Sera Prognostics Q1 2023 Earnings Call Transcript

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May 10, 2023

There are 8 speakers on the call.

Operator

Afternoon, and welcome to the SARA Prognostics Conference Call to review the Q1 Fiscal Year 2023 Results. At this time, all participants are in a listen only mode. We will be facilitating a question and answer session toward the end of today's call. As a reminder, this call is being recorded for replay purposes. I would now like to turn the call over to Peter Donato of CapCom Partners for a few introductory comments.

Operator

Please go ahead.

Speaker 1

Thank you, Darcy. Good afternoon, everyone. Welcome to Serra Prognostics' Q1 fiscal year 2023 earnings conference call. At the close of the market today, Cerep Lognostics released its financial results for the quarter ended March 31, 2023. Presenting for the company today will be Greg Critchfield, Chairman, President and CEO and Jay Moise, our CFO.

Speaker 1

During the call, we will review the financial results we released today, after which we will host a question and answer session. If you've not had a chance to review our quarterly earnings release, it can be found on our website atceraprognostics.com. This call can be heard via live webcast atceraprognostics.com and a recording will be archived in the Investors section of our website. Please note that some of the information presented today may contain projections or other forward looking statements about events and circumstances that have not yet occurred, including plans and projections for our business, future financial results and market trends and opportunities. These statements are based on management's current expectations and the actual events or results may differ materially and adversely from these expectations for a variety of reasons.

Speaker 1

We refer you to the documents the company files from time to time with the Securities and Exchange Commission, specifically the company's annual report on Form 10 ks, its quarterly reports on Form 10 Q and its current reports on Form 8 ks. These documents identify important risk factors that could cause the actual results to differ materially from those contained in our projections and other forward looking statements. As a reminder, a webcast replay of this call will be available on the Investors section of our website. I'll now turn the call over to Greg, Cereprognostic's Chairman, President and CEO. Greg?

Speaker 2

Thank you, Peter, and good afternoon, everyone. The start of fiscal 2023 has been both exciting and encouraging for us in our Pathway toward more broadly commercializing our preterm test while fostering early revenue growth. Keying on what we expect will be a strong year of solid developments for With the announcement in February of positive top line results from our AVERT preterm trial conducted at ChristianaCare Wilmington, Delaware. We are pleased to see increased numbers of tests being ordered by physicians as we continue to expand the number of providers who are offering preterm testing to their patients. A year over year comparison of the 1st quarters of 2023 and 2022 showed a 3 20% increase in tests reported.

Speaker 2

While these are admittedly on a small yet growing base, we are continuing to see demand grow. While we are unable to speak about many or Of the early adopter customer groups, we are making progress with hospital systems and selected physician practices who are beginning to contribute to the increased numbers of orders we are seeing. There are also early adopter integrated networks who have requested to see a VRT preterm trial and other clinical data that are being prepared for submission to scientific and clinical journals. A bit more on the preterm trial. If I may remind you of some key outcomes for this trial, both the co primary outcomes, reduction of severe neonatal morbidity or neonatal death and decreased length of neonatal hospital stay met their endpoints with the improvements in outcomes with our preterm test and treat approach being statistically significant.

Speaker 2

Notably, these results demonstrate the generalizability of the preterm test and strategy in achieving meaningful clinical results in more widely diverse U. S. Populations. The AVERT preterm trial builds on solid results from prior studies including paper, treetop, accordant and PREVENT PTV. There are two key points I would like to highlight with regard to the AVERT preterm trial findings.

Speaker 2

The announcement of these results in February resulted in our seeing increased interest from health systems parties with discussions underway. Some of the volume of our preterm testing has been driven by early adopters as they have learned of the first public availability of compelling new AVERT preterm trial data showing the clinical utility of our preterm test and treat strategy in a previously unstudied diverse population. And as mentioned on our last call, the detailed results of the AVERT trial, including secondary Endpoints and additional subgroup analyses are being prepared for submission to a peer reviewed scientific journal in the coming months. We are encouraged that the publication of these results should drive growing interest by physicians, payers and health systems. We believe that the results of revert and prior studies Show a growing body of evidence for the preterm test clinical benefit to mothers and babies.

Speaker 2

And now a bit on the PRIME study. Let me briefly recap a few important points about PRIME and how it relates to the positive results of our reverse study. For starters, during the recently completed quarter, increased PRIME study subject enrollment continued, Surpassing more than 2,800 subjects required to be enrolled for the trial in the trial for the interim analysis to And we continue to believe that the interim book analysis will take place by year end. The timing for this event requires delivery, Discharge of mothers and babies from the hospital and final data cleanup prior to this analysis. We provided quite a bit of transparency on the similarities and differences between The AVERT and PRIME studies on our last call, so I'll simply summarize them today.

Speaker 2

The AVERT And PRIME studies have identical co primary endpoints for reduction in neonatal hospital length of stay and decreased neonatal morbidity and mortality. Both have diverse demographics and pre existing risk profiles. And finally, multimodal clinical intervention strategies Right in the protocols for both, including care management are similar. These similarities are compelling for the potential for positive PRIME study results, but we caution that there may be that there are some noted and possible differences that could Results to be different. AVERT was performed in a single health system versus in at least 15 sites for PRIME, leading to possible differences in administration of the study and adherence to the clinical protocol across this number of sites.

Speaker 2

Another difference is that all enrolled patients that reached term INITRD were treated before COVID was prevalent in the study area and ended the study early. While some prime patients will have been treated during the pandemic and others after the pandemic substantially waned, Prime subjects are receiving the same interventions, whereas AVERT subjects were able to elect for some interventions and opt out of others. The AVERT preterm trial analysis is expected to report out data from a composite set of 1453 actively enrolled patients And approximately 10,000 historical controls who had completed pregnancies during the 2 years before the trial began. We anticipate and currently believe that the PRIME study will provide strong clinical utility evidence as a rigorous Multi center RCT design by enrolling concurrently randomized control and active arms. To clarify a point from last quarter's call On the numbers of patients in each study, PRIME is a much better powered, broadly representative in contemporary randomized control study compared to EVERT by including approximately twice as many prospectively enrolled subjects, 2,800 total with 1400 active and 1400 controlled patients at the interim look and Almost 4 times as many at full enrollment.

Speaker 2

Most important, we believe is Prime's strong statistical power of approximately 80% At the interim look analysis, with even greater statistical power at final readout with higher numbers of completed pregnancies. Ultimately, although the results are encouraging, there are no guarantees of a similar outcome for PRIME and we are hopeful the results will be positive since The availability of compelling data is a key enabler of driving test volumes as well as revenue over time. In addition to PRIME, we anticipate further publication of new compelling clinical data to take place later this year. And now more information on Syrah's pregnancy pipeline. We continue to make good progress on our robust Pregnancy pipeline using our biobank and advanced data science methods to create meaningful predictions.

Speaker 2

Our first step in developing products is to discover and validate the predictions. To that point, our preterm preeclampsia validation data are ready for submission for scientific review prior to publication. We also made excellent progress on validating a time to birth prediction to better inform patients on the personalized timing of individual deliveries for planning purposes. We have discovered a strong mid pregnancy gestational diabetes predictor. We will determine the best timing and ways to monetize these predictions and we'll communicate the timing as appropriate.

Speaker 2

We believe all these efforts help Syrah in his quest to be the pregnancy company, providing valuable pregnancy information to improve the well-being of mothers and babies and the economics of healthcare delivery. I'll now turn over the call to Jay for a review of our Q1 financial results.

Speaker 3

Thanks, Greg, and good afternoon, everyone. Let me review at a high level our financial results for the Q1 and our general view for 2023. Revenue for the Q1 of 2023 was $100,000 compared to $38,000 for the Q1 of 2022. As Greg noted, We experienced an increase in test volumes, which is a promising indicator of both improved adoption of our preterm test and our potential for revenue growth. Total operating expenses for the Q1 of $11,400,000 were down almost $1,000,000 from $12,300,000 for the same period a year ago.

Speaker 3

Research and development expenses were $4,100,000 Compared to $3,300,000 for the Q1 of 2022 due primarily to increased prime study costs. Selling, general and administrative expenses for the Q1 of 2023 were $7,300,000 This was a marked decline from $9,000,000 for the same period a year ago and resulted primarily from our successful steps Prior to the end of last year, to carefully reduce costs without impairing our ability to more broadly bring our preterm test to market. The net loss for the quarter for the Q1 of 2023 was $10,600,000 down from $12,200,000 for the Q1 of 2022. As of March 31, 2023, the company had cash, cash equivalents and available for sale securities of approximately $100,000,000 We continue to prudently manage our cost structure and cash balances to enable us to operate into 2026 without having to raise additional capital. We are excited by the increases we've seen in testing volumes and by increased interest in our preterm tests following the availability of new positive data announced in February for the AVERT preterm trial.

Speaker 3

While this and other readouts later this year are expected to help drive adoption, We are not changing our business outlook as shared on our Q4 earnings call when we noted our belief that 2023 revenues will be less than $1,000,000 I'll turn the call back to Greg.

Speaker 2

Greg? Thanks, Jay, and thanks, everyone, for attending our call today. We look forward to updating you on our progress through year end 2023 along with the positive AVERT study results continuing to be an encouraging tailwind. We see other potential catalysts for our business, including publication of additional study results as well as updates on our pipeline. We continue to build on Syrah's market position and reputation for providing valuable pregnancy information.

Speaker 2

This is important for mothers and babies, for healthcare costs and for our society as a whole. We wake up every day excited as we work to achieve our vision and mission to make Seraprognostics the pregnancy company leader in this important healthcare space. And now, we'll open up the line for questions. Operator?

Operator

Thank you. We will now begin our question and answer session. Your first question comes from Tom Stevens from Cowen. Please go ahead.

Speaker 4

Hey, guys. Thanks for the clarity, Orendover. I just had a question on if you'd A competitor data set that came out yesterday looking at cell free DNA and also tried assessing preterm risk there. I wonder if you'd had any response to kind of that approach versus your kind of protein approach, and kind of maybe how PRIME would be differentiated to that? Thank you.

Speaker 2

Yes. The details of that publication are under review right now. What I can say is that Our proteomics approach has superb sensitivity, nearly 90% for finding spontaneous preterm delivery and The negative predictive value of our test approaches 99%. So it's a very well performing predictor itself. The second point I would make is that we have actually used our predictor in clinical studies where Its utilization has been demonstrated to improve the well-being of babies in particular.

Speaker 2

The clinical trials data are very strong. We are the biomarkers we're measuring did not risk and that we actually The outcomes by being able to proactively intervene in patients who have higher risk. So those are some differences. There are a number of technologies that people have been trying to employ to build predictors. Ours It's rigorously validated in a proper U.

Speaker 2

S. Intended use population and in populations around the world. We have a Very large amount of data showing that we can stratify it in the spend and furthermore stratification can't be employed to improve well-being. That's really our thesis.

Speaker 4

Great. And then I just had a follow-up maybe more on the kind of longer term picture. So I mean given kind of the positive results And the idea that the full time results will kind of bleed over time. I guess could you talk a bit about the cadence of payer adoption that you expect Assuming interim hits later this year, full results in 2024 and I guess that kind of provide a cadence that would be really helpful for modeling.

Speaker 2

Yes. What I can tell you is I can give you a qualitative picture of it. The PRIME study, As I said before, it's multicenter. It's broadly diverse. It is a We believe it is in many ways a definitive data set for what the impact of using our technology will be in the U.

Speaker 2

S. Population. We believe This will be very appealing to payers. Those that we are in discussions with, those that have been supporting the company, All of them see this study as being an important step forward. They also view the AVERCE study as being A reasonable harbinger for what one might expect to see in Prime.

Speaker 2

As I said, there are differences between the 2, but they're Both there. As far as revenues go, it takes time to build revenues. We believe that one of the key enablers of building revenues is getting Payers to reimburse, that's certainly one of them, getting the professional organizations knowledgeable about the benefits That we believe can eventually lead to guidelines and getting out and actually putting the test in the hands of doctors that use it Can demonstrate utilization and benefits. So all those things take time. We see our current data That we're reporting out soon as being enablers.

Speaker 2

We see Prime as a stronger enabler and the pathway to us is Fairly clear about how we get there.

Speaker 4

All right, great. Thanks. I'll hop back in the queue.

Speaker 2

Thank you, Tom.

Operator

Thank you. Your next question comes from Dan Brennan from Cowen. Please go ahead.

Speaker 5

Guys, you're getting 2 for the price of 1. How are you?

Speaker 2

Good, Dan. Maybe a question

Speaker 5

on the burn. So what do we think about the burn for this year?

Speaker 2

Yes. Jade, do you want to talk about that?

Speaker 3

Yes. Sure. I mean, I think that based on our Exclamation last quarter that we felt we were in great shape to Cash sufficient cash through are well into 2026, that hasn't changed. I think you can extrapolate that from the Q4 to the Q1. I mean, our burn rate is pretty modest.

Speaker 5

Is there certainty that assuming PRIME is successful That study will be enough to trigger really kind of notable guideline and kind of payer coverage? Or is there a chance that the payers under guidelines would run 2 large prospective studies. I know certainly the AVERTS study is an important one, but it did have that Sorry, good arms. I'm just wondering, is there a clarity like ahead of it that prime is going to be enough?

Speaker 2

Yes. There There are actually 3 prospective studies that we've done, okay, or that we're completing. The first was the PREVENT PTP study, that was a prospective randomized controlled trial. The AVERTS study is the second one and then PRIME is the third. So as far as numbers of studies go, we believe that if someone is simply counting numbers of studies, we've done ample work to provide prospective data.

Speaker 2

Another thing that people are going to be looking for in the future is real world evidence By health systems that are using the technology. And those are the kinds of discussions that we're in now as we move forward. And those some of those can be announced at the right time and we will certainly be doing that as another piece of evidence. So to say, is it possible that somewhat a certain payer might not want To cover, that's possible, but I can tell you with the support of payers that we know very well And their interest with positive results, the likelihood of being able to reach an endpoint that they like It's fairly high. Ultimately, they make the decision of what they cover and what they don't.

Speaker 2

But we believe we're on track and The designs of these studies were actually done in conjunction with payers so that they would meet their needs for showing clinical benefit.

Speaker 5

Great. Thanks, Greg. And just on the impact of the interim look alone, assuming it's successful, I know it's powered well, But you're still going to payers and guidelines will still likely want to see the full data. Like what but just assume that you are successful knock on wood. What kind of impact could that have like say in 2024 before because the full data is not going to be out.

Speaker 5

Just remind us when the full data actually We'll be out. So two questions on timing of full data and impact of interim.

Speaker 2

Okay. That's a fantastic question, Dan. Let me Splendid in very clear terms. If the interim look is positive and the data safety monitoring committee says Stop the trial because it's positive, it's no longer ethical to have patients enrolled in a control arm where they don't have access To a protocol that is superior. So if that happens, then all the patients that have enrolled up to that Time that have been that have completed deliveries, all those patients are analyzed.

Speaker 2

And we add The 2,800 that are in the interim look that is pre specified, you add those remaining ones, they've already delivered. So it's just a matter of doing data cleanup. It will take it's a matter of months to be able to get the data if that happens, okay. So I think that there is a good chance, Let's assume for discussion sake that the inter look is positive and the trial is stopped. There's a good chance in that event that we would have completed data and a completed readout During 2024.

Speaker 2

So we don't have to wait for much longer Because the patients have already delivered, the trial is ended, you don't have 2 groups that you're comparing and following outcomes. You've got outcome is done at the time that the interim or the deposit interim look occurs. Does that help?

Speaker 5

Yes. Yes, that helps. And okay, I guess that's it. I'll get back in queue. Thanks.

Speaker 2

Okay. Thanks, Pat.

Operator

Thank you. Your next question comes from Patrick Donnelly from Citi. Please go

Speaker 6

ahead. Hey, there. You got Jason on for Patrick. Maybe first just on AVERT and the submission to a peer reviewed medical journal. What needs to take place for that to happen?

Speaker 6

And I guess what implications broadly do you see that having across Physicians, health institutions and payers.

Speaker 2

Yes, a great question. So when the data were read, let's remember the data Became known and available in mid February, okay. And the PI It is writing up the publication now. We anticipate that it takes a couple of months for that to be completed And for the data to be submitted. But the key would be that once we have the complete readout, We look forward to seeing what the reviewers say and there are possibilities of making data available under certain formats that are allowed by journals and authors.

Speaker 2

So We're looking into ways that we can do that. We will announce we will make announcements of course When the articles are published and we'll use those. But under CDA, we're able to share things even earlier with certain health With whom we're having discussions. So that's something that we're looking forward to doing. What will the impact be?

Speaker 2

We've already seen doctors that have become aware and say, yes, this shows me you got 2 studies that have been done, both prospective studies. This is a large study. There's evidence that in fact the test and treat strategy does work. It makes a positive difference. And that is partially responsible for first thing increased revenues along with other things.

Speaker 6

Okay? Got it. That's helpful. And maybe just one on the guide for the year, reiterating that from the 4Q call. How should we think about that Phasing throughout the year for modeling purposes, could we see a sequential ramp here in the second half, whether it be volumes or further traction with payers continue to grow.

Speaker 6

Just how should we be thinking about that?

Speaker 2

I'll make one comment. Our focus on systems as early adopters is a good one. You don't need To build out a gigantic sales force in order to do that. So that's one way of generating revenues in the early days, So that doesn't need much of a build out. And we're looking at ways to efficiently see where we're going.

Speaker 2

The modeling that you might be thinking about doing, you always have a cost of Costs associated with revenue, but we feel that we're in a very good position to do things in a cost efficient manner as we begin growing revenues. Once prime takes place, then the company will be in a position to decide How much expansion, how do we get out to the larger number of patients that are in fact our intended use market of 3,000,000 pregnancies For the preterm test alone, those discussions are taking place now and we will be looking at it doing it Ramping up in a very cost effective way. You don't want to hire too much in advance and Wait for the revenues to come, you want to build the revenues and go to places where there's promise and demand and that's really the way to build it out.

Speaker 6

Got it. Thank you very much.

Speaker 2

You bet.

Operator

Thank Your next question comes from Andrew Brackmann from William Blair. Please go.

Speaker 7

Hi, guys. Good afternoon. Thanks for taking the questions. I think on PRIME, you noted that it has the same intervention across the entire study versus AVERT, Which didn't. But maybe I guess when you're talking to current users here of the test, what interventions are they using For their patient population and how does that sort of compare to what you used in Prime?

Speaker 7

Thanks.

Speaker 2

Okay. The interventions that are in Prime that were in AVERT and were in the PREVENT PTP study, they were as follows. The patient was offered a form of progesterone. There was more intensive monitoring and care management of the patient By the physician, they were offered a low dose aspirin. And then if the patient developed Signs or symptoms of early delivery, very early delivery, they were encouraged to be prompt With the administration of steroids because that has been shown to be very effective in imminent delivery that occurs early.

Speaker 2

Those are the kinds of things that were that are in there. These are things that one typically does with patients that are at higher risk. And so The protocols, as I stated, the 2 clinical protocols include those elements Our presence in AVERT, they are present in the PRIME study. And the difference being in PRIME, everyone had access, everyone had the interventions in PRIME. In AVERT, some patients could elect not to do one form of treatment or the other.

Speaker 2

And that's One of the features of the study design of AVERT, okay.

Speaker 3

Very helpful.

Speaker 2

Even so, Andrew, even so when they didn't do it, We actually saw a positive result. So that's very encouraging actually.

Speaker 7

Yes, certainly. Maybe if I could just one on the pipeline here. I think you caught out making progress on the

Speaker 3

preeclampsia test. Can you just sort

Speaker 7

of talk at a high level about what else needs to Done there to take that through final validation and into commercial launch. Any other color that you might be able to provide there? Thanks.

Speaker 2

Yes, great question. So our pre eclampsia test is a pre term pre eclampsia test. Preterm preeclampsia is the most serious clinical condition where there's a dilemma. If it's early in pregnancy, When do you actually deliver the baby? Because delivery is definitive treatment for preeclampsia.

Speaker 2

So it's a challenging situation. The mothers both the mothers and babies have more severe outcomes in preterm preeclampsia. We've done a proper validation. As I said, the data are ready for submission. Well, the first steps you would want to do is publish those data.

Speaker 2

And then we are looking at ways of how this might be made available to the market. We haven't decided exactly how to do it yet, But we are learning and actually planning on ultimately making this test available to the market. There are other tests in our pipeline that may actually be come sooner than the pre class. We've not made any definitive decisions about which ones come when, but that's the kind of work that we're doing across all of our pipeline right now.

Speaker 4

Okay. Thanks guys.

Speaker 2

Yes.

Operator

Thank you. Your next question is a follow-up from Tom Stevens from Cowen. Please go ahead.

Speaker 4

Hey, guys. Thanks for taking this last question for me. So just on your prior commentary earlier in the call on kind of ramping that sales force and There's always a cost benefit associated with that. I guess to any potential acquirers out there or partners out there, What kind of investment would really accelerate growth and kind of what would be overkill? I guess what's your pitch to potential acquirers out there?

Speaker 2

Well, there are some companies that could be interested in acquiring an asset like Cera. As we build more value, we think there could be more interest. We're not looking at selling the company at this point because we believe we have Significant value to create before we'd like to consider doing that. But at the right price, of course, anything is possible. So But our focus is really to stick to our knitting to grow the commercial revenues in a cost effective manner.

Speaker 2

One other thing you could do rather than that outright acquisition, you could collaborate with someone With an asset like this that nobody else really has with the data that we have, there could be some interesting collaborations with certain parties. And we may find even with new tests, there are ways to partner in order to get the utilization of tests In novel ways that haven't been explored between groups. So all these things are things that we're exploring actively as we look at ways to monetize things. At the end of the day, we have a very robust pipeline of pregnancy tests. These tests provide valuable information to mothers, to doctors and to health systems.

Speaker 2

Getting these utilized in a variety of ways to do it. We're exploring efficient ways of Doing that. And that's how we think about it in the early days of commercialization.

Speaker 4

Great. Thank you.

Speaker 2

You bet.

Operator

Thank you. This concludes our question and answer session. I'd now like to turn the conference back over to Mr. Donato for any and closing remarks.

Speaker 1

This concludes the call and thank you for joining us today. Good afternoon everyone.

Operator

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

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