StageZero Life Sciences Ltd.

Good day, ladies and gentlemen, and welcome to the Stage Zero Sciences Second Quarter Financials Call. At this time, all participants have been placed on a listen-only mode, and the floor will be open for questions and comments after the presentation. It is now my pleasure to turn the floor over to your host, Rebecca Greco, Head of Investor Relations. Ma'am, the floor is yours.

Thank you very much. Good morning, everyone, and thank you for joining the Stage Zero Second Quarter 2022 Earnings Conference Call. Joining me today is Stage Zero Chairman and CEO James Howard Tripp. Please note that management's discussion today will contain forward-looking statements about anticipated results and future prospects. Forward-looking statements involve a number of risks and uncertainties, and Stage Zero's results may differ materially from those discussed today. Investors should consult the company's ongoing quarterly filings and annual reports for additional information on risks and uncertainties relating to these forward-looking statements. Investors are cautioned not to rely on these forward-looking statements. The company disclaims any obligation to update these forward-looking statements, except as required by law. On today's call, management will refer to non-GAAP-adjusted EBITDA. This metric excludes certain items discussed in our press release under the heading Discussion of Non-GAAP Financial Measures and any other items that management believes should be excluded when reviewing continuing operations. The reconciliations of Stage 0's non-GAAP measures to be comparable to Gap measures are available in the financial tables of the Q4 2021 financial results press release on Stage Zero's website. With that, I would like to turn the call over to James Howard Tripp, Stage Zero's Chief Executive Officer. James, please go ahead.

Thank you, Rebecca, and good morning, everyone. Thank you for joining us. It's certainly been an interesting quarter. If you think about the turmoil that the world is in, you look at where the financial markets are. I think it's just increased, not the level of uncertainty, but let's say the level of complexity, I think, within which we've got to navigate. We've actually had a very interesting quarter. We've had a very solid quarter, and one that, as I work through it, in the remainder of the quarter, you see sets us up as we move through the rest of the year. So let's begin with what we've done over the last six months. So Kelly, raising money is critical. Without money, you by and large can't do much of anything. Money in the first half of the year has been constrained. There are a number of things that I think we would have liked to push out even more strongly on that will occur as we move out into the second half. But all of it, all of it tied to money. However, having said that, we're managing to keep our heads above water and we're making money. We're bringing revenue in as it goes. So that is always a good thing. And the obvious piece is to continue to build that. As we've talked about, we've not only integrated care oncology into the company, but we started scaling. And it's the scaling piece that's really critical of this. Everything that we did as we brought it in was to amalgamate the businesses, add the various layers. We'll show why that is so critical as we move through some of the latest slides. But it was to make sure that we could scale. We could move it out very markedly. You'll see that we talk about the fact that the care oncology in the UK is now approaching break even. That's part of this. We've been able to grow it. It's the springboard into Europe. It's the springboard into a lot of the rest of the world. It actually underpins a significant amount of what care oncology does in the US. And so we've driven down all of that. We launched AVERT in the UK. AVERT is the preventative program, but AVERT will feature quite strongly as we talk about what we're doing with employers. And yes, we have started with employers. That's the really big news. We extended the availability of the COC protocol into the European Union. That is in order to build it out. Remember that the European Union is 750 million people. It's an extremely large market. You want to be correctly positioned in order to do that. We launched COC+, which is worldwide, and COC+, is essentially a version of AVERT, A-V-R-T, the preventative program, but it's now tied to or dovetails with the care oncology protocol, which is to treat patients that currently have cancer. This was done at the request of a whole series of patients, and in actual fact, the uptake has been very, very nice. We think as we move it forward, it's probably going to become part of the mainstay of what we do under the care oncology protocol. And essentially, it will become a seamless program. All again, extremely positive. Now about 10 months in your sort of post-acquisition, as you always do through all of this, is you take time to, in actual fact, evaluate where you're at. And we've been streamlining some of the operations. We've been pairing some of the pieces back. There's a degree of dislocation in the U.S., and perhaps I'll talk to that now. A little gentleman by the name of Jason Butcher, in actual fact, was one of the founders of care oncology in the U.S. Jason had cancer. And so Jason, many years ago, became a patient of Care Oncology in the UK and did well under the program, really liked it. So he banded together with a number of like-minded people, some clinicians, and they brought essentially the Care Oncology platform to the US. So Jason being pivotal in helping build all of this. Jason, unfortunately, succumbed to his cancer. It was many, many years of actually living with it. but he succumbed to his cancer over the last little while. It's actually a very sad loss. He was not only an amazing colleague, but actually a good friend and pivotal, as we said, in building everything up. Before Jason passed, we had been working on a reorganization program in the U.S., notably to improve the way that we dealt with patients, improve response time, automate a lot more of the systems And subsequent to Jason's passing, together with the team, we've continued to implement this, and that's causing a degree of dislocation. It's necessary. We need to work through it. It's not affecting care markedly. It's having a small effect on care, but we'll be through that within the next week or so, and then we'll be returning to normal, and we build back out again. But as a result of that, we'll have a much improved system and one that we know is totally scalable and where we too can begin to push to all the COC US on reaching breakeven point. So critical in all of these pieces. I think together with that, it's an opportunity for us to look at the cost across the entire organization. And we made sure that we're as efficient as possible, we're as cost-effective as possible. And you'll see that reflected in cost as we move on out from here. So all of that, a good thing. We've expanded the marketing programs and lab partners for Aristotle into multiple new cities in the U.S. Remember that about 50% of people have settled on telehealth as their preferred way of having health care, period. But that also means that about 50% of people like to walk into bricks and mortar, notably when it's getting the lab tests, getting the pieces like that. So we're making sure that we're building out all of these pieces in major geographic hubs so that we can work with all patients no matter where they come from. Most of our consulting is, in fact, still done by telehealth, and that works extremely well because depending upon what your situation is, we've got a variety of oncologists. And remember that we've got oncologists in different parts of the world. We've got different types of experience. As physicians do, they consult with each other. They guide each other. So it's extremely helpful to be able to do this through the medium of telehealth. We've engaged with employers. I mentioned that a little earlier. This is really critical because if you think about where we were approximately a year ago, a year to 18 months ago, this is what we were building to doing. COVID was a major impediment in terms of how you could do it and how fast you could move. Additionally, employers, as we were talking with them, told us that we really needed to have a clear set of capabilities in order to make it happen. That led to us acquiring Care Oncology, and we now are 12 to 18 months later on, we're fully positioned in all of that. Therefore, we can engage with employers, we can introduce the programs, and I'll explain that in great detail as we move through. We're continuing to deepen the Aristotle test offering. We have the colorectal cancer program, Early versus late by stages. That is developing nicely. We will introduce that into course. We're working on the additional pieces behind it. Lung is key for us, as is breast. And then we will bring a small number of additional cancers in as well. You will notice that we're focusing on a very discrete number of cancers. We're not trying to do extremely large numbers, notably because there's significant pushback against a lot of this. It's no good knowing that you have some esoteric form of cancer, which is difficult to screen for, difficult to diagnose. The accuracy of the tests in those areas are not great, and then you don't really have standard of care. So guidance on our side has been to stay within the cancers that are typically within standard of care that have the greatest impact. And you will see us literally stay within that role. We think it's the right decision. In actual fact, as we're picking up business, it shows it's the right decision and we will stay there. You will also notice that we're a lot more visible. We're in a lot more conferences. We were in the H.C. Wainwright conference a little earlier. We will be in the one in September. We were a keynote speaker and one of the organizers behind the Sikh symposium that we did with the charity focused on cancer in the young. We've been in a series of others. We will continue to do this, and our publication strategy is on track as well. So a lot more information from there. So where are we with employers? Because I'm sure that's what everyone really wants to know. So cancer is the number one catastrophic claim for employer health plans. And if you think about it, if you look at the U.S., and the U.S. is the major market where we are, out of a population of about 320 million, about 130 million people are insured under self-funded healthcare plans. By that, it means that the employers actually pay the cost of the healthcare plans. They are invariably driven by what is called catastrophic claims. The catastrophic claims are mostly for issues like cancer. In fact, the vast majority of claims in that space are cancer. And this is also where you wind off laying it off against insurance groups. And we've talked before about groups like Munich Reef. So you get the full layer three. If you can get a decrease of even a percentage point in your overall healthcare costs, CEOs and the groups managing these will eagerly take them. We're able to demonstrate that we can do significantly better for them. And so I'll explain as we go on down and you can see why... why we're actually getting to work with them. So we've talked about before sort of the lifesaving action or the lifesaving advantages of early detection. And this slide is a little difficult to see because it's so small, but I'll pick out our favorite one that we normally talk to, which is colorectal cancer. And as we know, if you find colorectal cancer early, you've got about 90% chance of surviving five years. In actual fact, if you find it really, really early, go back to what I was talking about earlier as we bring up the new version of colorectal cancer, you get even better survival from that. You find it late and your survival rate drops to the sort of 10 to 14% range. It's even more important When you begin to look at the costs associated with this, and so if I stay with the colorectal cancer aspect, you can see that if we take a sample population of, let's say, 1,000 in the workforce, we have an average sort of rate of 4% of people developing colorectal cancer. So let's take 40 of those that will test positive. You then look at treating them with early stage, and the cost is about $33,000. These are U.S. numbers, and U.S. numbers, U.S. dollars. It's about $33,000. You look at the cost of treating late-stage cancer, it's about $120,000. You now extrapolate that out to this group, and that's about $6 million versus $1.6 million. It's an incremental cost of nearly $4.4 million. as you go through this. Very in mind, this is just one cancer. You now take the program that we have, you split it across the multiple cancers that we're doing all with one blood. Your cost of screening for the individual cancers is minimal. And yet you have the benefit across all of these. So not only is it absolutely critical to screen for cancer within the employee base, particularly your high risk group, But the outcomes, as we looked at five-year survival, are absolutely massive. So that is where you have to go. So how do we do it? How do we do it? What's so special about us? Well, what is special about us is the programs. Because yes, we have Aristotle, and we've talked a lot about Aristotle, and Aristotle currently does nine or 10 cancers, depending upon how we're looking at it. We'll probably expand that out to about 15 or 16 in terms of where we go, and we'll then hold it there. But you look at the fact that you're screening across all of these cancers, as I said, single test, single blood draw, we do that. What Aristotle tells you is it tells you that you have cancer today, yes or no. And it tells you that with high accuracy. If you couple it with AVERT, and so AVERT is the preventative program on the care oncology side. And remember how we got to AVERT? We got to AVERT through the fact that the oncologists within care oncology are what are known as either integrative or metabolic oncologists. They're extremely experienced in how you develop cancer in the first place, why you develop it. sat through a series of lectures by two of our group just a couple of weeks ago. And one of our oncologists made the following statement, which is, when we find cancer, we'll use chemo or radiotherapy to actually look to destroy the cells. They said, what we forget about is the reason cancer got there in the first place. It didn't just suddenly appear. It got to there through a whole series of circumstances. And we forget that we've got to deal with those circumstances, both during the treatment phase, which is the program we call TREAT or the care oncology protocol. But also, one, we can look at preventing it ahead of time. About 40% of the most common cancers appear to be fully preventable. And if you have had it, we can look at preventing it from reoccurring. We can look to give you a better outcome or we can look to try and prevent it reoccurring in the future. These are the strategies that have been pulled forward into the program called AVERT. You now look at adding AVERT to Aristotle and you've got an amazing program. You've got an ability through Aristotle to see whether you have cancer today, yes or no. And as I said, with high probability. If you couple avert to that and you use the metabolic pathway panel, we will flag the metabolic pathways that we believe either lead to or could cause cancer or could put you in, let's put it this way, at risk of developing cancer. And we can then work with strategies to deal with it. It's a single program of its kind. We haven't seen anyone else be able to do that. In addition to that, what we can do is we can also work with you in this. And so, clearly, if you have cancer, because we have a clinic and I'll work with exactly, I'll talk to two of the employers that we're working with right now. In one instance, and perhaps I'll cover this a little more in the next set of slides, But in the one instance, they're very interested in all of the data that builds out of this. They've got a series of circumstances in which they need to be screening their people, but they also are very, very interested in the data as it works out and what they can actually do with it and what it tells them, and then how they use it to lobby for changes within the workplace infrastructure. That is critical. You've got to be able to pick up on all of these pieces to be able to do that. The second group was particularly interested in what the handoff would be. So if I have all of these employees and a whole series of them test positive on either Aristotle or they flag with raised issues under the overt metabolic panel, what on earth do we do with them? And because of care oncology, we can do that. We can triage the patients. We can ensure that the handoff occurs for those that test positive on Aristotle so that they actually get worked up correctly. We can do this on the U.S. side of the border as well as the Canadian side of the border. The same with Avert. With Avert, we can either do the handoff in terms of going to their physicians, or what we can do is we can offer them the programs on our side. They can come into the programs on our side. And clearly, if they test positive for cancer under Aristotle, they can also come back and enroll in the care oncology protocol. So it is this ability to essentially hold their hand all the way through the process. And again, as I say, that is novel, that is unique. No one else has that. We're number one in this area. So if I go to... the way the process would work. And so let's talk through this particular one. And I think it's no secret that we wanted to do work with first responders. So let's look at how a program such as this might work. You would do the Aristotle cancer screening. You get a positive, walk down the left side of the slide. You get a positive flag for cancer. We would do the relevant referral or we would work with the group to do the relevant referral and bearing in mind that the employers work in different ways. Some of them have none of the setup. Others, as we're working with, either have the full setup. They have their own clinical site that they want you to hand off to and they will help take it through. Others have a partial. And in the partial, they want the handoff, but they also want the guidance to ensure that these patients actually get worked up under standard of care so that should they have cancer, they then drop into appropriate treatment. If they have cancer, as we mentioned, they can come back to us on the treat side. It's not a must, it's an option. If they have no cancer, they can go down the avert side. And bear in mind as we tie in, we'll tie with the avert in just a moment as we follow through. what you do is you then look at your follow-up screening. If it's cancer only, and particularly where you're dealing with first responders, first responders certainly in the US, in most states there's a mandate that they get screened once a year, so they would come back once a year on the Aristotle side. If they have tested positive under the avert side, then the avert aspect, they would come back more frequently. But you run through this, and from there, we obviously get to gather all of the metrics. I'll move to the next slide. This, if you think about it, is how the metabolic screen would go. We would screen at month one. If you're negative, sorry, or if you're normal in all of this, go home. We'll see you at the same time that you get screened next year with Aristotle. If you're positive, if there are a whole series of flags in this, then in actual fact, we will either hand you off to your normal primary care team or should you choose to come and work with us within our system, we will put you into the program and we will begin to walk you through the steps and in which case you then get tested much more frequently. Because the advantage of what we do is through the metabolic markers, we can actually see whether you're staying the same or improving. And clearly what we want to do is to make sure that you're improving. So you wind up essentially with an overall score of things that you need to work with and you can drive it through. The measurements will drive through all of this. What we come to at the very end of this is we come to an analysis. And if we go to first responders, It's very interesting. For example, is it length of service in first responders that is most important? Is it the fact that you've been exposed to a particular situation that is most important? And remember, first responders are not just firefighters, but they're police and they're emergency medical services as well, ambulance, for example. If I look at the US side, there's something like 3.9 million people that tie up within that. It's a market opportunity of close to 4 billion as it drives through, and of course it gets done frequently as we drive through. So very, very important as we drive down. What people want out of this is they want the data. Is one area of the country different to another? Is one set of circumstances different to another? Is it age that drives this? Is it length of service that drives this? All of this comes back to actually look at what the health economic impact of this is. I will also take you to the fact that, don't forget, a big part of this is the multiple revenue streams, as we've talked to. If we were just a regular diagnostic laboratory, we would get a single touch. because we are all of these pieces, we have multiple touches, and so it continues to work with us.