Talis Biomedical Corporation

Thank you all for standing by and welcome to TALIS's first quarter 2022 earnings conference call. Please note that all lines will be in listen only mode until the question and answer session of today's conference. To ask a question over the phone by that time, you may press the star key followed by the number one. I'll now turn the call over to your host, Emily Fawcett. Ma'am, you may now begin.

Good afternoon, and thank you for participating in TALIS' first quarter conference call. Joining me today are Rob Kelly, our Chief Executive Officer, and Roger Moody, our Chief Financial Officer. Earlier today, the company released financial results and a business update for the quarter ended March 31, 2022. A copy of that press release can be accessed on the Investors page of our website at talisbio.com. Before we get started, I would like to remind you that management will make remarks during this call that are forward-looking statements within the meaning of the federal securities laws. These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated. Additional information regarding these risks and uncertainties appears in the section entitled forward-looking statements in the press release TALIS issued today. For a more complete list and description, please see the company's filings with the SEC, including the risk factor section of the company's 10-Q filed with the SEC on May 10, 2022, and in its other filings. Except as required by law, TALIS disclaims any intention or obligation to update or revise any financial projections or forward-looking statements, whether because of new information future events, or otherwise. This conference all contains time-sensitive information and is accurate only as of the live broadcast on May 10, 2022. With that, I'd like to turn the call over to Rob.

Thanks, Emily. Good afternoon, everyone, and thank you for joining us. Our mission at TALIS is to advance health equity and outcomes by delivering accurate infectious disease testing in the moment of need at the point of care. Over the last 60 days, we have made encouraging progress toward assessment and validation of manufacturing scale-up for our TALIS I testing platform, a foundational step to support our mission. During today's call, I'll provide an update on the objectives previously set forth and our path forward. Then I will turn it over to Roger to provide more details on manufacturing and to review our first quarter financials. In March, we committed to a strategic plan focused on the following key areas. One, demonstrating our ability to manufacture TALIS I instruments and cartridges at scale. Two, initiating a phased launch for the TALIS I COVID-19 test system under our EUA. Three, concentrating assay development to prepare for 2023 clinical milestones. And four, preserving CAS to carry us through 2024. To support this first objective, we engaged external consulting firms and conducted internal reviews to advise us on assessing the product design of our instruments and cartridges for manufacturing at scale, evaluating our manufacturing processes and partners, and determining appropriate next steps to manufacture both instruments and consumables at the yield and consistency needed to support commercialization. This manufacturing assessment is complete, and we remain confident there is a path to manufacturing at scale after working out process and minor design modifications. Importantly, I am pleased to report we did not identify any substantial design or supply changes that would require extended timelines to validate. Based on what we have learned, we are implementing modifications around manufacturing processes, quality controls, and supply conformance. We are prioritizing this work to complete verification and validation, followed by phased commercialization. Our team's immediate focus is to bring the TALIS I system to market, and we are diligently executing against this priority. Once we are in a position to deliver our products at scale, our focus will shift to initiating a phased launch for the TALIS I COVID-19 test system under our EUA, beginning with a limited rollout to prospective customers. Our fundamental goal with this launch is to ensure an excellent customer experience as we focus on long-term system adoption across multiple infectious diseases. As a reminder, our commercial strategy is to leverage our COVID EUA to drive initial use of the TALIS I platform in select market segments. These segments represent customers who are seeking molecular point of care systems for infectious disease testing in respiratory, sexual, and women's health. With this in mind, we are confident that we are strongly positioned with our TALIS I system as we broaden our test menu and expand our addressable market. While a variety of point of care technologies are commercially available, we believe that few, if any, sufficiently meet the needs of healthcare providers due to limitations with accuracy, time to result, ease of use, price, or menu. Our competitively advantaged system offers robust sample preparation with high sensitivity and specificity on an integrated platform to enable rapid and accurate results in the moment of need. Additionally, we recently completed the first release of our cloud software to provide customers with a comprehensive solution to consolidate patient test information and enhance organizational efficiency. We believe this cloud-based system called CIDX will further our competitive edge in the large markets we plan to pursue and look forward to gaining customer feedback on this application when we begin the first phase of our commercial launch. Looking ahead, we are focused on addressing the growing unmet need in point-of-care molecular testing with a clear roadmap for our pipeline. In the near term, we plan to pursue a 510 regulatory pathway for our respiratory panel and are on track to begin collecting samples this year. We are also advancing the development of our CT and G assay to begin menu expansion into sexual and women's health. This large and growing $5 billion US market opportunity is characterized by a lack of tests at the point of care where prompt treatment can be prescribed. I want to reiterate that we, The TALIS board and management team are encouraged by the progress made in these past couple months as we work to manufacture a complex system at scale with the goal of serving multiple infectious disease areas over time. While COVID-19 provides a near-term opportunity to introduce the TALIS I system and gain market acceptance, it is just the beginning in realizing our mission to make a meaningful impact on health equity and outcomes. with accurate infectious disease testing at the point of care. With that, I will turn it over to Roger to provide more detail on operations and to review our first quarter financials. Roger? Thanks, Rob. With Doug Lew's departure, I have reassumed responsibility for manufacturing and operations. functions I originally established as we pivoted to developing our COVID test and scale-up manufacturing in mid-2020. Prior to joining Thales, I spent more than two decades in various leadership positions at medtech companies, including COO at Medecen and COO followed by CEO at Klyshore. Here at Thales, I am fortunate to work with highly experienced and capable manufacturing, operations, and supply chain leaders and their respective teams. I look forward to drawing on this talented group and my past experience to demonstrate our ability to manufacture high-quality Talus I instruments and cartridges. As Rob stated earlier, we are pleased to have completed the internal and external assessments of our manufacturing processes and product design. These assessments provided us with valuable insights on how we can refine our manufacturing and quality control procedures to produce high-quality products at scale. Based on learnings from this manufacturing review, we are implementing modifications around manufacturing processes, quality controls, and supply conformance that are necessary to manufacture at scale while achieving our target quality standards. These changes will take some time to implement, verify, and validate. Fortunately, we have now ruled out the need for substantial design or supply changes that would require extended timelines to implement. I'm also encouraged that our recent manufacturing refinements are beginning to yield improvements in instrument first pass acceptance and cartridge performance, including reduced invalid rates. We will continue to work diligently on making these improvements and expect to be able to provide specific timelines for our commercial launch in the future. Turning now to first quarter 2022 financial results. We recognized $3 million in revenue in the first quarter, which was driven by antigen test sales and a final payment from the NIH RADx contract. While we may from time to time pursue other near-term revenue-generating opportunities, we do not expect significant revenue contribution in 2022. Turning to expenses, First quarter total operating expenses were $33 million compared to $68 million in the same period last year. Research and development spending for the first quarter of 2022 was $21 million compared to $60 million in the same period of 2021. This decrease was driven primarily by our manufacturing scale-up investments that were largely completed in 2021. Selling, general, and administrative expenses in the first quarter were $12 million, compared to $7 million in the first quarter of 2021. This increase was primarily due to higher personnel expenses, including salaries, benefits, and stock compensation, as well as increases from public company expenses. Unrestricted cash and cash equivalents as of March 31st, 2021, was $188 million. In the first quarter, we used $45 million in cash. Of this amount, approximately $23 million was related to non-recurring payments for manufacturing scale-up, inventory, payroll, and insurance. As Rob mentioned earlier, our objective is to ensure that our cash reserves are sufficient to fund operations through the end of 2024, if needed. We continue to focus on preserving cash to give us the longest runway possible and believe this objective is achievable. As we gain more clarity on the timing and trajectory of our TALIS I launch, this objective may change. With that, I'll turn the call back over to Rob for closing remarks. Thanks, Roger. I'm encouraged by the progress our team has made over the last couple months toward understanding, modifying, and completing verification and validation of our manufacturing scale-up. I continue to believe it is a matter of when, not if, we are able to deliver the long-term value proposition of our TALIS I system. With the team's continued focus on execution, I am confident we are on the right path to deliver on our 2022 business objectives. We see a clear and fundamental need for rapid, accurate, and expansive point of care testing for infectious diseases and are committed to bringing the TALIS I system to market. In doing so, we believe we will be well positioned to address a multi-billion dollar opportunity in respiratory, women's, and sexual health, which we expect to be our core focus. We look forward to updating you on our progress in the months ahead. With that, we will now open the call up for questions. Jesse?