Q2 2019 Earnings Call
Welcome to the option second quarter 2019 conference call at this time all participants are in a listen only mode. Following management's prepared remarks, we will hold at U.S. Kildani session.
As a reminder, this conference is being recorded today August seven 2018.
Thank you all for participating in today's call before we begin I would like to caution that comments made during this conference call by management will contain forward looking statements regarding the operations and future results of option I encourage you to review options filings with the Securities and Exchange Commission, including without limitation. The company's most recent Form 10-K , and 10-Q, which identify specific factors that may cause actual results or events to differ materially from do as described in the forward looking statements.
Factors that may affect the Companys results include but are not limited to its ability to successfully complete the demonstration project with New York State.
Successfully timely and cost effective b C and obtain regulatory clearance for and commercialize its about a buck and service offerings.
The rate of adoption of its products and services like hospitals and other health care providers.
Success with its commercialization efforts.
The effect on it's a business, that's existing and new regulatory requirements and other economic and competitive factors.
The content of this conference call contains time sensitive information that is accurate only as of the date of the life call today August seven 2019.
The company undertakes no obligation to revise or update any statements to reflect events or circumstances. After d., but this conference call except as required by the law.
I would now like to turn the call over to Evan Jones options Chairman and CEO .
Thank you operator, and thank you everyone for joining us this afternoon.
On today's call, we will review, our second quarter 2019 financial results.
Provide an update on the business and discuss recent progress towards key objectives for the year.
Our discussion will include updates on options product pipeline are completed and planned FDIC submissions.
And our commercialization initiatives, including the New York State infectious disease Digital Health initiative.
We had a solid first half of the year.
Total revenue for the six month period ended June 30 increased 24% to $2 million compared to $1.6 million in 2018.
During the second quarter option continued to execute on our highest priority to bring our novel Acuitas M or gene panel and Acuitas lighthouse software to market.
In May we filed a five 10-K submission seeking FDA clearance the Acuitas EMR gene panel product.
For the detection of any microbial resistance genes bacterial I suppose.
We're proud of the robust application and we are pleased with how the review process is progressing.
Our ongoing dialogue with the agency has been encouraging.
We received our first formal feedback from the agency in July .
And we are working to address their requests for additional information.
We anticipate providing our first responses to the agency through the interactive review process in early August .
And we will continue to provide technical data in support of our submission through the early fall.
Assuming we successfully worked to this timeline.
And the FDIC supports our responses, we would anticipate receiving clearance for the Acuitas Edmar gene panel for use with bacterial islip.
In the fourth quarter.
Concurrently we are diligently pursuing two follow on F.D.A. submissions for the Acuitas MRG paddle urine.
For the Acuitas lighthouse software.
The yarn indication and the accompanying software will provide for pathogen identification and antibiotic resistance detection and prediction.
Direct from your in the patients.
Versus direct from patients suspected of urinary tract infections.
In July we initiated testing sports the F.D.A. submission for them or gene panel urine FDIC submission.
We have eight clinical sites under contract and we expect to complete the majority of the third party clinical trial work during the mid to late fall.
We plan to submit the Denovo five 10-K submission late in the fourth quarter or in the first quarter of 2020, depending on the pacing of our clinical trials and subsequent DNA sequencing work.
In addition to the progress made with our F.D.A. submissions, we are working to strengthen up John's presence in the marketplace and to establish the company as a leader in precision medicine through peer reviewed scientific data presentations and publications.
In June we had a strong presence at the LCM Micro conference the industry's premier event.
Data from the clinical verification study for the Acuitas anymore gene panel test for urine.
Was presented by Guy singer.
In this study over 500 remnant urine specimens collected untested as Beth Israel Deaconess Medical center, guys singer and Intermountain healthcare were analyzed.
The data demonstrated that the Acuitas Samar gene panel and greater than 90% agreement with quantitative culture for semi quantitative pathogen detection.
Nothing Acuitas lighthouse phenotype predictions had greater than 90% average total agreement with antibiotic susceptibility testing.
Hello.
Klebsiella pneumoniae <unk>, the most common pathogens that causes urinary tract infections.
These data support our view that an acuitas product offering that provides test results in under three hours.
Versus the two days with the current standard of care has the potential to fundamentally transform patient care for patients with urinary tract infections.
Investigators from Intermountain healthcare presented data from a collaborative study with Beth Israel Deaconess Medical center, an option demonstrating the potential of the Acuitas Edmar gene panel, New Acuitas lighthouse software to be used as a rapid diagnostic to guide early empiric antibiotic use in patients with UTI <unk> from antibiotic resistant bacteria.
And finally, an analysis comparing the Tamar gene panel with whole genome sequencing or WGS carbapenems producing organism outbreak investigations was presented by the New York State Department of Health Wadsworth Laboratory.
Acuitas data was can often to the WGS reference method.
But with a faster turnaround time.
Suggesting that the Acuitas am or gene panel and the Acuitas lighthouse software can be used as frontline tools clinical settings for transmission an outbreak detection.
This is one of the key capabilities that supports the use of the options suite of Acuitas products in the New York State Digital Health initiative.
In the fall of 2018, we announced our collaboration with the New York State Department of Health and Mercks the loom.
Health solutions subsidiary to develop and infectious disease digital health and precision medicine platform that connects health care institutions throughout the state to the department of health.
The ultimate goal of this collaboration is to improve patient outcomes by establishing the statewide surveillance for multi drug resistant pathogens.
And helping to control and manage any microbial resistance in acute care patients.
The project continues to advance well.
And we achieved our second project milestone at the end of the second quarter.
The milestone included development of customized software.
To support the integration of the Acuitas lighthouse software with the Merck Ilim software and deployment of the Acuitas AMR gene panel systems in two of the three anticipated health systems.
In parallel the Wadsworth Center has continued to achieve their project milestones with the validation of the Acuitas MRG panel are you though.
And receipt of conditional New York State Department of Health.
Clinical laboratory evaluation program or club approval.
By the Wadsworth Center, New York State deal wage.
Conditional approval means that Wadsworth is authorized to use the acuitas test for testing while the review of the validation package is finalized by the deal wage regulatory group.
This is considered an important designation, which comes from an extensive evaluation of our product by the Wadsworth Center.
It is another step which supports the accuracy and reliability of the Acuitas MRM gene panel test.
With regard to the New York State initiative. The next step will be for the health system laboratories to complete their own validations. Following the Wadsworth protocols and after approval is received those laboratories may begin perspective testing.
Upturn has now received $1 million in program funding from the initiative this year.
We anticipate receiving the remaining milestone payments over the next three quarters.
We believe there is a significant opportunity to continue the project in the future years.
And we have begun initial discussions regarding potential next steps after a successful pilot phase.
With that.
Ill now turn the call over to Tim Dec, Our Chief Financial Officer, who will discuss our financial results Tim.
Thank you Evan.
On today's call I'll I will touch on the highlights of our second quarter and first half of 2019 financial results.
Revenue for the second quarter of 2019 was $1 million compared with $800000 for the second quarter of 2018.
Which represents a 28% increase quarter over quarter.
Operating expenses for the second quarter of 2019 were $3.6 million compared with 4 million in the second quarter of 2018.
The slight decrease in operating expense was due to lower R&D costs and DNA.
The company reported a net loss attributable to common stockholders for the second quarter of 2019 of $2.6 million or 15 cents per share.
Compared to a net loss attributable to common stockholders.
Of $3.3 million or 57 cents per share for the second quarter of 2018.
Total revenue for the first half of 2019 was $2 million compared with 1.6 million a 20% increase over the same period of 2018.
Operating expenses were $8.4 million compared with $7.9 million for the first half of 2018.
This increase was primarily due to the clinical trial work associated with the development of our of our Acuitas AMR gene panel for use with bacterial isolates.
The net loss for the first half of 2019 was $6.4 million or 48 cents per share compared to a net loss of $6.4 million or one dollar and 29 cents per share for the first half of 2018.
Turning to our balance sheet, we had cash and cash equivalents of $3.1 million at the end of June .
While we have not providing guidance on future revenue growth, we anticipate that upon achieving FDA clearance. We will see continued revenue growth and our topline from our Acuitas AMR gene panel beginning in early 2020.
In terms of the New York State initiative, we have achieved the second project milestone and I've recognized a total of $1 million.
Of the 1.6 million dollar contract.
As Evan just mentioned, we believe that there is a significant opportunity for option to get involved in a larger capacity, but initiatives as we move past the development stage of the contract.
As we prepare for our next FDA submission and completion of our year end clinical trials in Q4 of this year, we expect our R&D spend to increase in total we expect to spend roughly $1.2 million on clinical trial for the earn submission.
And we expect the R&D to be spent starting in late Q3 and throughout Q4 of this year.
In terms of our commercialization plans, we are looking to strategically add to our sales manufacturing and assembling teams as we finalize our go to market strategy.
These additions will be made at the proper time.
We are actively considering ways to strengthen our balance sheet and cash position by assessing various strategic options.
We are actively assessing partnerships business con combinations and M&A transactions as well as other financial approach and approaches that will extend our cash runway.
And finally, it is imperative for opt in option to retain our NASDAQ listing and for our shares to continue to trade on a major stock exchange.
In order to maximize our discrete our strategic discussions.
Our continued listing on NASDAQ is subject to the company regained compliance with the minimum stock price of one dollar.
On or before November 4th of this year.
Executing a reverse stock split will ensure that we meet the requirements and and enable us to move forward with our strategic priorities.
Overall, we are committed to the critical objectives, we laid out beginning a year and we'll continue to do everything in our power to maximize shareholder value.
With that I will turn the call back to Evan.
Thank you Tim.
Now I'll briefly review, our commercial strategy and the market opportunities, we see with our key product launches.
Heading into 2020, we will be gearing up for a commercial launch of our full suite of novel products.
These products address one of the largest public health challenges.
The margin panel products dress several attractive market segments.
Testing of bacterial islip for infection control and health systems and for public health organizations.
Testing of Islip to support.
Okay.
Direct urine testing for patients at risk for urinary tract infections.
Clinical trials and am our research applications.
The bacterial Iceland segment includes the Crs surveillance project with New York State that has supported the company's growth during the first half of 2019.
We see further growth potential for the Isla testing in conjunction with the anticipated FDA clearance later this year.
Commercial targets include public health laboratories, and health systems looking to adopt the cutest platform for both Iceland and urine testing.
We currently have 11 acuitas system installations in the U.S.
And a near term focus is to work with these sites to convert them to routine product use.
We expect this number to increase to 15 or more by the fourth quarter.
The broader market opportunity includes use of the air margin panel to aid in acute care antibiotic decision, making.
It is early days for this indication.
We estimate could ultimately be for up to 1 million tests annually.
The Acuitas am our gene panel for urine testing is currently available for research use only and is not for diagnostic use.
The product is being used in the Crs segment for pharmaceutical clinical trials.
In in conjunction with our FDA clearance, we expect the target market to expand to over 1 million yutai patients annually in the United States.
As we near our first FDC clearance for the M., Our gene panel, we will expand our commercial organization to support the initial product launch.
Currently we have five professionals and sales and marketing in our commercial organization, we envision adding to it from both the direct sales perspective, and in terms of commercial leadership and marketing support.
Additionally, we have been working to establish a channel partner relationships to further expand our market reach.
The FDA clearance is a key milestone needed to support these expansion plans.
Establishing our products clinical utility through scientific documentation.
Is another important priority that will lead to increased adoption of the product.
In October we will present at the I'd week meeting in Washington DC.
A major meeting for investigators in the field.
To meet our capital needs throughout commercialization, we are actively considering multiple alternatives strategic financings and other transactions.
These alternatives include potential partnering agreements.
Business combination transactions in M&A in order to obtain sufficient financing to continue operating the company and realizing appropriate benefit.
For our stockholders.
During this time as Tim noted it is critical for option to remain listed on NASDAQ and for our shares to continue to trade on a major exchange.
Our continued listing is subject to the company regaining compliance with the minimum $1 bid price requirement.
We are actively pursuing avenues to regain compliance, which will allow us to execute on strategic objectives.
Simultaneously meet our capital needs.
We have established a robust network of hospitals and strategic industry players as well as strong collaborations in the public health area.
These relationships are key to our commercial success as they provide a foundation to support the launch an uptake of our products.
Given the strategy outlined above we believe we are well positioned to execute a successful commercial rollout.
Bringing these products to more hospitals around the world.
Looking to the back half of 2019, we will continue to advance our business objectives as we evolve into a molecular informatics commercial organization.
Upcoming milestones include include.
Obtaining FDA clearance to market the EMR gene panel for bacterial islands'.
Recognizing program milestones for the demonstration project phase.
The New York State infectious disease Digital Health initiative, as we complete software development and validation to support.
Prospective deployment studies in the second half of 2019.
Completing clinical studies in filing Denovo FDIC submissions with the FDA for the Acuitas Edmar gene panel urine Acuitas lighthouse software.
For rapid testing of urine specimens and prediction of antibiotic resistance to frontline antibiotics.
Continuing to install Acuitas Edmar gene panel systems and support.
Research use only sales.
And full launch following first FDA clearance.
Expanding commercial activities to successfully launch the Acuitas product family following FDA clearance.
And commercializing rapid testing products and software in South America, using Columbia as a springboard, where we have already closed our first customer accounts.
I'm pleased with the momentum we have generated in the first half of the year and I am excited about the progress to come.
We appreciate your support and thank you for your time this afternoon.
We're now ready for questions.
Operator.
Thank you so much ladies and gentlemen, thank you have a question at this time. Please press the star and then the number one key on your Touchtone telephone.
If your question has been answered or you wish to remove yourself from the queue. Please press the pound key.
Uh huh.
Your first question comes from Yi Chen of H.C. Wainwright. Your line is now open.
Hi, This is phase on on for you Chen.
Thank you for taking my questions.
The first question I had was when do you plan to submit the next five 10-K application for the panel for your in samples.
Uh huh.
Good afternoon, we mentioned in our remarks and the press release that we would file the FDA submission for.
The aim our gene panel urine in the fourth quarter or the first quarter of 2020.
Okay. Thank you sorry about that.
And then just a follow up I went what can we expect in terms of revenue potential in 2020 for the panel for vector isolates. If it's if it obtains approval then.
And in 2019.
A very important question, we've tried to stay away from giving precise revenue guidance.
We can say that our goals are to convert the existing accounts to continue our success in New York State and then to expand the customer base.
That.
Frankly could be.
The majority of large health care systems in the United States. So we'll work too.
Chief that goal loan all occur in year, one, but we're certainly optimistic about the potential growth outlook.
Yeah, it's just a little bit early to provide guidance at this point, but as we get.
Further along our journey, we will be doing that.
Great. Thank you that's all for me.
Thank you so much and your next question comes from Nathan Weinstein of Aegis capital. Your line is now open.
Okay, and then Tim Thanks for taking my question.
Im just thinking about how you might gear up for for being a commercial stage organization and with regard to the iquitos products.
And potentially adding sales head count have you thought about how many more sales people you might need to add I think you said you were at five right now.
Yes, hi, Nathan and thanks for calling in and joining the call.
So the five that we have includes the full gamut of our commercial organization, it's really a pretty small team. When you think about the work that needs to be done and the expansion will include both some.
Senior leadership talent to help guide.
The commercial ramp, but then down in the field, both technical support but.
Additionally, sales coverage as you mentioned, which.
Likely would be in the five to six person initially.
Sizing initially and then growing from there as.
Revenues dictate.
Okay. Thanks, and then just thinking in terms of.
Geography, if you were to enter into potential partnerships do you foresee that that could be with the U.S. partner and or could it be multiple partners. If you look to bring your products abroad.
There are definitely opportunities to partner internationally.
Having said that.
The us remains a important focus for us and we see the.
Opportunity being potentially split into different segments for instance, you have.
The public health market, which would be laboratories simmer similar to the Wadsworth labs or the CDC.
There are.
I'll, just say the 50 states and more.
And then there's the hospital laboratory segment.
And the last segment that is.
Pretty attractive is in terms of physicians offices and urology.
Which is a fee for service opportunity.
Okay. Thanks, and then.
Just another one in terms of I guess, a top down view of the market from you guys. When you started down this path to develop the accrete a suite of products and you saw this niche when you look at the market today.
Including two new technologies that may have come on.
In the mean in the meantime.
Do you still see the same niche and epicentral larger market opportunity for accretive.
I would say, we see a larger opportunity. Some of you may have seen the coverage and the New York Times.
I think it was about a month ago talking about how the.
Urinary tract as an indication has become one of the most serious ones in the healthcare arena.
Because of the rise of resistance there.
We had seen that in some of our early work, which led us to pick yutai as our first indication.
But to be fair, we had no idea that it would explode to the kind of major clinical issue that exist today. So.
Realistically the million patients we see for.
Hi acuity.
Yutai testing.
Could potentially expand well beyond that when you think about testing.
More of the 10 million.
As the year to address this rising resistance.
Thank you and just one final one from me obviously these products. So weve discussed some focus on anti bacterial.
But antifungal is an interesting area as well and you'd mentioned in the past you talked about can you to or us as a public health threat as the anti fungal testing and susceptibility testing with regards to those pathogen something that you guys could expand into in the future.
Definitely could be.
We already have a test for.
Yeast infection for instance, in our fish product line and we've begun to see some increase in demand. There. During 2019, we don't test today for Canada, Canada, or us which is a resistant.
Fund Guy, but we could potentially in the future.
Hi, Thanks for taking my questions.
Thank you.
Thank you and your next question comes from Ben Haynor of Alliance Global Your line is now open.
Good afternoon, guys. Thanks for taking the questions first for me you mentioned earlier in the earlier in the prepared remarks about kind of going back and forth and too early fall with the FDA.
This might be a little bit pedantic, but what do you say fall are you referring to kind of meet your all meteorological fall starting in September or astronomical fall started on the fall equinox and I'm not going to be.
Consulting the zodiac susi or anything I'm, just curious on the timing there.
I love that question.
I'm not sure we want to parse it that carefully for you.
What I will say is that.
We were encouraged by the feedback from the FDA, we don't believe that there are any new.
Studies that are required.
We are re cutting the data for the agency.
Polishing some of the data that we want to resubmit.
And as soon as we get that in.
To the agency.
We will there is a.
The agency has been very.
Forward thinking co-operative in that they have.
Established an interactive review process for us.
So we.
Agreed to provide them the information on ongoing basis, and I mentioned that.
In the next days, we will be making our first response to the agency. So the review will be ongoing.
And then as soon as we have finished.
Submitting all the data that will be followed by.
The.
Lets you could think of as the official five 10-K filing but all of the data. We anticipate we'll have been previously reviewed by the agency and that then could move along pretty quickly.
And so yes, the labeling a base.
Okay. That's very helpful. So as you see as the discussions that you've had so far it sounds like the FDA as forward thinking you don't really see any any showstoppers out there.
Is that the correct way to.
I understand your comments Jeff.
We've got to be careful because we are not.
Inside the thinking of the agency, but we've been in conversation with them.
Very co-operative discussions and they would I think I believe like to see our products get to market.
And we on the other hand have too.
Complete the regulatory work.
To get there.
And we're doing that we know what needs to be done the questions from the agency are.
Very detailed but understandable and straight forward and ones that we can address.
Okay that makes sense and then I guess lastly from me.
Knowing that the capital needs that you have and you've had the mentions of you know potential partnerships.
Strategic alignments combinations et cetera.
Yes, I think you mentioned those in the past as well is there anything that you have on your plate that's advancing at this ER.
At this moment that gives you some sense that something could come sooner rather than later or what's a good way to think about that if any color there would be helpful.
So.
I think the best way to answer that is.
We spent quite a bit of time, obviously on our prepared remarks and put them together in such a way that we would lead you to.
Certain thoughts, but I think the best way I can answer that is we're very active.
And we will continue to be active here in the short term.
Okay. That's fair enough. Thanks, a lot gentlemen.
Thank you Ben.
Thank you. So much there are no currently questions at this time I will now turn the call back to Mr. Jones for closing remarks.
Hi, Thank you very much and thank you everyone for joining this afternoon.
I did want to mention that as part of our beginning to.
Step up the commercial activity around our products Weve completed a rebranding of the company.
If you take a look at the company's website.
Www dot option Dot com, you'll see some of the new look and feel.
We're proud of it we've gotten good feedback from.
Customers and.
We look forward to updating you on further progress as things progress.
Thank you very much.
Thank you.
Thank you. So much. This concludes today's conference call you may now disconnect.