Aspira Women's Health Inc.

Good morning, ladies and gentlemen, and welcome to Aspira's Women's Health, Inc.' 's first quarter 2022 earnings conference call. My name is Tom, and I will be your coordinator for the call today. At this time, all participants are in a listen-only mode. Following management's prepared remarks, we will open the line for your questions. As a reminder, this conference call is being recorded today. Leading the call today are Nicole Sanford, President and Chief Executive Officer, and Bob Beachy, Chief Financial Officer. After prepared remarks, we will open the call for Q&A. Before we begin, I would like to remind everyone that forward-looking statements, as defined under the Private Securities Litigation Reform Act of 1995, will be made during this call, including statements relating to ASPIRO's expected future performance, future business prospects, and future events or plans. Although the company believes that the expectations reflected in such forward-looking statements are based upon reasonable assumptions, actual outcomes and results are subject to risks and uncertainties and could differ materially from those anticipated due to the impact of many factors beyond the control of Aspera. The company assumes no obligation to update or supplement any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law. Participants are directed to the cautionary notes set forth in today's press release, as well as the risk factors set forth in ESPERA's most recent Form 10-K, filed with the SEC, for a description of factors that could cause actual results to differ materially from those anticipated in the forward-looking statements. And now, at this time, I would like to turn the call over to Nicole Sanford, President and Chief Executive Officer. You may proceed.

Thank you, Operator, and thank you to all of you for joining us today. I'll start with a business update before I hand the call over to Bob to review our Q1 financial performance. Our commercial leader, Michael Newton, and executive chairwoman, Valerie Palmieri, are also here with us and will be available for questions later in the call. During my first two months as CEO of Aspira, I have focused on validating our strategic priorities and aligning resources to the areas of the business that we believe are most likely to contribute to short- and long-term growth. That effort has included focusing our attention on volume growth in our core business, allocating R&D resources to the products that we believe are most likely to drive commercial success, and rationalizing our cash usage across the business. As I said the last time we were together, I believe the ability to achieve our mission to improve the health outcomes of women with gynecological diseases relies on our ability to make 2022 our most successful year across three dimensions, growth, innovation, and operational excellence. I've worked hard to align our leadership team around these value drivers, and I'm pleased with our initial progress. I can say with confidence that we are poised to see significant acceleration over the rest of the year. I'm going to speak to each value driver in a moment, but first I'd like to share an exciting development about our leadership team. Today we are announcing that Dr. Ryan Phan will be joining Aspira as our Chief Scientific and Operating Officer. Dr. Phan joins us from CareDx, where he currently is Senior Vice President of Lab Services and Medical Director. His combined and extensive experience, ranging from world-class academic institutions, healthcare systems, and the commercial biotech industry, is rare and aligned with our strategic priorities. We believe this appointment will strengthen our operations and accelerate our targeted pipeline development. Dr. Phan was a key member of the CareDX executive leadership team where he led clinical testing service operations, clinical development pipelines, manufacturing, supply chain, regulatory affairs and compliance, and automation and engineering divisions. In addition, he served as the licensed medical director of the company's CLIA and CAP accredited laboratories and played a key role in the growth and expansion of the company's testing revenues and portfolio. Prior to joining CareDX, Dr. Phan was managing director and head of regional molecular genetic pathology and cytogenics at Kaiser Permanente in Northern California, where he led a series of programs related to strategic clinical development, laboratory expansion, and clinical testing. Before that, Dr. Phan was faculty member at the University of California at Los Angeles and the Los Angeles VA Medical Center. Dr. Phan is highly prolific in academic medicine. He has published numerous academic papers and co-authored a medical textbook, The Atlas of Hematopathology. Dr. Pham received his bachelor's degree from the University of California at Berkeley and his PhD from Columbia University. He completed his postdoctoral training at Harvard Medical School, where he was a Cancer Research Institute Fellow and American Society of the Hematology Scholar. I believe Ryan is the leader we need to enhance our innovation efforts, accelerate the expansion of our product portfolio, and scale our clinical diagnostic operations as we grow. Fortunately, Ryan saw Aspira's substantial potential and decided to devote his talents to providing health providers with better tools to treat women with gynecological diseases. He will be joining us in just a few weeks and will be on our next quarterly earnings call. Now let's talk about our core business, starting with growth. Our commercial team faced both challenges and opportunities in the first quarter. Even though we started the year in the throes of another COVID surge, which threatened our aggressive growth plans, our volume recovered rapidly. Unlike other companies in the diagnostics sector, many of whom struggled with sales throughout the quarter, we saw improvements in volume, achieving top-line revenues of $1.9 million, an increase of 26.4% compared to the first quarter of 2021, and 2.1% sequentially compared to the fourth quarter of 2021. Perhaps not surprisingly, the COVID surge significantly impacted sales volume in January. Average daily OVA volume was 64.6 for the month of January. By March, however, average daily OVA volume had increased to 84.3, a new record for the company. The increase continued into April when OVA volume per day achieved 86.7, an additional 2.8% increase over March. The early days of May are very promising with average daily sales so far in the low 90s. Our new head of commercial, Michael Newton, wasted no time in making an impact. As previously disclosed, we executed a reorganization of the commercial team in March to effectively deploy personnel with the most relevant skills and experience for our portfolio. We have also taken a fresh look at territories and the incentive plans we have in place for our sales force. These efforts appear to be paying off in terms of sales efficiency. We ended Q1 with 23 salespeople, up only two from the end of 2021, yet we achieved the previously mentioned record sales volume in March and incrementally increased sales volume in April. We are in the process of adding to our sales team in newly created roles, plan to have approximately 34 field sales professionals by the end of 2022. An important leading indicator regarding future growth potential is new ordering physicians. In the first quarter of 2022, approximately 600 physicians ordered an overproduct for the first time. a record high and an increase of 47% compared to the first quarter of 2021, and a 3% increase compared to the fourth quarter of 2021, despite the slow start in January. We expect these physicians to drive incremental volume for the rest of 2022. Looking towards the rest of the year, our leadership team will focus on both volume and price as drivers of top-line growth. As part of our refresh of the commercial organization, we have improved the alignment of the sales and reimbursement teams to help ensure they are positioned for maximum impact. We will continue to push hard for new physician adoption, especially in areas of the country where we have secured favorable payer pricing and where there are large, relatively untapped physician pools, such as women's health supergroups, hospital and other health systems, and clinics that work with underserved populations. To that end, we have launched a series of market-making sprints aimed at creating accelerated progress in areas of potential high-volume growth. This includes active and retired military and their families, Medicare and Medicare Advantage nationally, and Medicaid populations in large states like New York, California, Georgia, and Illinois, where we have previously secured reimbursement. I want to assure you that we continue to explore strategic partnerships to rapidly expand the reach of our sales organization. In fact, while it is too soon to disclose detailed information, we are in the final stages of negotiating an agreement with a commercial partner to co-market and distribute our overproducts and expect to have additional information to share in the coming weeks. As we have said in the past, we believe these relationships are key to the adoption of our existing products and will drive rapid distribution of future products. Let's now turn to innovation and an update on our product pipeline. We have already achieved several important milestones this year with respect to our overproducts. The Overwatch manuscript, analytical validation of a deep neural network algorithm for the detection of ovarian cancer, has been accepted for online publication in JCO Clinical Cancer Informatics. This study was a critical step towards the launch of Overwatch, our next-generation ovarian cancer risk assessment tool. As a result, we have shifted to finalizing the commercialization and launch plan for Overwatch, which will occur in two phases. We intend to launch the single-use Overwatch test later this year. The timing will depend on the results of the clinical validation study that we expect to be completed over the summer with a plan to publish in the fall. We expect this interim study, which will include real-world data from patients, to be instrumental for driving both adoption and reimbursement. We believe all other prerequisites for a successful commercial launch have been met. The launch of the serial monitoring test is planned for 2023 upon the completion of the ongoing clinical validation study. Looking ahead on our over-product line, the strategic research collaboration agreement with Harvard's Dana-Farber Cancer Institute that we have previously disclosed will build upon strong initial findings. We believe the high specificity demonstrated by the microRNA technology coupled with strong sensitivity of our protein-based technology have the potential to deliver a groundbreaking personalized risk solution for patients who are genetically predisposed to ovarian cancer. With respect to our development of a commercially viable endometriosis diagnostic product, We have made a strategic decision to develop this diagnostic as an LBT or laboratory-developed test, rather than pursuing breakthrough device designation. One of the most attractive reasons for companies to pursue the breakthrough device path, which was achieving streamlined reimbursement through the FDA program, was eliminated last year. While we now believe the most appropriate path to market for our endometriosis diagnostic product is an LBT, we are not ruling out FDA breakthrough medical device designation in the future. Our final strategic priority is operational excellence. This speaks to how we operate the business and allocate our resources, especially with respect to people and discretionary spend. I've asked our leaders to focus on higher ROI activities, especially those that drive OVA adoption, sales volume, price improvement, and the accelerated development of our first-generation endometriosis diagnostic products. Outside of those priorities, we have implemented additional cost controls aimed at scaling our people, process, and technology infrastructure at a pace that is appropriately aligned with our growth. In areas where we seem to be spending in advance of business need, we have pulled back significantly and will continue to do so over the remainder of the year. Bob and I have also taken a hard look at discretionary spending and have challenged ourselves to be prudent with our cash reserves. To be clear, we will continue to focus time, talent, and funds on driving broad adoption of our overproducts and to the development of our endometriosis products. However, we will continue to challenge the ROI of spending across the organization, and we plan to refrain from expanding our strategic focus to other priorities in the near term. As an executive team, we are firmly committed to managing our cash flow very closely for the rest of the year. With that, I'll hand it over to Bob to talk about our first quarter financial performance. Over to you, Bob.

Thank you, Nicole. First quarter 2022 over one revenue was $1.83 million, an increase of 29% over prior year and a 1% increase sequentially. This 29% over one revenue increase is primarily due to an increase in the number of tests performed in 2022, as well as an increase in the over one average revenue per test in the first quarter of 2022 compared to the prior year. As Nicole has discussed and we discussed on our year-end call, the first quarter commenced with some COVID headwinds resulting in modest sequential growth for the quarter. We are pleased with its sequential progression throughout the quarter and for the month of April. The revenue per over one plus test performed was $308 for the first quarter of 2022 compared to $375 during the first quarter of 2021. The year-on-year price increased 1.2%, while the sequential price was a slight reduction from the $382 realized in the fourth quarter. This slight decrease is driven by patient pay collection challenges as patient deductibles reset in the beginning of the year, as well as our strategic initiative to serve the Medicaid population, which currently has a lower price when compared to our average. Gross profit margin on Oval and Plus was 53% in the first quarter of 2022 compared to 54% in the prior year first quarter of 2021. The year-on-year decrease was driven by the addition of laboratory personnel in advance of our anticipated growth in the coming quarters. Research and development expenses for the three months ended March 31st, 2021 were $1.3 million an increase of $476,000 compared to the first quarter of 2021, and a decrease of $105,000 when compared to the fourth quarter 2021 spending levels. This spending was focused primarily on product development costs related to Overwatch and investments in Aspyrus Synergy. Sales and marketing expenses were $4.5 million for the three months ended March 31, 2022, an increase of $1.4 million compared to the first quarter of 2021. The increase was driven by personnel costs as well as related travel and entertainment. During the first quarter of 2022, we executed a reorganization resulting in the separation of a number of employees. The changes were aimed at enhancing our national sales force and driving the accelerated adoption of Oval One Plus as the standard of care for early risk detection of ovarian cancer in women who have been planned for surgery. The organizational changes resulted in the recording of severance, separation, and settlement payments, as well as legal costs in the first quarter of approximately $1,284,000, including estimated future payouts partially offset by insurance reimbursement of $523,000. Severance paid for sales and marketing totaled $1,085,000. General and administrative expenses were $4.4 million for the three months ended March 31, 2022. We incurred $2.5 million in general administrative expenses in the prior year quarter. The year-on-year variance is attributable headcount and personnel expenses. We ended the first quarter of 2022 with approximately $27.1 million in cash, cash equivalents, and restricted cash. Cash used in the first quarter of 2022 was 10.2 million, including approximately 1.3 million of severance settlements and legal expenses associated with our first quarter reorganization, and approximately 1 million for payments under our annual incentive bonus plan. With that, I'll turn it back over to Nicole.