Biocept, Inc. (NASDAQ: BIOC) Q3 2022 earnings call dated Nov. 28, 2022
Corporate Participants:
Jody Cain — Investor Relations
Samuel D. Riccitelli — Chairman and interim President and Chief Executive Officer
Antonino Morales — Director and Interim Chief Financial Officer
Analysts:
Kemp Dolliver — Brookline Capital Markets — Analyst
Presentation:
Operator
Good day, and welcome to the Biocept Third Quarter Financial Results Conference Call. [Operator Instructions] And please note that this event is being recorded. I would now like to turn the conference over to Jody Cain. Please go ahead.
Jody Cain — Investor Relations
This is Jody Cain with LHA. Thank you for participating in today’s call. Joining me from Biocept are Sam Riccitelli, Chairman and Interim President and Chief Executive Officer; and Antonino Morales, Interim Chief Financial Officer. During this call, management will be making a number of forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include all statements that are not historical facts and generally can be identified by terms such as anticipates, estimates, believes, could, expects, intends, may, plans, potential, predicts, projects, should, will, would or the negative of those terms.
Forward-looking statements involve known and unknown risks and uncertainties and other factors that may cause actual results, performance or achievements to be materially different from those statements as well as performance or achievements that are implied by the forward-looking statements. In particular, there is significant uncertainty about the duration, severity and impact of the COVID-19 pandemic. This means results could change at any time.
And the contemplated impact of COVID-19 on Biocept’s operations, financial results and outlook is the best estimate based on the information available for today’s discussion. For details about these risks, based to the company’s SEC filings, including the company’s quarterly report on Form 10-Q for the period ended September 30, 2022, filed with the SEC on November 21, 2022. The content of this call contains time-sensitive information that is accurate only as of today, November 28, 2022. Except as required by law, Biocept disclaims any obligation to publicly update or revise any information to reflect events or circumstances that occur after this call.
Now I’d like to turn the call over to Sam Riccitelli. Sam?
Samuel D. Riccitelli — Chairman and interim President and Chief Executive Officer
Thank you, Jody, and good afternoon, everyone. It has been about nine months since Antonino and I assumed our current operating roles at Biocept, and more than five months since our last investment community conference call. We’re delighted to be speaking with you today for an update on our business and our recent financial performance. Antonino will speak to the numbers in a moment. But before we begin, I’d like to thank him and his team, both internal colleagues and external professionals for their hard work in getting our Forms 10-Q for the second and third quarters of this year finalized and filed.
The list of companies that have completed two 10-Q filings and 11 days cannot be long, and we are certainly not happy being on this list. It truly took heroic efforts, and many, many hours were devoted to completing those documents. And as of last Monday, we are current with our SEC filings. I’d also like to thank everyone joining us today for their patience with the scheduling of this call, but we chose to delay the call a bit rather than compete with the Thanksgiving holiday. In terms of the business, I’m pleased to share progress in our goal to establish Biocept as a leader in the emerging category of diagnosing cancers that have metastasized to the central nervous system.
We are well-positioned to achieve this goal with our CNSide assay, which is the first commercially available product to measure CNS biomarker status in real-time. As a laboratory-developed test, CNSide is analytically validated and run commercially in our CLIA-certified CAP-accredited laboratory here in San Diego. As an update, following a College of American Pathologists or CAP inspection last month, our labs CAP accreditation has been renewed for the next two years. We recently announced that CNSide is now validated to detect and quantify tumor cells in the cerebrospinal fluid of patients with melanoma who are confirmed or suspected of having leptomeningeal disease.
This is a devastating complication in which metastatic cancer spreads to the membrane surrounding the brain and spinal cord. This validation expands the commercial use of CNSide beyond breast cancer, non-small cell lung cancer and other carcinomas to now include melanoma, which is the third most common tumor type in CNS metastasis. The importance of detecting CNS metastases cannot be overstated, as targeted therapies can oftentimes reduce or resolve the debilitating symptoms and extend life expectancy.
That said the current standards of care, which are CSF cytology and clinical evaluation via MRI, have limited sensitivity and specificity, which creates challenges for physicians in managing the disease and determining the best course of treatment. In pilot studies, CNSide continues to demonstrate high levels of sensitivity and specificity. Additionally, CNSide is both qualitative and quantitative, which are key advantages in monitoring the response of leptomeningeal tumors to treatment and improving the ability to make or change treatment decisions.
Our first application for CNSide represents a major commercial opportunity for Biocept. We estimate the annual market opportunity of $1.2 billion in the U.S. and $2 billion globally. We plan to explore the use of CNSide for additional indications that could further expand this market opportunity, including for other diseases beyond cancer that affect the CNS. Since CNSide’s early access launch about 2.5 years ago, we have continuously reported consecutive quarterly increases in ordering volume. I’m pleased to report this trend continued into the third quarter, with CNSide volume increasing 8% sequentially and up 176% over the prior year.
Our customer base has also expanded with 28 of the ELITE 64 National Cancer Institute designated cancer centers having ordered CNSide. We expect some slowdown in ordering during this year’s fourth quarter as historically, cancer testing is impacted by the holiday season. During our last call in June, we introduced three initiatives to achieve our goal of becoming a leader in neurological tumor diagnostics. Today, I’m pleased to share our progress against each of them. Our first initiative is to drive the generation of significantly more evidence demonstrating the clinical utility of CNSide.
We plan to use this evidence to support reimbursement and the incorporation of CNSide into clinical care guidelines, which we believe will broaden physician adoption. Starting with our company-sponsored FORESEE clinical trial, the patient enrollment is now open at the first clinical site, with the second site expected to be cleared before year-end or in early 2023. The FORESEE study is a two-part prospective clinical trial. Now we’ll enroll patients with breast or non-small cell lung cancer who have suspected or confirmed leptomeningeal metastases.
The trial is designed to compare CNSide with conventional care techniques such as CSF, cytology and radiology. The goal of the FORESEE trial is to further evaluate the performance of CNSide in monitoring the response to treatment in a prospective clinical trial setting and to assess the impact of CNSide on treatment decisions made by physicians. This trial is focused on demonstrating clinical utility, which is based on how and to what extent physicians find value in the detection of disease and how CNSide influences them in their decision-making. We believe evidence of clinical utility will support higher reimbursement decisions as well as achieving standard of care status.
Earlier this month, we announced participation in an investigator-initiated study to better understand their development and progression of metastatic breast cancer and brain metastases and/or leptomeningeal disease. This 20-patient pilot study is being conducted by leading breast oncologists, Doctors Michelle Melisko and Laura Hupert, from the University of California, San Francisco, under a grants from the California Breast Cancer Research Program and the University of California, San Francisco [Indecipherable].
The study is designed to identify biomarkers associated with CNS metastases, enabling a better understanding of treatment response, prognosis and treatment resistance that may improve the management of CNS disease in patients with metastatic breast cancer. Results from cerebrospinal fluid using Biocept’s CNSide assay and match patient blood samples will be analyzed and compared to detect and characterize cancer in CSF, with the goal of identifying new targets and to guide therapeutic decisions. This study is notable for several reasons.
First, it is being conducted by oncologists rather than by neuro-oncologists, signaling that our test is gaining awareness beyond the neuro-oncology community. Second, the California Breast Cancer Research Program and the Breast Cancer Program at UCSF are part of the Biden Administration Cancer Moonshots, which is aimed to accelerate progress against cancer. Third, and perhaps most importantly, we expect that results will demonstrate the vastly superior ability of CNSide compared with blood to detect and quantify tumor cells in the CNS.
We intend to solicit and fund additional investigator-initiated trials, including some that may lead to expanded CNSide market opportunities. I’m also pleased to announce that three posters featuring CNSide were selected for presentation at the Society of Neuro-Oncology Annual Meeting, which took place earlier this month. This is the premier Neuro-Oncology conference, and these presentations are important in generating further awareness and interest in CNSide amongst our core customer group as well as biopharma companies that are conducting studies with neuro-oncology therapeutics.
One of our posters covered HER2 heterogeneity observation in metastatic tumor, with this data currently being prepared for publication in a peer-review journal. The other two posters provided compelling data demonstrating CNSide’s capability in CNS primary tumors, an area we intend to further evaluate for expansion. Of note, these studies were presented by leading neuro-oncology key opinion leaders, Dr. Priya Kumthekar of Northwestern University and Dr. Santosh Kesari at Providence Southern California.
Our second initiative is to focus on leveraging CNSide to drive collaboration with biopharma companies that are seeking to develop new treatments or expand the use for existing treatments for CNS tumors. The ability of CNSide to capture and characterize circulating tumor cells in cerebrospinal fluid enables the identification of biomarker targets that are susceptible to approved and investigational therapies. Additionally, the ability to quantitatively monitor the level of cancer cells in the CSF during treatment can indicate therapeutic response.
CNSide may provide an observational endpoint for these trials and subject to inclusion in standard of care guidelines has the potential to become an efficacy endpoint indicator for therapies undergoing clinical investigations. As you may have seen, we announced our first biopharma collaboration in June with Plus Therapeutics to use CNSide in the RESPECT LN Phase I/IIa trial to evaluate response to treatment and treatment efficacy of rhenium-186 nanoliposome in patients with leptomeningeal disease. We also announced our first CNSide biopharma collaboration revenues in the second quarter.
We continue to pursue additional collaborations through a robust funnel of potential leads having identified more than 50 relevant opportunities. And our third initiative is to identify additional technologies, products and services we can in-license or acquire that can augment our offerings to neuro-oncologists. We are very early in this process, yet remain excited about the prospects. As an update on our COVID-19 business, we do not anticipate providing this testing service much beyond the end of 2022.
It’s notable that we have received more than 1 million samples for COVID-19 testing since we began offering this service in June 2020, with the resulting gross profit helping to fund our CNSide activities. As previously announced, we have judiciously exited most of our blood-based oncology diagnostic businesses to focus our resources on CNSide. However, we continue to support existing diagnostic and biopharma company collaborations that still require some aspects of our prior blood-based programs.
With those comments, I’d like to turn the call over to Antonino Morales to review our financial results. Antonino?
Antonino Morales — Director and Interim Chief Financial Officer
Thanks, Sam, and thanks, everyone, for joining us today. As mentioned, we recently became current with our quarterly SEC filings. Although we filed our 10-Q for the second quarter on November 10, and we filed our 10-Q for the third quarter on November 21, today, I will focus my remarks on our Q3 and 9-month financial results. Starting with our third quarter results; net revenues for the three months ended September 30, 2022, were $5.6 million, which included $4.7 million in COVID-19 test revenue. This compares with net revenues for third quarter of 2021 of $17.5 million, which included $16.5 million in COVID-19 test revenue.
We accessioned 49,874 commercial samples during Q3 of 2022 compared with 152,796 commercial samples during the prior year period, with the decline due primarily to lower COVID-19 testing volume. Cost of revenues for the third quarter of 2022 was $5.8 million compared with $11.3 million a year ago, with the decrease primarily related to lower COVID-19 testing volume. R&D expenses for the third quarter of 2022 were $1.4 million, which compared with $1.3 million for the third quarter of 2021.
G&A expenses for the third quarter of 2022 were $3 million compared with $3.5 million for the third quarter of 2021, with the decrease primarily due to lower stock-based compensation and lower headcount. Sales and marketing expenses for this year’s third quarter were $1 million compared with $1.9 million a year ago, with the decrease due primarily to reduction in sales commissions expense. Net loss attributable to common stockholders for the third quarter of 2022 was $5.1 million or $0.33 per share.
This compares with the net loss attributable to common stockholders for the third quarter of 2021 of $0.6 million or $0.04 per share. Turning to our nine-month results; net revenues for the nine months of 2022 were $36.1 million, which compares with $47.3 million for the first nine months of 2021. Operating expenses for the first nine months of 2022 were $49.5 million and included cost of revenues of $24.1 million, R&D expenses of $4.9 million, G&A expenses of $4.2 million, and sales and marketing expenses of $6.3 million; within G&A, $3.5 million of expenses were nonrecurring.
Net loss attributable to common stockholders for the first nine months of this year was $13.6 million or $0.80 per share. This compares with net income attributable to common stockholders for the first nine months of 2021 of $0.1 million or $0.01 per share. We reported cash of $18 million as of September 30, 2022.
With those comments, I’ll turn the call back to Sam.
Samuel D. Riccitelli — Chairman and interim President and Chief Executive Officer
Thanks, Antonino. I want to mention that last month, we hosted our second KOL Webinar, this one featuring neuro-oncologist, Dr. Priya Kumthekar from Northwestern University and Dr. Seema Nagpal from Stanford University. Both discuss the real-world use of CNSide in their practices and at their institutions. We invite you to watch this compelling webinar, which is available on the CNSide page on biocept.com. Now before opening the call to your questions let me summarize by stating that our goal is to establish leadership in the emerging category of neurological tumor diagnostics.
We intend to generate the requisite clinical utility evidence that will support CNSide reimbursement and adoption into patient care guidelines. We are also focused on forming collaborations with biopharma companies that are developing treatments for CNS tumors. We faced several near-term milestones, including the following: We expect to announce our second revenue-generating biopharma collaboration, either later this year or early next year.
We plan to open an additional center in the FORESEE clinical trial, again, either later this year or early next year. We have one investigator-initiated trial with CNSide already underway and are seeking opportunities for additional independent trials — and we expect CNSide clinical study results to be published in a peer-reviewed journal sometime in the first half of 2023.
Lastly, I want to welcome Biocept’s newest Director, Quyen Dao-Haddock as a CPA with more than 20 years of financial and accounting experience. Quyen will be a valuable addition to our Board and also as a member of our Audit Committee. In closing, we believe Biocept is on an optimal path for growth and building shareholder value. We look forward to sharing our progress on the goals on upcoming quarterly calls. And as always, we are committed to improving patient treatment choices and clinical outcomes.
And with that overview, we’ll now — we’re now ready to take your questions. Operator?
Questions and Answers:
Operator
Thank you. [Operator Instructions]
Samuel D. Riccitelli — Chairman and interim President and Chief Executive Officer
While we are waiting for the first question, with the accounting review now completed and our SEC filings up to date, we look forward to keeping you abreast of our progress by resuming our practice of holding quarterly conference calls. Also, Antonino and I will be in San Francisco during the Annual JPMorgan Healthcare Conference and are available for one-on-one meetings, January 9 through the 11. Please contact LHA if you would like to schedule some time with us. Okay, operator, we’re ready for the first question.
Operator
And that question will come from Kemp Dolliver with Brookline Capital Markets. Please go ahead.
Kemp Dolliver — Brookline Capital Markets — Analyst
Hi, good afternoon. I have a couple of questions. First is what does the expense base look like after you exit COVID testing, assuming that, that will occur at the end of the year?
Samuel D. Riccitelli — Chairman and interim President and Chief Executive Officer
Kemp, thanks for the question. I’m going to let Antonino answer this one. Go ahead.
Antonino Morales — Director and Interim Chief Financial Officer
Yeah. That — in anticipation of the exit of the COVID, we had started reducing our expense base not only from the operating side and headcounts. And we had incurred some expense to make that happen this year, and you’ll see some improvements in the expenses going forward after the fourth quarter, but there will be definitely reductions in the expense base.
Kemp Dolliver — Brookline Capital Markets — Analyst
You’re not in a position to give specifics at this point?
Antonino Morales — Director and Interim Chief Financial Officer
No, I really can’t — I mean I can’t project at this point.
Kemp Dolliver — Brookline Capital Markets — Analyst
Okay. Fair enough. The next couple of questions are interrelated, and they relate to CNSide and your ability to expand use of it at the designated national cancer centers. So how are you trying to touch the cancer centers that have yet to order? What are the gating factors for you in doing so beyond the obvious that you have probably a minimal number of people out making calls? And finally, what experience have you had with repeat orders of late?
Samuel D. Riccitelli — Chairman and interim President and Chief Executive Officer
So many good questions in there, Kemp. As you may or may not be aware, we have a relatively small commercial organization in the field right now. We’re not fully covering the geography of the U.S. We’re focused mostly in the Midwest, the Southeast and in the Northeast. We have three FTEs there, and we have a leader in that group and who’s also helping us on the commercial side itself, he’s carrying a bag himself a bit.
And essentially, meetings like we just had at SNOW [Phonetic] are big forums for us, where we try to touch base with all of the KOLs that we have been interacting with, including those who have not yet ordered. I would describe the NCI centers much like I would describe most of the buying universe for health care products. There are early adopters. There are late adopters. There are middle to late adopters. So I think we’ve done a very good job at identifying those folks that were willing to try something brand new because of perhaps compassionate use issues or just the desperation they have in helping to manage these patients.
And so we continue to call on these centers with our small group. It is a collaboration between inside and outside folks. Our medical team spends a lot of time interacting with KOLs, explaining how the test works and what it can provide to these caregivers. So hopefully, some of that gives you a little color on how we go about getting these NCI centers. We’re seeing a nice pace of adoption, just had — several just start here in the last period of time. So we’re now off to 28. So hopefully, that gives you some color, Kemp. Did I answer all your questions?
Kemp Dolliver — Brookline Capital Markets — Analyst
The last question related to experience with repeat orders so far.
Samuel D. Riccitelli — Chairman and interim President and Chief Executive Officer
So we’re seeing relatively good performance there. I don’t have any off-hand statistics for that. Other than track — you can track the number of physicians who order every quarter. You can attract — you can also track the trends — the positive trends we’ve seen in cases per client that’s been steadily increasing. So those kinds of metrics are all contained in our investor deck. So those kinds of things give us great assurance that the test is sticky once the clinicians have some experience with it.
Kemp Dolliver — Brookline Capital Markets — Analyst
Great. Thank you, Sam.
Samuel D. Riccitelli — Chairman and interim President and Chief Executive Officer
Thank you Kemp. Thanks for the questions.
Operator
And this will conclude our question-and-answer session. I’d like to turn the conference back over to Sam Riccitelli for any closing remarks.
Samuel D. Riccitelli — Chairman and interim President and Chief Executive Officer
Once again, I’d like to thank everyone for participating on today’s call and for your interest in Biocept. We look forward to providing an update during our next conference call in March 2023 when we report our 2022 fourth quarter and full year financial results. Thanks again, and have a great day.
Operator
[Operator Closing Remarks]