Oncocyte Corporation

First quarter 2021 earnings conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. Should you require operator assistance during the conference, please press star zero to signal an operator. Please note this conference is being recorded. I will now turn the conference over to your host, Bob Yedid, with LifeSci Advisors. Thank you. You may begin.

Thank you, David, and thank you, everyone, for joining us for today's conference call. to discuss OccoSight's first quarter 2021 financial results and recent operating highlights. If you have not seen today's financial results, please visit the company's website on the investor page or the press release. Before turning the call over to Ronnie Andrews, OccoSight's President and Chief Executive Officer, I would like to remind you that during this conference call, the company will make forward-looking statements regarding future events and projections. Any statements that are not historical facts are forward-looking statements. We encourage you to review the company's SEC filing, including, without limitation, the company's Form 10-K and 10-Qs, which identify specific risk factors that may cause actual results or events to differ materially from those described in these forward-looking statements. These factors may include without limitation, risk inherent in development and or commercialization of potential diagnostic tests, uncertainties in the results of clinical trials or regulatory approvals, the capacity of Oncocyte's third-party blood sample analytics system to provide consistent and precise analytic results on a commercial scale, the need to obtain third-party reimbursement for patients' use of any diagnostic test the company commercializes, our need and ability to obtain future capital and maintenance of IP rights, and uncertainties associated with the COVID-19 pandemic and its possible effect on our operations. Therefore, actual outcomes and results may differ materially from what is expressed or implied by these forward-looking statements. OCCOSITE expressly disclaims any intent or obligation to update these forward-looking statements except as otherwise may be required under applicable laws. With that, it's my pleasure to turn the call over to Ronnie Andrews, CEO.

Ronnie? Thanks, Bob, and welcome, everyone, to our conference call to discuss our first quarter 2021 financial results and our operating highlights. Joining me today are Mitch Levine, our Chief Financial Officer, Dr. Doug Ross, our Chief Science Officer, and Padma Sundar, our Chief Commercial Officer. will all be available during the question and answer session later in the release call. It's great to be able to report that despite the ongoing macroenvironmental headwinds, Team Oncocyte has continued to maintain our solid momentum into 2021, with steady execution across our four growth engines, bringing us closer to our goal of delivering a single solution for physicians and their patients that will answer critical unanswered questions for the management of solid tumors. The technologies and tests we've integrated over the past seven quarters have the potential to improve patient outcomes while also reducing the cost of care and allow Oncocyte to execute commercially in markets that, when combined, have over $10 billion worth of TAMs. Key accomplishments so far this year include recording our first million-dollar revenue quarter, presenting compelling data on Determa IO and our third solid tumor type at AACR, initiating pilots with four pharma companies for DETERMA-IO, signing major agreements with two of the largest molecular platform companies to provide clinical reference testing and validation services across PCR and next-gen sequencing platforms. And that will be done out of our Nashville lab. We acquired Chronix Biomedical, giving us access to IP and technology that allows us rapid entry into the blood-based monitoring world in cancer, as well as a high-value reimbursement product for transplant rejection. And finally, we significantly strengthened our balance sheet to support our ambitious growth plans. Our growing product portfolio positions Oncocyte for both immediate-term revenue generation and long-term growth. And I'd like to spend the call today providing an overview of our most recent accomplishment and what's to come across these four areas. To recap for any of our new investors, first, we have the TermaRx, the first and only commercially available predictive test for informing chemotherapy decisions in early stage lung cancer. We believe our second test, the TermaIO, is the star of our future. as a potentially differentiated and proprietary test for immune therapy response prediction that will give oncologists and patients greater understanding of the likelihood of responding to an immune checkpoint inhibitor at the beginning of the disease management process to ensure the patient gets the right treatment from the very start, giving them the best chance at a good outcome. In a very short period of time, we built a compelling foundation of data demonstrating applicability of this test across all four approved immunotherapies, Keytruda, Opdivo, Dicentric, and Mfenzi, and across four different indications, lung, breast, bladder, and kidney cancers, which together suggest a pan-cancer immunotherapy opportunity, which is on track for clinical launch later this year. Third is our pharma services offering from our CAP accredited CLIA lab in Nashville, which continues to grow, generate revenue, which doubled in Q1 as compared to Q4 2020, and we now have a solid pipeline of opportunities with pharma and diagnostic companies. And finally, our newly acquired CNI test, which accelerates our entry into blood-based monitoring for therapy response and for recurrence in cancer, where we intend to replicate our successful DETERMA-IO development playbook for the Therassure CNI monitor test for immunotherapy response monitoring. Together our progress across these four growth engines will enable Oncocyte to become a one-stop shop offering Determa Rx, Determa IO, and eventually Determa CNI as proprietary tests that position Oncocyte to become the preferred lab for clinicians who need answers to the important treatment decisions only Oncocyte's test can answer and do that throughout the patient journey. So let's dive into some of the details on each of the product offerings. Q1 was a solid quarter for Determa RX, particularly given the COVID surge in late January and February, which we now know led to substantial delays for early stage cancer surgeries with patients waiting for vaccines and instead relying on radiation treatment until they felt it was safe to undergo surgery. We've continued our sales efforts to expand to new health systems, and as of the end of the first quarter, we had a total of 129 onboarded systems, which represents a 57% quarter-to-quarter growth. As of March 31, 2021, we had 218 onboarded physicians, a 57% quarter-to-quarter growth rate, And we completed testing on 236 patient samples in Q1, slightly ahead of Q4, with sample numbers growing every month in the quarter. We expect that as COVID cases continue to decline with the expansion of the vaccine programs, patients will be more comfortable seeing their doctors and undergoing these life-saving surgeries. The improving macro environment, combined with our steady growth onboarding new doctors and hospitals, leave us confident that as our reps can reengage with physicians in person, we'll be able to strengthen our momentum and see increased quarter-to-quarter growth in DETERMA Rx patient orders in Q2 and throughout 2021. Our agreement with Burning Rock to distribute DETERMA Rx in China is progressing as planned. Our continued progress to complete full onboarding and validation in late Q3 leaves us on track for $4 million in booked revenue from Burning Rock in 2021. And it's just the beginning of our efforts to tap into the world's largest early stage lung cancer market. Moving to our second growth engine, DETERMA-IO, where the new data being presented continues to validate that our test is the only precision diagnostic test on the market that evaluates the entire immune microenvironment in biopsies and surgical specimens to identify patients likely to respond to immune checkpoint inhibitors. We believe DETERMA-IO is poised to significantly improve treatment decisions for individual patients and their physicians, as well as help focus development process of biopharma and pharma companies in clinical validation of a new emerging class of immune therapies. It is clear that the opportunity with DETERMA-IO is tremendous, given more than 750,000 patients will be eligible annually for immune therapies in the US alone. Identifying which of these patients will benefit from ICIs remains an outstanding challenge. At the recent FDA Oncology Drugs Advisory Committee meeting, where they reviewed retrospective data from the accelerated approvals in the immune therapy drug class, the committee stated that only modest benefits were observed across diverse and often unselected patient populations. That is why we believe not only We believe we not only have a tremendous opportunity in guiding clinical immunotherapy treatment decisions, we believe there's also a huge opportunity to inform the estimated 5,000 ongoing clinical trials evaluating these types of drugs. The past few months have been data-rich. We've steadily provided compelling evidence that DETERMA-IO has broad potential across a range of tumor types. Starting with well-established clinical data across three different cancers, lung, breast, and bladder. Most recently, at the AACR meeting, we presented our first studies in bladder cancer, where we achieved our primary endpoint, demonstrating significant correlation between DETERMA-IO and two-year overall survival rate to ATISO in metastatic bladder cancer, demonstrating improved overall survival in DETERMA-IO positive patients versus the all-comer population where the drug had been voluntarily withdrawn due to lack of survival benefit. Our message is resonating with pharma, and we currently have several pilot studies underway where DetermaIO is being used to analyze samples from ongoing and failed pharma trials for a potential rescue opportunity. By selecting those most likely to respond, we may be able to help pharma reveal the true benefit of treatment in the right patient population. These pilots have definitive endpoints, and if we hit them, we'll be poised to rapidly enter trials that could lead to a companion diagnostic claim that could broaden and accelerate DETERMA-IO's clinical adoption. So with strong data in triple negative breast cancer, lung, and bladder cancer, we built a solid case that DETERMA-IO may have pan-cancer utility as a biomarker for many solid tumor types. We're excited to build on this data set with the new results that will be presented at ASCO in early June, where we'll expand to a new indication, renal cell carcinoma. Every new cancer indication moves us closer to being the only precision diagnostic that can accurately predict sustained response across all solid tumors and builds a case for Determi-IO as a pan-cancer predictive test in the 3 billion immune therapy patient selection market. And importantly, we remain on track for clinical launch in the second half of this year. Next, I'd like to spend some time on our newest product, the TheraSure CNI Monitor Clinical Assay, our entry into blood-based monitoring in cancer. We recently closed the acquisition of Chronix Biomedical, which provides Oncocyte proprietary access to the Therassure CNI Monitor clinical assay, a patented blood-based assay that uses copy number instability, or CNI, for immunotherapy response monitoring and oncology. As I said earlier, we'll apply the same playbook we successfully used with Determa IO this time last year, rebranding the test at Determa CNI and preparing for market with planned validation studies and publications to support a U.S. research and pharma services launch in late 2021. In the near term, though, we've established a clinical study plan for Determinacy and I, and we'll complete tech transfer to our lab in Nashville and start marketing to pharma companies in the U.S. later this year. However, we've hit the ground running with the Chronix team who already have ongoing studies in Europe in multiple cancers including lung, head, neck, ovarian, and pancreatic with over 700 patients recruited to date across several studies. Data from studies to date have demonstrated broad utility of this blood only test across three areas of monitoring. predicting the presence of minimal residual disease post-surgery, two, predicting recurrence in ovarian cancer that is in remission, and of course, three, predicting response to cancer treatment, including but not limited to immune therapy treatment. We believe the CNI test has a number of advantages for patients and physicians. First, it will allow physicians to begin monitoring patients for treatment efficacy more quickly given that the CNS test requires only a blood sample. In contrast, getting a result from the competing emerging tests for monitoring can take significantly longer as these tests start with the time-consuming and costly genetic sequencing of a patient's tissue sample. In several late-stage solid tumors such as lung, guidelines recommend neoadjuvant therapeutic intervention, not surgery, which means the pathology for these tumors is performed on a fine needle biopsy, which typically collects very little tumor tissue. So, in many cases, the initial pathology will use the majority of the tumor tissue and doesn't leave enough to complete the full genome or exome testing required to run a tissue-informed MRD methodology. Even in cases where sufficient tissue is available, preserving precious samples to enable other tests will be an added benefit of Oncocyte's fully blood-based approach. In addition, we believe C&I tests will be able to deliver timely results on progression at the second cycle of immune therapy, which is weeks earlier than currently seen with imaging or the tissue-informed technologies. From an overall strategic perspective, There's your CNI monitor assay will not only help us expand the projected 3 billion in growing immunotherapy response monitoring market, it will also provide us ownership of IP that could help develop a foundation to build additional applications for the estimated $6 billion plus recurrence monitoring market, a repeat testing opportunity that tells a patient that a second tumor may be forming long before it can be identified by imaging. These additions bring Oncocyte a distinct competitive advantage as the first and only company to potentially offer a continuum test from selecting patients for immune therapy to monitoring the effectiveness of treatment as well as monitoring for recurrence. The chronic acquisition was also important, and that included tests and a patent estate for the use of digital PCR to detect transplant rejection in recipients. The Crocs Therasure Transplant Monitor Test is a solid organ transplantation monitoring test intended to use a simple blood draw to monitor for rejection of transplanted organs. Excitingly, Palmetto, the Medicare Administrative Contractor for the Centers for Medicare and Medicaid Services, or CMS, recently issued a Local Coverage Determination, or LCD, recognizing molecular testing for solid organ allograft rejection as a category test eligible for Medicare reimbursement. This LCD creates a pathway for future Medicare reimbursement for the Therassure Transplant Monitor Test in the organ transplant space. Of note, the coverage policy for transplant rejection monitoring, molecular testing for solid organ allograft rejection, as it's titled, exclusively cites three peer-reviewed publications on the performance of the Chronic's test in solid organ transplant monitoring, which is an important validation of the Chronic's technology. In addition, the policy establishes a price parameter between $2,700 to $2,800 per test depending on the organ transplanted, which we estimate could translate to total revenues of $40,000 to $50,000 per patient over a two to three year timeframe, assuming current transplant monitoring guidelines are followed. While we will explore licensing the Therassure Transplant Monitor to potential partners for use in the transplant field, the underlying technology may be of interest to Oncocyte's core cancer-related assay business. We believe there is an opportunity for the use of technology in the development of a super sensitive test to detect tumor-derived DNA in blood to monitor for long-term cancer recurrence, which will ultimately become DETERMA-MX and complete our continuum of application. Although our focus were made in oncology, this LCD for transplant use, along with the key attributes of this technology, including greater sensitivity, reduced cost to run, And most importantly, the ability to kit and democratize the monitoring test to improve turnaround times makes this a highly attractive asset for players in the transplant diagnostic market. And finally, coming to our fourth growth engine, our pharma services business. We currently have a solid and growing pipeline of contracted pharma services projects. And while we know traditionally these revenue streams can be lumpy and directly related to project timelines and sample delivery from our pharma partners, I'd like to enthusiastically report that Pharma Services' revenues did double quarter-by-quarter. Another noteworthy accomplishment of Pharma Services was the Q1 initiation of a project from a very large study by a top 20 pharma company using our proprietary blood-based cell cycle assay for monitoring resistance in our Pharma Partners Phase III trial. It's the first major trial using this test, which was developed in-house by our team in Nashville specifically for this indication. And finally, we're thrilled to announce agreements with two of the largest molecular platform companies. Our work with these two global leaders will focus on clinical validation and system integration of selected tests on their respective PCR or next-gen sequencing systems. These two agreements will begin to bear fruit in late Q2, and we look forward to working closely with these two large strategic partners. And of course, there's more to come, but the progress in growing the client base in projects and pharma services provides an immediate and growing revenue engine to help smooth out the lumpy quarterly revenue ramp traditionally experienced when building pharma services business. As well, these relationships with global platform companies will support our operations as well as our strategic development of future tests for our sales channel and potentially provide a partner for kit development and distribution, XUS. As I look out into the rest of 2021, I envision a great year with rising revenues and at least three product launches, Determa IO, Determa TX, and Determa C&I. These products have a large total market opportunity of over 10 billion, and we have proprietary positions in some of the fastest growing areas of molecular oncology. We're beginning to attract the attention of leading pharmaceutical, biopharm companies, and molecular diagnostic tool platform providers. And we are bullish on our opportunity to complete important contracts with these global partners to strengthen our market position. It takes time to develop a comprehensive diagnostic platform for cancer, but we're making great progress in all areas thanks to an incredibly dedicated team. At this point, I'd like to turn the call over to Mitch Levine to review our financials. Mitch?

Thanks, Ronnie. Hey, everybody. As of March 31st, 2021, we had cash, cash equivalents, and marketable securities of $59.8 million following the equity capital raises we completed in January and February, as well as through the use of our ATM, which in total added $69 million in cash to our balance sheet. This included $25 million from a direct placement of equity with two prominent healthcare investment funds in January, and due to strong demand, we completed an underwritten public offering that raised an additional $37.9 million in net proceeds in February. We also paid $10 million in February to complete the Razor acquisition, giving us full control of the Determa RX test. which now allows us to execute our ex-US tech transfer to international partners. Cash used in operations for the quarter was around $6.3 million for normal operating burn, plus $1.6 million in discretionary annual merit and bonus payments, and approximately $1 million in non-recurring legal and business development expenses paid in the quarter. Excluding these items, We expect our base operating cash burn to increase modestly in future quarters as we continue to invest in clinical studies for DETERMA-IO and DETERMA-CNI, as well as investments in sales and marketing to drive increased adoption of our DETERMA-RX test and other tests we may commercialize, license, or acquire. As a reminder, the first quarter of each year is generally our largest cash burn quarter. due to annual merit and bonus payments. Excluding such periodic or one-time items, cash used in operations for the quarter was around $6.3 million for the base operating burn. One-time non-recurring expenses in the first quarter of 2021 included fees related to our underwritten public offering, annual bonuses, and legal fees arising from business development activities. An additional one-time expense in the quarter was the relocation of our Brisbane lab for DetermaRx to our headquarters in Irvine, California. Also in Q1, we invested in critical personnel, hiring 12 new employees in areas such as pharma R&D, market access, sales, business development, and medical education as we endeavor to quickly bring our diagnostic tests to market and see them best. reimbursement. With the continued ramp in revenues of DETERMA Rx combined with the solid quarter from our pharma services business, our consolidated revenues for the first quarter of 2021 were approximately $1.12 million, an impressive 123% increase from the fourth quarter of 2020 as revenues from both sources increased. I'd like to remind everyone that we launched the term Rx one year ago, as we accumulate payment history and experience. We are able to progress from recognizing revenue on a cash basis to an accrual basis that records revenue in the period that tests are performed during the first quarter of 2021. After accumulating additional history of cash receipts and other factors considered by management for Medicare Advantage-covered Term Rx tests, including the recently published Medicare rate, we transitioned to the accrual basis for tests covered by Medicare Advantage insurance plans. We will continue to recognize revenues for commercial and other payers on a cash basis until we have reimbursement contracts with those payers. At that point, those contracts will also progress to the accrual basis for DETERMA Rx tests. Operating loss as reported for the first quarter of 2021 was $11.4 million, an increase of $2.9 million from the first quarter of 2020. Operating loss as adjusted for the first quarter of 2021 was $8.6 million, an increase of $1.2 million as compared to the same period in 2020. We have provided a reconciliation between GAAP and non-GAAP operating losses in the financial tables, including with our earnings release, which we believe is helpful in understanding our ongoing operations. Cost of revenues for the current quarter was approximately $1 million. which included $307,000 in non-cash amortization expenses from our Razor asset acquired in February. As a reminder, the cost of our Razor asset amortization, which is a non-cash amortization expense over the remaining life of the Razor patent, will be included in cost of revenues each quarter. Cost of revenues also include testing services we perform for our pharma customers. It is important to note that as we ramp our testing volumes, we expect to see an improvement in our gross margins in future quarters for the DETERMA Rx test. Research and development expenses for the first quarter of 2021 were $3.4 million as compared to $2.2 million for the same period in 2020, an increase of $1.2 million. General and administrative expenses for the first quarter of 2021 were $4.8 million as compared to $4.6 million for the same period in 2020, relatively unchanged. Sales and marketing expenses for the first quarter of 2021 were $2.3 million as compared to $1.5 million for the same period in 2020, primarily attributable to ramp up in sales and marketing activities for our continued commercialization efforts of Determa Rx. For the first quarter of 2021, we reported a net loss of $3.9 million, or 5 cents per share, as compared to $7.7 million, or 13 cents per share, for the first quarter of 2020. We are very pleased to announce the newest member of our finance team, Lee Yu, Vice President and Controller and Principal Accounting Officer. Lee comes to us as a former Big Four CPA with a master's in accounting and more than 21 years of US GAAP, FP&A, SEC reporting, and SOX controls experience. Lee is clearly a fantastic hire and will be a critical member of the Oncocyte team. We have a good history of making timely, thoughtful, strategic investments in clinical studies and additional sales and marketing initiatives which allowed us to continue to build our momentum so far in 2021. And we'll continue to evaluate key studies for DETERMA-IO and now DETERMA-CNI that will help us accelerate these two important products towards market launch and uptake. In addition, we have several new relationships with biopharma and molecular platform companies that may require some capital investment to get the revenue streams flowing from these services opportunities. Our pharma services infrastructure remains extremely lean, and we expect investments of this kind will lead rapidly to new revenues in the second half of 2021 and beyond. We are pleased with the growth of DETERMA-RX and positive developments with DETERMA-IO and DETERMA-CNI, our new blood-based monitoring test. We believe these tests give Oncicide a distinct competitive advantage as one of the first and only companies to potentially offer a continuum of tests from selecting patients for immune therapy treatment to monitoring the effectiveness of that treatment. That concludes my remarks concerning our financial highlights. I'll turn the call back to Ronnie.

Thanks, Mitch. Operator, that concludes our prepared remarks. We'd like to now open the floor for questions.

Thank you. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. If at any time you wish to remove your question from the queue, please press star 2. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions.

Our first question is from Mike Madsen with Needham & Company.

Hi, thanks for taking my questions. I guess I want to start with the quarterly revenue. So it sounds like most of the, I guess, sequential growth came from the pharma services part of the business. Is that right? And is that just sort of the lumpiness going on there, or is that a sign that you're going to have You know, is any of that sustainable, I guess, is what I'm getting over the next few quarters.

Yeah, both RX and IO had significant revenue increase to get us over a million dollars. So, but we did see a round of, it was about 50-50 contribution to the number. So you had about just a little over 500,000 in RX and a little over 500,000 in IO. in the pharma services group. In terms of the lumpiness, we have a nice pipeline in the pharma services area. So the challenge, as you know, in pharma services is you are at the mercy of the samples that the pharma companies collect to send you. So adding these two global diagnostic platform company projects really helps us smooth out because these are validation and verification services as well as some clinical development services. And so we're more in control of the milestones in terms of our ability to complete the work and hit the milestone. So it's much more predictable than on the pharma side where we're dependent on them to find patients to send us for their clinical work. So I'm not going to promise it won't still be a little bit lumpy, but we do think that these two new agreements help us a lot. As far as RX, We saw January and February were slow. I think we had said that at the end of Q1, but when we look back, March, we saw an increase in sample volume in March, and we've now seen a continued increase every month. So we believe that the pandemic is not, quote-unquote, over in terms of surgical procedures, but it appears that as more and more people get vaccinated and we reach a point of what we hope will be a new normal, you know, equilibrium that these patients will see, you know, will go back and start getting these surgeries. And we certainly have seen that so far in March and April. But we'll see as we get to the end of the quarter. But we're pretty confident that with the doubling of onboarding accounts and doubling of onboarded docs that we certainly have the right, path forward, and our reps, as soon as we can start getting in and actually detailing and doing what we like to call the same store sales or same account sales with these new docs, that we'll be able to start to see and grow these sample volumes again in Q2 and on through the year.

Okay, thank you. That makes a lot of sense. And then the three Determa IO pilot projects with the pharma companies are Can you tell us any more about these, and how long does that pilot phase sort of last before we go into more of a regular phase, I guess?

Yeah, I'm going to let Dr. Ross take that one.

Yeah, sure. So these are pilot projects where, you know, it varies. Sometimes it's an in silico project, sometimes it's a small wet project of samples or data that they have available. And it's really, you know, a period of getting introduced to us and to the assay, and then it hopefully progresses to the next stage. where we would be part of a prospective study or a larger retrospective study. So it's the natural progression of a relationship with somebody who's getting to know you, your assay, and, you know, quite candidly pivoting what is usually an existing biomarker strategy. So it's the first stage.

What's very interesting and exciting about these pilot projects is that biopharma companies are actually developing novel therapeutics. So they are looking to see whether our biomarker is predictive for these new so-called second generation therapeutics. So we believe that if they do see a predictive signal, then to Doug's point, it'll pave the path for them to incorporate our biomarker into their program.

Yeah, I think the main thing to note, Mike, is the reason they're pilots is because both pharma and us want to get to a go or no-go decision point rapidly. And so by the sheer nature of them being pilots, the studies are geared towards fast turnaround time of the results so we can get to an answer for them and for us. Okay, great. Thank you. Thank you.

Our next question is from Mark Massaro with PTIG.

Hey, guys. Thanks for the questions, and congrats on all the progress. Thanks.

Thanks, Mark.

I guess my first question is, I think you alluded to it, but the volumes for Determa Rx were, call it roughly flat. You talked about January and February being impacted by the pandemic. So is it reasonable for us to think that you should have sequential growth in Q2? And then I believe you might have somewhere close to 10 reps in the field. Can you clarify that? And what percentage of your reps are actually out and about in the field?

Yeah, that's a great question. Let me take the high level. I'll turn it over to Padma, who's obviously here with me. Yeah, I mean, volumes were flat quarter to quarter. We were not, I was surprised by that until we got into mid-March, and we saw February, you know, January, February, the surge, and when we started doing our, sort of putting our feelers into the market, some of the rumors we heard, we felt were true, and that is, we heard they were true, which is, Patients were getting radiation to bridge them until vaccination so they could get surgeries. And we saw March, and obviously was a much bigger month than February and January. So we're feeling much better that we're starting to come out of the pandemic hangover. But, you know, we won't know completely until the end of the quarter, but we do have line of sight to quarter of a quarter sequential growth in sample volumes in Q3. I'm sorry, Q2 over Q1 for sure. So, Padme, you want to?

Yeah, so I think what's heartening is we grew every month January. February compared to January and March compared to February. So that's a good sign. In terms of our reps, I would say about half of our reps in certain parts of the country are slowly but steadily getting access to the doctors, but the other half are still working virtually. And one of the things that does do is, a lot of this work is blocking and tackling to make sure that the offices actually remember to order the Determa Rx in every eligible sample. so to the extent that it is virtual that blocking and tackling gets slowed down and obviously as more and more offices open up the reps will be able to get in there the other thing is about 60 percent of our reps have been in the field for have been hired or on the job for less than a quarter so as they get trained and as they build their connections and as they mature we expect all of the reps to become as productive as the ones that have been with us, you know, in the prior year. So both of those trends are positive for Puntiterma Rx. And, of course, the downside of that is the radiation, which is very interesting. To some extent, there has been a trend where radiation is being used as a substitution for surgery. That will not continue for all patients, but some of that might become a persistent new normal in some cases.

Okay. And you guys talked about launching DetermiCNI for clinical trial or RUO use later this year. What needs to happen for you to prepare that for a clinical launch? I'm guessing it's data and reimbursement, but can you give us some sense on what activities you're doing to ready that for a commercial clinical launch?

Yeah, absolutely, Mark. First off, when we acquired C&I and we actually, the deal was done, we got a wonderful surprise in the fact that they had already had numerous studies ongoing in Europe, and we have over 700 patients now enrolled across a number of different tumor types for C and I. And so the critical mass and speed at which we can gain critical mass and statistical powering these indications is obviously enhanced by the work that they were doing, and now we've been able to invest to ramp that up. In order to bring it to the U.S., Doug, you want to comment on the tech transfer component of that and

Yeah, so we are doing a check transfer in Q4 over to the U.S. to facilitate work that goes on in this country. And we're also, the early trial that we're doing, the prospective trial that we're doing is going to be done in Europe starting this summer out of the European lab. And so we want to aggressively expand that into the U.S. And so having that running out of our Nashville facility is the plan. And to move it towards commercial launch, we're trying to do clinical studies in a single clinical indication where it's very clear what the actionability of it is, and that's the plan to drive it towards commercial launch.

And the reimbursement path, we've had initial discussions. It's actually quite straightforward in that there's already a local coverage decision, as you know, Mark, very well, for blood-based monitoring tests. So as long as the next test is equivalent in performance to that first test, it is covered under that policy. So once we have the data demonstrating it's equivalent to the first test in the market, the coverage is, in a sense, automatic.

Yeah. So we feel pretty good, Mark, once we get momentum under the U.S. studies. And then there's always the opportunity potentially to petition CMS with European studies, but I think that obviously we don't want to wait on that. We want to get going in the U.S. as soon as we can. But we were very excited to see the progress that C&I or that Chronix had made between the time we had initiated our licensing deal in the fall and obviously the acquisition. So they made a lot of progress ahead of us actually acquiring the product or the company. And so very excited about where C&I is and how fast we might actually be able to bring it through the system here.

And the data shows a couple of things. Obviously, it's blood only, which is a great source of differentiation. And second, it's broad. It's not just for immune therapy response prediction. It's for treatment response prediction, which includes immune therapy. And in some cases, where the standard of care is chemotherapy, it includes response to that, as well as some early data in MRD. So it's a pretty broadly applicable asset.

I think you're going to see, I don't want to let too much of the good news out of the bag here because it hasn't been formally blessed yet, but we have a paper that has been accepted by a very prominent journal around using our CNI assay as a monitor for progression of ovarian cancer. as a very specific monitor for progression. And so far, the data looks significantly better than the current protein biomarkers that are being used for monitoring for ovarian cancer. So lots of good things coming out of the CNI acquisition, and we look forward to bringing those to market.

Okay, and just the last one from me. Are you guys still on track to – to show the Milan data at Esmo for triple negative breast cancer?

Absolutely. We would love to talk about it today, but it's embargoed and our trial partners obviously are eager to get it out as well. But ESMO, they're a European group and ESMO is their big annual meeting. And so that's what we're shooting for, but we're on schedule for that. And Doug, any further comment on that?

It's been submitted, which is kind of the criteria and Obviously, they haven't, you know, there's nothing more to know about it than that.

Yeah, except that we can't wait until it gets released, how's that?

All right, thanks very much. Thank you, Mark.

Our next question is from Thomas Flatton with Lake Street.

Hey, good afternoon, guys. Thanks for the question. On the term of TX, With the pending launch, can we make the assumption that a panel has been selected at this point?

you can. We have found what we like best, and we are in the process of validating TX. We took a strategic approach to this, Thomas, in that we wanted a technology that could allow us to continue our approach to tissue conservation, especially given we're in lung cancer. We Typically, we'll get, you know, after RX, where you get the tumor resection, after that it's neoadjuvant. So you're going to get these bimetal aspirates. And so we chose to go after a technology that doesn't require a significant amount of tissue or extracted DNA and RNA. And so that platform is moving forward, and we're excited about the decision, and more to come.

And then just a couple on – oh, sorry, Pat, go ahead.

Okay. The panel that's been selected will fulfill sort of our objective of being that one-stop shop for all the targeted therapy as well as all the immune therapy.

Got it. A couple of Rx questions. Do you know what the Medicare-Medicare Advantage mix was of your sample volume or percentage, I should say?

So as anticipated, it follows the incidence in the markets. It's about 70% together.

Great. And then where do you stand with the NCCN? I know you had talked about submitting a package to them ahead of the summer meeting. Has that been submitted yet, or can you just give us a sense of where you are with that?

Yes. So Doug is here with me, right next to me. We're both vaccinated. Yes, so we are on, they have a summer meeting in July where they review typically the diagnostics packages. Pharma is of course a rolling basis. Yes, we are on track to submitting an application for their July meeting. They do make, it's a closed door meeting, and they do make their decision in that meeting. However, they are prevented from disclosing what the decision is until the next update comes out, and we think that will happen in the Q4 timeframe.

What we're looking for, Thomas, is we were going after four various tiers of acceptance within our application, and so we'll actually have four shots on goal in terms of the indication that we're looking to support in their blessing. So more to come on it, but the application is going in, and we expect we'll be on the agenda, and we expect that we won't hear from them until Q4. But we're very hopeful given the work we've done with the various NCCN sites so far.

Great. Congrats on the quarter. Thanks for taking the question.

Yeah, thanks, Thomas.

Our next question is from Stephen Ma with Piper Sandler.

Hi, thanks for taking the questions.

Sure.

Hey, so real quick on DTERMA-IO, you know, given the very positive data that you guys presented at AACR, I'm curious to know, have you gotten more traction with potential pharma partners since that data release for patient stratification or companion diagnostics opportunities?

Yeah, so these four pilots that we are now engaged with came from sort of a byproduct of the data that we've been releasing this year. And we have a number of other conversations ongoing as well, but those four were directly related to the data that we've shown year to date. And so obviously with ASCO coming in a few weeks and another indication around renal cell carcinoma, We're hopeful we'll continue to gain momentum, but we're very hopeful with these four pilots that as soon as they're completed, they'll lead to some more substantial relationships and potentially the CDX we're looking for.

Okay, got it. So you guys see a path forward into potentially entering phase two. Yeah, we do, for sure.

And, you know, it's not going unnoticed that we seem to have somehow – been asked to get active in looking at a lot of trials with Atizo where there were failed arms or inadequate statistical power of arms. We continue to do well with that therapeutic. We'll see. We certainly have the final report out at the previously mentioned ESMO this fall where we'll have the neotrip data for triple negative breast, which is prospective data, and randomized. So it'll be interesting to have that data, but clearly so far the data we've seen and the data we've published is very interesting to pharma.

I think the, you know, what I think we've projected on previous calls where it's much easier to engage biopharma that's early in the development cycle than it is to pivot a very large pharma which has an existing biomarker program towards our approach is exactly what's playing out, but that isn't to say that we haven't gotten their attention. It's compelling data, but it's slow to shift these very large ships, if you will.

And the reason they're interested is, I mean, obviously they would want to give the drug to the entire patient population, but as the recent scare from bladder cancer shows, if you give it to an all-comers population, you may or may not achieve your endpoint, like overall survival. And so if you select a biomarker positive population and include them in the trial, it sort of de-risks that clinical trial because at least they have a higher probability of achieving the endpoint in that subpopulation. And that's what is piquing their interest and their desire to at least include the biomarker in the clinical trial as a so-called, you know, de-risking strategy for the trial itself. And that's the response we're getting.

Yep. Okay. Yep. That makes sense. And apologies if this was already asked. I had to read it all back in. But on the term Rx volumes, that was flat sequentially due to the pandemic. Do you guys expect a Q2 catch-up?

We are. We are expecting, you know, growth quarter over quarter in terms of the sample volume growth. We've already seen some of that, so we are expecting to have sequential growth from the 236 we did in Q1 upward. So we haven't projected those volumes, Steve, but we certainly are seeing that already so far. We're about halfway through the quarter or so.

Okay, got it. Thanks. And then last question. Given the three new test launches, can you give us some thoughts on the Salesforce hiring cadence ahead of those three launches?

Yeah, I'll let Padma go into detail if you're interested. But the reality is right now the goal is to add – some new territories as we enter Q3 preparing for the launch. But we also, there's also some creative opportunities we might have as well where we might have some indications in certain areas of a therapeutic where we might get some support from one of the pharma companies. So working on that, but I think you will see some growth in the sales force probably Q3 It'll probably start to see the expense impact in Q4, though.

One thing to add is several of our sales reps already have deep connections with oncologists treating lung cancer, thanks to DETERMA Rx. So as we think through adding headcount, we will consider the fact that in some geographies, we already have sales reps with deep connections with lung cancer oncologists, so we don't need to necessarily replicate a sales rep in that area. So we'll be very judicious in how we think about adding sales reps.

As well as we've seen real success in adding, you know, medical education headcount as well because this is a, you know, Rx but even more so with IO is going to be a fairly, you know, doc to doc or scientist to scientist discussion. And so, as the reps go in and generate the open door opportunity, having support folks that can go in and get deep down into the science and answer the medical questions will be helpful as well. So you'll start to see some increase in that area as well.

Okay, great. Yeah, thanks for the questions, and thanks for the congrats on the progress.

Thanks, Steve. Thanks, Steve. Our next question is from Paul Knight with KeyBank.

Mr. Knight, your line is live. Hey, Paul.

Hey, how are you, Ronnie? Could you talk to the fact that you had 60 million covered lives added, what, on RX in the quarter? And where are you in total covered lives now?

Yeah, so for RX, you know, obviously CMS was our big fish there. We got that already. The multi-plan is our first, you know, our private payer, so.

So if you added that up, the Medicare and Medicare Advantage is 70% of the 40,000 lives already covered, so that's 28 million. And then multi-plan in general has 60 million covered lives, but it's, so that's another incremental for their population. That is not a very high volume for RX. Maybe several hundred thousand would be my best guess.

We're probably somewhere in the low 70s of total number of covered lives. It's a great question, Paul. We are working, as you might imagine, on getting all because we're getting paid by some of the private payers, but they're paying very slow, as you might imagine. We're having to fight for every penny. That's the nature of that world. We'd love to get in there. In Q1, we hired a professional from that area. He has great experience, and we're already seeing the benefit of that. So part of the beauty of what Mitch has done to help strengthen our balance sheet is be able to go and get some of these key players that we needed on the field to help us in some of these key areas.

We're targeting the plans where we have the highest number of claims, And so we're going back to them and saying, you know, now we have enough claims in your population, can we contract with you? So that's the strategy. So we're targeting three to five top payers and hope to get with the goal of getting the test under contract at a price similar to Medicare, which is what we did successfully with Multiplan.

Yep.

Sure. I should probably one of the blues this year. And what's your thought? If you get a blue this year, you know, that kind of starts the momentum now.

No doubt about it. We are in constant conversation with them. So, you know, anyway.

To add some color, talking about the bureaucracy, we have been targeting and we've been in great conversations with one of the Blues. The medical director has passed the test and made a decision to contract with us, but it's going through their bureaucratic process. you wouldn't believe how long it's been taking. So once that blue is signed up, and unfortunately, if that process, I can't give you a date, then you're absolutely right. With that, we go to the other blue, then that sort of starts.

That's a nice cascade for us. So we're, you know, short of dropping in there personally and, you know, encouraging them. It's been a difficult slog through their process. Okay, thank you. Thanks, Paul.

As a reminder, it's star one to ask a question. Our next question is from Bruce Jackson with Benchmark.

Hi, good afternoon. Hey, most of my questions have been answered, but I wanted to see if we could dig into the press release where you mentioned you initiated a project utilizing the proprietary blood-based cell cycle test for monitoring resistance in a Phase III trial. Can you maybe tell us what you're monitoring the resistance of, and what is the test application, and how do you envision the test result being used?

Yeah, you know what? It's a cell cycle assay that basically looks at in-blood Key67 and the proliferation rate post-therapeutic intervention. It's a large European pharmaceutical company. It's a phase three trial. We developed the assay for them. We are excited about the opportunity to be in our first CDX. We hope we have many more of these in Determa IO in the future. But this is a great example of just the ability of the team in Nashville to to develop you know proprietary assays and so right now we'll see where we end up I think the jury's out on whether this will be a an ongoing therapeutic and if it is whether we'll have a true CDX but it's certainly you know in process and we'll have more to come in future quarters okay great congratulations on the quarter and thanks for taking my question yeah Bruce thanks a lot

Ladies and gentlemen, we have reached the end of the question and answer session, and I'll now turn the call back to Ron Andrews for closing remarks.

Thanks, everyone, for joining us. You know, 2021 is poised to be an amazing year for OncaSight. progress on all fronts. Despite the headwinds from the pandemic, we seem to be emerging with our RX volumes starting to come back. But the exciting part ahead is the DETERMA-IO data that's still ahead of us, as well as now launching DETERMA-CNI. So we will be the only company with not only a test that can predict with precision responders for immune therapy, we'll also have a blood-based test assay that can identify therapeutic efficacy within weeks after the first dose of therapy, which will be very important for physicians. So we're very excited about the year ahead. We remain committed to work with our physician base and our patients, and we're very excited to continue to report out the progress that we plan to make over Q2 and the rest of 2021. So thanks for your continued support. Thanks for joining the call today, and everyone stay safe.