On August 10, 2021 Oncocyte Corporation (Nasdaq: OCX), a precision diagnostics and monitoring company with the mission to improve patient outcomes by providing clear insights that inform critical decisions in the diagnosis, treatment, and monitoring of cancer, reported financial results for the second quarter 2021 ended June 30, 2021, along with a corporate update (Press release, Oncocyte, AUG 10, 2021, View Source [SID1234586278]).

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"Oncocyte continues its solid growth trajectory, driven by strategic acquisitions and is on a path to deliver three product launches: DetermaIO, DetermaTx and DetermaCNI, in Q4 as we committed," said Ron Andrews, Chief Executive Officer and President of Oncocyte. "We are encouraged by our steady quarter over quarter sample volume growth with DetermaRx despite the ongoing headwinds of the pandemic, and we expect to gain traction in Pharma Services with a number of near-term opportunities on the horizon with global leaders in pharma and molecular diagnostic platforms. DetermaIO, which is on track for clinical launch before year end, continues to prove to be a better predictor of immunotherapy response than the current prognostic assays and has the potential to be transformative for immunotherapy response prediction for both patients and pharma partners. We have now built a foundation of data, across tumor types, that support the pan-cancer utility of the test, so when combined with DetermaTx, which is also on track for launch in late fall for comprehensive molecular profiling, Oncocyte will offer a complete menu of treatment selection tests."

Mr. Andrews continued, "Our entry into blood-based monitoring through the acquisition of Chronix positions Oncocyte to enter two large and rapidly growing markets, therapy response and recurrence monitoring in oncology, and transplant rejection monitoring in the EU. And while outside of our original focus in oncology, the recent LCD recognizing molecular testing for solid organ allograft rejection as a category test eligible for Medicare reimbursement, based solely on extensive scientific validation from Chronix studies, is a critical de-risking event for our transplant monitoring test. With this in place, we have a clear path forward to commercialize the TheraSure transplant monitor test in Europe to improve testing sensitivity, reduce costs, and ultimately kit and democratize the monitoring test to improve turnaround times and patient outcomes."

Second Quarter and Recent Highlights Include:

Announced upcoming oral presentation at the European Society for Medical Oncology (ESMO) (Free ESMO Whitepaper) Congress 2021 detailing results from the NeoTRIP randomized clinical trial which evaluated DetermaIO as a predictive biomarker for immunotherapy response prediction when administered before surgery in triple negative breast cancer (TNBC).
Presented new data at the 2021 American Association for Cancer Research (AACR) (Free AACR Whitepaper) Annual Meeting demonstrating a significant correlation between DetermaIO and two-year overall survival rate of patients treated with atezolizumab for metastatic bladder cancer, bolstering the potential for pan-cancer utility of DetermaIO.
Presented new data at the 2021 American Society of Clinical Oncology (ASCO) (Free ASCO Whitepaper) Annual Meeting demonstrating DetermaIO response prediction in renal cell carcinoma, extending the utility of DetermaIO across four tumor types tested.
Collaboration with Gruppo Oncologico del Nord Ovest, a leading European clinical trials group which conducts independent investigator-sponsored clinical trials for targeted immunotherapy, to evaluate DetermaIO in colorectal cancer.
Completed the acquisition of Chronix Biomedical, Inc., positioning Oncocyte to enter the rapidly growing immune therapy monitoring and transplant monitoring markets with DetermaCNI and TheraSure transplant monitor.
Announced the Medicare Local Coverage Determination (LCD) for molecular testing for solid tumor allograft rejection, exclusively citing data from Oncocyte subsidiary Chronix Biomedical, Inc. The coverage policy for transplant rejection monitoring establishes a simplified and accelerated pathway for Medicare coverage of Chronix’s solid organ transplant rejection monitoring test, TheraSure transplant monitor.
With collaborators from subsidiary Chronic Biomedical, Inc., announced the publication of a review article in Nature Reviews Nephrology, highlighting the use of donor-derived cell-free DNA (dd-cfDNA) to provide actionable information for early detection of rejection in kidney transplants.
Collaboration for a new "Day One" launch site in the Company’s Nashville CLIA lab for Qiagen’s companion diagnostics test to identify patients for Amgen’s newly FDA-Approved drug Lumakras for advanced stage lung cancer. Offering the Therascreen RGQ KRAS test expands Oncocyte’s offerings for lung cancer treatment decisions.
Collaboration with Echelon Diagnostics, Inc. to develop analytical software that can scale to support the commercial expansion of Oncocyte’s proprietary clinical test offerings and solutions.
Corporate

Oncocyte Revenues for Q2 were $2.03 million, above the consensus estimate, driven by DetermaRx growth and delivery of key milestones in the tech transfer of DetermaRx to Burning Rock Biotech for launch in China.
Second Quarter 2021 Financial Results

At June 30, 2021, Oncocyte had cash, cash equivalents and marketable securities of $47.5 million.

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. During the first quarter of 2021, after accumulating additional history of cash receipts and other factors considered by management for Medicare Advantage-covered DetermaRx tests, including the recently published Medicare rate, the Company transitioned to the accrual basis for tests covered by Medicare Advantage insurance plans. Oncocyte will continue to recognize revenues for commercial and other payors on a cash basis until we have reimbursement contracts with those payors. At that point, those contracts will also progress to the accrual basis for DetermaRx tests. Until that time, for all payers other than Medicare, Oncocyte expects to recognize revenue for DetermaRx tests performed on a cash basis.

Revenues for the three months ended June 30, 2021, were $2.0 million, generated from three sources: DetermaRx tests, pharma services, and licensing revenues. This compares to revenues of $143,000 in the three months ended June 30, 2020. DetermaRx revenues grew solidly in Q2 2021 versus Q2 2020, primarily due to marketing efforts and revenue recognized for Medicare and Medicare Advantage tests performed following the receipt of final CMS pricing decision in September 2020.

Revenue for the second quarter of 2021 was driven primarily by licensing revenues earned upon the attainment of a technology transfer milestone in a licensing agreement. DetermaRx revenue also increased but the increase in patient samples tested grew at a faster pace than revenue due to accounting rules discussed above requiring the Company to continue to utilize the cash method rather than the accrual method of revenue recognition for DetermaRx tests performed for patients not covered by Medicare or a Medicare Advantage plan. Pharma Services revenues were slow during the second quarter as those revenues are generated under discrete agreements for particular customer projects that generally expire with the completion or termination of the customer’s project. Accordingly, different customers may account for greater or lesser portions of Pharma Services during different accounting periods, and Pharma Services revenues may exhibit a larger variance from accounting period to accounting period than other revenues such as DetermaRx testing revenues due to reliance on client’s ability to collect patient samples for their therapeutic clinical trials.

Cost of revenues for the second quarter 2021 was approximately $2.4 million, which included $1.1 million in non-cash amortization expenses from the Razor Genomics and Insight Genetics acquisitions. The cost of our Razor asset amortization, which is a non-cash amortization expense over the remaining life of the Razor patent, will be included in cost of revenues each quarter. Cost of revenues also include testing services we perform for our pharma customers.

Research and development expenses for the second quarter of 2021 were $2.5 million as compared to $3.2 million for the same period in 2020, a decrease of $0.7 million, primarily reflecting decreases in outside services and clinical consulting for our development programs, and a $0.3 million decrease in depreciation expense.

General and administrative expenses for the second quarter of 2021 were $7.9 million, as compared to $3.8 million for the same period in 2020, an increase of $4.1 million, with $2.7 million in personnel and related expenses, including non-cash stock-based compensation expense, comprising the largest portion of the increase. Personnel and related expenses for the three months ended June 30, 2021 include a $2.5 million severance expense incurred from the Chronix Merger.

Sales and marketing expenses for the three months ended June 30, 2021, were $2.7 million, as compared to $1.6 million for the same period in 2020. The increase was primarily due to personnel and related expenses resulting from the ramp up in sales and marketing activities for DetermaRx, as well as market development investments in preparation for the launch of new products later this year.

Operating losses, as reported, for the second quarter of 2021 were $13.6 million, an increase of $4.8 million as compared to $8.8 million for the second quarter of 2020. Operating losses, on an adjusted basis, were $10.3 million, an increase of $3.4 million from $6.9 million as compared to the second quarter of 2020.

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 second quarter ended June 30, 2021, Oncocyte reported a net loss of $10.5 million, or ($0.12) per share, as compared to $9.1 million, or ($0.14) per share, for the second quarter ended June 30, 2020.

Cash used in operations was approximately $8.1 million for the second quarter of 2021.

Conference Call Information

The Company will host a conference call today, August 10, 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 13721938. 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.