DermTech, Inc.

Good day, and thank you for standing by. Welcome to DermTech's fourth quarter 2022 financial results conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1-1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Steve Cansebo, Head of Investor Relations.

Thank you. Welcome to DermTech's fourth quarter 2022 earnings call. Joining me on today's call are Dr. John Doback, our President and Chief Executive Officer, and Kevin Sun, our Chief Financial Officer. Our call today will include 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, including projections of future performance based on management's expectations as of today 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 our most recent filings with the SEC. We undertake no obligation to update these statements as required by applicable law. Our fourth quarter 2022 earnings press release and SEC filings are available on our investor relations website. A recording and transcript of today's call will be available on our website later today. With that, let me turn things over to John.

Thank you, Steve, and thank you, everybody, for joining us. When we were last together in early November, I shared that our capital and energy was focused on two important priorities, expanding coverage of our DermTech melanoma test, or DMT, and alleviating payer friction in our commercial channel. We've steadily advanced against these objectives, and 2023 is off to a great start. In the last few months, we've expanded our coverage footprint from 91 million lives to 124 million lives, a 36% increase and a gain that is roughly equivalent to bringing on the second largest national commercial insurance provider. Billable sample volume in the fourth quarter grew 48% to approximately 17,460 tests versus last year. Billable sample volume was solid overall, and we expected a modest sequential decline primarily due to seasonal impacts and lingering pressure from commercial payers that it hindered increasing usage. We believe that payer friction may be starting to ease slightly And based on the trends we've observed thus far this year, we expect mid-single-digit sequential growth in test volumes in the first quarter. Overall, the steps we've taken to stabilize our average selling price, or ASP, for current volume, including a greater focus on generating covered billable samples, seem to be showing positive signs. We are pleased to report normalized fourth-quarter ASP of $239 for the DMT which is sequentially higher. But we still expect variability going forward, primarily due to fluctuating payments from non-contracted commercial payers. Nonetheless, all this points to monetizing existing demand in the quarters ahead. We continue to believe the most effective step we can take to accelerate top-line momentum is to bring on more commercial payers. To grow ASP and to remove barriers that increase customer usage, It is still all about the payers and will be throughout 2023. We achieved our first major goal we set, adding 30 to 40 million covered lives by the end of the first quarter of 2023. Specifically, our coverage footprint expanded by 33 million lives in the past three months, and the gains came from a broad mix of regional payers, policies stemming from the second largest lab benefits manager in the U.S. and its relationship with health plans, and two national government payers. Importantly, we now have six of the top ten largest blues plans in the country providing access to our test. We also have visibility into adding more covered lives from other regional payers. Our recent momentum demonstrates that certain payers recognize the DMT test results are clinically meaningful and actionable, improve patient care, and reduce healthcare costs. Overall pricing for the coverage we've recently added remains in line with our long-term targets. We remain closely engaged with four national payers and are on track for scheduled comprehensive year reviews throughout 2023. We believe these meetings could lead to coverage that would ultimately increase ASP and revenue. It's important to remember that in all cases where we are awarded coverage, the financial benefit could be delayed one to two quarters or more as additional administrative contracting and billing steps need to be taken by both parties. Overall, we are pleased with the recent progress we've made to expand coverage for the DMT. We have more work to do, and bringing on at least one national payer in 2023 is at the top of our priority list. The National Comprehensive Cancer Network, or NCCN, also recognizes that our technology may aid healthcare providers in identifying at-risk lesions for biopsy and surveilling potential melanoma. For the third consecutive year, our technology is included in the guidelines with a 2A recommendation. In a recent update to its guidelines, the NCCN strengthened its recommendation for using the DMT in guiding patient care decisions. We also recently held our national sales meeting. It's always a great event that reinvigorates the entire commercial organization. This year, we emphasized the DMT's clinical value proposition and an enhanced customer service experience, including electronic ordering of our test, regional billing, concierge services, and healthcare provider training programs. Importantly, our sales effort is structured to pull through test volumes in geographies where we've recently picked up coverage. In addition, we initiated our Trust2 study in 2022. This study is prospectively designed to follow a cohort of approximately 3,000 patients with negatively tested lesions for up to one year. This study also assesses the histopathologic diagnosis of up to 1,000 lesions that tested positive with the DMT and includes analysis of the TERT add-on test. We expect to release top-line results in the second half of 2023 to provide additional evidence in support of our payer discussions. Finally, we continue to see incremental progress from our targeted programs in primary care. Our agreement with SonoraQuest, a reference laboratory partnership between Banner Health, the largest primary care network in Arizona, and Quest Laboratories continues to ramp up. We received unanimous approval from Banner Health's medical review team to incorporate the DMT into their melanoma care pathway. SonoraQuest is now working to complete electronic medical records or EMR integration and is training staff at Banner Clinics throughout Arizona. We expect this work to be completed in the next couple months. We are also expanding our pilot with an important payer-provider IDN due to the initial success of this arrangement. We continue to believe that the primary care segment represents a significant market opportunity for our technology. We'll continue to look for ways this year to increase access to this channel through additional distribution and reference lab arrangements. With that, I'll turn the call over to Kevin for a more detailed financial review, and then wrap up with a few closing thoughts on my transition that was announced today and why patients are at the heart of everything we do.