NEW YORK – OncoCyte said after the close of the market on Tuesday that its 2020 Q1 net loss rose about 97 percent year over year, as it reached the cusp of recognizing its first ever revenues.
The liquid biopsy firm's net loss for the three months ended March 31 was $7.7 million, or $0.13 per share, compared to $3.9 million, or $.08 per share, in the same quarter last year, exceeding the consensus Wall Street estimate of a loss of $0.11 per share.
Prior to Jan. 1, 2020, Oncocyte had no revenues, and though it commercialized its DetermaRx test and completed the acquisition of Insight Genetics in Q1, it is not yet able to recognize revenues on an accrual basis under US accounting principles, which require contracts for reimbursement from third-party payers or a history of experience of cash collections for the tests performed, or both.
During Q1 Oncocyte received a final local coverage determination for DetermaRx from Medicare contractor Palmetto.
DetermaRx — Oncocyte's first commercially launched assay, which was initially called the Razor Genomic test when Oncocyte acquired Razor last year — differentiates patients at high risk for lung cancer recurrence who may benefit from adjuvant chemotherapy post-surgery, from those at a lower risk who might avoid it.
On a call discussing the firm's financial results, Oncocyte CEO Ron Andrews estimated that the Medicare population includes 70 percent of early-stage NSCLC patients eligible for the test and said the CMS finalization is also a first step in securing broader reimbursement with private payors.
"Our next step is to intensify our efforts with private payers who historically follow Medicare coverage decisions, with the goal of securing coverage for patients that have private insurance. To date our efforts have already included reaching out to additional commercial healthcare plans that represent over 100 million covered lives and we receive very positive feedback on the evidence supporting our test," Andrews said.
He also said that Oncocyte will submit its first invoices to CMS in June, which includes billing for tests run while awaiting the now final LCD.
"Our onboarding of new [adopting] sites continues at a rapid pace, despite the COVID-19 pandemic, and we are excited to have expanded the reach of DetermaRx to India, the Middle East and Africa," Andrews added in a statement.
In April, Oncocyte announced a distribution agreement with CORE Diagnostics to expand the commercial availability of DetermaRx to those regions. Under the terms of the agreement, test samples will still be processed in Oncocyte's US lab, while CORE Diagnostics will generate test orders and provide customer service to patients in India, the Middle East, and Africa.
According to Andrews the company has also been making progress advancing DetermaIO, a test that it brought on through its acquisition of Insight Genetics during Q1 of this year.
"We have [made DetermaIO available] … for research use only and look forward to moving forward with opportunities in pharma services for immunotherapy trials, while also uncovering the potential utility of this test more broadly for clinical use in lung cancer and other types of solid tumors," he said.
In addition to the DetermaIO test, the acquisition of Insight brought Oncocyte an already established boutique pharma services business.
"Excitingly, [we] are in discussions with several global pharma companies developing immunotherapies and other drugs for a broad range of oncology indications," Andrews said during the call.
Finally, Andrews added, the company remains on track with its planned timelines for validating and commercializing its initial non-invasive lung cancer screening test, DetermaDx (originally DetermaVu).
OncoCyte's R&D expenses in Q1 rose 69 percent year over year to $2.2 million from $1.3 million, primarily attributable to personnel and laboratory related expenses for clinical validation activities related to DetermaDx.
Its SG&A spending spiked 126 percent to $6.1 million from $2.7 million in the same period last year, reflecting an uptick in personnel and related expenses, legal expenses and business development costs, noncash stock-based compensation expenses due to additional equity grants, and a ramping up of sales and marketing activities, including key hires, for commercialization of DetermaRx.
The firm ended the quarter with $16.6 million in cash and cash equivalents, and $325,000 in marketable securities.
According to Andrews, Oncocyte does not anticipate any significant delays in its previously shared timelines across all three of its products, despite the ongoing COVID-19 pandemic.
"Given the capital market uncertainty … we have prioritized our investments … and [are] reducing spend on future R&D projects that are not related to generating market value in the next 12 months," he said. These prioritized projects include completing the clinical validation for DetermaDx, publishing data in the scientific press, preparing a CMS coverage dossier, driving revenue growth from the now launched DetermaRx, and pursuing pharma contracts and studies for DetermaIO.