MDxHealth SA

Greetings. Welcome to the MDX Health fourth quarter and full year 2022 earnings call. At this time, all participants are on a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. Before we begin, I would like to remind everyone that we will make forward-looking statements during today's call. Whether in prepared remarks or during the Q&A session, These four linking statements are subject to inherent risks and uncertainties. These risks and uncertainties are detailed in the risk factors section of our filings with the Securities and Exchange Commission, specifically in the company's annual report on Form 20F. I will now turn the conference over to your host, Michael McGarrity, Chief Executive Officer. You may begin.

Thanks, Jamali. And thank you all for joining us for our 2022 full-year release of results for MDX Health. With me today is Ron Kalfas, Chief Financial Officer. As you are likely aware, prostate cancer is the most common form of cancer in men. When I joined MDX Health in 2019, my vision was to continue to build a company that answered the most important questions facing the urologist and patient. And there are three that provide the path that patients will take through diagnosis and treatment. One, do I need a biopsy? Two, is my biopsy actually negative, or do I need further confirmatory analysis of my results in order to avoid repeat biopsies? And three, my biopsy is positive. What do I do now? MDX Health has become the only company that can answer all of these questions. Our menu of tests inform the patient and urologists through the often confounding journey and approved treatment decisions along the way. 2022 was a transformative year for MDX Health. We began the year with a single test generating substantially all of our reported revenue. Just 12 months later, MDX Health now has a menu of four tests, all generating or poised to generate sustainable revenue growth and drive significant operating leverage throughout 2023. In addition, we began the year with a sales channel of 30 direct reps and finished the year with a channel of 54 direct reps as a result of the GPS acquisition. Milestone drivers of growth and value creation were reinforced with our acquisition of the Genomic Prostate Score, or GPS, test from Exact Sciences. which we believe has allowed us to establish a best-in-class sales team and unmatched menu to offer urologists. The launch of our resolved MDX urinary tract infection test, the first growth opportunity driven by the strength of our sales channel, also played an integral role in our transformation, contributing close to $5 million in revenue. and demonstrates two key aspects of our operating model. First, it validates our strategy by demonstrating that we can successfully identify innovative, high-growth diagnostic products that complement our existing portfolio. Secondly, Resolve highlights the operating leverage of our business model by demonstrating how our process can seamlessly integrate a new diagnostic test into our existing sales and marketing channels without incurring significant additional operating expenses. Before I turn the call over to Ron to comment on our financial and operating results for the quarter and year, I'd like to first point to a few key highlights for 2022. Our Q4 revenue grew by 114% over Q4 2021 and 15% when excluding the acquisition of GPS. Acceleration of unit growth for confirmed MDX was an important contributing factor in our top-line performance, as continued execution by our sales team helped drive unit demand. In full year 2022, billable test volume for confirmed increased by 11% over 2021, with Q3 growth of 14% accelerating to 21% in Q4. With an estimated 30% of prostate biopsies resulting in a false negative, we believe the 96% negative predictive value of the confirmed test significantly reduces the need for repeat biopsies and will continue to become the standard as we drive adoption. Our full year of 2022 total revenue grew 67% over the last year, or 25% when excluding GPS, which reflects our continued focus and efforts throughout the pandemic to drive growth. And I would like to point out that while we were all excited to put the pandemic behind us, the impact on our business was profound. Prostate cancer screenings down 50% for the last couple of years, leading to increased rates of prostate cancer. In summary, our results reflect a clear focus on growth and execution as evidenced in the following. As communicated with the launch of Resolve MDX, we validated the opportunity with our sales channel and customer base following many months of diligence and a clear set of criteria to substantiate the fit with our current menu, call patterns, and relationships. We also evaluated the product's opportunity to generate a creative contribution to our gross margin from day one and dollar one. After 12 months on the market, we can confidently state that this process has been validated and can be applied to source additional channel opportunities that do not require material investment. The acquisition of the GPS test represents a clear and compelling opportunity to expand our existing customer base and leverage the acquired customer base by cross-selling complementary prostate cancer diagnostics in our offering. We now are the only company that can provide a clear and clinically actionable precision diagnostic for risk stratification, both positive or negative initial biopsy. We are confident that our ability to partner with our urology customers with an unmatched menu based on our reputation for excellence in laboratory services and allow improved efficiency through standardization. We continue to execute on our integration of the GPS test, while a complex and all-consuming process from both a sales and operating perspective. We have been focused in Q4 and into Q1 to transition all aspects of the business. In Q4, we completed the restructuring of our sales team with additional reps from EXACT, including territory realignment, alignment of performance-based incentive compensation, and cross-selling, cross-training of product offerings. We are confident that these efforts will provide for a high-performing sales team in 2023 and beyond. We have also been intensely focused on the customer experience, including transfer of physician portals, new pathology lab sample procurement, and market access contract pair coverage, all of which are critical in the laboratory model to efficiently receive, process, and report within the turnaround time expectations of our customer. I will provide further view forward in Outlook for 2023 But first, let me turn the call over to Ron for a review of our financial and operating results for 2022. Thank you, Mike.

As Mike mentioned, we are pleased to report our first consolidated quarter of the MDX health business with our revenue growth in the fourth quarter and full year 2022. Revenues for the fourth quarter ended December 31, 2022, increased by 114%, to $12.9 million versus $6 million for the same period last year. Excluding GPS, fourth quarter revenue increased 15 percent to $6.9 million versus Q4 2021. Total revenues for 2022 were $37.1 million, an increase of 67 percent as compared to total revenue of $22.2 million for 2021. Including GPS, total revenue for 2022 was $27.7 million, a solid increase of 25% versus 2021. 2022 revenues were comprised of $21.8 million for Confirm, $9.3 million for GPS, $4.9 million for Resolve or UTI test, with the remaining revenues from Select and others. Gross profit for 2022 was $19.2 million as compared to $10.6 million for 2021. Gross margins were 51.9% for 2022 as compared to 47.5% for 2021, representing a gross margin improvement of 440 basis points primarily related to our product mix and the addition of GPS to our product menu. Operating expenses for 2022 were $57.1 million, up 53% from $37.4 million for 2021, primarily related to additional field sales personnel associated with the GPS business, as well as non-recurring transaction-related expenses of $3.2 million. Excluding non-cash expenses such as depreciation, amortization, and stock-based compensation, as well as the non-recurring transaction-related expenses of $3.2 million, our operating expenses for 2022 were $48.1 million, an increase of 45% over 2021. Operating loss and net loss for 2022 were $37.9 million and $44 million, respectively, an increase of 41% and 52%, respectively, over 2021. Net loss also included one-time financial expense of approximately $1.2 million related to replacing the company's debt facility. So in total, non-operating, non-recurring expenses totaled $4.4 million. Cash and cash equivalents as of December 31st, 2022, were $15.5 million. Our balance sheet was strengthened recently from the February 2023 equity raise of $43 million, which includes gross proceeds of $3 million from the underwriters over allotment option. Including net proceeds of $40.4 million from this offering, our pro forma cash balance was $55.9 million for year end 2022. Total cash collections during 2022 amounted to $32.3 million, an increase of 50% compared to 2021, excluding collections from GPS total cash collections in 2022 increased by 20% versus 2021. This concludes my brief overview of the results. I will now turn the call back to Mike.