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spk01: And welcome to the BIOSEP first quarter financial results conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your touch-tone phone. To withdraw from the question queue, please press star, then two. Please note this event is being recorded. I would now like to turn the conference over to Jody Kane. Please go ahead.
spk02: This is Jody Kane with LHA. Thank you all for participating in today's conference call. Joining me from BIOSEPT are Michael Nall, President and Chief Executive Officer, and Tim Kennedy, Chief Operating Officer and Chief Financial Officer. During this call, management will be making a number of forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include all statements that are not historical facts and generally can be identified by terms such as anticipates, estimates, believes, could, expects, intends, may, plans, potential, predict, projects, should, will, would, or the negative of those terms. Forward-looking statements involve known and unknown risks, uncertainties, and other factors that may cause actual results, performance, or achievement to be materially different from those statements, as well as performance or achievements that are implied by the forward-looking statements. In particular, there is significant uncertainty about the duration, severity, and impact of the COVID-19 pandemic. This means results could change at any time, and the contemplated impact of COVID-19 on BIOSEP's operations, financial results, and outlook is the best estimate based on information for today's discussion. For details about these risks, please see the company's SEC filings. The content of this call contains time-sensitive information that is accurate only as of today, May 12, 2021. Except as required by law, BIOSEP disclaims any obligation to publicly update or revise any information to reflect events or circumstances that occur after this call. Now I'd like to turn the call over to Michael Nall. Mike?
spk03: Thank you, Jody, and good afternoon, everyone. Today we are reporting outstanding quarterly results with revenues of $17.8 million, operating income of nearly $2.7 million, and our second consecutive quarter of profitability. These results were driven by our quality RT-PCR testing for SARS-CoV-2 as our dedicated team continued to serve our community. In turn, our strong financial performance supports the investments in our core oncology business, and more specifically, our CN-side cerebral spinal fluid assay, which we officially launched late last month. I'm also pleased to announce today an agreement with Quest Diagnostics, with whom we will collaborate to give patients access to our target selector NGS lung assay throughout the United States. As you know, Quest is the world's largest diagnostic laboratory. We expect setup to be completed in the third quarter with availability to accept orders from Quest clients to follow. This is an exceptionally exciting and transformational time at BioCept with the full commercial launch of our proprietary C-Inside assay now underway. It's no overstatement to say that C-Inside is paradigm changing for both BioCept and for patients in need of more accurate diagnostics for late stage cancers. See Inside provides physicians with a significantly improved tool to diagnose and manage patients with tumors that have metastasized to the central nervous system. Since the soft launch of this assay in early 2020, we have seen quarterly volume growth from an increasing number of early adopter physicians, with many becoming repeat customers, and this is a trend that we expect will continue. Importantly, we're already seeing that See Inside can positively impact the life expectancy and the quality of life, of patients who otherwise might be referred to hospice care. Our C-inside assay is currently validated to identify metastatic cancers in patients originating in the lung and breast, which frequently involve the central nervous system. We estimate that the U.S. market for the assay at more than $1 billion annually with approximately 200,000 patients diagnosed with metastatic cancer involving the central nervous system per year. Over time, we plan to expand our C-inside testing menu for additional tumor types and biomarkers, including melanoma, by year end. We recently highlighted the advantages of our C-inside assay and key opinion leader webinar, featuring prominent neuro-oncologists, Dr. Amir Azadi from the Barrow Neurological Institute, Dr. Nicholas Blondin from the Yale School of Medicine, and Dr. Priya Kumtaker from Northwestern University. I invite our listeners to learn more about CNSide by registering for the webinar on the biocep.com homepage. Our enthusiasm for CNSide stems from its ability to offer physicians a more timely and accurate method to diagnose the presence of metastases to the central nervous system compared with the current standard of care, which is CSF cytology. In fact, our pilot studies show that in approximately 80% of cases of patients with suspected central nervous system involvement, tumor cells were detected using C-inside, whereas CSF cytology, only about 50% of cases were detected. Unlike CSF cytology, C-inside has the added advantage of identifying actual molecular targets. Patients with metastatic cancer involving the central nervous system have the potential for significantly better survival and reduction of neurologic symptoms due to the many advances in treatment, particularly new targeted therapies. Additionally, identifying specific biomarkers can be critical in treatment selection. For example, in a case study cited by Dr. Rizzotti during the webinar, a 57-year-old woman diagnosed in 2017 with stage 4 HER2-negative metastatic breast cancer showed negative results for CNS involvement with CSF cytology. Testing with CNSide found the presence of metastases, including HER2-positive cells. Dr. Azadi was able to use this information to prescribe the treatment regimen. As of January 2021, this patient is free of symptoms. Also during the webinar, Dr. Kumtaker noted that at least one patient with HER2-negative breast cancer in her systemic disease was found to be HER2-positive after being tested with CNSI. Dr. Kumtaker was then able to modify this patient's treatments. Additionally, CNSide provides a quantitative cell count that we can use to identify early trends in patients' therapy response. This vital information can help physicians determine whether a patient remains on treatment, comes off treatment, or changes treatment. I want to share some upcoming milestones with our CNSide program. We expect to have an update on securing FDA breakthrough device designation in the third quarter. This designation provides patients and healthcare providers with timely access to novel medical devices by speeding up their development via improved clinical trial assessment and review. We also expect this designation will be valuable in our ability to partner with pharma companies that are developing oncology drugs for the treatment of central nervous system metastases, and it creates the potential for high-value reimbursement within the next year. Given the many advantages of C-INSIDE over alternative diagnostic methods, our goal is to establish C-INSIDE as the new standard of care for diagnosing and monitoring patients with metastatic cancers involving the central nervous system. We have developed a clinical pathway intended to produce publications that will influence national oncology care guidelines by 2023. We expect to begin the first part of our 4C study by the end of this year with completion in mid-2022. This study is designed to provide clinical validation for FDA breakthrough device designation. We will then conduct the second part of the 4C study to evaluate CNSide's clinical utility in order to prove key decision points that can be made based on testing results. We expect to initiate this study in the third quarter of 2022 with completion approximately one year later. We will also be involved in at least one major multi-institutional neuro-oncology pharma trial and are working to develop additional related clinical trials with other academic centers of excellence. The objective of these studies will be to establish the use of C-INSIDE in assessing patient therapy responses and for monitoring patients post-treatment. Turning to our broader oncology business, every patient diagnosed with cancer needs some level of genomic profiling to provide valuable insights in order to help guide physicians with treatment decisions. Historically, one or maybe two tissue biopsies were performed during the continuum of patient care. Now with liquid biopsies, whether using blood or cerebral spinal fluid, this testing can be performed far more frequently for monitoring purposes. It's not surprising that during the early days of COVID-19 pandemic, our oncology testing volume declined. However, we've seen a steady increase in volume beginning in the 2020 third quarter. We believe this includes an increase in our assays being used for monitoring, which sometimes have a lower price point per test. Turning now to COVID-19 testing, our BioSep team takes pride in serving our community during the pandemic by providing quality testing with quick turnaround times. Since June 2020, we have received approximately 390,000 samples for COVID testing. You may have read recently about our announced partnership with the Foundation for California Community Colleges to serve the COVID-19 testing needs of the largest college system in the U.S. This testing could help protect the safety of campus populations and reduce the spread of the virus as California community colleges return to in-person classes. We have already served some athletes in many of the system's 116 colleges, and we are excited to expand our service to the general population of some 2.1 million students, as well as teachers and staff. Regarding our expectations for COVID-19 testing going forward, we are encouraged more people are getting vaccinated as we are all ready to get back to normal. That said, many of our customers for COVID testing are assisted living and nursing homes, and these facilities still must test on a routine basis. We expect COVID-19 testing will continue to be an important component of our business and will provide meaningful revenues throughout 2021, noting our expectations could change as the year progresses. As an update with our AGEA Biotechnologies collaboration, validation is underway to distinguish new strains of the virus while providing quantitative viral load results. This new assay will likely be especially helpful for our clients for reflex testing when patients test positive for COVID-19. The information provided will assist healthcare providers to monitor viral load over time to help determine next steps with their patients. And with that, I'll now turn the call over to Tim Kennedy to review our first quarter financial results.
spk04: Tim? Thanks, Mike, and good afternoon, everyone. As Mike mentioned, for Q1 2021, we reported revenues of $17.8 million. This is a significant increase from $1.4 million in Q1 of 2020. and is primarily due to COVID-19 testing. Our revenues included $17.7 million in commercial test revenue, including $16.8 million attributable to COVID-19 testing. In Q1 2021, we reported 145,110 total accessions. This is a significant increase from 1,306 total accessions in Q1 of 2020, and in line with Q4 2020 total accessions of $145,129. Total cost of revenues was $9 million, compared with $2.9 million for the prior year period, with the increase primarily due to COVID-19-related collection kits and consumable expenses. As we continue to leverage the fixed components of our costs, our cost of revenues as a percentage of net revenues decreased by approximately 153 percent for the first quarter of 2021 from the prior year period. Contributors to the percentage decrease in cost of revenues included better pricing on COVID-19 consumables and COVID-19 collection kits, as well as lower facility costs related to the move of our facility, which we completed in late 2020. R&D expenses for the first quarter of 2021 were $1 million, compared with $1.3 million a year ago, with the decrease primarily attributable to lower facilities costs and cost of revenue allocation to R&D. We expect R&D expenses to increase in the coming quarters as we begin the first 4C clinical study that Mike just previously mentioned. G&A expenses for Q1 2021 were 3.1 million versus 1.9 million in Q1 2020. with the increase primarily due to headcount additions and other expenses related to COVID testing. Sales and marketing expenses were $1.9 million compared with $1.5 million in the prior year period, resulting primarily from higher commission payments associated with COVID-19 sales. You may recall that we moved our headquarters and our CLIA lab to a new San Diego-based facility late last year. While we incurred some expenses related to the move, our new building is designed to meet our commercial, development, and administrative needs while reducing rent expense and other facility costs by approximately 20% annually. Operating income for the first quarter of 2021 was $2.7 million, and this compares with an operating loss of 6.2 million for the first quarter of 2020, representing an improvement of about 9 million. As Mike stated, we reported our second consecutive profitable quarter with net income of 2.6 million, or 19 cents per share, on 13.7 million diluted weighted average shares outstanding. This compares with a net loss for the first quarter of 2020 of 8.3 million or $1.06 per share on 7.9 million diluted weighted average shares outstanding. We reported cash and cash equivalents as of March 31st, 2021 of 14.2 million compared with 14.4 million as of December 31st, 2020. Revenues, sorry, receivables grew by $3 million from 2020 year-end, which we anticipate will provide for robust cash collections as we move forward in 2021. Additionally, from a cash flow perspective, BIOSEP negotiated a nine-month rent-free period with the facility move, which rent-free period began in January 2021. And finally, revenues from COVID-19 testing and expense management are supporting our investments in our neuro-oncology strategy. Based on historical and planned cash usage, we believe that our current cash position and revenue generation will support our business through the second quarter of 2022. However, with the uncertainty introduced by COVID-19 on revenues and collections, our cash runway may be shorter. With that, I'll turn the call back over to Mike. Mike?
spk03: Thank you, Tim. Before opening the call to your questions, I want to review our corporate priorities, which include the following. One, supporting the full commercial launch of our C-inside assay and positioning our assay as standard of care. C-inside answers three key questions for physicians treating patients with suspected metastatic cancer involving the central nervous system. Number one, is there a tumor? Number two, is there a target? And number three, is there a trend? The next priority is submitting for FDA breakthrough device status with C-INSIDE by the third quarter of 2021. Number three, initiating clinical studies with C-INSIDE to support adoption as standard of care under NCCN guidelines. Number four, expanding our C-INSIDE testing menu for additional tumor types and biomarkers. Number five, securing Medicare coverage for our target selector lung NGS panel. Number six, growing sales of our target selector liquid biopsy kits and seashore blood collection tubes. Number seven, entering into additional strategic commercial and technology partnerships like the agreement announced today with Quest Diagnostics. And eight, commercializing our next generation quantitative COVID-19 assay that we co-developed along with AGEA Biotechnologies. Our portfolio of target selector-based assays provides critical information to assist physicians in determining treatment choices for their patients diagnosed with cancer. Our assays are based on our differentiated platforms that leverage information from tumor cells, cell-free DNA and RNA in both blood and cerebral spinal fluid. To date, we have tested approximately 29,000 patient samples with our proprietary oncology biomarker assays, and have received approximately 390,000 samples for COVID-19 testing. We expect revenues related to COVID-19 testing to remain meaningful throughout 2021 and anticipate increasing adoption of our C-inside assay as we develop collaborations and clinical studies to obtain standard of care designation. And we have the support of a strong balance sheet. In closing, it's gratifying to see the BioSep team's excitement as we work toward establishing C&Side as standard of care and continue with our important COVID-19 testing. As always, we are committed to improving patient treatment choices and clinical outcomes. And with that overview, we are now ready to take questions. Operator?
spk01: Thank you. We will now begin the question and answer session. To ask a question, you may press star, then 1 on your touchtone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question from the queue, please press star then two. At this time, we will pause momentarily to assemble our roster.
spk03: While we're waiting for the first question, I'd like to remind listeners that if you've not watched our neuro-oncology webinar, it's available on the homepage of biosep.com. It runs just about an hour, and I think you'll find it to be highly informative. Okay, operator, we're ready for that first question.
spk01: Thank you. Our first question comes from Jason McCarthy with Maxim Group. Please go ahead.
spk06: Hey, this is Michael Okunowich on the line for Jason. Thanks for taking the question. Congratulations on the great quarter.
spk03: Well, thank you, Michael. Good to hear from you.
spk06: So I'd like to just kind of gauge from you guys, how has COVID testing held up into the second quarter? as we've seen a decline in cases and vaccine rollout. I know that a lot of your target business here is somewhat insulated from that. So how is that held up into the second quarter?
spk03: Michael, as you know, in the script just now, we let folks know that we've done 390,000 so far this week. So that lets people kind of know. The last time we reported, I believe, was about this time back in April. And that was about 40,000 different, Tim, between when we reported in April and now. So that gives you an idea, I think, of where we're at. And one of the key things to remember is that, you know, the bulk of our customers today come from these skilled nursing centers, and they're required to continue to test. And while we're maintaining all of our clients, I think they're quite happy with us, when we have low positivity rates, as we do now, and Dr. Dugan's here in the room with me along, and he's shaking his head, You know, there's not a need to retest. Folks may not understand that previously when there were higher positivity rates, when you got a positive, then based on the county guidance that the skilled nursing center is in, they either have to retest all the residents and employees twice a week or three times a week. Now that we're finding very seldom positives, and that's a thankful thing we should all be thankful for, there's not a need to do the retesting. So that's where you're seeing the impact so far with our client base. In addition, We are enthusiastic about the ways we can help the colleges, the community colleges that we've discussed. And that we don't know, because there's not a policy yet for the community colleges for how they're going to go back to school. So we know they need to test their athletes, which we're doing today, and their spring sports, such as baseball and others that we're helping with. But as the year progresses and they get their plans together for the year, I think that will inform us a lot about what to expect from that agreement.
spk06: Thank you. I'd also like to talk a bit about the full launch for C&Side. I'd like to know how we should look at that. What kind of differences should we expect, and what are you targeting for the full launch as opposed to the soft launch from back in 2020?
spk03: Well, I think the reason for the difference, one, we've learned a lot over the past year about how valuable this asset can be. Thus, the investment you saw with the actual name-seeing side and the way that we're doing the logo, if folks go onto the thing, there's a lot of going behind it from the marketing side. Other than that, there's a lot to go into it, and it also has to do with who we're targeting. We've started with neuro-oncologists, and that's who folks would see if they go on the webinar. And they're the early adopters here. They are doing everything they can to help these patients who get referred to them. The next level down will be the medical oncologist as far as our targeting to expand the basis. And they're interested as well. But very often, they're just sending patients to hospice. And so what we want to do is give them an alternative with our test. And we'll need a little bit more data to get the bigger lift there. So that's what we're investing in now is the data. And I think Dr. Dugan has some things he'd like to share with that as well.
spk05: Yes, thanks, Mike. Michael, the other things that are happening with the commercial launch, the more formal commercial launch, is an updated presentation of this test in terms of a test requisition form and a more integrated report that's easier to read. In addition, you'll see more educational materials come out, including a publications related to case studies that we've already completed and others that will help further explain the role of the test. And then we anticipate doing additional work with our KOL network, our key opinion leaders, to really establish additional studies, both investigator-initiated studies as well as our own studies, to clarify the role of the test and how it's used in a variety of indications of use. Thanks, Mike.
spk06: All right. Thank you very much. And then one more. I'd like to just see if you could talk just briefly a bit more in detail about the agreement with Quest and what that means for your core business.
spk03: Sure. Well, this is for our NGS assay that we've been working on for now a couple years, folks, for a call that we partnered with Thermo Fisher on that. And it's a targeted panel for lung cancer patients, non-small cell lung cancer patients, and it's used to inform treatment decisions. So ideally, it's used both at the time of diagnosis and can also be used for monitoring or restaging along the way and looks for key biomarkers that are all tied to targeted therapies for lung cancer. And so we developed the assay and have had some discussions over the past few months with Quest as they evaluated various options, and they chose BioSep to partner with there as they start to roll out their first next-gen sequencing assays for oncology as well. So we're very excited about the relationship. As with any big company, it's going to take a while for us to get onboarded, but we expect that to happen by the end of Q3 and then start to accept specimens along the way.
spk06: All right. Thank you very much.
spk03: Sure.
spk01: This concludes our question and answer session. I would like to turn the conference back over to Michael Null for any closing remarks.
spk03: Thank you. On behalf of our Board of Directors and the hardworking team here at Biosup, I want to thank everyone for participating on today's call and for your interest in our company. We look forward to providing an update on our progress during our next conference call in August when we report our 2021 second quarter financial results. Thanks again, and have a great day.
spk01: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.
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