Biora Therapeutics, Inc.

Welcome to the Progenity 4th Quarter 2020 Earnings Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. Ask a question during the session. You will need to press star 1 on your telephone. If you require any further assistance, please press star 0. I will now turn the call over to Robert Aul, Managing Director with Westwick ICR, Progenity's investor relations firm.

Thank you, Operator. Good afternoon, and welcome to Progenity's fourth quarter 2020 financial results conference call. Joining me on the call are Dr. Harry Stiley, Chairman and Chief Executive Officer, and Eric Desbarbis, Chief Financial Officer. Before I turn the call over to Dr. Stiley, I would like to remind you that today's call will include forward-looking statements within the meaning of the federal securities laws, including the but not limited to the types of statements identified as forward-looking in our annual report on Form 10-K that we will file later today and our subsequent periodic reports filed with the SEC, which will all be available on our website in the investor section. These forward-looking statements represent our views only as of the date of this call and involve substantial risks and uncertainties, including many that are beyond our control. Please note that the actual results could differ materially from those projected in any forward-looking statement. For a further description of the risks and uncertainties that could cause actual results to differ materially from those expressed in the forward-looking statements, as well as risks related to our businesses, please see our periodic reports filed with the SEC. A slide deck with some supplemental fourth quarter financial information is also now on the website, but it will not be directly referenced by the speakers on the call today. With that, I will now turn the call over to Dr. Harry Stiley, Chairman and CEO of Progenity.

Thank you, Robert, and thank you all for joining us this afternoon. We made significant progress during the fourth quarter, both with our revenue-generating business and especially with our innovation pipeline programs. In Q4 2020, we made progress in stabilizing our core revenue business. In addition to revenue cycle improvements that are beginning to strengthen ASPs, we continue to witness strong new customer acquisition and in-network expansion by adding national and regional contracts. Further, we advanced our discussions for in-network status with our remaining large commercial payers and saw additional commercial and government payers covering average risk and IPT. These factors, which will continue to grow in contribution, are helping lay the foundation for sustained growth in 2021 and beyond. We maintained a disciplined approach to managing our operating expenses during the quarter through a combination of reduction in force and cost controls, whilst maintaining appropriate resourcing of our key R&D programs. Eric, our CFO, will provide more details later in the call. During the quarter, we raised $180 million gross proceeds in December 2020 from a concurrent secondary equity offering and issuance of convertible notes. In addition, in Q1, we raised $25 million in gross proceeds from a private placement with two leading healthcare-focused investment funds that were drawn especially to our innovation pipeline. We view this increasing investor engagement positively and it allows us to extend investor focus beyond our core molecular testing business and into our innovation pipeline, which is now progressing at an accelerated pace. We were able to see evidence that our core business in the fourth quarter of 2020 was stabilizing and reported 82,000 tests, including 56,000 core molecular tests and 26,000 COVID-19 tests. In the quarter, we continue to witness customer turnover primarily due to changes we implemented during 2020 to strengthen our revenue cycle management and our billing process. As we approach the end of the first quarter of 21, the headwind of account attrition due to the aforementioned changes continues to significantly weaken. By contrast, we continue to secure new business with significant success. These new accounts are now increasing in productivity and beginning to help offset losses due to account attrition. I'm also pleased to share that during the fourth quarter, Progenity further increased its in-network covered lives with an additional one million lives from new contracts with regional payers. Separately, we're advancing in our efforts to achieving network status with remaining large commercial payers, and we're hopeful we can add a significant number of covered lives with access to our product portfolio in 2021, which should lead to a further expansion of our commercial presence. We further expect that our NIPT revenue and ASP will gradually improve as more payers begin to reimburse for average risk NIPT. Several key commercial payers, including more recently Fidelis Centene and Humana, as well as multiple state Medicaid programs, have begun offering coverage for average risk. As a result, many of our payers currently cover average risk. and most have indicated that it's a permanent shift in their medical policies. We expect that a rising ASP for average risk and IPT will make an important contribution to our revenue as it represents a significant and growing aspect of our product mix. As a reminder, in September, we expanded our carrier testing screening menu to better align with payer medical policy coverage, which we believe will also result in improved revenue NSP in the coming quarters. We have already converted approximately 80% of our carrier screening book of business to this payer line menu. In January, we implemented a patient cost estimator nationally that provides transparency to the patient's responsibility early in the testing process, and this program has further helped drive revenue and expand our business. We expect to begin realizing benefits from these changes in 21 with significant volume and revenue contribution from our NIPT and carrier testing product lines. We did experience a transient impact from the recent winter storms in Texas, a major market for us, and across the eastern United States. We remain confident that Q1 2021 ASP will show growth over Q4 as we continue to stabilize the business and establish our growth trajectory over the coming quarters. To serve our patients and physicians, we launched our COVID-19 testing nationally within our channel, in January. While our core women's health molecular testing business remains by far our priority, COVID-19 testing is helpful to both margins and volumes. For planning purposes, we continue to view COVID-19 testing as a transient opportunity and will adjust our efforts accordingly to respond to the rapidly changing testing demand dynamics while aiming to maximize the opportunity. We are working diligently to demonstrate that our revenue generating business is a strong and positive contributor to a success and expect this to become more explicit as we progress in 21. A quick note with respect to our ongoing litigation matters. While we continue to believe them to be unfounded and expect to vigorously defend our position, we're not going to go into detail on this call and refer you to our disclosures in our 10-K. Progenity is innovation-driven, and in this regard, throughout Q4, we have achieved development and critical risk-reducing milestones across our pipeline programs. During the fourth quarter of 2020, we made significant progress in our development efforts in the field of preeclampsia, a complex syndrome, by achieving a key milestone in analytical and clinical verification for our LDT rule-out test, now branded Precludia. The test, a multi-biomarker test with algorithmic analysis, is primarily intended for use by the OBGYN and MFM physicians to rule out preeclampsia in symptomatic patients. We are pleased with how our assay and platform are performing, and an abstract with data from our clinical verification study, PRO-129, was recently accepted as a late-breaking abstract at the 2021 Virtual ACOG Annual Clinical and Scientific Meeting in May. We have also initiated clinical sample testing for Pro104, a validation study which is expected to read out mid-year. During the fourth quarter, we held a virtual pre-eclampsia R&D day event During this event, we shared analytical and clinical verification data, as well as perspectives and insights from physicians and patient advocacy groups. The event provided additional understanding about the current unmet needs in managing pre-eclampsia. It also provided color on how our tests will help add clinical value by identifying pregnancies that can safely be prolonged, reducing unnecessary preterm deliveries. In other words, the Precludia test has the potential to improve outcomes and enhance the quality of pregnancy care. We are currently processing and analyzing samples from our Prevalidation cohort, a subset of randomly selected samples from the PRO104 study. The Prevalidation subset and the PRO104 study will further challenge the operational readiness of our production systems. further define our target population and expand upon our understanding of the heterogeneity of the broader patient population. Assuming successful clinical validation, Precludia would be the first and only preeclampsia rule out test in the U.S. for symptomatic patients in their third trimester of pregnancy. As a reminder, Precludia is a global opportunity and we also intend to realize that potential in the future. We recently completed research with payers using a third party to better understand how they would characterize the value of Precludia testing, and we were very encouraged by the findings indicating their understanding of the economic burden of the disease and our value proposition. More to come on the commercial impact in the future. Our commercial team is diligently preparing for the launch of Precludia in the second half of 2021. including plans for our targeted physician experience program, Salesforce training, and marketing campaigns. These activities will increase and accelerate as we move into 22. Moving to our single molecule detection platform, we continue to make progress with the development of the platform and its first assay, our next generation NIPT test in natal form. As a reminder, we announced in the fourth quarter we had achieved high target specificity across tens of thousands of multiplex single molecule detection probes, resulting in a measurable dose response to fetal fraction. This achievement enabled assay integration and initial performance benchmarking. This capability is critical, especially given ACOG's recent opinion highlighting the essential need to quantify fetal fraction in NIPT tests. We believe that Inatal 4 has the potential to reduce NIPT direct COGs by up to 50%, allow for a faster turnaround time, and achieve equivalent performance to sequencing. With these features, InNatal 4 is expected to usher in new opportunities for us to fuel growth in the NIPT market. In addition to genomic solutions such as NIPT, our single molecule detection platform has the potential to detect known RNA, epigenomic, and protein biomarkers with high sensitivity and low cost. The platform will be suitable for additional pipeline projects including several oncology opportunities in the near future. Moving to GI precision medicine, we continue to advance programs into key preclinical and clinical studies, now using fully autonomous devices where available. In targeted therapeutics, we recently announced initiation of an important clinical study for a drug delivery system, DDS, which in combination with a drug and proprietary formulation will be used to initially treat ulcerative colitis and other GI-related diseases. The company started its first clinical study with the fully autonomous DDS, evaluating the capsule's safety and tolerability in the gastrointestinal tract of normal, healthy volunteers. The study will also collect the first clinical data on the ability of the DDS to auto-locate and accurately deliver a payload to the ileocecal junction or colon, a key delivery site for the treatment of ulcerative colitis and Crohn's disease. This study will investigate the in vivo behavior of the DDS using the well-established method of scintigraphic characterization. Gamma scintigraphy will be used to validate the DDS GI localization as well as the drug delivery mechanism using a saline solution payload that includes radioisotopes. The DDS capsule will be evaluated in a single dose application in three separate dosing cohorts. Results of the study are expected in the second quarter of this year. If successful, this study will represent a significant milestone and build upon the promising preclinical testing done to date. This will enable us to advance our pipeline for both of our lead candidates, the JAK inhibitor tofacitinib via the 505b2 pathway and the monoclonal biotherapeutic, Adalimumab, which we have manufactured under contract. The oral biotherapeutic program, OBDS, for the systemic distribution of biomolecules orally has also advanced, and we expect to update you on our next key milestone shortly, showing for the first time the performance of our fully autonomous device in a canine model. We believe that the OBDS platform has the potential to transform how biotherapeutics are delivered orally. In our PLDX SIBO program, we continue to advance the technology with ongoing assay validation, and we are on track to initiate a clinical pilot study with fully autonomous devices in the second half of the year. As a reminder, the PLDX can perform a range of fluorescent tests based assays for a variety of GI-related pathologies without the need for capsule recovery, with the first indication being small intestinal bacterial overgrowth, or SIBO. There are over 100 million annual patient visits with signs and symptoms resembling those of SIBO. In a recent interview, SIBO expert Dr. Satish Rao communicated that the PLDX has the potential to be the new gold standard for evaluating suspected SIBO patients. Our assay for quantifying bacteria compared favorably to endoscopic aspiration followed by microbiology and received the small bowel section award at the ACG conference last October. A sampling program based on the RSS Capsule is designed for both discovery and diagnostics and continues to progress well. Initiation of the first clinical study with fully autonomous devices is on track for the second quarter this year. The RSS will enable us to recover preserved microbial cellular and omics samples from predetermined known locations in the GI tract. Once the RSS is recovered from the store, two samples drawn from the same location can be extracted for analysis by a range of benchtop systems. We continue to be actively engaged with additional potential pharma partners as we advance our precision medicine pipeline and expect developments on that front, especially as we generate data with our autonomous devices. With that, I'll now turn the call over to Eric Despavis for a discussion of our financial results for the fourth quarter of 2020.