Aspira Women's Health Inc.

Good morning ladies and gentlemen and welcome to Aspira's Women's Health Incorporated second quarter 2024 earnings conference call. At this time, all participants are in a listen only mode. Following management's prepared remarks, we will open the call for your questions. As a reminder, this call is being recorded today. Before we begin, I would like to remind everyone that forward-looking statements are 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 risk and uncertainties and could differ materially from those anticipated due to the impact of many factors beyond Aspira's women's health control. The company assumes no obligations 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 note set forth in today's press release, as well as the risk factor set forth in Aspira's most recent annual report on Form 10-K and quarterly report on Form 10Q filed with the SEC for a description of factors that could cause actual results to differ materially from those anticipated in forward-looking statements. At this time, I would like to turn the call over to Nicole Sanford, Chief Executive Officer. Please go ahead.

Thank you, Operator, and welcome everyone to our second quarter 2024 earnings conference call. With me today is our president, Dr. Sandy Milligan. I will begin with an overview of our strategy, execution, and operations, followed by an update from Sandy on product development. I will then review our financials before opening the call for questions. The most important development for the quarter was the launch of the longitudinal mass monitoring application for Overwatch, following the publication of powerful new data at the beginning of May. This is the latest development in our effort to expand both the clinical utility and commercial opportunity for our over-sweet portfolio of ovarian cancer risk assessment blood tests for women with an anexal mass. The launch of the longitudinal monitoring application means that we have achieved our goal of offering a life-changing suite of blood tests, the first and only tool of its kind available anywhere in the world. This is a major accomplishment and one that we share with the many long-term shareholders who have believed in the company and supported us on this important journey. Let's reflect on the addressable market for our tests over the past few years to set the stage for our future growth. Overwatch Plus, the only test that was commercially available when I joined the company in early 2022, has a total addressable market of between 200,000 and 400,000 tests per year in the United States. We increased that to more than 1.2 million with the launch of the initial assessment application of Overwatch in December of 2022. Now, with the launch of the longitudinal monitoring application this quarter, we believe the total addressable market for our OVA suite tests is between 2 and 4 million tests per year. This is a tenfold increase in the revenue potential for the tests that have already been trusted by healthcare providers more than 200,000 times. It is important to keep the dramatically increased addressable market in mind as we review our performance for the second quarter and look out to the rest of 2024 and beyond. You may recall that we began a refresh of our commercial strategy and program elements in the second half of 2023 with the goal of identifying people, process, and technology enhancements, as well as refining our market messaging to increase both impact and reach. The refresh was completed and fully implemented in the first quarter of 2024, and as a result, I believe we are well positioned to take advantage of the expanded adjustable market for our test. Moreover, the enhanced commercial organization is more efficient and cost-effective than ever, which is critical to our cost containment goals. I'm happy to report that we have seen positive momentum resulting from our refresh efforts, with sequential growth during the first half of 2024. Our total oversweet test volume in the second quarter hit a new company high watermark of 6,471, with more than 20% of that volume coming from the Overwatch test. We achieved this test volume with 17% fewer full-time field salespeople when compared to the second quarter of 2023. By comparison, we had an average of 16 field salespeople in the first half of this year compared to 21 field salespeople for the same period last year, resulting in an impressive 29% increase in volume for field sales representative to 769 tests. We added an additional two field salespeople in the third quarter and expect the enhanced commercial programs, along with the expanded application of the Overwatch test and the powerful new data published in May to support rapid success in these territories. Our primary focus now is to drive adoption of our Oversweet test portfolio to become the universal standard of care for every woman diagnosed with an Enexil mask. There are many important initiatives underway, including working with partners to have our tests added to the protocols for Enexil mask care, which we expect to come together in the third and fourth quarters of this year. Our commercial success and growth also rely on our ability to increase coverage and reimbursement for our Oversweet products, and I'm proud of the progress we have made. On the commercial plan side, we recently contracted with Anthem Plans in California and the Northeast states, adding 8 million covered lives. We expect the Anthem Central and Virginia geographic regions to complete contracting before the end of 2024, which would add an additional 16 million lives. Also of note, we have added Blue Cross Blue Shield of Texas, Blue Cross Blue Shield of Illinois, and Superior Plan Texas so far this year. On the Medicaid side, we added Maryland and Kentucky in the second quarter, bringing the total number of states covering one or more of our overseas tests to nine, including the critical states of California, New York, and Illinois. Medicare and Medicare Advantage reimbursement for Overwatch has also increased meaningfully in the first half of 2024. Despite these achievements, we know we have more to do to convert additional payers. The study we published in May was instrumental in helping to swing momentum our way. The data clearly demonstrated the benefit of adding Overwatch to a physician's clinical assessment in women presenting with adenexal mass. We've created a model to help payers quantify the potential savings that can result from a reduction in surgical interventions on low-risk patients if the Overwatch test is used. We believe the potential savings, while dependent on circumstances, are both significant and compelling. To further accelerate our reimbursement progress, we have initiated a comprehensive analysis of national, regional, and integrated delivery network payers with the assistance of an experienced third-party consultant. The objective of the project is to gather specific and direct insight regarding evidence requirements we must meet to support broader coverage and reimbursement for Overwatch. The first phase of the study, which we expect to complete in the third quarter of 2024, consists of interviews with senior stakeholders to identify evidentiary and other gaps we must fill. These findings will be incorporated into a clinical utility study that we expect will help expand commercial coverage for Overwatch and Overwatch Plus while also informing our market access and reimbursement strategies for future product launches. Now it is my pleasure to turn the call over to Sandy to talk about product development. Then I will come back on to discuss our operating performance and balance sheet position. Sandy? Thank you, Nicole.

In my role as president, my focus continues to be the acceleration of our research and product development program. I'm pleased with the progress we have made in the second quarter, which I'll share with you today. As Nicole mentioned, we announced the publication of two Overwatch-focused manuscripts in May. Together, these peer-reviewed publications demonstrate the potential for significantly improved physician triaging of malignancies for surgery over their clinical impression alone and supported the use of Overwatch as an ovarian cancer risk serial assessment tool. This data demonstrates that Overwatch could substantially reduce surgeries for low-risk patients performed out of concern for malignancy risk, especially for asymptomatic and premenopausal women. Indeed, Overwatch may have reduced the number of surgeries in women with low risk of malignancy by 62% in all patients and 77% in premenopausal women. With the added feature of serial mass monitoring, Overwatch can be drawn at provider-prescribed intervals for active surveillance of an adnexal mass determined by initial clinical assessment as indeterminate or low risk. This is the strongest clinical support for Overwatch and its value proposition for physicians and patients to date. Let me turn now to our product development updates with a brief overview of our progress on EndoCheck, our protein-based test that has been shown to identify certain endometriosis located on the ovary, including endometrioma. Following a robust discussion with healthcare providers upon our presentation of EndoCheck data, At the Society for Reproductive Investigation annual scientific meeting in February, we believe that the EndoCheck protein biomarker signature will significantly contribute to a test with broader endometriosis application, as well as offer insights to improve the understanding of this devastating and complex disease. We are currently processing nearly 400 samples collected in our endometriosis clinical study and expect to have new data for analysis during the third quarter. With this data in hand, we will have the opportunity to further assess the commercial application of the test and expand our outreach to potential development partners. This may include pharma companies with drug therapies in development that could potentially utilize EndoCheck as a research-focused test to identify or track patient response to drug therapies in ongoing clinical trials. We are also considering how the addition of an EndoCheck score to our Overwatch test reports would allow healthcare providers to assess the risk of both ovarian cancer and endometrioma for women presenting with an indexal mass. We believe this may have a positive impact on clinical utility, provider adoption, and pricing of the test. Clearly, we have work to do in deciding how best to proceed with EndoCheck, and for now have focused the majority of our development resources towards our molecular testing portfolio. With that, let me turn to OVA MDX. which is being developed in collaboration with the Dana-Farber Cancer Institute. We have completed assay analytical feasibility on an FDA-approved PCR system, a critical milestone which confirms the ability to perform a test that utilizes the microRNA technology discovered by Dana-Farber on a commercially viable diagnostic platform. Our next phase, which is currently underway, is the design and assay verification process, which we expect to provide additional data prior to the end of 2024. As we have shared previously, we believe that this test will have the power to improve sensitivity for early-stage ovarian cancer, as well as broader detection for various histological subtypes, solidifying our position as the leader in non-invasive ovarian cancer testing for women with adnexal masses. As we complete development steps for the OVA MDX program, we will leverage the learnings and experience in developing a microRNA and protein biomarker test into the development of our broad general endometriosis blood test that leverages proteins from endocheck and proprietary microRNAs identified through our research agreement with Dana-Farber. We are working to establish analytical feasibility and the selection of microRNAs and protein candidates as part of the ongoing test design for this broader endometriosis test. Now that the FDA has finalized its rule to regulate lab-developed tests, we are in the process of determining the regulatory pathway and related requirements for our in-development molecular tests for both ovarian cancer and endometriosis. We do not anticipate the new rule to have any impact on our ability to offer our existing products, including the longitudinal testing application of Overwatch nor do we anticipate the regulation to cause a significant extension of our prior development or launch timelines for the combination microRNA and protein biomarker tests. We continue to focus on identifying non-dilutive sources of funding for our R&D activities, including funding from multiple research grants. Our developments related to our in-process molecular tests are groundbreaking. We believe that related research has created new grant opportunities, which we intend to aggressively pursue. In addition, we are waiting for a funding decision on a sizable grant opportunity, which requires confidentiality until such decision is made. Regardless of the outcome, the application processes have helped us consolidate to a compelling and data-driven development and commercialization strategy to bring to potential development partners. Another potential source of non-diluted funding is through our research biobank, where a recent analysis showed that we have as many as 70,000 serum, plasma, and whole blood samples available for secondary research. In July, we executed a number of small material transfer agreements with third parties who intend to utilize the samples for validation of gynecological disease diagnostic tests. We recognized an average selling price of approximately $500 per sample. This is an important step in establishing a baseline market value for the purchase material and realizing another opportunity for non-dilutive cash through sample disposition. We also believe that there may be opportunities to work with foundations to identify additional academic and research activities in women's health that could benefit from access to our sample bank. Finding the right path for this initiative is complex and requires a strategic approach, but we have made tremendous progress in 2024. With that, let me now turn it back to Nicole for an update in our financials. Nicole?

Thank you, Sandy. Oversuite revenue for the second quarter was $2.4 million, a 13% increase sequentially from the first quarter and flat to the second quarter of 2023. Second quarter product volume of $6,471, increased 11% sequentially and 3% year over year. Overwatch test volume contributed significantly to overall growth, increasing 24% sequentially and 48% year-over-year. As I discussed earlier, the contribution of Overwatch to the overall growth is critical, given the test's large addressable market of between 2 to 4 million tests per year. Our overall average unit price this quarter was $374, a slight increase sequentially compared to $369 in the first quarter. but down 5% from 396 in the second quarter last year. It is important to note that our AUP in the prior year reflected an adjustment for a change in estimate required under generally accepted accounting principles based on actual collections compared to previously recognized revenues. After adjusting to this impact, our second quarter 2023 AUP for all products would have been $381 per test, just over 1% higher than this year. Overall, we are pleased to see Overwatch's AUP converging with Overwatch 1+. Overwatch AUP of $348 in the second quarter reflects a 3% increase sequentially, a 7% increase compared to the second quarter last year, and a 34% increase compared to the first half of 2023. Margins this quarter decreased slightly to 59% compared to 62% last year, as we saw an increase in product costs, including higher shipping costs. We are currently exploring options to better control shipping and other costs as we look ahead to 2025. Gross margin for the six months is largely consistent with the prior year. On the operating side, research and development expenses for the quarter increased 37% year-over-year as we saw an increase in collaboration costs with our research partner for the molecular test portfolio. This includes reagents and other supplies required to process samples, which must be purchased well in advance of testing. Sales and marketing expenses increased 21% over the second quarter of the prior year, primarily due to an increase in personnel costs for the addition of strategic account leaders, marketing professionals, and inside salespeople. G&A costs decreased 20% this quarter compared to last year, mainly due to a decrease in personnel and consulting costs. During the second quarter, our cash used in operations was $3.7 million, down 16% sequentially and a slight increase of 9% compared to last year. One cause of the increase in cash used over the prior year was related to our decision to pay bonuses to our staff, including a small amount that had been outstanding since 2022. These individuals have dedicated themselves to our mission, and the retention is critical for the achievement of our strategic goals. Our cash as of June 30th, 2024 was approximately $962,000. After adjusting for gross proceeds of the subsequent pipe and warrant inducements that were completed in July, our ending cash would have been approximately $5 million. In August, we entered into a new $4.5 million at-the-market facility with H.C. Wainwright. This facility, which will be available to the company following a 60-day standstill under the Warrant Inducement Agreement, replaces a prior arrangement with Cancer Fitzgerald, which had been suspended for some time. We believe H.C. Wainwright offers a better alternative for small-cap companies for this kind of a facility for a variety of reasons, including a significantly lower cost of capital. We are updating our guidance for cash use and operations for 2024 to be between 13 and 14.5 million, down from the 15 to 18 million we guided towards at the beginning of the year. We believe that our in-flight initiatives, including grant funding, sample sales, and partnership opportunities, and the availability of our newly executed ATM facility, will be sufficient for us to fund operations in the near term. Today, we also announced that Sandy and I have opted to change our base compensation for the remainder of the year. Each of us will be receiving additional equity in exchange for a 20% reduction in cash-based salary. We continue to believe that our stock is significantly undervalued. We want to be in a position to be rewarded alongside our shareholders when the capital markets catch up with the company's immense potential. While this year has presented many challenges, we remain steadfastly focused on our mission to improve health outcomes for millions of women while positioning ourselves for long-term success. We have the only blood test on the market for the accurate assessment of the risk of malignancy for all patients that have been diagnosed with an anexal mass, and we are leading the way in the development of noninvasive tests in endometriosis. I continue to be bullish on our prospects, and I'm proud that we have kept our promises to patients, physicians, and our shareholders to the best of our ability. Before I open for questions, I have an exciting personnel update. This week, the board appointed John Colassi, an experienced financial executive, as our interim chief financial officer effective August 15th. John brings a passion for our mission and decades of experience to the role. He has served in senior-level roles, including chief financial officer, chief operating officer, financial strategy, and innovation advisor, as well as founder to several businesses. John's expertise in solving challenges like those facing Aspira at our critical stage of growth will undoubtedly help to position us for future success. This first priority will be the refinement of our capital and liquidity strategy, as well as expanding our shareholder base. With that, I would now like to open the call for questions. Operator?

Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your questions from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before passing the star keys. One moment, please, while we poll for questions. The first question comes from the line of Ross Osborne with Cantor Fitzgerald. Please go ahead.

Hi. Thanks for taking our questions, and congrats on the progress. So starting up on the quarter, really strong volume quarter, would you parse out growth between increasing utilization by existing customers versus attracting new docs that inspire a portfolio?

Hey, Ross, thanks for the question. Thanks for joining. I think it's been pretty consistent across both categories, to be honest with you. So we continue to bring on new providers and continue to see growth in existing provider adoptions.

Okay, great. That's good to hear. And then regarding your comments around FDA's oversight versus historical LDT, realize you don't think the classification is going to impact your current offerings, but do you still plan to submit a watch for FDA approval? And can we walk through that process again, please?

Yeah, sure. Sandy, I don't know if you want to take that. Yeah, jump in.

Yeah, sure. Absolutely. So, Ross, we've been considering whether or not to move forward with Overwatch and get an FDA cleared this year, as we initially thought while we were anticipating the LDT regulation to come sometime this year. At this point, we're holding, because we do want to accumulate additional clinical utility data before we approach the FDA. So, we're going to leave it as an LDT for now, and as you're probably aware, companies have until Well, we can leave it forever because Overwatch was released before the LDT regulation came into effect. But if we do want to clear it, we've got the opportunity to do so. With the new products, we can release as an LDT, and then we just have to clear before mid-2028. Okay, perfect.

And then lastly, on John Colassi, nice to see the interim appointment. Will he be considered for a full-time hire?

At this point, he's only been brought in as an interim, but certainly we will keep all of our options open for long-term, as we obviously will need to have a CFO for the long term.

Okay, great. Thanks for taking our questions.

Thank you.

Thanks, Rob.

Next question comes from the line of Duke Kim with Water Tower Research. Please go ahead.

Hi. Thanks for taking my questions, and Congrats on the quarter. Just on Overwatch, just wanted to know how you're thinking about its growth as physicians implement longitudinal monitoring. Do you envision more of like a steady growth rate or could we potentially see a step up in growth as the retests occur?

Thanks for the question, Do. So, you know, I'm looking at it as, you know, the value proposition for our existing portfolio. A big part of that has been that as we introduce new products, we would be launching them into a warm market, meaning providers that are already familiar with our testing and trust it and have used it in the past. So I believe that we will see a faster ramp up for Overwatch than we saw when we launched Overwatch 1+. But we did see, if you look back over historical, we have seen nice steady growth in Overwatch 1 since it was launched. So I expect it to be at least the same, but I do believe it'll be much faster.

Good to know. And just anecdotally, have you gotten any feedback on the level of physician enthusiasm about the publications and for mass monitoring with Overwatch?

The reception has actually been very positive. I believe that since we launched Overwatch, one of the things that providers were really interested in learning more about is how it benefits pre- versus post-menopausal women and asymptomatic versus symptomatic women. And in both cases, we were able to provide information that showed the utility of the test for potentially reducing surgical intervention on women with benign masses. So in all of those categories, so for premenopausal women, where clearly maintaining their ovaries for, you know, as opposed to prophylactically removing them out of fear of malignancy is a really important goal. And also for asymptomatic women who are masked, is identified incidentally through another diagnosis or another kind of a identification through transvaginal ultrasound or some other when you're looking for something else. Hopefully that's clear. But these are two categories where we have heard in the past that doctors really wanted to understand how Overwatch would help them in those particular populations and the new data along with the longitudinal monitoring application, has been very warmly received as a result because we've brought forward some additional information that helps them to understand the utility of the test.

Okay, great. That's all great signs. Thanks for taking my questions. Thank you.

Thank you. Next question comes from the line of Laura Seville with Alliance Resource Partners. Please go ahead.

Hi, thank you for taking the questions and congratulations again on the growth this quarter. So with the longitudinal monitoring feature now implemented to Overwatch and you also mentioned the potential to add in the EndoCheck score to Oversweep, what do you see here as the next steps and do you have any current plans to further enhance Oversweep?

So next steps for, thanks for the question, by the way. Next steps for longitudinal monitoring, it's all about adoption. So we're really going back to physicians who have used one of our OVA suite tests in the past and making sure they understand the expansion of the test for longitudinal monitoring. And in terms of improving OVA suite or enhancing OVA suite, We do think there's a possibility. This was actually discussed on that earlier R&D webinar that we held with Dr. Elias, our partner at Bena-Farber, Brigham and Women's, actually talked about the benefit that he could see in being able to give the physician an opportunity to rule out ovarian cancer and either rule in or rule out and sort of to be determined with endocheck score endometrioma. and bringing to the table an even higher value proposition for a single test. So the next step, as Sandy mentioned, is we are running some additional experiments and endo-check testing on samples we brought in from our clinical study, and we'll have additional data in the third quarter to really help us to crystallize a vision for commercializing that. product, but certainly regardless of any decision we make about enhancing Overwatch with the EndoCheck score, the research that we're doing right now will be very instrumental in the design and the development of the EndoMDx test.

Got it. Much to look forward to. And then maybe another question for Dr. Milligan. It was mentioned in the past, the ongoing research on the digital PCR or droplet PCR platform. So what is this platform overall encompass and what are some of the opportunities you see here as well as any other plans on leveraging it commercially speaking?

So right now we're just looking at it for our microRNA. We do think it has an advantage over some of the other platen forms, especially with the throughput in the multivariate sense. Any deep particulars scientifically, I'd need to connect you with our scientist, Todd Pappas, but we are very satisfied to date with the performance that we're seeing on that commercial platform.

Got it. Thank you for taking the questions.

Thank you. A reminder to all the participants that you may press star and one to ask a question. Next question comes from the line of Andrew Brackman with William Blair. Please go ahead.

Hi, everyone. This is Maggie on for Andrew. Thanks for taking our questions. Maybe just to start here, can you give us maybe a little bit more color on how you're thinking about that clinical utility study for Overwatch? Just anything in terms of size, timing, or end points that might be helpful to be keeping an eye out for.

Yeah, so the first phase... Hi, Maggie. Thanks for joining. The first phase of the study is to get some additional clarity from the decision makers at the payers about what the gaps are for clinical data that would allow them to move forward with an enhancement to their medical policy for our tests. We're going to be doing data gathering at the front end that will help to answer some of those questions. So I'm not trying to be cagey here, but it is important for us to first find out, you know, what exactly is it that they need to see. Candidly, there's not going to be a single answer. We know that, right? You're dealing with, you know, maybe 50 to 100 different payers in the commercial space. You know, 20 of them matter a lot. Another 20 would matter more. as well, but maybe not as much as that top. So we have to kind of prioritize the views of the larger opportunities for the test in terms of payer input. So the main objective is to do it quickly so that we can very quickly answer those questions. How long is it going to take for us to gather the data? How long will it take? How much will it cost? And who will likely be responsive?

Got it. Thank you. And just with the reduced cash burn guide and recent funding, can you just update us on your thoughts around your ability to further boost the balance sheet? You know, what is your visibility into non-dilutive financing that you discussed earlier in the call and then when you expect to have updates there? And then do you view the implied quarterly burn of about $30 million as sustainable going forward, particularly with the product and innovation pipeline you have?

Sure. So in terms of non-dilutive financing, we've moved the ball forward quite a bit this quarter in terms of looking at the opportunity to monetize important assets that we have, including the biobank and data. That's something that's taken quite a while to get to the point where it is, which essentially required a full physical inventory and collection of the appropriate legal documents, etc., but also importantly looking for the right partners. Because this is an opportunity not just to bring in non-dilutive financing, but also an opportunity to look for partners that we can sort of lock arms with to either expand our commercial offering to include other tech, or to look for people who can kind of work and collaborate with us on our development. So that was an important, very important few steps forward from this quarter. In addition, we've been applying to lots of different grant opportunities, as Sandy mentioned. Many of them require confidentiality throughout the decision-making process, but I can't comment too much on that. Other than to just say we've just made such great progress on the molecular test portfolio, we're at a point in time where going out and asking for additional grant funding makes a lot of sense. Very different place where we're standing today. with that microRNA protein metadata combination of value versus where we've been in the past. So it makes great sense for us to go out and look for those opportunities. Is there a second part of the question that I didn't answer?

Oh yeah, keep going, sorry.

No, I'm just trying to remember. I think you asked the second question, unless I answered it.

No, no, it was just on.

Oh, sustainability. Yes, yes, yes, yes, yes. Yes. So if you look back over the last two and a half years where I've been in this role, we have reduced our cash burn every quarter, quarter over quarter, year over year. It's the first time in many, many, many quarters where we had a slight increase. And as I mentioned, there were some really specific investments that we made in the second quarter that we believed were worth the increase in spend. But my goal is to continue to reduce that quarterly burn. I have demonstrated an ability to do that, and I intend to continue to do that with the help of my new CFO.

Great. Thanks so much.

Thank you.

Thank you. There are no further questions at this time. I would now like to turn the floor over to Nicole Sanford. for closing comments.

Well, thank you everyone so much for joining us today. We look forward to continuing our execution and providing another update at our next quarterly earnings call. So, thank you everyone.

Thank you. This concludes our today's teleconference. You may disconnect your lines at this time. Thank you for your participation.