Aspira Women’s Health, Inc. (NASDAQ:AWH) Q2 2022 Earnings Conference Call August 10, 2022 8:30 AM ET
Company Participants
Nicole Sandford – President and Chief Executive Officer
Robert Beechey – Chief Financial Officer
Ryan Phan – Chief Scientific Officer and Chief Operating Officer
Conference Call Participants
Ross Osborn – Cantor Fitzgerald
Operator
Good morning, ladies and gentlemen and welcome to Aspira Women’s Health Inc. Second Quarter 2022 Conference Call. My name is Vikram and I will be your coordinator for the call today. At this time, all participants are in a listen-only mode. Following management’s prepared remarks, we will open the call for your questions. As a reminder, this call is being recorded today.
Leading the call today are Nicole Sandford, President and Chief Executive Officer, Bob Beechey, Chief Financial Officer and Dr. Ryan Phan, Chief Scientific Officer and Chief Operating Officer. After the 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 and 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 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. Please go ahead ma’am.
Nicole Sandford
Thank you, operator and thank you everyone for joining us today. We are very pleased to provide an update on our progress in the second quarter. Joining me on the call today are Bob Beechey, our Chief Financial Officer and Dr. Ryan Phan, our Chief Scientific and Chief Operating Officer. I will begin with an overview of our second quarter performance and an update on a number of important strategic developments.
Dr. Phan will follow with an update on our product pipeline before handing the call to Bob, who will provide a financial update. After our prepared remarks, we will then open the lines for a question-and-answer session. Last quarter, I shared my priorities for 2022. I told you then that my focus and the focus of the entire company would be on execution across three dimensions, growth, innovation, and operational excellence. While we still have much to do, I’m happy to report encouraging progress in all three areas in the second quarter of 2022.
Let’s begin with an update on our cash utilization as it sets an important context for the rest of the conversation. When I joined the company, I made it a priority to align our spending and resources to the most important business needs. I asked my executive leadership team to exercise fiscal conservatism but to do so without jeopardizing our strategic vision. We have made significant progress since then. In the second quarter of 2022, we utilized $6.4 million in cash, roughly 40% less than we utilized in the first quarter of 2022 and 16% less than the fourth quarter of 2021. This was a major achievement that required the attention of every Aspira team member. And I’m extremely proud of our progress.
We achieved this reduction in utilization without sacrificing our growth or innovation goals as you’ll hear shortly. We continue to hire individuals to fill key roles, especially in the commercial and R&D organizations, and invest in the infrastructure required to increase their volume and deliver on our Aspira synergy contracts. We plan to operate the business this way going forward. I’ll ask that you keep that reduced cash utilization number in mind as Ryan, Bob and I detail our second quarter achievements.
First, let’s talk about growth. In Q2, we broke through the $2 million revenue threshold for the first time in a single quarter with a volume of 5,411 tests performed. This represents an 11% increase in revenue over the first quarter of 2022 and an 18% increase over the same period in 2021. Our testing volume increased to 83 tests performed per day in Q2 compared to 75 tests performed per day in Q1. We achieved this growth while continuing to execute our previously disclosed commercial transformation, which I’m happy to report is largely complete.
As of today, 67% of our sales professionals have been with the company for more than three months, and 58% have been with us for more than six months. In the second quarter of 2022, approximately 593 physicians ordered an OVA product for the first time, which is essentially flat with new ordering physicians in the first quarter. We aim to increase the number of physicians ordering for the first time and do more to drive repeat orders from existing physicians. The latter will be a focus area for the rest of the year. Bob will provide additional information about revenue and AUP later in the call.
While I’m happy to see the uptick in volume, I’m far from satisfied with overall revenue growth. This quarter, I have spent time in the field with our reps and physicians and I will continue to do so in the third quarter to better understand challenges to adoption and overall growth. Elsewhere on the growth front, Aspira and BioReference established a national collaboration to co-market and distribute OVA1plus. BioReference is one of the largest full service specialty laboratories in the United States with a leading position in women’s health, oncology and urology, and 40 years of expertise in clinical diagnostics.
We are targeting a launch of the arrangement no later than the fourth quarter of this year. It is our expectation that the relationship will drive incremental volume in 2023 and beyond. Both Aspira and BioReference are deeply committed to enhancing health outcomes for women. And I found the cultures to be very complementary. I believe this is the beginning of a mutually beneficial long-term relationship and I’m working hard to ensure a strong start. Separately Aspira Women’s Health has established a standalone agreement with Scarlet Health, an innovative mobile phlebotomy solution, providing collections for Aspira’s patients from the comfort of their home.
As an update to the Aspira Synergy platform rollout, we are encouraged by adoption from our first physician super group which I am now able to identify as women’s care. We were able to design and implement a commercially reproducible solution and playbook for future Aspira Synergy opportunities, while implementing an arrangement that has helped both women’s care and Aspira achieve their shared mission to expand patient access.
Now turning to innovation, it is my pleasure to welcome Dr. Ryan Phan to our call for the first time. Dr. Phan, can I ask you to briefly introduce yourself and then provide an update related to our product portfolio, including today’s announcement of an expansion to our relationship with Harvard’s Dana Farber Cancer Institute, and a number of other academic institutions to include endometriosis, in addition to our ongoing collaborations related to ovarian cancer.
Ryan Phan
Thank you, Nicole. I’m honored to join Aspira as Chief Scientific and Operating Officer after many rewarding years in leadership and Academy institution healthcare system, and most recently at CareDx where I was a Senior Vice President of Lab Service and Medical Director. As a member of CareDx leadership executive team, I led the commercial testing operations, clinical development pipelines, manufacturing, supply chain, regulatory affairs and compliance and automation and engineering divisions. In addition, I served as the licensed Medical Director of the company’s CLIA CAP laboratory and played a key role in the growth and expansion of the company’s testing revenues and portfolio.
Prior to joining CareDx, I was Managing Director and Head of Regional Molecular Genetic Pathology and Cytogenetics at Kaiser Permanente in Northern California. Before that, I was a faculty member of the University of California at Los Angeles, and the Los Angeles VA Medical Center. I received my Bachelor degree from UC Berkeley, and my Ph.D. from Columbia University in New York. I completed my postdoctoral training at Harvard Medical School, where I was the Cancer Research Institute fellow, and American Society of Hematology Scholar.
I look forward to working with everyone at Aspira to strengthen our innovation efforts, accelerate the expansion of our product portfolio and scale our commercial testing service as we move forward.
Now, let me turn to our product portfolio by reiterating our intention to launch OvaWatch, our next generation ovarian cancer risk assessment by the end of the year, with superior negative predictive value, OvaWatch is non-invasive tests that provide additional data points for clinician initial assessment enrollment what maximizes, this lab develop test will support physician in making informed clinical decision in the management of woman with adnexal masses.
OvaWatch represents a significant expansion of our potential patient population, when compare what our assisting FDA CLIA OVA1plus tests, which are only approved for use in woman with matches that have been referred for surgery. We estimate the total addressable market for OvaWatch to be three or more times the addressable market for OVA1plus. As we previously disclosed, our paper entitled Analytical Validation of a Deep Neural Network Algorithm for the Detection of Ovarian Cancer was accepted for publication by JCO Clinical Cancer Informatics.
While our ability to collect samples for the study was significantly impacted by COVID surge over the past two years. Today, I can report that we recently completed enrollment of our [indiscernible] prospective study based on real world data in support of our plan to launch OvaWatch. We are in the final stage of analysis and are preparing a manuscript for peer reviewed publication. We are satisfied that the data provided in the analytical and clinical evaluation study will be sufficient to why physician and payer adoption.
OvaWatch and OVA1plus will be marketed together as part of our newly reimagined ovarian cancer portfolio, we have branded as OVASight [ph]. Physician will be encouraged to consider an OVASight test for a woman with a national to provide a more informed clinical decision in the assessment and management of their patient with ovarian cancer. In this regard, a single task requisition from OVASight will allow clinician to determine which test is appropriate for their patients. We are on track to launch the product in the fourth quarter of this year, and expect to see meaningful volume from OvaWatch during the early months of 2023.
We can also report on our ongoing efforts to support research related to the impact of race on the detection of ovarian cancer sponsored by Aspira clinical research efforts in the Philippines. The manuscript entitled clinical performance of a multivariate index assay in detecting early stage ovarian cancer in Filipino woman has been accepted for publication in the International Journal of Environmental Research and Public Health in a special issue on ovarian cancer prevention and treatment. The study was designed to validate the effectiveness of a multivariate index assay as OVA1plus in the assessment of ovarian cancer in Filipino woman. As soon as the report is published, we will stage on our website, you will hear more about ovarian cancer offerings, including a presentation regarding the clinical application of OVA1plus and OvaWatch in all the 24 at 12 PM Eastern time, when Nicole and I host the webinar with Dr. Charles Dunton, Aspira Chief Medical Officer, Dr. Nicole Williams of the Gynecology for Institute of Chicago, and Dr. [indiscernible] of Aspira Women’s Health. An invitation to the event will distribute by large size advisors. Registration details can be found on the Investor Relations page of our website.
Moving on to our endometriosis product offerings, we are excited to announce that we have entered into a sponsor agreement with Harvard Dana Farber Cancer Institute, Brigham & Women’s Hospital, and Medical University of Lodz for the generation of multi-omic, non-invasive diagnostic aid to identify endometriosis based on circulating micro RNAs and proteins. We will collaborate with this prestigious group of world renowned institutions to identify candidate markers and build a series of diagnostic models for woman being evaluated for possible endometriosis. We intend for the collaboration to be completed. We anticipate the total cost of the partnership to be approximately $1.2 million.
The result the technology to medical and clinical management of woman without pelvic mass presenting with symptom of endometriosis and to limit surgical evaluation for those cases were non-invasive test by pivotal or a non-surgical excision of endometriosis, a clinically indicated. This research collaboration agreement we do on — prior on the efforts and we expand our access to appropriate samples as well scientific resources required to accelerate the commercialization of our EndoCheck diagnostic tests. We believe this agreement helps to ensure a launch of an endometriosis diagnosis test in 2023 which continue to be our goal. We plan to host a second webinar to provide additional insight on our endometriosis test. And we can now see the timing of that webinar.
I will now turn to Bob Beechey for a discussion of our financial performance, Bob?
Robert Beechey
Thank you, Ryan. Second quarter 2022 OVA1plus revenue was $2 million, an increase of 17% year-over-year and a 10% increase sequentially. The revenue and volume numbers represent a record quarter for the company. The revenue for OVA1plus test performed was $373 for the second quarter of 2022 compared to $378 during the second quarter of 2021 and $380 for the first quarter of 2022. The year-on-year price and sequential 1% decrease in revenue per OVA1plus test performed was driven by the mix of payer type with decrease patient pay collection for the second quarter of 2022, as well as our strategic initiative to serve the Medicaid population, which currently has a lower price when compared to our average and representing a higher percentage of our revenue.
Our price for Medicaid was $90 in the second quarter of 2022, and represented approximately 12% of volume. Gross profit margin on OVA1plus was 48.6% in the second quarter of 2022 compared to 52% for the same period in 2021, and 53.2% in the first quarter of 2022. The decreases were driven primarily by software license costs and maintenance costs.
Research and development expenses for the three months ended June 30, 2022 were $1.4 million roughly flat when compared to the prior year second quarter of $1.47 million and the first quarter of 2022 spend of $1.35 million. The spending was focused primarily on product development costs related to OvaWatch and EndoCheck.
Sales and marketing expenses were $3.6 million for the three months ended June 30, 2022 a decrease of $917,000 compared to the second quarter of 2021 and $439,000 compared to the first quarter of 2022. The decrease was driven by decreases in personnel costs associated with our first quarter reorganization, as well as reduced consulting costs.
General and administrative expenses were $4.2 million for the three months ended June 30, 2022. We incurred $3.3 million in general and administrative expenses in the prior year quarter, and $4.4 million in the first quarter of 2022. The year-over-year variances attributable to headcount and personnel expenses, while the sequential decrease is driven by reduced consulting costs.
We ended the second quarter of 2022 with approximately $20.7 million in cash, cash equivalents and restricted cash. Cash used in the second quarter of 2022 was $6.4 million. As Nicole mentioned, we are focusing our investments on development of products with a near term impact, namely OvaWatch and EndoCheck, and enhancing our sales and marketing in preparation for the buyer reference collaboration and launch of OvaWatch. This focus on execution has resulted in reductions in spend on more speculative long-term research and a reduction in awareness marketing, which we concluded was not yielding adequate returns.
In addition, we have rationalized our cost structure across all functions, while maintaining appropriate quality and we are pleased with the result in cash utilization in the second quarter. We expect to sustain or reduce cash utilization levels in the coming quarters. We expect to utilize in the range of $14 million to $15.5 million totaled during the second half of the year. This outlook includes cash that we expect to use to maintain our current staffing levels and the required investments to lost OvaWatch. Kickoff our partnership with buyer reference, and continued discovery and development of EndoCheck.
The cash utilization expectation does not contemplate any revenue contributions in the fourth quarter from the OvaWatch launch, or from the buyer reference partnership initiation. Note we do expect an increase in cash utilization in third quarter compared to the second quarter of 2022 as we expect to fund endometriosis development of approximately $1.2 million. We expect the fourth quarter will then revert to levels in the range of the second quarter. We’re examining all options for extending our cash runway, and we’ll announce specific plans as appropriate.
With that, I will now turn the call back over to Nicole. Nicole?
Nicole Sandford
Thank you, Bob. And as a final update let me introduce and welcome two new board members Dr. Robert Auerbach and Ruby Sharma. Dr. Auerbach is the retired President of CooperSurgical. He brings extensive clinical and executive experience in the medical industry, including experience as a Director and as an Executive Officer. Ms. Sharma, the Managing Partner at R&D Strategic Advisors brings decades of senior leadership, accounting and audit committee experience. Each brings different, but equally critical skills and expertise to the board.
Bob’s medical background and track record of success as an executive in the women’s health sector, along with Ruby’s strategic mindset, and extensive financial business and governance acumen will be highly valuable to Aspira as we accelerate our strategic execution in today’s challenging environment.
Overall, we are pleased by our accomplishments this quarter, and our strategic focus on growth, innovation, and operational excellence. Things you can expect from us in the coming months include launch of our bio reference relationship in the second half of this year, launch of OvaWatch in the fourth quarter of this year. Launch of an endometriosis diagnostic test in the second half of 2023. And continued focus on cash utilization and sources of liquidity, with the expectation for cash usage to be between $14 million and $15.5 million for the balance of the year.
In closing, our executive team remains committed to our strategic vision. And we are focusing all of our efforts on execution for the remainder of 2022 and beyond. We have made tremendous progress and more is yet to come.
With that I would like to now open the call for questions. Operator?
Question-and-Answer Session
Operator
Thank you very much. At this time, we will be conducting our question-and-answer session. [Operator Instructions]. We have a first question from the line of Brian Weinstein with William Blair. Please go ahead.
Unidentified Analyst
Hi, good morning. This is Griffin on for Brian. Thanks for the questions. Maybe just to start on the sponsored research agreement for the endometriosis test. Just to clarify, is this product separate from EndoCheck or more of an extension of the existing R&D work that you guys have already done? And then I think Endo, the LDP launch was expected in ’23. So I just want to better understand that, how this research agreement work compares to the Endo product?
Nicole Sandford
Sure. Great. Well, thanks for the question. I’ll start and then, Ryan, you can add your thoughts as appropriate. So the sponsored research agreement is best characterized as an extension of our R&D efforts overall. So as I think we’ve talked about in prior calls, we have been looking for opportunities to accelerate and sort of ensure a launch of an endometriosis LDT in 2023. And this arrangement will give us access to resources and importantly specimens and expertise to complete both protein and micro RNA development work.
So but the exact LDT to be launched, we will obviously give more information about that when the time is appropriate. But I think the way to think about it is the ladder in your question as an extension of our team and access to additional resources. Ryan, anything to add to that?
Ryan Phan
No, I think you covered, Nicole. Thank you for the question.
Unidentified Analyst
Okay, thank you. And then on the BioReference Lab for marketing distribution agreement. It might be limited what you can say, but can you give us a sense of maybe how many reps on their site will be carrying the over one product and with your focus being more on depth in the second half year and in driving adoption utilization against existing docks? Is that are they going to be helpful here? Will that also be these reps focused? And then any deals — details on the economics of disagreement that revenue share or potential margin impact would be helpful?
Nicole Sandford
Yes, so it’s challenging to give anything that’s going to satisfy in terms of details. So I apologize in advance for that. But I will say, we’re extremely satisfied with the commitment that BioReference’s made to us in terms of their promotion of this relationship and our products with their sales team. And I really can’t comment on that, it wouldn’t be appropriate for me to comment on the size of their sales team. All I can say is, they’ve been incredibly supportive. And we’ve found the cultural fit between what we’re each trying to achieve with this relationship has been extremely positive. So we feel really confident that they’re going to do what they can to drive adoption within their — with — both within their sales force, but then, obviously, importantly, within their customer base.
And the economics are consistent with our current OVA1plus sales, although I’ll ask Bob to just confirm that there’s nothing else he’d want to say on that.
Robert Beechey
I would just comment that were our expectation is that it’s attractive to both sides, and we expect our margin profile to be consistent.
Unidentified Analyst
Okay, appreciate that. And then just last one here on the capital situation, the burn was down nicely year-over-year, and I probably appreciate the color on sort of second half expectations. And maybe can you just talk a little broadly about how you’re thinking about the cash burn in 2023? And ultimately addressing what will likely be a financing need?
Robert Beechey
Well, we haven’t given guidance for Q3. I mean, for 2023, obviously, the major catalysts or the BRL relationship and the OvaWatch launch. So we would expect top-line sequentially year-on-year to be meaningfully higher, and we don’t anticipate any significant cost increases. We believe the R&D that we just spoke about relative to the partnership is what’s necessary to get over the finish line on Endo in terms of our development.
Clearly, we’re not at the point where we’ve assess the marketing needs, and that’s on the comp. So the only cost step function that might be appropriate as the front end on marketing, relating to Endo, but look for top-line growth with consistent cost discipline. And we think the majority of the R&D is covered by this research. The majority of R&D development discovery is going to be covered by this Harvard, Dana Farber relationship that we’re going to fund in the current year.
Unidentified Analyst
Okay. Thank you for the questions.
Nicole Sandford
Thank you.
Operator
Thank you. We have next question from the line of Ross Osborn with Cantor Fitzgerald. Please go ahead.
Ross Osborn
Hi, thanks for taking the question. Just starting off could you walk through the 2Q cadence? And then how July shaped up maybe relative to June?
Nicole Sandford
Hey, there, thanks for the question. I’m sorry. Can you just clarify what are you looking for on the first part?
Ross Osborn
How the volume progressed throughout the quarter? Tolerating volumes month over month, and then how July and then even you know how August volumes have turned it?
Nicole Sandford
Sure. Well, too soon to say much about August. In terms of volume for the second quarter, it was pretty consistent month to month. And we continued to see marginal growth in April for sure. And frankly, July is never a great month, but we’ve actually seen strong volume in July so far. So pretty even growth over the three months.
Ross Osborn
Okay, got it. And then on the scarlet relationship, can you just walk through how that testing process works?
Nicole Sandford
Yes, so again, I don’t want to get too over my skis by describing somebody else’s a product, but how it essentially would work is as a mobile phlebotomy. So, a patient can choose instead of going to a draw station to have a scarlet mobile phlebotomy visit and have a drop down at their house. So it will help with people and/or anywhere else for that matter, work whatever. So it gives additional gives an additional optionality for having blood drawn for tests like this.
And also what’s really exciting is that the coverage is also inclusive of rural folks as well. So rural areas as well. So really nice national coverage, and we think will be helpful to get our tests to be more available to all women, which as you know, is a big part of our mission.
Ross Osborn
Okay, great. And then I guess lastly so it looks like that OvaWatch timeline has narrow down to the second half of this year to the fourth quarter. How should we think about the fourth quarter rollout of OvaWatch?
Nicole Sandford
Yes, so our plan is to spend the time between now and the launch, which we expect to be pretty early in the fourth quarter, to secure additional progress relative to reimbursement. We’re submitting our clinical dose agent Novitas in the next two weeks, and then lots of work to do on reimbursement there. We’re feeling very, very positive about the progress that we expect to make between now and the launch there.
So I think I would look at it as an early fourth quarter event. We’ve said that we are not counting on revenue this year for either OvaWatch or the BioReference co-marketing arrangement. There could be some uplift there, but frankly, we just — we didn’t think it was appropriate to rely on that.
Ross Osborn
Okay, got it. Thanks for taking the question.
Nicole Sandford
Sure. Thanks for the question.
Operator
Thank you. Ladies and gentlemen, we have reached the end of the question-and-answer session. And I’d like to turn the call back over to Nicole Sandford for closing remarks. Over to your ma’am.
Nicole Sandford
Thank you, everyone for joining us today. We look forward to seeing all of you on our KOL event on August 24.
Operator
Thank you. Ladies and gentlemen, this concludes today’s conference. You may disconnect your lines at this time. Thank you for your participation.
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