Aspira Women's Health Inc. (AWH) on Q1 2022 Results - Earnings Call Transcript
Operator: Good morning ladies and gentlemen and welcome to Aspira Women's Health Inc. First Quarter 2022 Earnings Conference Call. My name is Tom and I will be your coordinator for the call today. Leading the call today are Nicole Sandford, President and Chief Executive Officer and Bob Beechey, Chief Financial Officer. After prepared remarks we will open the call for Q&A. Before we begin, I would like to remind everyone that forward-looking statements as defined under the Private Securities Litigation Reform Act of 1995, will be made during this call, including statements relating to Aspira's expected future performance, future business prospects or future events or plans. Although the company believes that the expectations reflected in such forward-looking statements are based upon reasonable assumptions, actual outcomes and results are subject to risks and uncertainties and could differ materially from those anticipated due to the impact of many factors beyond the control of Aspira. The company assumes no obligation to update or supplement any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. Participants are directed to the cautionary note set forth in today's press release as well as the risk factors set forth in Aspira's most recent Form 10-K filed with the SEC for a description of factors that could cause actual results to differ materially from those anticipated in the forward-looking statements. At this time, I'd like to turn the call over to Nicole Sandford, President and Chief Executive Officer. You may proceed.
Nicole Sandford: Thank you, operator, and thank you to all of you for joining us today. I'll start with a business update before I hand the call over to Bob to review our Q1 financial performance. Our Commercial Leader, Michael Newton; and Executive Chairwoman, Valerie Palmieri, are also here with us and will be available for questions later in the call. During my first 2 months as CEO of Aspira, I have focused on validating our strategic priorities and aligning resources to the areas of the business that we believe are most likely to contribute to short and long-term growth. That effort has included focusing our attention on volume growth in our core business, allocating R&D resources to the products that we believe are most likely to drive commercial success and rationalizing our cash usage across the business. As I said the last time we were together, I believe the ability to achieve our mission to improve the health outcomes of women with gynecological diseases relies on our ability to make 2022 our most successful year across 3 dimensions: growth, innovation and operational excellence. I've worked hard to align our leadership team around these value drivers, and I'm pleased with our initial progress. I can say with confidence that we are poised to see significant acceleration over the rest of the year. I'm going to speak to each value driver in a moment, but first, I'd like to share an exciting development about our leadership team. Today, we are announcing that Dr. Ryan Phan will be joining Aspira as our Chief Scientific and Operating Officer. Dr. Phan joins us from CareDx, where he currently is Senior Vice President of Lab Services and Medical Director. His combined and extensive experience, ranging from world-class academic institutions, health care systems and the commercial biotech industry, is rare and aligned with our strategic priorities. We believe this appointment will strengthen our operations and accelerate our targeted pipeline development. Dr. Phan was a key member of the CareDx executive leadership team, where he led clinical testing service operations, clinical development pipeline, manufacturing, supply chain, regulatory affairs and compliance and automation and engineering divisions. In addition, he served as the licensed Medical Director of the company's CLIA and CAP accredited laboratories and played a key role in the growth and expansion of the company's testing revenues and portfolio. Prior to joining CareDx, Dr. Phan was Managing Director and Head of Regional Molecular Genetic Pathology and Cytogenic at Kaiser Permanente in Northern California, where he led a series of programs related to strategic clinical development, laboratory expansion and clinical testing. Before that, Dr. Phan was a faculty member at the University of California at Los Angeles and the Los Angeles VA Medical Center. Dr. Phan is highly prolific in academic medicine. He has published numerous academic papers and coauthored medical textbook, the Atlas of Hematopathology. Dr. Phan received his Bachelor's degree from the University of California at Berkeley, and his PhD from Columbia University. He completed his post-doctoral training at Harvard Medical School, where he was a Cancer Research Institute fellow and American Society of Hematology scholar. I believe Ryan is the leader we need to enhance our innovation efforts, accelerate the expansion of our product portfolio and scale our clinical diagnostic operations as we grow. Fortunately, Ryan saw Aspira's substantial potential and decided to develop his talent to providing health providers with better tools to treat women with gynecological diseases. He will be joining us in just a few weeks and will be on our next quarterly earnings call. Now let's talk about our core business, starting with growth. Our commercial team faced both challenges and opportunities in the first quarter. Even though we started the year in the throes of another COVID surge, which threatened our aggressive growth plans, our volume recovered rapidly. Unlike other companies in the diagnostic sector, many of whom struggled with sales throughout the quarter, we saw improvements in volume, achieving topline revenues of $1.9 million, an increase of 26.4% compared to the first quarter of 2021, and 2.1% sequentially compared to the fourth quarter of 2021. Perhaps, not surprisingly, the COVID surge significantly impacted sales volume in January. Average daily over volume was 64.6% for the month of January. By March, however, average daily OVA volume had increased to 84.3%, a new record for the company. The increase continued into April when OVA volume per day achieved 86.7%, an additional 2.8% increase over March. The early days of May are very promising with average daily sales so far in the low 90s. Our new Head of Commercial, Michael Newton, wasted no time in making an impact. As previously disclosed, we executed a reorganization of the commercial team in March to effectively deploy personnel with the most relevant skills and experience for our portfolio. We have also taken a fresh look at territories and the incentive plans we have in place for our sales force. These efforts appear to be paying off in terms of sales efficiency. We ended Q1 with 23 salespeople, up only 2 from the end of 2021, yet we achieved the previously mentioned record sales volume in March and incrementally increased sales volume in April. We are in the process of adding to our sales team in newly created roles, plan to have approximately 34 field sales professionals by the end of 2022. An important leading indicator regarding future growth potential is new ordering physicians. In the first quarter of 2022, approximately 600 physicians ordered an OVA product for the first time, a record high and an increase of 47% compared to the first quarter of 2021, and a 3% increase compared to the fourth quarter of 2021, despite the slow start in January. We expect these physicians to drive incremental volume for the rest of 2022. Looking towards the rest of the year, our leadership team will focus on both volume and price as drivers of topline growth. As part of our refresh of the commercial organization, we have improved the alignment of the sales and reimbursement team to help ensure they are positioned for maximum impact. We will continue to push hard for new physician adoption, especially in areas of the country where we have secured favorable payer pricing and whether our large, relatively untapped physician pools such as women's health super groups, hospital and other health systems and clinics that work with underserved populations. To that end, we have launched a series of market-making sprints, aimed at creating accelerated progress in areas of potential high-volume growth. This includes active and retired military and their families, Medicare and Medicare Advantage nationally and Medicaid populations in large states like New York, California, Georgia and Illinois, where we have previously secured reimbursement. I want to assure you that we continue to explore strategic partnerships to rapidly expand the reach of our sales organization. In fact, while it is too soon to disclose detailed information, we are in the final stages of negotiating an agreement with a commercial partner to co-market and distribute our OVA products and expect to have additional information to share in the coming weeks. As we have said in the past, we believe these relationships are key to the adoption of our existing products and will drive rapid distribution of future products. Let's now turn to innovation and an update on our product pipeline. We have already achieved several important milestones this year with respect to our OVA products. The OvaWatch manuscript, analytical validation of a deep neural network algorithm, for the detection of ovarian cancer has been accepted for online publication in JCO Clinical Cancer Informatics. This study was a critical step towards the launch of OvaWatch, our next-generation ovarian cancer risk assessment tool. As a result, we have shifted to finalizing the commercialization and launch plan for OvaWatch, which will occur in 2 phases. We intend to launch the single-use OvaWatch test later this year. The timing will depend on the results of the clinical validation study that we expect to be completed over the summer with a plan to publish in the fall. We expect this interim study, which will include real-world data from patients, to be instrumental for driving both adoption and reimbursement. We believe all other prerequisites for a successful commercial launch had been met. The launch of the serial monitoring test is planned for 2023 upon the completion of the ongoing clinical validation study. Looking ahead on our OVA product line, the strategic research collaboration agreement with Harvard Dana-Farber Cancer Institute, that we have previously disclosed, will build upon strong initial findings. We believe the high specificity demonstrated by the microRNA technology coupled with strong sensitivity of our protein-based technology have the potential to deliver a groundbreaking personalized risk solution for patients who were genetically predisposed to ovarian cancer. With respect to our development of a commercially viable endometriosis diagnostic product, we have made a strategic decision to develop this diagnostic as an LDT, or Laboratory Developed Test, rather than pursuing breakthrough device designation. One of the most attractive reasons for companies to pursue the breakthrough device path, which was achieving streamlined reimbursement through the FDA program, was eliminated last year. While we now believe the most appropriate path to market for our endometriosis diagnostic product is an LDT, we are not ruling out FDA breakthrough medical device designation in the future. Our final strategic priority is operational excellence. This speaks to how we operate the business and allocate our resources, especially with respect to people and discretionary spend. I've asked our leaders to focus on higher ROI activities, especially those that drive OVA adoption, sales volume, price improvement and the accelerated development of our first-generation endometriosis diagnostic products. Outside of those priorities, we have implemented additional cost controls aimed at scaling our people, process and technology infrastructure at a pace that is appropriately in line with our growth. In areas where we seem to be spending in advance the business need, we have pulled back significantly, and we'll continue to do so over the remainder of the year. Bob and I have also taken a hard look at discretionary spending and have challenged ourselves to be prudent with our cash reserves. To be clear, we will continue to focus time, talent and funds on driving broad adoption of our OVA products and to the development of our endometriosis product. However, we will continue to challenge the ROI spending across the organization, and we plan to refrain from expanding our strategic focus to other priorities in the near term. As an executive team, we are firmly committed to managing our cash flow very closely for the rest of the year. With that, I'll hand it over to Bob to talk about our first quarter financial performance. Over to you, Bob.
Robert Beechey: Thank you, Nicole. First quarter 2022 OVA1 revenue was $1.83 million, an increase of 29% over prior year and a 1% increase sequentially. This 29% OVA1 revenue increase is primarily due to an increase in the number of tests performed in 2022 as well as an increase in the OVA1 average revenue per test in the first quarter 2022 compared to the prior year. As Nicole has discussed and we discussed on our year-end call, the first quarter commenced with some COVID headwinds, resulting in modest sequential growth for the quarter. We are pleased with the sequential progression throughout the quarter and for the month of April. The revenue per OVA1Plus tests performed was $380 for the first quarter of 2022 compared to $375 during the first quarter of 2021. The year-on-year price increased 1.2%, while the sequential price was a slight reduction from the $382 realized in the fourth quarter. This slight decrease is driven by patient pay collection challenges as patient deductibles reset in the beginning of the year as well as our strategic initiative to serve the Medicaid population, which currently has a lower price when compared to our average. Gross profit margin on OVA1Plus was 53% in the first quarter of 2022 compared to 54% in the prior year first quarter of 2021. The year-on-year decrease was driven by the addition of laboratory personnel in advance of our anticipated growth in the coming quarters. Research and development expenses for the 3 months ended March 31, 2021, were $1.3 million, an increase of $476,000 compared to the first quarter of 2021 and a decrease of $105,000 when compared to the fourth quarter 2021 spending levels. This spending was focused primarily on product development costs related to OvaWatch and investments in Aspira Synergy. Sales and marketing expenses were $4.5 million for the 3 months ended March 31, 2022, an increase of $1.4 million compared to the first quarter of 2021. The increase was driven by personnel costs as well as related travel and entertainment. During the first quarter of 2022, we executed a reorganization resulting in the separation of a number of employees. The changes were aimed at enhancing our national sales force and driving the accelerated adoption of OVA1Plus as the standard of care for early risk detection of ovarian cancer in women who have been planned for surgery. The organizational changes resulted in the recording of severance separation and settlement payments as well as legal costs in the first quarter of approximately $1.284 million, including estimated future payouts, partially offset by insurance reimbursement of $523,000. Severance paid for sales and marketing totaled $1.085 million. General and administrative expenses were $4.4 million for the 3 months ended March 31, 2022. We incurred $2.5 million in general administrative expenses in the prior year quarter. The year-on-year variance is attributable to headcount and personnel expenses. We ended the first quarter of 2022 with approximately $27.1 million in cash, cash equivalents and restricted cash. Cash used in the first quarter of 2022 was $10.2 million, including approximately $1.3 million of severance settlements and legal expenses associated with our first quarter reorganization and approximately $1 million for payments under our annual incentive bonus plan. With that, I'll turn it back over to Nicole.
Nicole Sandford: Thank you, Bob. In closing, our executive team remains firmly committed to our strategic vision, and we'll focus our efforts on execution for the remainder of 2022. Anyone that is betting against Aspira just has it wrong. We believe the wind is at our back, and we are on the best path towards achieving our goals. Thank you for your time today, and with that, we will open up the lines for questions.
Operator: . Our first question comes from Brian Weinstein with William Blair. Please go ahead.
Brian Weinstein: Hey, guys. Good morning. Thanks for taking the questions. I wanted to start on what you're seeing from your physician cohorts that are ordering your tests. You're talking about 600 docs, I think, that were first-time users here. I'm just curious, as you look historically, what you tend to see from new cohorts of clinicians when they start to order the test? Have you seen differences in the way that cohorts behave? Are they ordering more or more recent cohorts, ordering more tests faster? I just wanted to get some insight here because you have a significant number of doctors that are ordering, and we continue to wait to see kind of revenue inflect here. So can you give us some idea about what you're seeing kind of on a per doc basis or kind of a cohorted basis? Anything that would get us comfortable on kind of how we should think about future trends.
Nicole Sandford: Sure. Brian, thanks for the question. Thanks for joining us today. I'll start and then I'll give Michael Newton, our Commercial Leader, a chance to add to my thoughts. I think that it is difficult to project based on prior trends because as you know, we've only had a short runway of historical experience. So I think it's important to look at the most recent trends that's going back over time. A lot has changed over the last year. Michael, I'll ask you to comment on what your sales team is seeing in the field in terms of adoption from the new .
Michael Newton: Absolutely. From that perspective -- Brian, I appreciate the question. When we look at essentially behavior in the space where the kind of the biggest question mark comes in is when patients with a Pelvic Mass are going to present to these particular providers. So that's really kind of the x factor as it relates to frequency of use and a particular application based on higher proved utilization within the clinic. But from that perspective, as we get new providers, what comes incumbent upon the sales team is to make sure that they're present from a standpoint of being there to remind or refresh that memory like any habit when you first start something, it certainly takes a much more effort on the front side and really kind of first utilization for us is where the work begins to get that pull through. As we look at particular cohorts, it's a little bit tougher to say in terms of that utilization because of the fact that, again, patients for this type of tests don't show up in the clinic every single day. Thankfully, obviously, based on what it is we're testing for. But from that standpoint, there's not necessarily a big differential in terms of the patient influx from a particular provider based on how long they've been a user of OVA. It's really just a matter of patient frequency, and then from there, it's been coming upon us to make sure that we're present to stay top of mind with those providers with OVA1Plus for them when those patients show up. So it's a little bit tougher to stratify in a more typical way of an initial user will kind of ramp up at this particular speed because of, again, the unknown of when a patient's going up here. Does that answer that question?
Brian Weinstein: Yes. No, it gives some color, and I appreciate that. Is it...?
Nicole Sandford: Brian, I'm sorry to interrupt. I will say one thing. We have learned that the back office plays a really important role here because those first few interactions that a physician has with our tests that are really important and driving whether they choose to bore test again. And that means making sure there are no surprises in terms of what it's going across the patient, making sure that the patient knows where to go, if they have questions, making sure that we're bringing all of our customer service and clinical expertise to the table. And it also means making sure that the test is giving back to the doctor in the timely manner. So obviously, our focus on operational excellence is really important to make sure that those early interactions are positive because what we do know is that doctors who have good early experiences tend to continue ordering than those that do not.
Brian Weinstein: Yes, that makes sense. Is there an update on Synergy? It was talked about a lot in prior calls, I didn't hear as much of an update here on that today. Can you just talk about where that stands? What the interest looks like? And how the first experience is around?
Nicole Sandford: Yes, sure. I'm recovering from a little illness here, so I apologize for my voice. Yes, Synergy continues to be a very high potential opportunity for the company. In fact, since I've joined as CEO, I come to believe that it's a very critical part of our future growth plan, even more so than I had before. So there's no backing off on Synergy. It is an important part of our strategy. Our first 4 clients are in the implementation phase. We do have ordering positions coming through, I think, 3 of before. As I mentioned in the last call, we wanted to be sure that we were beginning the implementation right so that we have a playbook going forward that allows us to ramp up fast and to make sure that we're doing the implementation in the most efficient way possible in the future. But so far, signals are very positive, and we're not backing off on that commitment at all.
Brian Weinstein: Okay. Then I heard you talk about negotiating some sort of a partnership to distribute the product, and we get more information in the coming lease. Can you just talk about the strategic rationale for thinking about bringing in a partner for distribution?
Nicole Sandford: Yes. So I think it all comes down to how fast can you grow your sales organization on your own versus partnering with other strategic partners that have -- that are in the same marketplace that we are in. And so it's about driving adoption for our ovarian products, which is obviously critically important today, but it's also important as a platform for our future products. So the rationale there is that we can get far more on the ground sales impact working with others than we could make growing the sales force on our own.
Brian Weinstein: Okay. We'll wait until that is announced to come back with questions on kind of the operation and logistics of that, but I look forward to that. Can you give us any update on timing for kind of next data readout or next steps with the Harvard Farber situation as well as what the LDT approach for endo means as far as timing and kind of next steps there?
Nicole Sandford: Sure. Well, we've been very pleased with the partnership with Harvard Dana-Farber Cancer Institute. It's been an incredibly positive working relationship. It's moving along as we had planned, and I think that we will just see further development on that partnership going forward this year. So nothing incredibly interesting to say there, Brian, other than it continues to be an incredibly positive relationship for us, and it is helping us to accelerate our development on the ovarian cancer side for sure. And the second question around endo, we're not making any specific changes to the timeline for endo check product in this call. So we're still tracking as we had said for second half of 2023.
Brian Weinstein: Okay. Then a question for Bob, maybe or whoever on cash situation. Obviously, the burn was higher this quarter. You have, I think, you said 25 -- 27.1, I think, is what you said in cash. Just how should we be thinking about the cash burn for the year and plans you guys have to show up the balance sheet?
Robert Beechey: Well, we -- as Nicole discussed, we're anticipating some compression of the cash burn going forward. The issue -- obviously, we articulated a bunch of one-timers, which just kind of impacts more of the balance sheet. So I would encourage people to look at that as not the new run rate and so a combination of plus control, sales rep productivity and kicking in relative to the synergy volumes. And then recall, within the relevant time horizon, we will launch OvaWatch, and we've largely already done most of the preparation work in terms of the marketing work and things of that nature, and that will be incremental top line. So we see the same compressing in terms of our cost structure. Our margin expansion as well as we look at ramping up volume over the course of the year. So that will be narrowing in terms of cash burn as we commenced into the quarter. So that's the principal issue to communicate.
Brian Weinstein: Okay. I got it. We will follow-up with you on that following call. Okay, great. Thanks.
Operator: . Next question is from Ross Osborn with Cantor Fitzgerald. Please go ahead.
Ross Osborn: Congrats on the quarter. I guess just as a follow-up from Brian's questions on physicians. What was the total amount of ordering physicians during the quarter?
Nicole Sandford: Bob, do you have that number handy?
Robert Beechey: It was -- yes. Sorry, 3,275.
Ross Osborn: Got it. Then I guess, turning to the operating environment. I realized average daily volumes improved throughout the year, and I appreciate that additional color. But just curious, are you still seeing any headwinds at this point that are limiting growth?
Nicole Sandford: So it's interesting. It seems to me that the COVID impact is turning into more of a just a general productivity issue. Not for us specifically, I'm speaking more kind of broadly, right? So we're not seeing huge shutdowns, but we are seeing new cases that are resulting in people missing work and not being able to take salespeople and that kind of thing. So I don't think I see anything macro beyond what everyone helps is operating in this environment. And we -- as we said in the last quarter call -- in the year-end call, we've been working really hard to make sure that we have good response plans for any additional slowdowns or macro issues that we signed, whether they're related to COVID or otherwise. I think some of those levers that we pulled in the first quarter helped us to recover quickly. So for example, we very quickly, as soon as we saw a slowdown from COVID in January, moved to doing some more KOL events. We have one of our best attended physician webinars administrative company in February resulted in quite a few new positions being added in February, which would have been a reason that we were able to recover so quickly. So we're not seeing anything that we're super concerned about. However, we have developed the playbook to make sure that regardless of the reason we might see headwinds, we have the playbook to respond. Anything that you want to add to that? I mean is there anything that on your side, Bob or Michael?
Robert Beechey: No, I think we're -- I don't want to speak on Michael's behalf, but the access restrictions to doctors has largely subsided. But obviously, there's various variants that impact people going to the doctor. So we're really planning operationally to resume to a normal environment, but being ready to adjust as we move forward, as Nicole indicated. So we're not seeing COVID as a big headwind, but wary of the fact that, that could resurge just like everybody.
Ross Osborn: Okay. Perfect. No, that sounds great. Then maybe one on ASP. Have you seen a willingness for payers to meet? Has that increased throughout the year? And then how does the pipeline look like in terms of coverage? And then lastly, how many covered lives did you end the quarter with?
Nicole Sandford: I'm sorry, Ross, can you repeat the first question? I didn't catch that.
Ross Osborn: Yes. Just on payer access, have you seen any willingness from payers to meet with you all? Has that increased?
Nicole Sandford: I think it's been pretty consistent. Bob or Valerie, anything to add to that? I don't -- we haven't seen any issues there.
Robert Beechey: No. There hasn't been a big change in terms of acceleration, but we haven't had that as an access restriction over time. We've obviously mentioned a big effort we have in places, improving the ASP relative to Medicaid, given the fact our product has a differentiation that can help to serve that underserved population. So there's a fairly -- currently, the Medicaid is somewhat dilutive to the average Our objective is to increase that ASP over time, and we've been really focused on credentialing and the like. It's less of a scientific sell, it's more of an administrative conversion effort. So we continue to ramp that up over time, and we'll see some increase in the ASP there, but there hasn't been access restrictions. What I would comment on is that a big effort right now is getting coverage, getting preparation for coverage as we get the appropriate publications for OvaWatch, which will be -- we reiterated the plan to launch, in Nicole's remarks, in the latter part of the year. We did have a key publication in Q1 and a critical factor for us is getting that crosswalk, if you will -- I think that's the appropriate term to get reimbursement for OvaWatch. And I think that's a big part of the dynamic to Brian Weinstein's question earlier in terms of physician behavior is that there's just a broader indication and a more day-to-day usage is our expectation relative to OvaWatch. So think about getting reimbursement for OvaWatch is the critical strategic thrust that we have in motion right now.
Ross Osborn: Okay. Great. Then besides, do you have the number of covered lives you ended the quarter with on hand? If not, I can get it later.
Nicole Sandford: I believe it was 194 million.
Robert Beechey: 196 million.
Ross Osborn: Got it. Thank you for taking my questions.
Robert Beechey: Thank you.
Operator: This concludes our question-and-answer session. I'll turn the conference back over to Nicole Sandford for any closing remarks.
Nicole Sandford: Thank you, operator, and thanks again, everyone, for joining us today. Hopefully, you found the information helpful. I think you're going to hear over and over the rest of the year these 3 consistent themes. Our hyper focus on growth, innovation and operational excellence. The company is focused in these areas, and we're making great progress. So thank you again for joining us, and we'll speak with you soon.
Operator: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.
