On March 16, 2021 Oncocyte Corporation (Nasdaq: OCX), a molecular diagnostics company with a mission to provide actionable answers at critical decision points across the cancer care continuum, reported financial results for the fourth quarter and full year 2020 ended December 31, 2020, along with a corporate update (Press release, Oncocyte, MAR 16, 2021, View Source [SID1234576734]).
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"In a short time, we have transformed Oncocyte from a single-product, development stage company into a commercial stage oncology diagnostics company with a broadening product portfolio and multiple engines of revenue growth," said Ron Andrews, President and Chief Executive Officer of Oncocyte. "We began to build momentum in the commercialization of our expanding product portfolio targeting a multi-billion-dollar global market opportunity for diagnostic tests to help physicians make critical treatment decisions across the cancer care continuum. We launched DetermaRx, which in Q4 generated strong unit growth and even faster revenue growth. We completed clinical studies of DetermaIO, our flagship proprietary product for immune therapy selection, laying the groundwork to launch that product in the second half of 2021. We also are preparing for the commercial launch of a complementary targeted therapy panel later this year as well as the launch of DetermaCNI for research and pharma clinical trial use, also in the second half of this year. Our recent equity offering strengthened our balance sheet in preparation for our broadening commercialization efforts, including our planned expansion in medical education programs and sales coverage. We are now focused on executing several anticipated product launches throughout 2021 to ensure that we create maximum value from our product portfolio for patients and shareholders."
Commenting on the fourth quarter, Padma Sundar, Chief Commercial Officer stated, "We continue to be encouraged with the commercial success of DetermaRx in its first year. Despite the headwind of the surge in COVID-19 cases in the fourth quarter, we generated 36% sequential growth in DetermaRx orders and 58% sequential revenue growth. In its first year as a commercial product, DetermaRx received high value Medicare coverage, including adoption into the standard of care menu for multiple hospital systems and large oncology groups. We also struck several domestic and global collaboration and distribution agreements. For example, our agreement with Burning Rock Biotech may provide access to the DetermaRx test to the estimated 250,000 patients in China who receive surgical resections for non-small cell lung cancer each year."
Mr Andrews concluded, "In Q4, we were offered the opportunity to make additional investments in new studies that allowed us to expand our indications for DetermaIO as well as expand our sales and medical education teams which increased our expense burden for the quarter. With the lineup of publications, papers and abstracts now scheduled for release over the coming months, like the AACR (Free AACR Whitepaper) abstract released yesterday, we feel the ROI on the additional expenses will be significant and thus, we anticipate a rapid cadence of important data releases and new product launches in 2021. We are on track to launch DetermaIO for immunotherapy response prediction and DetermaTx for targeted therapy selection, both planned in the fourth quarter. These two expected product launches will expand the focus of Oncocyte’s commercialized product portfolio to an estimated combined addressable market opportunity of over $5 billion."
"Our broadening product portfolio will also position Oncocyte as a one-stop oncology lab capable of rapidly and efficiently providing comprehensive testing across treatment decisions, not just for lung cancer but also potentially as a pan cancer test for the majority of solid tumors. With our strengthened balance sheet, we plan to continue driving rapid unit and revenue growth across our expanded product portfolio. We also plan to hire additional high-performing sales and market access staff, and to onboard additional leading cancer centers, in part with the advice and guidance of our new Medical Advisory Board. We look forward to continuing to penetrate the multi-billion-dollar market opportunity anticipated for our tests and building Oncocyte’s brand as a leading partner to physicians, patients and payers in making cost effective, critical treatment decisions across the cancer care continuum."
Fourth Quarter and Recent Highlights Include:
DetermaIO
Over the course of 2020, the test was accepted for studies in several important trials, including the NeoTrip Trial for Neoadjuvant Triple Negative Breast cancer utility. Data from these studies will be presented at major medical meetings and via peer-reviewed publications throughout 2021
Published peer-reviewed study demonstrating that DetermaIO’s gene expression analysis of the complete tumor micro-environment followed by synthesis using a proprietary algorithm may be predictive of response across multiple solid tumors
Selection of abstract for mini-symposium presentation at AACR (Free AACR Whitepaper) 2021 demonstrating potential clinical utility of DetermaIO in a third cancer – bladder cancer, in addition to NSCLC and TNBC
Presented data at the Association for Molecular Pathology 2020 Conference, demonstrating that DetermaIO is reproducible at tissue inputs compatible with very small tissue samples, which is critical for driving broad test usage given the scarcity of tissue for competing molecular testing methods
Presented data at the ASCO (Free ASCO Whitepaper) 2020 conference and the IASLC North America 2020 which demonstrated DetermaIO outperformed PD-L1 testing in predicting response to immune-checkpoint inhibitors in triple negative breast cancer and non-small cell lung cancer
Established a Medical Advisory Board of world-renowned thought leaders in oncology to assist in accelerating our clinical development and publication efforts in immune-oncology and blood-based monitoring
DetermaRx
Test volumes continued to grow in Q4 2020 with 36% quarter over quarter increase in testing volume to 238 samples, 58% increase in DetermaRx revenues driven by initiation of Medicare payments starting in September 2020, and 22% increase in onboarded hospitals to 82 customers; maintained physician re-order rate of approximately 60%
Signed agreement with Multiplan networks, representing 60 million covered lives, to offer DetermaRx at a high-value reimbursement rate commensurate with Medicare
Signed exclusive agreement with Burning Rock Biotech in China to license DetermaRx in China, the world’s largest early stage lung cancer market, with an estimated 250,000 patient Total Addressable Market (TAM), reaching our goal of distribution to all major world markets within the first year of launch
Presented new data at the IASLC 2020 World Conference on Lung Cancer showing broad adoption and real-world clinical utility of its DetermaRx test for early-stage lung cancer
Closed second investment in Razor Genomics to complete acquisition of founding company behind DetermaRx
Pharma Services
Initiated clinical trial processing of proprietary, blood-based monitoring assay for targeted drug response for a top 20 Pharma company
Continued execution on FDA submission studies for a leading global diagnostic company
Executed on site certification for two new customers, a major global pharma and leading diagnostic company, which is expected to lead to new project revenues in 2021 and beyond
Finalizing Pharma service component of immune oncology testing for clinical trial for Fondazione Michelangelo, a leading non-profit Cancer research foundation
Fourth Quarter and Annual 2020 Financial Results
At December 31, 2020, Oncocyte had cash, cash equivalents and marketable securities of $7.8 million. In January and February 2021, Oncocyte raised an aggregate of $69 million in net proceeds from two public offerings and shares sold from its at-the-market (ATM) program. In February 2021, Oncocyte completed the acquisition of the remaining equity interests in Razor Genomics and paid the $10 million cash portion to the selling shareholders, so Oncocyte now owns all of the outstanding common stock of Razor and will consolidate Razor as of that date.
Oncocyte currently derives its revenues from the sale of its lung cancer test, DetermaRx, which was commercially launched in early 2020 and pharma services generated by its wholly owned subsidiary, Insight Genetics, which was acquired on January 31, 2020. Upon CMS and Noridian final pricing decision for the DetermaRx test, which became effective in September 2020, Oncocyte is able to recognize revenues for Medicare covered tests on an accrual basis, rather than on a cash basis, when the tests are performed.
Under U.S. accounting principles, for all payers other than Medicare, Oncocyte will be able to recognize revenues for DetermaRx 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, for all payers other than Medicare, Oncocyte expects to recognize revenue for DetermaRx tests performed on a cash basis. Accordingly, Oncocyte will incur and accrue cost of revenues and other operating expenses related to all DetermaRx tests ordered and processed, including its pharma services performed.
Revenues for the three and twelve months ended December 31, 2020 were $0.5 million and $1.2 million respectively, generated from pharma services and DetermaRx tests completed that are covered by Medicare on an accrual basis since Oncocyte received a final pricing from CMS in September. DetermaRx revenues grew solidly in Q4 2020 versus Q3 2020, primarily due to revenue recognized for Medicare tests performed following the receipt of final CMS pricing decision in September 2020. The number of tests ordered increased significantly in the fourth quarter as compared to the third quarter of 2020 despite the COVID-19 resurgence. Pharma Services’ revenues in the fourth quarter of 2020 were lower sequentially when compared to the third quarter of 2020, due to delays in project completion as a part of the COVID surge which are being carried over and are expected to be completed in the first half of 2021. Prior to January 1, 2020, Oncocyte had no revenues and no cost of revenues.
Research and development expenses for fourth quarter of 2020 were $1.8 million as compared to $2.3 million for the same period in 2019, a decrease of $0.5 million, primarily due to reduced clinical trial expenses of DetermaDx. Research and development expenses for the year ended December 31, 2020, were $9.8 million as compared to $6.8 million for the same period in 2019, an increase of $3.0 million primarily attributable to increased investment in DetermaIO, personnel and related expenses.
General and administrative expenses for the fourth quarter of 2020 were $3.4 million, as compared to $4.2 million for the same period in 2019, a decrease of $0.8 million. General and administrative expenses for the year ended December 31, 2020 were $16.8 million, as compared to $13.3 million for the same period in 2019, an increase of $3.5 million, primarily attributable to personnel growth and related expenses.
Sales and marketing expenses for the three and twelve months ended December 31, 2020, were $1.9 million and $6.5 million, as compared to $1.0 million and $2.2 million for the same periods in 2019, respectively. The increases in the respective periods were primarily due to personnel and related expenses for ramp up in sales and marketing activities for the commercialization efforts of DetermaRx as well as market development investments in preparation for the launch of new products in 2021.
Operating losses, as reported, for the fourth quarter of 2020 were $6.3 million, a decrease of $1.2 million from $7.5 million as compared to the fourth quarter of 2019; and operating losses, on an adjusted basis, were $6.2 million, a decrease of $0.5 million from $6.7 million as compared to the fourth quarter of 2019. Operating losses, as reported, for the year ended December 31, 2020 were $29.7 million, an increase of $7.5 million from $22.2 million as compared to the same period in 2019; and operating losses, on an adjusted basis, were $26.5 million, an increase of $7.9 million from $18.6 million as compared to the same period in 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.
For the fourth quarter ended December 31, 2020, Oncocyte reported a net loss of $6.3 million, or ($0.09) per share, as compared to $8.0 million, or ($0.15) per share, for the fourth quarter ended December 31, 2019.
For the year ended December 31, 2020, Oncocyte reported a net loss of $29.9 million, or ($0.46) per share compared to $22.4 million, or ($0.44) per share for 2019.
Cash used in operations was approximately $6.2 million for the fourth quarter of 2020 and $26.0 million for the year ended December 31, 2020.
Conference Call Information
The Company will host a conference call today, March 16, 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 13717267. To access the live webcast, go to the investor relations section on the Company’s website, or by clicking here: View Source The webcast replay will be available on the Oncocyte website for 90 days following the completion of the call.