Q3 2023 OncoCyte Corp Earnings Call
Speaker 1: Thank you for standing by. My name is Tamika, and I will be your conference operator today. At this time, I would like to welcome everyone to the Encore site third quarter 2023 earnings conference call.
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.
Speaker 1: All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star, followed by the number one on your telephone keypad.
All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session.
You don't want to ask a question. During this time simply press star followed by the number one on your telephone keypad.
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Speaker 1: Thank you. I will now hand today's call over to Stephanie Price of PCG Advisory. Please go ahead.
Thank you I will now hand, todays call over to Stephanie price P. C. G Advisory. Please go ahead.
Speaker 2: Thank you, Tamika, and thank you to everyone joining us for today's conference call to discuss Oncocyte's third quarter 2023 financial results and recent operating highlights.
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.
Speaker 2: If you have not seen today's financial results press release, please visit the company's website on the investigation.
He has not seen today's financial results press release, please visit the company's website on the investors page.
Speaker 2: Before turning the call over to Josh Riggs, OncoSite's President and CEO , I would like to remind you that during this conference call, the company will make projections and forward-looking statements regarding future events.
Before turning the call over to Josh rigs, Besides president and CEO 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 fact are forward looking statements.
Speaker 2: Any statements that are not historical facts or 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.
Encourage you to review the company's SEC filings.
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.
Speaker 2: Actual outcomes and results may differ materially from what is expressed or implied by these forward-looking statements. Oncocyte 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?
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.
Speaker 3: In the quarter, we achieved a positive coverage decision from CMS for our proprietary transplant assay, saw a significant new data release, and made progress.
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.
Speaker 3: We've continued to manage our spend down and reach our lowest cash net of financing in four years.
We've continued to manage our spend down and reached our lowest cash burn net of financing in four years.
Speaker 3: We believe our path to revenue is clear with multiple products launching in the first half of 2024.
We believe our path to revenue was clear with multiple products launching in the first half of 2024.
Speaker 3: And our plan to layer high margin products on top of a capital light infrastructure will set Oncosite up for rapid value creation.
No plans to lay our high margin products on top of the capital light infrastructure will set on good sign up for rapid value creation.
Speaker 3: Innovation usually happens in a centralized way, like what we do with our labs in Nashville and Germany. These central labs let us explore technology, find new clinical indications, and create new markets in a very controlled way.
Innovation, usually happens in a centralized way like what we do with our labs in Nashville in Germany.
Central Labs led us explore technology bind clinical indications and create new market in a very controlled way.
Speaker 3: But what is great for innovation doesn't necessarily serve broad market adoption or meet the needs of clinicians managing patients locally.
But what is great for innovation doesn't necessarily serve broad market adoption or meet the needs of clinicians managing patients locally.
Speaker 3: As clinical markets begin to mature, there is a natural pole to bring testing closer to the patient and the decisions that are being made in the clinic.
Clinical markets begin to mature, there's a natural pull to bring testing closer to the patient.
<unk> that are being made in the clinic.
Speaker 3: We can see that starting in transplant, the demand for local testing options is growing by the day.
We can see that starting in transplant the demand for local testing options is growing by the day.
Speaker 3: We expect that billions of annual margin opportunities are going to shift over the next few years to meet this growing demand.
We expect the billions of annual margin opportunity are going to shift over the next few years to meet this demand company.
Speaker 3: Companies that do a good job of making testing accessible and easy to use are going to be the natural beneficiaries of this chain.
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.
Speaker 3: We believe that our universal PCR-based workflow is quicker and easier to use than anything built on the back of a next-generation sequencing system.
We believe that our universal PCR based workflow, it's quicker and easier to use that anything built on the back of a next generation sequencing system.
Speaker 3: This shifting demand is why we pivoted our commercial approach from one that is a central lab driven one to one that is built on scalable kitted product.
This shifting demand is why we pivoted our commercial approach from one that is a 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 Luke Gould testing for transplant recipients will be the norm and patient compliance and access to this.
Speaker 3: 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 organ saving technology will be at an all time high.
Oregon saving technology will be at an all time high.
Speaker 3: For early adopters, we are planning to launch a Research Use Only, or RUO, 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.
For early adopters, we are planning to launch a research use only or are you owe 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.
Speaker 3: And both of these products are based on our proprietary technology backed by 10 years of research and development.
And both of these products are based on our proprietary technology backed by 10 years of research and development.
Okay.
Speaker 3: Going from a lab developed test to a regulated product is not easy. And the fact that we were able to convert our lab developed test or LDP workflow into a globally distributable product speaks to the robustness of the assay and the underlying technology.
Going from a lab developed test to a regulated product is not easy.
We were able to convert our lab developed tests or LDP workflow into a globally distributable product speaks to the robustness of the assay and the underlying technology.
Speaker 3: While we are building out the manufacturer product, we plan to continue to create clinical value through our innovation centers in natural and Germany.
While we are building out the manufactured product we plan to continue to create clinical value through our innovation centers in Nashville in Germany.
Speaker 3: Recent data from a randomized interventional kidney study shows that our technology can pick up AVMR, a common, endanguous type of organ rejection, and BSA positive patients 10 months ahead of standard care.
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 Pat positive patients 10 months ahead of standard of care.
Speaker 3: DSA is a biomarker that is used in monitoring for organ health and transplant patients. Those who become DSA positive are at higher risk for rejection.
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.
Speaker 3: This study put DSA-positive patients into two arms, one that used our tests and another that didn't.
This study put DSA positive patients into two arms one.
And that used our test another that didn't.
Speaker 3: And what we found is that those that use our tests were able to capture rejection much sooner than those that didn't.
And what we found is that those that use our test we're able to capture a rejection much sooner than those that didn't.
Speaker 3: And this is big. I mean, there's no other company that has reported anything like this level of validation. Approximately 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 organ. The data shows that using our technology gets an opportunity for earlier intervention.
And this is this is big I mean, there's no other company that has reported anything like this level of validation.
<unk>, 20% of kidney patients will have 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.
Speaker 3: When this data publishes, we anticipate submitting for an expanded claim for routine monitoring of these at-risk patients. If approved, this opens up a significant recurring revenue opportunity.
When this data publishes we anticipate submitting for an expanded claim for routine monitoring of these at risk patients. If approved this opens up a significant recurring revenue opportunities.
Speaker 3: Based on the data and the study design, we will recommend six tests within the first year of a patient testing positive for the essay.
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 usually has the advantage of bringing all your clinical data with it instead of needing to rerun the bunch of studies.
Speaker 3: Our Kitted product will follow a parallel path known as 510K that will be able to tap into the great clinical work we are doing in the lab. The ability to combine clinical innovation from our lab with our easy to use product is what will set oncocytop to be the market-leadering global transplant patient management.
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 are doing in the lab.
The ability to combine clinical innovation from our lab with our easy to use product is what will set uncle side up to be the market leader in global transplant patient management.
Speaker 3: As of today, our progress continues to support and draw interest from strategic partners that would like to see this testing in their channel.
As of today, our progress continues to support and draw interest from strategic partners that would like to see this testing in their channel.
Speaker 3: 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.
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.
Speaker 3: Our oncology products determine IO and determine CNI continue to progress through their development stages. We anticipate that both will largely follow the same path that our transplant test is charting to market. You can expect strong clinical validation followed by rapid kit development and deployment.
Our oncology products the term of 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 test discharging to market you can expect Trump strong clinical validation followed by rapid kit development and deployment.
Speaker 3: or the I.O. product, specifically progress continues on the 800 plus patient SWAG study and triple negative breast cancer. And assuming a positive outcome there, we expect that there will be significant strategic interest in the assay.
Or the Io product specifically progress continues on the 800 plus patients Swags study in triple negative breast cancer, and assuming a positive outcome there.
We expect that there'll be significant strategic interest in the assay.
Speaker 3: For C&I, we're still waiting on the publication of the Pancreatic Data Presented at AACR earlier in the year. Once it publishes, we'll be submitting to Moldex under LCD 38835. This is the same LCD. Then multiple companies have received coverage under in the past several months. Reinversement for these types of assays is reached into the thousands per episode of care. The timing of the submission is expected to be in the first half of 2024.
For C&I, we're still waiting on the publication of the pancreatic data presented at AACE our earlier in the year.
Once it publishes we'll be submitting to <unk> under LCD 38835. This is the same LCD than 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 the submission is expected to be in the first half of 2024.
Speaker 3: I'm going to 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 and marketable securities on the balance sheet. This is a 72% improvement in cash burn year over year.
I'm going to 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.
Speaker 3: Our consolidated revenues for the third quarter were approximately $400,000 and cost of revenues for the third quarter were approximately $200,000, 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 manufacturing versions of our assays.
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.
Speaker 3: General administrative expense for the third quarter decreased 56% year over year from 5.7 million to 2.5, reflecting our successful efforts to reduce spending. Sales and marketing expense for the third quarter increased 76% year over year from 400,000 to 700,000, while we focused our sales and marketing investments on our early access program and early market access work.
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, and we focused our sales and marketing investments on our early access program and early market access work.
Speaker 3: Gap net loss from continuing operations of 6.5 million or 79 cents per share as compared to a net loss of 1.8 million or 31 cents per share for the third quarter of 222. We've provided a reconciliation between the gap and non gap operating losses in the financial tables included with our earnings relief.
GAAP net loss from continuing operations of $6 5 million or 79 per share as compared to a net loss of $1 8 million or <unk> 31 per share for the third quarter of 2022, we have provided a reconciliation between these GAAP and non-GAAP operating losses in the financial tables included with our earnings release.
Speaker 3: Non-GAP operating loss is adjusted for the third quarter, with 4.1 million, an increase of 1.9 million, compared to the same period in 2022. A quantitative reconciliation to GAP net loss from continuing operations can be found in our earnings release, which is available at our website.
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.
Speaker 3: We have reflected the operations of Razor as discops for all periods presented in our financial statements. And we are maintaining guidance of sub five million and quarterly average burn for the foreseeable future.
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.
Okay.
Yeah.
Speaker 1: At this time, if you'd like to ask a question, press star one on your telephone keypad. If you'd like to withdraw your question.
At this time, if you'd like to ask a question press star one on your telephone keypad.
If you would like to withdraw your question Press Star one again.
Speaker 1: Your first question, it's in the line of Mike Mattson, would need him.
Your first question is from the line of Mike Matson with Needham.
Yes, thanks for taking my questions.
Speaker 4: I guess I'll start with the vitograph test. So how do you plan on selling those? I guess at this early access program, you know, first and then once you go beyond that, are you gonna have to go out higher to some salespeople?
I guess I'll start with.
The Vida craft tests so.
Yes.
How do you plan on selling.
Selling those I guess at this early access program.
You know first and then once you go beyond that are you going to have to go out hire some salespeople.
Speaker 3: Yeah, no great question. We expect that we've already started the pre-market activity for the Kitted product. And we will start taking pre-orders in the first half of next year with full market launch towards the end of Q2. So yeah, we will be putting on a sales force that we'll be calling on research labs that are interested in bringing up the RUO version of our product.
Yes, no great question Mike.
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 the 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.
Speaker 4: And then I didn't really hear much about the cancer side. I mean, there's still plans to proceed with any of those tests like term IO.
And then.
I didn't really hear much about the cancer side.
<unk> plans to.
Proceed with any of those tests like term Io.
Speaker 3: Yeah, no, I think we love our oncology content. We're just waiting on data to generate at this time. So once that data publishes, you'll see much heavier investment on that front. But right now, we're just playing our cash pretty close.
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.
Speaker 4: Yeah, understand. Okay. And then finally, you're talking about the market moving to away from kind of the lab developed, transplant test to the your kidded test or local testing. So, are you aware of any other companies out there kind of pursuing the same strategy that you guys are moving to kidded? Or, I mean, I know they've been in this for many, they've sent you know, lab developed.
Yeah, I understand Okay, and then finally, you talked about the market moving to away.
Away from currency lab dissolved transfer.
Transplant tests to the market.
Pets are local testing so.
Are you aware of any other companies out there kind of pursuing the same strategy that you guys are going to hit it or I mean, I know there's been lots of mandates.
Lab developed tests.
Speaker 3: Yeah, I mean, so you guys sort of have seen that there was an announcement from one Lambda, they did a partnership with divisor to bring an NGS kit to market.
Yes, 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 to market.
Speaker 3: And so they're they've gotten you know they're marketing both the EU and the US and then Omixin has been also bringing a kit to market here in the US. So the kind of the writing's on the wall for us that the market's eventually going to shift this way. It feels like kind of like the market environment before HIV testing, democratize before you have before biofire really brought you know the infectious disease testing closer to the patient. It's just.
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 I mean the kind.
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.
Speaker 3: One of those things that feels natural that as the clinical market really starts to understand the technology and its utility and patience, the demand is to naturally run that in house. And so we see that there's gonna be a shift over the next couple of years as these technologies and the insurance products get through the regulatory paces that get their strong demand out there. Okay, got it, thank you.
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.
Is that yes, there is strong demand out there.
Okay got it thank you.
Yes, Sir.
Speaker 5: Goodness question is in the line of Mason Corrico from Stevens. Hey, thanks for taking the question. This is Jake of the on floor.
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.
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.
Speaker 5: Thank you, sir. You're perfect to remain below 5 million quarterly average. And sorry if I'm this is, but is that going into 24 as well and includes expenses related to commercialization of new products next year?
And sorry, if I missed this but is that going into 'twenty four as well and includes expenses related to the commercial.
Commercialization of new products next year.
Yes, I would say that it extends into the first half of next year.
Okay got it thanks.
Okay.
Speaker 1: As a reminder, if you want to ask a question, press star one on your telephone keypad.
As a reminder, if you'd like to add.
I ask a question press star one on your telephone keypad.
Speaker 1: During that question, it's from a line of Mark Miserro, so ZT IG.
Next question is from the line of Mark Massaro.
P I G.
Speaker 6: Hey guys, this is Sige and I'm from Mars. Thanks for taking the question. Sige kept sharing briefly in the prepared remarks, but just any updates on the forming of a kidding partnership, how dialogue there is in moving along, particularly after securing kidney coverage here. Thanks.
Thanks for taking my question.
Briefly in that prepared remarks.
Forming an exciting partnership.
Now I think moving along particularly after asset sharing.
Thanks.
Speaker 7: Yeah, thank you for the question. And I would say that the conversations took a very positive turn when we got the coverage decision and then when this data that was presented at ESAW about a month and a half ago came out. Yeah, we feel great about how those conversations are going. It's a competitive process. And we feel that we're going to be able to bring something home for the uncle-side shareholders. That's very positive. OK, perfect. That's what we mean.
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> 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.
That's very positive.
Okay.
At this time there are no further audio questions.
Speaker 1: This does conclude today's call. Thank you for your participation. You may now disconnect your minds. Thank you.
This does conclude today's call. Thank you for your participation you may now disconnect your lines.
Thank you.
Disconnect your lines.
Thank you.