Good afternoon and welcome to the Sera Prognostics Conference Call to Review Fourth Quarter Fiscal Year 2023 Results. At this time, all participants are in listen-only mode. We will be facilitating a question-and-answer session toward the end of today's call. As a reminder, this call is being recorded for replay purposes. I would now like to turn the call over to Peter DeNardo of CapComm Partners for a few introductory comments.

Thank you, Gary. Good afternoon, everyone. Welcome to Sera Prognostics' fourth quarter fiscal year 2023 earnings conference call. At the close of the market today, Sera Prognostics released its financial results for the quarter ended December 31, 2023. Presenting for the company today will be Zhenya Lindgardt, President and CEO; and Austin Aerts, our CFO. During the call, we will review the financial results we released today, after which we will host a question-and-answer session. If you've not had a chance to review our quarterly earnings release, it can be found on our website at seraprognostics.com. This call can be heard live via webcast at seraprognostics.com and a recording will be archived in the Investors section of our website. Please note that some of the information presented today may contain projections or other forward-looking statements about events and circumstances that have not yet occurred, including plans and projections for our business, future financial results, and market trends and opportunities. These statements are based on management's current expectations and the actual events or results may differ materially and adversely from these expectations for a variety of reasons. We refer you to the documents the company files from time-to-time with the Securities and Exchange Commission, specifically the company's annual report on Form 10-K and its quarterly reports on Form 10-Q and its current reports on Form 8-K. These documents identify important risk factors that could cause the actual results to differ materially from those contained in our projections and other forward-looking statements. I would also like to note that although we will not refer to it during today's earnings conference call, the company has just posted an updated slide presentation to the Investor Relations' page of its website. As a reminder, a webcast replay of this call will be available on the Investors section of our website. I will now turn the call over to Zhenya, Sera Prognostics' President and CEO. Zhenya?

Thank you so much, Peter and good afternoon everyone. We're pleased with our progress last year and during the fourth quarter in laying out the foundation for future growth through key advancements in our PRIME and AVERT studies and product pipeline, all while controlling operating costs to ensure such growth is well-funded. With the key drivers of revenue in our business being publications validating our technology, signing on insurance payers, and broadening consumer and physician awareness of our products, we believe 2024 will be an exciting year for Sera with a number of expected catalysts and developments to support commercial expansion and shareholder value. Just before year end, we were delighted to announce that the Data Safety Monitoring Board overseeing Sera's pivotal PRIME study recommended stopping enrollment due to efficacy. This was due to either of the co-primary endpoints having met the stopping criteria for statistical significance at the pre-planned interim analysis. Something like this usually doesn't happen, so we're highly encouraged that, following successful outcomes with our -REVENT PTB and AVERT studies, the interim PRIME readout may show similarly our test-and-treat approach enables better management and better health outcomes. It has been three months since we announced enrollment stoppage due to efficacy. Given the potentially breakthrough results we hope to report, we were urged to temper our desire to share more on PRIME and to take our time in publishing results in order to preserve the integrity of the publication. We saw the wisdom in this advice and while diligently working towards a strong publication, we've engaged with both the guideline-setting bodies and with our target journals, which confirmed their interest in receiving a manuscript submission. In the next few months, we hope to have a powerful suite of accepted manuscripts, PREVENT-PTB, AVERT, and PRIME that demonstrate consistent clinically…

Thanks Zhenya and good afternoon everyone. Let me review our financial results for the quarter and then I'll provide a bit of color on our OpEx-savings actions, cash runway and business outlook on revenue, as well as activities to foster revenue generation. Revenue for the fourth quarter of 2023 was $41,000 compared to $65,000 for the fourth quarter of 2022. As we previously noted, we had expected that 2023 total revenues would be less than $400,000 and total revenue for the year came in at $306,000. Total operating expenses for the fourth quarter of $8.9 million, were down significantly from $10.5 million for the same period a year ago due to steps we took to streamline commercial operations, better focus our commercial strategy, and reduce overall operating expenses. Research and development expenses were $3.9 million and up from $3.5 million for the fourth quarter of 2022, due primarily to higher clinical study costs. Selling, general and administrative expenses for the fourth quarter were $5 million and down significantly from $6.9 million for the same period a year ago, due to the steps we've taken to reduce expenses, while focusing on the best pathways to increase revenue in the quarters ahead. Net loss for the fourth quarter of 2023 was $7.9 million, which was down from $9.7 million for the fourth quarter of 2022. As of December 31, 2023, the company had cash, cash equivalents, and available-for-sale securities of approximately $79.9 million. The improvements in our company-wide cost structure and our careful management of cash burn have paid off. The result is that our total 2023 gross cash expenses came in at $33.7 million, consistent with our shared expectation of bringing this down to about $34 million for the year, and down significantly when compared to approximately $39 million for 2022.…

We will now begin the question-and-answer session. [Operator Instructions] Our first question today comes from Andrew Brackmann with William Blair. Please go ahead.

Hi, good afternoon. Thanks for taking the questions. Maybe to start on the prime publication. I think it's pretty clear on why you're now waiting to share that data until such a publication comes about. But can you maybe just sort of talk about your ability to work with and show that data to the guideline groups? I think you mentioned that in your prepared remarks. But I'm just trying to better understand your ability to sort of make progress on those fronts even before we see that publication.

Thank you so much for the question Andrew. You're absolutely right, we've been actually in lockstep updating the guideline-setting bodies throughout PRIME right after kickoff. We do so because our staff is closely connected to the organizations and understand deeply how the guidelines are set. And of course, step number one in that is sharing our progress, keeping them updated on to the studies that are being conducted and the results. We have indeed had conversations with them at the upcoming meetings at SMSM, and of course, we'll have conversations at ACOG. Specifically, we're delighted that there's a lot of interest in the results, as well as recommendations that the guideline-setting bodies are giving us on how to further our strategy to ensure the broader adoption and, therefore, evolution of the guidelines appropriately. So, it's using those recommendations as we're shaping our publication plan. We're engaging with the guidelines-setting bodies specifically on that plan, and are looking forward to continued dialogue with them. Rest assured, these conversations are at least quarterly and we look forward to seeing the fruits of that engagement as soon as the data becomes available.

Great. Thanks for that. And then if I could, on the payer side, I appreciate you sort of being upfront on sort of the reality, that may take some time. But you do have a lot of momentum on the publication front moving throughout 2024. Can you maybe just expand on what else you think you might need in order to successfully engage with the payers moving forward? Anything that we should be keeping an eye on aside from the publications? Thanks.

Definitely. Thank you. Well, at least two things, and we're working on those right now and, of course, engaging with both national and regional payers. One is, as I shared, there is a huge economic benefit of the test-and-treat strategy. So, for us to lay out for the payers what could it look like for their member population and communicate that effectively is something we're actively working on in addition to the publication. So, of course, leveraging the model that already exists, we're plugging in different assumptions based on the data from AVERT and PRIME. So, that will be ready alongside as the value proposition to the payer community. That's the first thing. Second thing is, I think it's essential for us to collaborate with payers, as I mentioned in my remarks, to drive adoption in their provider networks. So, we're actively thinking through what could be models and initiatives to drive density of adoption, in particular, the geographic areas, maybe particular states with dominant payers in that area, and what role they can play together with us in driving that adoption and awareness. That initiative and set of initiatives, we hope to drive together with our payer partners as soon as data is available. And of course, we will bring all three to the conversations with the payers; data, economic analysis, and where could we start in terms of showing in particular geographic areas what broad-based adoption and utilization of PreTRM test-and-treat strategy could achieve for their patient population. Thank you for the question.

I'll leave it there. Thank you.

[Operator Instructions] The next question is from Dan Brennan with TD Cowen. Please go ahead.

Great. Thanks for taking the questions. Maybe just the first one, just going back to the PRIME study, can you just remind us, like in order to have -- you obviously stopped on the interim look, when we eventually see the publication, what's like the magnitude of the benefit on the primary endpoints that we should expect to come out like? And is there a range of outcomes? I'm just wondering like if it's at the higher end or the lower end of the range. Like how much would that really matter towards ACOG or doctors? Just trying to think through what the type of outcomes that we could see when the publication eventually comes out?

Thank you so much for the question. Given the standard-of-care for expectant mothers, who unfortunately get missed because of the risk factors in the guidelines, only capture a tiny portion of those at risk for preterm birth, we believe that any improvement will make a big difference for those women and their children. So, we don't have any particular expectation that a low range or high end of the range on any of those outcomes are a prerequisite or threshold for guideline-setting bodies to, let's say, comment on it or put it into guidelines. So, as you think about the four endpoints we put into our PRIME study, two primary and two secondary, all of them talk about both the health of the baby, the neonatal morbidity and mortality index, and the hospital stay, whether it is general hospital stay or NICU stay. We believe that even modest improvement on any of those make a big difference in the health outcomes. So, look forward to sharing the specifics of that once the data becomes public. But at this point, I won't be able to comment whether it's at the low range or high end of the range. I would just point out that it's very consistent with the outcomes you've seen from the data that's already available out there.

Got it. And then in terms of the cash well into 2027, obviously, if we just keep the same burn and run it out, that would get like, call it, breakeven in 2027. Just kind of what are -- can you share any of the other assumptions that you're assuming when you kind of comment about cash well into 2027 kind of beyond this year?

Sure. Hi Dan, this is Austin. So, at our current levels, which we just said in our prepared remarks, we can easily get into 2027 and beyond. We did talk about expanding that cash usage as we invest into our opportunities and behind our opportunities. That will obviously potentially speed up the burn, but we are remaining extremely diligent and prudent in the amount, the timing, and how we invest in those opportunities. So, really, right now, like we said, the goal is to get into 2027 and potentially beyond.

Okay. And then maybe a final one, just on the guidelines, I know Andrew asked it, but just maybe a little more color there. Just so you're able to share the data now with them from PRIME before it's published, you have to wait until it's published. And then what's the right way to think about the pace at which the guide, the ACOG, the other guide -- kind of guidelines would look to possibly incorporate your test? Is it one publication, is it two publications? Like how long does that process usually take? Could it be a year or two years? And then when we think about the timing, how critical are guidelines towards payers? Thank you.

Great. Three questions in one. I will tackle them one at a time. One specific one, we do think even with the first publication, the interim PRIME results, we can expect a reaction. I do not expect changing guidelines on the basis of one study, and that's just my expectation. That said, if the results are breakthrough and the guideline bodies see the potential of it, absolutely. History does show that it takes years and multiple results to do that. So, you're wise to ask, is it multiple publications, multiple results. We will be adding interim study as our third in a row and the final one will be fourth. Not sure if that is just right in terms of the number of studies. What I would suggest is probably the earliest is going to come is a commentary. Guidelines-setting bodies tend to comment on 20, 30 studies per year. We look forward to sharing the results with them as soon as they're available so that they are very well-informed to issue such commentary. The third question you asked is, is it necessary? That's a really, really good one. Is it necessary to be in the guidelines for payer coverage? No, I don't believe so. Their coverage, to me, is a really critical prerequisite to drive physician adoption, and physician adoption is going to be a great vote of confidence for the guideline-setting bodies to change and evolve the guidelines. So, it's actually going to go hand-in-hand. For really mass adoption across physicians, yes, guidelines are necessary. We do think that a lot of physicians will start adopting the test as soon as we remove the barriers that exist right now; number one is published data, number two is reimbursement. So, hopefully, that tackles our guideline strategy. We are really focused on making sure that we do our best, yet we're not counting on them as a key blocker to driving revenue and adoption of the test.

Got it. Actually, one final one on modeling. Should we expect any milestone payments this year? And could those persist into 2025 or are they just kind of one and done?

Yes, the minimum payments, we did have a pretty large receivable on the books at the end of 2023, and that cash was received at the beginning of 2024.

Got it. So, that's it then?

Yes, and that's the other -- conclusion of the minimum payments, yes.

Great. Okay. Thank you.

[Operator Instructions] Showing no further questions, this concludes our question-and-answer session. I would like to turn the conference back over to Zhenya Lindgardt for any closing remarks.

Thank you so much for everyone for attending our call today. In moving through the rest of the year, we will invest in our strategy to drive revenue growth and ROI, while addressing the public health challenge of premature birth. You absolutely can expect to see us share more in the quarters ahead and we're excited by what's in store in 2024. Thank you so much for your support and joining us on this journey. I'll now turn it back over to the operator to conclude the call. Operator?

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.