Q3 2023 OncoCyte Corp Earnings Call
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Thank you for standing by my name is Jamaica and that will be accomplished operator today at this time I would like to welcome everyone to the Unquote site third quarter 2023 earnings Conference call.
All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you'd like to ask a question. During this time simply press star followed by the number one I've got telephone keypad if.
If you want to withdraw your question again press Star one.
Thank you I will now hand, todays call over to Stephanie price P. C. G Advisory. Please go ahead.
Thank you Tamika and thank you to everyone joining us for today's conference call to discuss our anchor sites third quarter 2023 financial 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 rigs on besides president and CEO I'd 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 fact are forward looking statements.
We encourage you to review the company's SEC filings, including without limitation, the company's forms 10-K, and 10-Q, which identify 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.
<unk> 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.
Thank you Stephanie and welcome everyone.
In the quarter, we achieved a positive coverage decision from CMS for our proprietary transplant assay.
So on significant new data released.
And made progress on key manufacturing milestones.
We've continued to manage our spend down and reached our lowest cash burn net of financing in four years.
We believe our path to revenue was clear with multiple products launching in the first half of 2024.
And I don't plan to layer high margin products on top of the capital light infrastructure, what's that uncle side up for rapid value creation.
Innovation, usually happens in a centralized way like what we do with our labs in Nashville in Germany.
Central Labs, let us explore technology bind clinical indications and create new markets in a very controlled way.
But what is great for innovation doesn't necessarily serve broad market adoption or meet the needs of clinicians managing patients locally as.
Clinical markets begin to mature, there's a natural pull to bring testing closer to the patient.
Patients that are being made in the clinic.
We can see that starting in transplant.
Demand for local testing options is growing by the day.
We expect the billions of annual margin opportunity are going to shift over the next few years to meet the screening demand company.
Companies that do a good job of making testing accessible and easy to use are going to be the natural natural beneficiaries of this change.
We believe that our universal PCR based workflow, it's quicker and easier to use than anything built on the back of a next generation sequencing system.
This shifting demand is why we pivoted our commercial approach from one day to the Central lab, driven one to one that is built on scalable kitted products by 2026, if we've hit all our development milestones, we believe that rapid local testing for transplant recipients will be the norm and patient compliance and access to this.
Oregon saving technology will be at an all time high.
For early adopters, we are planning to launch a research use only or are you old version of our technology that we expect will be available in the first half of 2024.
This is expected to be followed by a regulated version in the second half of 2025.
And both of these products are based on our proprietary technology backed by 10 years of research and development.
Okay.
Going from a lab developed tests to a regulated product is not easy.
We were able to convert our lab developed tests or L. D. P workflow into a globally distributable product speaks to the robustness of the assay and the underlying technology.
While we are building out the manufactured product we plan to continue to create clinical value through our innovation centers in Nashville in Germany.
Recent data from our randomized interventional kidney study shows that our technology can pick up a BMR, a common and dangerous type of organ rejection and DSA pay a positive patients 10 months ahead of standard of care.
DSA is a biomarker that is used in monitoring for Oregon health and transplant patients those who become DSA positive or at higher risk for rejection.
This study put DSA positive patients into two arms one.
And that used our test another that didn't and.
And what we found is that those that use our test we're able to capture rejection much sooner than those that didn't.
And this is this is big I mean, there's no other company that has reported anything like this level of validation.
Absolutely, 20% of kidney patients will test positive for DSA within the first five years of kidney transplant.
Many of them will go on to have rejection and potentially lose their Oregon the.
The data shows that using our technology gives an opportunity for earlier intervention.
When this data publishes we anticipate submitting for an expanded claim for routine monitoring of these at risk patients.
This opens up a significant recurring revenue opportunity.
Based on the data in the study design, we will recommend six tests within the first year of a patient testing positive for DSA.
As I mentioned earlier, we believe easy to use regulated product is the future of the market is pushing us towards our first step is to submit both of our kidney claims to the FDA under a single site program, bringing us in line with recent guidance single site as a process available to labs like ours to gain clearance for their products and use.
He has the advantage of bringing all your clinical data with it instead of needing to rerun the bunch of studies.
Our kitted product will follow a parallel path known as 500 10-K that will be able to tap into the great clinical work, we're doing in the lab.
The ability to combine clinical innovation from our lab with our easy to use product is what will set also signed up to be the market leader in global transplant patient management.
As of today, our progress continues to support and draw interest from strategic partners that would like to see this testing in their channel.
We are pleased with the progress we are making in these discussions and expect to be able to update the market as more information becomes available in the near term.
Our oncology products determine Io and determined C&I continue to progress through their development stages, we anticipate that that both will largely follow the same path that our transplant tests discharging to market you can expect trumped strong clinical validation followed by rapid development and deployment.
Or the Io product specifically progress continues on the 800 plus patients swab study in triple negative breast cancer and assuming a positive outcome. There. We will we expect that there'll be significant strategic interest in the assay.
Our C&I, we're still waiting on the publication of the pancreatic data presented at ACR earlier in the year.
Once it publishes we'll be submitting to mold ex under LCD 38835. This is the same LCD multiple companies have received coverage on during the past several months.
Reimbursement for these types of assets has reached into the thousands per episode of care.
The timing of this submission is expected to be in the first half of 2024.
Move over to the financials.
Q3 saw much of the benefit of the cost reductions we did in the first half of the year cash burn was $3 6 million in the quarter, leaving $14 2 million of cash cash equivalents in marketable securities on the balance sheet. This is a 72% improvement in cash burn year over year.
Our consolidated revenues for the third quarter were approximately 400000 in cost of revenues for the third quarter were approximately 200000, primarily from services customers.
Research and development expense for the third quarter increased 48% year over year from $1 5 million to $2 2 million driven by our strategic pivot to focus on investment in developing manufacturer versions of our assets.
General and administrative expense for the third quarter decreased 56% year over year from $5 7 million to $2 five reflecting our successful efforts to reduce spending.
Sales and marketing expense for the third quarter increased 76% year over year from 400000 to 700000, while we focus our sales and marketing investments on our early access program and early market access work.
GAAP net loss from continuing operations of $6 5 million or 79 per share as compared to a net loss of one 8 million or <unk> 31 per share for the third quarter of 2022, we've provided a reconciliation between these GAAP and non-GAAP operating losses in the financial tables included with our earnings release.
non-GAAP operating loss as adjusted for the third quarter was $4 1 million, an increase of $1 9 million compared to the same period in 2022.
A quantitative reconciliation to GAAP net loss from continuing operations can be found in our earnings release, which is available at our website.
We have reflected the operations of razor as disc ops for all periods presented in our financial statements and we are maintaining guidance of sub $5 million in quarterly average borrowings for the foreseeable future.
Thank you.
Okay.
Okay.
Yeah.
Yeah.
At this time, if you would like to ask a question press star one on your telephone keypad.
If you would like to withdraw your question Press Star one again.
Your first question is from the line of Mike Matson with Needham.
Yes, thanks for taking my questions.
I guess I'll start with.
The Vida graft test so.
How do you plan on selling.
Selling those I guess with this early access program.
First and then once you go beyond that or are you going to have to go off hire some salespeople.
Yeah, No great question like we we expect that.
We've already started the pre market activity for the kitted product.
And we will start taking preorders in the in the first half of next year with you a full market launch towards the end of Q2.
So yes, we will be putting on a sales force that will be calling on on research labs that are interested in bringing up the <unk> version of our product.
Okay got it.
And then.
I didn't really hear much about the cancer side.
Are there still plans to proceed with any of those tests like term Io.
Yeah, No I think we we love our oncology content, we're just waiting on data to generate at this time.
Once that data publishes youll see a much heavier investment on that on that front, but right now where we're just playing our cash pretty close.
Yes, I understand okay, and then finally, you're talking about the market moving to away from kind of the lab developed a transplant attests to the.
Pets are local testing so.
Are you aware of any other companies out there kind of pursuing the same strategy that you guys are moving to <unk>.
It or I mean, I know that.
That's right.
Lab developed tests.
Yeah, I mean, so you guys would have seen.
Seeing that there was an announcement from from one Lambda did a partnership with divisor to bringing in Ngls kit to market.
And so they're they've gotten their marketing both the EU and the U S. And then <unk> has been also.
Bringing <unk>.
To market here in the U S. So the you mean the.
The writings on the wall for us that the market's eventually going to ship. This way, it's it feels like kind of like the market environment before your HIV testing democratize before.
Before <unk> really brought the infectious disease testing closer to the patient niches.
One of those things that feels natural that as the clinical market really starts to understand the technology and its utility in patients. The demand is to is to naturally run that in house and so we see that there's going to be a shift over the next couple of years as these technologies mature as products get through the regulatory paces.
Yes, theres strong demand out there.
Okay got it thank you.
Yes, Sir.
Yeah.
Your next question is from the line of Nathan Cali.
Cherico from Stephens.
Hey, Thanks for taking the question. This is Jacob on for Nathan on just a quick one for me on cash burn it was $3 6 million during the quarter. Thank you said you expected to remain below 5 million quarterly average.
And sorry, if I missed this but is that going into 'twenty four as well and includes expenses related to.
Commercialization of new products next year.
Yes, I would say that it extends into the first half of next year.
Okay got it thanks.
Yeah.
Yeah.
As a reminder, if you'd like to ask a question press star one on your telephone keypad.
Next question is from the line of Mark Massaro.
P I G.
Thanks for taking the question.
Briefly in the prepared remarks.
At this time.
Farming I think hitting partnership.
Moving along particularly after assets sure Anthony Thanks.
Thanks.
Yes. Thank you for the question and I would say the the conversations took a very positive turn when we got the coverage decision and then when this data that was presented at <unk> thought about a month and a half ago came out.
Yeah, we feel great about how those conversations are going at the competitive process and we feel that we're going to be able to bring something home for the oncotype shareholders.
It's very positive.
Okay. That's it for me.
Thanks.
At this time there are no further audio questions.
This does conclude today's call. Thank you for your participation you may now disconnect your lines.
Thank you.
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