Oncocyte Corporation

You have joined the meeting as an attendee and will be muted throughout the meeting. Welcome, everyone, and thank you for joining us to discuss Oncocyte's fourth quarter 2024 results. If you have not seen today's shareholder letter, please visit Oncocyte investor relations page at investors.oncocyte.com. Today's prepared remarks build upon the information already shared in this robust letter. Joining us today are OncoSight President and CEO, Josh Riggs, Chief Science Officer, Eki Schutz, and CFO, Andrea James. We also have our analysts with us as panelists. After our prepared remarks, our analysts may ask questions. Attendees may also type questions into the Q&A. Before turning the call over to Josh Riggs, I'd like to go over our safe harbor. The company will make projections and forward-looking statements regarding future events. Any statements that are not historical facts are forward-looking statements. These statements are made pursuant to and within the meaning of the safe harbor provision of the Private Securities Litigation Reform Act of 1995. We encourage you to review the company's SEC filings, including the company's most recent form, 10-K, in subsequent forms 10Q, which identify risks and uncertainties that may cause future actual results or events to differ materially. Please note that the forward-looking statements made during today's call speak only to the date they are made, and Oncocyte undertakes no obligation to update them. And with that, I would like to now turn the call over to Josh Riggs.

Thanks, Gabby. Hello, everyone. Thanks for joining. We've gotten a lot done since our update in November. It's great to be closer than ever to having our clinical assay on market. While we detail our 2024 highlights in the shareholder letter, I'll just briefly recap them here. We launched Grab2Sure, which is our research use-only kidney transplant test with some of the leading transplant centers in the world, proving that we could design, develop, and ship a lab test in kit form. Having that kit in the field since last July has been tremendously valuable to our IVD product development. The labs running Graft Assure are some of the largest and most scientifically advanced transplant centers in the world. Feedback from those centers has led to improvements in user experience and assay design. We are locking in those improvements as we speak, which we believe will better position us from a competitive standpoint. We've been fortunate to be able to lean on our CSO, Dr. Eki Schutz. He has a solid track record of innovative science and publications, coupled with extensive experience in transplant assay development. Combining that with a group of eager early adopters who see this as the future of transplant management, we find ourselves in a really good place heading into our U.S. and European regulatory submissions. Our partner-first approach has brought together an amazing group of clinician researchers. As far as new data in the past year, we continue to advance the science in both oncology and transplant. This includes a groundbreaking and favorable publication in the New England Journal of Medicine. That study used our assay to monitor response to peltartumab for patients at risk for kidney transplant rejection. This study led to breakthrough designation for the drug from the FDA. Importantly, We believe this signals TAM expansion in the future as these drugs come to market, and doctors need a tool to monitor for the drug working and disease recurrence. In another example of TAM expansion, we published data showing that our assay can detect organ rejection in transplant patients 11 months ahead of standard protocols in certain high-risk populations. Then, within weeks of that publication, we achieved Medicare claims expansion to monitor these high-risk patients. Combined, these new indications can expand the total addressable market up to 20%. Add to that the potential increased use of more marginal organs with the rollout of IOTA this summer, and we expect meaningful market expansion over the next five years. Also, in 24, we attracted a key strategic partner in BioRed Laboratories, which makes us look and feel like a multibillion-dollar company as we go in to sign new transplant centers and get them up and running. I'm also happy to note that Bio-Rad participated in all three of our equity funding rounds over the last year, and we are grateful for their investment and partnership. In the year, we also strengthened our team, welcoming Andrea as CFO and Dr. Paul Billings as Consulting Chief Medical Officer. They both have hit the ground running, with Andrea helping to grow our capital markets awareness and build for scale, and Dr. Billings providing strategic direction and connecting us to future potential strategic partners. Towards the end of the year, we had our first pre-submission meeting with the FDA to prep for our final submission later this year. The meeting was very positive. They were engaged and thoughtful. While many of the folks on our team have been through the FDA process several times, this was a first for our company. It was a big step, pushing us ever closer to having a regulated product on market. We walked away confident and feeling good about the packet we are putting together. I'd be remiss if I didn't touch upon some of the macro uncertainties around the federal government, which could affect our timeline and which we are monitoring. The FDA office that will be reviewing our assay is the FDA Center for Devices and Radiological Health, CDRH. In late February, the Department of Government Efficiency cut staff from CDRH. Then, a few days later, reversed its decision, and those folks were hired back. We were pleased to see that reversal. We believe that one advantage our industry has, amidst the doge cuts, is that the private sector helps to fund the FDA's device review process. Specifically, CDRH is partially funded by medical device manufacturers through fees that fall under the Medical Device User Fee Amendments, or MDUFA. And so, because the private sector is involved in the funding of the review process, from a federal budget standpoint, we hope CDRH will not be majorly affected, That said, we are watching the back and forth the same as you are. The net takeaway today is that we are excited about 2025, about finalizing our assay design, launching and concluding our clinical trial, and submitting our data package to the FDA. Our projected timeline for having an approved product on market is mid-2026. In the interim, you can look forward to exciting updates about our clinical trial partners, including a KOL call this spring with our national principal investigator and updates about our strengthening commercial pipeline with key institutions progressing through stages of signing and then assay validation. Taking a step back, every once in a while we get a chance to be reminded why we all choose to do this work. One of the potential unfortunate side effects of the immunosuppression given to transplant patients is that it makes it much more likely that a patient will develop cancer. And I've heard from many of our collaborators that they would like to study immunosuppression tapering in their patient populations so that they can minimize such potential negative effects of immunosuppressive therapy. Then, at a conference in the fall, I had the opportunity to listen to a patient advocate talk about their stage four cancer, one that they'd got because they'd been immunosuppressed for a very long time. And I tell you, the need for more research and better guidelines, it really hit home. Couple that with the work that some of our partner centers are planning for pediatric patients, and it feels like we are a small part of something special. Putting our RUO test kit out there means transplant centers are finally free to do the research that matters to them. And we are proud to be a partner in that. We are reiterating our commitment today to have 20 transplant centers signed up by the end of 2025, which we believe will translate to roughly $20 million in future annual recurring revenue once we've achieved the appropriate regulatory approvals. In fact, we are already about halfway to that goal and expect to have several more centers sign on in the coming months. And of course, we believe that that is just the beginning of several years of rapid growth in our transplant business. From research through to the clinic, our Graft-Assure family of products are designed to be easy to deploy and easy to adopt. We're in a good place as a company, and we're going to have the opportunity to do something really cool. Next year, assuming regulatory clearance, the transplant testing market changes as local testing becomes a realistic option. You shouldn't have to send patient samples across the country or halfway around the world to get the answers you need. If you're a transplant doc, it shouldn't matter where you are in the world. With our kitted product, you'll have access to the diagnostic tool that you need to manage your transplant patients in real time. Most of our target institutions can already do their own HLA testing, so we see DDC of DNA as just the next logical step, one with strong reimbursement and margins here in the U.S. Some of you on the call are new to us, and we appreciate your support in funding our companies. The product cycles and upfront investment are often higher in healthcare than they are in many other markets. And yet, we believe that the bulk of the time and investment are behind us. We believe that our momentum will only build over the course of the next two years. Now, I'm going to hand the call over to Andrea to take us through our numbers. Andrea.

Thank you, Josh. Hello, everyone. It's great to be providing this update today and to be doing so over Zoom. And thank you to Gabby for helping to moderate. And I also want to thank the investment community for joining us, especially as we do our first Zoom earnings call. Okay, so at the conclusion of our shareholder letter, you can find our financial tables. I do want to highlight a few things. First, you'll see that in Q4, we reported farmer services revenue of $1.5 million with a gross margin of 40%. We're pleased about this and it exceeded our expectations. Our team in Nashville did an excellent job utilizing their expertise and our lab capacity to generate this revenue at the end of the year. It's a testament to the team and their ability to achieve the on-time delivery of clear, scientifically sound and accurate data sets to our firm of services clients. The way we think about our firm of services business is that it provides non-dilutive capital. But it's not a core pillar of our long-term molecular diagnostics revenue strategy. It allows us to monetize our national lab by performing studies and testing instruments for paying customers. And we're especially grateful to our R&D team for balancing these services while remaining focused on our primary goal, which is developing our kitted assay. Our solid execution in pharma services also holds strategic value. It helps us to deepen our relationships with potential future strategic partners. These customers are actually counting on our lab to deliver data that supports their own FDA submissions. And these customers are coming away impressed about the capabilities of our team and gaining confidence regarding potential future development projects. We do expect to see some continued revenue from pharma services in the first half of 2025. At this time, we expect that revenue for the entire first half to come in as less than what we realized in Q4, That said, our clients are pleased with our work and sometimes ask us to perform more, and we're happy to oblige. The takeaway is that pharma services revenue will naturally vary as we balance it with our strategic priorities. The priority for our sales team this year is to raise awareness of our transplant assay and to support transplant centers, which we expect to become future recurring revenue customers. Also in the coming months, we will need our Nashville Lab employees to prioritize supporting our own FDA submission package, which is strategically more relevant to our long-term success. Turning to expense management cash flow. In the fourth quarter, our outgoing cash flow was $5.6 million, and this was favorable to our targeted spend of $6 million. This includes quarterly operating cash expenses, as well as CapEx or purchases of property and equipment. Recall that last year I had told you on my first earnings call with OncoSight that I had enjoyed stepping into a company that is so focused on operational efficiency? That discipline allowed us to finish the year with $10 million in cash. And then in February, so just last month, we successfully raised an additional $29 million. This most recent fundraise was fantastic for us. It was a simple and clean transaction with straight common stock with no incentive warrants nor discounts. our five largest shareholders led the funding round. That included BioRad, which made its third equity investment in Oncocyte, and also pledged to provide non-dilutive support for the clinical trial and with our pilot site program. BioRad's support should help us to mitigate the level of expense increase this year, and we're appreciative of that. Everyone at the company has worked incredibly hard to get to this point, which is the point where our top shareholders were confident enough to invest the equity capital required to fully fund the development of our clinical kitted assay. Looking at 2025 and beyond, we are excited about the potential future value of our business, and we aim to continue executing to systematically retire risk and to reduce the time distance to meaningful revenue. Every step we take toward finalizing our assay towards launching and conducting our clinical trial, and toward expanding relationships with major transplant centers brings us meaningfully closer to building a scalable, high-margin, and recurring revenue business. We also remain committed to disciplined cash management. In 2025, we continue to target about $6 million per quarter in cash burn, and that ensures us a financial runway of well over a year. The timing of that spend may vary, however, and at this time we expect Q2 and Q3 to be our heaviest cash expense quarters of the year. Q2 is the quarter in which we pay out the company bonuses, and we also expect to have some incremental sales and marketing expense in the middle of the year as we welcome new pilot sites for Graft Assure, as well as start to incur clinical trial expenses. We are deeply grateful for the team's hard work and dedication. And we're grateful for the investor support as we advance our mission to democratize access to molecular diagnostic testing and improve patient outcomes. And with that, Gabby, let's start taking questions.