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spk05: 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.
spk06: 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.
spk01: 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.
spk07: Thanks, John. Assay revenue increased 220% to $1.2 million for the third quarter of 2020, compared to $0.4 million for the same period of 2019 due to higher billable sample volumes and revenue recognition of Medicare samples related to the final local coverage termination that went effective in February. We consider billable sample volumes as one of our key metrics to understand the demand and health of the business at this point of early commercialization of the PLA. Billable samples do not include a small fraction of samples received that are rejected for a variety of reasons. Our goal is to monetize our billable sample volume by gaining commercial payer contracts and policies and increasing the proportion of samples received that are reimbursed. Currently, our potential revenue that could be recognized from having broader payer coverage is meaningfully higher than the actual reported revenue. Billable samples for the quarter were approximately 6,700, compared to approximately 3,600 for the third quarter of 2019, or an 86% increase, and compared to approximately 3,200 in the second quarter of 2020, or a 107% increase. While we are still seeing continued headwinds due to the pandemic and may see more fluctuations, we are back on our growth trajectory, as John mentioned. We continue to make progress with increasing awareness of the PLA in the Medicare population. Note that approximately half of surgical biopsies perform for melanoma each year in the Medicare population. However, Medicare represented only about 16% of our billable sample volumes in Q3 of 2020, compared to approximately 11% in the same period of the prior year. We are now actively working to increase clinician and patient education awareness that our PLA is covered by Medicare, though this patient population is currently less likely to seek dermatologic care during the pandemic. Our current overall target market includes approximately 13,000 dermatology clinicians. We sized our sales force to reach our current overall target market and prioritized approximately 5,000 clinicians for our initial target market who account for a high concentration of the total annual surgical procedures to diagnose melanoma. During the first nine months of 2020, we've penetrated approximately 30% of our initial target market and 8% of our current overall target market with approximately 1,400 unique ordering clinicians. We had approximately 950 unique ordering clinicians in Q3 of 2020 compared to approximately 620 in Q2 and 900 in Q1 of 2020, highlighting our COVID recovery. While we were working to both increase the number of unique ordering clinicians and to increase the average number of tests ordered by each clinician each month. Our average quarterly utilization or average number of tests ordered per unique ordering clinician was 7.0 billable samples in Q3 of 2020 compared to 5.2 in Q2 and 6.5 in Q1 of 2020. We hit all-time high in monthly utilization in July, but as new sales reps bring in new ordering clinicians, average utilization has decreased slightly in recent months. We believe as new ordering clinicians continue to understand the increased accuracy, ability to find melanoma earlier, and practice efficiency with our test, they will increase utilization. Contract revenue decreased 28% to $0.1 million for the third quarter of 2020 compared to $0.2 million for the same period of 2019. Contract revenue can be highly variable as it is dependent upon the pharmaceutical customer's clinical trial progress, which can be difficult to forecast due to variability of patient enrollment and other factors which have been exacerbated by the pandemic. Total revenues increased 141% to $1.4 million for Q3 of 2020 compared to $0.6 million for the same period of 2019. Gross margin for Q3 2020 was negative 18% compared to negative 38% for the same period of 2019. The improvement in gross margin was largely driven by increased revenue recognition of Medicare samples in 2020. Assay gross margin for Q3 2020 was negative 29%. Sales and marketing expense increased 132% to 4.6 million for the third quarter of 2020 compared to 2.0 million for the same period of 2019. The increase was primarily attributable to Salesforce expansion and additional marketing investment to increase awareness of our PLA. Research and development expense increased 113% to 1.6 million for the third quarter of 2020 compared to 0.8 million for the same period of 2019. The increase is primarily attributable to higher compensation costs related to expanding the R&D team as well as increased spend on laboratory supplies. General administrative expense decreased 9% to $2.9 million for the third quarter of 2020 compared to $3.2 million for the same period of 2019. The decrease was primarily due to reduced legal costs in the current quarter since the reverse merger closed in August of 2019. Net loss for the third quarter of 2020 was $9.4 million, which included $1.4 million of non-cash stock-based compensation compared to a net loss of $5.7 million for the same period of 2019, which included $0.7 million of non-cash stock-based compensation. At the end of the third quarter, our cash, cash equivalents, and marketable securities totaled $51.5 million. We continue to invest in our commercial efforts and infrastructure to support our expected increase in billable samples, as well as our pipeline products and commercial channels. We feel well positioned to capitalize on that opportunity in front of us. Now I'd like to turn the call back to John for additional Q3 accomplishments and pipeline updates.
spk01: Thank you, Kevin. As mentioned previously, we paused our Salesforce hiring when the pandemic hit, but we're now back on track and in line with our previously stated expectation that we'd have 40 to 50 reps by the end of the year. We may continue to incrementally add a few more sales reps before the year end. but we feel like we are currently at about the right size. We held our national sales meeting virtually at the end of September and have now trained our new sales reps. Like all other companies in our industry, it takes some time for new sales reps to reach the level of sales productivity of a seasoned rep. We are monitoring this ramp up period for the group of new sales reps we hired during the summer of 2019. and expected the ramp period to be about nine to 15 months after a three-month training period. However, the pandemic has introduced challenges in ramping new sales reps due to reduced in-office access to clinicians, which we expect could result in the ramp taking a little bit longer than originally anticipated. We will continue to monitor the ramp trajectory, and we have implemented other tools, as we discussed, such as virtual sales calls, trainings, and speaker sessions to potentially mitigate the impact of the pandemic. Bill Benos, Activity and new technology assessments by commercial payers declined in the first six months of the pandemic. Bill Benos, However, activity picked up in the third quarter, and we have been able to engage with approximately 50 payers representing about 250 million covered lives in the US. Bill Benos, We are are currently reviewing various contracts and pricing proposals. While some payers are seeking a discount to Medicare pricing, we are confident we can achieve pricing targets that we believe will allow us to meet our long-term revenue and gross margin targets. To better inform our payers during our negotiations around price, we are completing another economic impact study with OptumInsight, United Healthcare Group's healthcare data subsidiary. The initial output of this study supports the current price that Medicare provided and cost savings associated with this price. We recently We're able to negotiate and execute a contract with Blue Cross Blue Shield of Illinois with over 7 million covered lives on their PPO plan with pricing that is commensurate with the value Medicare has assigned. We've also been informed by another large blues plan that they too will contract at a value consistent with our pricing target. We're actively educating many other payers on the clinical and economic value proposition of our test and believe we will be successful in achieving coverage goals that will allow us to monetize our sample volume, which would lead to meaningfully higher revenue over what we recognize at our current levels. During the quarter, we also signed agreements with new pharmaceutical partners worth up to approximately $1.1 million in contract revenue for work related to those partners' clinical trials. We have currently have a maximum 4.6 million in potential remaining contract revenue related to our current agreements. We are also working hard to launch the PLA Plus in the next couple of months to further enhance early melanoma detection. This second-generation test identifies mutations in the TERT promoter, along with the other genes, and improves the sensitivity of our PLA test to approximately 97 based on a published validation study. TERT promoter mutations have been found to be driver mutations for early melanoma development. Our key opinion leaders and clinician users believe the addition of TERT provides an important improvement to the test sensitivity performance and its clinical validity. We believe the addition of TERT will further enhance early detection and help drive adoption of the test. Given the challenges posed to the dermatology space by the pandemic, we are happy with our Q3 performance. and the strides we've made in cultivating some key infrastructure development work for our business and positioning us for future growth. Now I'd like to talk a little bit about our clinical and pipeline update. We have completed the enrollment in our trust study and are currently analyzing the data and expect to present top line results by the end of the year. The TRUST study is a real-world, long-term follow-up study of lesions that tested negative for melanoma with the PLA. It is designed to confirm the high negative predictive value of the PLA by reevaluating and retesting lesions that were PLA negative one to two years prior to enrollment. The study will have approximately 300 evaluable subjects. To confirm the NPV of 99%, we would expect to have only about three melanomas identified in this cohort. Other variables measured will be any melanoma-related deaths, any melanoma diagnoses, and stage of melanomas, if found. We believe the TRUST study will help us build more confidence in the performance of the test and the long-term outcome for lesions that test negative. Now, talking a little bit about our product initiatives that we have ongoing. I'd like to update you on our telemedicine effort. As mentioned previously, we have identified a unique telemedicine strategy that will capitalize on our digital consumer education campaign and offer patients visiting our Find a Doctor page an immediate telemedicine option. One technology development solution we completed in the third quarter is a downloadable iPhone and Android HIPAA-compliant software application that allows for submission of high-quality images and lesion information to a portal for review by a clinician. We will initiate beta testing of this application before the year end. We are also evaluating web-based software application to provide the same function without the need to download a phone application. In the first half of 2021, we will look to pilot a complete solution. Moving on to our Luminate product, it is now in the internal validation phase. and will assess UV-related gene mutations in normal-appearing skin, which is related to skin cancer risk and photoaging. We are very excited about the preliminary data that we've seen for Lumin8. Our study investigated the mutation number and variant allele frequency of UV-associated driver mutation in genes related to basal and squamous cell carcinoma. Almost no driver mutations were detected in non-sun-exposed skin areas, but there was a high frequency of mutations in normal appearing skin from patients with a history of skin cancer and sun damage. In general, driver mutation burden correlates with age and history of sun exposure. It is our goal that Luminate will provide patients and consumers with an option to objectively measure their UV damage related sun exposure and to seek treatment options and initiate behavior changes to better manage their UV damage and premature photo aging. In the third quarter, we also completed some qualitative and quantitative consumer research on the Luminate product involving over 700 participants. We were very encouraged by the data from the research, which indicated a strong interest in the product and the actionable information it provides, as well as a strong likelihood to purchase the product. From this research, we estimate a target market opportunity of approximately 18 to 20 million persons in the U.S., We expect to complete more internal validation and proof of concept testing in the fourth quarter and initiate real-world validation and pilot demand testing in the first half of 2021. Assuming success of that real-world validation and interest from our pilot demand study, we expect to offer the product commercially in the second half of 2021. We also continue to make solid progress on our carcinoma product for the diagnosis of non-melanoma skin cancer, During the quarter, we identified several potential gene classifiers from our whole transcriptome sequencing efforts in Q2. We expect to complete the training and proof of concept studies for the target gene classifiers in the first half of 2021. Assuming success of these training and proof of concept efforts, we would look to complete clinical validation of the test in the second half of 2021 with initial launch of the test as a laboratory-developed test in the first half of 2022. We are assessing plans to also seek FDA clearance or approval of the test, which would not occur until late 2022 or early 2023. Looking ahead, we are keenly focused on three key growth drivers of our business in the near and mid-term. The first is to drive billable sample volume growth at the PLA test. With our sales force in place and trained, we feel well positioned. As we continue with our digital direct-to-consumer marketing efforts, We think the combination of an expanded sales team with a patient base that is educated to demand a more accurate non-invasive melanoma test will spur increasing adoption. We are also hoping to drive additional billable sample volume through our unique telemedicine solution and build on this care delivery channel as it becomes more accepted. The second is to make additional progress with commercial payer coverage. We are happy that new technology assessments have resumed after the initial COVID crisis, and we are actively negotiating pricing with various private payers. Although these processes can take some time, we do feel confident that our clinical and economic data will continue to win over payers. The third key driver is to deliver additional products to the market based on our non-invasive skin genomics platform. As you can tell, There was a lot happening behind the scenes here at Durham Tech over the third quarter. While the pandemic continues to provide some headwinds to our near-term revenues, we feel very well positioned for growth across multiple initiatives as we look ahead. And I look forward to updating you on our progress. With that, I'll turn things over to the operator for questions.
spk05: Ladies and gentlemen, if you have a question at this time, please press star, then the number one key on your touchtone telephone. If your question has been answered or you wish to remove yourself from the queue, please press the pound key. We have our first question coming from the line of Ryan Blaker with Cowen. Your line is open.
spk04: Hi, thanks for taking my questions. Maybe starting with commercial payer conversations, congrats on the two blues plans that you mentioned. Beyond those two plans, are there any other major deals that you think are close to the finish line where it's possible we hear something over the next few months? Or do you think it's inherently going to take a bit longer to strike any major deals and COVID might be a consideration?
spk01: It's hard to predict what the impact that COVID might have. We are in discussions with a lot of payers. Some of the other larger payers, they tend to have particular review cycles. Some of those review cycles will be coming up in the first quarter. So I can't really project what exactly will happen before the end of the year and with those payers, with additional payers. We do think, though, that the payers are understanding the limitations and the problems with the current path here, which is step one. They then want to understand the economic impact, and we're providing them a lot of information on that. So we do think we'll be successful in the coming year and coming quarters with other payers. And particularly, we think that the activity we have with the Blues plans will help catalyze some of those other payers to get on board.
spk04: Got it. That's helpful. And then maybe just a near-term volume question. Is there any more color you can provide on volume trends early in Q4? I just want to make sure we don't get ahead of ourselves after this strong update. Should we expect volumes to grow in Q4 versus Q3? And Can you just talk a bit more about what gives you confidence in this trajectory given the flare-up in COVID-19 across much of the U.S. over the past few weeks? Thank you.
spk07: Yeah. So, as we mentioned, you know, for September and October, we were at levels that, you know, we expected to be at prior to the pandemic hitting. And so, October was certainly a growth trend compared to September. But then, obviously, the choppiness that John referred to is related to the most recent uptake above 100,000 COVID cases per day. for certain days, as well as potentially some election fallout. So we are optimistic that the trend that we saw in October will continue, but it's just hard to really determine the actual impact of COVID in various jurisdictions, especially if the surge continues to accelerate.
spk05: We have our next question coming from the line of Brian Weinstein with William Blair. Your line is open.
spk02: Hey, guys. Good afternoon. This is Andrew on for Brian. Thanks for taking the questions. Maybe just to start sort of on the funnel of new doc ads, can you maybe just talk a little bit about how that funnel is progressing and maybe some of the ways that you guys are knocking down some of the hurdles of uptake out there? What are some of the specific tactics that your sales is using in this unique sort of timeframe with COVID? Thanks.
spk07: Yeah, sure. So the new doc ads continue to progress along. They have certainly recovered from the initial COVID dip, but I'd say the new doc ads are still a challenge because our sales force has reduced access to the physician's clinics. And so especially as we've brought on all these new sales reps, you know, getting that access to bring them on is critically important. But what we've been able to see is that the doctors that do know us and have started using us are actually using us more. And so that's really what's been driving a little bit more of our sample volume growth over new clinicians. And again, just to clarify, the new clinicians, we are still adding them in Q3 and so far in October. We just do worry that as the clinicians continue to lock down or state restrictions continue to lock down, then they'll focus only on seeing patients in office and really reduce the sales people's calls in office. So we've been able to use virtual sales calls and training sessions and educational tools and virtual tools to really get them up to speed in this environment. We do think that the virtual trainings have gone well, and we've gotten great attendance on some of these doctor-hosted sessions recently that, again, we believe the message is getting out there, even though we've got this limited access right now.
spk02: Got it. Thanks, Kevin. And then maybe just one follow-up to you here, recognizing that we're which might not be said yet. Can you maybe just sort of talk to us about how you're thinking about investment spend heading into 2021 and maybe some of the key products or projects that you're going to be putting those investment dollars to?
spk07: Yeah, if you look historically at our expenses, you know, we've been underspent in marketing and R&D for a while, obviously, becoming public and getting the Medicare reimbursement and really starting to launch the PLA full scale. So we do plan on making investments there, both marketing and R&D, to help accelerate some of the products. So as John mentioned, the Luminae product is very exciting to us. We're completing kind of our initial pilot work and market research right now, but if that goes well, then it's likely we'll need some additional investments next year to really fully launch that product, since it will be a DTC-type product. And then general awareness of the PLA, again, is still early stages, and so we'll need to increase the marketing spend for our PLA test just so that we can really activate the patient, especially in a population that we think really is appealed by our non-invasive technology for melanoma diagnosis.
spk02: Got it. Okay. And then last one, John, you talked a little bit about the sort of telemedicine opportunity and some of your work that's going into that. But maybe can you just talk to us sort of about how you're sizing that opportunity and maybe a little bit more color on some of the unique ways that you're going to tap that. Thanks for taking the question.
spk01: Well, we think that one thing the telemedicine opportunity offers are only about 7% of people in the U.S. actually go to the dermatologist for a skin check and a very small fraction of patients actually see dermatologists. So we think that option can open up patients to have lesions reviewed by dermatologists that might not otherwise be able to do that. So we do think it can expand the overall access to dermatologic care, which is a good thing, particularly as it pertains to melanoma. We think that what's nice about our telemedicine opportunity is that it dovetails significantly with our consumer awareness campaign so we want to take advantage of what we're doing there by offering patients that telemedicine solution and we know we're driving just with you know having that campaign in a few select states we're driving 1500 or more find-a-doctor searches every week we believe those patients are motivated perhaps they have something they're concerned about and we think they would respond to a an option to have a lesion reviewed immediately via telemedicine. So that gives you some idea about, you know, how we think we can capture that market, and we do think overall we'll expand access and the number of patients that could seek dermatologic care, particularly for melanoma. Great. Thanks, guys.
spk05: Again, if you have a question at this time, please press star, then the number one key on your touchtone telephone. We have our next question coming from the line of Thomas Flynn with Lake Street Capital. Your line is open.
spk03: Hey, guys. Thanks for taking the question. Just a couple for me. Just back to the envelope math, Kevin, looks like the Medicare penetration remains pretty low from a billable sample volume. Could you comment on that a little bit?
spk07: Yeah, we are seeing growth quarter over quarter, but it is a fairly slow growth right now. And so even compared to Q2 of this year, it was about a percent better in Q3, and same with against Q1. So we're seeing a little bit over 1% per quarter growth in that Medicare proportion. And so while we have activated marketing for the Medicare population through our direct-to-consumer marketing efforts, that population is, again, the least likely to want to go into a clinic right now during the COVID environment. So we're trying to counter some of the macro environment that is going on right now with that population. But we are seeing improvements. It's just, again, fairly slow going right now just generally because of COVID.
spk01: And those are the patients that go in to see the dermatologist right now.
spk03: Right. And then, John, could you let us know what the status of the Optum project is and when you might expect to see some data coming out of that or at least be sharing data with us about that?
spk01: Sure. We do have some preliminary data that suggests the all-in costs to adjudicate a pigmented lesion are about $2,000. somewhat comparable to our earlier economic impact study. And again, it supports that Medicare pricing. This is a more rigorous study that looked at 29 million claims over a one-year period and tabulated all the costs associated with assessing melanocytic lesions. And so that number reflects all those costs from the initial surgical biopsy through late-stage treatment. So we're going to finalize that in the coming weeks, but so far the data looks to be very commensurate and, as you'd expect, a little higher than our initial study just because there's been some inflation in the cost, particularly around later-stage melanoma treatments.
spk03: Great. And then just one final one for me. As you think about Luminate, are you thinking that will initially launch as a cash-paid product, or are you seeking reimbursement for that up front as a covered product? I'm just trying to think of how you're going to launch that. You've mentioned a lot of consumer campaigning around that, so I was wondering if you could give us some color on that.
spk01: We do see that as a cash-based consumer pay product. That's one of the reasons we like that, because it diversifies the potential revenue mix. We will again utilize this digital channel that we have developed over the last couple of quarters to help funnel patients into a place where they can obtain that product. We will also drop it into our sales team's bag. There are clinicians that have expressed interest because the dermatologist actually sells a lot of the services to remove those damaged cells, whether it's a chemical peel or photodynamic therapy. We've got to understand the pricing better if we sell it to the dermatologist first and what they would want to upsell it to. But we do think that there's a good opportunity based on that market research for the consumer to pay directly for that product.
spk03: Awesome. Thanks, guys, for taking the questions. Much appreciated.
spk05: There are no further questions at this time. This concludes today's teleconference. You may now disconnect. Thank you. Thank you. so Thank you. you Thank you. Thank you. music music you
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