Aspira Women's Health Inc.

Good afternoon, ladies and gentlemen, and welcome to Aspira Women's Health Incorporated first quarter 2023 earnings conference call. During the presentation, all participants will be in a listen-only mode. Following management's prepared remarks, we will open the call for your questions. At that time, if you have a question, please press the 1 followed by the 4 on your telephone. If at any time during the conference you need to reach an operator, please press star and zero. As a reminder, this call is being recorded today. Leading the call today are Nicole Sanford, President and Chief Executive Officer, Marlene McLennan, Interim Chief Financial Officer, and Dr. Ryan Fon, Chief Scientific Officer and Chief Operating Officer. After the 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 Aspira'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 Aspira Women's Health Control. 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 Aspira's most recent annual report on Form 10-K and quarterly report on Form 10-Q filed with the SEC for a description of factors that cause actual results to differ materially from those anticipated in the forward-looking statement. At this time, I'd like to turn the call over to Nicole Sanford, President and Chief Executive Officer. Please go ahead.

Thank you, Operator, and good afternoon, everyone. I would like to welcome you to our first quarter 2023 conference call. With me today are Dr. Ryan Zahn, our Chief Scientific and Operating Officer, and Marlene McLennan, our Interim Chief Financial Officer. After my prepared remarks, Ryan and Marlene will provide a brief update on our product portfolio and financial performance, respectively, before we open the call for questions. Let me begin with a review of our performance this quarter. In the few weeks since our 2022 year-end earnings call, we have continued to make progress on a number of fronts. Our sales and revenues for the quarter fluid in part from the launch of Overwatch in December reached new record highs. A total of 491 Overwatch tests were performed in the first full quarter after launch, contributing about 8% to the total over-sweet volume. Our strategy has been to leverage the trust and brand recognition that has been established with Overwatch Plus for a rapid adoption of Overwatch by the OB-GYN community. Total product volume increased 29% over the first quarter of last year, one of the strongest performances ever recorded by the company. Our pivot to a more physician-focused portfolio approach and awareness marketing for the entire overshoot of tests appears to be effective. We have also seen progress with alternative sales channels, such as our relationship with bioreference laboratories and our Aspyrus Energy relationship. As a result of these efforts, we achieved volume growth while simultaneously cutting sales and marketing expenses by 43%, and nearly doubling the number of tests per full-time sales representative from 173 to 348. We also saw increases in our new ordering positions and average daily test volume. As is common with newly launched products, the majority of Overwatch tests in the first quarter were not covered by insurance, which led to a larger number of patient bill accounts. Our historical collection patterns appear to be holding across the Oversweep portfolio. However, we expect a shift in product volume to create some volatility in the average selling price of our tests for the rest of the year. We are focusing on securing broad reimbursement as a key driver to revenue growth and announced in March that Overwatch will be covered under our existing contract with a leading national payer. In addition, our Overwatch-specific TLA code went into effect on April 1st. We expect to make an announcement regarding the publication of a sponsored over one clinical utility study in the coming weeks and plan to use that as an accelerator to continue our progress with the remaining national payers for over one plus and as a catalyst for the expansion of coverage for Overwatch. While we are confident that our reimbursement strategy will be successful, we cannot control the timing of payer coverage decisions. We intend to continue aggressively driving provider adoption as we execute upon our strategy. and will closely monitor the resulting impact on our cash needs. Let me now turn to our progress on our operational performance. I believe it remains prudent to extend our cash runway as much as possible through strategic reductions in discretionary spending. As a result of the personnel cuts in 2022 and continued focus on cost containment, we significantly reduced our net operating cash spending in the first quarter to 5.7 million compared to 10.2 million in the first quarter of last year. We really iterate our operating cash utilization target for the remainder of 2023 to be between 10.3 and 13.3 million. Given our first quarter ending cash balance of 7.5 million, we are keenly aware of the need to identify additional sources of liquidity. We continue to meet with potential partners and I'm pleased to see the positive momentum the launch of Overwatch has created. We have proven ourselves to be capable of launching innovative diagnostic products to address unmet needs in gynecologic health. We are in a stronger position for partnership discussions than at any time since I joined the company. We have increased our efforts to attract investors and partners since the beginning of the year and will continue to make that a top priority. In the meantime, we have significantly increased our access to just-in-time capital by $22.5 million this quarter, by implementing an ATM sales agreement with Cantor Fitzgerald and securing a committed stock purchase agreement with Lincoln Park Capital. We intend to utilize these facilities prudently over the next one to three years to close funding gaps. These are valuable tools that provide access to the market at an attractive cost of capital, especially compared to transactions that have been closed by microcap companies in recent months. Aspira's strategy and science is sound, and has helped us to attract talent and retain our top performers. Our attrition remains very low. We were also able to attract three outstanding new board members, Stephanie Cavanaugh, Danny Herchuk, and Lynn O'Connor-Voss. They bring the experience and passion we need in these challenging times. With that, it is now my pleasure to turn the call over to Ryan for a closer look at our product portfolio.

Thank you, Nicole. I am very pleased to say that we continue to make progress on the development front. Let me begin with Overwatch. Overwatch has been very well received by physicians since the recent launch in December last year, as it provides a personalized risk assessment for women presenting with anastomosis. The Overwatch Clinical Validation Manage Group was accepted for publication in January. This peer-reviewed publication in the Frontiers in Medicine provides real-world evidence so physicians can be confident in utilizing Overwatch in the management of anastomosis. including to safely decrease premature ovary removal and reduce surgical backlog. As excited as we are to have Overwatch available to patients, our work is not done. Overwatch's true benefit lies with its potential as a serial monitoring test for managing anastomosis. Currently, physicians view Overwatch as a one-time test to determine the clinical management of a patient, including whether a woman can continue to be monitored or needs additional workup or surgical consideration. As a serial monitoring test, physicians would use Overwatch multiple times to follow up on the woman at natural mass status. These personalized risk scores will guide the physician decision to monitor the mass or to refer her for additional testing or surgery. We continue to follow and enroll patients in the prospective Overwatch multi-center clinical study via additional periodic blood draws As a result, we are collecting real-world evidence to support the use of Overwatch as a serial monitoring assay. We anticipate this phase of the study to be completed in the third quarter of this year. Moving to EndoCheck, our in-development non-invasive test to aid the diagnosis of endometriosis. We are making progress on both internal development efforts and the development program with a consortium of institutions led by Harvard's Dana-Farber Cancer Institute. Starting with our internal development process, we recently succeeded in identifying and cataloging a large number of patient samples from our own biobank. This is a significant milestone given the previous concerns about the adequacy of available samples needed for the development of our assays. We are in the process of validating our tests using those samples. We remain focused on the launch of the first-generation endometriosis assay in the second half of this year. With respect to our partnership with Dana-Farber, the endometriosis research collaboration continues to be productive. Through our collective efforts, we have obtained sufficient cohort data enabling us to move forward. This project is on track to meet expect development goals for 2023. Turning to the recent announcement on our partnership with Dana-Farber Cancer Institute, we are very excited to expand the collaboration to include the development of a microRNA-based ovarian cancer test. Because microRNAs are easy to extract from blood samples and appear earlier compared with other testing targets, like circulating tumor cells or proteins, they are a good target for an early stage diagnostic test. This new non-invasive molecular-based risk assessment test will become part of our over-sweep portfolio. We look forward to having a deeper discussion on our portfolio during the Investor R&D Day on May 21, featuring our physician collaborator, Dr. Kevin Elliott, a Harvard Medical School gynecology professor. I will now turn to Marlene for discussion of financial performance. Marlene?

Thank you, Ryan. Product revenue for the three months ended March 31, 2023, with $2.3 million. an increase of 26% compared to 1.8 million for the same period in 2022. The increase in revenue was primarily driven by an increase in over three tests performed during the quarter, which increased 29% to 6,259 compared to 4,846 for the same period in 2022. Revenue per over-suite test performed for three months ended March 31, 2023 decreased 2% to $370 compared to $379 for the same period in 2022. We expect revenue per test to be volatile during 2023 as we seek payer adoption on the Overwatch test. Total profit margin was 51.4% for the three months ended March 31st, 2023, compared to 50.8% for the same period in 2022. Research and development expenses for the three months ended March 31st, 2023 were 1.2 million, a decrease of 9% compared to $1.3 million for the same period in 2022. The decrease was primarily due to a reduction in clinical trials, supply, and consulting costs. Sales and marketing expenses for three months ended March 31, 2023, were $2.6 million, a decrease of 43% compared to the same period in 2022. The decrease was primarily due to a decrease in personnel costs, including severance-related to our Salesforce reorganization in the first quarter of 2022. General and administrative expenses for the three months ended March 31st, 2023, were $3.2 million, a decrease of 27% compared to the same period in 2022. The decrease was primarily due to reductions in personnel, consulting, and outside legal costs. Total cash and cash equivalents as of March 31st, 2023 was approximately 7.5 million. Cash used in operations for three months ended March 31st, 2023 was 5.7 million compared to 10.2 million for the same period in 2022. This is the result of cost cutting and personnel realignment activities taken in 2022. In February, we secured an ATM sales agreement for $12.5 million, and in March, we secured a committed stock purchase agreement for $10 million. As Nicole mentioned, we intend to utilize these facilities on an as-needed basis over the next one to three years to close funding gaps. We generated a total of $162,000 in proceeds for these agreements in the first quarter. I will now turn it back over to Nicole.

Thank you, Marlene. May 8th was World Ovarian Cancer Day, which presented an opportunity to reflect on the need for better ovarian cancer diagnostic tools and the resulting potential for our business. We are extremely proud of the work we are doing to improve health outcomes for women and are excited to continue our forward progress across our strategic growth, innovation, and operational excellence goals. With that, I would like to now open the call for questions. Operator?

And I'd now like to turn the conference over to Marlene.

Actually, no, I think we're ready to open for questions. Actually, I have one quick other thing to add, and then we'll open for questions. Thank you, Grant. Sorry about that. Earlier this week, our shareholders overwhelmingly approved a reverse stock split between 1 to 10 to 1 to 20 during our annual meetings. Management and the Board undertook an extensive analysis of similar capital transactions from a wide variety of sources and considered alternatives that would be most likely to allow us to remain in compliance with NASDAQ listing standards and protect the interests of our existing shareholders. Our Board of Directors approved a 1 for 15 split, reverse split, that was announced earlier today and will be effective at the start of trading tomorrow morning. We remain optimistic that upcoming milestones, including the expansion of Overwatch as a serial monitoring test and the launch of a first-generation endometriosis test, among others, will have a meaningful impact on Aspira's staff performance to the end of the year and beyond. We are ready to look towards the future. I remain firmly committed to transparency with you, our shareholders, and focused execution of our strategy. With that, I will open for questions.

Thank you. If you would like to register for a question, please press the 1 followed by the 4 on your telephone. You will hear a three-tone prompt to acknowledge your request. If your question has been answered and you would like to withdraw your registration, please press the 1 followed by the 3. And one moment, please, for the first question. The first question comes from the line of Andrew Brackman with William Blair. Please proceed with your question.

Hey, everyone. This is Maggie Bui on for Andrew today. Thanks for taking our questions. Appreciate the commentary on the Overwatch momentum. Could you maybe give a little bit more color there? You know, what specific types of accounts are you seeing the traction in and anything you can tell us about how this launch has allowed for you to open new doors into accounts you maybe previously weren't able to get into?

Sure. Thanks, Maggie. Appreciate the question. We've seen pretty broad interest in Overwatch. Candidly, physicians have been interested in a test like this and in this test in particular. We've been priming the pump for a while now. So we've had a lot of interest from our existing physicians. We had a record number of new physicians, new ordering physicians in the first quarter. And of course, some piece of that was related to Overwatch. So it's been helpful on both fronts in terms of driving repeat order physicians and bringing new physicians on board. And just quickly adding to that, you know, we've said that we really believe that the brand and trust that we've built up with physicians with Oval and Fox would create a great springboard and platform when we launched Overwatch. And so far, that strategy has proven to be sound.

Great, thanks for that. And then just on the spend here, so it looks like another solid quarter of moderation. As you think about perhaps increasing spend, what specific areas are you eyeing and how are you evaluating potential ROI on that spend?

I think that we would really focus on accelerating the remaining steps on development for products that are in the portfolio or in development, for example. We would want to open additional sites for the endometriosis study, which we think will be helpful not only in our first-generation test, which we have committed to launching by the end of the year, but for the add-on tests that we expect to be part of that portfolio in the future. So that certainly would be one area that we would look to add resources.

Great. Thanks so much.

And the next question comes from the line of Sally Yankas with Water Tower. Please proceed with your question.

Oh yes. Hello. Hi Nicole. Do you expect sort of the same volume of tests to be sold in the next quarter. I mean that's a huge jump. It was I mean do you think you're sort of at that kind of quarterly level or do you expect it to further increase.

So it's pretty early in the Overwatch launch to draw too many conclusions about the trend. I will say, though, as we've kind of gone into Q2, we've continued to see strong demand both for the legacy Overwatch and for Overwatch. So we're feeling pretty good. We've mentioned in the past that we have focused on physician educational events and conferences. That continues to be a priority for us. We're in conference season right now. We will be out and about and presenting and holding product roundtables and theaters and other ways to present the test to large physician groups. And we have seen that after we attend and present at one of those events, we see a significant bump after that. So we're feeling confident that that shift in focus has been appropriate.

Okay, good. And then in terms of the marketing partner with Organon, you expect some sort of commercial sales this quarter. Do you have any idea when they're going to launch? Are they doing like a full launch meeting or anything like that?

So I'm not sure what – we don't have an announced partnership with Organon yet. You may be referring to our relationship with BioReference Laboratories that we launched last year.

Oh, yeah, yeah, okay, yeah.

Yeah, yeah, yep. So that continues to gain momentum. Our sales team is working very closely with their sales team. Oh, good, okay. And that's been very positive in terms of one of the drivers, frankly, for the increase in the test volume for sales reps because the other channels are starting to produce more more test volume so we can get volume without adding a lot of cost and headcount. So we're feeling pretty confident in the sales team that we have and the momentum that we're getting from our alternative channels.

Okay, great. Well, thank you very much. No, thanks for joining, Sally.

And there are no further questions at this time. I will now turn the presentation back to the host.

Well, thank you, everyone. I just want to take another opportunity to thank you for joining us and encourage you to register for our May 23rd event. You'll hear more about our forward progress across our three strategic priorities. Those have not changed, growth, innovation, and operational excellence. And we'll give you additional color commentary and detail around the expansion of our product portfolio. So please make sure you join us then. And thanks so much for being here.

That does conclude today's conference. We thank you for your participation and ask that you please disconnect your line.