Oncocyte Corporation

Welcome, everyone, and thank you for joining us to discuss OncoSight's first quarter 2025 results. If you have not seen today's shareholder letter, please visit OncoSight's investor relations page at investors.oncosight.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. 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 and subsequent forms 10-Q, which identify risks and uncertainties that may cause future actual results or events to differ materially. On this note, but the forward-looking statements made during today's call speak only to the date that 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.

Hi, everyone. Thanks for joining us today. It's great to be checking in with you about two months after we reported our annual results. We've been heads down executing on our 2025 plan. For those of you who are new to us, we're a molecular diagnostics company investing in the significant opportunity to improve transplant rejection testing. We are just over two years into a strategic pivot that has now brought us to the cusp of delivering a kitted molecular test kit. Our key areas of focus for 2025 are, first, finalizing our clinical assay and trial design. Second, getting through our clinical trial to submit a data package to the FDA by the end of the year. And third, spring loading back half 2026 revenue by signing up transplant centers to use our research use only kit. We finalized our clinical trial design and just a few weeks ago we got central IRB approval. This is a key milestone where an external committee has reviewed and approved the safety and ethics of our trial. We've continued to have productive dialogue with the FDA and are now preparing for our final pre-submission meeting ahead of locking in for the trial. The clinical trial itself, which we've gone over in previous quarters, has drawn interest from several university hospitals that would like to participate in both the U.S. and Germany. We expect to welcome at least three of the top 10 transplant centers in the United States as clinical trial participants. And if we look at all of the U.S. transplant hospitals actively engaged in supporting our trial, we see nearly 10% of U.S. transplant volumes represented. In the near future, we are going to be up on clinicaltrials.gov and on our way to first patient in. And I'm really looking forward to sharing that milestone. We'll follow that with an introduction to one or more of our site principal investigators in a KOL call. We believe the strong interest we are seeing for the trial will translate well to future demand for our IVD assay. We believe we are on track to submit to the FDA by the end of this year, which is the same timeline we communicated in March. Like with any FDA program, there are several work streams that must come together. And from what we can see, we're on pace. So we continue to target FDA approval in the first half of 2026. Continuing on, we are on track to have 20 sites trained on our graft-assure workflow by the end of this year, which is the kickoff to our land and expand strategy to land hospitals with our RUO product and then expand to selling our clinical kitted product post-FDA clearance. We now have 10 sites running our RUO assay. They're in the U.S., Germany, U.K., Switzerland, Austria, and Southeast Asia. And the researchers at these universities are starting to perform real studies using donor-derived cell-free DNA and discovering new applications for our tests, such as pediatric transplantation, the role of absolute quantification in long-term kidney transplant management, and ultra-sensitive detection of microchimerism for bone marrow transplants. We are thrilled that researchers are exploring new ways that our technology could potentially help future patients. You'll see in the shareholder letter that we are starting to prove out the value of digital PCR as a technology differentiator. It's simpler, it's faster, and it offers better sample economics than NGS at low volumes. Most transplant centers don't have the sample volumes needed to efficiently run an NGS platform. These machines require a processing chip that costs well north of a thousand dollars per run. That math just doesn't work when you only have a couple samples a day. With PCR testing, even running a single sample is an affordable option given that the batch size does not meaningfully alter the cost per result. With only a few pipetting steps and a simple readout, labs don't need sophisticated hands to get the work out. We see a great future for PCR technology to bring testing closer to the patient. BioRat has been investing in improving and simplifying digital PCR workflows for years, and our assay benefits from these ease of use improvements. The net takeaway is that transplant is doing really well. And just a few years after our strategic pivot, we are closer than ever to building a rapidly growing, sustainable business. Speaking of that pivot, you may have noticed that our company name, Oncocyte, doesn't really fit our strategic direction, which has broadened considerably. The first market in which we are commercializing is transplant. And while we do have an oncology pipeline, which I will get to in a minute, the name Oncocyte no longer makes sense. In the coming weeks, we plan to unveil our new name. Also, our CFO has asked me to inform you that this rename is being done on a very tight budget so we can strategically allocate our capital toward the things that we believe will create real shareholder value. Onto oncology. Because our main focus on transplant is going well, I want to spend a few minutes updating you about our oncology pipeline and where we are carefully investing to unlock future value. Determa.io is showing real promise in the drug rescue category. We are really good at finding patients who respond to immunotherapy for certain types of cancer. Enriching for responders is a great way to get a drug with marginal benefit across the finish line. We are out there talking with strategic partners about Determa.io. One of those potential partners told us, never in my wildest dreams did I think the results would look this good on the work that you are doing. So with all the caveats that our oncology pipeline is still earlier than transplant, we do see future markets for potential long-term revenue growth where we will be able to invest in R&D after our transplant business is healthy and self-sustaining. Before I turn it over to Andrea, I'll conclude with the fact that from where I sit, I feel good about how far we've come and where we are going. Not only are we successfully building a market for our transplant product, but also we are seeing increased interest from potential corporate partners who see the value in our technology in both transplant and oncology. This type of external validation supports our confidence that we are on the right path, making the right investments, and have the right people to build a valuable business. Let me turn it over to Andrea.

Thanks, Gabby and Josh. Hello, everyone. Just a few financial highlights this quarter. First, farmer services revenue of $2.1 million exceeded our expectations, particularly with a large order that came in late in the quarter that we processed quickly and efficiently. This enabled us to invoice $1.4 million with just a few days left in the quarter. And our Nashville lab team brought more automation this quarter, which drove gross margins of 62%. This revenue is great for us. It extends our cash runway, and it deepens our relationship with our customers. In Q1, the vast majority of the revenue came from a single corporate customer that was impressed with our lab team's work, and they had asked us to help them meet some of their own deadlines. This customer also is now seeking partnering opportunities on one of our oncology assays, which Josh alluded to in his prepared remarks. As thrilled as we are to meet this customer's demand, it is situation driven and farmer services revenue, as I had said last quarter, will continue to naturally vary as we balance it with our own strategic priorities. This is particularly true because our sales team doesn't focus on it. We want our sales team out there moving potential graft assure customers through our funnel so that we can meet our goal to have 20 transplant centers by the end of this year and therefore spring load our commercial launch and our back half 2026 revenue. To put it simply, we want our sales team focusing on the land and expand strategy that you just heard Josh talk about. At this time, we expect Q2 pharma services revenue to be less than $500,000. And we did not invoice for any services in the month of April, which really speaks to its lumpiness. We concluded the first quarter with nearly $33 million in cash. And that includes restricted cash, which we'll begin having access to later this year. Our free cash flow is negative 6.2 million in the quarter, which is right in line with our target average quarterly cash burn of 6 million. For free cash flow, we're simply calculating cash flow from operations, less purchases of property and equipment. Finally, we also collected $1.4 million in receivables in the first week of April. As we noted last quarter, we will have a couple of quarters this year where cash burn ticks up a bit, but not a lot before coming back down. The biggest needle mover here is our clinical trial and the instruments that we must purchase to support that trial at our partner sites, albeit at a discount. Also, R&D will continue to reflect the added costs of FDA-compliant software development for our IVD program. We continue to target an average of about $6 million per quarter of cash burn until our commercial launch next year. Finally, Josh talked about our corporate rename. I'm really excited about this. Along with the rename, we will also announce a new corresponding NASDAQ ticker. We really took a resource-conscious approach to the rename. We take capital stewardship seriously, and we want to keep the spotlight and our investments where they belong, which is on advancing research, on serving our customer community so they can in turn better serve their patients, and on investing in the commercialization of our transplant assay, which we expect to translate to real shareholder value creation. Okay, with that, Gabby, let's come up into gallery view and start taking questions. Thank you, Andrea.