Earnings Labs

Insight Molecular Diagnostics Inc. (IMDX)

Q1 2022 Earnings Call· Wed, May 11, 2022

$4.21

+9.64%

Key Takeaways · AI generated
AI summary not yet generated for this transcript. Generation in progress for older transcripts; check back soon, or browse the full transcript below.

Same-Day

-3.54%

1 Week

+0.88%

1 Month

-0.88%

vs S&P

+3.62%

Transcript

Operator

Operator

Greetings and welcome to the Oncocyte Corporation First Quarter of 2022 Earnings Conference Call. At this time, all participants are in listen-only mode. And please question and answer session will follow the formal presentation. . As a reminder, this conference is being recorded. This time to turn the conference of Investor Relations.

Troy Williams

Management

Thank you Operator and thank you everyone for joining us for today's conference call to discuss Oncocyte's first-quarter 2022 financial results and recent operating highlights. If you have not seen today's financial results, press releases, please visit the company's website on the Investors page. Before turning the call over to Ronnie Andrews, Oncocyte's President and Chief Executive Officer. I would like to remind you that during the conference call, the company will make projections and forward-looking statements regarding future events. Anything that are not historical facts are forward-looking statements. We encourage you to review the company's SEC filings, including without limitation, the company's Forms 10-K and 10-Q, which identifies the risks, the specific risk factors that may cause actual results or events to differ materially from those described in the forward-looking statements. These factors may include without limitation, risks inherent in development and, or the commercialization of potential diagnostic tests. Uncertainty in the results of clinical trials or regulatory approvals. The capacity of OncoCyte third-parties supplies, blood sample analytics system to provide consistent and precise analytics 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 maintenance of IP rights, risks inherent in strategic transactions, such as failure to realize anticipated benefits. Legal, regulatory, or political changes in the applicable jurisdictions, accounting and quality controls greater than estimated allocations of resources to develop and commercialize technologies or failure to maintain any laboratory accreditation or certification and uncertainties associated with COVID-19 pandemic and its possible effect on our operations. 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 otherwise, may be required under applicable law. But that I'll turn the call over to Ronnie.

Ronnie Andrews

Management

Hey, thanks, . Welcome everyone to our conference call to discuss first-quarter 2022 financial results and operating highlights. On today's call, I'll review the significant progress we've made and continue to make across all of our major products, as we move toward reimbursement submissions for our oncology menu and update you on our exciting opportunity in transplant. But first I think it's important to address the market headwinds and some important decisions we've made to better position OncoCyte to whether the current external environment. When I stepped into the CEO role in July of 2019, we introduced and adopted and ambitious vision to acquire companies that own technologies that could accelerate our path to deliver a complete menu of precision treatment decision and therapy monitoring test to assist oncologists and pathologists to making more timely, informed decisions for their patients. Despite the challenging external market environment, I'm very proud to say we enter 2022 with every product on schedule and poised for submission for reimbursement over the next 12 months. No we stand in these favorable developments, we recognize a need to be fiscally prudent in strong stewards of capital. In connection with these objectives, the company led by our board, determined take access to strengthen our balance sheet so as to ensure we have a solid path through 23 and into 24. In April, we successfully consummated an underwritten public offering of common stock and warrants with net proceeds of approximately $32.8 million. This financing round was accomplished with the strong support of several current investors, as well as some new institutions. We very much appreciate the continued commitment to the company and to our vision. We believe this recent funding combined with our current balance sheet, expected revenue ramp, as well as licensing and platform partnerships will provide…

Mitch Levine

Management

Hey, thanks, Ronnie. Hi everyone. Our consolidated revenues for the first quarter of 2022 were approximately $1.4 million up from $0.3 million from the same quarter and year ago. First-quarter revenues associated with DetermaIO, with $1 million up from $0.2 million sequentially, and up $0.4 million year-over-year. We received $40,000 in licensing-related revenues in the first quarter from licensing, our proprietary molecular tests to China. After the close of the first quarter, we received the final Burning Rock milestone payment of $1 million according to our November 2021 amendment and will account for it as licensing revenue in the second quarter of 2022. Our pharma services business generated $0.4 million in the first quarter, a decrease of $0.1 million quarter-over-quarter, and a decrease of $0.1 million year-over-year. As we have discussed previously, revenue and pharma services likely fluctuate, as we receive samples from biopharma clinical trials. Cost of revenue for the first quarter was approximately $2.0 million, including $1.0 million from the cost of diagnostic test and testing services we performed for our pharma customers, and $0.9 million in non-cash amortization expenses of DetermaRx and pharma services related intangibles. Cost of revenues also include test and services we performed for our pharma customers. Research and development expense for the first quarter of 2022 was $5.1 million, an increase of $1.8 million from the same period a year ago. The increase in R&D expense was related to the increased headcount, as we prepare to begin the clinical trials to build IVD kits for our platform partnerships, as well as increased R&D activity as we continue to support clinical trials to gain statistical power to our current DetermaIO datasets to ensure success as we submit the CMS reimbursement, as well as build our clinical efforts for our new transplant business. General and…

Operator

Operator

Thank you very much, sir. Ladies and gents, we will be now conducting the question-and-answer session. . The first question comes from Mike Matson of Needham & Company.

Mike Matson

Analyst

Yes. Thanks for taking my questions. Let's see, I guess I'll start with the comments around things you've done to reduce the cash burn. So can you maybe just talk a little bit more about this sequential approach and how that might affect the timing of any of the test launches.

Ronnie Andrews

Management

Yeah, Mike, we will and I appreciate the question. Our goal right now is all about focus. And right now we have to -- we believe immediate revenue opportunities to compliment Determa RX. And so obviously we're going to continue all the efforts around the term Determa RX, but we are going to throttle back on some of the clinical studies that were planned for the Determa RX and so to expand utility etc. Those will be re-prioritized and we'll put energy behind Determa IO to get it submitted to the -- for CMS. Keep in mind, we've got an update. We believe after ASCO and the upcoming publications of the data that's already been presented to submit for at least two indications. And so that's where we're going to go to market where we have planned, I think as you know, to try to get a few more studies under our belt and to try to present the case for a pan cancer reimbursement. But right now we decided that to minimize the cost and obviously there's risk in anytime you go do clinical study, so we're going to take what we got and we're going to go forward with that. It won't delay the long DetermaIO, but it will mean that we focus IOs launch into triple-negative breast non-small cell lung cancer, and potentially bladder cancer, now that we have the AACR paper behind us. And then transplant of course, where -- we're way down the road on transplant, we -- we beat our tom lines that we set for the team to end -- by the end of June, they finished the LCD. I'm trying to finished the LDT at the end of March and they finished the LCD a couple of weeks ago and we announced that last week. So we believe that we're poised for launch for our transplant business in the fall, and so we'll be shifting some of the planned sales force expansion oncology over to transplant. So that we can -- we can have someone representing our transplant offering for liver in the marketplace about fall. And so the delay -- the real only delay that we anticipate might be pushing out DetermaCNI and potentially DertemaTx launches just based on how we have to sequentially plan these things without adding new marketing headcount. So that's really the big challenge now is just to make sure we stay focused on transplant and getting IO submitted. And then after that we'll begin the sequential fall one of the other products. So we're not expecting quarter years’ delay, we're expecting quarter delays in in some of the other products that were mentioned today.

Mike Matson

Analyst

Okay. Got it. The thoughtful. And then just any updates on the potential platform deal for TheraSure. It sounds like Mitch mentioned that there's still being discussed, but I guess I thought we might hear something by those spring or early summer time frame. Is that still the case?

Mitch Levine

Management

Yeah, let me -- Yeah Mike, we have -- we are in the -- at the 11th hour with the digital PCR opportunity and we're down the road on the next gen sequencing opportunity as well. And so it's very plausible that we might end up on two platform technology -- technologies, next gen sequencing and digital PCR, but we'll definitely be announcing very soon the primary relationship that we're looking to execute on in digital PCR. So just stay tuned for that. It's -- I just can't announce it yet because we aren't finalized the contract with signatures on both sides yet.

Mike Matson

Analyst

Okay. Got it. Thank you.

Operator

Operator

The next question comes from Mark Massaro of BTIG.

Mark Massaro

Analyst

Hi guys, thank you for taking the questions. Ronnie, I think you mentioned that you may move a small number of your reps over from oncology to transplant. I mean, is that literally one or two folks? And then, can you give us a sense for now that the liver transplant test is validated, I think you indicated in the press release a launch seems to be imminent, but maybe can you just talk about when exactly that will launch and then talk about some of the logistics out of your lab on the east coast?

Ronnie Andrews

Management

Yeah, absolutely. First off, Mark, just to be clear, we're not going to take anyone from oncology sales and moved into transplant. If you remember, we're planning on doubling -- pretty much doubling the oncology sales force this year. We're going to put those plans on the back corner for now and we're going to take some of those headcount we have planned to move over, and we'll hire a team to sell transplant that comes from the transplant industry, or transplant marketplace. So that's the first thing. The second thing is, we did absolutely complete the LDT validation for liver. The LCD was also completed and submitted, so we are in a waiting phase to hear from CMS. Our goal is also to try to submit as we committed, kidney as well, by the end of June. So all those are in process. Our goal is going to be to begin to establish. We've already established the lap processes; we have a really good workflow. We have a team in Nashville prepared to take samples, and so now it's really about executing to your point the logistics of how we're going to get the sample collected and how we're going to get those samples into our lab. And so all that's being worked on now, and we expect to have all that in place by the time we get reimbursement, which who knows at this point given where CMS is from a timeline perspective, but we expect early fall we'd be ready to go for a market launch with reimbursement. That's the -- That's what we believe based on what we know about CMS 's backlog today.

Mark Massaro

Analyst

Okay. That helped. Thanks for clarifying that. And then obviously DetermaRx our will remain a commercial focus for OncoCyte. But did I hear you say that you may throttled back on clinical study development on RX, and if that's the case, should we be maybe pushing out our own expectations for when RX could be included into NCCN Guidelines.

Ronnie Andrews

Management

Yeah. I think that's the big question Mark to you hit the nail on the head. I -- we are -- we have a randomized clinical trial open. It is enrolling at a slow pace. Patients have not necessarily wanted to randomize themselves knowing how powerful our data is at selecting patients that have high risk in the outcome if they take chemo obviously is profound. And so our goal is not to add any additional studies around that. We have an open registry, we'll keep the registry open, and we'll keep the current slow intake of RCT, but we're not going to add into the other trials that we were considering that might have accelerated a dataset for NCCN by next summer. Those would be risky to get them done in that time frame. And so we just said -- we'd given the risk and given the burn, it would take to get there. And we just decided it's probably better to let the current trials continue to go forward and not add any additional expense to that.

Mark Massaro

Analyst

Okay. And maybe one last question and I'll hop back in the queue. The $40,000 of licensing revenue, I believe came from Burning Rock for the launch of RX in China. I'm pretty sure Shanghai is on lockdown. I guess, can you just talk about -- I assume that things are definitely under alarm in China, especially in Shanghai, but can you give us a sense for Burning Rock 's focus on that test and maybe just describe the impact that you saw as a result of the lockdown in Shanghai?

Ronnie Andrews

Management

Yes. I'm going to let to Mitch answer that. I think everyone knows Mitch was on point for the whole -- since the beginning and really did all the negotiations with our Chinese partner. And so again, kudos to Mitch for the hard work there. Mitch stays on the phone with them. What's the latest? And we do know we're being impacted by the lockdown for sure.

Mitch Levine

Management

Definitely impacted by the lockdown. But they are committed to RX, they've done studies around it. It's commercialized now for about five consecutive months and are showing good progress. And so you're right, Mark, the -- China is exceptional in their lockdown regarding COVID and that's going have an impact.

Mark Massaro

Analyst

Okay. Thanks for the time. I'll hop back in the queue.

Ronnie Andrews

Management

Thanks, Mark.

Operator

Operator

Thank you. The next question comes from David Westenberg on Piper Sandler.

David Westenberg

Analyst

Hi. Thank you for taking the questions. I got two I think short ones first, just a clarity on all the oil cash metrics here. I think you exited the 24 you did $32 million deal. That puts you -- your current Cannis balance somewhere around 50, does that make sense? And then you gave this cash runway to 2024. I just want to make sure, Claire, that it's -- was it to '24 or through '24. And then you said it does add in some of the non-dilutive capital that your assumptions. Can you clarify whether some of that non-dilutive capital assumptions or stuff that hasn't been announced yet, or is it everything you kind of already talked about so far?

Ronnie Andrews

Management

Sure. Yeah, Mitch is going to take that one, Mitch.

Mitch Levine

Management

Yeah. Dave, you're -- you're fairly accurate on the cash number. I'd say in the low fifties is probably a little bit more accurate and we do anticipate it bringing in another $10 million in our preferred offering with two of our institutional investors that will come in two tranches, $5 million each one will close in the second quarter, one will close in the fourth quarter. Additionally, we can't delve into details regarding non-dilutive financing and capital sources specifically because that's, we're a public company. We just can't tell you that but --

David Westenberg

Analyst

Just wanted to make sure. It does contemplate stuff that has not yet

Mitch Levine

Management

That's correct. It does contemplate things that have not been disclosed and we expect that capital combined with what we currently have on the books and bringing in the $10 million dollars from our preferred, will get us into 2024. How far into 2024 is going to be dependent upon how we are able to scale back our plans.

Ronnie Andrews

Management

Dave, let me just say this, I think that we are -- it's not like we're hoping for those non-dilutive things, we're actually in discussions around some things, so we just can't comment on them because they're not completed yet.

David Westenberg

Analyst

Perfect, now that's helpful. And then just quickly on account access, you onboarded, I think you have 472 onboarded accounts, up 10%, but the test orders were up 73%. Can you maybe talk about on -- it sounds like there's order frequency trends going on and just want to maybe clarify that?

Ronnie Andrews

Management

Yeah. We are seeing -- well, one of the things we did, David given the lockdown -- coming out of lockdown, if you remember, we had bond board at a lot of people virtually, but a rapid not been into basically detail that surgeon itself, or himself of herself. And so would things opening up, our sales team was able to start to getting in and doing that. And as a result of that, you're seeing an increase in sample volume from same-store sales, if you will, or same sites that we've already gotten some. Now we get more positions onboarded there and they begin to order. And so we expect that that is a better use of our sales teams time we spent all the synergy getting these new accounts. So while we do want to continue to grow our account base, our original wave of account access and account effort was focused on high incident rate areas. And as you know, DetermaRx is a smaller market opportunity. But with IO and TX counting, we wanted our reps to have a presence in a brand presence in these high incident rate accounts, and that's what we focused on. So now that things opening up, we want to start really penetrating the current accounts and driving more utility of our products. We think it's a better more efficient use of their selves time.

David Westenberg

Analyst

Thank you so much.

Ronnie Andrews

Management

Thanks, David.

Mitch Levine

Management

Thanks, David.

Operator

Operator

Thank you. The next question comes from Paul Knight of KeyBanc.

Paul Knight

Analyst

Thank you, Ronnie. On the -- On TheraSure, what should we think about -- regarding a pricing for that particular type of test?

Ronnie Andrews

Management

Yes. So today, kidney as our digital PCR methodology, was given a blank at LCD a year ago, and it was given for kidney at $2,700 and heart for $2,850, I believe. Good degree of probability that will fall between the $2,700 and $2,800 range.

Paul Knight

Analyst

And then is this a multiple test per year per patient type test?

Ronnie Andrews

Management

Correct, yes. The -- Depends on -- European standard of care is all different from the U.S. but we're looking and we think somewhere between seven -- at least seven in year one and four and four, which is very similar to kidney and heart. So somewhere in that follow-up -- utility for follow-up you'll see liver fall more than likely.

Paul Knight

Analyst

Okay. And then regarding RX in the quarter, the pricing seems to be up. Is that a fair assumption?

Ronnie Andrews

Management

Yeah, that's a great point, Paul. We -- We've been attacking the private payers pretty hard in hand-to-hand combat adjudication to claims. And Mitch, I mean, you're nodding, I thought we saw a really, really nice quarter of being able to collect cash and actually move some of the folks that have paid us -- underpaid us, up to a better standard for us. So the answer yes -- is yes, Paul. And as you know though, when we -- we always say this, that we're not in contract with -- except for one, a small payer, and so every private claim has to be adjudicated typically. And we have a team that's doing that, so they're obviously gaining sustain. And we do believe the addition of DetermaIO and DertemaTx will add more value to our market access team, because now they've got more a position for contracting. So hopefully we'll see some gains out of that group in terms of actually getting on contract, but probably not into already the launch TX and IO.

Paul Knight

Analyst

Okay. And then lastly regarding the services business, is that kind of steady-state for foreseeable future?

Ronnie Andrews

Management

Yeah. Paul, it's weird. I've been watching other folks report and we've heard several times from different companies that they're pharma businesses are down and that they felt like the surge -- the winter surge, that people stayed away from some of the clinical studies. I have to be honest, it doesn't make sense to me if you are a cancer patient, why you not go and get into the trial. But the reality is we did see and hear from other companies, so we do have a really robust contracted pipeline, but until we see patient samples, we can't bill against those. And so I'll see I think it's going to be lumpy this year. We had hoped it would be a little more predictable, but it looks like it might be as lumpy this year as last year, given the challenges that our former partners around having recruiting patients.

Paul Knight

Analyst

Okay. Thank you.

Ronnie Andrews

Management

Thank you.

Operator

Operator

The next question comes from Thomas Flaten of Lake Street Capital Markets.

Thomas Flaten

Analyst

Hey, guys, appreciate you taking the questions. Just with respect to the launch of DetermaIO, you mentioned that you might be shifting some of the plan headcount from the oncology team over to the up-and-coming transplant team. Can you just talk a little bit about how we should think about the IO and RX growth curves given a -- that seems to be a smaller commercial infrastructure that you're planning.

Ronnie Andrews

Management

Yeah, absolutely. And I started there on an earlier question but let me be a little more specific. So when we launched in deployed our original 10 reps, we show -- we thought and we think we did a good job of choosing high incident rate. Our high incident areas for our sales reps to be deployed. And throughout the pandemic that proved to be true because we were able to onboard docs, but without having more than the 10 reps. We added three and Q1, so we have 13 now. Our goal by the end of the year was to have that into the low 20s, probably and expand into some new territories. So instead, what we're going to do is take the current territories and we're going to focus on as we launch IO and TX and they get reimbursement, we're going to focus more on the current territories and going deeper into the accounts and gaining a better, faster traction for IO and TX. As you guys know, TX is a blanket LCD, so we still expect it to get reimbursed fairly rapidly once we submit it. And so the idea would be to instead of expanding outward, actually going deeper into account. Some of our accounts like Florida oncology or Georgia oncology. There's multiple Physicians, Texas oncology, multiple positions within those accounts, and so the ideas instead of onboarding and account and getting one or two dogs were one onboard the accounting go deep within the sort of the infrastructure those accounts and drive utility across physicians within the account versus add new territory. So as we get through the current market storm and as we launched these products and revenues begin to grow, will take a deep wrap and see if it's when the right time is to add new territories. But today that's the specifics around what we're planning to do around the oncology business.

Thomas Flaten

Analyst

And if I might, you made reference to CMS a couple of times with respect to timing. And then in response to an earlier question, did I hear -- maybe I -- I might've misheard, but did you say you're going to submit here shortly the LCD, but you expected to have a response in the early fall, did I hear that right? I've seen a bit of

Ronnie Andrews

Management

Yes, we are -- Thomas, we already -- Keep in mind the transplant LCD is the blanket LCD for digital PCR, and we submitted liver two weeks ago. And so we are -- but liver does not have a -- is not part of the blanket LCD. There's nobody with a liver test today as you know, so we're the first ones out. But kidney and heart are reimbursed already using digital PCR, so we don't know for sure, but we believe that given there's kidney and heart, that they -- we should receive a rapid review of the LCD given there's already a blanket LCD written for our technology that cited our papers.

Thomas Flaten

Analyst

And the timing on IO, do you think would be --

Ronnie Andrews

Management

IO will still attract -- Yes, we're waiting on one publication to be accepted and us notified. And once that happens, we're going to prepare. We've been working on the dossier, so our goal is to submit IO, as we we've said, somewhere by the end of summer.

Thomas Flaten

Analyst

Got it, appreciate it. Thanks so much.

Ronnie Andrews

Management

Thank you, Thomas.

Operator

Operator

Next question comes from Mason Carrico of Stephens Inc.

Mason Carrico

Analyst

Hey, guys, most of my question to the manager tiers, so maybe just one quick one, on TheraSure, any call you can provide around recent discussions with transplant centers. How should we kind of think about the opportunity between centers versus more community-based centers, is one or more and more near-term target. I'd assume that the, the transplant centers versus the community centers themselves, but just any color there, you can provide?

Ronnie Andrews

Management

I think the thing that's in our favor is today there's no molecular tests for liver in the market validated today. So we are kind of the first out in that indication. The good news is there are some great competitors already out there, CareDx in the Tara and the other indications. And they've done a terrific job of the missionary marketing work to sort of convince transplant positions the need for molecular testing. So we certainly believe that that has created an awareness of what we're doing. Our initial engagement with the various centers we talked to has been very positive and they have acknowledged the need for what we're bringing and they certainly are excited about a rapid turnaround time that we can provide out of our lab. And so the jewelries out on that till we start hitting the rubber meets the road when our reps star going in and try to start getting samples in. But we certainly have received a very positive feedback from the key opinion leaders that we talked to in in these large centers.

Mason Carrico

Analyst

Got it. Thank you guys.

Ronnie Andrews

Management

Thanks mate.

Operator

Operator

The final question comes from Bruce Jackson of The Benchmark Company.

Bruce Jackson

Analyst

Hi, thanks for taking my questions. With regards to the TheraSure launch, where are you in terms of your launch preparations in terms of the sales force, clinical support, things like that.

Ronnie Andrews

Management

Yeah. So we are because the lab came first. We got the lab in place, the workflow was in place. The LBT is final. We have -- we're working obviously on the logistical components of that now. So which will include the requisition to order as well as the how we're going to return results via a report electronically versus PDF. Even crazy as it sounds, a lot of these facilities still prefer a PDF and a fax. We sometimes scratch our head at that, but that's still the case in many instances. But we are working on an electronic report as well. So all those things are in process. And again we wanted to wait and make the investment behind those till we saw a successful workflow in LDT. Those are now complete. So by the time we get reimbursement, we expect will be a fully functional Battlestar in transplant.

Bruce Jackson

Analyst

Okay. And then just real quick on the DetermaTx and DetermaCNI timelines. How far should we be thinking about shifting those out?

Ronnie Andrews

Management

I would -- I think the DetermaCNI timeline is the one that's at the greatest risk candidly, because right now we are not going to -- unless we find an appropriate partner that wants to do some studies with us and keep them fairly cost neutral for us, we'll probably not invest behind those studies, we'll launch it as an RUO in the United States for pharma and hope we can solicit some of that support from pharma. But right now, that's the one that's at the most risk. And so we had originally planned to launch it, which we will, as an RUO this summer. But we had hoped to basic -- maybe actually submit for reimbursement later in the year. But I think given where we are financially and the need to conserve cash, that we'll have to wait till we find a stronger partner relationship where they'll help fund some of that effort. And so unsure about how long that'll push it out, but I wouldn't expect a long time because we do have some good conversations underway, but I would not expect any revenue from C&I in the next 12 months outside of an RUO project with pharma.

Bruce Jackson

Analyst

Okay. That's it for me. Thank you very much.

Mitch Levine

Management

Thanks, Bruce.

Ronnie Andrews

Management

Thanks, Bruce

Operator

Operator

That was the final question. Ladies and Gentlemen, we have reached the end of the question-and-answer session. This concludes today's conference call. Thank you for your participation. You may now disconnect your lines.

Ronnie Andrews

Management

Thanks to everybody.