Biocept Inc (BIOC) 2022 Q1 法說會逐字稿

Welcome to the Biocept business update conference call. (Operator Instructions) Please note this event is being recorded. I would now like to turn the conference call over to Jody Cain. Please go ahead.

This is Jody Cain with LHA. Thank you all for participating in today's call. Joining me from Biocept are Sam Riccitelli, Chairman and Interim President and Chief Executive Officer; and Antonino Morales, Interim Chief Financial Officer, who will be available for the Q&A session.

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, estimates, believes, could, expect, intends, may, plan, potential, predict, projects, should, will, would, or the negative of those terms.

Forward-looking statements involve known and unknown risks, uncertainties, and other factors that may cause actual results, performance, or achievements to be materially different from those statements, as well as performance or achievements that are implied by the forward-looking statements.

In particular, there's significant uncertainty about the duration, severity, and impact of the COVID-19 pandemic. This means results could change at any time, and the contemplated impact of COVID-19 on Biocept's operations, financial results, and outlook is the best estimate based on the information available for today's discussion. For details about these risks, please see the company's SEC filings including the company's quarterly report on Form 10-Q, which was filed on May 23, 2022.

The content of this call contains time-sensitive information that is accurate only as of today, June 7, 2022. Except as required by law, Biocept disclaims any obligation to publicly update or revise any information to reflect the events or circumstances that occur after this call.

Now I'd like to turn the call over to Sam Riccitelli. Sam?

Thank you, Jody, and good afternoon, everyone. I'm delighted to be speaking with you today to share details about our refocused and rationalized business strategy. Developing this strategy requires significant efforts by the Biocept team, to undertake a comprehensive review of our assets, operations, and commercial opportunities, all with an eye toward building shareholder value. This intensive process allowed us to map a path forward, we believe offers the greatest opportunity for growth, while also identifying underperforming operations.

Now we thank shareholders for your patience during this rigorous process in developing the strategy we're discussing today. And we're confident that this was time well spent. This extensive review led us to the clear conclusion that our proprietary cerebrospinal fluid assay, called CNSide, far and away offers the greatest opportunity for Biocept's long-term success.

Our primary goal going forward will be on positioning our company as leading the emerging category of neurological tumor diagnostics, with the additional objective of becoming the provider of choice for biopharma companies seeking to develop therapies to treat cancer that has metastasized to the central nervous system or CNS.

We see CNSide is playing a critically important role in providing frontline assistance to the patients who receive a most desperate cancer diagnosis by supporting companies seeking to bring new medicines to their care and treatment. This objective aligns with Biocept's long-standing corporate mission of improving outcomes for patients with advanced cancer.

CNSide is the first commercially available method to measure biomarker status in the central nervous system in real time. It is a novel combination of cell-based and cell-free assays utilizing proprietary technology developed through years of experience with our blood-based diagnostic business. As a lab-developed test, it is analytically validated and run commercially in our CLIA-certified CAP-accredited laboratory here in San Diego.

CNSide is currently validated to detect and quantify tumor cells in the cerebral spinal fluid or CSF of patients with breast cancer or non-small cell lung cancer, as well as a handful of other solid tumors, who are confirmed or suspected of having leptomeningeal disease or LMD. LMD is a devastating complication in which metastatic cancer spreads to the membrane surrounding the brain and spinal cord.

While targeted therapies oftentimes can reduce or resolve [-- that sense again.] While targeted therapies oftentimes can reduce or resolve the debilitating symptoms and extend life expectancy, the current standards of care for detecting CNS metastasis have limited sensitivity and do not identify molecular treatment targets or quantify tumor cell counts. Current standard of care involves CSF cytology and clinical evaluation via MRI. And its limitations create challenges for physicians that manage LMD in determining the best course of treatment.

Preliminary results from investigator-initiated studies and individual case studies indicate that CNSide provides significant advancements over CSF cytology and imaging. In these studies to date, CNSide was shown to be more sensitive with the ability to detect a higher percentage of tumor cells than cytology. Additionally, CNSide is both qualitative and quantitative, which is a key advantage for physicians in monitoring the response of leptomeningeal tumors to treatment and improving the ability to make or change treatment decisions.

Our first application for CNSide represents a major commercial opportunity for Biocept. We estimate the annual market opportunity for CNSide at $1.2 billion in the United States and $2 billion globally. Over time, we plan to explore the uses of CNSide for additional indications that could further expand the market opportunity including, eventually, other diseases beyond cancer that affect the central nervous system.

CNSide was launched about two years ago through an early-access commercial program targeting neuro-oncologists, academic cancer treatment centers, and other physicians who manage patients with metastatic brain cancers. We are highly encouraged by their reception, with ordering volume increasing in each consecutive quarter. In fact, CNSide volume during this year's first quarter increased 70% sequentially and was up 219% over the prior year.

Our customer base has also expanded and now includes more than 40 ordering physicians including many of the top neuro-oncologists at prestigious academic institutions across the US and of the elite 64 National Cancer Institute-designated cancer centers. These are the NCI centers. More than one-third have already ordered CNSide. I'm pleased to say that during the first quarter, six leading cancer care centers placed first-time orders.

We view the increasing volume and expanding customer base as strong indicators that neuro-oncologists who are using our assay recognize its value in improving patient outcomes.

In our quest to lead the emerging category of neurological tumor diagnostics, we are implementing a three-pronged strategy. First, we plan to drive the generation of significantly more evidence by us and by others that demonstrates CNSide's clinical utility. This clinical evidence, once published in respected peer-reviewed journals, will be used to support reimbursement and adoption into clinical care guidelines, which we believe will broaden use among oncologists.

To this end, preparations are underway for our company-sponsored FORESEE clinical trial, with enrollment expected to begin in the third quarter of this year. The FORESEE study is a two-part multi-center prospective clinical trial that will enroll patients with breast or non-small cell lung cancer, who have suspected or confirmed leptomeningeal metastasis. The trial is designed to compare CNSide with CSF cytology and radiology. As mentioned, these methods have limited sensitivity and specificity, and lack the ability to qualitatively measure disease response to treatment.

The goal of the FORESEE study is to further evaluate the performance of CNSide in monitoring response to treatment in a prospective clinical trial setting and to assess the impact of CNSide on treatment decisions made by physicians. This trial design is directly focused on demonstrating clinical utility, which is based on how and to what extent physicians find value in the detection of disease and how CNSide influences them in their decision making.

We also intend to solicit and fund select investigator-initiated trials, with the first such study expected to begin before 2022 year end. These studies will target specific indications for use of CNSide, some of which may lead to expanded market opportunities. We are excited to extend our relationship with several highly supportive neuro-oncologists, key opinion leaders do conduct these trials.

We will utilize the clinical evidence from these studies to create benchmark peer-reviewed publications, demonstrating the valuable role CNSide can play in the care of patients with metastatic central nervous system cancers. We expect to submit the first peer-reviewed papers this year with publication expected in the first quarter of 2023.

Our second initiative is focused on leveraging CNSide to drive collaborations with biopharma companies seeking to develop treatments or expand the use for existing targeted therapies for central nervous system tumors. The ability of CNSide to capture and characterize circulating tumor cells in a patient's cerebrospinal fluid enables the identification of biomarker targets that are susceptible to approved and in-development therapies.

Additionally, the ability to quantitatively monitor the level of cancer cells in the CSF during treatment can indicate therapeutic benefits. CNSide may provide an observational endpoint for these trials and, subject to inclusion in standard of care guidelines, has the potential to become an efficacy endpoint indicator for therapies undergoing clinical investigations.

We have already developed a robust funnel of potential biopharma collaborations, having identified more than 50 relevant opportunities. We expect a near-term announcement for our first CNSide revenue-generating biopharma collaboration with the potential for an additional collaboration before year end.

And our third initiative is to identify additional technologies, products, and services we can in-license or acquire, that can augment our offerings to neuro-oncologists. We are on the hunt, but we are very early in this process and have yet to set any milestones for the near term. Although our primary focus is on CNSide, we will continue providing our community with RT-PCR COVID-19 testing, while maintaining a nimble posture to definitely respond to other critical public health diagnostic testing needs should they emerge.

As of May 31 this year, we have received more than 920,000 samples for COVID-19 testing since we began providing this service in June 2020. Currently, our volume is running at an average of approximately 5,000 samples per week.

You may be aware of that federal funding for COVID-19 testing for the uninsured has lapsed, and that the federal Health Resources and Services Administration stopped accepting reimbursement claims as of March 22. It's still too early to determine how this change will impact our COVID-19 testing service.

We are better positioned in some molecular labs to continue providing COVID-19 testing services, because many of our customers are skilled nursing facilities that are subject to routine testing requirements. We also continue to serve select California community colleges, each of which has its own COVID-19 testing protocol. With the recent surge in COVID-19 cases reported in the media, we have seen an uptick in the positivity rate. This could lead to more testing from our skilled nursing customers. However, samples from our college program are currently declining as the schools begin summer break.

Needless to say, it's difficult to predict the prevalence of COVID-19 going forward. That said, we plan to offer this service for as long as there is need, and we can do so profitably. At this time, we do not anticipate performing COVID-19 testing beyond 2022. Importantly, we have a solid balance sheet with cash resources we believe are sufficient to fund our planned operations over the coming year, including investments in our CNSide clinical trial.

Lastly, we have rationalized or are in the process of rationalizing several service lines and business collaborations. As we previously announced, we are judiciously exiting our blood-based oncology diagnostic business to focus our resources on the most promising opportunities involving cerebrospinal fluid. This initiative is about 60% complete, and we expect to be fully completed by the end of the third quarter. These changes will also impact our expense structure. And we'll talk more about that once the rationalization is done.

Before opening the call to your questions, let me summarize what I've shared with you today about our rationalized strategy.

Our objective is to lead the emerging category of neurological tumor diagnostics. We intend to generate the requisite clinical utility evidence that will support CNSide reimbursement and adoption into patients' care guidelines. We are also in the process of forming collaborations with biopharma companies that are developing treatments for central nervous system tumors. And we intend to support our community with RT-PCR COVID-19 testing for as long as necessary.

We have laid out our near-term milestones as follows. We expect to announce our first revenue-generating biopharma collaboration in the coming weeks. We plan to begin enrollment in the FORESEE clinical trial in Q3. We expect the initiation of at least one investigator-initiated trial by year end. And we expect the initial CNSide clinical study results to be published in a peer-reviewed journal in the first quarter of 2023.

We believe Biocept is on an optimal path for growth in building shareholder value. We look forward to sharing additional milestone markers of our success as we make progress on the goals that we've laid out today. As always, we are committed to improving patient treatment choices and clinical outcomes. And with that overview, Antonino and I are now ready to take your questions. Operator?

(Operator Instructions)

While we are waiting for the first question, I'd like to again thank shareholders for your patience over the past several months as we thoroughly reviewed our business. We look forward to keeping you posted on our progress and sharing future plan milestones with you.

I'd also like to remind you that our virtual annual meeting will be held this Friday, June 10 at 1:30 PM, Pacific Time. If you have yet to do so, I encourage stockholders to vote on the proposals in the proxy statement. Your vote is important. Please vote your shares whether or not you plan to attend the meeting. You can find voting instructions in the proxy card that accompanies the proxy statement.

Okay, operator, we're ready for the first question.

Michael Okunewitch, Maxim Group.

Hey, guys, thank you for taking my question, and thanks for providing us with the strategic update.

Thank you, Michael.

I'd like to, I guess, first just touch off on the opportunities for CNSide beyond the initial target of brain metastasis. In particular, is there an opportunity to use this in primary CNS tumors, in particular on the monitoring and response to treatment applications?

The short answer to your question, Michael, would be yes; we do envision that. We have a lot of work to do to understand exactly how we can contribute to these other disease indications. But given the fact that we have the ability to both assess cells and also assess the nucleic acids that are contained within the cerebrospinal fluid, we do see applications for our capabilities in these other indications [for use].

None of those other indications have yet made it into our market -- our total market availability assessments. So the $1.2 billion that are shared with you doesn't include things like primary brain tumors or screening applications for high-risk breast cancer or lung cancer patients. These are all things that are being discussed in the literature. So it's important to point that out. But yes, we do believe we have application in these other disease indications.

Thank you. And then in that same vein, I'd like to see if you could expand a bit. You mentioned potential for application in non-oncology indications. Could you touch on how CNSide might be applied there and what sort of indications we could think of?

So this is highly speculative. So I need to caveat any comments I make. And we're very early -- have done very little research other than speaking with key opinion leaders. But there are -- there is now evidence in the literature that there are cellular processes involved in other neurodegenerative diseases.

Whether or not CNSide will have application in either diagnosing or understanding potential for treatment in those other applications is yet to be determined. But the fact that science already has come to understand that there are cellular processes that are visible in the CSF, gives us a lot of encouragement for some of these other indications.

All right, thank you very much. And then just one more for me and I'll hop back in the queue. I wanted to see if you could comment at all, if you have any data on repeat orders from physicians -- the physicians that are adopting CNSide. Are they pretty much coming back? Do you have any information, any data on that?

It's not been really enough time to provide good insight on that. Everything I have is somewhat anecdotal. We have physicians who are almost every month now trying us out for the first time. We have a very solid cadre of the -- on average, we're seeing about 40 ordering physicians a month, and that's growing nicely.

There's probably a third of those physicians who are routine orders, a third who are using us for select patients, and I guess, to make that another third who are just trying us for the first time to see if there's application. So we do envision in the future being able to provide a lot more insight on these data, on these kinds of metrics. But I believe it's still too soon, Michael, but I appreciate the question.

All right. I appreciate you taking the time to take my questions.

Great. Okay.

Kumaraguru Raja, Brookline Capital Markets.

Hi, Kumar.

Hi. Hi, thanks for the update and also for taking my questions. So first, in terms of the volume growth, how do you see that playing out as the FORESEE clinical trial comes on board and patients start enrolling? Do you expect some movement from the paying patients versus into the clinical trials? And also in terms of -- okay, please go ahead.

That's an insightful question, Kumar. So, yes, we are anticipating that some of the physicians that are commercial or ordering our test commercially are, obviously, going to be some of the physicians we invite into the FORESEE trial. And therefore, they will be having to make choices with -- along with their patients about whether or not that patient is involved in the trial or whether or not it's just a routine commercial sample to us.

So we are anticipating some decrescendo in the commercial volume, but we are hopeful that we'll still be able to stay on a positive trend as we move forward through the clinical trials. But that's an insightful question. Thank you for that. Other questions?

Yes. In terms of the biopharma collaborations, when can we expect to see revenues there?

We hope to be able to put some revenues on the P&L this year. We believe we're close on a number of these potential collaborations. These are not trivial decision processes that these companies are making. There's a lot of back-and-forth analysis, understanding of how the test works. Very typically, our key opinion leaders are involved in these conversations. I think that's important to point out here. But we do anticipate -- very much anticipate having revenue from biopharma collaborations in 2022.

Okay. And in terms of the reimbursement increase, I think you're about $1,700 per specimen right now. In terms of increasing that, you think that's a possibility probably early next year once you have the first publication out? And also in terms of the pharma collaboration, should we be looking at -- in terms of the reimbursement per specimen, what kind of numbers should be -- we'll be thinking there?

So I'll take the last one. On the pharma collaborations, it's too soon yet for me to disclose that. So I'd like to actually post some biopharma revenue and be able to talk live about what we're seeing. So it's just too soon. Excuse me, Kumar.

On the reimbursement for the commercial opportunity, it's actually closer to around $1,000 per case, when you include all payers -- including payers that -- we do still get rejection from payers because the test is not yet in the guidelines. But we do -- we are seeing payment from a number of other folks. So $1,000 is a more realistic average reimbursement for CNSide -- a little over that at the present time.

Now we have laid out internally, which we're not yet sharing publicly, some internal milestones about how we gradually begin to increase the reimbursement for CNSide. Obviously, we have -- because of our past work in blood and also in CSF, we have MolDx approval for reimbursement when we identify circulating tumor cells, whether from blood or from CSF and we perform a HER2 expression analysis via FISH. So for many of the breast cancer metastatic patients suspected of having LND, we do see reimbursement and that is on the order of $2,400 or so.

So one thought we're having is, can we take that same tact for the non-small cell lung cancer patients? We're very early in that process. We've not even made application yet or had a detailed discussion with MolDx, which is why I'm not yet sharing milestones. But we do have a plan that enables us to begin to slowly add other indications or at least others of the markers that we're measuring for these patients to be able to be reimbursed.

The larger question about reimbursement is, when will we be paid for the fact that we have this proprietary technology that is so exquisitely good at capturing and identifying these circulating tumor cells? We call that the enumeration phase of the assay, and we don't get any reimbursement for that yet.

But we understand what it's going to take to get that reimbursement. That's why we need the FORESEE clinical trial and the peer-reviewed publications. Because that's what we'll need to make petition to the folks at MolDx to get that portion of the assay reimbursed as well.

So it's going to be a stepwise, gradual change -- we bet you'll see in time. But rest assured, we're busily working on improving that metric.

Okay. Great. Finally, a question on COVID-19. As there is no reimbursement for uninsured patients, are you going to shift focus mostly on nursing homes, probably with -- you have a lot more clarity on the insurance test as well as the ability to get reimbursed? And how are you -- are you able to exclude patients who potentially might not have insurance?

I'll take the last question. First, if we receive a specimen, we are obligated by law to run the specimen. So we can't -- once we have taken the specimen and we -- in a [session] that we can't use the insurance of the patient to determine whether or not we provide a result. That -- we just have to do that, so that's not even a choice. But I'll let Antonino answer the other --

Good question, Kumar. Hi, how are you? Yeah, we are focusing on the SNFs and the community colleges. But primarily, what's happening is we do have mostly insurance coverage from the folks that we are testing. And then for those folks that aren't -- that do not have coverage or are not paid through the insurance coverage, we typically have a contract with the client. So it'd be actually with the community college district or the rest home itself.

Okay, great. Thanks so much.

All right. Thank you, Kumar. Appreciate the questions.

Len Yaffe, [Everyday] Stock Doc Partners.

Hi, Dr. Yaffe.

Hi, how are you? I hope you're well. As you probably know, this week was ASCO, and there were several presentations. I know one in particular, they talked about this ROS1 target in non-small cell lung cancer. It's only in a small percent of those cases, but it frequently ends up with brain metastasis. Other presentations were talking about this as well.

And so what I was wondering is, have you either had any conversations with any of the payers or oncologists, either while based on this recent data or in the recent past, who are interested in using CNSide, given the recognition that breast and lung cancer can metastasize to the CNS?

Len, we've only had very early conversations about these kinds of things. The data, obviously, coming out of ASCO is hot off the press. So we'll see how that manifests in the coming weeks and months in our client base.

The ROS1 marker is in our NGS panel that's part of our CNSide offering. So we're well suited in that regard. But all the conversations that I've had in that regard at this point have been very early and nothing of -- with any meat or substance that I could share unfortunately.

Right. That's okay. Thanks so much.

Thank you.

Okay. This concludes our question-and-answer session. I would like to turn the conference back over to Sam Riccitelli for closing remarks.

Thank you. And once again, I'd like to thank everyone for participating on today's call and for your interest in Biocept. We look forward to providing an update on our progress during our next conference call in August, when we will report the second-quarter financial results. Thanks, again. Have a great day. Bye-bye.

Thank you.

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