally, our focus on operating discipline is evident in our anticipated and now being realized improvement in gross margin as well as a 34% reduction of $4 million of cash burn from Q4 2020 to Q1 2023.
I will provide a further view forward for 2023, but first let me turn the call over to Ron for a review of our financial and operating results for Q1.
Uh huh.
Thank you Mike as Mike mentioned, we are pleased to report our positive results for the first quarter of 2023.
Revenues for the first quarter ended March 31, 2000 and twenty-three.
Increased by 141% to $14 $7 million versus $6 $1 million for the same period last year.
Excluding G. P. S Q1, 2023 revenue increased by 39% versus last year.
Our Q1 2023 revenues of $14 7 million were comprised of $6 2 million from G. P. S.
$5 $7 million from confirm.
$2.2 million from resolved with the remaining revenues from select and other.
Gross profit for Q1, 2023 was $8 $7 million as compared to $2.8 million for Q1 2022.
Gross margins were 59, 3% for Q1 2023.
As compared to 46, 6% for Q1 2022, representing.
Our gross margin improvement of 270 basis points, primarily related to our product mix and the addition of G. P. S. Two our product menu.
Operating loss for Q1, 2023 was $8 $7 million, an increase of 11% over Q1 2022, primarily related to the additional field sales personnel associated with the G. P. S acquisition.
Net loss for Q1, 2023 of $11 $7 million increased by $3 4 million versus $8 3 million for the same period last year.
Primarily from an increase in financial expenses of which $1 $9 million was a noncash fair value adjustment to the G. P. S contingent consideration and there remain and the remainder was primarily related to an increase in interest expense from our debt facility.
Cash and cash equivalents as of March 31, 2023 were $48 $3 million.
This amount reflects the receipt of approximately 40 million in net proceeds from our recent equity offering in February 2023.
Our total cash burn for the quarter was $7 $9 million down 34% from a cash burn of $11 $9 million for Q4 of 2022.
This concludes my brief overview of the results and I will now turn the call back to Mike.
Thanks, Ron.
I'd like to finish our prepared remarks by going to layer beneath the numbers to provide perspective on what we believe will be the most important aspect of delivering clear and straightforward growth and progress.
Recently, we brought our entire field sales team together as well as marketing and market access managed care together first sales meeting to reaffirm our goals culture and commitment to be a growth company.
In my experience I've been fortunate to be part of or led some of the best sales teams in both the device and diagnostics industry.
And what I saw in our newly formed an integrated team represents the same standard of excellence.
One single, United and supportive group of highly responsible sales professionals.
Comfortable with expectations and accountability.
Clearly it will all come down to execution by each and every one of them and we focus on instilling that they all have to be great.
Illustrative of our restructuring and refocusing of our culture.
The 70 people in our field sales team.
Only five of them are here when I started in 2019.
We as a team deemed these changes is critical to setting a new sales culture of commercial excellence and talent focus incentives and accountability.
All of which are required to commit to growth.
Our results going forward will confirm my view, but we believe our Q1 results set a basis for a promising outlook.
I believe we can get still our focus down to three simple and straightforward driving principles.
First.
Patients quality first.
Second customers always and third take care of the sales force.
Which is and should be the rule for all of us on the inside.
Is there the face and voice of Mdx health to our customers.
Candidly each of these principles has been tested with the challenges and opportunities related to our acquisition integration all while striving for and preserving best in class service levels that will meet and exceed our customer expectations and.
And we're in a good position to do just that.
So as we look forward Mdx health is committed to driving sustainable growth, which will serve as 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 now I will turn the call back over to Kyle for questions.
Thank you.
We'll now be conducting a question and answer session.
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Our first question comes from Andrew.
Liam Blair. Please go ahead.
Hi, guys. Good afternoon, and thanks for taking the question.
Maybe to start here I may have missed it but how should we be thinking about the balance of the year. Here. I think previously you had sort of talked about a guidance range of $65 million to $70 million is that still intact or any moving pieces here that we should be considering.
Yeah, Andrew we're committed to the $65 million to $70 million and very confident at this point that that's the right guidance to have in place. So we're reaffirming that.
Okay, Great and then maybe if I could just as a follow up there you sort of talked about some of the things that you're doing on the integration side with the sales team, but maybe can you provide a bit more color on those efforts are sort of what else are we waiting for before we sort of unleash the entire power of that acquisition and I guess, how should we also be thinking about contribution.
From cross selling here moving and the balance of the year.
Yeah, Andrew So we feel like our integration of the sales team is complete.
Through Q4, and Q1, and we expect to to leverage the yeah.
Our menu, which we think again is an uncommon offering are in our space. So our expectation is that our reps will.
Be able to drive adoption of all of our products. We will look to to report probably more color on that as we go through towards the second half of this year, but yes that is the that is the plan. They have been cross trained and we think of our menu is select upfront on the diagnostic pathway, obviously confirm in G. P.
S a will be where the focus is post.
Biopsy and then our U T. I tests, we're confident has really validated our view that.
We can take advantage of additional growth opportunities that <unk>.
Primarily our criteria that ive spoken to has clearly established right it can't be dilutive to our focus on prostate cancer.
And it's got a read directly on our our call point, we believe that the U T. I progress we've made in the first five quarters demonstrates that.
Okay. Thanks, you took my resolve questions. So I'll leave it there thanks.
Alright, Thanks, Andrew.
Our next question comes from Tomasz <unk>.
KBC Securities. Please go ahead.
Hi, Thanks for taking my question and congratulations on the almost family Russell, especially at sort of revenue growth and gross margin improvement two questions from my side first one is just isn't it also on the results first just wanted to check is the launch or the ramp up seems to be going really well.
Could you provide some more partner Liberty on the prescriber base and overall commercial dynamics do you see a strong overlap in those prescribers today Oh are you also already successfully targeting additional physicians there.
Yeah, Hey, Thomas Thanks for standup latest always yeah. We are as I said as I briefly commented on we had a really rigorous criteria for introducing a new product into our channel because we think our channels.
It is very very valuable and we were not looking to just throw additional products into our customers back. So you know our criteria kind of read on a number of things to my point you know, we're not it's got to it can't be dilutive and our focus on prostate cancer and our customer relationship base. Secondly, it's got to read exactly on that thirdly reimbursement.
Has to be established and it has to be accretive to our gross margin day. One dollar one so we believe that our work, which we spent probably 12 months before we introduce this into our sales organization on that diligence.
And we think the first like I said five quarters is demonstrating that to be accurate and now the second part of your question as far as the fit and focus we are directing our sales team to.
To focus our U T I into our exact customer base, so where we have the relationships and not to be going out and knocking on doors to sell UTI and we think that that's the right strategy and we think that it's demonstrated that that that's the appropriate approach and that we do indeed have that relationship.
And the ability to present and provided and drive adoption of additional growth opportunities.
Okay very clear. Thank you and then maybe another question also with regards to the recent Medicare reimbursement for or the approval for our first select could you provide some some insights or some some overall thoughts on when we might see start seeing an impact from that in the numbers.
Sure Thomas So we had communicated that we expected.
Coverage to come over mid year.
And to begin to.
Drive revenue in the second half of the year.
Thomas We don't really think that's materially changed will go through the process to go through the administrative process to begin building and collecting we'll be conservative with our revenue cycle management is we're always our AR, but we think what this does is provide us with a really running start as we make that turn at the.
Mid year, where we've got established payment history.
The average sell price assumptions payment and that gives us clarity of the second half of the year. So we would we would update on our visibility to and communicated.
Communicate that we're through that entire process when we get together after Q2.
Okay. Thank you.
Our next question comes from Bruce.
Block we've spoken please.
Please go ahead.
Hi, This is Dan on for Frank Thanks for taking my question I, just wanted to say congrats on the quarter and congrats on the positive L. B.
Is there any other payers that you're focusing on those.
This adds to United Health care that happened in February and now Medicare any other.
Payers that you are currently focusing on the color. Thanks.
Yeah, Dan So we believe it is not just for us but in our space that Medicare is really the catalyst for additional commercial and private payer coverage. So our team our market access team has been active across our menu and driving continued coverage through the payers as evidenced with the United.
Average so we expect that to continue with our our our confirm N. G. P. S test and we expect it to now begin with our select based on the Medicare coverage. So as we go through the back half of the year, we would expect to continue to drive that that's been our model here with with confer.
Firm and obviously, what the G. P S coming over so we're confident that'll that'll follow the same path.
Thanks for taking my questions.
Hi, Dan.
Our next question comes from Mark Massaro with BP.
Please go ahead.
Hey, guys. Thanks for the questions and congrats on an excellent quarter.
So.
Hey, How's it going so I certainly appreciate the commentary about expecting select to kick in.
Around mid 2023, you know so you know we got the good news that you completed your technical assessment with Palmetto Mall backs are in April .
When we're updating our model I guess can you help us just a little bit with Q2 I'm trying to understand when.
You think select revenue can build whether or not it's I would think of it we might see some in Q2.
Hmm.
So any clarity as to whether or not you've been submitting claims to mold X and potentially getting paid yet.
Yeah, we we we agree with your assumption as far as the detail around our process to begin to submit claims and get paid.
We have not yet, but that's expected that we're following the standard process, but I think to.
To your point when we report Q2 will obviously be able to where we're very confident they will contribute it will contribute something to Q2, we just want to make sure that we get that established and.
To my point right.
And we are very conservative on the revenue cycle management side. So we're just trying to get that established.
The payments and then put forth our view forward.
Okay, and maybe just to confirm I think you guys obtained a positive coverage determination from United Health care on the GPS test it was nice to see the GPS tests contribute.
Here are $6 2 million.
Certainly above my expectations.
Is it right that we should expect to go live I think at my notes I had April 1st So is it fair to expect maybe a step up from GPS in Q2 from United.
Yeah, so as far as our I S. P. A smart whoa whoa whoa, you'll see that in the numbers as we go forward you know I I don't know that I'd be modeling and significant uptake on our I think that's where you could model it right coming through on the ISP side with GPS, we Wanna get visibility to how that come.
Through based on our mix, but yeah, I mean, obviously coverage for additional payers as part of our we have a team that drives that and if you look at our Asps overtime. It's clearly demonstrated that it does drive a accretion of our S P and associated gross margin.
Perfect and then maybe last one on the gross margin side, you know really incredible lift on a year over year basis coming in at 59% I think with the G. P. S expansion as well as select reimbursement on the CMS side is it reasonable to think that we can get.
Into the low sixties for the rest of the year or how should we think about any puts and takes around the Q1 level and how that might trend later this year.
Yeah, that's not an unreasonable assumption. We this is the way we viewed our business building right I've communicated that we expected a linear acceleration of our gross margin and then the corresponding linear decrease in our cash burn.
And that's what we saw in Q1 Q2 will probably trend around the same way and that is select comes over.
Yes, we feel like then we've got the full menu of driving contribution and better growth rates that we will be pushing what do you think that that provides a continued escalation of the gross margin a reduction of our cash burn so when I comment that we have clear visibility to operating profitability.
It's clear visibility to operating profitability.
Okay, and then also the Opex came in above $3 million below <unk>.
Our estimate I'm curious if that $17 million to $18 million range is a reasonable run rate or were there. Some one timers in Q1, how should this trend throughout the course of the year.
Hey, Mark it's Ron.
Yeah, I think I think it is a reasonable run rate.
You know, obviously, we didnt mentioned on some noncash portions of that but as a total expense.
You can expect more or less this level of opex throughout the year on average.
And as far as the burn Mark you know like I said, we would expect Q2 to probably transition like Q1, and then continued.
M D.
Decrease as we go into the second half of the year Q3, and Q4, we expect that to again be.
A pretty linear Vicki.
The claim.
Excellent that's it for me thank you.
Okay Mark Thank you.
Yeah.
There are no further questions at this time. So this concludes today's call.
You may now disconnect your lines at this time and thank you for your participation.
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Yes.
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