Q2 2023 OncoCyte Corporation Earnings Call

And welcome to the uncles side Q2, 2023 earnings call.

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I would now like to turn the conference over to Stephanie Prince from P. C. G Advisory. Please go ahead.

Thank you Anthony and thank you to everyone for joining us for today's conference call to discuss <unk> second quarter 2023.

Our results and recent operating highlights.

If you have not seen today's financial results press release, please visit the company's website on the investors page.

Before turning the call over to Josh Triggs anchor Vice President and Chief Executive Officer, I would like to remind you that during this conference call. The company will make projections and forward looking statements regarding future events any statements that are not historical facts are forward looking statements. We encourage you to review the company's FCC.

Filings, including without limitation, the company's 10-K intentions, which identify the specific risk factors that may cause actual results or events to differ materially from those described in these forward looking statements.

Actual outcomes and results may differ materially from what is expressed or implied by these forward looking statements anthracite expressly disclaims any intent or obligation to update these forward looking statements, except as otherwise may be required under applicable law.

With that I'll turn the call over to Josh Josh.

Thanks, Stephanie and welcome everyone to our conference call to discuss our second quarter 2023 highlights.

In the first half of 'twenty three are good sites shifted to a capital light product focused commercial model significantly, reducing our cash burn and channeling our efforts for success in 2024 and beyond.

We're accelerating on turnkey Dell development milestones that will highlight today and preparing for product launch while maintaining tight controls on our expenses.

I'll start by taking us through progress on our nearest to market products, the biograph kidney and liver lab developed tests and our donor derived cell free DNA research use only assay.

Both by the graphs kidney and liver have been up for review and coverage decisions at mold X for a little over a year.

We're encouraged by the conversations we are having and the robustness of that review process and we hope to be able to provide an update soon on status for those assets.

On clinical development, we recently published a paper in kidney International reports that highlights again, the strength of our technology and identifying antibody mediated rejection.

Key problem in post kidney transplant patient management.

This is the second publication that showed the reliability of absolute quantification over time, a key advantage of the digital droplet PCR that I that our assays to use.

In Q1, we guided to a Q4 2023 early access launch of our blood based transplant monitoring assay.

And I'm happy to report that the manufacturing transfer process started in Q2.

On track to meet our goal.

We will continue to update you on our progress as we hit the additional milestones that are expected in Q3 and beyond.

Early market access work is preparing us for commercial launch and anticipated started generating revenue from this important product beginning in the first half of 'twenty four.

In line with keeping our cost infrastructure is low we committed to partnering on our commercial channel.

Those conversations with strategic platform and distribution partners continue to progress.

Baidu grabbed kidney and liver have an estimated $2 billion U S clinical market opportunity and potential downstream value inflection points to watch out for include obtaining coverage provided a graph kidney antibody graph liver, a national or global commercial partnership for the are you a product and the manufacturing transfer completion of that.

Are you a product.

Yeah.

Shifting to our oncology products determine I O L. D. T continues to build its case is best in class measure of the tumor immune microenvironment, we're making progress on the NIH funded Swags studies are being run by the southwest oncology group in Triple negative breast cancer. This study is expected to be completed in late 2023 or early 'twenty four.

The data is expected to support our existing application for coverage that mold ex the review process for our foundation coverage decision is expected to continue into 2024.

The are you a product is nearing design lock and are showing significant promise for further analytical and clinical development.

This is a reminder, determine io has an estimated $2 billion critical U S market opportunity.

And the potential value inflection points to watch out for our.

Coverage decision for I O in non small cell lung cancer, or and or triple negative breast cancer and the Swags study data publication.

Determined C&I, our blood based solution for therapeutic efficacy monitoring, which we believe makes it an attractive alternative for researchers that don't have access to or need to get surprises tissue since no upfront tumor typing is required.

Acute in Q1, together with U Penn we presented data at the ACR or the American Association for cancer Research annual meeting in pancreatic cancer that showed C&I has the ability to distinguish between responders and non responders Dr.

Doctors have two options for treating late stage pancreatic cancer, knowing knowing if a patient is benefiting from the chosen therapy can give them an opportunity to adjust if needed.

The submission for publication of this data is expected in the second half of this year.

Once accepted for print we plan to submit for coverage under local coverage decision L. 38835. This is the same L. T D that multiple companies have received coverage under in the past several months reimbursement for these types of assets is reaching into the thousands per episode of care.

Timing on submission is expected to be in the first half of 2024.

The German CNI at the greater than 4 billion dollar estimated U S clinical market opportunity.

Inflection points for that I'd say include the completed CLIA validation in our Nashville lab, the publication of the patriotic data and submission to mold X for coverage.

I'm going to shift over to the financials.

Okay.

Our consolidated revenues for the second quarter of 'twenty, three where approximately a 500000 and cost of revenues for the second quarter were approximately 200000.

Primarily from services for for our lab service customers.

Consolidated research and development expense for the second quarter decreased 56% year over year from $5 6 million to $2 4 million driven by our.

Our strategic pivot to focus our investment on developing manufacturer will burn manufacturable versions of our assays that we believe are scalable at high contribution margins.

Consolidated G&A expense for the second quarter decreased 35% year over year from $5 5 billion to $3 5 million, reflecting our successful efforts to reduce spending not directly related to product development or commercial activities.

Consolidated <unk> expense for the second quarter decreased 77% year over year.

From $3 5 million to 800000, we focused our sales and marketing investments on our early access programs and early market access work for L. D teas, and scalable our UO products.

non-GAAP operating loss as adjusted for the second quarter was $4 7 billion, a decrease of $6 5 million compared to the same period in 2022.

GAAP operating loss as reported for the quarter was $8 3 million a change of <unk> 3 million compared to the loss of $8 6 million in second quarter of 2022.

For the second quarter, we reported a GAAP net loss from continuing operations of $8 3 million or $1.07 per share as compared to a net loss of $8 3 million or $1 48, a share for the second quarter of 'twenty. Two we have provided a reconciliation between these GAAP and non-GAAP operating losses in the financial tables include.

With our earnings release as of June 32023, we had cash cash equivalents in marketable securities of $17 9 million net cash used in operating activities was $6 8 million for Q2 2023.

We anticipate continuing.

Improvement in quarterly operating cash burn levels into the back half of 2023 and are maintaining our guidance to reach a below $5 million in quarterly average burn.

And just as a final comment it would be the next steps for Unco site are gaining reimbursement for our product portfolio, bringing our test the market to generate revenue growth and we believe we have optimized our product development strategies to support these steps, which we will believe which we believe have a strong probability of leading to revenue generating external partnerships and lights.

Okay.

Our strategy should generate much higher contribution margins and it's typically seen it publicly traded diagnostic companies and we believe it's just a bit. This is Pierre your commercial strategy combined with our reduced burn puts us on path to financial sustainability as a final note next week, we will be presenting at the 20 <unk> annual Needham Virtual conference.

Thank you.

Yeah.

I'll hand, the call back to the operator.

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At this time, we will pause momentarily to assemble our roster.

First question will come from Mike Matson with Needham <unk> Co. You May now go ahead.

Yeah. Thanks.

So I guess just.

Just to clarify the quarter itself, you said that the revenue of its really all from the pharma services part of the business correct. You didn't really have any testing revenue in the quarter that's correct.

Okay, and then just with regard provider graphs I mean, when do you think you would what's the earliest you think you could start to generate some revenue from that from either liver or kidney.

Yeah, I think it all depends on sort of the timing of the coverage decision you know theres, usually a couple of month lag between coverage decision and sort of the final reimbursement decision.

You'd have to be like it would have to be really really quick for us to see.

New this year.

So I would say, it's it's either extremely late this year or early next year, depending on the timing of that coverage decision.

Okay got it and then just the it's good to see the the big declines in the Opex.

Can you kind of.

Well, you're guiding to the 5 million cash burn quarterly cash burn or less in the second half but.

The kind of are you kind of at the run rate that you're expecting to maintain for the rest of the year for the R&D sales marketing and G&A.

Or is that going to tick down a little more in the second half.

Yeah, I mean, I think you'll see it at its scale down a bit I mean, you know in that six plus million that we used in the quarter. I mean, there were some one time expenses. So yeah I'd say the run rates are are starting to look like what we expect on a go forward.

Okay got it thank you.

So for sure.

Again, if you have a question. Please press Star then one.

Our next question will come from Nathan America with Stephens you May now go ahead.

Hey, Thanks, so for your transplant product once its launched what is that initial validation work timeline look like for an academic center of that.

Interested in the product.

How long does that last and how should we think about that from a volume perspective.

Yeah, No really really good question.

I can I can speak to our personal experience.

So it took us about three months to transfer the assay from our German lab to our Nashville by up once we had sort of made the decision to bring to the assay over that.

We have a lot of experience with the assets that we probably are on the faster into that spectrum.

Can't speak specifically to sort of average timelines without sort of having already done it but that gives you some kind of guidance.

Alright, Yes, I think so just one for me I appreciate it.

Sure.

It appears there are no further questions.

This concludes our question and answer session as well as the conference.

Thank you for today's presentation you may now disconnect.

Yeah.