Biocept, Inc.
Q4 2020 Earnings Call Transcript

Published: 29 Mar 2021

[Operator:]

Good day, and welcome to the Biocept Fourth Quarter Financial Results Conference Call. All participants will be in a listen-only mode. . After today’s presentation, there will be an opportunity to ask questions. . Please note this event is being recorded. I would now like to turn the conference over to Jody Cain. Please go ahead, ma'am.

[Jody Cain:]

This is Jody Cain with LHA. Thank you for participating in today's conference call. Joining me from Biocept are Michael Nall, President and Chief Executive Officer; Tim Kennedy, Chief Operating Officer and Chief Financial Officer; and Dr. Michael Dugan, Senior Vice President, Chief Medical Officer and Medical Director.

[Michael Nall:]

Thank you, Jody, and good afternoon, everyone. I'm looking forward to sharing both our results for 2020 and details about our exciting neuro-oncology strategy in today's call. But first, I want to say that I'm exceptionally proud of our entire Biocept team for their enthusiasm and dedication in supporting the COVID-19 testing needs of our community, while at the same time, advancing our oncology business for a strong post-pandemic future. Since Biocept began offering COVID-19 testing in June 2020, we have received more than 300,000 samples, including about 140,000 samples during the fourth quarter. Even with the relocation of our corporate headquarters and CLIA Laboratory in December, we provided the vast majority of COVID-19 test results to health providers within 48 hours from sample collection. Our team's success in providing COVID-19 testing is reflected in our financial results. For the fourth quarter, revenues reached a record $18.5 million, and we reported our first ever profitable quarter. For the full year of 2020, we generated record revenues of $27.5 million. It's highly gratifying to report that our team achieved these results while continuing to provide excellent service to both our core oncology and COVID-19 customers. The higher revenues in recent quarters has had the added benefit of significantly reducing our cash burn. This allowed us to dedicate more financial resources to our oncology business, in particular our new focus on neuro-oncology as we build for a strong post-COVID era.

[Timothy Kennedy:]

Thanks, Mike, and good afternoon, everyone. As Mike mentioned, for Q4 2020, we reported record quarterly revenues of $18.5 million. This is a significant increase from $1.8 million in Q4 of 2019 and is primarily due to COVID-19 testing. These revenues included $18.3 million in commercial test revenue, including $17.6 million attributable to COVID-19 testing. In Q4 of 2020, we received 145,129 total accessions, a significant increase from 1,404 total accessions in Q4 of 2019. Commercial volume in Q4 2020 was 144,932. Total cost of revenues were $10 million compared with $2.9 million for the prior year period, primarily due to COVID-19 related collection kits and consumable expenses. R&D expenses for the fourth quarters of 2020 and 2019 were relatively flat at $1.2 million. G&A expenses for Q4 2020 were $3.1 million versus $1.9 million in Q4 2019, with the increase primarily due to headcount additions to handle COVID-related activities as well as consulting expenses.

[Michael Dugan:]

Thanks, Tim, and thank you to our participating audience. Following Mike's introduction of the topic, we are delighted to discuss our neuro-oncology strategy, and specifically, our expanded efforts to help patients with cancers that involve the brain and spinal cord, together known as the central nervous system, or CNS. Our goal is to establish a new standard of care for the diagnosis of suspected intracranial metastasis using Biocept's quantitative tumor cell assay in cerebrospinal fluid or CSF. We are also working to establish our CSF assay as a new standard of care for monitoring treatment response in patients with cancer involving the central nervous system. This is an area of high unmet medical need as current diagnostic tools are often inadequate for determining tumor involvement and assessing therapy response in a timely manner. These patients do not have time to waste on inaccurate diagnostic tests. Overall survival expectancy with brain metastasis is low, and many of these patients are not recognized early enough for therapeutic intervention. However, the use of newer targeted therapies for lung and breast cancer patients with intracranial metastasis can often extend survival for a year or more, resolving symptoms and substantially improving their quality of life. Similar improvements have been seen in melanoma and some other solid tumors. Survival for several years post-treatment is now possible with these amazing therapeutic advances. As Mike mentioned, the current standard of care for diagnosing central nervous system involvement is microscopic evaluation of the cerebrospinal fluid by a pathologist. This common diagnostic procedure is known as CSF cytology. However, CSF cytology has limited sensitivity for detecting brain metastasis and is imprecise. This method can often show false negative or indeterminate results due to limited cellularity, sometimes forcing oncologists to make repeated lumbar puncture or spinal tap procedures in an attempt to confirm the diagnosis. Additionally, CSF cytology is reported in a qualitative fashion, typically as positive, negative or indeterminate for the presence or absence of cancer cells, with no additional information provided about molecular biomarkers that can be used to help make better therapy choices. As such, CSF cytology has significant limitations as a clinical diagnostic tool and is widely recognized as an imperfect standard of care. Current clinical oncology care guidelines from the National Comprehensive Cancer Network, or NCCN, reflected inadequacy, recommending that CSF cytology be attempted up to 3 times to establish a diagnosis when central nervous system involvement is suspected.

[Michael Nall:]

Thanks, Michael. Before opening the call to your questions, I want to review our corporate priorities, which include the following

[Operator:]

[Michael Nall:]

Thank you, operator. While we're waiting for the first question, I'd like to mention that we'll be holding a Key Opinion Leader Webinar on April 8, beginning at 12

[Operator:]

Your first question will come from Jason McCarthy with Maxim Group.

[Michael Okunewitch:]

This is Michael Okunewitch on for Jason. I don't want to dote on COVID for too long considering it's not really the core focus of the company, but relating to the revenues, have you seen any pullback in testing as we've gone through the first quarter? How has that continued so far in 2021? Has it slowed at all? Has the rate continued? And how do you look at COVID going forward through this year?

[Michael Nall:]

Yes. Michael, well, that's a great question. And I think that's literally the billions of dollar question everyone's asking in our industry, right? But our peak was kind of as we exited last year up to the first of this year, but as we stated just here on the call today, we're being consistent around 10,000 to 11,000 patient specimens per week at this point. And notably, if folks are following the news, we're starting to see a little bit of positivity increase again in certain parts of the country, and whether it's a 1-week only or not, we also are starting to see a little bit of that at Biocept after several weeks of declining positivity numbers. So, this is really a difficult part of the business to predict what it's going to be like going forward. But in the meantime, we have a client base who needs to continue to test with the skilled nursing centers. In addition, as folks will recall if they were investor conference, I mentioned that we had been selected as one of the 4 labs here in California to service the community college system. So, we continue to get business from that and anticipate that being in demand throughout the year and on into fall as folks really get back to school.

[Michael Okunewitch:]

And then I'd also like to ask something about the CSF liquid biopsy. What kind of information do physicians gain from the CSF cytology? And is there any way right now to get that actionable biomarker data or is there really only Biocept out there?

[Michael Nall:]

That's a great question. Well, first, for the first part of your question, I'm going to ask Dr. Dugan to weigh in, and then I can talk a little bit about the competitive environment. But go ahead, Dr. Dugan, chance to CSF cytology.

[Michael Dugan:]

Sure. CSF cytology is an established standard of care for making -- for answering a simple question, is there tumor in the CSF? But it has significant limitations in terms -- the cells are not preserved as captured or as collected rather. They're also not labeled with any particular marker, and they're not captured by any particular method other than air drying them on a slide, so they're subject to a lot of degradation, and they are usually few in number, which makes the interpretation somewhat difficult and hence, qualitative, as I explained.

[Michael Nall:]

Yes. So with that quantitative , and when you talk about the biomarkers in competition, remember there's really 3 different questions we're answering. And on questions one and three , Biocept really is the best answer. So, question one is, is there tumor present, and that's the intact cell, the cancer cells, that we can identify with our technology. Question number two is, is there a target? And that's where you're looking for the certain biomarkers. And so, they will have already sent us the CSF, and so it makes sense for us to also profile for the biomarkers. And then number three is, is there a trend? And once again, you're back to looking for the cells, looking for the cells to go up and down. And I’m going to point folks towards our investor deck, and there's an excellent case study that illustrates how helpful that is in our investor deck that's on our website, so as well as the presentations I've done at the three different investor conferences here in the last couple of weeks.

[Michael Okunewitch:]

And then I'd like to see if you can just give us a bit more of a -- a bit more color on the roadmap for you guys to establish your CSF test as the standard of care and to secure reimbursement with that breakthrough device status.

[Michael Nall:]

Sure. Well, once again, I think Dr. Dugan is the best one to talk about our trial strategy, so maybe a little bit about that as well as how the breakthrough device works.

[Michael Dugan:]

Sure. I mean, I kind of went through it, but it's a little bit quick the first time. There are several clinical trials that we have planned. The pivotal trial, our Four C study will establish us against cytology and to some degree against imaging as a current existing standards of care. We anticipate entering into a larger multi institutional pharma trial later this year that will evaluate us, in particular, as a therapy monitoring tool. And then we have many academic centers that are interested in working with us to develop their own investigator initiated studies, which would further elaborate the use of the test in various clinical indications of use. And we will go into more of that in our -- on our key opinion leader webinar on April 8, which I invite you to listen to as Mike invited you listen to, and that will lay out some more of what the clinicians are saying about the tests and how they anticipate using it.

[Michael Nall:]

And when it comes to the breakthrough, we'll be submitting for that later this year. And that's -- we're very thankful that the FDA and CMS have gotten together to expand this program for diagnostic assays. And while I think CMS is now looking for additional comments before re-finalizing their part of the program, the FDA program is there. And so, we're confident that we'll have the necessary data to pursue that, and then once you get awarded a breakthrough, then you automatically are qualifying for CMS reimbursement at the same time, which was the original plan. As I said, CMS has recently put that back out for comment after some feedback on it, but we're looking forward to that being finalized for good and have a great path forward for Biocept in our whole industry.

[Operator:]

And this concludes our question-and-answer session. I would like to turn the conference back over to Michael Nall for any closing remarks. Please go ahead, sir.

[Michael Nall:]

Thank you, operator. And on behalf of our Board of Directors and our hard-working team here at Biocept, I want to thank everyone for participating on today's call and for your interest in our company. We hope you will join our neuro-oncology webinar in April 8, and we look forward to providing an update on our progress during our next conference call coming up soon in May, when we report 2021 first quarter financial results. Thanks, again, everybody, and have a great day.

[Operator:]

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.