Sera Prognostics, Inc.

Good afternoon and welcome to the SARA Prognostics conference call to review fourth quarter fiscal year 2024 results. At this time, all participants are in listen-only mode. We will be facilitating a question and answer session towards the end of today's call. As a reminder, this call is being recorded for replay purposes. I would now like to turn the call over to Peter DiNardo of Capcom Partners for a few introductory comments.

Thank you, operator. Good afternoon, everyone. Welcome to Sarah Prognostics' fourth quarter fiscal year 2024 earnings conference call. At the close of the market today, Sarah Prognostics released its financial results for the quarter and full year ended December 31, 2024. Presenting for the company today will be Jenya Lingard, President and CEO, and Austin Erick, our CFO. During the call, we will review the financial results we released today after which we will host a question and answer session. If you've not had a chance to review our quarterly earnings release, it can be found on our website at sarah.com. This call can be heard live via webcast at sarah.com, and a recording will be archived in the investor section of our website. Please note that some of the information presented today may contain projections or other forward-looking statements about events and circumstances that have not yet occurred, including plans and projections for our business, future financial results, and market trends and opportunities. These statements are based on management's current expectations, and the actual events and results may differ materially and adversely from these expectations for a variety of reasons. We refer you to the documents the company files from time to time with the Securities and Exchange Commission, specifically the company's annual report on Form 10-K, its quarterly reports on Form 10-Q, and its current reports on Form 8-K. These documents identify important risk factors that could cause the actual results to differ materially from those contained in our projections and other forward-looking statements. As a reminder, a webcast replay of this call will be available on the Investors section of our website. I will now turn the call over to Zhenya, Sarah Prognostics President and CEO. Zhenya?

Thank you, Peter, and good afternoon, everyone. During 2024 and starting strong in 2025, we effectively executed on our stated plan of putting in place the necessary steps to grow Sarah's business and shareholder value. That included building our evidence portfolio, building awareness, and seeking publication of clinical trial results to drive adoption and inclusion in care guidelines in the future. I'm pleased to report that we have made solid progress on each of these, We believe we're now poised to take advantage of a new phase following pivotal prime study results to pursue evident growth opportunities. Towards leveraging the best of these opportunities, we're grateful for the support of our investors and pleased to have successfully executed our fundraise last month to help fund these endeavors. Added to our strong debt-free balance sheet, this affords us flexibility to cost-effectively invest in those with the best potential commercial return on investment to build awareness and adoption of our solution to preterm birth. Speaking of awareness, we were excited to recently share the full results of our prime study at the Society for Maternal Fetal Medicine 2025 pregnancy meeting on January 31st and during our virtual R&D event later that day. Prior to that, Society for Maternal Fetal Medicine published our abstract as one of just a few late-breaking ones chosen for publication. Furthermore, ours was one of just five studies for which Society for Maternal Fetal Medicine issued a press release out of about 1,200 studies overall reviewed in the pregnancy meeting. Let me briefly review compelling data points Dr. Brian Herrier, maternal fetal medicine expert at the High Risk Pregnancy Center in Las Vegas and principal investigator for PRIME, shared during the January presentation. First of all, Dr. Herrier recapped that the PRIME study was conducted at 19 locations and included an intended treat population of 5,018 patients in a randomized controlled trial designed to represent the gold standard evidence in our portfolio. Our preterm test and treat strategy yielded statistically significant outcomes on both co-primary endpoints in the PRIME study, with a 25% reduction in the neonatal mortality and morbidity index, or NMI, and an 18% reduction in neonatal length of hospital stay. Furthermore, Dr. Erie highlighted a 20% overall reduction in NICU admissions and a much reduced number needed to screen, or NNS, of 41 to prevent a NICU admission. This number needed to screen compared to a number needed to screen of about 150 for the cervical length screening which is the type of screening currently recommended in guidelines for symptomatic women with a history of preterm birth. This significant reduction in NICU admissions is very important, as this is a top focus for payers in reducing healthcare costs for their insured patients. The NICU admission reduction showed that we are keeping one out of five babies out of the NICU with our test and treat strategy. There are various etiologies when it comes to root causes of preterm birth, and each case is patient-specific as to which lever to use, aspirin, progesterone, and care management. But identifying these at risk early is informative, and physicians are excited about the potential for our test to predict which mothers are more likely to deliver prematurely, more accurately than current tools. Since we've published this meaningful data, Society for Maternal Fetal Medicine urges to continue to publish the results of PRIME and our prior trials to build awareness and illustrate real-world utilization. Ultimately, we believe there are three linchpins necessary for professional society recommendation inclusion for preterm, and these are publishing more information from significant datasets derived from our studies, providing more real-world evidence of the healthcare and economic benefits using our test along with an intervention bundle. And lastly, driving clinical community adoption and bringing institutions on board that can effectively use preterm testing and based on their experience improving outcomes for moms and babies, ask for the SMSM and ACOG position on preterm test usage and guidelines. We plan to continue with our primary goal of achieving publication of the full prime study in a peer-reviewed journal, In the meantime, we're continuing to build on our evidence portfolio to corroborate our test and treat strategy in real world evidence studies, the first of which is already underway. We recently received approval by an institutional review board for a pre-implementation study at a premier hospital network to observe the impact of our preterm test with intervention in real world. We look forward to continuing building awareness of PRIME results at the upcoming American College of Obstetrics and Gynecology meeting in May in Minnesota. With the publication of AVERT and anticipated publication of PRIME, we have entered a new phase of commercialization focused on driving awareness, seeking reimbursement, adding to evidence for guideline inclusion, and accelerating preterm adoption in the United States, as well as exploring international expansion. This is the time for us to put our money to work in a focused approach. Building our presence in waves of geographies will allow us to drive density of adoption, awareness, and test utilization where we have achieved reimbursement and built opinion leadership. During this phase, we expect to leverage cash from our recent capital raise to maximize opportunities. Net proceeds from the offering are expected to enable measured expansion in our commercial infrastructure and capabilities in the United States, as well as opportunities that we've created. In addition, this will help accelerate preparations for possible expansion into European Union and fund additional studies designed to increase adoption of preterm, including monitoring milestones set for FDA oversight of LDTs. 2024 was the third consecutive year the United States received a D-plus grade from the March of Dimes annual report card for our persistently high preterm birth rate. This needs to change, and we can do more to create a paradigm shift to improve outcomes and reduce healthcare costs. Following the availability of AVERT and PRIME data, in our conversations with payers, two key results resonated strongly. First is the reduction in NICU admissions, and second, the number needed to screen of only three or four moms to drive savings of one NICU day. We are continuing to share with them our economic model of the value delivered which exceeds their target of three to one ROI. In addition, we are starting a program with a key payer to monitor the cost of care to build on the evidence we have in deploying our test and treat strategy. In the United States, Medicaid pays for approximately 43% of births. Given the burden on public health agencies, we expect to pursue partnerships to measure and demonstrate our impact on the patient population. Specific early states of focus may include Nevada, Louisiana, Texas, and California. According to the March of Dimes, the first two of these states have nearly 50% higher preterm birth rates than the national average. Our goal is to focus on geographies where the need is the greatest, where a prime study site is located, or where we have strong opinion leader support, and where we have line of sight to pair coverage. We're analyzing the geographies where these conditions are met, and we'll deploy both digital awareness campaigns at scale and regional account managers to drive adoption. To address conditions specific to the European market, in February, we executed an agreement with a lab to develop an immunoassay version of preterm tests. These types of assays enable a decentralized commercialization model better suited to health systems in Europe. We believe that once this is successfully completed, it will allow us the opportunity to strategically partner with other organizations in addressing preterm birth in Europe in commercializing preterm tests there. With our product pipeline, we continue to work on our time to birth offering. Here, Just as with preterm, publications will help support awareness building and provide real-world evidence of the value of this technology. In early February, work by Sarah's Key researchers was published by the journal Life. This study showed the ability to accurately predict the delivery dates of term pregnancies by examining 15-clock proteins found to have direct association with time to birth. These findings suggest that one of these proteins, ADA12, as well as potentially other clock proteins, may serve as predictors of term delivery date in uncomplicated pregnancies. This study further illustrates our role in supporting an expectant mother's journey with our novel technology. To help advance the market opportunity we see ahead of Pacera, we are pleased to announce today the appointment of Jeff Elliott to our Board of Directors. Jeff brings two decades of experience and expertise in guiding companies in the medical diagnostics industry, including as chief financial and chief operating officer at Exact Sciences during its high growth phase. His appointment broadens the depth and breadth of expertise on our board. We're also announced today that our longtime board members, Ryan Trimble and Marcus Wilson, are stepping down in June after many years of service and commitment to their mission. We're thankful to them for their role in taking SARA from startup to commercialization. In summary, we believe we have momentum behind us and are in a better position than ever to expand our commercialization, grow adoption and revenue, and take SARA to the next level. Now, I'll turn the call over to Austin. Austin?

Thanks, Jenya, and good afternoon, everyone. Let me review our financial results for the fourth quarter. I'll then touch on our view of operating expenses for the year ahead and our plan to make selective investments that we believe will expand our commercial reach and revenue over time. Net revenue for the fourth quarter of 2024 was $24,000 compared to $41,000 for the fourth quarter of 2023. Total operating expenses for the fourth quarter of $9.4 million were up 6% from $8.9 million for the same period a year ago, Net loss for the quarter was $8.6 million compared to $7.9 million for the same period a year ago. Research and development expenses were $3.1 million down from $3.9 million for the fourth quarter of 2023 due primarily to reduced expenses related to our prime study which stopped enrollment at the end of 2023. Selling general and administrative expenses for the fourth quarter were $6.3 million up from $5.0 million for the fourth quarter of 2023 due primarily to focused spending on commercial activities aimed at broadening awareness of the preterm test to begin growing test volumes and sales over time. As of December 31st, 2024, the company had cash, cash equivalents, and available for sale securities of approximately $68.2 million. As noted previously, in February 2025, we raised $57.5 million through a public follow-on offering that allows us to significantly expand our commercial operations in 2025 and beyond, while also securing a cash runway through 2028. Despite the capital markets environment continuing to be extremely challenging, particularly within our space, we believe investors see the promise of what our technology can do to improve the lives of mothers and babies and drive the future growth for SARA. We are thankful for their continued support. We previously communicated that our expectation that 2024 growth cash expense would be less than $30 million, and we're pleased that our careful cash management during the year resulted in a gross cash expense of about $28.6 million. For 2025, which will be a year of building our business commercially, our targeted range for cash operating expenses is $30 to $35 million. With the expectation of Prime being published, we see this as a pivotal year in which to pursue engagement with and adoption by key stakeholders. As a result, this increase in operating expenses is primarily driven by planned new and significant investments in commercialization. While we remain steadfast in prudent oversight of our capital resources, we have begun investing in both broad awareness and targeted education campaigns to begin to build adoption of the preterm test on the heels of exciting prime study data. Once we have published prime data, we will expand our investment where we believe the commercial opportunities have the highest likelihood of near-term success and return on investment for our business. The amount we ultimately invest in 2025 will be dictated by the timing of a prime publication and the commercial opportunities presented for preterm and potentially our pipeline. Operator, we can now please open the call for questions.

Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star followed by the number one on your touchtone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press star followed by the number two. If you are using a speakerphone, please make sure to lift your handset before pressing any keys. Your first question comes from the line of Dan Brennan from TD Cowen. Please go ahead.

Great. Thanks for the questions. Maybe just the first one on the three tenets. of your plan to get into guidelines. You talked about publishing more information, providing more real-world evidence on health care and economic benefits, and then driving clinical community adoption and getting institutions on board. Can you just elaborate a little bit on each of those and kind of things investors should be looking for in 2025 on each of those fronts that will give people confidence that you're making progress?

Absolutely. Great question. So first on the publications front, as you can imagine, with our 5,000 patient trial prime, we have unleashed and unearthed an enormous treasure trove of data and have 19 PIs who are currently looking at the data and have discussed plans for further analysis of the data set and discussing half a dozen to a dozen potential topics that may end up in additional publications from prime data set. We think that the more value can be derived from prime data set in new publications, the more evidence will there be in the market about the value of the test and treat strategy of preterm test. Of course, PRIME is not the only data set we have. We are looking forward to broader analyses from the other studies that we have conducted, namely AVERT, potentially PREVENT, and of course, any future evidence we generate. So that's on the publications front. Second tenet is real-world evidence. We truly believe that Learning how test performs in real world and partnering with leading institutions to study aspects of it, both in different populations, in context of health disparities, for example, will be accretive to adoption and awareness building across the clinical community. So as I mentioned, we are kicking off a first real-world evidence study this year, and with a preeminent institution, we will absolutely publish on the results of this study and look forward to sharing the outcomes of that work. We're planning to launch more real-world evidence trials and generate a continuous flow of evidence on how well the test is performing. Additionally, we've launched an investigator-initiated research program at Society for Maternal Fetal Medicine meeting in January and are looking forward to all of the submissions, review, and communicating back to the investigators on the results of which studies will support come April of this year. We're hoping that The investigator-initiated research will also provide a lot of interesting evidence around the test that will help whenever the professional society chooses to review the policy and recommendations on preterm birth care to take into account all of the evidence that these three levers generate. The last tenet I talked about was generating clinical adoption, of course. As you can imagine, a lot of the early adopter physicians and institutions will put the test to use in real world. And the more adoption we generate, the more, of course, questions will be raised to the professional societies on what is their formal position on utilization of preterm test and our screen and test strategy. So we believe that all these three avenues of supporting evidence generation and momentum for preterm test will pull forward getting to professional recommendations on how this test should be used in the community.

Great. Maybe the follow-up you talked about in the prepared remarks, Medicaid, you talked about paying for 43% of births, you cited the four states, with a focus on Nevada and Louisiana. How do we think about that opportunity ahead of guidelines? So are you kind of just maybe elaborate a little bit on the Medicaid opportunity, what your plans are, and if there's any predicates about how Medicaid looks at tests like this. Is this a multi-year process in order to get Medicaid to pay for this test, or could it go faster than that?

Great. Another great question. Medicaid, as you can imagine, is our single biggest payer in the United States. And 27% of all inpatient costs that Medicaid covers are related to childbirth and neonatal care. So, of course, maternal care and neonatal care slice of Medicaid budget is substantial. with tens of billions of dollars that are spent on both the childbirth and the first year of a baby's life that is covered in most cases by Medicaid. So our test and its very low number needed to screen to save a NICU day and again, very low number to save a NICU admission is an enormous opportunity for Medicaid leaders to reduce Medicaid budget costs without cutting benefits. We think at this moment in time when unfortunately the United States has struggled to reduce the rates of preterm birth in spite of many innovations in the last couple of decades, we now have both the momentum of the community around clinical breakthrough research, but also focus by Medicaid administrators on cost reduction. We believe that that momentum of both innovations, supportive research, and potential to save money will be a catalyst for Medicaid moving faster than usual in covering the innovations that can help the community. So, of course, it will be different state by state given a different plan shape across the states. But the reason we want to start focusing on the states most hard hit by preterm birth is that's where it will become a priority for the administrators to adopt innovations that can make a difference in clinical outcomes as well as save on the budget. So we look forward to and are engaging as we speak with Medicaid plans across the country and are looking forward to coming back to which states would jump in with us to start adopting our screen and treat strategy. It is unusual for a screening test to generate savings and especially generate savings within a year, given the test is administered in the second trimester. and within six months the baby is born, and therefore the savings are realized. So we think it could be not a multi-year affair, but we could make some really nice inroads even this year. So we'll, of course, keep the community appraised of our progress.

Perfect. And then maybe just on the guidelines, so between SMFM and ACOG are both important. Is one more important than the other? And any way to think through, given the feedback so far from the PIs and the DACA community and your plans, is this possible in the next year, two, three? Or is this something that, you know, given predicates, could take four, five, six years? Any thoughts on how investors might contemplate the opportunity for you to get in guidelines?

Great. Well, it's hard to say which society is more important because ACOG and SMFM work together on the guidelines and specifically on the ACOG Bulletin 234 that governs preterm birth, which is an ACOG Bulletin. But Society for Maternal Fetal Medicine is an enormous influencer and partner in developing those guidelines, given their expertise in addressing higher risk pregnancies and preterm birth. And in this case, we think that they will work together. There are precedents when Society for Maternal and Fetal Medicine went ahead with practice advisory separately for ACOG, but given how important preterm birth is to the community, we think they will very, very likely work together on it and will be equally important. Hence, we're engaging with both sets of experts and opinion leaders from both societies. Now, as far as the feedback so far from opinion leaders that we're hearing, of course, everybody is eager to dig into the data. Like investors and analysts, we frequently get the question, when is the publication coming? To which our answer is, we don't know quite yet, but we're working very hard on it, and hopefully it is imminent in the coming months. I'm happy to dive deeper into the questions around the data, which you can probably anticipate. Questions like what subpopulations, for example, first-time moms or second, third-time moms, are there performance differences for the screen and treat strategy? Are there differences in the usage of particular intervention levers like aspirin? et cetera, et cetera, but we are working with our principal investigators to feed them the questions that we receive and hope that they pick them up and address them in the publications. What our PI is saying, all of our principal investigators are incredibly committed to bringing innovative solutions and bringing great research and rigorous science to the community. And we're excited that we have seen several of them step up and start discussing with us what potential topics they might want to take up and look at the data for a possibility of a publication or poster session or digging into the analysis and the data of it. So we're excited about their level of engagement. And given the 19 sites and 19 PIs, We're definitely hoping to generate a lot of evidence coming out of that work, which of course is critical in terms of the number of references that will exist for ACOG and SMFM committee, which whether it is one, two, three years from now or more, will be formed to review all of the available literature and evidence. The more we can create evidence, the better. And to your fundamental question, what is our best guess if it could happen in the one, two, three year timeframe, or it could take longer, it is incredibly difficult to predict. However, I will say that the last time the ACOG Bulletin 234 was updated was August 2021. And the societies typically update these bulletins every, 24, 36, 48 months. So it is prime time, no pun intended, to potentially review these. However, we will be delighted if we have a bit more time to put more evidence out there, more publications out there for the review to take those into the account. So it is very plausible that the review and update of Bulletin 234 will happen in the next one, two, three years.

Great. Maybe last one. Sorry, I'm asking so many. Maybe one for Austin. Just on the cash on balance sheet today and basically the burn, which is going up a bit, which makes sense. Just again, walk us through how far in advance or how far out you think the cash on the balance sheet will last. What are some of the key assumptions that go into that? Any color on kind of where the costs are going to this year? Thank you.

Yeah, thanks, Dan. So we think we have cash runway into 2028 based on our current operating plans, which, as we stated in the prepared remarks, includes a range of cash operating expense this year of 30 to 35 million. how much or where we land in that rain will be dictated by the opportunities that are presented for us commercially. The vast majority of that increased spend over last year's roughly $29 million is going to be dedicated to commercial investment. Over the next two or three years, certainly we would expect that to be the majority of where operating expenses increases in commercial investment. And so to get to that 2028 mark, you know, we're looking at some increase in spend over the next three or four years. and offset by some, you know, in that assumption or some very modest revenue assumptions as well, which we certainly hope will be much greater than modest over that time period.

Are you willing to share any details on the revenue assumptions or no?

Not at this time.

Great. Thank you.

Ladies and gentlemen, as a reminder, if you would like to ask a question, please press star followed by the number one on your touchstone phone. If you wish to decline from the polling process, please press star two. And if you are using a speakerphone, please make sure that you lift your handset before pressing any keys. Your next question comes from the line of Andrew Brackman from William Blair. Your line is now open.

Hi, everyone. This is Maggie Bowie on for Andrew Brackman. Thanks for taking our questions. Maybe first, if you could just dive into those commercial investments you were just talking about. What can we expect for 2025 and here on out for what the focus will be, you know, what you're thinking about, how big your commercial organization needs to be as you continue to build prime evidence and drive adoption of preterm? Thanks.

Hi, Maggie. Good to talk to you. And absolutely, let me start with the last question, the size of commercial organization and how we are aiming to grow it to go after the commercial opportunities. We are first building out our sales organization with the regional account managers to be driving on the ground the adoption in the selected target states that we are addressing. with building a strong ecosystem of influence between the opinion leaders, the clinicians, organizing speaker programs, unlocking institutional buy-in and adoption by individual clinicians and largest practices in those states. As you can imagine, we are teaming with our partners on the payer front, potentially on the public payer side as well, to make sure that the awareness and policy coverage is there to support their efforts. Second, of course, is going to be on the medical liaison front. We brought in a head of medical liaison group last year and are looking forward to potentially adding to the field presence in selected states as needed that role. We also grew our revenue cycle organization last year and we're aiming to optimize that this year depending on how fast is the uptake. Revenue cycle, as you know, is going to be critical for for bringing the revenue in and collecting on the payments. Last but not least, potentially building out our payer group to ensure that we are expanding reimbursement and working with both payers, government and commercial payers, as well as employers, benefit design consultants, and others. So that's just to start. Of course, as momentum grows and more states become in focus, we will expand our commercial presence in WAVES as we go into more and more geographies.

Hope this helps. Got it. Thanks. Yeah. Thanks so much. And then just maybe one on the pipeline. Can you talk about what we should be expecting for pipeline initiatives in the near term? And just kind of level set us on where things stand around the launch of the time to birth assay. And then just relatedly, any updates on how you're thinking about the pricing of that test when launched. Thank you.

Definitely. So as we've talked about before, we've prioritized two products from our pipeline to bring to market near term. That's the time to birth product, which we are targeting the second half of this year. And the... Second one is the Predictive Analytics product, which we are beta testing across the country and are hoping to get to production scale release in the second half of this year as well. In terms of pricing of the time to birth product, it is truly a consumer directed test, even though it will be helpful for both consumers and physicians. So as an immunoassay, it's priced at $150 or around that. So it should be accessible and affordable.

Great. Thanks so much for taking our questions.

Thank you for the questions.

Ladies and gentlemen, again, if you'd like to ask a question, please press star followed by the number one on your touchstone phone. You will then hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press star two. One moment while we compile the Q&A roster. There are no further questions at this time, so I'm going to go ahead and turn the call over to Ms. Danielle Lingard for closing comments. Ma'am, please go ahead.

Thank you, operator. Thank you all for attending our call today, we are really pleased with our progress during the year and, of course, more recently in being able to share the results of prime as we await expected publication of the full study results. which will provide more evidence of the value of utilizing our preterm test and treat strategy we're. thankful for the support of our investors, including those who participated in our recent fundraise that see the great opportunity that lays ahead for Sarah. I'll now turn it back over to the operator to conclude the call. Operator?

This concludes today's conference call. Thank you everyone for your participation. You may now disconnect.