Biocept, Inc.

Welcome to the Bioset Business Update Conference Call. All participants are in listen-only mode. Should you need assistance, please signal 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 1 in your telephone keypad. To withdraw your question, please press star then 2. Please note this event is being recorded. I would now like to turn the conference call over to Jody Kane. Please go ahead.

This is Jody Canewith, LHA. Thank you all for participating in today's call. Joining me from BIOSEP are Sam Riccitelli, Chairman and Interim President and Chief Executive Officer, and Antonino Morales, Interim Chief Financial Officer, who will be available for the Q&A session. 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, plan, potential, predicts, 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 achievements 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 the information available for today's discussion. For details about these risks, please see the company's SEC filings, including the company's quarterly report on Form 10-Q, which was filed on May 23, 2022. The content of this call contains time-sensitive information that is accurate only as of today, June 7, 2022. Except as required by law, BIOSEP disclaims any obligation to public 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 Sam Riccitelli. Sam?

Thank you, Jody, and good afternoon, everyone. I'm delighted to be speaking with you today to share details about our refocused and rationalized business strategy. Developing this strategy required significant effort by the BioCEP team to undertake a comprehensive review of our assets, operations, and commercial opportunities, all with an eye toward building shareholder value. This intensive process allowed us to map a path forward we believe offers the greatest opportunity for growth, while also identifying underperforming operations. Now, we thank shareholders for your patience during this rigorous process in developing the strategy we're discussing today, and we're confident that this was time well spent. This extensive review led us to the clear conclusion that our proprietary cerebrospinal fluid assay, called CN-SIDE, far and away offers the greatest opportunity for BioSep's long-term success. Our primary goal going forward will be on positioning our company as leading the emerging category of neurological tumor diagnostics, with the additional objective of becoming the provider of choice for biopharma companies seeking to develop therapies to treat cancer that has metastasized to the central nervous system, or CNS. We see CNSide as playing a critically important role in providing frontline assistance to the patients who receive a most desperate cancer diagnosis by supporting companies seeking to bring new medicines to their care and treatment. This objective aligns with BioCept's longstanding corporate mission of improving outcomes for patients with advanced cancer. C-INSIDE is the first commercially available method to measure biomarker status in the central nervous system in real time. It is a novel combination of cell-based and cell-free assays utilizing proprietary technology developed through years of experience with our blood-based diagnostic business. As a lab-developed test, it is analytically validated and run commercially in our CLIA-certified CAP accredited laboratory here in San Diego. C-INSIDE is currently validated to detect and quantify tumor cells in the cerebral spinal fluid, or CSF, of patients with breast cancer or non-small cell lung cancer, as well as a handful of other solid tumors who are confirmed or suspected of having leptomeningeal disease, or LMD. LMD is a devastating complication in which metastatic cancer spreads to the membrane surrounding the brain and spinal cord. While targeted therapies oftentimes can reduce or resolve the debilitating symptoms and extend life expectancy, The current standards of care for detecting CNS metastasis have limited sensitivity and do not identify molecular treatment targets or quantify tumor cell counts. Current standard of care involves CSF cytology and clinical evaluation via MRI, and its limitations create challenges for physicians that manage LMD in determining the best course of treatment. Preliminary results from investigator-initiated studies and individual case studies indicate that C-INSIDE provides significant advancements over CSF cytology and imaging. In these studies to date, C-INSIDE was shown to be more sensitive with the ability to detect a higher percentage of tumor cells than cytology. Additionally, C-INSIDE is both qualitative and quantitative. which is a key advantage for physicians in monitoring the response of leptomeningeal tumors to treatment and improving the ability to make or change treatment decisions. Our first application for CNSIDE represents a major commercial opportunity for BioScent. We estimate the annual market opportunity for CNSIDE at $1.2 billion in the United States and $2 billion globally. Over time, We plan to explore the uses of C-INSIDE for additional indications that could further expand the market opportunity, including, eventually, other diseases beyond cancer that affect the central nervous system. C-INSIDE was launched about two years ago through an early access commercial program targeting neuro-oncologists, academic cancer treatment centers, and other physicians who manage patients with metastatic brain cancer. We are highly encouraged by their reception, with ordering volume increasing in each consecutive quarter. In fact, see inside volume during this year's first quarter increased 70% sequentially and was up 219% over the prior year. Our customer base has also expanded and now includes more than 40 ordering physicians including many of the top neuro-oncologists at prestigious academic institutions across the U.S. And of the elite 64 National Cancer Institute designated cancer centers, these are the NCI centers, more than one-third have already ordered C-INSIDE. I'm pleased to say that during the first quarter, six leading cancer care centers placed first-time orders. We view the increasing volume and expanded customer base as strong indicators that neuro-oncologists who are using our assay recognize its value in improving patient outcomes. In our quest to lead the emerging category of neurological tumor diagnostics, we are implementing a three-pronged strategy. First, we plan to drive the generation of significantly more evidence by us and by others that demonstrates CNSIDE's clinical utility. This clinical evidence, once published in respected peer-reviewed journals, will be used to support reimbursement and adoption into clinical care guidelines, which we believe will broaden use among oncologists. To this end, preparations are underway for our company-sponsored IV-C clinical trial, with enrollment expected to begin in the third quarter of this year. The 4C study is a two-part, multi-center, prospective clinical trial that will enroll patients with breast or non-small cell lung cancer who have suspected or confirmed leptomeningeal metastases. The trial is designed to compare CNSides with CSF cytology and radiology. As mentioned, these methods have limited sensitivity and specificity. and lack the ability to qualitatively measure disease response to treatment. The goal of the 4C study is to further evaluate the performance of C-INSIDE in monitoring response to treatment in a prospective clinical trial setting, and to assess the impact of C-INSIDE on treatment decisions made by physicians. This trial design is directly focused on demonstrating clinical utility, which is based on how and to what extent physicians find value in the detection of disease and how C-INSIGHT influences them in their decision-making. We also intend to solicit and fund select investigator-initiated trials, with the first such study expected to begin before 2022 year-end. These studies will target specific indications for use of C-INSIDE, some of which may lead to expanded market opportunities. We are excited to extend our relationship with several highly supportive neuro-oncologist key opinion leaders to conduct these trials. We will utilize the clinical evidence from these studies to create benchmark peer review publications demonstrating the valuable role of C-INSIDE can play in the care of patients with metastatic central nervous system cancers. We expect to submit the first peer-reviewed papers this year, with publication expected in the first quarter of 2023. Our second initiative is focused on leveraging C-INSIDE to drive collaborations with biopharma companies seeking to develop treatments or expand the use for existing targeted therapies for central nervous system tumors. The ability of CNSide to capture and characterize circulating tumor cells in a patient's cerebrospinal fluid enables the identification of biomarker targets that are susceptible to approved and in-development therapies. Additionally, the ability to quantitatively monitor the level of cancer cells in the CSF during treatment can indicate therapeutic benefits. The inside may provide an observational endpoint for these trials and subject to inclusion in standard of care guidelines as the potential to become an efficacy endpoint indicator for therapies undergoing clinical investigations. We have already developed a robust funnel of potential biopharma collaborations, having identified more than 50 relevant opportunities. We expect a near-term announcement for our first see inside revenue generating biopharma collaboration with the potential for an additional collaboration before year end. And our third initiative is to identify additional technologies, products, and services we can in-license or acquire that can augment our offerings to neuro-oncologists. We are on the hunt. but we are very early in this process and have yet to set any milestones for the near term. Although our primary focus is on CN side, we will continue providing our community with RT-PCR COVID-19 testing while maintaining a nimble posture to adeptly respond to other critical public health diagnostic testing needs should they emerge. As of May 31st, this year, we have received more than 920,000 samples for COVID-19 testing since we began providing this service in June 2020. Currently, our volume is running at an average of approximately 5,000 samples per week. You may be aware that federal funding for COVID-19 testing for the uninsured has lapsed and that the federal health resources and Services Administration stopped accepting reimbursement claims as of March 22nd. It's still too early to determine how this change will impact our COVID-19 testing service. We are better positioned than some molecular labs to continue providing COVID-19 testing services because many of our customers are skilled nursing facilities that are subject to routine testing requirements. We also continue to serve select California community colleges, each of which has its own COVID-19 testing protocol. With the recent surge in COVID-19 cases reported in the media, we have seen an uptick in the positivity rate. This could lead to more testing from our skilled nursing customers. However, samples from our college program are currently declining as the schools begin summer break. Needless to say, it's difficult to predict the prevalence of COVID-19 going forward. That said, we plan to offer this service for as long as there is need, and we can do so profitably. At this time, we do not anticipate performing COVID-19 testing beyond 2022. Importantly, we have a solid balance sheet with cash resources we believe are sufficient to fund our planned operations over the coming year, including investments in our see-inside clinical trial. Lastly, we have rationalized or are in the process of rationalizing several service lines and business collaborations. As we previously announced, we are judiciously exiting our blood-based oncology diagnostic business to focus our resources on the most promising opportunities involving cerebrospinal fluid. This initiative is about 60% complete and we expect to be fully completed by the end of the third quarter. These changes will also impact our expense structure, and we'll talk more about that once the rationalization is done. Before opening the call to your questions, let me summarize what I've shared with you today about our rationalized strategy. Our objective is to lead the emerging category of neurological tumor diagnostics. We intend to generate the requisite clinical utility evidence that will support C-Inside reimbursement and adoption into patient care guidelines. We are also in the process of forming collaborations with biopharma companies that are developing treatments for central nervous system tumors. And we intend to support our community with RT-PCR COVID-19 testing for as long as necessary. We have laid out our near-term milestones as follows. We expect to announce our first revenue-generating biopharma collaboration in the coming weeks. We plan to begin enrollment in the 4C clinical trial in Q3. We expect the initiation of at least one investigator-initiated trial by year-end, and we expect the initial see-inside clinical study results to be published in a peer-reviewed journal in the first quarter of 2023. We believe BioCEP is on an optimal path for growth and building shareholder value. We look forward to sharing additional milestone markers of our success as we make progress on the goals that we've laid out today. As always, we are committed to improving patient treatment choices and clinical outcomes. And with that overview, Antonino and I are now ready to take your questions. Operator?