DermTech, Inc.

Good afternoon, ladies and gentlemen, and welcome to the DERM Tech's third quarter 2020 financial results call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session, and instructions will follow at that time. If anyone should require any assistance during a conference, please press star, then zero on your touchtone telephone. I would now like to turn a conference over your host, Ms. Caroline. Caroline, your line. Please go ahead.

Thank you, Operator. Welcome to Durham Tech's third quarter 2020 earnings call. Joining me on today's call are Dr. John Doback, President and Chief Executive Officer, and Kevin Sun, Chief Financial Officer. This call will provide forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements made on this call that do not relate to matters of historical fact are considered forward-looking statements. Forward-looking statements made during this call, including projections of future performance, are based on management's expectations as of today, November 10, 2020, and are subject to various factors, assumptions, risks, and uncertainties which change over time. Actual results could differ materially from those described in such statements. Several factors that may contribute to or cause such differences are described in today's press release and DermTech's most recent filings with the SEC, including DermTech's annual report on Form 10-K for the year ended December 31, 2019, and quarterly report on Form 10-Q for the quarter ended September 30, 2020. DermTech undertakes no obligation to update these statements except as required by applicable law. DermTech's press release with the third quarter 2020 results is available under the investor relations section of the DermTech website, www.dermtech.com, and includes additional details about DermTech's financial results. Also available on the DermTech website are DermTech's latest SEC filings, which you are encouraged to review. A recording of today's call will be available on the DermTech website by 5 p.m. Pacific time today. Now, I would like to turn the call over to John for his comments on third quarter 2020 business highlights.

Great. Thank you, Caroline, and thank you, everyone, for joining us today. Before we get started, I would like to go through a background of the company since this is our first NASDAQ. Entering this call is a NASDAQ-listed company, and there may be some of you who are new to our story. DermTech is among a rare class of genomics companies. whose goal is to transform the practice of medicine by making diagnosis less invasive, more accurate, and less expensive. We are one of the first companies to bring genomics to clinical dermatology, which is a relatively uncrowded marketplace in which we are a recognized leader. Dermatology is one of the largest medical marketplaces. Skin cancer assessments alone result in approximately 15 million diagnostic surgical procedures each year in the US. DermTech is a commercial stage company creating a new category of medicine we call precision dermatology. Precision dermatology is enabled by our non-invasive skin genomics platform. This platform is based on our SmartSticker, an adhesive patch skin sample collector that allows us to perform a variety of genomic analyses on skin diseases. With this platform, we can address very large markets in skin cancer and inflammatory diseases, and we are currently scaling around our first commercial product, the Pigmented Lesion Assay, or PLA. The PLA enhances early melanoma detection with a goal of reducing melanoma deaths. Today we offer the PLA in all 50 states, and we process our samples in a CLIA-certified and CAPA-credited laboratory in San Diego. If you've been following our story, you likely saw that Medicare coverage for our PLA went into effect in February of this year. We were very pleased to receive a reimbursement rate of $760 per test which we think reflects the quality and utility of our data. Today we are leveraging the CMS coverage as well as our clinical experience and data to negotiate with various commercial insurance payers for additional coverage. The existing diagnostic paradigm for melanoma detection relies on subjective visual assessments by the dermatologist or pathologist and invasive surgical biopsies. This pathway is notoriously inaccurate and leads to an excessive number of unnecessary surgeries and a high number of misdiagnoses. Currently, approximately 25 surgical biopsies are performed to find one melanoma. And despite all this cutting, the negative predictive value of this pathway is only about 83%, which means the probability of missing melanoma is approximately 17%. The PLA reduces the number of surgical biopsies needed to identify melanomas by approximately tenfold and increases the negative predictive value to 99%, meaning the PLA has less than 1% probability of missing the disease. DermTech is effectively bringing melanoma diagnosis into the 21st century by transforming it from a pathway that is subjective, invasive, inaccurate, and costly to one that is objective, non-invasive, highly accurate, and less costly. To understand how dramatically the PLA can impact melanoma diagnosis, I will share with you a recent anecdote involving our test. A patient with a history of moles suspicious for melanoma and several surgical biopsies that were found to be negative visited one of our dermatology clinicians. The patient expressed concern about being cut again unnecessarily. Our test was subsequently used and it came back double gene positive, meaning both the link and prame genes were detected. A surgical biopsy was performed and the pathology report came back as non-melanoma but severely atypical. However, because the pathologist only looks at 1% of a biopsy sample, the clinician felt the pathologist may have missed a more significant problem and asked the pathologist to look at more sections of the biopsy sample. After additional sections of the sample were reviewed, an early stage invasive melanoma was confirmed. This diagnostic upgrade significantly changed the treatment for this patient, such that a curative wide excision was performed, whereas under the previous treatment plan, a much less effective narrow excision would have been performed, creating a risk that all tumor cells would not have been removed. We often hear stories like this about how our platform enhanced the early detection of melanoma and led to a potentially life-saving outcome. With Medicare reimbursement secured, We began to initiate the full launch of our PLA test and the scaling of our sales force. Unfortunately, this effort was curtailed by about six months due to the COVID pandemic. However, I am pleased to report that at the end of Q3, we completed the hiring of our latest sales team cohort, and we now have approximately 40 sales reps. Completing this significant effort sets the stage for future growth, and we believe we are back on track. as the volumes we saw in September and October were approximately what we were planning for in April and May before the pandemic hit. I will add here that the environment still has a lot of uncertainty due to the recent surge in COVID cases, and we are closely watching for increasing state restrictions. While we still face headwinds in terms of access to offices by our sales team, the initiatives we launched around virtual sales calls and training webinars have allowed us to return to what we believe is a solid growth trajectory in our sample volumes. We are also gaining traction with commercial payers and have seen a modest increase in our Medicare payer mix, which we believe will allow us to monetize this sample volume over time and potentially accelerate our revenue growth. While a primary concern of ours has been and will continue to be the health and safety of our employees, patients, and clinician customers, we believe that we can continue to deliver sales and commercial traction despite the challenging environment. I would also point out that the pandemic has catalyzed a telemedicine initiative here at DermTech. We now offer our tests for clinician-supervised remote collection. While the current volume of samples we receive via this method is very low right now, we are working on technology solutions to streamline the telemedicine access to the PLA and drive more testing of volume via this delivery method. We recently launched a consumer awareness campaign for the PLA in several select territories, which has been very successful and generated 1,500 or more Find a Doctor searches on our website each week. This indicates a strong consumer interest in our PLA. Our plan is to capture more telemedicine volume of the PLA by offering these motivated potential patients a simple telemedicine solution they can access immediately when they visit our Find a Doctor page. Because melanoma cancer will not wait and delays in diagnosis can lead to more advanced disease, this telemedicine option may be critical for patients going forward, particularly when they are reluctant to visit the doctor's office. In summary, we believe that DermTech has a tremendous long-term growth opportunity given the size of the markets we address and the unique attributes of our non-invasive skin genomics platform. While COVID continues to create some near-term challenges, We believe that we can achieve robust adoption, particularly when a more normalized environment resumes. For example, we were pleased to see our numbers in October hit record or near record highs in key metrics related to sample volume, utilization, and ordering clinicians. This occurred during the lull in viral infections after the summer surge of COVID cases. While there has been some flattening of sample volumes with the current surge, We are optimistic we can manage through this and maintain our growth trajectory. We are also very optimistic we can monetize our sample volume and are starting to have some important commercial payer contract successes. We'll discuss those later, but we have been able to preserve the value assigned to the PLA by Medicare in these discussions with payers. I'll turn this now over to Kevin to go over our financial results.