Cue Health Inc.

Good day, and thank you for standing by. Welcome to the Q Health third quarter earnings conference call. At this time, all participants are on a listening mode. After the speaker's presentation, there will be a question and answer session. To ask the questions during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. Please be advised that today's conference is being recorded. I would like to hand the conference over to Norma Williams, investor relations. Please go ahead.

Good afternoon, and welcome to Q's third quarter 2022 earnings conference call. Joining me today are Ayub Katak, Chairman and Chief Executive Officer, and John Gallagher, Chief Financial Officer of QHealth. Before we get started, let me begin by reminding you that we are making forward-looking statements including statements related to the expected performance of our business, future financial results and guidance, strategy, long-term growth, and overall future prospects, as well as the impact of the COVID-19 pandemic. These statements are subject to risks, uncertainties, assumptions, and other factors that could cause actual results to differ materially from those described. These risks and uncertainties include but are not limited to those outlined in today's call, as well as other risks identified from time to time in our public statements and reports filed with the SEC. Forward-looking statements that we make on this call are based on assumptions and beliefs as of the date they are made, and the company disclaims any obligations to update these statements except as required by law. In addition, on today's call, non-GAAP financial measures will be used. Reconciliations between GAAP and non-GAAP financial measures are included in our earnings release. Finally, I would like to mention that the press release and a recording of this call will be available on the investor relations page of our website. With that, I would like to turn the call over to AU.

Thank you, Lorna, and thank you everyone for joining us today. I'd like to start by welcoming Dr. Sachin Jain to our board of directors. Sachin is the president and CEO of Scan Group and Health Plan and an adjunct professor of medicine at Stanford. Earlier in his career, Sachin was Chief Medical Information and Innovation Officer at Merck, an attending physician at Boston VA Medical Center, and a female member at Harvard Medical and Business School. We are excited to have Sachin's vast knowledge of health plans and pairs, as well as perspective as a medical doctor, to cue as we continue to pursue our vision of making the healthcare system more convenient, accessible, and timely by placing diagnostic information at the center of care. In the third quarter, We continue to make great strides towards our vision by combining our accurate at home and point of care diagnostics with our integrated virtual care platform. Financially, the third quarter reflects continued solid execution with total revenue of $70 million driven primarily by stronger than anticipated demand from our existing customers. We continue to make good progress on each of our growth drivers. Let me start with broadening our customer base. In the third quarter, we shipped over 9,000 key readers bringing our installed base to approximately 260,000 key readers. To help with future growth, we recently added a new chief commercial officer, Suzanne Stone, to our team. Suzanne comes to us from Dexcom, where she most recently served as head of revenue for North America. She has extensive experience navigating the triangle of payers, providers, and consumers. As menu expansion continues, She will lead our global commercialization efforts across customer categories, including the point of care segment where well-defined reimbursement pathways are already in place. We are excited to have Suzanne join the management team. Shifting to our test menu expansion growth driver, we have made significant progress on several initiatives in our respiratory and sexual health offerings. To provide some context, hospitalizations of children with RSV are at record levels. Hospitalizations are at a decade high for influenza for this time of year. A mix of code variants is on the rise. CDC is warning of a severe burden on the health system due to a tripledemic. These facts underscore the need for accurate and convenient diagnostic results to address these persistent threats at the home and point of care. In fact, historically, RSV is the number one cause of hospitalization for infants with influenza falling close behind. Providing convenient and quick access to diagnostic data and making it immediately actionable with therapy specific to the identified virus will make a dramatic difference in the way these issues are handled. I'm happy to report that for respiratory health, we have made very substantial progress in our pipeline above what we have communicated to date. We have submitted the flu AB standalone de novo application. We have also submitted the flu AB plus COVID multiplex test for emergency use application to the FDA in the third quarter. With these submissions, we're one step closer to enabling people at home and healthcare providers to accurately diagnose flu A and B and COVID early and conveniently at the home and point of care in 30 minutes or less. For RSV, we began clinical studies in the third quarter as planned and have been enrolling patients at multiple clinical sites. We hope to complete enrollment and submit a de novo application to the FDA in the first half of next year. Most parents can relate to the common concern of strep throat among their children. Being able to identify strep early at home and at the point of care with an accurate molecular test would allow for targeted antibiotic use and decrease the risk of complications, such as rheumatic fever. Though we haven't previously indicated a timeline for strep throat, I'm happy to report that we expect to be in clinical studies in this respiratory season. We continue to anticipate that we will have a comprehensive test menu for the respiratory category next year. which will greatly accelerate our efforts to establish ourselves broadly at the point of care where there's already robust reimbursement infrastructure for these tests. Combined with the sexual health menu, our market research reveals a strong existing market of around 50 million tests performed annually. And in the home, we hope to secure a pair coverage support for our respiratory offerings, starting with the most vulnerable among us, the immunocompromised, elderly, and young children. Moving to the sexual health category, chlamydia and gonorrhea infections have each reached a new high in each of the past six years, according to the CDC. While routine testing is recommended for all sexually active adults, the status quo is clearly not sufficient to handle the problem. We expect to start our chlamydia and gonorrhea clinical studies here in the fourth quarter. Our solution will allow healthcare professionals and individuals at home to screen more easily, and if positive, allow for quick delivery of the proper antibiotics. In addition, to support our goal of having a robust test menu that broadens the PLWQ platform, we are pleased to report that we have developed a high-sensitivity molecular monkeypox test. We expect to be able to execute analytical and clinical testing support and EUA submission in Q1. Overall, we achieved the three previously outlined near-term menu expansion milestones in the fourth quarter with two FDA submissions and the start of our RSV clinical study. We remain on track to deliver the remaining milestone to begin chlamydia and gonorrhea clinical studies before the end of the year. In addition, the team completed development of strep throat and monkeypox tests, pushing progress more quickly than we originally planned. We believe the strong progress on menu development will make the Q platform the market's most compelling value proposition for home and point of care diagnostic needs for both respiratory and sexual health, which represent a present day $3 billion market opportunity according to our market research. I'm extremely proud of the team's ability to deliver on the product pipeline, and I look forward to providing additional details on our test menu milestones for 2023 during our next call. Moving to the digital capability growth driver, I'd like to remind everyone that the durable cue reader, which runs all the planned tests in our pipeline, is Bluetooth connected to the mobile device, providing digital results to the user. This connectivity immediately opens up substantial actionability on test results for both home users and at the point of care. we are making progress on plug and play integration with all the most common umr systems building on the work we've already done integrating with both epic and cerner and multiple hospital systems q care our program connecting diagnostic results for home users to healthcare providers for quick consultation and medication delivery was launched in q3 and is now available nationwide with our flu and flu plus covid submission into the FDA, we are preparing to expand Qcare to include immediate consultation for influenza positive users with on-demand delivery of one of multiple available FDA cleared prescription therapies. These medications need to be taken in the first 48 hours after symptoms start, highlighting the need for early diagnosis and treatment, especially for the vulnerable among us, including immunocompromised, elderly, and young children. Q-Care is a foundational capability for many new test-to-treat pathways coming to the QHealth platform to address a wide variety of common health conditions and wellness concerns, particularly for test-diagnosing conditions for which there are specific treatments available. For example, for chlamydia and gonorrhea, antibiotics are the standard treatment. RSV has multiple antivirals coming, and strep throat has oral antibiotics. All of these have a similar diagnosis-to-treatment workflow, which, for home users, allows for seamless connectivity of their test results to a medical professional and medication delivery services. We believe this test-to-treat model will lead to better health outcomes. In addition to our progress on growth drivers, I'd like to highlight a recent third-party study that found that our point-of-care molecular COVID-19 test is as accurate as centralized lab-based PCR tests. The study presents findings from a head-to-head comparison of the Q-COVID-19 test against lab-based RT-PCR on paired samples from over 3,000 individuals. This study is special because of the size of the study and because these 3,000 individuals were testing prior to travel, and therefore almost all were asymptomatic. The findings revealed a 99.4% match between results from Q's test and the reference PCR test, including 100% clinical sensitivity detect positive cases, yielding no false negatives. This study by FH Health adds to the body of clinical evidence already available, including a previously reported Mayo Clinic study, validating that with Q, you can achieve fast, convenient diagnostic testing that is as accurate as lab-based PCR. We believe these characteristics of accuracy, speed, and convenience will apply to all the tests in our pipeline. This leads me to another executive team update. We recently appointed Dr. David Tsai as our chief medical officer. Dr. Tsai is a board-certified cardiologist and MD-PhD trained at Columbia. He has been working at the intersection of healthcare and dentistry, most recently at Apple Health, where he led a clinical team developing new health products, including FDA-cured products and cardiovascular health. As our vision to make healthcare more convenient, proactive, and personalized extends beyond infectious diseases, we're actively pursuing a product roadmap centered on diagnostic capabilities to enable chronic disease management, especially for the world's number one cause of death and disability and the number one cost in our healthcare system, cardiometabolic disorders. David, as a board-certified cardiologist working at the intersection of medicine and technology, helped define Q's future diagnostic products and services, including our cardiometabolic care offerings. In summary, I'm extremely proud of the strides we've made this quarter with our strong progress on the pipeline, the nationwide launch of Q-Care, our foundational diagnostic to treat capability, and our recruitment of great new additions to the board and management team. Our recent investments in R&D were critical to enable the rapid pipeline execution we've reported so far this year. These investments have laid the foundation and allowed us to hone key organizational competencies, including test development, software development, regulatory expertise, and manufacturing efficiency. Looking ahead, we will build from the strong platform with increasing focus on our commercial and financial management success factors in support of our mission to enable personalized, proactive, and informed healthcare that empowers people to live their healthiest lives. With that, I'll turn the call over to John.