Oncocyte Corporation

Greetings. Welcome to the OncaSite Corporation fourth quarter and full year 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. Please note, this conference is being recorded. I'll now turn the conference over to your host, Troy Williams of LifeSci Advisors. You may begin.

Thank you, Kyle. And thank you, everyone, for joining us for today's conference call to discuss Oncocite's fourth quarter and year-end 2021 financial results and recent operating highlights. If you have not seen today's financial results press releases, please visit the Investors page on the company's website. Before turning the call over to Ronnie Andrews, Oncocite's President and Chief Executive Officer, I would like to remind you that during this conference call, the company will make projections and forward-looking statements regarding future events. Any statements that are not historical facts 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 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 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 technologies, or failure to maintain any laboratory accreditation or certification, and uncertainties associated with 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 four looking statements. Oncasite expressly disclaims any intent or obligation to update these forward-looking statements except as otherwise may be required under applicable law. With that, I'll turn the call over to Ronnie Andrews. Ronnie?

Hey, thanks, Troy, and welcome, everyone, to our conference call to discuss our fourth quarter 21 and year-end financial results and operating highlights. Joining me today is Mitch Levine, our Chief Financial Officer. Following our prepared remarks, as always, we'll be happy to take your questions. Today, I'm going to be sharing a few slides which we believe will be instrumental in bringing clarity to our progress against our strategic milestones, as well as provide a thorough overview of our Q4 achievements. I hope all of you were able to either join in or listen to the replay of our investor day that we had in December. But if not, I'll use a few of those slides today to review our 2022 strategy, the key milestones for this year, and provide updates on all our products during today's call. For the New Donka site, two years ago, my team and I stepped in to reposition the company for the future and laid out a compelling strategy to bring to market a portfolio of tests that would complement each other and deliver answers to critical questions physicians and patients face today that large-scale genomics continue to fail to answer. We believe two major decisions still face every physician managing a cancer patient. What's the best treatment option and is the therapy working for my patient? The advancement of targeted 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, a new treatment paradigm has emerged where understanding the tumor biology of each patient's tumor is becoming essential to answering these questions. With confidence, I can say that 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 and positioned us well to capitalize on the opportunities in this emerging paradigm. The next slide is an overview of the Determine Platform Strategy that's really been our playbook for the last few years. We came in with the ambitious goal of bringing four major products to market to complete the patient care continuum by our third anniversary as a management team. We remain on track to have Determa IO for immunotherapy optimization and Determa TX, our comprehensive molecular profiling test, join Determa Rx to complete our treatment selection menu by the end of the first half of 2022. And by this summer, we also plan on launching Determa C&I, our blood-based only monitoring test as a research only product for post-cancer treatment monitoring in various types of clinical trials. This will fulfill our commitment to concurrently bring the complete menu to market and we'll begin to initiate the reimbursement process for these exciting products in the second half of 2022. We're enthusiastic about our product offering and look forward to being the first company in our industry to offer the complete testing menu needed by physicians to manage their cancer patients throughout the journey from diagnosis all the way through to therapy monitoring. And as you've heard by now, we're not stopping there. With our acquisition of Chronix Biomedical in April of 2021, we gained a powerful test for transplant rejection monitoring called Therasure. After CMS issued a blanket coverage decision for this technology, specifically citing our papers and patents last April, we made the decision to allocate a small team to stand up a transplant monitoring business and rapidly transfer and validate the test in our Nashville CLIA lab. We remain on track to complete the work and have our lab-developed test completed for commercialization by the end of March. We continue to believe that our decision to establish a transplant monitoring business will create significant revenue opportunities for Oncocytes beginning later this year as we hopefully gain access to coverage under the blanket LCD granted to our technology. Platform partnership discussions are on schedule from there, sure, as well. And we've opened new avenues to generate non-diluted working capital for the company. In our December investor call, I shared the milestone scorecard for each product for 2022. And as you will see in the next slide, we have identified the critical success factors could currently bring our major products through the development process to commercialization. We exit at Q4 2021 with momentum to execute against our milestones, and we'll use the milestone slide throughout 2022 to ensure you, our investors, have a good understanding of how we are progressing against the major milestones. Assuming we hit each of these milestones, we will exit 2022 with all major products launched, at least two with high-value reimbursement and gaining revenue traction, and two more with reimbursement dossiers submitted awaiting CMS approval. We will have dedicated global platform partners for oncology and for transplant and be in full clinical trial mode to gain the data necessary for regulatory submission for DETERMA-IO in Europe and Therasure Transplant Monitoring here in the U.S. Bottom line is this. Our ambitious strategy of developing and launching a full continuum of treatment selection and blood-based monitoring products will be almost complete in 2022, and the subsequent revenue growth is on the horizon. Now for a short update on the progress in each progress area. For the TermaRx, Q4 of 2021 saw a return to double-digit quarter-to-quarter growth as the pandemic-affected regions opened back up and surgeries began to pick up again. Though procedures are still behind pre-pandemic levels for early stage non-small cell lung cancer surgery, this was welcome news for Oncocyte. Our commercial team delivered a strong 152% growth in revenues for Q4 of 21 compared to Q4 of 2020. Needless to say, this was a welcomed outcome given the headwinds of the pandemic, which has slowed our revenue growth from the Term Rx throughout 2021. We continue to see solid quarter-to-quarter growth in the number of sites and physicians onboarded at 16% and 17% respectively, and now have a solid onboarded base of physicians of 429 surgeons and oncologists that are trained to order and utilize our tests. I remain encouraged with the fact that we have continued to build an onboard physician base every quarter since we launched the product. And clearly, we saw the benefit of that large install base in our fourth quarter sample volumes. In Q4, our tech transfer team successfully completed the transfer of Determa RX to our Chinese partner, Burning Rock. And we're happy to report that Determa RX is officially on the market in China as of this call. As Mitch will discuss, Oncosite earned an important milestone payment as a result of this accomplishment. The enormity of the challenge of transferring a complex molecular profile and successfully validating for market readiness within 12 months should not be underestimated. The two teams work heroically through very restrictive pandemic conditions, and the successful outcome is a testimony to the incredible professionals on both sides of the Pacific. On the DETERMA-IO front... We launched the test in our early access program in November in late stage non-small cell lung cancer and early stage triple negative breast cancer. We now have our seven early adopter sites up and running. All the medical oncologists in the program to date have acknowledged a significant unmet need for precision immunotherapy biomarkers and have chosen to participate in the program because of the strength of our clinical evidence to date. During the EAP, the physicians are getting a first-hand experience of the test and are providing feedback on the real-world utility of the test in optimizing immunotherapy, which is a challenge they face every day for patients who are eligible for this treatment. There's also significant interest in this test in alternative tumor types, which suggests there's a broad demand for the test across solid tumors, so we will continue to pursue clinical studies to validate the test across many solid tumors. Key learnings from the program are this. There's significant interest in understanding the tumor-immune microenvironment across solid tumors. There's a growing body of evidence to support the tumor-immune microenvironment, or as we call it, time, as a way to assess the biology of a tumor and provide valuable information to pathologists and treating physicians. None of the currently commercialized clinical tests used for treatment decisions today assess the microenvironment of the tumor. There are now numerous papers showing that the microenvironment plays a critical role in response and resistance to immune therapy. DETERMA-IO has a growing and very impressive data set across four tumor types and continues to show the ability to effectively quantify the time and identify tumors that are poised to respond to immune checkpoint inhibitors. In Q4, we had abstracts at both CINCI and San Antonio press conferences, highlighting DETERMA-IO's precision in identifying ICI response in both TMBC and lung cancers, our two early launch indications. We now have over 1,000 patients studied and data published in abstract or paper supporting the use of DETERMA-IO. The next steps are to make our time test broadly available across additional tumor types to pathologists and to treating physicians via full market launch of our non-small cell lung cancer and triple negative breast cancer indications, as well as to apply to CMS for coverage, starting with those tumor types where we have the strongest peer-reviewed clinical evidence. Let's now turn to DETERMA-TX. Our comprehensive gene panel for answering the question, what targeted drug is my patient's tumor eligible for? In Q4, we completed the in silico design and received our first custom panel and began work on the actual development of the test. We are now in full clinical validation phase to validate performance across the various genes of known significance and to establish our test reproducibility. Just like for transplant, there's already an existing LCD in place for next-gen sequencing tests, and our validation data should enable us to get coverage for this test for patients diagnosed with advanced solid tumors. Turning now to the term of CNI, the second question I mentioned a moment ago that physicians face that remain unanswered for the majority of tumor types is this, is the therapy working? If provided early in disease cycle, this information could allow changes in therapy to be made in real time and thus potentially offer better outcomes for more patients. While there are companies beginning to offer tests that help identify minimal residual disease, or MRD, to answer whether patients were adequately treated by surgery alone, they can only serve a subset of patients whose tumors can be adequately removed or biopsied to obtain sufficient tissue samples. These tests are complicated to execute because they need to be personalized to individual patients and require genomic sequencing of the respective tumor specimen prior to the monitoring test being performed. This takes time and the extra tissue required for these tests is not always available. Moreover, the fact is that 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 the MRD test can typically not 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 prior knowledge of the tumor genome. Our therapy monitoring product, Determine C&I, was launched in the European Union in the summer of 2021 for research use, and we're on track to complete tech transfer to the U.S. in the first half of 2022. As a reminder, our test is a blood-based test and does not need resected tumor tissue, offering physicians an option for the majority of patients they serve. In fact, we not only solved the tumor tissue requirement issue, Determi-CNI also provides results on disease progression at the second cycle of treatment and is not limited to immunotherapy since we have data as well on target and chemotherapeutic options. Our ability to deliver this information at the second cycle of treatment provides important disease progression information weeks earlier than MRD or imaging to provide, thereby allowing oncologists the opportunity to start a more effective treatment regimen much earlier. It's a very exciting opportunity for Oncocyte to participate in the $4-6 billion global therapy monitoring market. With Determa I.O. now in its launch phase, our development team's efforts can now focus on getting more clinical studies for Determa C&I under our belt so we can submit for reimbursement in early 2023 and move this highly differentiated test closer to clinical market release in the U.S. When we offer the term of CNI, we will then become the only diagnostic company to offer a solution to inform treatment selection up front with a proprietary tumor immune microenvironment assay for immunotherapy optimization and a blood-only monitoring of patients on that same treatment to detect progression early. The Q4 update for DETERMA-C and I is this. We now have more than 1,200 patients under study across several tumor types. We had a major paper published in Cancer in late December showing outstanding results in ovarian cancer. This paper put our number of patients under study well over 500, with many more papers to come in 2022. 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 the physicians who treat them throughout the patient journey. The bottom line is this. While the pandemic has slowed other companies' development efforts, I'm excited to say that we've stayed focused and are now poised to deliver the full complement of tests in our current oncology portfolio to the market over the next four quarters. With these products launched, OncoSight will now enter a very large market opportunity with unique and proprietary capabilities. Based on our current momentum, within the next 12 months, all of the current tests in our portfolio will be on the market, receiving reimbursement, and driving the rapid revenue growth we envisioned when we laid out our compelling strategy a few years ago. Next, I'd like to spend a little time on transplant. Through the acquisition of Chronix Biomedical, we acquired access to the Therasure Transplant Moderate Test for early transplant solid organ rejection monitoring. This is an extremely large market of $2 billion in the U.S. alone, with an established reimbursement rate of $2,700 and $2,800 per patient, depending on the organ type. Given the repeat testing modality for monitoring for transplant rejection, this is a recurring revenue stream and represents a very large and very exciting revenue opportunity for Oncocyte. As discussed at our investor day call in December, we're on a fast track to launch an LDT in the United States by the end of Q1 2022, so we can begin our efforts to gain access to the current reimbursement that is offered by CMS. One of our key milestones for transplant is identifying and contracting with a large global digital PCR platform company. We're very close to an agreement and continue to work on non-diluted investment approaches for the development kit rights for Therassure to decentralize the technology into transplant centers in the U.S. and in Europe. We know from our extensive market research that providing transplant centers the ability to deliver same-day turnaround time on important monitoring results as well as participate in the economics from the reimbursement is a game-changer in this exciting market. We remain incredibly enthusiastic about the potential of donor-derived cell-free DNA testing to deliver cost-effective, precise surveillance of transplant recipients, which will decrease premature graft loss resulting in the need for re-transplantation. In summary, Our differentiated approach is more specific, cost-effective, and can provide same-day turn-on time of important information for patient management, as well as provide quantitative results for longitudinal follow-up for the life of the organ, attributes only Oncocytes Therasure can deliver for the foreseeable future. In summary, I'm very excited for our team and our investors who supported us through the development phase of our comprehensive offering. We're continuing to make progress on each product area and are in a good market position with solid momentum toward our goal of launching a compelling and powerful portfolio of molecular diagnostic test assets with a large combined market opportunity of well over $10 billion. And when we get the portfolio launched, we'll have proprietary positions in some of the fastest growing areas of molecular oncology and transplant. I 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 organizations respond to 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 transplant, and their unwavering commitment is evidence. Now I'd like to turn the call over to Mitch to review our financials. Mitch?