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OncoCyte Q2 Net Loss Ticks Up

NEW YORK – OncoCyte said after the close of the market on Wednesday that its second quarter net loss increased year over year and exceeded the consensus Wall Street estimate.

For the three months ended June 30, OncoCyte reported revenues of $143,000 compared to no revenues in the year-ago period, and it beat the analysts’ average estimate of $50,000. Q2 2020 revenues resulted primarily from pharma services generated by its wholly owned subsidiary, Insight Genetics, which it acquired in January.

Although the firm has begun to see its first commercial test revenues after several years of pre-commercial research and development, revenues from its DetermaRx test, launched this January, are recognized on a cash, rather than an accrual basis.

OncoCyte said earlier this month that it was scrapping its only in-house developed test, DetermaDx (originally DetermaVu), and is now relying on two other tests it acquired during the last year to support its commercial development plans. The first, DetermaRx, was formerly the Razor Genomics assay, and originated as a test called Pervenio which was briefly acquired and then released by Life Technologies/Thermo Fisher. The second, DetermaIO, was developed by Insight Genetics.

During a call discussing the firm's Q2 results, OncoCyte CEO Ron Andrews said that the decision to jettison DetermaDx will allow the company to "eliminate a significant amount of … spending."

"We certainly share your disappointment that although we completed the clinical trial of DetermaDx by the end of second quarter 2020, the result of that trial is not strong enough to justify further investment in the program at this time," he said.

Despite the failure, he stressed that OncoCyte's strategy to diversify and de-risk its product portfolio through acquisitions has been relatively successful.

"Looking ahead, OncoCyte will now focus on driving adoption and revenue for our two commercially available products —DetermaRx for the clinical market, and DetermaIO for the rapidly growing market for patient selection to support pharma development in immune therapies — with an eventual goal of rapidly advancing IO to the clinical market for immune therapy response prediction and selection," Andrews added.

According to Andrews, commercial payers have begun to reimburse DetermaRx claims, and OncoCyte is poised to receive its first Medicare payments following the final local coverage decision from its local Medicare administrative contractor Noridian, which aligns with an earlier LCD issued by Palmetto. The Noridian LCD, which goes into effect in August, establishes Medicare coverage for approximately 70 percent of eligible patients nationwide for a new class of predictive lung cancer tests, of which DetermaRx is currently the only member.

For the recently completed quarter, OncoCyte incurred a net loss of $9.1 million, or $0.14 per share, compared to a net loss of $5.4 million, or $.10 per share, in the year-ago period. Analysts on average had expected a loss per share of $.10

OncoCyte's Q2 R&D expenses more than doubled to $3.2 from $1.5 million in Q2 2019. According to the company, this was primarily attributable to expenses related to the failed clinical validation activities of DetermaDx.

The Alameda, California-based firm's SG&A expenses rose 32 percent to $5.3 million from $4.0 million, attributable largely to personnel and related expenses as it ramped up its sales and marketing activities for the newly launched DetermaRx.

OncoCyte ended the quarter with $16.8 million in cash and cash equivalents and $341,000 in marketable securities.