Oncocyte Corporation

Greetings and welcome to the OncoSci Corporation third 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. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Bob Yedid of LifeSci Advisors.

Thank you, Joe, and thank you, everyone, for joining for today's conference call to discuss OncoSight's third quarter 2021 financial results and recent operating highlights. If you have not seen today's financial results press release, please visit the company's website on the investors page. Before turning the call over to Ronnie Andrews, OncoSight's president and chief executive officer, I would like to remind you that the During this conference call, the company will make projections and forward-looking statements regarding future events. Any statements that are not historical fact are forward-looking statements. We encourage you to review the company's SEC filings, including, without limitation, the company's Forms 10-K and 10-Qs, which identify the 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, risks inherent in the development and or commercialization of potential diagnostic tests, uncertainty in the results of clinical trials or regulatory approvals, 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, risks inherent in strategic transactions, such as the failure to realize anticipated benefits, legal, regulatory, or political changes in the applicable jurisdictions, accounting and quality controls, greater than estimated allocations of resources to develop and commercialize technology, or the failure to maintain any laboratory accreditation or certification, and uncertainties associated with the COVID-19 pandemic and its possible effects on our operations. Therefore, actual outcomes and results may differ materially from what is expressed or implied by these forward-looking statements. OncoSight expressly disclaims any intent or obligation to update these forward-looking statements, except as otherwise may be required under applicable law. With those prepared remarks, 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 third quarter 2021 financial results and our operating highlights. Joining me today on our call is Mitch Levine, our CFO, Gisa Paulson, our new COO, Dr. Doug Ross, our CSO, Padma Sundar, our COO, and Dr. Eki Schutz, our GM of our Oncocyte Germany and head of our liquid biopsy and transplant programs. We'll all be available during the question and answer session. I received feedback from several investors during my travels over the past few months that while it's exciting to follow all the progress being made at OncaSight, they'd appreciate more context as to how all the moving parts fit into our overall strategy. So based on that welcomed, honest feedback, I want to start first with a high-level overview of how all the initiatives fit together to enable our future. For those new to OncaSight, two years ago I stepped off the board and into the CEO role to reposition the company for the future and laid out a strategy to bring a market, a portfolio of tests that would complement each other and deliver answers to critical questions physicians and patients still face today that the industry's focus on large-scale genomics has failed to answer. Two major decisions still face every physician managing a cancer patient. What is the best treatment option and is the therapy working for my patient? The advancement of targeted and immunotherapy options has happened rapidly. with a clinical trial pipeline full of promising drugs across all major solid tumors. As the options for mono or combinatorial therapy expand, understanding the tumor biology of each patient is becoming more and more important. With confidence, I can say, in two short years and in the face of a global pandemic, Team Oncocyte has made several important strategic advances that have moved us rapidly to the forefront of precision oncology diagnostics to answer these questions. On the treatment front, we are now the only company that has a menu of precision tests to answer all three questions necessary to select the best treatment protocol for cancer patients. The first question, do I give chemo, is answered by our Determa Rx product. Secondly, do I give a targeted drug? This is answered by Determa Tx, which is currently planned to launch in late Q1 of 2022. or do I give an immunotherapy, which is answered by Determa IO. These three tests complete the treatment selection menu we've been working on for the past 18 months and allow us now to enter an extremely large market for treatment decisions. To answer the do I have chemo question, Determa RX was launched last year in the middle of the pandemic, and while it has the smallest of the available markets of any of the tests in our arsenal, It's become a beacon for our mission of improving the lives of cancer patients. In a little over a year, we've touched over 1,200 patients, of which just over 500 have been found to be high risk for recurrence and thus needed chemo. And with that choice, those patients will now have an improved five-year life expectancy of 92% versus the 49% five-year expectancy they would have had without our test information. We are now bringing the second of our three treatment selection tests to clinicians with the commercial launch of DETERMA-O this quarter. Moreover, we plan on fulfilling the promise we made to investors and the customers we serve to have a complete repertoire precision treatment decision test on the market by the middle of 2022 with the launch of DETERMA-TX, our 500 gene targeted decision panel scheduled for launch in late Q1 of 2022. By mid-year next year, Oncocyte will be the only company with a full menu of tests from one lab that uses minimal tissue and provides less than 10-day turn-on time to address the estimated $5 billion cancer treatment decision diagnostic market in the US and the EU. The potential value generation from the full menu is very substantial. And after two years of integration, development, and clinical studies, We are now on the cusp of realizing our vision to go after these large markets with our proprietary offering. The second question that remains unanswered from the majority of tumors is, is the therapy working? This information, if provided early in the disease cycle, could allow changes to therapy to be made in real time and thus potentially offer better outcomes for more patients. While emerging companies are beginning to offer tests that help identify minimal residual disease, to answer whether patients were adequately treated by surgery alone. They can only serve a subset of patients whose tumors can be removed surgically. These tests are complicated to execute upon because they need to be personalized to individual patients, and they require genomic sequencing of the resected tumor specimen prior to testing, which takes time, and extra tissue is not always available. The fact is the majority of decisions in solid tumor treatment monitoring happen without a surgical resection of the tumor, meaning these patients have no option today since MRD cannot serve them. When we acquired Chronix Biomedical earlier this year, we acquired patents and proprietary methods that allow a blood-only approach to therapy monitoring. This allows immediate initiation of testing upon the start of therapy. and interpretation of test results without requiring knowledge of the tumor genome. Our therapy monitoring product, DetermineCNI, is launched in the European Union for research use, and we will be completing tech transfer to the U.S. in Q1 of 2022. Our test is a blood-based only and does not need resected tumor tissue, offering physicians an option for the majority of patients that they serve. In fact, we not only solved the tumor tissue requirement problem, determined CNI also provides results on disease progression at the second cycle of immunotherapy, target therapy, or chemotherapy weeks before MRD or imaging can provide meaningful results. This is a very exciting opportunity for Oncocyte to participate in the 4 to 6 billion global therapy monitoring market. With DETERMA-IO now in its launch phase, our development efforts can now focus on getting more clinical utility studies under our belt so we can move DETERMA-CNI closer to market in the US and in Europe. Taken as a whole, our monitoring capability rounds out a very robust offering that represents the only comprehensive set of tests to answer every question facing patients and physicians who treat them throughout that patient's journey. Bottom line is this, despite the challenges of the pandemic, I'm excited to say we've stayed focused and are now poised to deliver the full complement of tests in our current portfolio to the market over the next four quarters. With these product launches, OncoSight is now entering very large market opportunities with unique proprietary capabilities. And based on our current momentum, we believe all the current tests in our portfolio will be on the market within the next year, gaining market adoption. The most important metric we'll be watching during their launch year. Ultimately, we'll see reimbursement, which will draw out the rapid revenue growth we envisioned when we laid out our compelling strategy. While there'll be solid revenue growth along the journey for individual tests as we launch them, the full force of OncaSight's strategy is found in the comprehensive information we can deliver to treating physicians. Our go-to-market strategy is only in the beginning stages, and thus, we remain incredibly enthusiastic about the potential for long-term value creation ahead. That's the strategy. And now some updates on the product supporting our vision. Last week, we announced the clinical launch at Determa IO. Internally, we've known for some time that the proprietary technology behind Determa IO had incredible potential to change the way we selected patients for immune therapy. In less than two years, we validated the analytical reproducibility, completed CLIA validation, and completed clinical validations across four major solid tumors. We've now tested over 1,000 patients to date, and in every study, including randomized clinical evaluations, we've outperformed every other molecular diagnostic test. So today, I'm very excited to discuss the clinical launch strategy for our flagship product, Determa IO, the first and only clinical test that comprehensively assesses both the tumor and the immune microenvironment to identify patients who can benefit from immunotherapy. In clinical studies evaluating patients across multiple tumor types, including breast, lung, bladder, and renal cancers, DETERMA-IO has consistently been better at identifying immunotherapy responses than the standard of care test PD-L1-IC in head-to-head comparisons, and in some tumor types, even identified patients missed by the current test who would have benefited from immunotherapy. DetermaIO addresses a critical unmet need in the market, which is to inform the optimal use of immune therapy treatment for more than one million eligible patients annually in the U.S. alone. Over the past few quarters, we've shared updates on the incredibly strong foundation of data that we presented at various conferences, and we believe we've now built a solid clinical foundation for DetermaIO to be used by physicians as a potential pan-cancer and pan-immunotherapy test. Our strategy is to roll out the test initially as part of an early access program with sites and physicians that have successfully partnered with Oncocyte on prior tests and participated in our clinical study efforts. During the early access program, we'll optimize sample processing and logistics to ensure we deliver on a promise to provide rapid turnaround time and utilize the lowest sample requirements in the industry to inform immune status while maintaining strict HIPAA compliance. After the successful EAP launch of DETERMA-IO and our processes have been optimized, we will then roll out DETERMA-TX, our tissue-based 500-gene comprehensive genomic profiling test using next-generation sequencing on the same tumor sample that we used for DETERMA-IO. This will allow us to meet our turnaround targets of less than 10 days and conserve precious tissue while still delivering the comprehensive synoptic information of physician needs to understand the targeted and immune therapy options for their patient. Determined TX will fall under a current local coverage decision, or LCD, for Medicare. So we expect Determined TX to be revenue generating in the second half of 2022. And its launch will complete our treatment decision menu, giving us access to a large market of close to $5 billion and establish us as the most comprehensive and differentiated test provider with predictive answers for various therapy options available to physicians for their cancer patients. To complement this exciting test combination, we'll launch Determine a C&I as a research-use product in the U.S. in Q1 of 2022. Our initial efforts in the U.S. will be providing the test for pharma clinical trials and via our registry efforts to generate real-world evidence on the benefit of this test for managing patients being treated for cancer. Determinacy and I, as I said, is currently available in Europe for former research and trials and is already attracting researchers who are running immunotherapy and targeted therapy trials. We now have over 1,000 patients in various studies in the EU across several solid tumors and look forward to report outs as early as ASCO of 2022. We remain very enthusiastic about Determinacy and I and the feedback from researchers and oncologists has been solid as they appreciate the blood-only monitoring solution without the need for tissue or the need for very costly genome testing. Moving to DetermineRx, our test for early stage lung cancer patients. When we launched in the spring of 2020 at the beginning of the pandemic, we had no idea what was ahead of us. But our team forged ahead to bring this important test for early stage lung cancer patients rapidly to market. Despite the unprecedented challenges, surgeons managing these patients' cases have had getting access to surgical suites for well over a year now, I'm proud to say that we are on track to close 2021 at over 100% year-over-year growth in test volume for DETERMA-RX. Since launching DETERMA-RX just over a year ago, we've run over 1,200 samples, of which 40% or approximately 500 samples have been deemed high risk for recurrence of their lung cancer. Without action, more than 40% of these patients will lose their life within five years. Many of these high-risk patients are receiving chemo based on the results from our test, and their five-year survival rate is expected to increase well above 90%. Simply put, DetermaRx is saving lives. This is the essence of Oncocytes' mission. We continue to experience strength in key metrics we use to judge adoption in the current environment. Our growth in the number of new physicians and hospitals onboarded in Q3 was solid, and Mitch will go into more details. But this is particularly meaningful given the strong headwinds from the Delta surge, which has dramatically impacted surgeries and early stage diagnoses in a key area where we have significant adoption. In fact, one study showed a 38% reduction in diagnosed cases and early stage lung cancer surgeries through the summer of 2021. While the summer showed a slowdown in surgical cases, we were encouraged by a steady uptick in sample volume in September and had our largest volume month to date in October. which we believe is a really good sign for our year-end closing push. Our growing install base of physicians ordering the TermaRx speaks to the value our test brings to patients and has us poised to experience strong volume growth as we emerge from the Delta surge and screenings and early stage surgeries return to pre-pandemic levels. Next, I'll transition to our emerging growth opportunities, which stem from our acquisition of Chronix Biomedical. We briefly talked earlier about Determine C&I, our patented blood-based test to monitor cancer patients post-treatment. Through this acquisition, we also acquired access to the TheraSure transplant monitor test for early transplant solid organ rejection monitoring. This is a very large market of approximately $2 billion in the U.S. alone, with established reimbursement of between $2,700 and $2,800 per test per patient in the United States. Given the repeat testing modality for monitoring for transplant rejection, this is a recurring revenue stream and represents a very large revenue opportunity for Oncocyte. Recently, we received issuance of our second US patent covering the use of our digital PCR technique for molecular detection of solid organ allograft rejection. This new patent complements our first patent issued, which gave us IP around absolute quantification, a very important differentiator for our method versus the competing next generation sequencing methods. We now have both IP components needed in the U.S. to support entry into the transplant monitor market in the U.S. with our TheraSure product starting out as an LDT out of our Nashville CLIA lab. So how is TheraSure differentiated? First, our test offers the broadest application across transplanted organs. While we have indication in heart and kidney, the two largest volumes, organs transplanted, TheraSure is the only test with a current indication for monitoring liver transplants. We also offer the fastest turnaround time and greater sensitivity for early indication of rejection, which can prompt a timely and critical change in dosing of therapy to suppress the rejection. Additionally, our test offers absolute quantification, which allows for greater sensitivity to identify early onset of rejection, providing utility for longitudinal monitoring of organ health over time. Over 20 clinical studies and numerous peer-reviewed publications have validated the usefulness of our donor-derived cell-free DNA test as a non-invasive biomarker to assess rejection, cell death, and under immunosuppression. All signs that a transplant is or soon will be rejected. However, the other technologies in use differ in effectiveness, accuracy, and speed of turnaround. Data published to date identifies our digital PCR method as the fastest and most cost-effective for payers as compared to other methods that measure donor-derived cell-free DNA. These results have been published in prestigious journals, including PLOS Medicine, American Journal of Transplantation, and others. Importantly, the recent CMS coverage policy for transplant rejection monitoring citing digital PCR methods for solid organ allograft rejection, as it's titled, cites three peer-reviewed publications from Chronix on the performance of our tests in solid organ transplant monitoring. This is a huge validation of the Chronix technology, and we believe paves the way for commercialization and reimbursement here in the U.S. We're now on a fast track to launch an LDT in the U.S. by the end of Q1 2022, so we can begin our efforts to gain access to the current reimbursement offered by the Center of Medicare Services. Europe represents another attractive market, which is currently intact. And last quarter, we unveiled the new details about our plans for the Dershowitz Transplant Monitor Test in Europe. We're now moving rapidly to work with local governments for reimbursement ahead of our 2022 launch in Germany. We're incredibly enthusiastic about the potential of donor-derived cell-free DNA to deliver cost-effective, precise surveillance of transplant recipients to decrease premature graft loss resulting in a need for re-transplantation. In summary, our differentiated approach is more specific, quantitative for longitudinal follow-up, cost-effective, and can provide same-day turnaround time of important information for patient management. As we look forward, I'm very excited for our team, our investors who have supported us through the development phase of our comprehensive offering. We're continuing to make progress on each product area and we'll exit 2021 with solid momentum toward our goal of launching a compelling and powerful portfolio of molecular diagnostic test assets with a large combined market opportunity, well over $10 billion. And we will have proprietary positions in some of the fastest growing areas of molecular oncology. 2022 promises to be a year of rapid expansion of our markets and testing growth. In order to take full advantage of our progress, the board and senior management thought it was time to solidify the infrastructure to deliver a best-in-class customer experience. Our recent appointment of Gisa Paulson as Chief Operating Officer brings world-class talent in strategy, operations, and industry leadership to the OncoSight team. Her history with Genentech, Roche, and Exact Sciences Genomic Health or about solid experience and positioned us to enter our upcoming growth period where flawless execution will be essential. We're excited to have her on the team and look forward to her contributions as we build out the fundamentals required to deliver our menu to physicians and patients in the United States and Europe. Continue to be amazed by the dedication of our incredible team, particularly during the relentless challenges of the pandemic. And I'm incredibly proud of how our organization has responded by keeping all major programs on track. I can say with incredible conviction that Team Oncocyte believes we have the potential to transform treatment decisions in oncology and beyond, and their unwavering commitment is evidence. At this point, I'd like to turn the call over to Mitch Levine to review our financials. Mitch?