Insight Molecular Diagnostics Inc (IMDX) 2021 Q1 法說會逐字稿

Good afternoon, ladies and gentlemen, and thank you for standing by. Welcome to the Oncocyte Corporation First Quarter 2021 Earnings Conference Call. (Operator Instructions) Please note, this conference is being recorded. I will now turn the conference over to your host, Bob Yedid with LifeSci Advisors. Thank you, you may begin.

Thank you, David, and thank you, everyone, for joining us for today's conference call to discuss Oncocyte's first quarter 2021 financial results and recent operating highlights. If you have not seen today's financial results, please visit the company's website on the Investor page for the press release.

Before turning the call over to Ronnie Andrews, Oncocyte's President and Chief Executive Officer, I would like to remind you that during this conference call, the company will make forward-looking statements regarding future events and projections. Any statements that are not historical facts are forward-looking statements. We encourage you to review the company's SEC filings, including, without limitation, the company's Form 10-K and 10-Q, which identify specific risk factors that may cause actual results or events to differ materially from those described in these forward-looking statements.

These factors may include, without limitation, risks inherent in development and/or commercialization of potential diagnostic tests, uncertainties in the results of clinical trials or regulatory approvals, the capacity of Oncocyte's third-party blood sample analytic system to provide consistent and precise analytic results on a commercial scale, the need to obtain third-party reimbursement for patients' use of any diagnostic test the company commercializes, our need and ability to obtain future capital and maintenance of IP rights and uncertainties associated with the COVID-19 pandemic and its possible effect on our operations. Therefore, actual outcomes and results may differ materially from what is expressed or implied by these forward-looking statements. Oncocyte expressly disclaims any intent or obligation to update these forward-looking statements, except as otherwise may be required under applicable laws.

With that, it's my pleasure to turn the call over to Ronnie Andrews, CEO. Ronnie?

Thanks, Bob. And welcome, everyone, to our conference call to discuss our first quarter 2021 financial results and our operating highlights. Joining me today are Mitch Levine, our Chief Financial Officer; Dr. Doug Ross, our Chief Science Officer; and Padma Sundar, our Chief Commercial Officer. We'll all be available during the question-and-answer session later in this -- in the release call.

It's great to be able to report that despite the ongoing macro environmental headwinds, team Oncocyte has continued to maintain our solid momentum into 2021 with steady execution across our 4 growth engines, bringing us closer to our goal of delivering a single solution for physicians and their patients that will answer critical unanswered questions for the management of solid tumors.

The technologies and tests we've integrated over the past 7 quarters have the potential to improve patient outcomes while also reducing the cost of care and allow Oncocyte to execute commercially in markets, that when combined, have over $10 billion worth of TAMs.

Key accomplishments so far this year include recording our first $1 million revenue quarter; presenting compelling data on DetermaIO in our third solid tumor type at AACR; initiating pilots with 4 pharma companies for DetermaIO; signing major agreements with 2 of the largest molecular platform companies to provide clinical reference testing and validation services across PCR and Next Gen Sequencing platforms, and that will be done out of our Nashville lab.

We acquired Chronix Biomedical, giving us access to IP and technology that allows us rapid entry into the blood-based monitoring world in cancer as well as a high-value reimbursement product for transplant rejection. And finally, we significantly strengthened our balance sheet to support our ambitious growth plans.

Our growing product portfolio positions Oncocyte for both immediate-term revenue generation and long-term growth. And I would like to spend the call today providing an overview of our most recent accomplishment and what's to come across these 4 areas.

To recap for any of our new investors, first, we have DetermaRx, the first and only commercially available predictive test for informing chemotherapy decisions in early-stage lung cancer. We believe our second test, DetermaIO, is the star of our future as a potentially differentiated and proprietary test for immune therapy response prediction that will give oncologists and patients greater understanding of the likelihood responding to an immune checkpoint inhibitor at the beginning of the disease management process to ensure the patient gets the right treatment from the very start, giving them the best chance at a good outcome.

In a very short period of time, we built a compelling foundation of data, demonstrating applicability of this test across all 4 approved immunotherapies: Keytruda, Opdivo, Tecentriq and Imfinzi; and across 4 different indications: lung, breast, bladder and kidney cancers, which together suggests the pan-cancer immune therapy opportunity which is on track for clinical launch later this year.

Third is our pharma services offering from our CAP-accredited CLIA lab in Nashville, which continues to grow, generate revenue, which doubled in Q1 as compared to Q4 2020. And we now have a solid pipeline of opportunities with pharma and diagnostic companies.

And finally, our newly acquired CNI test, which accelerates our entry in the blood-based monitoring for therapy response and for recurrence in cancer, where we intend to replicate our successful DetermaIO development playbook for the TheraSure CNI monitor test for immunotherapy response monitoring. Together, our progress across these 4 growth engines will enable Oncocyte to become a one-stop shop offering DetermaRx, DetermaIO and eventually, DetermaCNI, as proprietary tests that position Oncocyte to become the preferred lab for clinicians who need answers to the important treatment decisions only Oncocyte's test can answer and do that throughout the patient journey.

So let's dive into some of the details on each of the product offering. Q1 was a solid quarter for DetermaRx, particularly given the COVID surge in late January and February, which we now know led to substantial delays for early-stage cancer surgeries, with patients waiting for vaccines and instead relying on radiation treatment until they felt it was safe to undergo surgery.

We've continued our sales efforts to expand to new health systems. And as of the end of the first quarter, we had a total of 129 onboarded systems, which represents a 57% quarter-over-quarter growth. As of March 31, 2021, we had 218 onboarded physicians, a 57% quarter-over-quarter growth rate and we completed testing on 236 patient samples in Q1, slightly ahead of Q4, with sample numbers growing every month in the quarter.

We expect that as COVID cases continue to decline with the expansion of the vaccine programs, patients will be more comfortable seeing their doctors and undergoing these life-saving surgeries. The improving macro environment, combined with our steady growth with onboarding new doctors and hospitals, leave us confident that as our reps can reengage with physicians in person, we'll be able to strengthen our momentum and see increased quarter-to-quarter growth in DetermaRx patient orders in Q2 and throughout 2021.

Our agreement with Burning Rock to distribute DetermaRx in China is progressing as planned. Our continued progress to complete full onboarding and validation in late Q3 leaves us on track for $4 million in booked revenue from Burning Rock in 2021. And it's just the beginning of our efforts to tap into the world's largest early-stage lung cancer market.

Moving to our second growth engine, DetermaIO, where the new data being presented continues to validate that our test is the only precision diagnostic test on the market that evaluates the entire immune microenvironment in biopsies and surgical specimens to identify patients likely to respond to immune checkpoint inhibitors. We believe DetermaIO is poised to significantly improve treatment decisions for individual patients and their physicians as well as help focus development process of biopharma and pharma companies in clinical validation of a new emerging class of immune therapies.

It is clear that the opportunity with DetermaIO is tremendous given more than 750,000 patients will be eligible annually for immune therapies in the U.S. alone. Identifying which of these patients will benefit from ICIs remains an outstanding challenge.

At the recent FDA Oncology Drugs Advisory Committee meeting, where they reviewed retrospective data from the accelerated approvals in the immunotherapy drug class, the committee stated that only modest benefits were observed across diverse and often unselected patient populations. That is why we believe not only -- we believe we not only have a tremendous opportunity in guiding clinical immunotherapy treatment decisions, we believe there's also a huge opportunity to inform the estimated 5,000 ongoing clinical trials evaluating these types of drugs.

The past few months have been data-rich. We steadily provided compelling evidence that DetermaIO has broad potential across a range of tumor types, starting with well-established clinical data across 3 different cancers: lung, breast and bladder. Most recently, at the AACR meeting, we presented our first studies in bladder cancer, where we achieved our primary end point, demonstrating significant correlation between DetermaIO and 2-year overall survival rate to Atezo in metastatic breast -- bladder cancer, demonstrating improved overall survival in DetermaIO-positive patients versus the all-comer population, where the drug had been voluntarily withdrawn due to lack of survival benefit.

Our message is resonating with pharma, and we currently have several pilot studies underway, where DetermaIO is being used to analyze samples from ongoing and failed pharma trials for a potential rescue opportunity. By selecting those most likely to respond, we may be able to help pharma reveal the true benefit of treatment in the right patient population. These pilots have definitive end points and if we hit them, we'll be poised to rapidly enter trials that could lead to a companion diagnostic claim that could broaden and accelerate DetermaIO's clinical adoption.

So with strong data in triple-negative breast cancer, lung and bladder cancer, we booked a solid case that DetermaIO may have pan-cancer utility as a biomarker for many solid tumor types. We're excited to build on this data set with the new results that will be presented at ASCO in early June, where we'll expand to a new indication, renal cell carcinoma. Every new cancer indication moves us closer to being the only precision diagnostic that can accurately predict sustained response across all solid tumors and builds a case for DetermaIO as a pan-cancer predictive test in the $3 billion immune therapy patient selection market. And importantly, we remain on track for clinical launch second half of this year.

Next, I would like to spend some time on our newest product, the TheraSure CNI monitor clinical assay, our entry in the blood-based monitoring in cancer. We recently closed the acquisition of Chronix Biomedical, which provides Oncocyte proprietary access to the TheraSure CNI monitor clinical assay, a patented blood-based assay that uses copy number instability, or CNI, for immunotherapy response monitoring in oncology.

As I said earlier, we'll apply the same playbook we successfully used with DetermaIO this time last year, rebranding the test as DetermaCNI and preparing for market with planned validation studies and publications to support a U.S. research and pharma services launch in late 2021. In the near term, though, we've established a clinical study plan for DetermaCNI, and we'll complete tech transfer to our lab in Nashville and start marketing to pharma companies in the U.S. later this year.

However, we've hit the ground running with the Chronix team, who already have ongoing studies in Europe in multiple cancers, including lung, head and neck, ovarian and pancreatic, with over 700 patients recruited to date across several studies. Data from studies to date had demonstrated broad utility of this blood-only test across 3 areas of monitoring: one, predicting the presence of minimal residual disease post-surgery; two, predicting recurrence in ovarian cancer that is in remission; and of course, three, predicting response to cancer treatment, including, but not limited to, immune therapy treatment.

We believe the CNI test has a number of advantages for patients and physicians. First, it will allow physicians to begin monitoring patients for treatment efficacy more quickly given that the CMS test requires only a blood sample. In contrast, getting a result from the competing emerging test for monitoring can take significantly longer as these tests start with the time-consuming and costly genetic sequencing of a patient's tissue sample.

In several late-stage solid tumors, such as lung, guidelines recommend neoadjuvant therapeutic intervention, not surgery, which means the pathology for these tumors is performed on a fine-needle biopsy, which typically collects very little tumor tissue. So in many cases, the initial pathology will use the majority of the tumor tissue and doesn't leave enough to complete the full genome or exome testing required to run a tissue-informed MRD methodology.

Even in cases where sufficient tissue is available, preserving precious sample to enable other tests will be an added benefit of Oncocyte's fully blood-based approach. In addition, we believe the CNI test will be able to deliver timely results on progression at the second cycle of immune therapy, which is weeks earlier than currently seen with imaging or the tissue-informed technologies.

From an overall strategic perspective, TheraSure CNI monitor assay will not only help us expand in the projected $3 billion and growing immunotherapy response monitoring market, it will also provide us ownership of IP that could help develop a foundation to build additional applications for the estimated $6 billion-plus recurrence monitoring market, a repeat testing opportunity that tells a patient that a second tumor may be forming long before it can be identified by imaging.

These additions bring Oncocyte a distinct competitive advantage as the first and only company to potentially offer a continuum of tests from selecting patients for immune therapy, to monitoring the effectiveness of treatment as well as monitoring for recurrence.

The Chronix acquisition was also important in that it included test and a patent state for the use of digital PCR to detect transplant rejection in recipients. The Chronix TheraSure transplant monitor test is a solid organ transplantation monitoring test intended to use a simple blood draw to monitor for rejection of transplanted organs. Excitingly, Palmetto, the Medicare administrative contractor for the Centers for Medicare and Medicaid Services, or CMS, recently issued a local coverage determination, or LCD, recognizing molecular testing for solid organ allograft rejection as a category test eligible for Medicare reimbursement. This LCD creates a pathway for future Medicare reimbursement for the TheraSure transplant monitor test in the organ transplant space.

Of note, the coverage policy for transplant rejection monitoring molecular testing for solid organ allograft rejection, as it's titled, exclusively cites 3 peer-review publications on the performance of the Chronix test in solid organ transplant monitoring, which is an important validation of the Chronix technology. In addition, the policy establishes a price point out of $2,700 to $2,800 per test, depending on the organ transplanted, which we estimate could translate to total revenues of $40,000 to $50,000 per patient over a 2- to 3-year time frame, assuming current transplant monitoring guidelines are followed.

While we will explore licensing in the TheraSure transplant monitor to potential partners for use in the transplant field, the underlying technology may be of interest to Oncocyte's core cancer-related assay business. We believe there's an opportunity for the use of technology in the development of a super-sensitive test to detect tumor-derived DNA in blood to monitor for long-term cancer recurrence, which will ultimately become DetermaMx and complete our continuum of application.

Although our focus were made in oncology, this LCD per transplant use, along with the key attributes of this technology, including greater sensitivity, reduced cost to run and most importantly, the ability to kit and democratize the monitoring test to improve turnaround times, makes this a highly attractive asset for players in the transplant diagnostic market.

And finally, coming to our fourth growth engine, our pharma services business. We currently have a solid and growing pipeline of contracted pharma services projects. And while we know, traditionally, these revenue streams can be lumpy and directly related to project time lines and sample delivery from our pharma partners, we -- I would like to enthusiastically report that pharma services revenues did double quarter-over-quarter.

Another noteworthy accomplishment in pharma services was the Q1 initiation of a project from a very large study by a top 20 pharma company using our proprietary blood-based cell cycle assay for monitoring resistance in our pharma partner's Phase III trial. It's the first major trial using this test, which was developed in-house by our team in Nashville specifically for this indication.

And finally, we're thrilled to announce agreements with 2 of the largest molecular platform companies. Our work with these 2 global leaders will focus on clinical validation and system integration of selected tests on their respective PCR or Next Gen Sequencing systems. These 2 agreements will begin to bear fruit in late Q2, and we look forward to working closely with these 2 large strategic partners. And of course, there's more to come, but the progress in growing the client base and projects in pharma services provides an immediate and growing revenue engine to help smooth out the lumpy quarterly revenue ramp traditionally experienced when building a pharma services business. As well, these relationships with global platform companies will support our operations as well as our strategic development of future tests for our sales channel and potentially provide a partner for kit development and distribution ex U.S.

As I look out in the rest of 2021, I envision a great year with rising revenues and at least 3 product launches: DetermaIO, DetermaTx and DetermaCNI. These products have a large total market opportunity of over $10 billion, and we have proprietary positions in some of the fastest-growing areas of molecular oncology. We're beginning to attract the attention of leading pharmaceutical, biopharma companies and molecular diagnostic tool platform providers. And we are bullish on our opportunity to complete important contracts with these global partners to strengthen our market position.

It takes time to develop a comprehensive diagnostic platform for cancer, but we're making great progress in all areas, thanks to an incredibly dedicated team.

At this point, I would like to turn the call over to Mitch Levine to review our financials. Mitch?

Thanks, Ronnie. Hey, everybody. As of March 31, 2021, we had cash, cash equivalents and marketable securities of $59.8 million following the equity capital raises we completed in January and February as well as through the use of our ATM, which, in total, added $69 million in cash to our balance sheet. This included $25 million from a direct placement of equity with 2 prominent health care investment funds in January. And due to strong demand, we completed an underwritten public offering that raised an additional $37.9 million in net proceeds in February.

We also paid $10 million in February to complete the Razor acquisition, giving us full control of the DetermaRx test, which now allows us to execute our U.S. -- our ex U.S. tech transfer to international partners.

Cash used in operations for the quarter was around $6.3 million for normal operating burn, plus $1.6 million in discretionary annual merit and bonus payments and approximately $1 million in nonrecurring legal and business development expenses paid in the quarter. Excluding these items, we expect our base operating cash burn to increase modestly in future quarters as we continue to invest in clinical studies for DetermaIO and DetermaCNI as well as investments in sales and marketing to drive increased adoption of our DetermaRx test and other tests we may commercialize, license or acquire.

As a reminder, the first quarter of each year is generally our largest cash burn quarter due to annual merit and bonus payments. Excluding such periodic or onetime items, cash used in operations for the quarter was around $6.3 million for the base operating burn. Onetime nonrecurring expenses in the first quarter of 2021 included fees related to our underwritten public offering, annual bonuses and legal fees arising from business development activities. An additional onetime expense in the quarter was the relocation of our Brisbane lab for DetermaRx to our headquarters in Irvine, California.

Also, in Q1, we invested in critical personnel, hiring 12 new employees in areas such as pharma R&D, market access, sales, business development and medical education as we endeavor to quickly bring our diagnostic test to market and CMS reimbursement.

With the continued ramp in revenues of DetermaRx, combined with the solid quarter from our pharma services business, our consolidated revenues for the first quarter of 2021 were approximately $1.12 million, an impressive 123% increase from the fourth quarter of 2020 as revenues from both sources increased.

I would like to remind everyone that we launched DetermaRx 1 year ago. As we accumulate payment history and experience, we are able to progress from recognizing revenue on a cash basis to an accrual basis that records revenue in the period that tests are performed.

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

Operating loss as reported for the first quarter of 2021 was $11.4 million, an increase of $2.9 million from the first quarter of 2020. Operating loss as adjusted for the first quarter of 2021 was $8.6 million, an increase of $1.2 million as compared to the same period in 2020. We have provided a reconciliation between GAAP and non-GAAP operating losses in the financial tables included with our earnings release, which we believe is helpful in understanding our ongoing operations.

Cost of revenues for the current quarter was approximately $1 million, which included $307,000 in noncash amortization expenses from our Razor asset acquired in February. As a reminder, the cost of our Razor asset amortization, which is a noncash 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.

It is important to note that as we ramp our testing volumes, we expect to see an improvement in our gross margins in future quarters for the DetermaRx test.

Research and development expenses for the first quarter of 2021 were $3.4 million as compared to $2.2 million for the same period in 2020, an increase of $1.2 million. General and administrative expenses for the first quarter of 2021 were $4.8 million as compared to $4.6 million for the same period in 2020, relatively unchanged. Sales and marketing expenses for the first quarter of 2021 were $2.3 million as compared to $1.5 million for the same period in 2020, primarily attributable to ramp-up in sales and marketing activities for our continued commercialization efforts of DetermaRx. For the first quarter of 2021, we reported a net loss of $3.9 million or $0.05 per share as compared to $7.7 million or $0.13 per share for the first quarter of 2020.

We are very pleased to announce the newest member of our finance team, Li Yu, Vice President and Controller and Principal Accounting Officer. Li comes to us as a former Big 4 CPA with a masters in accounting and more than 21 years of U.S. GAAP, FP&A, SEC reporting and SOX controls experience. Li is clearly a fantastic hire and will be a critical member of the Oncocyte team.

We have a good history of making timely, thoughtful strategic investments in clinical studies and additional sales and marketing initiatives, which allowed us to continue to build our momentum so far in 2021. And we'll continue to evaluate key studies for DetermaIO, and now DetermaCNI, that will help us accelerate these 2 important products towards market launch and uptake. In addition, we have several new relationships with biopharma and molecular platform companies that may require some capital investment to get the revenue streams flowing from these services opportunities.

Our pharma services infrastructure remains extremely lean, and we expect investments of this kind will lead rapidly to new revenues in the second half of 2021 and beyond. We are pleased with the growth of DetermaRx and positive developments with DetermaIO and DetermaCNI, our new blood-based monitoring test. We believe these tests give Oncocyte a distinct competitive advantage as one of the first and only companies to potentially offer a continuum of tests, from selecting patients for immune therapy treatment, to monitoring the effectiveness of that treatment.

That concludes my remarks concerning our financial highlights. And I'll turn the call back to Ronnie.

Thanks, Mitch. Operator, that concludes our prepared remarks. We would like to now open the floor for questions.

(Operator Instructions) Our first question is from Mike Matson with Needham & Company.

I guess I want to start with the quarterly revenue. So it sounds like most of the, I guess, sequential growth came from the pharma services part of the business. Is that right? And does it -- is that just sort of the lumpiness going on there? Or is that a sign that you're going to have -- is any of that sustainable, I guess, is what I'm getting, over the next few quarters?

Yes, both Rx and IO had significant revenue increase to get us over $1 million. So -- but we did see around -- it's about 50-50 contribution to the number. So you had about just a little over $500,000 in Rx and a little over $500,000 in the pharma services group.

In terms of the lumpiness, we have a nice pipeline in the pharma services area. So the challenge, as you know, in pharma services, is you are at the mercy of the samples that the pharma companies collect to send you. So adding these 2 global diagnostic platform company projects really helps us smooth out because these are validation and verification services as well as some clinical development services. And so they're more -- we're more in control of the milestones in terms of our ability to complete the work and hit the milestone, so it's much more predictable than on the pharma side, where we're dependent on them to find patients to send us for their clinical work. So I'm not going to promise it won't be -- still be a little bit lumpy, but we do think that these 2 new agreements help us a lot.

As far as Rx, we saw -- January and February were slow. I think we had said that at the end of Q1. But when we look back, March, we saw an increase in sample volume in March, and we've now seen a continued increase every month. So I -- we believe that the pandemic is not "over" in terms of surgical procedures, but it appears that, that as more and more people get vaccinated and we reach a point of, what we hope will be, a new normal equilibrium, that these patients will see -- will go back and start getting these surgeries. And we certainly have seen that so far in March and April. And -- but we'll see as we get to the end of the quarter.

But we're pretty confident that with the doubling of onboarding accounts and doubling of onboarded docs, that we certainly have the right path forward, and our reps, as soon as we can start getting in and actually detailing and doing what we like to call the same-store sales or same-account sales with these new docs, that we'll be able to start to see and grow these sample volumes again in Q2 and on through the year.

Okay. That makes a lot of sense. And then the 3 DetermaIO pilot projects with the pharma companies, can you tell us any more about these? And how long does that pilot phase sort of last before they were going to more of a regular phase, I guess?

Yes. I'm going to let Dr. Ross take that one.

Yes. Sure. So these are pilot projects where it varies. Sometimes, it's in a silico project. Sometimes, it's a small wet project of samples or data that they have available. And it's really a period of getting introduced to us, into the assay. And then it hopefully progresses to the next stage, where we would be part of a prospective study or a larger retrospective study. So it's the natural progression of a relationship with somebody who's getting to know you, your assay, and quite candidly, pivoting what is usually an existing biomarker strategy. So that's the first stage.

What's very interesting and exciting about these pilot projects is that with biopharma companies, they are actually developing novel therapeutics. So they are looking to see whether our biomarker is predictive for these new so-called second-generation therapeutics. So we believe that if they do see a predictive signal, then to Doug's point, it will pave the path for them to incorporate our biomarker into their program.

Yes. I think the main thing to note, Mike, is the reason they're pilots is because both pharma and us want to get to a go or no-go decision point rapidly. And so by the sheer nature of them being pilots, we have -- or the studies are geared towards fast turnaround time of the results so we can get to an answer for them and for us.

Our next question is from Mark Massaro with BTIG.

And congrats on all the progress.

Thanks.

Thanks, Mark.

I guess my first question is, I think you alluded to it, but the volumes for DetermaRx were, call it, roughly flat. You talked about January and February being impacted by the pandemic. So is it reasonable for us to think that you should have sequential growth in Q2? And then, I believe, you might have somewhere close to 10 reps in the field. Can you clarify that? And what percentage of your reps are actually out and about in the field?

Yes. It's a great question. Let me take it a high level. I'll turn it over to Padma, who's obviously here with me. Yes, I mean, volumes were flat quarter-over-quarter. We were not -- I was surprised by that until we got into mid-March. And we saw February -- January and February, the surge. And when we started doing our -- sort of putting our feelers into the market, some of the rumors we heard, we felt, were true, and that is we are -- we heard they were true, which is patients were getting radiation to bridge them until vaccination so they could get surgeries.

And so -- and we saw March, and obviously, was a much bigger month than February and January. So we're feeling much better that we're starting to come out of the pandemic hangover, but we won't know completely until the end of the quarter. But we do have line of sight to quarter-over-quarter sequential growth in sample volumes in Q3 -- I'm sorry, Q2 over Q1, for sure. So Padma, you want to...

Yes. So I think what's happening is we grew every month, January -- February compared to January and March compared to February. So that's a good sign. In terms of our reps, I would say about half of our reps in certain parts of the country are slowly but steadily getting access to the doctors, but the other half are still working virtually. And one of the things that does do it is a lot of this work is blocking and tackling to make it -- to make sure that the offices actually remember to order the DetermaRx in every eligible sample. So to the extent that it is virtual, that blocking and tackling gets slowed down. And obviously, as more and more offices open up, the reps will be able to get in there.

The other thing is about 60% of our reps have been in the field for -- have been hired or on the job for less than a quarter. So as they get trained and as they build their connections and they -- as they mature, we expect all of the reps to become as productive as the ones that have been with us in the prior year. So both of those trends will -- are positive for DetermaRx. And of course, the downside of that is the radiation, which is very interesting. To some extent, there has been a trend where radiation is being used as a substitution for surgery. That will not continue for all patients, but some of that might become a persistent new normal in some cases.

Okay. And you guys talked about launching DetermaCNI for clinical trial or RUO use later this year. What needs to happen for you to prepare that for a clinical launch? I'm guessing it's data and reimbursement. But can you give us some sense on what activities you're doing to ready that for a commercial clinical launch?

Yes. Absolutely, Mark. First off, when we acquired CNI and we actually -- the deal was done, we got a wonderful surprise in the fact that they had already had numerous studies ongoing in Europe. And we have over 700 patients now enrolled across a number of different tumor types for CNI. And so the critical mass and speed at which we can gain critical mass and statistical powering these indications is obviously enhanced by the work that they were doing, and now we've been able to invest to ramp that up. In order to bring it to the U.S., Doug, you want to comment on the tech transfer component of that and...

Yes. So we are doing a tech transfer in Q4 over to the U.S. to facilitate work that goes on in this country. And we're also -- the early trial that we're doing, the prospective trial that we're doing is going to be done in Europe, starting this summer out of the European lab. And so we want to aggressively expand that into the U.S. And so having that running out of our Nashville facility is the plan. And to move it towards commercial launch, we're trying to drive -- do clinical studies in a single clinical indication where it's very clear what the actionability of it is. And that's the plan to drive it towards a commercial launch.

And the reimbursement path, we've had initial discussions, is actually quite straightforward in that there's already a local coverage decision, as you know, Mark, very well for blood-based monitoring tests. So as long as the next test is equivalent in performance to that first step, it is covered under that policy. So once we have the data demonstrating equivalence to the first test of the market, the coverage is -- it's, in a sense, automatic.

Yes. So we feel pretty good, Mark, once we get momentum under the U.S. studies. And then there's always the opportunity potentially to petition CMS with European studies. But I think that, obviously, we don't want to wait on that. We want to get going in the U.S. as soon as we can. But we were very excited to see the progress that CNI -- or that Chronix had made between the time we had initiated our licensing deal in the fall and obviously, the acquisition. So we -- they've made a lot of progress ahead of us actually acquiring the product -- or the company, and so very excited about where CNI is and how fast we might actually be able to bring it through the system here.

And the data shows a couple of things. Obviously, it's blood only, which is a great source of differentiation. And second, it's broad. It's not just for immune therapy response prediction, it's for treatment response prediction, which includes immune therapy. And in some cases, where the standard of care is chemotherapy, it includes response to that as well as some early data in MRD. So it's a pretty broadly applicable asset.

Yes. I think you're going to see -- there's a -- I don't want to let too much of the good news out of the bag here because it's not -- it hasn't been formally blessed yet, but we have a paper that has been accepted by a very prominent journal around using our CNI assay as a monitor for progression of ovarian cancer as a very specific monitor of progression. And it's -- so far, the data looks significantly better than the current protein biomarkers that are being used for monitoring for ovarian cancer. So lot's of good things coming out of the CNI acquisition, and we look forward to bringing those to market.

Okay. And just last one for me. Are you guys still on track to show the Milan data at ESMO for triple-negative breast cancer?

Absolutely. We would love to talk about it today, but it's embargoed. And our trial partners obviously are eager to get it out as well. But ESMO, they're a European group, and ESMO is their big annual meeting. And so that's what we're shooting for, but we're on schedule for that. And Doug, any further comment on that?

It's been submitted, which is kind of the criteria. And obviously, they haven't -- there's nothing more to know about it than that.

Yes. Except that we can't wait until it gets released. Now that's...

Our next question is from Thomas Flaten with Lake Street.

On DetermaTx, with the pending launch, can we make the assumption that a panel has been selected at this point?

You can. We have found what we like best, and we are in the process of validating Tx. And it is -- we took a strategic approach to this, Thomas, in that we wanted a technology that could allow us to continue our approach to tissue conservation, especially given we're in lung cancer, we typically will get -- after Rx, where you get the tumor section. After that, it's neoadjuvant. So you're going to get these fine-needle aspirates. And so we chose to go after a technology that doesn't require a significant amount of tissue or extracted DNA and RNA. And so that platform is moving forward, and we're excited about the decision and more to come.

And then just a couple on -- oh, sorry, Padma, go ahead.

Okay. It will -- the panel that's been selected will fulfill sort of our objective of being that one-stop shop for all the targeted therapy as well as all the immune therapy [decision].

Yes.

Got it. A couple of Rx questions. Do you know what the Medicare-Medicare Advantage mix was of your sample volume, or percentage, I should say?

So as anticipated, it followed the incidents in the markets. It's about 70% together.

Great. And then where do you stand with the NCCN? I know you had talked about submitting a package to them ahead of the summer meeting. Has that been submitted yet? Or can you just give us a sense of where you are with that?

Yes. So Doug is here with me, right next to me. We are both vaccinated. So yes, so we are on -- they have a summer meeting in July, where they review typically the diagnostics packages. And pharma is, of course, a rolling basis. Yes, we are on track to submitting an application for their July meeting. They do make -- it's a closed-door meeting, and they do make their decision in that meeting. However, they are prevented from disclosing what the decision is until the next update comes out, and we think that will happen in the Q4 time frame.

What we're looking for, Thomas, is we were going after 4 various tiers of acceptance within our application. And so we'll actually have 4 shots on goal in terms of the indication that we're looking to support in their blessing. So more to come on it, but the application is going in. And we're expected -- we expect we'll be on the agenda, and we expect that we won't hear from them until Q4. But we're very hopeful given the work we've done with the various NCCN sites so far.

Great. Congrats on the quarter.

Yes. Thanks, Thomas.

Our next question is from Steven Mah with Piper Sandler.

So real quick on DetermaIO. Given the very positive data that you guys presented at AACR, I'm curious to know, have you gotten more traction with potential pharma partners since that data release for patient stratification or companion diagnostics opportunities?

Yes. So these pilot -- these 4 pilots that we are now engaged with came from sort of the -- a byproduct of the data that we've been releasing this year. And we have a number of other conversations ongoing as well. But those 4 were directly related to the data that we've shown year-to-date. And so obviously, with ASCO coming in a few weeks and another indication around renal cell carcinoma, we're hopeful we'll continue to gain momentum. But we're very hopeful with these 4 pilots that, as soon as they're completed, they will lead to some more substantial relationships and potentially the CDx we're looking for.

Okay. Got it. So you guys see a path forward into potentially entering Phase III and diagnostic trials.

Yes. We do, for sure. And it's not going unnoticed that we seem to have somehow been asked to get active in looking at a lot of trials with Atezo, where there were failed arms or inadequate statistical power of arms. And we continue to do well with that therapeutic. So we'll see. We certainly have the final report out at the mentioned -- previously mentioned ESMO this fall, where we'll have the NeoTrip data for triple-negative breast, which is prospective data and randomized. So it will be interesting to have that data. But clearly, so far, the data we've seen and the data we publish is very interesting to pharma.

I think the -- what I think we projected on previous calls where it's much easier to engage biopharma that's early in the development cycle than it is to pivot a very large pharma, which has an existing biomarker program, towards our approach. It's exactly what's playing out. But that isn't to say that we haven't gotten their attention. And it's compelling data, but it's slow to shift these very large ships, if you will.

And the reason they're interested is, I mean, obviously, they would want to give the drug to their entire patient population. But as the recent scare from bladder cancer shows, if you give it to an all-comers population, you may or may not achieve your end point like overall survival. And so if you select a biomarker-positive population and include them in the trial, that sort of derisks their clinical trial because at least they have of a higher probability of achieving the end point in that subpopulation. And that's what is piquing their interest and their desire to at least include the biomarker in the clinical trial as a so-called derisking strategy for the trial itself. And that's the response we're getting.

Yes. Okay. Yes. That makes sense. And apologies if this was already asked, I had to redial back in. But on the DetermaRx volumes, that was flat sequentially due to the pandemic, do you guys expect a Q2 catch-up?

We are expecting growth quarter-over-quarter in terms of the sample volume growth, and we've already seen some of that. So we are expecting to have sequential growth from the [2 36] we did in Q1, upward. So we're not -- we haven't projected those volumes, Steve, but we certainly are seeing that already. And so far, we're about halfway through the quarter. So...

Okay. Got it. And then last question. Given the 3 new test launches, can you give us some thoughts on the sales force hiring cadence ahead of those 3 launches?

Yes. I'll let Padma go into detail if you're interested. But the reality is, right now, the goal is to add some new territories as we enter Q3, preparing for the launch. But we also -- there's also some creative opportunities we might have as well, where we might have some indications in certain areas of therapeutic, where we might get some support from one of the pharma companies. So working on that, but I think you will see some growth in the sales force probably Q3. And you will probably start to see the expense impact in Q4 though.

One thing to add is several of our sales reps already have deep connections with oncologists treating lung cancer, thanks to DetermaRx. So as we think through adding headcount, we will consider the fact that in some geographies, we already have sales reps with deep connections with lung cancer oncologists. So we don't need to necessarily replicate a sales rep in that area. So we'll be very judicious in how we think about adding sales reps.

As well as we've seen real success in adding medical education headcount as well. Because this is -- Rx, but even more so with IO, is going to be a fairly doc-to-doc or scientist-to-scientist discussion. And so as the reps go in and generate the open-door opportunity, having support folks that can go in and get deep down into the science and answer the medical questions will be helpful as well. So you'll start to see some increase in that area as well.

Okay. Great. And congrats on the progress.

Thanks, Steve.

Thanks, Steve.

Our next question is from Paul Knight with KeyBanc.

Could you talk to the fact that you had 60 million covered lives added, what, on Rx in the quarter? And where are you in total covered lives now?

Yes. So for Rx, obviously, CMS was our big fish there. We got that already. Multiplan is our first private payer. So...

So if you added that up, the Medicare and Medicare Advantage is 70% of the 40,000 lives already covered. So that's 28 million. And then Multiplan, in general, has 60 million covered lives, but it's -- so that's another incremental for their population. That would probably -- that is not a very high volume for Rx, maybe several hundred thousand would be [my bet on] Rx.

Yes. So we're probably somewhere in the low 70s of total number of covered lives. It's a great question, Paul. But we are working, as you might imagine, on getting all because we're getting paid by some of the private payers, but they're paying very slow. As you might imagine, we're having to fight for every penny. That's the nature of that world. So we would love to get in there.

We hired a -- we went -- in Q1, we hired a professional from that area. He has great experience, and we're already seeing the benefit of that. So part of the beauty of what Mitch has done to help strengthen our balance sheet is be able to go and get some of these key players that we needed on the field to help us in some of these key areas. So...

So we're targeting the plan that has -- where we have the highest number of claims. And so we're going back to them and saying, "Now we have enough claims in your population, can we contract with you?" So that's the strategy. So we're targeting 3 to 5 top payers and hope to get -- with the goal of getting the test under contract at a price similar to Medicare, which is what we did successfully with Multiplan.

Yes.

Sure. I [should have] probably one of the Blues this year and what's your thought if you get a Blue this year to do -- that kind of starts the momentum though.

Correct.

No doubt about it. We are in constant conversation with them. And so, anyway, it -- they're...

Just to add some color, [Paul], in regard the bureaucracy, we have been targeting and we've been in great conversations with one of the Blues. The Medical Director has passed the test and made a decision to contract with us, but it's going through their bureaucratic process. You wouldn't believe how long it's been taking. So once that Blue is signed up, and unfortunately, in that process, I can't give you a date, then you're absolutely right. But that will go to the other Blue, and that sort of starts the process.

That's a nice cascade for us. So we're short of dropping in there personally and encouraging them. We -- it's been a difficult slog through their process.

(Operator Instructions) Our next question is from Bruce Jackson with Benchmark.

So most of my questions have been answered, but I wanted to see if we could dig into the press release where you mentioned you initiated a project utilizing the proprietary blood-based cell cycle test for monitoring resistance in the Phase III trial. Can you maybe tell us what you're monitoring the resistance of? And what is the test application? And how do you envision the test result being used?

Yes. You know what, it's a sales cycle assay that basically looks at, in blood, Ki67, and the proliferation rate post-therapeutic intervention. It's a large European pharmaceutical company. It's a Phase III trial. We developed the assay for them. We are excited about the opportunity to be in our first CDx. We hope we have many more of these but -- in DetermaIO in the future. But this is a great example of just the ability of the team in Nashville to develop proprietary assays.

And so right now, we'll see where we end up. I think the jury is out on whether this will be an ongoing therapeutic and if it is, whether we'll have a true CDx. But it's certainly in process, and we'll have more to come in future quarters.

Okay. Great. Congratulations on the quarter.

Yes, Bruce, thanks a lot.

Ladies and gentlemen, we have reached the end of the question-and-answer session. And I'll now turn the call back to Ron Andrews for closing remarks.

Yes. Thanks, everyone, for joining us. 2021 is poised to be an amazing year for Oncocyte. We have progress on all fronts. Despite the headwinds from the pandemic, we seem to be emerging, with our Rx volumes starting to come back. But the exciting part ahead is the DetermaIO data that's still ahead of us as well as now launching DetermaCNI. So we will be the only company with not only a test that can predict with precision responders for immune therapy, we'll also have a blood-based assay that can identify therapeutic efficacy within weeks after the first dose of therapy, which will be very important for physicians.

So we're very excited about the year ahead. We remain committed to work with our physician base and our patients. And we're very excited to continue to report out the progress that we plan to make over Q2 and the rest of 2021. So thanks for your continued support. Thanks for joining the call today. And everyone, stay safe.

Thank you. This concludes today's conference. Thank you for your participation. You may disconnect your lines at this time.