On May 12, 2020 Oncocyte Corporation (NYSE American: OCX), a molecular diagnostics company with a mission to provide actionable answers at critical decision points across the cancer care continuum, reported financial and operating results for the first quarter ended March 31, 2020, and provided a corporate update (Press release, Oncocyte, MAY 12, 2020, View Source [SID1234557602]).
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"Oncocyte has built remarkable momentum in 2020, and we have continued our strong execution across our programs to provide patients and doctors with actionable answers with the potential to improve outcomes," said Ron Andrews, Chief Executive Officer of Oncocyte. "We were thrilled to announce the recent final Medicare LCD from Palmetto, establishing Medicare coverage for DetermaRx, the first and only test for chemotherapy benefit prediction in patients with surgically resected early stage NSCLC. This is an incredibly important milestone for Oncocyte as it may lead to Medicare reimbursement for up to 70% of eligible early-stage NSCLC patients, and also is the first step in securing broader reimbursement with private payers that typically follow CMS decisions. Our onboarding of new sites continues at a rapid pace, despite the COVID-19 pandemic, and we are excited to have expanded the reach of DetermaRx to , India, the Middle East and Africa."
Mr. Andrews continued, "We have also advanced DetermaIO, our immunotherapy response prediction test, to commercial availability for research use only, and look forward to moving forward with opportunities in pharma services for immunotherapy trials, while also uncovering the potential utility of this test more broadly for clinical use in lung cancer and other types of solid tumors. These accomplishments, in combination with our on-track progress with DetermaRx, DetermaDx Clinical Validation and our expanding offerings for pharma services, make it clear that Oncocyte has reached a new era in its transformation to a leader in molecular diagnostics in lung cancer.
Recent Corporate Highlights
●DetermaRx
○Announced final Medicare local coverage determination (LCD) from Palmetto potentially establishing Medicare coverage for up to 70% of eligible early-stage lung cancer patients
○Announced commercial availability in January and now have 20 sites onboarded including a number of large healthcare systems
○Expanded international availability through a distribution agreement with CORE Diagnostics, providing commercial availability of DetermaRx in India, the Middle East and Africa
○Successfully pivoted to virtual physician engagement due to COVID-19 and continued efforts to increase adoption of DetermaRx with over 1,500 participants in online physician education programs
○ATS 2020 International Conference abstract selected for oral presentation with long-term follow-up data from a 195-patient study demonstrating the clinical utility of DetermaRx in identifying high-risk cancers that can recur rapidly if untreated, as well as the potential to safely reduce follow-up for low-risk patients to conserve healthcare resources and limit patient stress
○Abstract accepted for the 2020 ASCO (Free ASCO Whitepaper) Virtual Meeting detailing potential significant health economic savings provided by DetermaRx
●DetermaIO
○Completed CLIA validation of DetermaIO
○Announced commercial launch for research use only as a reliable and robust option for academic research and biopharma companies
○Advancing pharma services opportunities, including immunotherapy trials and development of companion diagnostics in lung cancer and other solid tumors
○Abstract accepted for presentation at the 2020 ASCO (Free ASCO Whitepaper) Virtual Meeting highlighting the potential utility of DetermaIO in triple-negative breast cancer (TNBC), in addition to NSCLC
●DetermaDx
○Announced successful completion of CLIA Validation Study
○Clinical Validation study on-track for completion in Q2 2020
ATS 2020 International Conference abstract selected for oral presentation with data highlighting clinical features of the IRENE (Immune Response for Nodule Evaluation) Study population, a 2,903-patient sample biobank from 62 sites across the U.S. The study identified significant differences in the management of pulmonary nodules including different rates of invasive procedures across the academic, community and Veterans Affairs settings. These findings highlight the clinical decision challenge in managing the use of invasive biopsies for lung nodule diagnosis that DetermaDx has the potential to address.
●Pharma Services
○Re-launch of pharma services offering with full suite of molecular analyses including tissue and blood-based technologies, proprietary platforms such as DetermaIO and TNBCType Assay, as well as custom next-generation sequencing and PCR services including whole exome sequencing, RNA-seq and targeted mutation panels
○With collaborators from MD Anderson Cancer Center, announced the peer-reviewed publication in PLOS One with data demonstrating the utility of the TNBCType Assay to inform triple-negative breast cancer drug development by identifying the most suitable cell lines to help biopharma and academic researchers develop new treatments
●Financial and Corporate
○In April, Oncocyte successfully completed a $10.7 million registered offering of common shares, priced at the market, directly with fundamentally driven, healthcare focused institutional investors. This transaction builds on the successful $7.6 million registered offering in January, further strengthening Oncocyte’s balance sheet to support the continued commercialization of DetermaRx and DetermaIO, as well as the continued development of DetermaDx and other programs.
○Moved Oncocyte’s administrative and executive headquarters to Orange County, California, in January 2020 with ongoing plans to construct a clinical diagnostic and research laboratory to eventually have full service labs on the west and east coasts.
First Quarter 2020 Financial Highlights
At March 31, 2020, Oncocyte had cash, cash equivalents and marketable securities of $16.9 million as compared to $22.5 million at December 31, 2019. In April 2020, Oncocyte completed a $10.7 million registered offering of common shares, priced at the market.
Prior to January 1, 2020, Oncocyte had no revenues. During the current quarter, Oncocyte commercialized DetermaRx and completed the acquisition of Insight Genetics, providing sources of revenue generation and other commercial opportunities for the first time since the company’s inception.
Under U.S. accounting principles, Oncocyte will be able to recognize revenues on an accrual basis of accounting once it has contracts for reimbursement from third-party payers or a history of experience of cash collections for the tests performed, or both. Until that time, Oncocyte expects to recognize revenue for tests performed on a cash basis. Accordingly, Oncocyte will incur and accrue cost of revenues and other operating expenses related to its diagnostic tests, including DetermaRx.
Beginning on January 31, 2020, Oncocyte’s consolidated financial statements and results also include the results from its wholly owned subsidiary, Insight Genetics, which Oncocyte acquired on that date.
For the first quarter ended March 31, 2020, Oncocyte reported a net loss of $7.7 million, or $(0.13) per share, as compared to $3.9 million, or $(0.08) per share, for the first quarter ended March 31, 2019.
Operating losses, as reported, for the first quarter of 2020 were $8.4 million, an increase of $4.4 million from $4.0 million as compared to the first quarter of 2019; and operating losses, on an adjusted basis, were $7.4 million, an increase of $4.2 million from $3.2 million as compared to the first quarter of 2019.
Oncocyte has provided a reconciliation between GAAP and non-GAAP operating losses in the financial tables, included with this earnings release, which it believes is helpful in understanding its ongoing operations.
Research and development expenses for first quarter of 2020 were $2.2 million as compared to $1.3 million for the same period in 2019, an increase of $0.9 million. The increase was primarily attributable to personnel and laboratory related expenses for clinical validation activities related to DetermaDx.
General and administrative expenses for the first quarter of 2020 were $4.6 million, as compared to $2.4 million for the same period in 2019, an increase of $2.2 million. The increase was mainly due to personnel and related expenses; investment banking expenses; legal, business development, investor relations expenses; and noncash stock-based compensation expenses due to additional equity grants. As noted above, Oncocyte transitioned from the Lineage Cell Therapeutics (formerly BioTime) Shared Services agreement in the latter half of 2019, and established its own administrative, human resources, legal, finance and accounting functions and teams. This transition also includes the termination of the Shared Facilities agreement with Lineage as of December 31, 2019. In addition, Oncocyte moved its administrative and executive headquarters to Orange County, California, in January 2020 with ongoing plans to construct a clinical diagnostic and research laboratory to eventually have full service labs on the west and east coasts.
Sales and marketing expenses for the three months ended March 31, 2020, were $1.5 million, as compared to $0.2 million for the same period in 2019, an increase of $1.3 million. The increase was primarily due to ramping up in sales and marketing activities, including key hires, for commercialization of DetermaRx.
Cash used in operations was approximately $6.9 million for the first quarter of 2020 as compared to approximately $6.7 million during the first quarter of 2019, which is in line with Oncocyte’s expectations as the first quarter of each year is generally the largest cash use quarter of the year due to the timing of payments of annual merit increases and other payments. Oncocyte also paid some nonrecurring, acquisition-related legal and other costs of approximately $0.5 million in the first quarter of 2020.
Conference Call
The Company will host a conference call today, May 12, 2020, at 4:30 pm EDT / 1:30 pm PDT to discuss the results along with recent corporate developments.
The dial-in number in the U.S./Canada is 877-407-9716; for international participants, the number is 201-493-6779. For all callers, please refer to Conference ID 13703079. To access the live webcast, go to the investor relations section on the Company’s website, or by clicking here: View Source