5/11/2022

speaker
Operator

Greetings and welcome to the OncoSite Corporation first quarter of 2022 earnings conference call. At this time, all participants are in listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star then zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to turn the conference over to Mr. Tech Sim of Investor Relations.

speaker
Tech Sim

Thank you, Operator, and thank you, everyone, for joining us for today's conference call to discuss OncoSight's first quarter 2022 financial results and recent operating highlights. If you have not seen today's financial results press releases, 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 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 form 10-K and 10-Q, which identifies the specific risk factors that may cause actual results or events to differ materially from those described in the forward-looking statements. These factors may include, without limitation, risks inherent in the development and or the commercialization of potential diagnostic tests, uncertainty in the results of clinical trials or regulatory approvals, the capacity of Oncocyte's third-party supply blood sample analytic 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, risks inherent in strategic transactions such as failures to realize anticipated benefits, legal, regulatory or political changes in the applicable jurisdiction, accounting and quality controls, greater than estimated allocations of resources to develop and commercialize technologies, or failures 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 four looking statements. OncoSight expressly disclaims any intent or obligation to update these four looking statements, except that otherwise may be required under applicable law. With that, I'll turn the call over to Rani.

speaker
Ronnie Andrews

Hey, thanks, Tech. Welcome, everyone, to our conference call to discuss first quarter 2022 financial results and operating highlights. On today's call, I'll review the significant progress we've made and continue to make across all of our major products as we move toward reimbursement submissions for our oncology menu and update you on our exciting opportunity in transplant. But first, I think it's important to address the market headwinds and some important decisions we've made to better position Oncocyte to weather the current external environment. When I stepped into the CEO role in July of 2019, we introduced and adopted an ambitious vision to acquire companies that own technologies that could accelerate our path to deliver a complete menu of precision treatment decision and therapy monitoring tests to assist oncologists and pathologists in making more timely, informed decisions for their patients. Despite the challenging external market environment, I'm very proud to say we enter 2022 with every product on schedule and poised for submission for reimbursement over the next 12 months. Notwithstanding these favorable developments, we recognize the need to be fiscally prudent and strong stewards of capital. In connection with these objectives, the company, led by our board, determined to take actions to strengthen our balance sheet so as to ensure we have a solid path through 23 and into 24. In April, we successfully consummated an underwritten public offering of common stock and warrants with net proceeds of approximately 32.8 million. This financing round was accomplished with the strong support of several current investors, as well as some new institutions. We very much appreciate the continued commitment to the company and to our vision. We believe this recent funding combined with our current balance sheet expected revenue ramp as well as licensing and platform partnerships will provide us sufficient capital into 2024. However, in order to do this, we've had to make some important prioritization decisions that I want to share with everyone today. First, we expect to shift from our current parallel path product development and launch processes and begin to focus on two main product priorities. For the foreseeable future, we intend to focus our organizational energies on, one, launching our recently CLIA-validated transplant monitoring test for liver transplant patients, as well as completing the platform partnership and initiating the clinical trials for an IVD kit submission in transplant. And two, completing the DETERMA-IO early adopter program and publishing supporting papers to drive future adoption, as well as submitting for CMS reversement in the second half of 2022. In Q1, we completed the investment required to build out our Irvine lab to accommodate the upcoming IVD development in both transplant and in oncology. Our exciting relationship with Thermo Fisher to build regulated content on their next generation sequencing system, GeneXus, required preparations and capital investments. Here in Q2, with the infrastructure investments now behind us, we had the facilities, the instruments, and the expert team in place to begin this important work, allowing us to start the regular process to position our oncology test to launch XUS through Thermo's global channels. Before I dive into the product line progress we made in Q1, I'd like to address some organizational changes that I believe will assist us in our efforts. As of June 1st, Mitch Levine will move over to become Corporate Development Officer, where he will oversee the multiple initiatives underway for bringing in non-dilutive cash via licensing and partnership negotiations. We're grateful to Mitch for all his work as our CFO and believe this move allows us even better leverage of Mitch's extensive capital markets experience and negotiation skills as we seek new sources of revenue. Also on June 1st, Anish John will be promoted to the role of Senior Vice President of Finance and interim CFO. We originally recruited Anish to run our transplant business as head of operations and finance, and he's done an exceptional job as evidenced by our completion of the LDT validation and the LCD submission for liver two months ahead of schedule. Anish has over 30 years of finance and operational experience within the diagnostics, life science, and high technology industry sectors, including molecular diagnostics companies like Foundation Medicine and Perkin Elmer. Anish brings incredibly broad experience to the role, and he understands the challenge ahead and is uniquely qualified to help us deliver on our financial and cash management goals. In addition, what saddens me personally, Kevin Redman, our chairman of the board, has decided not to stand for reelection to the board of directors at our annual shareholder meeting this summer. Kevin has served shareholders extremely well for the past six years. However, in light of some very personal reasons, Kevin has determined that more time with family is needed and other life interests. We're extremely appreciative of the investment in time and experience he's made to OncaSight over the years, and I'm grateful for his willingness to remain accessible as a trusted advisor to me and other members of management to ensure a seamless transition. In connection with Cabin's decision to not run for re-election, I'm pleased to announce that Andy Arno, our current audit chair, has been unanimously elected by our board to succeed Cabin. Andy brings a long history of financial acumen to the role, which we believe will ensure solid continuity as we navigate the current market environment and move Oncocyte forward. With that, let me now provide updates on our solid progress across our portfolio. First, I want to discuss our anticipated rapidly emerging revenue opportunity in transplant rejection monitoring. Last fall, we set out an ambitious plan to finalize our lab-developed test for liver patients by the end of first half of 2022. As announced last week, thanks to the incredible effort by our teams in Germany and Nashville, we now have a fully CLIA-validated lab test for liver transplant monitoring poised for launch. The team was also able to complete the liver clinical validation for CMS submission two months ahead of plan, positioning us for a full market launch in the fall of this year. Building on our patents and numerous papers published based on our digital PCR methods, our two teams have streamlined the workflow, delivering an incredibly efficient digital PCR process that allows us to consistently, with solid assay reproducibility, complete the test process and report results within a single shift once our lab receives a patient's blood sample. We believe this will be the fastest turnaround time available in the industry today, and we're enthusiastic about the opportunity to provide this important test for liver patients, where today there is no current molecular monitoring test on the market. I look forward to updating you on our commercial plans on future calls. Now let's turn to our oncology portfolio. In the first quarter, the TermRx grew 66% versus Q1 of 2021, and sample volumes were 73% above the prior year, reflecting continued momentum towards our stated goal of doubling 2021 volumes in revenues. In the first quarter, we continued to expand our pool of onboarded physicians, which is now up to 472. This is an increase of 10% year over year. And similarly, onboarded accounts also increased 10% to a total of 278 as of the end of first quarter. Let's turn next to DetermineIO. It's clear from our early adopter program that there's a tremendous need for a better solution to immune therapy response prediction than the two prognostic tests that are currently available today. Over the course of first quarter, we gained valuable insights as to the use cases for DETERMA-IO and have a clear understanding of its importance in early stage triple negative breast cancer and late stage non-small cell lung cancer. We continue to build the foundation of supportive papers, expanding the clinical utility of the test and supporting the unique claim of DETERMA-IO's utility across multiple tumor types. Recently, at AACR, we presented data supporting its use in metastatic bladder cancer, our second major data set in this cancer type, which we believe is now statistically powered to allow us to expand into bladder cancer as our third tumor type. This June, at the American Society of Clinical Oncology, or ASCO meeting, our collaborator will be releasing the results of the previously announced collaboration with the GONO Clinical Trials Group, where DETERMA-IO was tested as a biomarker on the ATIZO TRIBE study. ATIZO TRIBE is a randomized clinical trial in metastatic colorectal cancer, where patients receive placebo or the standard of care, plus the Roche drug ATIZO. Last September, Dr. Chiara Cremolini of the Gono Group reported the results of the trial where the trial was considered a success, but only for a very small population of patients. But as has been previously seen in numerous studies, most of the benefit was seen in a subgroup of 5% of metastatic colorectal cancer patients that had a rare genetic mutation. It is now universally accepted that the remaining 95% of patients need a biomarker. In fact, without a predictive test, this very large patient population will continue to lack access to immune checkpoint inhibitors as a treatment option. Dr. Kamalini mentioned that her team's future work will be looking at biomarkers for these low-responding patients, and DETERMA-IO is mentioned by name as a candidate. These important data will be released at ASCO. And while today we cannot comment on the results, given it's a blinded study, we encourage you to stay tuned. I cannot overstate the importance of such a potential new indication for immune checkpoint inhibitors and for our DetermaIO program. Additionally, at ASCO, we're releasing data on DetermaIO and metastatic triple negative breast cancer using the drug Keytruda. While we have previous data in TMBC, those studies were with different immune checkpoint inhibitors and in earlier stage tumors rather than metastatic disease. So this could expand our applicable TMBC patient population for one of the leading immune checkpoint inhibitors, Keytruda. Finally, we'll be releasing new data in gastric cancer. While gastric cancer is not a common cancer in this country, it is the third leading cause of cancer-related deaths worldwide. We feel that this indication is important now that we've solidified our platform and channel partnership with Thermo Fisher for the rest of world markets and are already working on the kit version of DetermaIO. Needless to say, ASCO is an important meeting for DetermaIO, and we look forward to speaking with you further once the data is all public. Let me close by summarizing. Despite the external environment, I continue to be extremely enthusiastic about the progress we've made today. Looking ahead, we'll be taking steps to focus our investments on how we stage our product development and launches and have many exciting growth drivers for you to watch over the next six to eight quarters. We'll continue to drive sample volume growth and revenue increases for DETERMA-RX. And beginning in the second half of this year, we plan to start the sequencing of our four major product launches with our transplant monitoring offering in liver, followed by full market launch of DETERMA-IO, DETERMA-TX for the U.S. clinical oncology market. And finally, we expect to launch DETERMA-CNI in the U.S. for pharma clinical trial markets. gaining reimbursement for our portfolio and bringing our test to market generate revenue growth is essential we believe that we've optimized the organization to drive external partnerships and licensing to generate additional revenue streams and we've taken steps to reduce our burn to ensure our current resources carry us into 2024. we built a world-class organization that i'm very proud of and i'm grateful for your support as we advance our our platform to deliver life-changing tests to the patients' physicians we serve each day. At this point, I'd like to turn the call over to Mitch Levine to review our financials. Mitch?

speaker
Irvine

Hey, thanks, Ronnie. Hi, everyone. Our consolidated revenues for the first quarter of 2022 were approximately $1.4 million, up from $0.3 million from the same quarter a year ago. First quarter revenues associated with the term Rx for 1.0M dollars. Up from 0.2M dollars sequentially. And up 0.4M dollars year over year. We received 40,000 dollars in licensing related revenues in the first quarter. From licensing our proprietary molecular test to China. After the close of the first quarter. We received the final burning rock milestone payment of 1M dollars. According to our November 2021 amendment, and we'll account for it as licensing revenue in the 2nd quarter of 2022. Our pharma services business generated 0.4M dollars in the 1st quarter, a decrease of 0.1M dollars quarter over quarter and a decrease of 0.1M dollars year over year. As we have discussed previously, revenues and pharma services will likely fluctuate as we receive samples from biopharma clinical trials. Cost of revenues for the first quarter was approximately $2.0 million, including $1.0 million from the cost of diagnostic tests and testing services we perform for our pharma customers, and $0.9 million in non-cash amortization expenses of Determa Rx and pharma services-related intangibles. Cost of revenues also include testing services we perform for our pharma customers. Research and development expense for the 1st quarter of 2022 was 5.1M dollars. An increase of 1.8M dollars from the same period a year ago. The increase in R and D expenses related to increase head count as we prepare to begin the clinical trials to build IVD kits. for our platform partnerships, as well as increased R&D activity as we continue to support clinical trials to gain statistical power to our current DETERMA-IO datasets to ensure success as we submit the CMS reimbursement, as well as build our clinical efforts for our new transplant business. General and administrative expense for the first quarter of 2022 was $5.7 million, an increase of $900,000 for the same period in 2021, due primarily to an increase in personnel and related expenses. We saw increases in stock-based and cash compensation for our new hires and a standard cost of living increase for many employees. We also incur professional legal fees, as well as other acquisition and business development related costs, which we expect will be non-recurring. Sales and marketing expense for the first quarter of 2022 was $3.2 million, an increase of $1 million year over year, primarily attributable to an increase in headcount and continued ramp in sales and marketing activities to prepare for commercialization of our transplant business. as well as support the commercialization efforts of Determa IO and Determa RX. Non-GAAP operating loss, as adjusted for the first quarter of 2022, was $11.3 million, an increase of $3.9 million sequentially, and an increase of $2.7 million as compared to the same period a year ago. This increase is primarily attributable to an increase in headcount in several critical areas of the company. GAAP operating loss, as reported for the first quarter of 2022, was $9.9 million, a decrease of $25.8 million quarter over quarter, mainly due to the $25 million change in contingent consideration recognized in Q4 2021, and a decrease of $1.5 million as compared to the same period a year ago. We have provided a reconciliation between these GAAP and non-GAAP operating losses in the financial tables, including with our earnings release. For the first quarter of 2022, we reported a gap net loss of $10.3 million, or 11 cents per share, as compared to $35.9 million, or 39 cents per share, a decrease of $25.6 million quarter over quarter, again, mainly due to the $25 million change in contingent consideration recognized in Q4-21. and $3.9 million, an increase of $6.4 million as compared to the same period a year ago. Turning now to the balance sheet, as of March 31, 2022, we had cash, cash equivalents, restricted cash, and marketable securities of $22.7 million. Following the end of the first quarter, we raised $32.8 million in net proceeds from an underwritten offering of common stock priced at market. We anticipate receiving two tranches of $5 million preferred stock offerings in the second and fourth quarters of this year. The preferred is priced at a 20% premium to market. Additionally, We are currently reviewing several options for non-dilutive forms of capital, including capital lease lines, platform partnerships for transplant, licensing tests in the U.S. markets, as well as commercial partnerships. And we feel confident that our current balance sheet, combined with these non-dilutive opportunities, provide us with sufficient cash to take the company into 2024. As Ronnie mentioned, we are proactively preparing for continued market headwinds by reprioritizing on a more sequential approach to product development and test launches. Specifically, we plan to reduce the number of clinical studies we invest in over the next 18 to 24 months and rely on the data collected to date to support the submission for reimbursement and the subsequent product launches. We also plan to reevaluate timing of several capital intensive investments, including planned Salesforce expansion to launch Determa TX and Determa IO. These expense reductions, combined with the anticipated revenue growth once our tests receive reimbursement, is expected to have an immediate impact on reducing our cash burn. Net cash used in operations for the quarter was $13.3 million. net cash used in operations increased sequentially due to timing of invoices that were paid in the first quarter rather than the fourth as well as personnel r d and sales and marketing expenses note that net cash used in q4 reflected a two million dollar milestone payment from the burning rock licensing agreement looking ahead we expect our q1 cash usage for facilities build out and instrument purchases to be a one-time expense and thus our operating cash issues will begin to decline over the future periods. And we are committed to solid stewardship of the current cash on hand following our recent funding. As I transition into my new role as head of corporate development, I want to take a moment to express my gratitude for the privilege of serving as your CFO the last five years. I look forward to working closely with Ronnie as we enter the next phase of our strategic initiatives and seek new global partnerships and licensing opportunities to bring increased capital and revenue to all the sites. That concludes my remarks concerning our financial highlights. Operator, please open the call for questions.

speaker
Operator

Thank you very much, sir. Ladies and gentlemen, I'll be conducting a question and answer session. If you would like to ask a question, please press Start and 1 on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. You may press Start 2 if you would like to leave the question queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the Start keys. The first question comes from Mike Madsen of Needham and Company.

speaker
Mike Madsen

Yeah, thanks for taking my questions. Let's see, I guess I'll start with the comments around things you've done to reduce the cash burn. So can you maybe just talk a little bit more about this sequential approach and how that might affect the timing of any of the test launches?

speaker
Ronnie Andrews

Yeah, Mike, we will, and I appreciate the question. Our goal right now is all about focus, focus, focus. And right now we have two, we believe, immediate revenue opportunities to complement the term Rx. And so obviously we're going to continue all the efforts around the term Rx, but we are going to throttle back on some of the clinical studies that were planned for the term Rx next. and so to expand utility, et cetera. So those will be reprioritized, and we'll put energy behind Determa IO to get it submitted for CMS. Keep in mind, we've got enough data. We believe after ASCO and the upcoming publications of the data that's already been presented, to submit for at least two indications. And so that's what we're going to go to market with. We have planned, I think, as you know, to try to get a few more studies under our belt and to try to present the case for a pan-cancer reimbursement. But right now, we've decided to minimize the cost. And obviously, there's risk in any time you go do clinical studies. So we're going to take what we got, and we're going to go forward with that. So it won't delay the launch of the term IO, but it will mean that we focus IO's launch into triple negative breast, non-small cell lung cancer, and potentially bladder cancer now that we have the AACR paper behind us. And then transplant, of course. We're way down the road on transplant. We beat our timelines that we set for the team to end by the end of June. They finished the LCD. I'm sorry, they finished the LDT at the end of March, and they finished the LCD a couple weeks ago, and we announced that last week. So we believe that we're poised for launch for our transplant business in the fall, and so we'll be shifting some of the planned Salesforce expansion oncology plans over to transplant so that we can have someone representing our transplant offering for liver in the marketplace by fall. And so the delay, the real only delay that we anticipate might be pushing out DETERMA C&I and potentially DETERMA TX launches just based on how we have to sequentially plan these things without adding new marketing headcount. So that's really the big challenge now is just to make sure we stay focused on transplant and getting I.O. submitted. And then after that, we'll begin the sequential follow-on of the other products. So we're not expecting quote-unquote years delay. We're expecting quarter delays in some of the other products that were mentioned today.

speaker
Mike Madsen

Okay, got it. That's helpful. And then just any updates on the potential platform deal for Therasure? It sounds like Mitch mentioned that, you know, they're still being discussed, but I guess I thought we might hear something, you know, kind of by the spring or early summer timeframe. Is that still the case? Yeah, let me...

speaker
Ronnie Andrews

Yeah, Mike, we are at the 11th hour with the digital PCR opportunity, and we're down the road on a next-gen sequencing opportunity as well. And so it's very plausible that we might end up on two platform technologies, next-gen sequencing and digital PCR, but we'll definitely be announcing very soon the primary relationship that we're looking to execute on in digital PCR. So just stay tuned for that. It's I just can't announce it yet because we aren't finalized the contract with signatures on both sides yet.

speaker
Mike Madsen

Okay, got it. Thank you.

speaker
Operator

The next question comes from Mark Mazero of PTIG.

speaker
Mark Mazero

Hey, guys. Thank you for taking the questions. Ronnie, I think you mentioned that you may move a small number of your reps over from oncology to transplant. I mean, is that literally one or two folks? And then can you give us a sense for now that the liver transplant test is validated? You know, I think you indicated in the press release a launch seems to be imminent, but maybe can you just talk about, you know, when exactly that will launch and then talk about some of the logistics out of your lab on the East Coast?

speaker
Ronnie Andrews

Yeah, absolutely. First off, Mark, just to be clear, we're not going to take anyone from oncology cells that moved into transplant. If you remember, we're planning on doubling, pretty much doubling the oncology cells for us this year. We're going to put those plans on the back burner for now. We're going to take some of those. headcount we have planned and move over and we'll hire a team to sell transplant that comes from the transplant industry, our transplant marketplace. So that's the first thing. The second thing is we did absolutely complete the LDT validation for liver. The LCD was also completed and submitted, so we are in a waiting phase to hear from CMS. Our goal is also to try to submit, as we committed, kidney as well by the end of June. So all those are in process. Our goal is going to be to begin to establish. We've already established the lab processes. We have a really good workflow. We have a team in Nashville prepared to take samples. And so now it's really about executing, to your point, the logistics of of how we're going to get the sample collected, how we're going to get those samples into our lab. And so all that's being worked on now, and we expect to have all that in place by the time we get reimbursement, which, you know, who knows at this point given where CMS is from a timeline perspective, but we expect early fall we'd be ready to go for a market launch with reimbursement. That's what we believe based on what we know about CMS' backlog today.

speaker
Mark Mazero

Okay, that's Thanks for clarifying that. And then, obviously, Determa Rx will remain a commercial focus for Oncocyte, but did I hear you say that you may throttle back on clinical study development on Rx? And if that's the case, should we be maybe pushing out our own expectations for when Rx could be included into NCCN guidelines?

speaker
Ronnie Andrews

Yeah, I think that's the big question mark that you hit the nail on the head. We have a randomized clinical trial open. It is enrolling at a slow pace. Patients have not necessarily wanted to randomize themselves, knowing how powerful our data is at selecting patients. Patients that have high risk and the outcome that they take chemo obviously is profound. And so our goal is not to add any additional studies around that. We have an open registry. We'll keep the registry open and we'll keep the current slow intake of RCT, but we're not going to add any of the other. trials that we were considering that might have accelerated a data set for NCCN by next summer. Those would be risky to get them done in that timeframe. And so we just said, given the risk and given the burn it would take to get there, and we just decided it's probably better to let the current trials continue to go forward and not add any additional expense to that.

speaker
Mark Mazero

Okay. And maybe one last question and I'll hop back in the queue. The $40,000 of licensing revenue, I believe, came from Burning Rock for the launch of RX in China. Pretty sure Shanghai is on lockdown, I guess. Can you just talk about, I assume that things are definitely under alarm in China, especially in Shanghai, but can you give us a sense for Burning Rock's focus on that test and Maybe just describe the impact that you saw as a result of the lockdown in Shanghai.

speaker
Ronnie Andrews

Yeah, I'm going to let Mitch answer that. I think everyone knows Mitch was on point for the whole since the beginning and really did all the negotiations with our Chinese partner. And so, again, kudos to Mitch for the hard work there. Mitch stays on the phone with them. What's the latest? And we do know we're being impacted by the lockdown for sure.

speaker
Irvine

Definitely impacted by the lockdown. But they are committed to Rx. They've done studies around it. They've commercialized it now for about five consecutive months and are showing good progress. But you're right, Mark. China is exceptional in their lockdown regarding COVID, and that's going to have an impact.

speaker
Mark Mazero

Okay. Thanks for the time. I'll hop back in the queue.

speaker
Operator

Thanks, Mark. Thank you. The next question comes from David Westenberg of Piper Sandler.

speaker
Mark

All right. Thank you for taking the questions. I just have two, I think, short ones. First, just a clarity on all the cash metrics here. I think you exited at 24. You did a $32 million deal. That puts your current cash balance somewhere around 50. Does that make sense? And then you gave this cash runway to 2024. I just want to make sure, Claire, that it's through, was it 224 or through 24? And then you said it does add in some of the non-dilutive capital assumptions. Can you clarify whether some of that non-dilutive capital assumptions are stuff that hasn't been announced yet, or is it everything you kind of already talked about so far?

speaker
Ronnie Andrews

Sure, yeah, Mitch is going to take that one, Mitch.

speaker
Irvine

Yeah, Dave, you're fairly accurate on the cash number. I'd say in the low 50s is probably a little bit more accurate. We do anticipate bringing in another $10 million in our preferred offering with two of our institutional investors. That'll come in two tranches of $5 million each. One will close in the second quarter. One will close in the fourth quarter. Additionally, we can't delve into details regarding non-dilutive financing and capital sources specifically because we're a public company. We just can't tell you, Dave. I just wanted to make sure.

speaker
Mark

So it does contemplate stuff that has not yet.

speaker
Irvine

That's correct. It does contemplate things that have not been disclosed, and we expect that capital combined with what we currently have on the books and bringing in the $10 million from our preferred will get us into 2024. How far into 2024 is going to be dependent upon how we're able to scale back our plans.

speaker
Ronnie Andrews

Okay, let me just say this. I think that we are, it's not like we're hoping for those non-diluted things. We're actually in discussions around some things, so we just can't comment on them because they're not completed yet.

speaker
Mark

Perfect. No, that's helpful. And then just quickly on account access, you know, you onboarded, I think you have 472 onboarded accounts, you know, up 10%, but, you know, the test orders was up 73%. So can you maybe talk about, it sounds like there's order-frequency trends going on, and just want to maybe clarify that.

speaker
Ronnie Andrews

Yeah, we are seeing. Well, one of the things we did, David, given the lockdown, coming out of lockdown, if you remember, we had onboarded a lot of people virtually, but a rep had not been in to basically detail the surgeon itself or himself or herself. And so with things opening up, our sales team was able to start getting in and doing that. And as a result of that, you're seeing an increase in sample volume from same store sales, if you will, or same sites that we've already gotten some. Now we get more positions onboarded there. and they begin to order. And so, you know, we expect that that is a better use of our sales team's time. We spend all this energy at getting these new accounts. So while we do want to continue to grow our account base, our original wave of account access and account effort was focused on high incident rate areas. And as you know, DetermineRx is a smaller market opportunity. But with IO and TX coming, we wanted our reps to have a presence and a brand presence in these high incident rate accounts, and that's what we focused on. So now that things are opening up, we want to start really penetrating the current accounts and driving more utility of our products. We think it's a better, more efficient use of their sales time.

speaker
Mark

All right. Thank you so much. Thanks, David.

speaker
Operator

Thank you. The next question comes from Paul Knight of KeyBank.

speaker
Paul Knight

Hey, Ronnie. On the Ontario shore, what should we think about regarding pricing for that particular type of test?

speaker
Ronnie Andrews

Yeah, so today kidney is our digital PCR methodology was given a blanket LCD a year ago and it was given for kidney at 2700 and heart for 2850, I believe. We think liver will be somewhere in that range, but hard to tell. But it should be. It's the same technology, same methodology, a little more important outcome given the number of biopsies, et cetera. So we think that there's probably a good degree of probability that we'll fall between the $2,700 and $2,800 range.

speaker
Paul Knight

And then isn't this a multiple test per year per patient type test?

speaker
Ronnie Andrews

Correct, yeah. It depends on, you know, the European standard of care is a little different than the U.S., but we're looking, and we think somewhere between, you know, seven, at least, you know, seven in year one and four in four, which is very similar to kidney and heart. So somewhere in that follow-up, you know, utility for follow-up, you'll see liver fall more than likely.

speaker
Paul Knight

Okay, and then regarding Rx in the quarterback, the pricing seems to be up. Is that a fair assumption?

speaker
Ronnie Andrews

Yeah, that's a great point, Paul. We've been attacking the private payers pretty hard in hand-to-hand combat adjudication of claims. And Mitch, I mean, you're nodding. I mean, I thought we saw a really, really nice quarter of being able to collect cash. and actually move some of the folks that have paid us, underpaid us, up to a better standard for us. So the answer is yes, Paul. And as you know, though, and we always say this, that we are not in contract except for one small payer. And so every private claim has to be adjudicated typically. And we have a team that's doing that. So they're obviously gaining some steam. And we do believe the addition of the term IO and the term of TX will add – more value to our market access team because now they've got more to position for contracting. So hopefully we'll see some gains out of that group in terms of actually getting on contract, but probably not until we're ready to launch TX and IO.

speaker
Paul Knight

Okay, and then lastly regarding the services business, is that kind of steady state for the foreseeable future?

speaker
Ronnie Andrews

Yeah, you know, Paul, it's weird. I've been watching other, you know, folks, You know, report, and we've heard several times from different companies that their, their pharma businesses are down. And that they felt like the surge, the winter surge that people stayed away from some of the clinical studies. It doesn't make, I have to be honest, it doesn't make sense to me if you're a cancer patient, why you not go and get into the trial. But the reality is we did see and hear from other companies. So we do have a really robust contracted pipeline. But until we see patient samples, we can't bill against those. And so we'll see. I think it's going to be lumpy this year. We had hoped it would be a little more predictable, but it looks like it might be as lumpy this year as last year, given the challenges that our pharma partners are having recruiting patients.

speaker
Paul Knight

Okay, thank you.

speaker
Ronnie Andrews

Thank you.

speaker
Operator

The next question comes from Thomas Flatton of Lake Street Capital Markets.

speaker
Thomas Flatton

Hey, guys. Appreciate you taking the questions. With respect to the launch of the Terma IO, you mentioned that you might be shifting some of the planned headcount from the oncology team over to the up-and-coming transplant team. Can you just talk a little bit about how we should think about the IO and RX growth curves given what seems to be a smaller commercial infrastructure that you're planning?

speaker
Ronnie Andrews

Yeah, absolutely. And I kind of started there on an earlier question, but let me be a little more specific. So when we launched and deployed our original 10 reps, we thought and we think we did a good job of choosing high incident rate or high incident areas for our sales reps to be deployed. And throughout the pandemic, that proved to be true because we were able to onboard of docs, but without having more than the 10 reps. We added three in Q1, so we have 13 now. Our goal by the end of the year was to have that into the low 20s probably and expand into some new territories. So instead, what we're going to do is take the current territories and we're going to focus on, as we launch IO and TX and they get reimbursement, we're going to focus more on the current territories and going deeper into the accounts and gaining a better, faster traction for IO and TX. As you guys know, TX is a blanket LCD, so we still expect it to get reimbursed fairly rapidly once we submit it. And so the idea would be to, instead of expanding outward, actually going deeper into accounts. Some of our accounts like Florida Oncology or Georgia Oncology. There's multiple physicians, Texas Oncology, multiple physicians within those accounts. And so the idea is instead of onboarding an account and getting one or two docs, we want to onboard the account and go deep within the infrastructure of those accounts and drive utility across positions within the account versus add new territories. So, you know, look, as we get through the current market storm and as we launch these products and revenues begin to grow, we'll take a deep breath and see if it's, you know, when the right time is to add new territories. But today, that's the specifics around what we're planning to do around the oncology business.

speaker
Thomas Flatton

And if I might... You made reference to CMS a couple times with respect to timing. And in response to an earlier question, did I hear, maybe I might have misheard, but did you say you're going to submit here shortly the LCD, but you expected to have a response in the early fall? Did I hear that right? That seemed a bit aggressive from a timing perspective.

speaker
Ronnie Andrews

Thomas, we already, keep in mind, the transplant LCD is a blanket LCD for digital PCR. And we submitted liver two weeks ago. And so we are, but liver does not have a, is not part of the blanket LCD. There's nobody with a liver test today, as you know, so we're the first ones out. But kidney and heart are reimbursed already using digital PCR. So, you know, We don't know for sure, but we believe that given there's kidney and heart, that we should receive a rapid review of the LCD given there's already a blanket LCD written for our technology that cited our papers.

speaker
Thomas Flatton

And the timing on I.O., do you think, would be?

speaker
Ronnie Andrews

I.O., we're still on track. Yeah, we're waiting on one publication to be accepted and us notified. And once that happens, we're going to prepare. You know, we've been working on the dossier. So our goal is to submit I.O., as we've said, somewhere by the end of summer.

speaker
Thomas Flatton

Got it. I appreciate it. Thanks so much.

speaker
Ronnie Andrews

Thank you, Thomas.

speaker
Operator

The next question comes from Mason Carrico of StevenSync.

speaker
Terra

Hey, guys. Most of my questions have been answered here, so maybe just one quick one. On Therasure, any color you could provide around recent discussions with transplant centers? How should we kind of think about the opportunity between centers versus more community-based centers? Is one a more near-term target? I'd assume it'd be the transplant centers versus the community centers. centers themselves, but just any color there you can provide.

speaker
Ronnie Andrews

Yeah, I mean, you know, I think the thing that's in our favor is today there's no, there's no molecular test for liver in the market validated today. So we are kind of the first out in that indication. The good news is there's some great competitors already out there, CareDx and the Terra and the other indications. and they've done a terrific job of the missionary marketing work to sort of convince transplant physicians the need for molecular testing. So we certainly believe that that has created an awareness of what we're doing. Our initial engagement with the various centers we talked to has been very positive and they have acknowledged the need for what we're bringing and they certainly are excited about a rapid turnaround time that we can provide out of our lab. And so, you know, those things, you know, the jury's out on that until we start hitting the rubber meets the road when our reps start going in and trying to start getting samples in. But we certainly have received a very positive feedback from the key opinion leaders that we talk to and deliver in these large centers.

speaker
Terra

Got it. Thank you. Thanks, Mason. Thanks, Mason.

speaker
Operator

The final question comes from Bruce Jackson of the Benchmark Company.

speaker
Bruce Jackson

Hi, thanks for taking my questions. With regard to the Therasure launch, where are you in terms of your launch preparations in terms of the sales force, clinical support, things like that?

speaker
Ronnie Andrews

Yeah, so we are, you know, because the lab came first, we've got the lab in place, the workflow is in place, the LDT is final. We're working, obviously, on the logistical components of that now, which will include the requisition to order as well as how we're going to return results. uh via a report electronically versus pdf even crazy as it sounds a lot of these facilities still prefer a pdf and a fax we sometimes scratch our head at that but uh but that's still the case in many instances uh but we are working on an electronic you know uh report as well uh so all those things are in process and again we we wanted to wait and make the investment behind those till we saw a successful workflow and ldt those are now complete So by the time we get reimbursement, we expect we'll be a fully functional battle star in transplant.

speaker
Bruce Jackson

Okay. And then just real quick on the Determine TX and Determine CNI timelines, how far should we be thinking about shifting those out?

speaker
Ronnie Andrews

I think the DETERMA CNI timeline is the one that's at the greatest risk, candidly, because right now we are not going to, unless we find an appropriate partner that wants to do some studies with us and keep them fairly cost neutral for us, we'll probably not invest behind those studies. We'll launch it as an RUO in the United States for pharma and hope we can solicit some of that support from pharma. But right now, that's the one that's at the most risk. And so we had originally planned to launch it, which we will as an RUO this summer. But we had hoped to maybe actually submit for reimbursement later in the year. But I think given where we are financially and the need to conserve cash, that we'll have to wait till we find a stronger partner relationship where they'll help fund some of that effort. And so unsure about how long that'll push it out. I wouldn't expect a long time because we do have some good conversations underway, but I would not expect any revenue from CNI in the next 12 months outside of an RUO project with pharma.

speaker
Bruce Jackson

Okay. That's it for me. Thank you very much. Thanks, Bruce. Thanks, Bruce.

speaker
Operator

That was the final question. Ladies and gentlemen, we have reached the end of the question and answer session. This concludes today's conference call. Thank you for your participation. You may now disconnect your line.

Disclaimer

This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.

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