Biocept, Inc.
Q2 2017 Earnings Call Transcript

Published: 11 Aug 2017

[Operator:]

Ladies and gentlemen, thank you for standing by. Welcome to the Biocept 2017 Second Quarter Conference Call. At this time, all participants are in a listen-only mode. Following management's prepared remarks, we will hold a question-and-answer session [Operator Instructions]. As a reminder, this conference call is being recorded today August 10, 2017. I’d now like to turn the call over to Ms. 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, Senior Vice President of Operations and Chief Financial Officer and Mike Terry, Senior Vice President of Commercial Operations. During this call, management will be making a number of forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include all statements that are not historical facts and generally can be identified by terms such as anticipates, believes, could, estimates, expects, intends, may, plans, potential, predicts, project, should, will, would or the negative of those terms. Forward-looking statements involve known and unknown risk, uncertainties and other factors that may cause actual results, performance or achievements to be materially different from any future results as well as performance or achievements that are expressed or implied by the forward-looking statements. For details about these risks, please see the company’s SEC Filings. The content of this call contains time sensitive information that is only accurate as of today, August 10, 2017. Except as required by law, Biocept disclaims any obligation to publicly update or revise any information to reflect events or circumstances that occur after this call. Now I’d like to turn the call over to Michael Nall. Mike?

[Michael Nall:]

Thanks Jody, and thanks to everyone for joining us today. In the second quarter of this year, we focused on two primary objectives; driving growth of our liquid biopsy test volume and evaluating strategic opportunities for our business in both the U.S. and international territories. I'm pleased to report that we've made and continue to make meaningful progress on both of these initiatives. Revenues and billable test volumes increased both sequentially and on a year-over-year basis. This was driven in part by our interactions with physicians at the 2017 American Society of Clinical Oncology Conference or ASCO, where we launched our new marketing campaign as well as traction gained by our new sales professionals. We continue to leverage this momentum, which gives us confidence in maintaining solid growth trends in the second half of 2017. Our investments in revenue cycle management have significantly improved our ability to obtain timely reimbursement for our services from both government and private health plans. This is a differentiating factor for Biocept in the field of liquid biopsy and demonstrates the value proposition of our Target Selector platform, which features high performance and cost-effective liquid biopsy testing that is focused on actionable biomarkers. On the corporate side, we entered into a common stock and warrant purchase agreement for $2.2 million with our largest shareholder, Ally Bridge, who acquired additional common stock at a premium to the market and was granted a warrant for additional common stock. We believe that this Vote of Confidence from Ally Bridge is validating and we've announced that we are exploring potential strategic opportunities in China with the help of Ally Bridge’s Chinese affiliate. China has an advanced diagnostic market and liquid biopsy is gaining traction. We believe that our Target Selector platforms for both circulating tumor cell or CTC and circulating tumor DNA or ctDNA will be favorably received in China where the detection and tracking of tumor material and blood is sometimes used by Chinese physicians and patients to determine progression of disease, response to treatment, in addition to therapy selection. Additionally, we may seek to further develop our technologies in China by producing liquid biopsy kits for both of our patented Target Selector platforms. We’d expect that any partnership we may form in China will take advantage of the high-performance and low-cost attributes of our liquid biopsy test offering. We were granted several patent issuances earlier this year, including broad coverage of our technology in the U.S. and in other territories such as China, Japan and Australia. We intend to leverage our strong IP position through strategic agreements domestically and abroad, as we continue to evaluate multiple opportunities to expand our business and to create shareholder value. In addition to growing our sales and evaluating strategic opportunities, we continue to execute on our other key corporate initiatives to advance the company. In the second quarter and early third quarter, the company accomplished the following. We launched our 14th biomarker assay, the latest for Progesterone Receptor or PR, expanding our test offering in breast cancer. We expect to launch additional assays for clinically actionable biomarkers in the second half of 2017. We hosted our tradeshow booth at the 2017 ASCO Conference in Chicago. During the conference, we also sponsored three published abstracts on our assay platform, held two clinical advisory boards with key opinion leaders and launched our AND marketing campaign, which has been successful in driving growth of our test volumes. This exciting campaign emphasizes the importance of using both tissue and blood, CTCs and ctDNA as well as protein and genomic testing for patient profiling. In the second quarter, we announced additional health plan coverage with MediNcrease a national health insurance provider. In this week, we announced an agreement with Scripps Health a luminary institutions for both research and clinical treatment located right here in San Diego. Our reimbursement team remains very active and we expect to enter into additional health plan contract later this year. Also in the second quarter, we were granted a new patent in the United States that provides broad coverage for our novel rare cell detection capture technology. This expands Biocept IP portfolio to 20 issued patents in total demonstrating that are proprietary liquid biopsy platform will remain a unique offering in the marketplace. Similar patents in China and Japan were also issued earlier this year. In June Biocept was added to the Russell Microcap Index which increases our visibility with the investment community. As I mentioned previously we raised additional capital from Ally Bridge a well-respected healthcare investment fund based in Hong Kong. I want to emphasize that this is not a traditional transaction the private financing was a reverse inquiry in which Ally Bridge approached us to increase their investment in Biocept. Ally Bridge is a fundamental investor that typically has a long-term focus. They paid a premium to the market price of our stock and is assisting us as we explore strategic opportunities in China. And lastly, I want to mention the agreements that we have with two major cancer treatment centers in the United States Oregon Health, Sciences University and Cancer Treatment Centers of America. Partnering with institutions such as these is an important component of our commercial strategy and we expect to continue enter into agreements with healthcare institutions and integrated healthcare delivery networks for IDN's in the coming quarters. We expect that our pathology partnership strategy targeting hospitals across the country will be an attractive offering that can help us win additional contracts with major health systems. We plan to launch this strategy later this year. We continue to drive market awareness of the unique benefits of our Target Selector platform as we invest in our commercial organization. We now have 13 sales executives in the field in addition to our National Sales Director and two Regional Manager roles. We remain on track to have between 15 to 20 sales executives in the field by the end of this year. Our visibility and growth in the market continues to be driven by our focus on delivering high-value actionable information to physicians broadening health plan reimbursement for our liquid biopsy services and increasing patient access to our solutions in the United States and abroad. As drug companies continue to develop targeted cancer therapies to prolong life and minimize side effects the need for our technology increases with our proven ability to identify more patients with actionable cancer biomarkers. Before I conclude my prepared remarks, I'd like to review the seven key initiatives that Biocept has focused on delivering as we move into the second half of 2017. These are one; entering into partnerships to capture value from our patented and proprietary technologies domestically and outside U.S. Increasing the number of physicians ordering our liquid biopsy test and expanding test volumes from our current base of accounts. Three, collaborating with top-tier oncology institutions and integrated delivery networks to increase commercial adoption of our liquid biopsy platform. Four, launching our pathology partnership or TC/PC strategy to serve hospital and institutional client. Five, driving down our cost per patient sample through economies of scale and operational efficiencies, six signing additional health plan agreement to support third-party reimbursement for our test. And seven expanding our test menu with the introduction of new clinically actionable oncology biomarker test. We look forward to reporting our progress on these initiatives throughout the coming quarters. In the first half of 2017, we made considerable progress in building the Biocept brand and positioning the company for success in the emerging liquid biopsy market. While still in its early stages liquid biopsy has potential to become a multibillion dollar global market as this advancing field can significantly improve patient outcomes with noninvasive and cost-effective testing. The number of patient success stories we get from our clients is growing and we continue to update our website to reflect these successes. I encourage all of you to visit www.biocept.com and read about the cancer patients who benefited from the use of our technology when traditional methods were simply inadequate. These real-world examples are only the beginning as we continue to position Biocept as a leader in the space. We have made good progress in the first half of this year and we continue to believe that 2017 will be a transformational here for the company. And with that, I'll turn the call over to Tim Kennedy to review the financial highlights of the second quarter. Tim?

[Tim Kennedy:]

Thanks Mike and good afternoon everyone. Revenue for the second quarter of 2017 was $1.3 million up 93% from the $663,000 reported in the second quarter of 2016. Second quarter 2017 revenue is comprised of $1.2 million from commercial testing and $84,000 from development services. Year-to-date 2017 revenue of $3 million was up more than threefold from the $884,000 reported in the same period last year. Commercial revenue per accession continues to be in the $1,100 to $1,200 range. As a reminder, we converted to accrual based revenue recognition at the end of Q1 2017. Total sample accessions in the second quarter were 1,405, which also includes samples submitted from research and validation purposes. This is up 16% from the second quarter last year. Research and validation samples are not billable but do support the use of our liquid biopsy test awareness of our services and the development of our pipeline of new biomarker assays. We accessioned a total of 1,225 billable samples in the second quarter of 2017 which represented year-over-year volume growth of approximately 9% despite one less sales day in the 2017. Billable sample volumes in the second quarter of 2017 also represented a sequential increase of 11% from the first quarter of 2017. As a reminder, billable samples are defined as commercial cases plus little samples that come from our development services. Commercial cases are tests ordered by physician for which, we submit a claim to an insurance company, hospital or other third parties responsible for payment. Development cases are testing services performed for either a research partner a pharmaceutical company or under an international distribution agreement. The number of billable samples per sale day averaged approximately 19 in the second quarter of 2017. Importantly, our sales force expansion began to gain traction in June. We exited the second quarter at a run rate of approximately 24 billable samples per sales day, which is up more than 30% from an average of 18 billable samples per sales day in the first quarter of 2017. And so far in the third quarter we've seen the momentum in our volume growth continue despite the 4th of July holiday. New account startups in the second quarter of 2017 were 98 with same-store growth or base account referral volume increasing by 15% over prior period averages. In the second quarter of 2017, we continue to expand our sales force and we have hired seven new sales executive so far, this year six of which were hired March through May. As a reminder, we anticipate that sales executives will take about six months on average to fully ramp up from when they first joined the company. Now moving on to our expenses second quarter of 2017 cost of revenue as a percentage of total revenue improved 67 points or 26% versus the same period last year. As we continue to leverage the fixed component of our costs with increasing volume. In the second quarter of 2017, cost of revenue was $2.4 million compared with $1.7 million in the second quarter of 2016. The increase was attributable to direct cost associated with higher commercial assay volume and the addition of excess capacity in our lab operations to service expected higher volumes in the coming months as a result of our sales force expansion. As mentioned on previous earnings calls, we need to hire in advance of volume increases in order to properly train new employees to effectively process the higher number of tests. At our current volume levels once all newly hired personnel are fully trained, we will have about 35% excess capacity. Cost per accession in the second quarter of 2017 of $1,686 was 22% higher than the $1,378 in the second quarter of 2016. As previously mentioned this is due to the increase in capacity in our CLIA lab operations in preparation for future growth. Given the investment in additional lab capacity and the with third quarter volumes continuing to show good growth we believe that our cost per accession will trend lower over the next several quarters. In the second quarter of 2017 our gross margin improved 67 points versus the prior year period or 44%. As with our cost of revenue as volume increases we continue to leverage the fixed component of our cost. R&D or research and development expenses in the second quarter of 2017 were $842,000 and increase of approximately 18% from the $716,000 reported in the same period last year. This increase was due mainly to the addition of personnel for the development of new biomarker assays and greater consumption of materials associated with this development as well as other costs associated with research and development activities. General and administrative expenses for the second quarter of 2017 were $1.8 million an increase of about 18% compared with $1.5 million reported in the same period last year. The increase was primarily due to personnel costs associated with bringing in-house billing, human resources and investor relations functions offset partially by reduced fees for outsourcing. Since bringing our billing in-house in April, we've been able to accelerate collections of our receivables. As a result of faster collections and increase revenue in the second quarter of 2017 we've been able to lower our days sales outstanding or DSOs from over 100 days in the first quarter of 2017 to the mid-60-day range in the second quarter of 2017. Sales and marketing expense in the second quarter of 2017 increased, by 35% to $1.7 million versus $1.3 million in the same period last year due to the expansion of our team of sales professionals. The net loss for the second quarter of 2017 was $5.7 million or $0.21 per share. This compares to a net loss for the second quarter of 2016 of $4.6 million or $0.60 per share. The year-over-year increase in net loss was largely driven by our sales force expansion and a creation of excess capacity in our lab operations to support additional growth. During 2016 cash generated from our operations average about 15% of the company's overall cash need. Year-to-date through June 30 our cash generated from operations was 17% up 2% compared to the 2016 average. While our overall expense base grew to support our higher current and future period volumes we expect that our cash generated from operations will continue to fund a higher percentage of the company's overall cash need. Turning to our balance sheet, cash and cash equivalents as of June 30, 2017 totaled $10 million compared to $4.6 million on December 31, 2016. Today we announced a capital raise of $2.2 million in gross proceeds related to a private sale stock and warrants to Ally Bridge LB Healthcare Master Fund Limited for $1.50 per unit. The warrant sold to Ally Bridge in a transaction have an exercise price of $1.50 per share. The additional capital from Ally Bridge is intended to strengthen our balance sheet and enable us to continue to execute on our plans to grow the business and evaluate opportunities to leverage our cost infrastructure and extend our cash runway. And with that, I’ll now turn the call back over to Mike. Mike?

[Michael Nall:]

Thanks Tim. Before we move on to Q&A I'd like to reiterate the four key areas of our business that I believe provide Biocept with a sustainable competitive advantage in the liquid biopsy market. First our Target Selector dual platform leverages both CTC and ctDNA resulting in a comprehensive menu of assays focused on cancer biomarkers with clear clinical utility. We are differentiated by marketing both CTC and ctDNA analysis in a liquid biopsy to physicians and therefore can offer a more complete answer by providing the same biomarker information that a physician obtains from a surgical tissue biopsy all with a simple blood drop. Second our test leverage, our proprietary biomarker enrichment technologies resulting in industry-leading assay performance including very high concordance with tissue biopsy. Third, the cost effectiveness and reimbursement strategy of our liquid biopsy solutions continue to drive our preferred provider status with health plans and increases the efficiency of our claims collection. And lastly, our technologies are amenable to the development of Target Selector in vitro diagnostic or IVD kit. With the future development of our diagnostic kits we have potential to significantly scale our business by enabling our liquid biopsy test to be performed in laboratories around the world. So, in summary, we've made significant progress establishing the Target Selector brand in the marketplace with growing commercial sample volume and sales revenue. Most importantly together we are helping more physicians and their patients rapidly access the actionable information they need to meaningfully improve treatment outcomes by identifying more patients for therapies to safe or extend their life. I want to thank our employees at Biocept for there constant dedication and hard work, our customers for their trust, our investors for their support and thanks to each of you for dialing in to today's call. Tim and I, as well as Mike Terry our Head of Commercial Operations, will now be happy to answer questions. Operator, please pull the audience.

[Operator:]

[Operator Instructions]. One moment please for your first question.

[Michael Nall:]

While we’re waiting for that first question, I’d like to announce that we’ll be presenting at 6th Annual Gateway Investor Conference to be held in San Francisco on September 6 through 7, 2017. Okay, operator we ready for our first question.

[Operator:]

The first question comes from Lauren Chung of WestPark Capital. Please go ahead.

[Lauren Chung:]

Hi congratulations for good quarter.

[Michael Nall:]

Hi Lauran.

[Lauren Chung:]

Hi thanks for taking my call.

[Michael Nall:]

Sure.

[Lauren Chung:]

I have a couple questions; can you talk about how the AND marketing campaign is going since its launch in ASCO? What makes the doctors excited by the liquid biopsy with respect to the campaign? And then secondly, on the TC/PC strategy, can you talk a little bit more about that just so that we understand more how that rollout is going look like and also if there are any other competitors doing the same thing? Thanks.

[Michael Nall:]

No. Absolutely, two good questions so the campaign you're talking about is what we launched at ASCO and we call it our AND campaign and Mike and his team did an excellent job rolling that out, both with our graphics that we had in our booth and our marketing collateral as well as the messaging that was key and we tested that messaging really in two sponsored ASCO and we’re very gratified with the result. The first area we tested it with was with our scientific advisory board and I think a lot of the callers know who some of those folks are, but I would encourage people to review our investor deck because you can see the impressive scientific advisors that we have. And we wanted their buying in their verification that we're on the right track first and they were e very a much endorsing this AND strategy. The AND refers to as I said in my call tissue and blood CTCs and ctDNA and protein and DNA all from liquid biopsy and specifically liquid biopsy with Biocept as were an ideal fit. The tumor type we primarily are targeting for this is lung and one statistic folks might not be aware of it is that anywhere between 20% and 40% of lung cancer patients don't have enough tissue to get the biomarker information that's required for the physician that make the best treatment decision. Our test along with the tissue biopsy allow that to happen so it's been a good message that was embraced by both our scientific advisors as well as our clinical customers that we had at a dinner later that day. Since then the sales team has been successful in rolling that out to clients. And as part of the reason you’ve seen the growth in our existing business. So, before I go on I see if you have any other questions about the AND campaign then I’ll our pathology partnership strategy.

[Lauren Chung:]

That’s good thanks.

[Michael Nall:]

Okay. So, you mentioned about the pathology partnership strategy which is also called TC/PC strategy just for folks that don't understand that on the call that stands for technical component/professional component those industry terms, but it really refers to the preparation of the testing is all done at the core lab. In other words, in our case the lab here at Biocept the PC stands for professional component and that means the interpretation of the test and that can be done remotely because we can capture the images from the test we run here in our lab put them on the Internet have them access to a secure portal and a local physician called pathologist through the doctor in the laboratory can log on and do their own interpretation. There is revenue for that they can get reimbursed for doing that interpretation so that's available to us at Biocept because we capture intact cells as well as cell for DNA. The intact cells are treated very much like a pathology workflow. So therefore, it can work in the same way pathologists are used to, they’ll be interested in doing this interpretation. So, we’re excited to rollout we’re on target to roll that out before the end of the year with beta site starting later this quarter. So, stay tuned as far as competitors we don't know if anyone else doing this with liquid biopsy but there's quite a few companies that do it with tissue today it's kind of become one of the standard of care or reference lab testing. Where I was before Clarient we were one of the innovators in that space and course now NeoGenomics had acquired Clarient and so that was the business model they were in as well so if you know NeoGenomics that’s where a lot of the volume there comes from, but on the tissue side. So, hope that’s helpful.

[Lauren Chung:]

Yes thanks.

[Operator:]

The next question comes from Chris Lewis with ROTH Capital Partners. Please go ahead.

[Chris Lewis:]

Hey, can you hear me okay?

[Michael Nall:]

Hi Chris, we can hear you fine.

[Chris Lewis:]

All right. Great. Thanks for taking the questions. I wanted to start just looking at the billable volume growth sequentially you had a nice uptick in Tim’s comment imply that momentum you started to see in the second quarter has continued into the third. So, I was just hoping maybe you could just elaborate on what have been the key drivers of that momentum and volume just staring to see how we should think about the kind of the sequential growth profile for billable samples going forward?

[Michael Nall:]

Sure no, that’s a great question. I appreciate your comment on that as well. Sounds like you might be at the airport, so you might want to go back on mute because we can hear all the background noise. But yeah, I think it’s good question actually for Mike Terry to answer and Mike is recently joining us. So, I’ll let Mike handle that one and maybe I fill in little color afterwards.

[Mike Terry:]

Right thanks Mike. Chris let me start up by kind of reviewing the sequence of events and the plans we had. So, when I arrived in March we initiated sales force expansion program in conjunction with the capital raise. So, we now head the capital to really invest in that. And so, there was a fair amount of lead timing going out and recruiting experience reps with experience of molecular diagnostics and oncology. And we are successful in doing that and the fact that we actually put started seven new reps. The timing on that is really probably six out of those reps really came on during the April-May timeframe so they only had a small amount of time on the ground to really affect the quarter, but even again with considering that and considering there was one less day of the accession in this period. We're still able to increase the daily accession rates from the start of the quarter to the last day of quarter by 30%. So, I think that's a very positive trend that our plan is working and should continue to grow. And I would also add that usually I think industry standard would say that it probably take six months to get a rep up to speed in a territory I think there's some evidence that we've been able to do that quicker by effective on-boarding and training. I think another important data point is the fact that by having more reps and you therefore you’re reducing the territory of vitro reps and logistically it's easier for reps to manage their territory they can actually spend more time with an existing account. So, and I think it’s very important for us to really focus on our existing accounts and to drive more business from them and again with only a small amount of time of the new reps actually on the ground we’re actually able to grow their volume by 15%. Again, the driver on this is the AND campaign I mean that AND campaign really has identified a critical pain pointer unmet need in lung cancer and that campaign resonated very nicely at ASCO it was validated by – our clinical advisors and other KOLs. And now we’re starting to get really traction with – that is really the basis of our traction is the field of value proposition of what that brings is really what it will drive us forward. So, a very optimistic going forward into Q3.

[Chris Lewis:]

All right I want to appreciate it, in terms of revenue per accession you talked about $1100 to $1200 range can you kind of walk us towards the puts and takes that we should expect to impact that metric as we move forward?

[Michael Nall:]

Sure, no absolutely I think Tim is probably the best one to address that Tim?

[Mike Terry:]

Well net revenue per accession is a lot of things that come into play there as we continue to move forward with our sales as an example depending on that particular specialty practice that we received accession volume from that being whether there a lung specialist, a breast cancer specialist or whatnot those all carry different reimbursement rate on a per accession level because different doctors order different quantities of test just an underlying factor there. On a go-forward basis as far as the current referral mix goes I don't anticipate they’re being any impact the $1100 to $1200. With regard to our launch of our TC/PC product that Lauren mentioned earlier approximately 15% of our global reimbursement for fish is reimbursed as a professional component on the physician fee schedule. So, while we might see a slight reduction in reimbursement there the launching of that TC/PC product line we do expect to have significant adoption out the marketplace associated with that but short of that I don't see any degradation Chris in the commercial reimbursement rate of $1100 to $1200 going forward.

[Chris Lewis:]

And then in terms of strategic opportunities Mike you talked quite bit about China can you help us understand what stage of the process you’re in there what potential opportunities could be in place and any just additional commentary you can provide on that would helpful I think? Thanks.

[Michael Nall:]

Yeah, no problem at all no China is of great interest to us one, is a very fast-growing market there and number two we got issued patents there and while there is a reputation in China of some vagary around patents the fact that we do have solid patents issued in China is a help and makes us want to monetize those patents. Example of how large this market is lung cancer incidence as well over 450,000 newly diagnosed cases per year so a very large market. However, their markets a little bit different than us and other markets it’s against the law to send the specimen outside the borders of China. So therefore, we have to find a partner who can perform the testing there and we are also interested in finding someone to collaborate on the development our IVD kit we’re can taking the test -- in other words for those like heart is familiar taking the testing we’ve developed and moving that into kits -- these will be performed in laboratories all over the world including in laboratories all over China. So that’s an exciting aspect of it and something that we’re evaluating as we look for potential partners. How that eventually can look financially could be a lot of different things it could be a licensing deal, it could be a JV it could take other forms we’re looking at several different options and some of those options can happen both sooner and other options might have later, happen later. And the other piece is our good partner the Ally Bridge which truly understands the dynamics of this area as a large investor both here in the U.S. but especially in China as well.

[Chris Lewis:]

Okay. Great. Sorry about the background noise. Thanks for taking the questions.

[Michael Nall:]

Yes, no worry. Safe travels.

[Operator:]

[Operator Instructions] The next question comes from Keay Nakae with Chardan. Please go ahead.

[Keay Nakae:]

Hi thanks.

[Michael Nall:]

Hi Keay.

[Keay Nakae:]

Hi how is it going guys?

[Michael Nall:]

Good, good.

[Keay Nakae:]

With respect to same-store sales, are you able to quantify at all whether that the physician ordering more of a specific test like lung for more of his patients or are they actually been comfortable using a broader array of tests for their customers?

[Michael Nall:]

That’s a great question so in other words when people starting to monitor the same patient over and over or are they just using it on more patients and I think it's a little bit of both. We still primarily get profiles so that means that we get multiple tests for folks that aren't just familiar with health what we mean by that. Multiple tests for each patient sample so another words we’ll get the blood in and they order several different biomarkers. So generally, that means that they're using it either at diagnosis or they're using it at a progression point where they're looking to make a change in treatment decision. However, one of the most commonly ordered tests from us whether by individual or included in a panel is EGFR mutation. And so, as you may be aware that’s the test you need to have run to see if you're progressing on a certain drug from Genentech or now one of these are all brand names or patent them from BI. And you’re going to go on the new drug from AstraZenec called Tagrisso. So that’s the test that bodes well for monitoring and we’re getting more and more of that so I think we’re starting to see the monitoring and I think monitoring with liquid biopsy is one of the biggest inflection points for our business and all of liquid biopsy. But it's kind of early I think we get the same questions Keay about monitoring using liquid biopsy today that we got last year at the same time about liquid biopsy in general. It's like kind of ha that's interesting but what do I do with that. So last year it has been a sea change between what I talked about the profiling and the progression when they do the profiles to where now most oncology are strong board now they're looking for the solution that best fits their need, But the real volume is as this idea monitoring and still needs to be more data put out. So, one of the key things we’re doing is -- very large study that we announced last quarter that’s funded by the Addario Lung Cancer Foundation, the Addario Lung Cancer Medical Institute a division of them and it’s the ALCMI trial and that’s going to include monitoring. So, we start connect data points of using monitoring and liquid biopsy to progression of disease response to therapy and also tied to imaging and scan. So, whether at someday it might be replacement for scan or more likely sooner it will be a signal when it's time to rescan the patient. So that’s a long answer to your question I hope it helps.

[Keay Nakae:]

No, it is helpful because again as you stated the monitoring is the big advancement for the field switching gears Oregon health and science. Can you talk about the progress made with the initiatives there?

[Michael Nall:]

Sure, we have a good relationship there and for folks that don't remember one of the key physician we work there, his name is Chris Corliss and he is true KOL in the terms of molecular pathology and molecular assay development. He evaluated many liquid biopsy companies and shows us as a partner because of the strength of our proprietary technology. And our relationship with Oregon is really trifold the first is a commercial partnership and I’ll let Mike give us an update on that. The other is a kind of a tech transfer well they’ll be one of our first sites to start to find ways that we can partner on actually interpreting and actually performing the test in another facility in the future. And then finally development and they have $1 billion grant from the Knight Cancer Foundation from Nike to help develop not only cancer detection and other cancer treatment options. So, in the future we’ll be working on developing assays with them as well but we are really thankful for that relationship. Mike do you want to add any color on the actual commercial progress we’re making.

[Mike Terry:]

Yeah in terms of the commercial collaboration we really started the physician outreach part of this probably in the April, May timeframe. So, we working with the Knight Cancer Center and their pathologist we really have to go out and talk to all the referring medical oncologist that are in their system. And I believe there's some 600,000 patients that are under their health care system. So, it's a huge network and so we’re just at the forefront of that we started to get initial sample flow and it's pretty consistent once we go out and educate them on our technology. And with the credibility of the Knight Cancer Center behind us you know that the accounts will start to order. So, we expect that to start to accelerate rapidly as we get into the third quarter.

[Keay Nakae:]

Okay. And then part of the tech transfer part when do you expect to see that come on board?

[Michael Nall:]

Well that’s tied it away to our movement to more and more of a distributed model with kits so stay tuned on that. We’ve got some a lot of progress that we've been making and so we’ll have announcements for that at the appropriate times in the future. But as far as the first step I think with Oregon per se we’ll be with our TC/PC option they do a lot of molecular testing up there and they have very qualified molecular geneticists as well as molecular pathologists that will be good partners for us as we rollout this option for them to do their own interpretation. Part of the China initiative is finding ways in a cost effective and resource conservative way to leverage a potential partnership in China to move us faster to this kit development then we could probably do here. So that's an exciting aspect of a potential partnership in China that we’re looking at.

[Keay Nakae:]

All right. That’s all I had thanks.

[Michael Nall:]

Thank you, Keay.

[Operator:]

This concludes our question-and-answer session. I would like to turn the conference back over to Michael Nall for any closing remarks.

[Michael Nall:]

Thank you, operator, I want to thank all of you for participating on today's call and for your interest in Biocept. We look forward to sharing our progress on our next quarterly call. Thanks again and have a great day.

[Operator:]

The conference is now concluded. Thank you for attending today's presentation, you may now disconnect.