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OncoCyte Corp (OCX) Q4 2023 Earnings Call Transcript Highlights: Strategic Partnerships and ...

  • Average Burn Rate: Reduced to $3.91 million over the past three quarters from $11 million in the same period a year ago.

  • Partnership Investment: Bio-Rad invested in a $15.8 million private placement offering.

  • Global Transplant Market: Over 157,000 transplants annually with a 9.1% growth rate.

  • Q4 Cash Reserves Decline: $4.4 million, leaving $9.4 million on the balance sheet, a 58% improvement year over year.

  • Q4 Consolidated Revenues: Approximately $314,000.

  • Q4 Cost of Revenues: Approximately $431,000.

  • Q4 Research and Development Expense: Increased 85% year over year to $2.5 million.

  • Q4 General and Administrative Expense: Decreased 66% year over year to $1.8 million.

  • Q4 Sales and Marketing Expense: Increased 74% year over year to $582,000.

  • Q4 GAAP Net Loss: $16 million, or $1.99 per share, compared to a net loss of $12 million, or $2.8 per share, in the fourth quarter of 2022.

  • Q4 Non-GAAP Operating Loss: $4.2 million, an increase of $1.2 million compared to the same period in 2022.

Release Date: April 12, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

  • OncoCyte Corp has successfully reduced its average burn rate from $11 million to $3.91 million compared to the same period a year ago.

  • The company has developed GraftAssure, an easy-to-use manufactured product, with the first prototypes exceeding quality and performance expectations.

  • OncoCyte Corp announced a partnership with Bio-Rad, which includes a $15.8 million private placement offering to support development and commercial efforts.

  • The company has achieved reimbursement for VitaGraft Kidney and is pursuing claims expansion based on promising clinical study results.

  • OncoCyte Corp has seen a 58% improvement in cash burn year over year, with Q4 benefiting from cost reductions implemented earlier in the year.

Negative Points

  • The company's consolidated revenues for the fourth quarter of 2023 were relatively low at approximately $314,000.

  • Cost of revenues for the fourth quarter were higher than the revenues, at approximately $431,000.

  • Research and development expenses increased by 85% year over year, indicating a significant increase in investment towards product development.

  • GAAP net loss from continuing operations was $16 million, or $1.99 per share, compared to a net loss of $12 million, or $2.8 per share, for the fourth quarter of 2002.

  • There are no minimum volume commitments in the agreement with Bio-Rad, which could imply uncertainty in revenue projections from this partnership.

Q & A Highlights

Q: Can you tell us what Bio-Rad's installed base is in the US and over the US, for the machines that can run this test? A: They don't publicly disclose their installed base.

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Q: How is the commercial strategy with Bio-Rad going to work going forward? A: OncoCyte will add about five headcount for commercial efforts, with Bio-Rad marketing the product and OncoCyte closing the accounts. Outside the US and Germany, Bio-Rad has full commercial and distribution rights.

Q: Are there any minimum volume commitments in the agreement with Bio-Rad? A: There are not.

Q: Will OncoCyte continue to offer the transplant tests in the US as a lab-developed test or will it fully transition to being kitted? A: OncoCyte will maintain its service lab in Nashville for clinical development and to engage with MolDX for claims expansion. They plan to bridge clinical claims from the lab-developed test to the kitted product in the future.

Q: What should we expect for pricing on the kits once you fully transition to a cleared version of the product? A: Pricing is usually capped at about 50% of the reimbursed value for the test. The exact price will be set once the national price for the kit is established.

Q: Will OncoCyte be sharing a portion of the kit pricing with Bio-Rad? A: Yes, that's correct.

Q: Can you provide more detail on the commercial strategy with Bio-Rad? A: OncoCyte expects to add incremental headcount for the commercial team and will focus on site activation and building an installed base of early adopters.

Q: What are the revenue expectations going forward and the cash burn outlook? A: Revenue from the RUO product is expected to start in Q4, with incremental growth thereafter. The company is committed to maintaining a low cash burn, aiming to keep it below $5 million per quarter on average.

Q: How will the mechanics of the agreement with Bio-Rad work for international markets that are not Germany? A: It is a manufacturing and supply agreement. Bio-Rad will be OncoCyte's customer, and the revenue will hit OncoCyte's top line with a normal COGS-type calculation.

Q: Will there be two revenue streams in the United States, one for the lab version of the test and another for the RUO shipped revenue? A: Yes, both will show up on the top line, one as services and the other as products.

Q: Can you give any color on the operating expense mix, particularly with the incremental sales and marketing spend? A: About five headcount will be added to the sales and marketing team, which will slightly increase the burn rate, but the company will try to maintain it below $5 million per quarter.

This article first appeared on GuruFocus.