OncoCyte Q3 2023 Earnings Call Transcript

Quartr
Provided by Quartr
November 9, 2023

There are 6 speakers on the call.

Operator

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 Onco Insight Third Quarter 2023 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session.

Operator

On your telephone keypad. Thank you. I will now hand today's call over to Stephanie Price of PCG Advisory. Please go ahead.

Speaker 1

Thank you, Tamika, and thank you to everyone joining us for today's conference call to discuss OncoCyte's Q3 2023 financial results and recent operating highlights. If you have not seen today's financial results press release, please visit the company's website on the Investors page. Before turning the call over to Josh Riggs, OncoCyte'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. 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 ks and 10 Q, which identifies specific risk factors that may cause actual results or events to differ materially from those described in these forward looking statements.

Speaker 1

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?

Speaker 2

Thanks, Stephanie, and welcome, everyone. In the quarter, we achieved a positive coverage decision from CMS for our proprietary transplant assay, Saw significant new data release and made progress on key manufacturing milestones. We continued to manage our spend down and reach our lowest cash burn net of financing in 4 years. We believe our path to revenue is clear with multiple products launching in the first half of twenty twenty for our plan to layer high margin products on top of a capital light infrastructure will set OncoCyte up for rapid value creation. Innovation usually happens in a centralized way like what we do with our labs in Nashville and Germany.

Speaker 2

These central labs let us explore our technology, find to clinical indications and create new markets in a very controlled way. But what is great for innovation doesn't necessarily serve broad market adoption or meet the needs of clinicians managing patients locally. As clinical markets begin to mature, there is a natural pull to bring testing closer to the patient and the decisions that are being made in the clinic. We can see this starting in transplant. The demand for local testing options is growing by the day.

Speaker 2

We expect that billions of annual margin opportunity are going to shift over the next few years to meet this growing demand. Companies that do a good job of making testing accessible and easy to use are going to be the natural beneficiaries of this change. 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. 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 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.

Speaker 2

For early adopters, we are planning to launch a research Fuse only or RUO version of our technology that we expect will be available in the first half of twenty twenty four. This is expected to be followed by a regulated version in second half of twenty twenty five. And both of these products are based on our proprietary technology backed by 10 years of research and development. Going from a lab developed test to a regulated product is not easy. And the fact that we were able to convert our lab to develop TAS or LDT workflow into a globally distributable product speaks to the robustness of the assay and the underlying technology.

Speaker 2

While we are building out the manufactured product, we plan to continue to create clinical value through our innovation centers in Nashville and Germany. Recent data from a randomized interventional kidney study shows that 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. DSA is a biomarker that is used in monitoring for organ health and to patients. Those who become DSA positive are at higher risk for rejection. This study put DSA positive patients into 2 arms, one that used our test and another that didn't.

Speaker 2

And what we found is that those that used our tests were able to capture rejection much sooner than those that didn't. 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.

Speaker 2

The data shows that using our technology gives an opportunity for earlier intervention. When this data publishes, we anticipate submitting for an expanded claim for routine monitoring of these at risk patients. If approved, this opens up a significant recurring revenue opportunity. Based on the data and the study design, we will recommend 6 to test within the 1st 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.

Speaker 2

Our first step is to submit both of our kidney claims to the FDA under its single site program, bringing us in line with recent guidance. Single site is 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 a bunch of studies. Our kitted product will follow a parallel path known as 510 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 OncoCyte up to be the market leader in global transplant patient management. As of today, our progress continues to support and draw interest from strategic partners that would like to see this testing in their channel.

Speaker 2

We are pleased with the progress we are making in these discussions and expect to be able to update the market as more information becomes available in the near term. Our oncology products Determa I O and Determa C and I 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. For the IO product specifically, progress continues on the 800 plus patient SWOG study in triple negative breast cancer and assuming a positive outcome there, we expect that there will be significant strategic interest in the assay.

Speaker 2

For C and I, we're still waiting on the publication of the pancreatic data presented at AACR earlier in the year. Once to MolDX under LCD 38835. 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 the 1,000 per episode of care. The timing of submission is expected to be in the first half of twenty twenty four.

Speaker 2

Let me 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 $3,600,000 in the quarter, leaving $14,200,000 of cash, cash equivalents and marketable securities on the balance sheet. This is a 72% improvement in cash burn year over year. Our consolidated revenues for the Q3 were approximately 400,000 and cost of revenues for the Q3 were approximately $200,000 primarily from services customers.

Speaker 2

Research and development expense for the 3rd Quarter increased 48% year over year from $1,500,000 to $2,200,000 driven by our strategic pivot to focus on investment in developing manufacturer versions of our assays. General and administrative expense for the 3rd quarter decreased 56% year over year from $5,700,000 to $2,500,000 reflecting our successful efforts to reduce spending. Sales and marketing expense for the Q3 increased 76% year over year from 400,000 to 700,000 and we focused our sales and marketing investments on our early access program and early market access work. GAAP net loss from continuing operations of $6,500,000 or $0.79 per share as compared to a net loss of 1.8 $1,000,000 or $0.31 per share for the Q3 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 2

Non GAAP operating losses adjusted for the Q3 was $4,100,000 an increase of $1,900,000 compared to the same period in to 2022. A quantitative reconciliation to GAAP net loss from continuing operations can be found in our earnings release, which is available at our website. We have reflected the operations of Razer as disc ops for all periods presented in our financial statements, and we are maintaining guidance of sub $5,000,000 in quarterly average burn for the foreseeable future. Thank you.

Operator

Your first question is from the line of Mike Matson with Needham.

Speaker 3

Yes. Thanks for taking my questions. I guess I'll start with the Vitagraph test. So how do you plan on selling those, I guess, with this early access program, first and then once you go beyond that, are you going to have to go out and hire Some sales people.

Speaker 2

Yes. Great question, Mike. We expect that We've already started the premarket activity for the kitted product, and we will start taking preorders in the first half of next year with full market launch towards the end of Q2. So yes, we will be putting on a sales force that will be calling on research labs that are interested in bringing up the RUO version of our product.

Speaker 3

Okay, got it. And then, I didn't really hear much about, the cancer side. I mean, is there still plans to Proceed with any of those tests like term IO?

Speaker 2

Yes. No, I think we love our oncology content. We're just waiting on data to generate at this time. Once that data publishes, you'll see a much heavier investment on that front, but right now we're just playing our cash pretty close.

Speaker 3

Yes, I understand. Okay. And then finally, you're talking about the market moving to away from kind of the lab dissolved transplant test to the to your kitted tests or local testing. So are you aware of any other companies out there kind of pursuing the same strategy that you guys are We may get hit it or I mean, I know that you've been in the lab developed tests.

Speaker 2

Yes. I mean, so you guys would have Seeing that there was an announcement from One Lambda, they did a partnership with Devisor to bring an NGS kit to market. And so they've gotten they're marketing both the EU and the U. S. And then Omixin has been also bringing a kit to market here in the U.

Speaker 2

S. So the I mean, the kind of the writing is on the wall for us, that the market is officially going to ship this way. It feels like kind of like the market environment before HIV testing democratized before BioFire really brought the infectious to this disease testing closer to the patient. It's just one of those things that feels natural that as the clinical market Really starts to understand the technology and its utility and patients, the demand 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, that gather strong demand out there.

Speaker 3

Okay. Got it. Thank you.

Speaker 2

Yes, sir.

Operator

Your next question is from the line of Mason Carriko from Stephens.

Speaker 4

Hey, thanks for taking the question. This is Jacob on for Mason. Just a quick one for me on cash burn. It was $3,600,000 during the quarter. I think you said you expect it to remain below $5,000,000 quarterly average.

Speaker 4

And sorry if I missed this, but is that going into 2024 as well and includes

Speaker 2

Yes, I would say that it extends into the first half of next year.

Speaker 4

Okay. Got it.

Speaker 3

Thanks.

Operator

Your next question is from the line of Mark Massaro with BTIG.

Speaker 5

Hey, guys. This is Sydney on for Mark. Thanks for taking the questions. So you kept hearing briefly in the prepared remarks, but just any updates on the forming of a hitting partnership, how dialogue there has been moving along, particularly after securing kidney coverage here. Thanks.

Speaker 2

Yes. Thank you for the question. And I would say the conversations took a very positive turn when we got the coverage decision and then when this data that was presented at ESOD about a month and a half ago came out. 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 OncoCyte shareholders that's very positive.

Operator

At this time, there are no further audio questions. This does conclude today's call. Thank you for your participation. You may now disconnect your lines.

Remove Ads
Powered by Quartr
Earnings Conference Call
OncoCyte Q3 2023
00:00 / 00:00
Remove Ads