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?