Sera Prognostics, Inc.

Good afternoon and welcome to the CIRA Prognostics conference call to review second quarter fiscal year 2025 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' second quarter fiscal year 2025 earnings conference call. At the close of the market today, Sarah Prognostics released its financial results for the quarter ended June 30, 2025. Presenting for the company today will be Jenya Lingard, President and CEO, and Austin Ertz, 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 serra.com. This call can be heard live via webcast at serra.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 or 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. I will now turn the call over to Zhenya, Sarah Prognostics President and CEO. Zhenya?

Thank you so much, Peter, and good afternoon, everyone. We're continuing to advance Sarah's commercial progress and building momentum in our business. Today, I'll review how we plan to grow market awareness through data generation. I'll then review our commercial strategies and tactics and how we're engaging with professional society's opinion leaders, to support our role as the pregnancy company. In terms of data generation, we continue working towards the publication of our full prime study results in a peer-reviewed publication. This first prime publication will include the strong primary outcomes we shared earlier this year, as well as new and compelling data points from the study demonstrating the efficacy of the preterm test. We remain actively engaged with the reviewers and remain optimistic the publication will occur before year end. We know publication is important to our stakeholders, and we will keep you apprised and certainly announce publication as soon as it arrives. I will note that from a commercial perspective, payers have shown high willingness to engage with us on the abstract and podium presentation by our principal investigator at the Society for Maternal Fetal Medicine, or SMSM, meeting last January, allowing us to make progress on our reimbursement strategy. To add to the strong and compelling data from this initial prime publication, we plan to swiftly follow up with additional publications of data on health economic benefits, subpopulation analysis, for example, first versus second, third, fourth time moms, and Medicaid, expected cost savings of Sarah's preterm test. Many state Medicaid programs cover the first 12 months of health care for newborns, and we believe the cost-saving benefits of preterm tests will be very compelling as state governments seek to reduce overall Medicaid costs. As a reminder, our prime study results reported in January demonstrated that we can save one very expensive neonatal intensive care unit, or NICU day, by screening on average just three to four patients with the preterm test. As a reminder, the average cost of one NICU day is about $4,000, but for the earliest born, and depending on the procedures and equipment used, the cost could be up to $20,000 per NICU day. Prime data indicates Medicaid programs can break even and recoup savings without cutting benefits, and our conversations with Medicaid organizations support that view. Beyond NICU savings, in a 40,000-member health economic analysis, Elevance modeled both NICU savings and the first 12 months of healthcare cost savings amounting to $1,600 per member tested with preterm test. Commercially, as I shared before, we're focusing our sales and marketing efforts in several geographies where we see synergistic commercial momentum with Medicaid plan pilots, local opinion leader support, early adopter institutions, prime study site locations, and other opportunities, which we believe could combine to drive clinical utilization of our tests in that region quickly. We've continued to be highly engaged with many healthcare provider organizations in these targeted states. Regarding Medicaid planned pilot programs, while still early in the process, I'm pleased to report that we're seeing notable traction in two particular states with above-average premature birth rates and growing momentum in two additional states. We're hopeful we can execute signing on two to four pilot programs within the next few months and we'll keep you updated on these opportunities in the coming months. Beyond Medicaid, we continue to target other payers of all sizes that have a growing desire to provide attractive healthcare benefits while managing escalating costs. Our focus here is on those that are innovators and have a substantial covered member presence in our target states where we have or are building our sales force to maximize the return on investment relative to our sales efforts and resources. In our sales efforts, we have begun hiring additional sales representatives in these geographies to build awareness and establish the foundations for pull-through as these commercial opportunities launch. We expect that it will take a couple of quarters for each new representative to begin driving adoption of the preterm test within their territory, but we are excited to be investing into these commercial opportunities. We've also recently made key strategic leadership hires in our commercial team and beyond in order to expand Sarah's commercial reach and increase awareness among physicians, patients, partners, and investors. As announced in May, Lee Anderson was appointed Chief Commercial Officer. Lee is an accomplished leader in driving sales within the healthcare and diagnostics space. He brings to Sarah more than 30 years of cross-functional leadership experience in sales, marketing, customer service, strategic accounts, and training. In his first 90 days at the helm, Lee has been focusing on building out our commercial organization, namely sales and market access. In July, Lee brought on board Chuck Hyde, who joined Sarah as the head of market access. Chuck has over 20 years of experience in opening up markets following leadership roles in oncology diagnostics and pharmaceuticals. He also previously held an instrumental role in guiding the payer team for a groundbreaking cancer diagnostic company. Chuck will focus on broadening reimbursement for our preterm tests across government and commercial payers. Now that we have passed through the R&D phase and into what we believe is an evident pathway for commercial and revenue growth, we are also ramping up awareness of SARA among the investment community through the recent appointment of Jennifer Zabuda, head of our investor relations. Jen is an experienced buy-side, sell-side, and healthcare investor relations professional. I hope many of you have a chance to connect with her in the coming weeks. We welcome Lee, Chuck, and many new members of our sales team and Jen on board and look forward to their contributions in growing upon Sarah's success. As we stated earlier, we are excited to be sharing new data broadly with the professional societies and clinical communities. We'll also continue to have a strong presence at upcoming medical conferences. sharing this data with the clinicians. Data on health economic benefits will be shared at a leading European conference this fall. In October, Dr. Iria will be presenting prime data at the First Renaissance Conference, The Three Ages of the Woman, being held in Italy. We also plan to bring additional prime insights to the SMFM annual pregnancy meeting in February, 2026. With the power of real-world evidence on how preterm can support customized treatment, We're planning on getting as much data out there as soon as possible before the American College of Obstetrics and Gynecology, or ACOG, chooses to update guidelines so that our published data is included in their review. Part of this process includes meeting with innovative maternal and fetal medicine clinicians, key opinion leaders, and others who can evaluate the role of newer technologies like preterm tests. As our commercialization gains momentum in the coming quarters, we will start reporting on key commercialization performance indicators and may include sales activity metrics, scale of reach of physicians via direct and digital channels, payer contract wins, and, of course, eventually revenue. The last item I wanted to update you on is the progress we've been making in Europe. Over the last 18 months, SARA has advanced the commercialization preparation of the preterm tests in Europe, where the unmet need for preterm birth risk assessment is well-recognized. European healthcare systems acknowledge preterm birth issues, and the established pregnancy management protocols are aligned with Sarah's studies and allow for easy incorporation of the preterm test, and there is no effective competition. To enable a successful market entry, we are transitioning the preterm test from mass spectrometry to an immunoassay, focusing initially in the UK, France, and Germany. We are engaging with the European regulatory agencies as well as medical leaders to generate evidence that meets the standards required for regulatory approval, reimbursement, and clinical adoption. Our goal is to make a submission to these regulatory agencies in early 2026, sign a commercial partnership agreement, and begin preterm test implementation from mid-2026 onwards. In summary, we believe that through the year end, We will build on the body of evidence illustrating the value of preterm tests while further establishing the commercial building blocks needed to grow market awareness and revenue. Now, I'll turn the call over to Austin. Austin?

Thanks, Jenya, and good afternoon, everyone. Let me review our financial results for the second quarter. Net revenue for the second quarter of 2025 was $17,000 compared to $24,000 for the second quarter of 2024. Total operating expenses were $9.3 million and flat with the same period a year ago. Research and development expenses of $3.3 million were down from $4.4 million, or approximately 24%, relative to the prior year period due to lower clinical study costs following the completion of the prime study and a shift toward commercialization. Selling general and administrative expenses for the second quarter were $6.0 million, up from $4.9 million for the second quarter of 2024, as we continue to carefully invest in targeted commercial activities, build market awareness, and recently add strategic headcount to drive future revenue. Net loss for the quarter was $8.0 million, down from $8.3 million for the same period a year ago due to our continued focus on managing capital resources ahead of expected revenue expansion. As of June 30, 2025, the company had cash, cash equivalents, and available-for-sale securities of approximately $108.5 million, which we expect will fund the company across significant adoption and commercial milestones through 2028. We will continue to be good stewards of our cash position as we build towards revenue inflection, and we'll continue to invest where we see opportunities with commercial merit that could expand preterm awareness and test volumes.

Operator, we can now please open the call for questions.

Thank you.

Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press the 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 the star followed by the number two. If you are using a speakerphone, please lift the handset before pressing any keys.

One moment please for your first question. Your first question is from Andrew Brackman from William Blair.

Please go ahead.

Hi, everyone. This is Maggie Bowie on for Andrew today. Thanks for taking our questions. Maybe first just on your commercial efforts given that you did add Lee and May. Can you talk about how we should be thinking about the different milestones as you continue to build out your commercial sales force? Has there been any shifts or changes since he has joined? and potentially added new perspectives? Thanks.

Maggie, thank you so much for your question. Good to hear you. First of all, of course, Lee brings in decades of experience of traditional commercialization playbook in diagnostics. And one of the first things in his remit was to take a look at our commercial strategy. One of the first things Elements that he added is the emphasis on just how much the test itself can help augment the care protocols for the pregnancy in order to empower the physicians to select the right treatment and intervention methods. So we're very excited to emphasize that in our commercial messages and in the data that we generate and empower our sales team with. Second key priority for him was, of course, expanding our commercial team. And he brought his perspective on who are the types of sales leaders who can really propel us forward in commercial momentum with the strength of the data that we are receiving right now from Prime Study. So we have stepped up. the level of seniority and experience in the reps that we brought in under his leadership. Last but not least, he's upgrading capabilities of the team, and that's where market access addition to our team, Chuck Hyde, came in and allowing us to fire on all cylinders across both commercial payers, public payers, and generating demand from providers. I hope that's helpful. Great.

Thank you. Yes, that's great. Thank you. And then just for my follow-up, I know we're anxiously awaiting the prime data publication as well as some additional data sets, but can you just update us on how conversations have progressed with guideline bodies thus far and where your expectations are at in terms of getting in guidelines at this point? Thanks for taking our questions.

No, that's a great question. And I assure you, we are exactly where you are eagerly awaiting the publications of all of the results. And we'll keep all of you updated on that. The conversations around PRIME have been incredibly rich, both with the opinion leaders that influenced and set guidelines as well as clinicians as well as payers. Prime Study delivered a very rich data set that is exciting for all involved because of the breakthrough results we're seeing. So they're asking us great questions and the reason it's taking a bit of time is because it required in some cases additional analysis of the data set that we were hoping to leave for follow-on publications. But it's exciting that the community is very engaged, very interested, and sees how much of a breakthrough saving one out of five babies from going into the NICU will be in today's day and age when the chances of a newborn ending up in the NICU are multifold higher than they were five, ten years ago.

Thank you for the questions, Maggie. Your next question is from Dan Brennan from TD Catlin. Please go ahead.

Hi, guys. This is William Ruby on for Dan. I guess my first question would be on the EU, the plan to go to the EU. Just kind of wanted to get a little bit more of your rationale for doing that, just given the large market in the U.S. Is that going to increase costs at all? Just wondering if you could just give some rationale on the EU plan I'll just start with that.

William, great question. And for us, the opportunity for global impact has always loomed large, even if U.S. market is absolutely by far the largest in that. That said, over the years, we've engaged with many European opinion leaders at various conferences, and they held up a mirror and said, why are you just focusing on the US? We really need it in Europe, and asked us to take our action to Europe as well, even before we achieve significant trajectory in the US. We decided to do that and started about 18 months ago working very closely with European opinion leaders in our focus markets because they felt we have a huge opportunity to achieve impact for moms and babies there as well. In terms of your question on additional cost, we're not intending to build out our own large footprint in Europe. We are aiming to and have been in deep discussions with partners across Europe to help us commercialize the test on the ground. So from that perspective, it would be an arrangement that is based on revenue sharing and the cost of commercialization falling on the partner balance sheet and P&L. So from that perspective, we're not anticipating a significant cost increase. We, of course, did need to invest to make the product ready for commercialization, but that, we anticipate, will have a very high ROI once we begin striking the commercialization partnerships next year.

Got it. Thanks. And then, wondering how many reps you – I think you said you'd hire some additional reps in, like, target regions. Wondering how many reps you've hired – in the quarter and then also just how will getting coverage in a few of these high population Medicaid states drive hiring of additional sales reps?

Great question. So we have about a 10% sales force right now and are stand ready to hire more as soon as we see traction. Our approach has been start with creating a fertile ground for reimbursement in particular geographies, and this is why I report the number of states where we see traction. Ideally, by the end of the year, we will see four to six geographies where that fertile ground of reimbursement has been achieved. and staffing those geographies to allow us to drive density of adoption among the providers because, of course, we can share the good news with them that there is reimbursement for the test in their area. That is our approach, and we frequently talked about a waived rollout across states. So as soon as we get good reimbursement context for our sales team and we see traction, we will go ahead and take that commercial model to other states. And our access team is actually reaching out to a much broader set of states to start preparing this reimbursement engagement in additional half a dozen states every six months or so. Does it answer your question?

Yes. Yes, thank you. Great. If I could just ask one more question. Just going back, I think we talked about in the last call, there was some positive feedback with like the ACOG 234 bulletin is talking about, you know, I think it talked about the need for some of the preterm births. I'm just wondering if you had any more positive feedback with that ACOG 234 bulletin from just KOLs or physicians?

So the discussions are not specific to the bulletin that governs spontaneous preterm birth treatment. However, I did, you're absolutely right, speak about the change, momentous change in ACOG approach, where now ACOG pursues across all of the conditions in pregnancy, a tailored approach to care. It's not that it's always been Just one size fits all. Of course, if there's a differential diagnosis, the physicians treated it appropriately. However, for vast majority of low-risk women in pregnancy, which is the target audience that we address with our test, there was a standard care protocol before. Now, with the April announcement that ACOG put out, there is going to be much more, much deeper integration of tailored care pathways even for what used to be so-called lower-risk pregnancies by using additional risk stratifiers, which, of course, we fit into, and therefore changing care protocols based on those findings and including patients into shared decision-making with the physician, which, of course, was great news for us because for conditions in pregnancy, that lead to spontaneous preterm birth that don't typically have clear signs that spontaneous preterm birth could happen. It basically sets the stage for proposing a tool and evaluating all tools in the market where we advantageously stand out because we do have a test with a lot of data validating the test in the clinical utility domain, analytical domain, to propose that to physicians. So what was exciting to us was ACOG's movement towards that. And of course, we can't share specific conversations with opinion leaders, but they have the eyes on what data we will put out in the coming months. so that they can appropriately evaluate inclusion of innovative risk certification tools into this new paradigm of tailoring care to pregnancies that are higher risk and identifying them with new instruments.

Got it. Thank you. I appreciate it. Thank you for the question.

Ladies and gentlemen, as a reminder, should you have any questions, please press the star key followed by the number 1.

There are no further questions at this time. Ms.

Lingard, please proceed with closing remarks.

Thank you, operator, and thank you all for attending our call today. Over the coming months, we look forward to sharing progress updates and additional data with our medical community stakeholders and SARA shareholders. This data will help us grow our business and SARA's impact on premature birth in the United States and, of course, abroad. We are excited by what lays ahead to take SARA to the next level. I'll now turn it back over to the operator to conclude the call. Operator?

Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.