OncoCyte Corporation Q4 2023 Earnings Call
Operator: Thank you for standing by. My name is JL, and I will be your conference operator today. At this time, I would like to welcome everyone to the OncoCyte fourth quarter and year-end 2023 earnings conference call. All lines have been placed on mute to prevent any background noise.
Thank you for standing by my name is Jay L and I will be your conference operator today at this time I would like to welcome everyone to the Oncotype <unk> fourth quarter and year end 2023 earnings conference call.
Speaker Change: Lines have been placed on mute to prevent any background noise.
Operator: 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. If you would like to withdraw your question, please press star one again. Thank you. I would now like to turn the conference over to Jeff Ramson, PCG Advisory, Inc. You may begin.
Speaker Change: 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 on your telephone keypad.
Speaker Change: If you would like to withdraw your question. Please press star one again. Thank you I would now like to turn the conference over to Jeff Remsen TCG Advisory Inc. You may begin.
Jeff Ramson: Thank you, operator, and thank you, everyone, for joining us for today's conference call to discuss OncoCyte's fourth quarter and full year 2023 financial results and recent operating highlights. If you have not seen today's financial results press releases, please visit the company's website on the investor's page.
Jeff Remsen: Thank you operator, and thank you everyone for joining us for today's conference call to discuss <unk> fourth quarter and full year 2023 financial results and recent operating highlights.
Jeff Remsen: I've not seen today's financial results press releases. Please visit the company's website on the investors page.
Jeff Ramson: Before turning the call over to Josh Riggs, OncoCyte's President and Chief Executive Officer, 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 facts 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. OncoCyte expressly disclaims any intent or obligation to update these forward-looking statements except as otherwise may be required under applicable law.
Before turning the call over to Josh rigs Oncotype, <unk>, President and Chief Executive Officer, 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.
Jeff Remsen: Encourage you to review the company's SEC filings, including without limitation. The Companys 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.
Jeff Remsen: 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.
Jeff Remsen: With that I'll turn the call over to Josh.
Joshua Riggs: Thanks, Jeff, and welcome, everyone. A year ago, we said that we were going to reduce our burn, package our IP for distribution, and find a partner for commercialization. Including Q1 of 2024, our average burn for the past three quarters has been $3.91 million, compared to $11 million for the same period a year ago.
Josh: Thanks, Jeff and welcome everyone.
Josh: A year ago, we said that we were going to reduce our burn.
Josh: Package, our IP for distribution and find a partner for commercialization.
Josh: Including Q1 of 2024, our average burn for the past three quarters has been $3 nine 1 million.
Josh: Compared to $11 million from the same period a year ago.
Joshua Riggs: We successfully converted our transplant LDT workflow into an easy-to-use manufactured product called GraftAssure. The first prototypes came out of manufacturing in December of last year, and I'm proud to say that the quality of performance of that essay has exceeded our expectations.
We successfully converted our transplant LDC workflow into an easy to use manufactured product called graft assurance.
Josh: The first prototypes came out of manufacturing in December of last year.
Josh: I'm proud to say that the quality and performance of that assay has exceeded our expectations.
Josh: We expect to receive the first full production late in Q2 and began shipping our first sites after QC release.
Joshua Riggs: We expect to receive the first full production lot in Q2 and begin shipping our first sites after QC release. And lastly, yesterday, we announced our partnership with Bio-Rad to support the global launch of the Graftsure product. They invested alongside current and new shareholders in a $15.8 million private placement offering to support the accelerated development and commercial effort. The investment was priced at market value.
Speaker Change: And lastly, yesterday, we announced our partnership with bio Rad to support the global launch of the graph show product.
Speaker Change: They invested alongside current and new shareholders and a $15 8 million private placement offering to support the accelerated development and commercial efforts.
Speaker Change: The investment was priced at market value.
Joshua Riggs: Having them as an investor and commercial partner provides OncoCyte with the highest level of validation and a strong base to build from. As part of the agreement, Bio-Rad and OncoCyte will co-market the assay in the U.S. and Germany, with OncoCyte acting as commercial leads. Outside these countries, BioRAD has been granted exclusive global distribution and commercial rights. Having the support of the Bio-Rad team in the U.S. and Germany gives us the scale that we need to meet the market opportunity. The market in both countries is highly concentrated at the top academic centers where most transplant surgeries are performed.
Having them as an investor in commercial partner provides acre site with the highest level of validation that strong base to build from.
Speaker Change: As part of the agreement bio Rad and <unk> will co market the assay in the U S and Germany with I'll go site acting as commercial beat.
Speaker Change: Outside these countries bio Rad has been granted exclusive global distribution and commercial rights.
Speaker Change: Having the support of the bio Rad team in the U S and Germany gives us the scale that you need to meet the market opportunity.
Speaker Change: The market in both countries is highly concentrated at the top academic centers, where most transplant surgeries are performed at.
Joshua Riggs: At around 100 call points, we can effectively commercialize with minimal incremental headcount. Globally, over 157,000 transplants are performed annually with a 9.1% growth rate. Much of this transplant population is going underserved or unserved. It's really challenging to try and meet the global demand with a central lab in the United States.
Speaker Change: At around 100 call points, we can effectively commercialize with minimal incremental head count.
Speaker Change: Globally over 157000 transplants are performed annually with a nine 1% growth rate.
Speaker Change: Much of this transplant population is growing underserved or unserved.
Speaker Change: It's really challenging to try and meet the global demand with a central lab in the United States.
Joshua Riggs: A robust kitted product with this partnership puts that market within reach. Going forward, both companies have committed to joint efforts in developing a regulated product and system designed to facilitate widespread distribution and clinical adoption of the core technology in the United States and beyond. Additionally, Bio-Rad has been granted an option for IBD commercial rights at FDA clearance, subject to meeting specific objectives. Exercising the option would come with a second equity investment into OncoCyte.
Speaker Change: Robust kitted product with this partnership puts that market within reach.
Speaker Change: Going forward both companies have committed to joint efforts in developing a regulated product and system designed to facilitate widespread distribution and clinical adoption of the core technology in the United States and beyond.
Speaker Change: Additionally, bio Rad has been granted an option for IBD commercial REIT that FDA clearance subject to meeting specific objectives.
Speaker Change: Exercising the option would come with a second equity investment into anchor site.
Joshua Riggs: We look forward to working with their experienced team to bring this needed product to market as quickly as possible. And we've discussed the upcoming transition in transplant monitoring from one where central labs dominate to one where local labs are empowered to serve the community. This partnership on IBD development is a key step in that direction. Working together, we believe that we are on an accelerated path to deliver this product to market and look forward to updating you on our progress. Prior to that, we are going to offer researchers and labs around the world an opportunity to use our technology through the GraftAssure kit, an easy-to-use, rapid turnaround test for monitoring and measuring donor-derived cell-free DNA in the blood. We are encouraged by the response and demand for the technology and look forward to supporting our day one sites in the U.S. and other world markets.
Speaker Change: We look forward to working with their experience team to bring this needed product to market as quickly as possible.
Speaker Change: We discussed the upcoming transition in transplant monitoring from one where central labs dominate to one where local labs are empowered to serve the community.
Speaker Change: This partnership on IBD development is a key step in that direction.
Working together, we believe that we are on an accelerated path to deliver this product to market and look forward to updating on our progress.
Speaker Change: Prior to that we are going to offer researchers in labs around the world and opportunity to use our technology through the graft assure kit and easy to use when a big turnaround tests for monitoring and measuring donor derived cell free DNA in the blood.
Speaker Change: We are encouraged by the response and demand for the technology and look forward to supporting our day one sites in the U S and rest of world markets.
Speaker Change: We're going to measure success over the next 12 to 18 months by site activation looking to build alongside bio Rad a significant install base of early adopters that are interested in doing in house research on their patient populations to push the body of knowledge in literature forward.
Joshua Riggs: We're going to measure success over the next 12 to 18 months by site activation, looking to build, alongside Bio-Rad, a significant user base of early adopters that are interested in doing in-house research on their patient populations to push the body of knowledge and literature forward. We couldn't be more excited to put our tools into the hands of these capable researchers and institutions around the world.
Speaker Change: We couldnt be more excited to put our tools into the hands of these cable researchers and institutions around the world.
Speaker Change: We continue to make progress on the clinical development of our products.
Joshua Riggs: We continue to make progress on the clinical development of our product. Last year, we achieved reimbursement for phytograft kidney. This year, we have an opportunity for claims expansion when the data that was presented at ESOT gets published. It is currently in review.
Speaker Change: Last year, we achieved reimbursement for Cytograft kidney.
Speaker Change: This year, we have an opportunity for claims expansion when the data that was presented at <unk> Dot gets published it is currently in review.
Joshua Riggs: Claims expansion would be an opportunity to build beyond the four cause testing claims that we have today. As a reminder, this data is from a randomized interventional kidney study that showed our technology can pick up ABMR, a common and dangerous type of organ rejection, in DSA-positive patients 10 months ahead of standard of care. The DSA is a biomarker that is used for monitoring organ health in transplant patients. Those that become DSA positive are at higher risk for rejection. This study put PSA-positive patients into two arms. One used our test, and the other didn't.
Speaker Change: Claims expansion would be an opportunity to build beyond the four cause testing things that we have today.
Speaker Change: As a reminder, this data is from a randomized intervention with kidney study that showed our technology can pick up EMR, a common and dangerous type of Oregon rejection and DSA positive patients 10 months ahead of standard of care.
Speaker Change: The DSA as a biomarker that is used for monitoring for Oregon health in transplant patients.
Speaker Change: Does that become DSA positive are at higher risk for rejection.
Speaker Change: This study put DSA positive patients into two arms, one used our tests and the other didn't.
Joshua Riggs: Those that used our tests were able to catch rejection much sooner than those that didn't. Approximately 20% of kidney patients will test positive for DSA within the first five years of kidney transplantation. Many of them will go on to have rejection and potentially lose their organs. The data showing using our technology is an opportunity for earlier intervention. Further and Variably
Speaker Change: Those that used our tests, we're able to catch rejection much sooner than those that didn't.
Speaker Change: 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 Oregon.
Speaker Change: The data showing using our technology gives an opportunity for earlier intervention.
Speaker Change: Further and very important abms.
Joshua Riggs: ABMR is notoriously hard to treat, but certain new drugs are in trials to treat DSA-positive ABMR. Assuming a positive outcome in these trials, an early diagnosis will become truly crucial. We are watching these phase two studies very closely, as we believe that they have the opportunity to change the outcomes for the many patients that experience ABMR. And our technology has the potential to be the front end diagnostic to find these patients in time to make a difference. For Determine CNI, we are waiting on the publication of pancreatic data presented at AACR earlier in 2023 to submit to Moldex under LCD 38835. This is the same LCD that multiple companies have received coverage under in the past several months.
<unk> is notoriously hard to treat.
Speaker Change: But certain new drugs are in trials to treat DSA positive a BMR.
Assuming positive outcome of these trials and early diagnosis will become truly crucial.
Speaker Change: We are watching these phase II studies very closely as we believe that they have the opportunity to change the outcomes for the many patients that experience a DMR.
Speaker Change: And our technology has the potential to be the front end diagnostics define these patients in time to make a difference.
Speaker Change: We're determined C&I, we are waiting on the publication pancreatic data presented at ACR earlier in 2023 to submit to <unk> under LCD three eight to three five. This is the same LCD that multiple companies have received coverage under in the past several months reimbursement for these types of assays has reached into.
Joshua Riggs: Reimbursement for these types of assays is reached into the thousands per episode of care. For DETERMA-IO, we continue to make progress processing samples from the 800-plus patient TNBC study being run by the Southwest Oncology Group, funded by the NIA. Success in this study would represent an opportunity to support the treatment decision post-surgery for these patients by identifying those most likely to benefit from immunotherapy. On our financials, Q4 benefited from the cost reductions we did in the first three quarters of the year. Cash reserves declined $4.4 million in the quarter, leaving $9.4 million on the balance sheet.
Thousands per episode of care.
Speaker Change: For determine Io, we continue to make progress processing samples from the 800 plus patients CNBC study being run by the southwest oncology group funded by the NIH.
Speaker Change: Success in this study where it would represent an opportunity to support the treatment decision post surgery for these patients by identifying those most likely to benefit from immunotherapy.
Speaker Change: On our financials Q4 benefited from the cost reductions we did in the first three quarters of the year cash reserves declined $4 4 million in the quarter, leaving $9 4 million on the balance sheet. This is a 58% improvement in cash burn year over year.
Joshua Riggs: This is a 58% improvement in cash burn year over year. Our consolidated revenues for the fourth quarter of 2023 were approximately $300,000. And the cost of revenues for the fourth quarter was approximately $400,000, primarily from services and customers. Research and development expense for the fourth quarter increased 85% year-over-year from $1.4 million to $2.5 million. This is driven by our strategic pivot to focus our investment on developing the manufacturable version of our assay. General and administrative expense for the fourth quarter decreased 66% year over year from $5.1 million to $1.8 million, reflecting our successful efforts to reduce spending not directly related to product development and commercial activity. Sales and marketing expense for the fourth quarter increased 74% year-over-year from $300,000 to $600,000, where we focused our sales and marketing investments on our early access program and early market access work for the RUO product.
Speaker Change: Our consolidated revenues for the fourth quarter of 2023 were approximately 300000 and the cost of revenues for the fourth quarter were approximately 400000, primarily from services and customers.
Speaker Change: Research and development expense from the fourth quarter increased 85% year over year from $1 4 million to $2 5 million.
Driven by our strategic strategic pivot to focus our investment on developing the manufacturer book version of our assay.
Speaker Change: General and administrative expense for the fourth quarter decreased 66% year over year from $5 1 billion to $1 8 million, reflecting our successful efforts to reduce spending not directly related to product development and commercial activities.
Speaker Change: Sales and marketing expense for the fourth quarter increased 74% year over year from 300000 to 600000, where we focus our sales and marketing investments on our early access program and early market access work for the <unk> product.
Joshua Riggs: Gap net loss from continuing operations of $16,000,000, or $1.99 per share, as compared to a net loss of $12,000,000, or $2.08 per share, for the fourth quarter of 2022. Non-GAAP operating loss as adjusted for the fourth quarter was $4.2 million, an increase of $1.2 million compared to the same period in 2022. We have provided a reconciliation between our GAAP and non-GAAP operating losses in the financial tables included with our earnings release, which is also available on our website at OncoCyte.com. We have reflected the operations of Razor as discontinued operations for all periods presented in our financial statements. In my closing remarks, I'd like to talk a little bit about why the partnership came together. It has exactly what you would expect.
GAAP net loss from continuing operations of $16 million or $1 99 per share as compared to a net loss of $12 million or $2 eight per share for the fourth quarter of 2022.
Speaker Change: non-GAAP operating loss as adjusted for the fourth quarter was $4 2 million, an increase of $1 2 million compared to the same period. In 2022, we have provided a reconciliation between our GAAP and non-GAAP operating losses in the financial tables included with our earnings release, which is also available at our website at Oncotype outcome.
Speaker Change: We have reflected the operations of razor as discontinued operations for all periods presented in our financial statements.
Speaker Change: In my closing remarks, I'd like to talk a little bit about why the partnership came together.
Speaker Change: Yeah. It has exactly what you would expect you know has a good product.
Joshua Riggs: It has a good product, you know, an established commercial channel, and robust demand. But what makes it special and what makes it work is the timing, what we see, and ultimately, what we think led BioRed to invest in it, is the chance to take the lead in an opportunity that only comes along once in any given clinical market, where it shifts from one that's centralized to one that's local. It only makes sense that transplant centers would rather have an answer in a day instead of waiting up to a week for results from a lab in another state. And if you add to that a reimbursement rate of in the thousands for an easy-to-use PCR test, you start to build a pretty compelling business. It happened in HIV testing, respiratory testing, EGFR, among others, and it's about to happen in transmission. And again, it's something that only happens once.
Speaker Change: And established commercial channel and robust demand.
Speaker Change: But what makes it special.
Speaker Change: And what makes it work is the timing.
Speaker Change: What we see and ultimately what we think led by our red to invest.
Speaker Change: Is the chance to take the lead and an opportunity that only comes along once in any given political market.
Speaker Change: Where it shifts from one that's centralized to one that is local.
Speaker Change: It only makes sense the transplant centers would rather have an answer in a day instead of waiting up to a week for results from our lab in another state.
Speaker Change: And if you add to that a reimbursement rate in the thousands for an easy to use PCR test.
Speaker Change: You start to build a pretty compelling business case.
Speaker Change: It happened in HIV testing respiratory testing Egfr, among others and it's about to happen in transplant.
Speaker Change: But again, it's something that only happens once.
Joshua Riggs: After local labs have access to testing, it never goes back to being centralized. Over the next two years, we are going to see this transition take place, and believe that we have the right partnership and the right product to position OncoCyte as a leader in that transition. That will mean more research, more patients being tested, and hopefully better outcomes. Our appreciation goes out to the Bio-Rad team and our current and new shareholders who have joined us in supporting this vision. Thank you.
Speaker Change: After local labs have access to testing and never goes back to being centralized.
Speaker Change: Over the next two years, we're going to see this transition take place.
Speaker Change: And believe that we have the right partnership and the right product to position Unco site as a leader in that transition.
That will mean more research more patients being tested.
Speaker Change: And hopefully better outcomes.
Speaker Change: Our appreciation goes out to the bio Rad team and our current and new shareholders, who have joined us in supporting this vision.
Speaker Change: <unk>.
Speaker Change: Yeah.
Operator: Thank you. The floor is now open for questions. If you have dialed in and would like to ask a question, please press star one on your telephone keypad to raise your hand to join the queue. If you would like to withdraw your question, simply press star one again. If you are called upon to ask your question and are listening via the loudspeaker on your device, please pick up your handset to ensure that your phone is not on mute when asking your question.
Speaker Change: Thank you the floor is now open for questions. If you have dialed in and would like to ask a question. Please press star one on your telephone keypad to raise your hand to join the queue.
If you would like to withdraw your question simply press Star one again.
Speaker Change: If you are called upon to ask your question and are listening via loud speaker on your device. Please pickup your handset to ensure that your phone is not on mute when asking your question.
Michael Stephen Matson: Again, press the star 1 to join the queue, and your first question comes from the line of Mike Matson of Needham. Your line is open. Yeah, thanks for taking my questions. I guess just a few on the Bio-Rad agreement. So can you tell us what their installed base is, you know, U.S. and O.U.S., if possible, you know, for the machines that could run this test?
Speaker Change: Again press star one to join the queue and your first question comes from the line of Mike Matson of need him. Your line is open.
Michael Stephen Matson: Yeah, Thanks for taking my questions.
Michael Stephen Matson: I guess just a few on the buyer a pretty minute. So can you tell us what their installed bases.
Michael Stephen Matson: U S O U S.
Michael Stephen Matson: If possible.
Michael Stephen Matson: Machines that can run the tests.
Michael Stephen Matson: They they don't publicly disclose their installed base.
Joshua Riggs: They don't publicly disclose their installed base.
Joshua Riggs: Okay, no, that's fine. And then, just to be clear and make sure I understand how this is going to work, so initially, you'll be working with them. There will be a research use only version of the test. You'll try to build up some initial customers using that test, and then eventually, you'll have FDA cleared and EU cleared versions of the kitted test to have them sell for their testing systems.
Speaker Change: Okay, No that's fine.
Speaker Change: And then just to be just to be clear and make sure I understand how this is going to work. So initially you'll be working with them they'll be a research use only version, but they will try to build up some initial customers.
Speaker Change: That helps and then eventually you'll have.
Speaker Change: FDA cleared.
Speaker Change: Are you a clear version of the kit tests and to have them.
Speaker Change: Well for their testing.
Joshua Riggs: Yeah, that's correct, Mike. And, you know, so we're excited by it. You know, there's a really nice overlap between the life science side of BioRAD that's calling on the academic centers where the research is being done today and, you know, in our call point, which happens to be academic centers that have the talented surgeons that can actually perform the transplant surgeries. So there was a really nice overlap and call point that made this make a lot of sense. Okay, I got it.
Speaker Change: Yeah, that's correct and so we're excited by it.
There's a really nice overlap between the life science side of bio Rad Thats, calling on the academic centers, where the research is being done today.
Speaker Change: And our call point, which happens to be academic centers, who are who have the talented surgeons that can actually perform the transplant surgeries. So there was a really nice overlap and call point.
That makes a lot of sense.
Speaker Change: Okay got it.
Joshua Riggs: Um, all right. And then is there any kind of minimum volume commitments or anything like that built into the agreement?
Speaker Change: Alright, and then is there any kind of a.
Speaker Change: Minimum volume commitments or anything like that built into the agreement.
Speaker Change: There are not.
Joshua Riggs: There are not any.
Joshua Riggs: Okay, all right, and then are you going to continue to offer the transplant tests in the U.S. as a lab-developed test or CLIA wave test in your own facility, or is it going to fully transition over to being kitted?
Speaker Change: Okay.
Speaker Change: Alright, and then are you going to continue to offer the transplant tests in the U S. A.
Speaker Change: As a lab developed test or clear way of testing your own facility or is it.
Speaker Change: It kind of fully transitioned over to Pete to being Kidded.
Joshua Riggs: We will absolutely maintain our service lab in Nashville. It's a wonderful vehicle for us to do clinical development work. It's through that lab that we're able to engage with Moldex to do the claims expansion work, like we're doing with the DSA-positive patients. It also gives us a path through the FDA, so we can take our lab through the single-site process and establish a predicate device that we can then use to bridge clinical claims over to our kitted product. We believe that's a really efficient path through the FDA and look forward to being able to bridge those two things together in the future.
Speaker Change: So we will absolutely maintain our service lab in Nashville.
Speaker Change: It's a wonderful vehicle for us to do clinical development work.
Speaker Change: It's through through that lab that we're able to engage with <unk> to get to the claims expansion work like we're doing with the DSA positive patients. It also gives us a path through the FDA. So we can take our single site.
Speaker Change: Our lab to the single site process and.
Speaker Change: And establish a predicate device that we can then use to bridge clinical claims over to our kitted product and we believe that's a really efficient path through the FDA.
Speaker Change: And look forward to being able to bridge those two things together in the future.
Speaker Change: Okay, and then finally, what should we expect for the pricing on the kids had one year.
Joshua Riggs: Okay, and then finally, what should we expect for the pricing on the kitted test once you, you know, fully transition over to a clear version of the product? I don't know if you're willing to disclose that, but...
Speaker Change: Fully transitioned over to a clear version of the product I don't know, if you're willing to disclose that but.
Joshua Riggs: Well, I can tell you how the math usually works, you know, so depending on whatever the reimbursed value is for the test, and so that's whatever your customer can bill to the payers, you're usually capped at about 50% of the reimbursed value for the top end of your pricing. And so if you have a kit that has a national price of, you know, $1,500, then the limit you can really charge to generate the result is about $750. If it's $2,000, then it's $1,000. If it's $1,000, it's $500, and that's just kind of the way the math works, and that's the general expectation in the industry. And until we have a national price for the kit, it's really tough to say exactly where we would set the price.
Speaker Change: Well I mean, I could tell you how how the math usually works so.
Speaker Change: Depending on whatever the reimbursed value is for the test and so that's whatever your customer can bill.
Speaker Change: To the payers, you're usually capped at about 50% of the reimbursed value pre pre.
Speaker Change: The top end of your pricing and so if you have a kid that has a national price of <unk>.
Speaker Change: <unk> hundred than the limit you can really charged to generate the result is about 750.
Speaker Change: If it's 2000, it's 1000 about 1500 and Thats just kind of the way the math works and that's the general expectation in the industry.
Speaker Change: And until we have the national price for the kit, it's really tough to say exactly where we would set the price.
Joshua Riggs: Okay, but then you would, I assume you'd be sharing a portion of that price with BioRADS?
Speaker Change: Okay, but then you would I assume you would be sharing a portion of that pricing with fireeye.
Joshua Riggs: That's correct.
Speaker Change: Correct.
Joshua Riggs: Okay. All right. Okay. Thank you.
Speaker Change: Okay.
Speaker Change: Alright, okay. Thank you.
Speaker Change: Yes.
Speaker Change: Your next question comes from the line of Mesa and careful of Stephens. Your line is open.
Mason Owen Carrico: Your next question comes from the line of Mason Carrico of Stevens. Your line is open. Mason, perhaps your line is on mute. Can you guys hear me all right? Yes, and Mason.
Mason, perhaps your line is on mute.
Mason: Can you guys hear me all right.
Mason: Yep.
Joshua Riggs: Hey, yeah, so if you don't mind, maybe just a few quick ones here, can you please provide just a bit more detail on how the commercial strategy with Biorad is going to work going forward. I mean, given you're the commercial lead, what type of team do you have in place today or presence do you have? What type of incremental investments need to be made here?
Mesa: Hey, yes. So if you don't mind, maybe just a few quick ones here could you.
Mesa: Provide just a bit more detail on.
Mesa: Kind of how the commercial strategy with bio Rad is going to work going forward I mean, given your the commercial lead what type of team do you have in place today or presence do you have what type of incremental investments need to be made here.
Joshua Riggs: No, thanks. Yeah, we're expecting to add an incremental about five headcount. So four in the US on top of our small team today, and then one in Germany. And that goes against, you know, the Bio-Rad marketing machine that's already in place in the US and Germany. And so we will, you know, if you think of them as kind of filling the funnel, and then we're at the bottom end of the funnel, closing the accounts is generally how the relationship will work. Outside of those two territories, Bio-Rad has the full commercial and distribution lead on that, and so we will bear no incremental costs there.
Speaker Change: No. Thanks, Yeah, we're expecting to add incremental about five head count so far in the U S on top of our small team today and then one in Germany.
Speaker Change: And that goes against the bio Rad marketing machine, that's already in place in the U S and Germany.
Speaker Change: And so we will if you think of them as kind of filling the funnel and then we're at the bottom end of the tunnel closing the accounts is generally how the relationship will work.
Outside of those two territories.
<unk> has the full commercial and distribution lead on that and so we will bear no incremental cost there.
Joshua Riggs: Got it. Okay, and... Could you talk a bit about revenue expectations going forward as well as the cash burnout look? Sure.
Speaker Change: Got it okay and.
Speaker Change: Could you talk a bit about revenue expectations going forward as well as the cash burn outlook.
Speaker Change: Sure.
Speaker Change: So the U S. It is in our <unk> product and so it takes time for a lab to bring it up validate it and get it running and so we.
Joshua Riggs: So it is an RUO product, and so it takes time for a lab to bring it up, validate it, and get it running. And so we expect that the day-one sites will start converting into revenue customers in Q4, and then revenue will start to build from there. And so we'll see a little bit of revenue in Q4, more in Q1, and so on and so forth through Q2 next year. The cash burn, we've committed to maintaining a low cash burn. We'll take up a bit here in Q2 with just some manufacturing expense and one-time expenses, but I think you can expect to see us try to maintain that below $5 million a quarter on it. Sorry, below $5 million on a quarterly burn basis average.
Speaker Change: Expect that the the day, one sites will start converting into revenue customers in Q4.
Speaker Change: And then the revenue will start to build from there and so we'll see a little bit of revenue in Q4 more in Q1 and the answer.
Speaker Change: So on and so forth through Q2.
Next year.
Speaker Change: The cash burn I mean, we are committed to maintaining a low cash burn you will tick up a bit here in Q2 with just some manufacturing expense and one time expense but.
I think you can expect to see us try to maintain that below $5 million a quarter.
Speaker Change: Sorry below $5 million on a quarterly burn basis average.
Joshua Riggs: Got it. All right. That's helpful. Thanks. Yes, sir. Your next question comes from the line of Bruce Jackson of The Benchmark Company. Your line is open. Hi, good morning.
Speaker Change: Got it alright thats helpful. Thanks.
Speaker Change: Yes, Sir.
Speaker Change: Your next question comes from the line of Bruce Jackson of the Benchmark Company. Your line is open.
Bruce David Jackson: Hi, Good morning, and thank you for taking my question.
Bruce David Jackson: Thank you for taking my question. So, getting into the mechanics of how this works with Bio-Rad, and we'll start with the easier scenario with the international markets that are not Germany. So if they sell a test, then how does that get booked to you? Is it going to come in on the income statement as like a license fee, or does that hit either the operating expenses or the non-operating expenses? Tell me how the mechanics of just that one piece are going to work.
Bruce David Jackson: But getting into the 8-K.
Bruce David Jackson: So getting into the mechanics of how this works with bio Rad and we'll start with easier scenario with the international markets that are not Germany.
Bruce David Jackson: So if they sell a task then how does that get booked to you is it going to come in on the income statement as they are it's a license fee.
Bruce David Jackson: That hits the uses of the operating expenses or the nonoperating expenses tell me how the mechanics of the just try it one piece of it are going to work.
Joshua Riggs: No, good question. It's a manufacturing and supply agreement. So it comes off the end of the manufacturing line, and then Bio-Rad is our customer. And so it hits the top line, and then you'll see a normal COGS type calculation.
No. Good question its manufacturing and supply agreement. So it comes off the end of the manufacturing line and then bio Rad as our customers. So it hits the top line and then Youll see a normal Cogs type calculation.
Joshua Riggs: Okay, and then in the United States in particular, you've got the lab version of the test as well, so are there going to be like sort of two revenue streams here? So there's going to be like the lab revenue, and then there's also the RUO cash revenue. So tell me how that piece of it's going to flow.
Bruce David Jackson: Okay, and then with the United States in particular, so you've got the lab version of the test as well. So are there going to be like sort of to revenue stream service. It seemed like the lab revenue and then there's also the <unk>.
Bruce David Jackson: Revenue. So does that tell me how that piece of it is going to flow.
Joshua Riggs: Yeah, I mean, they'll both show up on the top line. One will just show up as services, and one will show up as products. I don't know if that answers your question, Bruce.
Bruce David Jackson: Yeah, I mean, the boat show up on the top line one will just show up as services and will show up as products.
I don't know if that answers your question Bruce.
Joshua Riggs: And then, the last question is on the incremental sales and marketing spend. So, is there going to be any shift in the 5 million burn rate per quarter, I'm sorry, less than 5 million burn rate per quarter from R&D to sales and marketing, or is it just maybe a little color on the operating spend mix would be helpful? Thank you.
Bruce David Jackson: It does it does.
Then last question.
Bruce David Jackson: <unk> is on the.
Bruce David Jackson: The incremental sales and marketing spend so as to give me any shifts in the just.
Bruce David Jackson: The 5 million burn rate per quarter, I'm, sorry, less than 5% 5 million burn rate per quarter.
Bruce David Jackson: From R&D to sales and marketing or is it just maybe a little color on the operating spend which makes it would be helpful. Thank you.
Joshua Riggs: Yeah, sure. I think, you know, we are planning on adding about five new staff to our sales and marketing team to support this over the next quarter. And so that will tick up that a little bit. And then, you know, we will try to maintain as well as we can that below $5 million quarterly burn. Again, we are going to tick up here in Q2 with just one-time manufacturing expenses, obviously some deal costs, but we'll go right back to that low burn.
Speaker Change: Yeah sure I think we are planning on adding about five head count to our sales and marketing team to support this.
Speaker Change: The next quarter.
Speaker Change: So that will tick up that a little bit and then we.
Speaker Change: We will try to maintain as well as we can that that below $5 million quarterly burn again, we are going to tick up here in Q2 with just some onetime manufacturing expense.
Speaker Change: Obviously, some deal costs, but will go right back to that to that low carbon.
Speaker Change: Alright.
Bruce David Jackson: All right, that's it for me. Congratulations on the agreement. Thank you. I appreciate it.
Speaker Change: So for me congratulations on the agreement thank.
Speaker Change: Thank you I appreciate it.
Operator: There are no further questions at this time. That concludes our Q&A session. This concludes today's conference call. You may now disconnect.
There are no further questions at this time that concludes our Q&A session.
Speaker Change: This concludes today's conference call you may now disconnect.
Speaker Change: Okay.
Speaker Change: Yeah.
Yeah.
Speaker Change: Yeah.
Speaker Change: Yeah.
Speaker Change: Okay.
Speaker Change: Yeah.
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Speaker Change: Yeah.
Speaker Change: Yeah.