Q2 2023 Sera Prognostics Inc Earnings Call
Good afternoon, and welcome to the Cerro Prognostics Conference call to review second quarter fiscal year 'twenty twenty-three results.
At this time all participants are in a listen only mode.
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We will be facilitating a question and answer session towards the end of today's call.
As a reminder, this call is being recorded for replay purposes, I would now like to turn the call over to Peter Denardo, a cap call them partners for a few introductory comments.
Thank you Gary Good afternoon, everyone welcome to Sara Prognostics second quarter fiscal year 2023 earnings conference call at the close of the market today surplus Gnostics released its financial results for the quarter ended June 32023.
As any public company today will be Zenyatta, Blayne guard interim president and CEO and Austin are our interim CFO during.
During the call we will review the financial results, we released today after which we'll host a question and answer session.
Not had a chance to review our quarterly earnings release. It can be found on our website at zoro Prognostics Dot com. This call can be heard live via webcast at Cerro Prognostics Dot com and a recording will be archived in the investors section of our website.
Please note that some of the information presented today may contain projections or other forward looking statements about events and circumstances that have not yet occurred including plans and projections for our business future financial results and market trends and opportunities. These statements are based on management's current expectations and the actual events or results.
May differ materially and adversely all these expectations for a variety of reasons. We refer you to the documents the company files from time to time with the Securities Exchange Commission specifically the company's annual report on Form 10-K, its quarterly reports on Form 10-Q, and its current reports on form 8-K. These.
These documents identify important risk factors that could cause the actual results to differ materially from those contained in our projections and other forward looking statements. As a reminder, a webcast replay of this call will be available on the investors section of our website.
And now I'll turn the call over to Danielle for a prognostic interim president and CEO Jan here.
Thank you so much Peter and good afternoon, everyone.
Having served on <unk> board of directors since November 2021 and now just a few weeks into my role as interim President and CEO I have developed an even greater appreciation of the Companys technology and talented employees. These past few weeks.
After spending significant time with the team and working hard since made with our outside advisors at a leading strategy consulting firm to conduct a rigorous evaluation of our business and its strength I'm highly encouraged by what I've seen and what we're capable of achieving good going forward.
Mindful of the fact that I've been in the role a short time I will focus most of my comments today on <unk> vision key learnings to date, our strategic priority to accelerate test adoption and revenue in the near term as well as key aspects of our longer term strategic road map.
Sure. It is in a unique position to have pioneered our pre term blood draw based prognostic tests.
And what we believe will mark a new and improved era in pregnancy care.
This just provides unique insights into the risk of something spontaneous preterm birth.
In the process of development and commercialization of Praetor, we compiled and continue building a unique nearly 20000 strong pregnancies dataset.
We anticipate this data set should yield actionable data to determine the risk of pregnancy complications like preeclampsia and potentially of more accurate time to birth as well as many other pregnancy predictors we're exploring.
As I'll touch on momentarily. We believe this data will be commercially valuable and support longer term shareholder value creation as well as help us fulfill our vision to be the pregnancy company.
What we've learned to date through commercializing our pre term test is that the data. It provides can truly have an impact on patient care and save lives.
Well as health.
Health care costs.
We've also learned that scaling such a novel offering among payers patients and the medical community takes time.
And we're still in the early stages of this commercial build out.
What is essential to test adoption and growing our revenue our successful study outcome.
Applications, illustrating test and treat effectiveness payer coverage and market awareness and finally established standard of care methods.
These essentials have become even more evidenced through our rigorous business valuation over the last few weeks, which we anticipate will lend itself towards better positioning et cetera for commercial success.
To date, we've already presented compelling data and most recently, we're excited to share data from our recent Herbert trial manuscript of which was submitted for publication and we look forward to sharing the results one it once they become publicly available.
However.
As announced in February the results do show that we met our two primary endpoints reduced new new NATO length of stay and improved you'll need a halt.
We expect detailed results of preferred will be published in a peer reviewed journal in due course.
As an institution and see the value given the growing cost of medical care and particularly for Nick you care of prematurely born infants.
And patients and doctors, obviously want to see better outcomes to keep mothers and babies seats during pregnancy. When one out of 10 babies are born prematurely with long term health complications.
That said, what we've noted is that along with clinical study evidence to show that test and treat approach works all of the stakeholders, particularly doctors and patients also need to know what the informed standard of care is so big.
They can follow specific approved guidelines.
This requires supporting the establishment of standard of care guidelines. So once the test results are in there's no guesswork in regards to the best treatment paths forward.
We believe we already have in place several of these essentials, but our need to establish better awareness of preterm and support the establishment of standard of care guidelines, which takes time is why we need to refocus our business and take actions to optimize the business for market success cost effectively we are undertaking this effort diligently.
While carefully protecting our strong balance sheet.
So what have we identified during our evaluation, thus far as key points of focus in the near and mid term to more quickly activate increased revenue opportunity.
Number one our three leavers to improve near term revenues.
We see that these include first engaging and re engaging institutions with the new data, we are bringing out this year to initiating and extending pilot of care coordination offering.
Three launching real world evidence studies illustrating the value of preterm.
For example, the outcomes show reduction in neonatal length of stay and lower neonatal morbidity test.
Hughes.
To prevent sub analysis has been submitted for peer review and then the manuscript demonstrated with the pregnancy was significantly prolonged and subjects screened with preterm tests compared to controls.
In the preterm.
Green positive group interventions that were associated with pregnancy prolongation included care management and low dose aspirin.
Additionally in their bird study in particular, we studied impact and racially diverse populations and we're aiming to bring this exciting outcomes to the customers who have been waiting to see additional evidence of the effectiveness of our test and treat strategy using pre term in a more diverse population, which we now can provide.
We're in the process of launching a pilot program offering care coordination for women identified as high risk for preterm birth, using our pre Trump test.
We believe the service offering to patients can't address a hurdle to test adoption by physicians by increasing the comfort level of physicians, who cannot provide care coordination to their high risk patients.
This pilot resulted in a significant positive trends for test orders in the quarter after the pilot launch versus the quarter before.
In view of this we expect to extend the pilot to additional institutions.
Quickly as we can in the next six to 12 months.
And third we're aiming to expand our commercialization and evidence generation activities via additional real world evidence studies.
Our goal is to launch at least two studies in the next six months aiming for more in the coming years to show that outcomes are randomized controlled trial can be replicated in real life.
We are engaging large nationally recognized leading institutions to partner with us in this work.
As a result of these efforts we believe we can achieve not only revenue growth, but also a higher ROI on our commercial investment and stronger value proposition to physicians and a broader set of key opinion leaders, who are already familiar with Sara and are willing to use the test and educate other clinicians on the value of Breacher.
Longer term beyond these leavers, our five year vision calls for ramping up pre term in the United States as well as globally, where we're currently exploring opportunities and also developing multiple revenue streams beyond that.
This would entail successfully executing on a more wholesome pregnancy care platform approach by enhancing our value proposition to physicians through broadening our portfolio.
This would potentially include bringing additional products to market such as those in our current development pipeline and reviewing additional market penetration approaches such as patient paid options is it the teachers price and margin points.
We also plan to explore complementary product or company acquisition targets in a highly disciplined fashion to potentially boost revenue, while not over extending our balance sheet or capital structure.
Launching new product May also allow us to broaden our relationships with the clinicians and patients which could be accretive to driving preterm growth.
Finally, and something we're rather excited about longer term in regards to our vision is the potential to launch and monetize our data as an asset strategy here, we see a compelling opportunity to partner on the use of proteomics and predictive analytics using our high value datasets across nearly 20000 pregnancies to date and growing day by day.
To create breakthroughs in the care of a broad range of issues and pregnancy.
Ultimately to date, we've provide profiled many important pregnancy complications such as preeclampsia interstitial diabetes. In addition to preterm birth.
With these datasets, we have to keep ability to integrate them with clinical and demographic data within our proprietary pregnancy assay combined this provides powerful data driven utility and health insights, which we believe in it.
Identifying human health issues as early as in infancy through serious insights and then possibly leveraging others technologies for better care management in fact.
You did well we anticipate this approach could open up significant high margin revenue opportunities from possible partnering on complementary products and technologies and potentially even from licensing options.
Before I hand, the call over to Austin, Let me take a moment to update you on our Prime study.
As noted last quarter Prime studies subject enrollment has surpassed more than 2800 subjects required to be enrolled in the trial for the interim analysis to occur and now stands at over 3800.
We continue to be really excited about the potential prime interim book and the timing for this.
It requires delivery hospital discharge of modern mothers and babies and we're looking to.
To get the final deliveries completed by the end of August .
Then followed by cleanup of the data prior to the analysis of study results.
We are mindful as although we may be excited about increased interest and given the key learnings I noted earlier.
Look forward to seeing those results by the end of the year, though they may not immediately translate into accelerated adoption given the need for a defined standard of care guidelines are physicians to follow.
That said the bundled treatment, we're testing now with prime could help change the guidelines in our favor after prime is completed.
We would expect that volumes would be levered up more demonstrably one standard of care has been established for the medical community to have an accepted a course of action in order to mitigate premature delivery health problems and proven to yield positive benefits.
Going forward through our.
Our plant care coordination pilot program and other activities to engage physicians and patients we plan to do our part to help establish their guidelines as soon as possible.
And going back to my comments earlier on our five year vision, there may be a future where precision recommendations for care could be made based on leveraging our advantage datasets to determine the likelihood of risk factors in pregnancy, and which intervention would be proven to work best.
I'll now turn the call over to Austin for a review of our second quarter financial results Austin.
Thanks, Danielle and good afternoon, everyone.
Let me review our financial results for the second quarter and provide our view on expectations for the remainder of 2023.
Even the actions and you discuss that will refocus our business for success.
Revenue for the second quarter of 2023 was $123000 compared to $78000 for the second quarter of 2022.
While we are pleased with the steady expansion of our early adopter pool of customers. We expect revenue for the full year to come in at less than $400000. As we continue optimizing test adoption and our revenue model.
Total operating expenses for the second quarter were $11 $6 million down somewhat from 11 $8 million for the same period a year ago.
As a result of streamlining our commercial operations and other cost reductions, we expect our GAAP operating expenses to decrease by around 10% in the second half as compared to the first half of the year.
Based on the actions we've already taken we expect our cash expenditures to decrease by about 15% in the second half as compared to the first half of the year.
We hope to recognize even greater savings on an annualized basis as we continue to search for efficiencies in our operations in the near term, while continuing to invest in our future.
Research and development expenses were $3 $7 million compared to $3 3 million for the second quarter of 2022, due primarily to increased clinical study costs as we accelerated prime enrollment year over year.
Selling general and administrative expenses for the second quarter of 2023 were $7 $8 million.
This represents an 8% decrease from $8 $5 million from the same period, a year ago due primarily to steps. We took prior to year end 2022 to streamline sales operations and better focus our commercial strategy.
Additional streamlining additional streamlining efforts occurring late in the second quarter 2023 are expected to further reduce SG&A expenses by 15% to 20% in the second half of the year.
Net loss for the second quarter of 2023 was $10 $5 million down from $11 $5 million for the second quarter of 2022.
As of June 32023, the company had cash cash equivalents and available for sale securities of approximately $92 1 million.
We are carefully managing our cost structure and cash balances with the goal of maintaining a runway for several years based on our existing operating plans.
And to better position Sarah for revenue growth through test adoption, while continuing the exploration of our proprietary datasets to improve the health of moms and babies. This will take time, but we are leaning into these activities to create operational and commercial improvements as soon as possible.
I'll now turn the call back to junior Junior.
Thanks, Austin and thank you all for attending our call today as a mom and Sarah stakeholder myself, I'm really eager to maximize the company's potential and accelerate our impact on the well being of moms and babies.
We have the pathway ahead of us to create change, especially when as many as 30% of pregnancies are impacted by complications and given the fact that maternal mortality has doubled in the United States in the last 20 years, the wrong trend and we have a lot of work to do and Sarah has the technology platform to effect positive change to address these.
Trends to improve human health, we know how critical our mission is we know what work we need to do for our shareholders for our patients for our clinicians and the payers.
And we know we have the opportunity to succeed in our mission degree societal change by helping mothers and babies.
We really thank all of you for your support and helping us get there.
And now we'll open the line for questions operator.
We will now begin the question and answer session.
To ask a question you May press Star then one on your telephone keypad.
If you were using a speakerphone please pick up your handset before pressing the keys.
To withdraw your question. Please press Star then two.
At this time, we will pause momentarily to assemble our roster.
Our first question today comes from Patrick Donnelly with Citi. Please go ahead.
Hi, This is Brendan on for Patrick. Thank you so much for taking our questions first of all I'll start with the guidance for the year, how should we think about the phasing in the back half of the year, we see it more evenly split between <unk> and <unk> or is it kind of more of a ramp in Q4 too.
Yeah.
Yeah. Thanks for the question.
Yeah, Thanks, Danielle and thanks, Brandon for the question.
At this point that the shift in our strategy a little bit to be more focused on institutions. We think it's probably too early to really determine exactly how that is going to play out for the rest of the year.
But we are confident based on the revenue we have through.
Q2 that we will be able to achieve that.
We'll be within that guidance range that we just gave.
Okay, great. Thank you and then one follow up I was wondering if you'd be able to talk a little about the cash burn in the quarter and if thier.
The run rate through.
126, and still kind of there or if those expectations have changed at all.
Yes, so regarding runway we were certainly still on track for the runway guidance, we've given previously and.
Our goal as I mentioned in my prepared remarks is to extend that runway as far as we can while continuing to invest in that into our future.
Great. Thank you so much for taking my questions.
The next question is from Daniel <unk> with TD Cowen. Please go ahead.
Hey, guys I think you've been taking all the questions today.
I'm on for Dan.
I think I'm just curious junior.
You're new to the role.
And just hearing about how youre thinking about payer progression as youre waiting for prime but your plans for commercial commercializing our without reimbursement.
Given them that.
Is that further down the line here.
Thank you so much for the question Indeed, our pairs are our key stakeholders and we're really excited to bring them. The new data. We've generated that is getting published this this summer we submitted for publication and are excited to engage with payers in the <unk>.
Coming weeks to share the data as soon as it becomes available.
As you know we talk to policy a medical policy departments frequently.
And all of them are.
Really excited about the outcomes, we're showing and the potential.
Impact on cost of care if.
If you if you are asking for us to predict whether the current data avert preterm prevents sub analysis and other publications. We're publishing now is sufficient to start.
Turning medical policy opinions into broad based coverage, we don't know yet, but we will certainly disseminate the data.
Soon as possible. We're also excited to see the interim look of crime by the end of the year. So we're excited to share all of that with the pairs as we complete prime I think that that dataset will be even stronger to bring to the table for payer disk.
<unk>.
Great. Thanks, and then maybe a follow up I think it would be.
Just to get an update from you on how you think the pipeline is shaping up.
But how.
How you are overseeing transition.
Any updates on <unk>.
Our readouts on.
Institutional diabetes or time to birth.
Yes, no. Thank you so much for the question. Indeed, we are very excited about our pipeline.
Just completed a rigorous review of all of the products in the pipeline and indeed, we'll be imminently testing in the market are some of our new products I'm not in a position to to announce the launch timing today, but as soon as we.
See some of the successful pilots, we will be undertaking in the next six plus months, we will come back to you with that with announcements and to share our excitement about these product launches.
I know you mentioned, specifically time to birth and gestational diabetes. There are a couple of other products that we've identified in our pipeline that could be equally exciting to bring to market.
And we're going through estimates of how long the the validation and the commercial pilots will take in order to successfully bring them to market of course of all of these we want to make sure that we keep our focus on preterm and not overextend the team.
So what I can say is we'll aim to go.
So steady as oppose to broaden our portfolio too quickly and not lose our focus on our on our product and be successful with them in the market.
Appreciate the color.
I can.
Again, if you have a question. Please press Star then one.
The next question is from Andrew Brachman with Blair. Please go ahead.
Hey, everyone. This is jos amount for Andrew Thanks for taking our questions.
Just on the institutions that you're going after at this point, what's the willingness of them to interact with you and which of these you know if you break them out by sub type of institutions, which ones are most promising so far.
Is there a certain category that saying that the standard of care.
Establishing after the pilot programs is more important at this point.
Great question I will see we've noticed a very exciting trend that's a larger a more a more scaled institutions.
Are more excited to.
Start working with us on pre term as you know institutional sales Ah is a different bird from targeting physician practices. It takes a long lead time to engage with them and they are.
They are very much excited to engage with us on the new clinical data that we're bringing forward. So we see a very positive trend and look forward to to communicating if these institutions are willing to disclose our partnership as we launch a new.
Institutions, and bringing them online with preterm.
But do you know the short answer is they're very willing to engage very excited about the results that our studies show and very excited to bring them to their institutions.
Of course, it's about logistics because some of these institutions have hundreds and hundreds of physicians and making sure that our that our cash flow is.
Integrated into their standard operating procedures.
That also takes time.
Understood.
And then just on the sales force and what they're carrying at this point.
I guess post the Bert have they've been hearing more about the standard of care.
From these physicians is more important or has this been something that's been going on for a long time and says.
The investment there has not been made.
In an effort to conserve the cash runway.
Let me just clarify the question is the question more about what is the reaction to avert since we published that we met our primary endpoints or is it something else I think there may be two questions in one could you ever stated yeah understandable and.
And understanding your new management team here, but why is you know its realization about the standard of care.
The interventions that can be made post the test why is this coming up.
Now or so it's been a long standing issue on the investments behind <unk>.
What program has not been made.
Oh, no. It's been known all along and you will probably trace it to the compensations, Greg head with all of you over the years and it shaped our clinical trial strategy to very methodically Ah study after study show.
Effectiveness of interventions in order to influence standards of care. So we continue investing in doing it and are seeing that we have.
We are being successful in convincing clinicians in effectiveness of the study so no not new and that's why we have a number of studies in the pipeline and we're going to broaden that even further to show with real world.
Evidence that intervention work.
Understood. Thank you that's it for our questions.
Once again.
Again, if you have a question. Please press Star then one please standby as we poll for questions.
Showing no further questions. This concludes our question and answer session I would like to turn the conference back over to Peter Denardo for any closing remarks.
Thank you Carrie this concludes the call and thank you for joining US today good afternoon to everyone.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
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