Insight Molecular Diagnostics Inc. (IMDX) Q4 2019 Earnings Report, Transcript and Summary

Greetings and welcome to the OncoCyte Corporation Fourth Quarter and Fiscal Year 2019 Earnings Conference Call. At this time, all participants are in a listen-only mode and a brief question-and-answer session will follow the formal presentation. [Operator Instructions]. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Bob Yedid, Managing Director at LifeSci Advisors. Thank you. You may begin.

Thank you, Doug. And thank you, everyone, for joining us for today's conference call to discuss OncoCyte's fourth quarter and full-year 2019 financial results and recent operating highlights. If you have not seen today's financial results press release, please visit OncoCyte's website at www.oncocyte.com. Before turning the call over to Ronnie Andrews, OncoCyte's President and Chief Executive Officer, I would like to remind you that during today's conference call, the company will make projections and forward-looking statements regarding the future events. Any statements that are not historical fact, including, but not limited to, statements that contain words such as will, believes, plans, anticipates, expects, estimates and similar expressions are forward-looking statements. We encourage you to review the company's SEC filings, without limitation, the company's Form 10-K and 10-Qs, which identify the specific risk factors that may cause actual results or events to differ materially from those described in these forward-looking statements. These factors may include, without limitation, risks inherent in the development and/or commercialization of potential diagnostic tests, uncertainty in the results of clinical trials or regulatory approvals, the capacity of OncoCyte's third-party supply blood sample analytical system to provide consistent and precise analytical results on a commercial scale, the need to obtain third-party reimbursement for patients' use of any diagnostic test the company commercializes, our need and ability to obtain future capital, and the maintenance of IP rights. Therefore, 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 may be required under applicable law. With those prepared remarks, it's my pleasure to turn the call over to Ronnie Andrews, CEO. Ronnie?

Hey. Thanks, Bob. And welcome everyone to our conference call to discuss the fourth quarter and full-year 2019 financial results and our operating highlights. Joining me today are my staff, Al Parker, our Chief Operating Officer; Mitch Levine, our Chief Financial Officer; Padma Sundar, our Senior Vice President of Commercial; Dr. Lyndal Hesterberg, who is our Chief Science Officer; and the newest addition, Dr. Doug Ross, our Chief Medical Officer. All of these folks will be available during the question-and-answer session today. To start today's call, I just wanted to say how proud I am of the continued progress we've made over the last several quarters. Since stepping into the CEO role last July, we've been dedicated to OncoCyte's mission of providing actionable answers at underserved decision points along the cancer continuum. And I can confidently say that we have significant organizational velocity towards our mission and enter 2020 with exciting new acquisitions and assets to expand our reach and drive our growth in our enterprise value for years to come. But before we start, I'd also like to first acknowledge the unprecedented circumstances we're all facing with the COVID-19 outbreak. As a company, I can assure you, we are taking every step to protect the health and safety of our team, but also recognize that cancer doesn't shelter in place. And every day that a lifesaving procedure and/or therapy are withheld from a patient is one day closer to metastatic disease that becomes much, much harder to treat. So, we, at OncoCyte, remain dedicated to meeting the needs of those patients and physicians we serve each day and to our investors who are supporting our vision. It's important to note, though, that we are complying with the current restrictions in place on our workplace here in California and support the actions taken by states and the federal government to ensure the safety of our employees, their families, and our communities in these challenging times. The uncertainty we're operating in today is unprecedented and requires our management team to use lessons learned from our successful navigation of another public company, Clarient, during the financial crisis of 2008 and 2009. Let me assure you that rigorous prioritization of projects and close oversight of our operating expenses will be essential, and these measures are already in place. To ensure we maintain our velocity during these challenging times, we're asking each member of the OncoCyte team to come together and pitch in to minimize the need to increase our cash use over the next 90 days when we hope we'll finally be beyond the current crisis. I can say with incredible conviction that every member of our small team is responding to that challenge with enthusiasm. It's important to note that our lab employees and critical support staff are continuing to work on an as-needed basis to perform essential services, as that is the term generally defined under most local and national stay-in-place types of orders or mandates. In light of the current macroenvironment, we remain dedicated to continually advancing our programs to ensure that we bring patients real solutions to improve outcomes in lung cancer, which remains the leading cause of cancer death in the United States. We believe our dedication providing actual answers for cancer patients will contribute to healthier outcome for these patients. Before we really dig into our noteworthy accomplishments, I want to highlight the recent launch of our new branding. This is important as we've now rolled our growing offerings into the DetermaRx family of test. So, throughout the call today, I'll introduce the new names of each of our new offerings. We believe this shift, along with our new website, is representative of how we've begun to transform into a commercial stage company that is building a comprehensive suite of diagnostics across the lung cancer care continuum. So, jumping into the massive amount of work we've gotten done, I'd like to start with our recent acquisition of Insight Genetics, which was a privately held company with a history of impactful discoveries in both lung and breast cancer. This acquisition was significant for OncoCyte in two very important ways. First, the acquisition included a potentially transformative immunooncology diagnostic test for the selection of therapy for cancer patients. This proprietary test, previously the Immune Modulation, or IM Score, is now rebranded as DetermaIO. And I'll tell you about our significant progress with DetermaIO in a minute. But before that, I'll also highlight that the acquisition of Insight Genetics also included a successful boutique pharma services business, which operates a certified lab that immediately allows us to leverage our proprietary products in scale to better serve biopharma customers. I believe that Insight will bring tremendous value to OncoCyte. Why is this important? It provides us with a broader scientific base and potential commercial opportunities and the growing investment being made by biopharma companies, which is delivering new therapeutic classes that require leading-edge diagnostics to identify the right patients for their trials, and ultimately, for their clinical use. Secondly, the acquisition gave us access to DetermaIO, a gene expression test that evaluates the immune microenvironment in biopsies from cancer patients to identify individuals that are more or less likely to respond to checkpoint immune therapies, also known as immunotherapy responders and non-responders. Checkpoint inhibitors have transformed the treatment paradigm in late stage lung cancer. But as an industry, we still have a lot of work to do on how to best use them. The DetermaIO test uniquely characterizes inflammatory infiltrates in the tumor in the context of the surrounding tissue microenvironment. In short, this test has the ability to determine if the immune environment in and around the tumor is active, or hot, as we call it, or dormant, often described as cold in our industry. As a quick background, there are two currently marketed predictive diagnostic tests for immune therapy selection – PDL-1 staining and tumor mutational burden, or as we affectionately call it, TMB. There are widely recognized challenges with both of these biomarkers and plenty of room for improvement. This is why we're so excited about our opportunity with DetermaIO. In data presented at SITC in 2019 in November, DetermaIO was shown to be superior to these two available tests. We clearly recognize this outcome still needs to be proven in a larger sample set. So, work is already underway to extend this into larger, more diverse populations across multiple types of solid tumors, which we believe will further differentiate DetermaIO. Why is it so important for patients and the oncology community? While immune therapies have been transformative for a subset of cancer patients, identifying the patients that are likely to benefit from these therapies remains a real challenge for both oncologists and pharmaceutical researchers. Being able to accurately predict which patients will benefit from treatment will allow treating physicians to more accurately identify the patient population that can be helped by these therapies. And it could also have a real impact on the speed at which new therapies are brought to market. Identifying the actual responders also potentially minimizes the serious side effects that happen when a latent autoimmune disorder is exacerbated by immune therapy in patients that have no response. Well-informed, judicious use of immune therapy will allow oncologists to select alternative treatments, as well as potentially save CMS and private payers significant spending for treatments that have no sustainable impact on patient outcomes. This is particularly important given that a recent Jama publication estimated that close to 750,000 patients in the US are eligible for immune therapy, representing a total addressable market of over $2 billion for the testing to identify appropriate patients. DetermaIO could potentially better target therapeutic spend for insurers and our government to help reduce the immune therapy cost burden which analysts predict could exceed $50 billion in future years. Moreover, this patient population will continue to grow as immune therapies are approved in earlier-stage adjuvant settings. Beyond the potential impact, improved outcomes for patients, DetermaIO's is an important pharma services opportunity. There are close to 3,000 PD1 and PDL1 ongoing clinical trials designed to recruit over 0.5 million patients. Being able to outperform a test that allows them to improve the identification and qualification of potential patients for clinical trials and appropriate treatments may be truly transformative. And as I mentioned earlier, owning the pharma compliant lab that we acquired with Insight Genetics leaves us well positioned to break open this pharma services opportunity. Given how important DetermaIO may be for patients and pharma, I'm incredibly proud of the real progress we've made since announcing the acquisition just a couple of months ago. Last week, we were thrilled to announce that we completed the CLIA validation of DetermaIO. With the completion of CLIA validation, we have officially launched DetermaIO, making it available for research use in biopharma and academic settings. Briefly touching upon CLIA validation, we perform DetermaIO in our ISO, CLIA and College of American Pathologists, or what we call CAP, accredited lab which we acquired in the Insight transaction. This ensures that tests that we get out of that lab meet or exceed pharmaceutical industry standards for clinical lab testing. We're proud that the lab has been qualified by multiple top 20 diagnostic and pharma firms for clinical sample testing. And based on the solid performance characteristics of the DetermaIO test, we'll also simultaneously be pursuing a CE Mark kit strategy in Europe, leveraging the install base of leading PCR platform manufacturers. Providing a test that can rapidly be deployed across a large install base ex-US is a priority for our potential pharma partners since central lab strategies at work here in the US have not been successful in the EU or in Asia. A democratized companion diagnostic test allows for more rapid uptake of new drugs when launched. And we believe we'll have the ability to make that happen with DetermaIO. So, what's to come next for DetermaIO? We've successfully shown that potential partners can be confident in the results obtained in our laboratory. Importantly, the test is highly reproducible and also requires minimal tissue input. We expect to present additional details on our results at upcoming medical meetings and are actively working to engage with new potential partners in the bio pharm and research communities. This is an exciting beginning for DetermaIO and we couldn't be more pleased with our progress. Moving next to DetermaRx, formerly known as the Razor genomics test, the first test for chemotherapy benefit prediction in patients with non-squamous non-small cell lung cancer. Similar to DetermaIO, DetermaRx is a gene expression test that analyzes a patient's tumor to stratify these early stage non-small cell lung cancer patients into high intermediate and low risk of recurrence. DetermaRx addresses a very underserved decision point for early stage lung cancer patients with over 40,000 plus stage 1 or 2 non-small cell lung cancer diagnosis in the US each year. The current treatment paradigm generally consists of complete surgical resection, which is intended to be curative. However, 30% to 50% of these early stage patients will die from recurrence within five years post resection. DetermaRx aims to identify the subset of high-risk patients that would benefit greatly from chemotherapy. Stratifying early stage non-small cell lung cancer patients provides many potential benefits, including improved survival and patient outcomes, avoidance of over-treating patients who will not benefit from toxic chemotherapy, and reduction of overall cost and morbidity by preventing recurrences in the expense of late stage treatment that accompanies it. As a brief reminder, in a clinical study, high risk patients identified by DetermaRx post-surgery that were treated with adjuvant chemotherapy had a significant increase in survival rates. Specifically, these patients had a five-year survival rate of 92% as compared to 49% in the high risk patient group that did not receive chemotherapy. This is a remarkable result and the reason we've been pushing hard to get this test in the market for patients. We've accomplished a significant amount with DetermaRx since our last call. First and foremost, we announced our commercial launch of DetermaRx with two early access sites, the Leonard Cancer Institute at Mission Hospital in Orange County, California, and Florida Precision Oncology. Amazingly, seven weeks into commercial launch, I can now share that all seven of our initial early access targets are active and a total of 13 sites have been onboarded and include customers from major health systems, including multiple physicians who are part of the Dignity Health Care, a large community-based health system with 41 hospitals and primary care clinics in 22 states. We continue our efforts to strategically bring on more customers and believe we'll have a rapidly growing list over the next several months. Here's what I'm most excited about today. We're already making an impact on patient lives. I can share that, as of today's call, we've identified seven high risk patients that were high risk for recurrence. And based on results of DetermaRx, their physicians made a treatment change, including administering timely chemotherapy treatment. The ability to potentially improve patient outcomes is why I joined OncoCyte and I'm thrilled to know that we're now beginning to have a real world impact that we expect will grow as we expand the reach of our test. Recently, I've been asked a lot about how the current COVID-19 pandemic will affect our Rx launch. So, let me just answer that question head on. We have had a terrific launch phase with our early access sites. And the response prior to the outbreak was solid and was growing. As you know, we hired a commercial team with excellent experience and they hit the ground running. Given the broad range of local, state and national responses to COVID-19, it has required us, though, to curtail our face-to-face engagement of new target accounts and adjust our marketing and selling activities to reflect the current environment. Our ability to meet with those in the oncology community is significantly reduced and now relies on virtual contacts. Additionally, we believe a trend might be developing where early stage lung cancer surgeries will be delayed in high incident rate cities until we see the situation get better. To ensure we maintain as much momentum as possible, while respecting the priorities of the healthcare communities we serve, we have proactively worked to create a virtual environment for the education of physicians, their staff, and their patients on DetermaRx. We do know from speaking with our early access physicians that urgent cases continue to be addressed in most areas of the US, except for the hardest hit cities where greater percentages of these important surgeries are being delayed. The reality, though, is these tumors must be removed, and thus these surgeries will happen as soon as possible. So, while we are expecting a slowing of our sample volume growth trajectory over the next 30 to 45 days, we know these patients are in need of life-saving procedures, and we will be ready to serve our early access sites and bring on new customers when the current situation eases. From a patient perspective, early patient feedback to the test has been extremely positive and we are actively engaging with ordering physicians to conduct patient education to ensure this continues. In addition, we have partnered with the GO2 Foundation, the world's leading organization dedicated to saving, extending and improving the lives of those vulnerable, at risk and diagnosed with lung cancer. In the partnership, the GO2 Foundation is helping to drive test adoption across their Community Care Center of Excellence network and also help us increase patient awareness. These patient-facing efforts are synergistic with our initiation of physician education programs. We have provided financial support for an accredited, continuing medical education, or now what we call CME program, which feature world renowned medical oncologists Dr. David Gandara from UC Davis and Dr. Johannes Kratz from UCSF. In addition, we've initiated a key opinion leader, or KOL, speaker program with multi-specialty KOLs in oncology, surgery and pathology to ensure we are rapidly expanding our physician education and test adoption in a peer-to-peer setting despite the current situation. So, now to touch on reimbursement. On our last call, I shared a proposed positive coverage decision from the Centers for Medicare and Medicaid Services, or CMS, for DetermaRx, which may also provide reimbursement coverage we believe for 70% of the anticipated non-small cell lung cancer market. I'd like to update you today that we've been in direct dialogue with our contact at CMS and they have confirmed we are currently in the queue awaiting final local coverage decision, or LCD, and the subsequent pricing that will come with it. Given the current situation at CMS related to their need to respond in real time to the number of companies seeking reimbursement for the COVID-19 PCR test, we are now anticipating the LCD determination for DetermaRx to occur sometime in the first half of 2020 versus our original target, which was at the end of March. We've also continued our efforts for commercialization by reaching out to additional private payer plans that together cover over 100 million lives and have received overwhelmingly positive feedback on the evidence supporting the test. It's important to remember from previous discussions that we are able to hold the invoices from the current patient orders and we will be able to submit to CMS once we get our final decision in pricing. In addition to our initial commercialization and marketing plan, which is a highly targeted with an initial focus on 10 regions in the US that represent high risk populations of targeted patients, we also are beginning to explore international expansion. I'm pleased to say that we've received a regulatory approval to begin distribution of the DetermaRx in Canada, marking our first international regulatory approval. In addition, we'll be continuing our international momentum by targeting innovative ex-US oncology-focused labs with large existing sales forces and oncology relationships. We believe this approach can drive awareness for our company and test, building demand in advance of the potential availability of a kit that the labs can run themselves in those remote geographies. Next, I'd like to transition to where it all started at OncoCyte, with DetermaDx, formerly known as DetermaVu, our liquid biopsy test in development to aid in ruling out malignancy in lung nodules and potentially avoiding unnecessary invasive lung biopsies. DetermaDx utilizes our proprietary immune system interrogation approach that harnesses the immune system's response to the presence of cancer. I am pleased to say that, since our last call, we announced the on-track completion of our CLIA validation study of DetermaDx. As a reminder, CLIA validation tested approximately 120 blood samples previously tested as part of our R&D validation study, and the goal was to demonstrate equivalent test performance when conducted in the company's CLIA validated lab with CLIA lab staff and includes specific protocols to confirm the accuracy, reproducibility and precision of DetermaDx in a real world clinical lab setting. With the CLIA lab validation completed, we began the clinical validation with the goal to deliver solid statistical power to our test and to subsequently create publications. To do this, we are testing approximately 500 blinded, prospectively collected patient blood samples to serve as the final confirmation of DetermaDx in our clinical lab setting. If successful, clinical validation will establish the independent clinical performance prior to commercial launch. Since we have collected all of the necessary patient samples prior to the current COVID pandemic and our lab personnel qualify as essential workers under the current stay at home orders in California, we remain on track to complete clin val by the end of Q2. Once the performance parameters are established, we will begin preparations for commercial availability, which includes the publication of the clinical validation results, which will be required for us to submit our CMS dossier, as well as the execution of additional clinical studies that we will begin. Again, we're fortunate this product timeline is not currently impacted by the evolving macroenvironmental issues, and we're hopeful that when we plan to submit our CMS dossier this fall, their process is indeed back to normal. Our ultimate goal is, of course, to secure broad reimbursement and we're working to assemble a robust package just as what was submitted for our DetermaRx product. With more than 1.6 million lung nodules detected annually through imaging, and majority of these nodules found to be benign following an invasive diagnostic procedure, we believe DetermaDx has an important role to play in reducing unnecessary biopsies, which can be associated with very serious complications. On the corporate front, I'd like to highlight, again, my philosophy that great people are the key to achieving great things. We have a small, but incredibly talented and experienced, team who selflessly work across departments and their primary responsibilities to help us stay on track despite the current headwinds in the macro environment. And this is something that many companies our size are facing at the moment. One important recent addition to our staff, though, is our new Chief Medical Officer, Dr. Doug Ross. Doug has been working with us in a consulting role since July when I joined the company while he wound down some of his commitments at the Bethesda Group, where we were partners before I joined OncoCyte. We are pleased he has the bandwidth to give us his full attention. Doug trained in pathology and genomics at UCSF and Stanford, and has spent the past 20 years discovering and shepherding multivariate diagnostics into the marketplace. His extensive experience at leading molecular diagnostic companies, including Applied Genomics, Clarient, GE Molecular, Life Technologies and Thermo Fisher make him uniquely qualified to bring a valuable medical, scientific and commercial perspective to our company. Our commitment to growth and team building is actually one of the main reasons for our recent relocation to Orange County, California. Our new headquarters has replaced our Alameda office in the Bay Area. This relocation is key for our growth as Orange County is an emerging hub for the life sciences in the US, and with that brings real access to talented individuals to grow our team as we grow. By moving to Irvine, we're confident that we can continue to support our growth trajectory with top notch talent and to ultimately reduce the overall cost of operating our West Coast CLIA facility. In addition, the relocation allows us to engage with patients in the community setting, leveraging access to incredible community treatment centers, including the Leonard Cancer Institute at Mission Hospital, one of our early DetermaRx sites, along with the reasonably open City of Hope Cancer Center and Hoag Hospital. We're excited to build strong ties within the Orange County community and I'm hopeful that we'll contribute by bringing clinical trials that may benefit area patients. Taken all together, it's clear that the OncoCyte of 2020 is poised to do remarkable things. In nine months, we've gotten DetermaDx back on track, we've got two new exciting tests – DetermaRx and DetermaIO, both have the potential to dramatically change the treatment paradigm for lung cancer. Even more, with a lot of hard work and dedication, these two tests are now commercially launched. Rx for the clinical patient care and IO for research use and biopharma and academic setting. On our last call, I said this is just the beginning for OncoCyte, and I believe that statement remains true today. We're continually evaluating opportunities along underserved decision points on the cancer care continuum and believe there are number of partnerships that could expand on how we value ourselves and the value that we are bringing to patients, doctors, payers and our shareholders. We expect to report a number of significant milestones in 2020. And I'm committed to continue our fast paced progress as we work to accomplish our mission of providing actual answers at critical decision points across the cancer care continuum, with the goal of improving patient outcomes by accelerating and optimizing treatment decisions. At this point, I'd like to turn the call over to Mitch Levine for a review of our financials. Mitch?

Thanks, Ronnie. Hello, everyone. Before I begin the review of our financials, I'm pleased to note that, earlier this quarter, we strengthened our balance sheet with the completion of a $7.6 million offering of registered common shares. The offering was completed directly with healthcare-focused institutional investors, which we believe is a testament to our strategy and now proven ability to execute. We also believe that reinforcing our balance sheet via smaller offerings, priced at market, enables us to remain agile from a strategic perspective, while also rapidly advancing our efforts for commercialization and market preparation across our rapidly growing offering. To further add flexibility and optionality in satisfying our capital objective, we've put in place an at-the-market, or ATM, offering, which is an efficient and cost effective solution for issuing equity over time. As of December 31, 2019, we had cash, cash equivalents and marketable securities of $22.5 million as compared to $8.5 million at December 31, 2018. Through the fourth quarter of 2019, we reported a net loss of $8.0 million, or $0.15 per share, as compared to $4.5 million or $0.11 per share from the fourth quarter of 2018. Operating expenses as reported for the fourth quarter of 2019 were $7.5 million, an increase of $3.5 million as compared to the fourth quarter of 2018. And operating expenses as adjusted for the fourth quarter of 2019 were $6.7 million, an increase of $3.1 million as compared to the same period in 2018. We've provided a reconciliation between GAAP and non-GAAP operating expenses in the financial tables included with our earnings release, which we believe is helpful in understanding our ongoing operating expenses. Research and development expenses for the fourth quarter of 2019 were $2.3 million as compared to $1.2 million for the same period in 2018, an increase of $1.1 million. The increase was primarily attributable to personnel and laboratory-related expenses for the activities related to, and completion of, the CLIA validation of DetermaDx. General and administrative expenses for the fourth quarter of 2019 were $4.2 million as compared to $2.6 million for the same period in 2018, an increase of $1.6 million. The increase was mainly due to personnel and related expenses, investment banking expenses, legal, business development, investment-related expenses, and non-cash stock-based compensation expenses due to additional equity grants. As mentioned before, the transition from Lineage Cell Therapeutics, or formerly BioTime, shared services in the latter half of 2019 and established our own administrative, human resources, legal, finance and accounting functions and teams. This transition also included the termination of the shared facilities agreement with Lineage as of December 31, 2019. And as Ronnie mentioned earlier, we have leased our own facilities last December and moved into our Irvine, California headquarters in January of this year. Sales and marketing expenses for the fourth quarter of 2019 were $1.0 million as compared to about $300,000 for the same period in 2018, an increase of approximately $700,000. This increase was primarily attributable to the ramp up in sales and marketing activities, including key hires for our commercialization efforts of DetermaRx. Cash used in operations was around $5.3 million for the fourth quarter of 2019 as compared to approximately $4.9 million during the third quarter of 2019, a modest increase on cash burn on a sequential quarter-to-quarter basis in the latter half of 2019 as compared to our cash used in operations of about $2.5 million during the fourth quarter of 2018. This is consistent with our earlier comments about how OncoCyte has begun to transform into a commercial stage company as compared to a one product, R&D stage company just one year ago. That concludes my remarks concerning our financial highlights. Ronnie?

Operator, we can now open the call for questions if you don't mind.

Thank you. [Operator Instructions]. Our first question comes from the line Paul Knight with Janney Montgomery Scott. Please proceed with your question.

Hi, Ronnie. Could you talk about – have you got your sales force hires done and how are they going to get into the field in the current environment?

Sure. I think everybody remembers we had a goal of hiring the sales team in early January. We were able to get that team on board by January 13. They spent the first couple of weeks training and learning about our various products, but certainly focused on Rx and getting prepared for the target launch. Padma is on the call today. So, I think what I'd like to do is flip it to her and let her talk about the number of reps we have and how we've targeted and then what she sees the ongoing opportunities, and then I'll add a little color commentary. Padma?

Yeah, I'm happy to do that. So, we did hire a limited sales force to call on the top volume hospitals in the United States. What's happened is their face to face interactions have definitely slowed down because the hospitals increasingly have a policy of not allowing sales reps to come in. However, we have not slowed down. What we've done is we have pivoted to offering virtual learning opportunities and interaction opportunities. And we're finding that doctors are actually quite receptive to it because, actually, they have more time than they had before for such events. So, we have started to do that on a weekly basis and we're getting a lot of interest in participating in these learning opportunities. So, like Ronnie said, these surgeries have to be performed. They may be postponed, but these surgeries must be performed to remove tumors. So, we are expecting that once these hospitals are back to normal, these surgeries will be performed and there will be a sort of pent up demand for these samples and for these tests at that time.

Yeah. Well, let me let me answer this too. I've affectionately named this internally, at least for me, operation inherent resolve. And being an ex-military guy, I'd like to look at commercial execution much like warfare. And this team and Padma – she won't beat her chest, but I'm going to do it for her – they've flexed quickly into more of a virtual selling and marketing model. And to date, we've got over 1,000 invites sent out to oncologists and targeted thoracic surgeons to have, what I would call, lunch and learns with some of the key opinion leaders and Dr. Kratz and Dr. Kanaan specifically who are early adopters. The CME event that our Head of Med Ed, Sara Riordan, put together with Dr. Gandara has – if you haven't had a chance to go look at it, you can access it through our website. It is phenomenal. And these are two world leaders in lung cancer that you can see the enthusiasm for educating physicians that, finally, there is a test that will identify and upstage, as we call it in our industry, patients from early stage to now high risk of recurrence. There's also – we've also got the GO2 Foundation living rooms that we put in place, which are sober discussions in a living room setting that get videoed and sent across. We've got a video ad board that this team has put together. We've got developing marketing strategies now for when post COVID ends. We have a nurse navigator program. We've got a patient education resource program that's going to be helping patients become educated from the surgeons that, when they go to their doctor, their med onc, they'll be educated on how to influence the med onc's decision to give them chemotherapy, as well as numerous social media type things we're working on. So, we aren't sitting still. And I think that's the message we want to send to everyone. These are unique times. But as I always like to say, that's when preparation meets opportunity. And so, this team is working on new ways to touch clients and to educate. And as Padma said, I talked to one of our early access sites last night, and they were encouraging us to do more of these virtual things because they jokingly said, they have all this time on their hands because they're not able to do surgeries right now. And so, they really like to encourage us to really beat these things up. So, we're going to take that to heart and do that. So, probably a long answer, but I think it's important to get that out for everyone that we are using the tools at our disposal to overwhelmingly provide force in the marketplace for our message.

What's your retargeted cash burn this year as well, Ronnie?

Yeah, I'm going to let Mitch handle that, but we have been working, as you might imagine, over the last 30 days since this COVID situation took place, to look at how do we attack this and how do we minimize it and only do the essential things versus assume that the capital markets are going to be there for us. So, Mitch, you want to handle that question for us?

Yeah, of course. Thanks, Paul. Currently, at the end of the end of the year, we had $22.8 million of cash. I think we mentioned we burned about $5.3 million. I think that's probably in line, maybe slightly higher, of what we expect for the next several quarters.

How much cash burn quarterly is that number?

It was $5.3 million for the fourth quarter of 2019. We expect that cash burn to come in slightly, but not much from there.

Okay. Thank you.

Thank you. Operator, are there any other questions?

Yes. Our next question comes from the line of Bruce Jackson with The Benchmark Company. Please proceed with your question.

Hi, good afternoon. Thanks for taking my questions. With the DetermaRx kit for CE Mark, when do you anticipate having that available?

We are working with a couple of potential partners. The good news for the PCI world is there's quite a few manufacturers of instruments today that have saturated the clinical market. The bad news for us right now is all the momentum we had, as you might imagine, is now being absorbed by these manufacturers trying to get COVID – or what we – in my world, CoV-2 kits to market, so that they can identify positive patients for COVID-19. Our conversations continue to be ongoing. Our original goal was by the end of fourth quarter this year. And we really won't know, Bruce, unfortunately, until the dust settles on the current situation if we can stay on track with that or if that's going to push into Q1. Hopefully, by April/May call, we'll be able to give you some insight if we're going to be able to make it this year or not. A real quick overview. That kit is a 14 gene kit. And it's run on mostly all – it can be run on any multiplex PCR platform, real time platform. So, I think we're in good place to get that done. We just need to see some light at the end of tunnel on the current situation, so we can get some bandwidth from these potential manufacturers.

Okay, great. And then, I believe you mentioned you're doing some additional studies for – is it the DetermaIO product? And then, can you tell us a bit more about how those studies are progressing, given the COVID-19 situation and when you might have some additional follow-up data?

Yeah, I'm going to let Dr. Doug Ross and Dr. Lyndal Hesterberg tag team that one. But at a high level, we had been in very close contact with a couple of key investigators that had some trials that had failed in Italy. And we were very hopeful to be able to bring that to closure. But as you might imagine, that has been now put on the back burner for all the obvious reasons. But our strategy remains intact. So, I'll let Doug – you want to handle how we're going to approach the expanded data collection? And Lyndal, you can add some color commentary in terms of our lab readiness and what we'll be able to do out of Nashville.

Sure, yeah. This is Doug. Appreciate the question. So, there's three different sources of doing retrospective studies with a product like this. There are institutional studies that you can get through working with academic institutes or potentially with pharma companies that have archive samples. And as Ronnie said, we're interested both in pursuing advancing the data in both triple negative breast cancer because that's where this product started, but also in lung cancer because that's the commercial focus of OncoCyte. So, as Ronnie noted, we were working with a very spectacular study, frankly, with some folks in Italy. And that has been pushed off a bit for now and can't really give you any guidance as to when that might get a little bit more momentum since the situation in Italy is so challenging. But there are other opportunities both in triple negative breast cancer and in lung cancer that we're pursuing, and we're in conversations with multiple different pharma partners for the potential to pursue studies with them. And I might remind you that this product was originally developed as an RNA-seq product, so you can do a whole transcriptome analysis in silico. So, that's really just an experiment done in computer, if you will, so it's very efficient. Or we can use the CLIA-validated product from our Nashville lab to go retrospectively on archive paraffin block samples. And so, that makes the ability to generate on this rather quick and efficient as soon as we can get those things going given the current situation. Ronnie?

Yeah. Lyndal, you want to comment on the IRENE cohort and the access to our 60 plus sites that we are actively collecting in IRENE and the impact that the COVID situation is having and what you expect in the next 90 days maybe?

Sure. We have to talk about that. The IRENE cohort, as you may recall, is a study that we've been running for over three years now and has over 3,000 patients, with nodule sizes between 0.5 and 3 centimeters. And this is the intended use range in the area that physicians tell us are the greatest need for nodule management. And the benefit that has is that we're in contact with the key physicians and the folks who are working, both for research and clinically on cancer patients. And so, this opens the door for us for our conversations for IO studies to be able to approach them and get rapid answers. Unfortunately, we're impacted here in the US just as the study in Italy is, but that's a great resource for us to have. And we have over 60 sites across the US that are potential sites for us to expand our IO studies on.

Thanks, Lyndal.

Okay, great. That's very helpful. Last question for me, I just wanted to confirm this, the physicians who are watching your webinars, they're getting continuing medical education credit for this. And are you profiling just the DetermaRx product? Orr are you getting the entire product lineup in there?

Yeah, we're starting just with Rx, but I'm going to pitch to Padma to give you more details around the CME program. It's the first of what we expect to be many from us. But Padma?

Yes, that's absolutely right. So, the first one that we did, like Ronnie described, with a world renowned lung oncologist, Dr. David Gandara, as well as with Dr. Johannes Kratz, was focused on management of early stage lung cancer and naturally focused on the utility of DetermaRx. But our strategy is to continue with such CME events. We'll probably have one more for this product. But as we bring additional tests online for clinical use, our strategy very much will be to have CME events for each of our tests. And, yes, the answer to the question is – sorry, to answer the question, yes, the doctors who watch the test to get CME credit.

Yeah. For the CME event, but I think the important note is that these are now a virtual given in the current situation. And so, we will continue to produce these and put them out.

And anybody who watches it over the course of the next one year virtually, very conveniently on their computer, can get CME credit. So, it's very convenient.

All right, that's great. Thank you very much.

Thank you, Bruce.

Our next question comes from the line of Keay Nakae with Chardan Capital Markets. Please proceed with your question.

Yes, thank you. Ronnie, a couple of questions about pricing. Maybe starting with the IO test in the research use only, what kind of price are you bidding?

Yeah, the goal of the lead RUO program with pharma is to obviously enroll patients and to be a part of their trial process. The list price for the product today has not been determined in terms of what the clinical price will be. Pharma, what we typically do is we have a per patient fee for the management of the sample collection and the running of the test. And so, right now, I'm actually – by the way, we are not all in the same room. So, we are – I have my team on Zoom and I'm looking at Dough. And maybe you can comment on sort of our thoughts on that. I think the reality is, at this point, we're in negotiations and we haven't really landed on that price, but we'd rather get these clinical trials than worry about price, but we will be able to charge for these and we certainly think we'll be able to make these profitable ventures. Okay, Doug's putting up a sign that Lyndal is going to take that one. So, Lyndal, you want to take that one for us?

Sure. So, Ronnie is correct that we don't have exact pricing yet. We're working on that. But one of the things we do want to let you know is that we have the lab capacity to deal with our own studies as well as pharma studies. We have lab readiness in place. We've established the performance. One of the concerns that has been voiced, at least in the public press, is the ability to get PCR-related reagents, supplies, materials, because so many are being diverted to the current crisis with the coronavirus testing. We have all those supplies reagents in place to last us for the foreseeable future. So, we stand ready. In addition, we have trained certified staff already set, ready to roll and operating. And, thankfully, in the national environment, it's not quite as severe as in New York and California yet, and so we stand in a very good position to service the pharma clients that we line up.

If you guys are – Keay, if you're trying to consider sort of how these things typically price, typically there's some discount to what we would think the clinical price would be. So, again, we can't really comment specifically yet because we haven't closed a deal, but we will obviously share some of that information as we go forward. Typically, you see these things anywhere from $1,500 a patient to $4,000 a patient. But since we're running a small multiplex PCR panel, I suspect we'll be at the low end of that range and whatever we're able to negotiate. So, hopefully, that helps as you think about pricing. Hang on. Dr. Ross decided he is going to offer some thoughts. Sorry, guys. I know this is a little clunky, but we're not in the same room due to the mandate. So, Doug, do you want to just add some comment to that for these guys?

Yeah, I just thought I'd comment on the range of sorts of relationships that you could imagine. So, we think this product will be very attractive to folks that want to get into the lung cancer market. And so, those would be arrangements that would be CDx partnerships potentially. And so, that would be very different, for instance, than a customer who wanted to get RNA-seq – whole transcriptome RNA-seq done on all of their samples, which is something our lab in Nashville does very well. And then, it would be an informatic analysis on that RNA-seq data, and so there would be charges for the RNA-seq and then charges for access to the algorithm and so forth. So, there's a very broad range of services that that Nashville lab offers. And so, it's a little hard to talk in general about price per patient or price per project. Some of those projects benefit us as much as they do pharma and so forth. So, that's a bit of a big overview.

Yeah. That's a great point.

Okay. Ronnie, what would now be the timeframe for this to – to the launch of commercial tests?

Do you mean clinically or in terms of use for pharma trials?

Yeah, beyond this limited research use only.

Got it. Yeah. Right now, the plan is to – the plan was to get our breast cancer data out at ASCO. We still think we'll be able to do that because ASCO, even though there won't be a physical meeting, we will actually have an online meeting. And so, our researcher from MD Anderson and Yale, they are preparing to present the breast cancer data at that meeting. And at that meeting, we will collect – we will have now collected well in excess of 125 patients across two tumor types. And we know that MSI received their CMS approval with about that many patients. What we are not doing is assuming that we will get that. So, we are planning a upcoming meeting with CMS. And we think by the time we get to our next call, we might have some information to shed some light on that question. But Dr. Ross is raising his hand. So, Doug, do you want to add a little comment to that?

Yeah, sure. This is an incredibly exciting product that is going to be, we believe, impacting the use of immunotherapy, use of checkpoint inhibitors. So, I think I'm a little shy to give exact guidance on it. But as Ronnie said, we're going to talk with CMS and get some guidance from them on how to advance that forward, whether it be with one of the drugs that are trying to penetrate the market or to provide the right sort of information that would give oncologists more information for the judicious use of checkpoint inhibitors, given, as Ronnie's already mentioned, there's a lot of excitement about those drugs. But in fact, they also cause a lot of side effects. When you take the brakes off the immune system, people with sort of latent autoimmune diseases get activated. And so, it's really important, not just for the financial reasons, for the healthcare system, but also for the appropriate care of patient to know when they work and when they don't. And we think this biomarker signature may really improve our ability to identify those patients who will respond or conversely those patients who might not respond.

Okay. And then switching to Rx, can you talk about pricing there and how your economics change with that model?

Yeah. So, Padma and one of the doctors that founded the test spent a significant amount of time in October/November putting together an incredibly strong health economic dossier. So, Padma, you want to talk about the price we're going for and our confidence and what we think we're going to see and then the whole crosswalk approach that CMS might use?

Yeah, sure. Happy to do that. So, CMS prices tests in two different ways. The first is their preference is to crosswalk the price to a similar test and methodology. And if they cannot do that, then they look at other factors, including health economic benefits from using the test, to price the test. So, we have submitted a very comprehensive pricing dossier to CMS that explains that the right benchmark in terms of a crosswalk is the Oncotype DX test because our test uses a very similar methodology in terms of RT-PCR and proprietary algorithm like that test did. So, that's one approach. We've also done a pretty comprehensive house economic analysis that demonstrates that at a price comparable to Oncotype DX, this test delivers significant savings to the healthcare system because it reduces the recurrence of cancer to an advanced stage when the cost of treatment can be as high as $200,000 per patient. So, based on those two analyses, we feel pretty confident at getting a pricing that's comparable to other tests in this space using a similar methodology. One obvious example being Oncotype DX for breast cancer.

Yeah, the Genomic Health test today is reimbursed around $3,800 by the a few of the MACs and I think the lowest is about $3,500. So, that is our expected range.

Our next question comes from the line of Rachel Vatnsdal with Piper Sandler. Please proceed with your question.

Good afternoon. Thanks for taking the question. So, I appreciate the comments that reimbursements for DetermaRx may be delayed given the COVID outbreak. Can you give us any more color on your conversations with CMS? So, for example, do you foresee delaying the timeline for your DetermaDx reimbursement as CMS has a backlog of LCDs to get through?

Yeah. Listen, we – Padma is one of the incredible – she brings a lot of attributes to our company. One is this knowledge of how to get through pricing – thread the pricing needle of CMS. So, Padma, I'm going to let you talk about your conversation with CMS and your thoughts on that and I'll close with some color commentary maybe. You probably will handle it.

Sure. So, as far as Rx is concerned, there is a cadence of milestones that our test needs to pass before it gets final coverage. The first is the proposed LCD, we got through that. And then, we had the comment period, which we got through in the November time frame. And after that, Palmetto, which is the entity responsible for our test, gets feedback from other MACs and we got through that in January. And so, after that, the last final step is to get final LCD. And unfortunately, that's when the COVID situation happened. So, we haven't heard anything. We know that we are one of 13 others in this final stage. We haven't heard anything that suggests that there will be a delay. But as Ronnie pointed out, they do have other tests in the queue of waiting approval and probably expedited approval. So, it could be impacted. So, we haven't heard anything to suggest that there's any kind of bottleneck so far.

Yeah. So, I think, Rachel, what we are doing is we were expecting and telling our analysts we thought we'd get it by the end of March. I do think we're backing off of that, to be blunt today. Because last time we talked to them a few weeks ago, we know we're one of 13 companies in the queue. But we know a lot has happened in the last few weeks. And so, we're just anticipating that it's going to be somewhere in the April/May timeframe, but we're still hopeful that it will be sooner obviously than later. But we aren't sure about what that backlog means. We know that there's 13 companies awaiting approval before the next cycle. Their unofficial cycle begins in May. And we don't know how many companies will be in the May cycle that might be delayed. We won't be presenting a dossier until fall. So, it's really hard to tell right now if there's going to be a backlog for the spring going through the summer cycle until we see how many companies actually submit for that cycle. But we'll probably know more after we get our approval and we can start to see who's teed up for the May cycle. And that'll give us a better indication of whether we're going to see something delayed in fall or not. So, more to come on that, but hard to tell at this point in time.

Great, thank you. And then, last question for me. Can you just tell us about the feedback you've received from your discussions of private payers on DetermaRx? And I know this is kind of a hard question, but when do you expect to see any private payer coverage decisions on that? Thank you.

Yeah. Let me tell you what we're doing there and then, Padma, add some color commentary, if you like. We were and are focused on obviously CMS because about 70% of the patient population is Medicare that we're going after with Rx. However, as you know, having private payers in the regions we have our sales reps will be important because not every patient is a CMS patient and physicians want to order it once they get going, not just for their Medicare patients, but for all patients. And so, what we want to do is come behind reps in these key target areas and we want to have access to the top payers in that area and then to follow-up as CMS gives us our pricing, follow-up with a well-organized push to meet with those payers and to get those payers on board. We do know from previous work with those payers that, as Padma said, because of the significant costs of late stage, end-of-life lung cancer, that anything that you can do to reduce the number of patients that end up there for a payer is saving them money. And so, we think that we have a really strong health economic story to go to those private payers with. But we'll know more as we start to engage them in the coming months. Padma gave me the thumbs up on Zoom. So, I think that she's okay with my answers.

Our next question comes from the line of Thomas Flaten with Lake Street Capital Markets. Please proceed with your question.

Hey, guys. Thanks for taking the question. I just wanted to follow up on the earlier question about the commercial footprint. Obviously, you've done a pilot program ongoing right now. Can you talk just a little bit about what the plans were for expansion before COVID and what the plans look like peri and post COVID from a rep gathering perspective and an expansion perspective?

Yeah, sure. Let me give you my thoughts on that. Right now, we think we've got – we know we've got really high powered reps and a really talented leader from our previous world. These reps are multi sort of experienced. They come from folks like Foundation Medicine, like Guardant, like Clarient. And so, we've got a nice blend of folks from various areas of the industry selling high value tests. Our original goal was to build these territories up. And then, these early hires would become the district managers. And then, we would begin to hire reps underneath them in adjacent areas to the markets that they build out. And so, again, if you remember some earlier discussions, we talked about that, it takes about, 9 to 12 months, these reps, get to – sometimes 18 months depending on how big the territory is to get to what I would say is about a 60% growth or 60% of the total available revenue market for that area, which typically saturates a rep in this type of industry at about $3.5 million, $4 million. And so, as we started to get to the $1.5 million, $2 million dollar range of a rep territory, we'd start looking for that second rep, third rep, fourth rep. And that's just from experience in building Clarient and that's how we built it. It was a responsible way to add sales reps, so that the revenue was not lagging very far behind the cost of the rep. And so, that was the plan. And candidly, still is the plan going forward. But the one thing that could change that plan is if we were to get an early approval from CMS of our DetermaIO test and we were to score some early influence from key opinion leaders and papers that would indicate that this is the test that could become standard of care there, then we would obviously increase the number of sales force around that. But that would come with the knowledge that we're going to get reimbursement for it and that we would have to expand significantly because, as you imagine, the Rx – 40,000, 45,000 patients that might be eligible for the Rx test, if there are 750,000 eligible patients in 2020 for immune therapy, then we would need to expand our rep coverage in significant ways. We could do that one or two ways. We could hire that or we could partner with another company that might have a sales force already in place that could help us do that. And so, we obviously have both of those on the table, not sure which way we go. I think the goal would be to retain as much of that revenue and profit, but these are very profitable tests. So, we want to retain as much of that as we can for our company. And we want to maintain the customer experience with an OncoCyte experience since we have a lot of experience through the years of creating a very, very positive sort of engagement with physicians and their patients. So, I don't know if that answers the question. I'm happy to go deeper if you want, but that's the current high level strategy and we'll continue to add reps. As the Rx test expands in its influence, we'll continue to add reps around the current rep base. But we don't expect a significant number of additions this year, especially given this little break that we're getting from our momentum with the COVID situation.

I think that's great. And thanks, Ronnie. And then, could you talk a little bit about – with the dossier submission for Dx in the fall, if everything stays on course, could you talk a little bit about when you would expect to make that commercial and how that would influence commercial expansion?

Yeah, that is a terrific question. I'll let – Padma, feel free to comment. That is a different call point. That's pulmonology versus thoracic surgeons and med oncs. However, what we are seeing with Rx is this is a team that treats lung cancer patients and the pulmonologists, believe it or not, become somewhat a "primary care" type physician for people with respiratory distress. So, whether it be a pre-surgery or a post-surgery and post-treatment, the pulmonologist is actively involved in these lung cancers lives pretty much the rest of their lives. And so, we do have some experience already in what that market would look like. But we would – with Dx, we think we'd have significant momentum behind us at that point with that type of reimbursement that we believe we would get based on what's currently reimbursed in that space. And that would afford us the ability to go hire a significant number of sales reps to go attack that market. Padma, you're not in the room. I see you smiling. So, you want to comment on my comments and some color commentary for these guys.

Yeah, I think you're absolutely right. The way patients are being managed increasingly, even in the community setting, the management is by a team of doctors, the tumor board. So, the fact that our reps are already there talking to the surgeon, talking to the oncologist and in fact even beginning to talk to the pulmonologist already means that they are fully equipped to also call on pulmonologists once we have the Dx tests available in those systems that they are in already. Having said that, the market for the Dx system is considerably bigger than the market for Rx. So, we would want to expand our reach with the judicious, again, addition of sales reps in the areas that a lot of these nodules are actually detected. So, we know that there are a number of these screening centers that a lot of these nodules are detected and we want to make sure that we have reps covering those high volume screening centers where these nodules are detected. So, that will be our strategy. But we do think that our current reps will be effective and then we'll add other reps targeting those high volume centers on top of that.

That's a great problem for us to have, though, folks. If we have IO, which is a pan cancer opportunity and we have Dx which is a significantly larger market, those are two really good problems to have. And I think we'd be happy to hire our sales force behind both of those initiatives. Once we get closer, we can give your thinking on what that will cost us. But right now, it's too early to say until we see what reimbursement is going to be.

Great. Thanks so much.

Yeah, thank you.

That is all the time we have for questions. I'd like to turn the call back to Mr. Andrews for closing remarks.

Okay, gang, thank you. It was a long call today. We appreciate everyone's patience. Obviously, we've got a lot going on at OncoCyte. I'll just close with this. Look, we are in a unique position as a company to do something pretty spectacular for lung cancer patients. We believe we have the right mix of products and we certainly have the right team behind it. I think we're extremely acutely aware, let me use that word, of our need to make sure that we manage our burn given the current environment. So, you can count on us to do that. And we think we're extremely well positioned for growth. I'd like to close by thanking our team. They are amazing. They work long hours. They never, never shy away from stepping in and helping someone here that needs it and keeps us from having to hire in this current environment. And so, I appreciate their effort and I look forward to future calls where we can continue to update you on the success of OncoCyte. Thanks, everyone.

Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time and have a wonderful day.