Aspira Women’s Health Inc. (NASDAQ:AWH) Q2 2023 Earnings Call Transcript

Aspira Women’s Health Inc. (NASDAQ:AWH) Q2 2023 Earnings Call Transcript August 14, 2023

Operator: Good afternoon, ladies and gentlemen, and welcome to Aspira’s Women’s Health, Incorporated Second Quarter 2023 Earnings Conference Call. At this time, all participants are in 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 is Nicole Sandford, President and Chief Executive Officer; Joining her is Dr. Torsten Hombeck, Chief Financial 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 Aspira Women’s Health control. 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 the cautionary notes set forth in today’s press release, as well as the risk factors set forth in Aspira’s most recent Annual Report on Form 10-K and quarterly report on Form 10-Q 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 now like to turn the call over to Nicole Sandford, President and Chief Executive Officer. Please go ahead.

Nicole Sandford: Thank you, operator, and good afternoon, everyone. I would like to welcome you to our second quarter 2023 conference call. Before I began, I would like to officially welcome Dr. Torsten Hombeck to our senior leadership team. Torsten was appointed Chief Financial Officer on June 15 and brings over two decades of biotech experience having served in several senior positions at life science companies. His extensive experience includes capital raising, M&A transactions, corporate strategic planning, product development and launch, and of course, expertise in all aspects of accounting and SEC reporting. Torsten has already made a major impact, including the successful closing of a $4.7 million capital raise just weeks after coming on Board.

He will provide remarks later related to our financial performance before we open up the call for questions. Now let me begin with a review of our performance this quarter. As always, I’ll start with growth. OvaSuite product revenues for the second quarter were $2.5 million representing growth of 23% compared to the second quarter of 2022. This continues our established trend of year-over-year quarterly growth for each of the quarters since I became Chief Executive Officer. The number of OvaSuite tests performed in the second quarter was 6,289, an increase of 16% compared to the second quarter of 2022 with OvaWatch contributing 884 tests to the total. This represents an 80% increase in OvaWatch tests performed in the second full quarter of adoption.

OvaSuite tests performed for the six months ended June 30, 2023 was 12,548, an increase of 22% versus the same period of 2022. Importantly, the volume growth was driven by a much leaner sales team with year-to-date test volume for field representative improving substantially from 354 per rep in 2022 to 598 per rep in 2023. This demonstrates that our commitment to eliminating unprofitable and underperforming territories along with a renewed focus on partnerships like BioReference Laboratories to women’s care of Florida are beginning to bear fruit. When we look beyond volume and focus on average unit price, I’m very pleased with our progress. Our OvaSuite AUP for the quarter increased to $396. Importantly, we began billing OvaWatch under its unique PLA Code on April 1, which resulted in the second quarter OvaWatch AUP of $326 of 142% increase over the first quarter.

While we are still in early days, we are pleased to see reimbursement patterns for OvaWatch line up nicely with Ova1Plus. We have launched an OvaSuite payer adoption strategy for the second half of the year that is aimed at making as much progress as possible on the OvaSuite test portfolio, while we prepare for a successful launch of EndoCheck by the end of 2023. More broadly in reimbursement, events continue to unfold with CMS and Medicare reimbursement of diagnostic tests through national and local coverage decisions. They’re actively participating in industry initiatives to collaborate with CMS and we’ll disclose any changes that could have an impact on our future revenue. Lastly, in terms of our growth initiatives, we are now in the final stages of the commercial strategic refresh, which was launched last summer.

The initial focus was on refining our core value proposition and proving the effectiveness of our field sales team and rationalizing our overall sales and marketing spend. I’m proud of our progress as our sales and marketing expenses for the second quarter dropped once again, decreasing over 50% when compared to the second quarter of 2022, while simultaneously achieving growth in both product revenues and volumes. While cost containment is critical to the company, I want to stress that our commercial refresh is not simply a cost cutting exercise. It always has been and will continue to be about improving impact and the return on investment. As we move into the next phase of the commercial strategy in the second half of the year, we’ll focus on reaching physicians and other healthcare providers directly through multiple channels.

The timing of this effort is very intentional. We are emerging from the seasonal slowdown of the early summer months and are preparing to expand OvaWatch for use as a serial or longitudinal monitoring test. Specific activities will include the creation of a content hub for direct healthcare provider interaction, advertisements and high impact OBGYN journal targeted virtual and in-person physician education and ovarian cancer awareness month social media campaign, and the expansion of our sales capabilities to drive growth more efficiently in parts of the country that are outside of our field sales territory. As a result, we expect a modest increase in sales and marketing expense for the third and fourth quarters of 2023. Let me now turn to innovation.

Last week, we announced that Dr. Ryan Phan has made the decision to step down as Chief Scientific Officer effective September 15. He’s however expected to remain as an advisor to the company. It’s difficult to describe the contribution Dr. Phan has made to the company during his tenure. He has worked tirelessly to enhance our scientific capabilities and made significant measurable improvements in our operations. He has built a solid foundation and a professional team that will carry on his vision. We both remain confident in our path forward and expect to remain on track to complete our OvaWatch longitudinal test clinical study publications, and to commercially launch our EndoCheck diagnostic blood test by the end of the year. Let me briefly talk about each of these programs now.

OvaWatch was developed with the intention to launch commercially in two stages. The first phase was to launch OvaWatch as a single point in time application for initial clinical assessment. The second phase expands the application of OvaWatch for longitudinal monitoring testing. Although, OvaWatch currently can be ordered at intervals that are determined by the provider to be appropriate for each patient, we’re finalizing a manuscript related to an ongoing clinical study of that. It’s accepted for publication may provide additional clinical data to support and drive adoption of the test as an effective clinical tool for longitudinal monitoring adnexal masses. Moving on to EndoCheck, our first generation protein-based blood test to aid in the detection of endometriosis.

We’re on track for commercial launch by the end of 2023. Our current focus is on sample acquisition for clinical verification and validation, and we are on track to obtain sufficient cohort data to complete this important step. We have secured nine sites for our EndoCheck clinical study and continue to collect samples that meet our study criteria from other sources around the world, giving us the confidence that will we meet our launch timeline. In terms of operational excellence, we have once again decreased cash used in operations to $3.4 million in the second quarter, representing a 46% reduction over the prior year while still showing sustained growth. We completed an equity raise recently strengthening our balance sheet to support our long-term strategic vision.

We have a high quality effective team determined to set a new standard of care and gynecologic health, in addition to an industry standard for prudent high impact capital deployment. Now I would like to turn the call over to Torsten for a review of our financial performance. Torsten?

Torsten Hombeck: Thank you, Nicole, and good afternoon everyone. It is a pleasure to be here today to provide this update. We have wasted no time in my first two months with the company, executing swiftly on the capital needs while continuing to drive the company forward in all of our plans. When I joined, I saw a company that offered tremendous promise in advancing the care of women with ovarian cancer. There have been very few innovations in this area to date and brought adoption of the OvaSuite products would be significantlyforward in the practice of medicine. I would like to see this become a reality and I’m proud to be part of a committed team executing on that promise. Now, let me turn to the financial performance of the company.

Product revenue for the three months ended June 30, 2023 was $2.5 million, an increase of 23% compared to $2 million for the same period in 2022. Increase in revenue was primarily driven by an increase in OvaSuite tests performed during the quarter, which increased 16% to 6,289 compared to 5,411 for the same period in 2022 combined with an increase in average selling price or AUP. Revenue per OvaSuite tests performed for the three months end of June 30, 2023 increased 6% to $396 compared to $373 for the same period in 2022, reflecting better than anticipated collections for OvaSuite in its second quarter of adoption. So the gross profit margin for the three months and the June 30, 2023 was 62% compared to 51% for the first quarter of 2023 and 47% to the second quarter of 2022.

Gross profit margin improved due to an increase in average unit price and our ongoing focus on process efficiencies and cost containment. Research and development expenses for the three months in the June 30, 2023 was $700,000, a decrease of 51% compared to $1.4 million for the same period in 2022, the decrease was primarily due to decreases in expenses for consulting, clinical trials and supplies. Sales and marketing expenses for the three months ended June 30, 2023, were $1.8 million, a decrease of 51% compared to the same period of 2022. The decrease was primarily due to decreased personnel costs. General and administrative expenses for the three months ended June 30, 2023 were $3.4 million, a decrease of 19% compared to the same period of 2022.

This decrease was primarily due to a decrease in personnel expenses and outside legal cost. Total cash, cash equivalents and restricted cash as of June 30, 2023 was approximately $4.5 million. Cash used in operations for the three months ended June 30, 2023 was $3.4 million compared to $5.7 million for the three months ended March 30, 2023 and $6.3 million for the three months ended June 30, 2022. We continued to focus on prudent use of resources and as a result alluring our expected cash to be used in operations for the remainder of 2023 to between US$6 million and US$8 million. In July, we completed a privately placed registered direct offering of straight common stock with Alliance Global Partners as placement agent, raising gross proceeds of approximately $4.7 million, adding approximately $4.3 million in net proceeds to our cash balance.

We were very pleased that we saw a broad participation of long-term existing shareholders as well as the entire board and management team in addition to bringing in new healthcare focused investors. We believe that the cash on hand following this transaction will be sufficient to achieve our development program goals for OvaSuite and EndoCheck. I will now turn it back over to Nicole. Nicole?

Nicole Sandford: Thank you, Torsten. I’d like to close by personally thanking our shareholders that participated in our most recent capital raise. The continued support from you our investors is not something that I take for granted. I’m fully dedicated to our future success and appreciate the faith you have shown in me and our incredible team. With that, I’d like to open the call for questions. Operator?

Q&A Session

Operator: Thank you. We’ll now be conducting a question-and-answer session. [Operator Instructions] Thank you. Our first question comes from the line of Sally Yanchus with Water Tower Research. Please proceed with your question.

Sally Yanchus: Hi, Nicole. Good to talk to you. Good results.

Nicole Sandford: Thank you.

Sally Yanchus: It certainly looks like test volumes continue to improve and I gather you are in the process of replacing – finding replacement for Dr. Phan. I mean, how far are you along in that process?

Nicole Sandford: Thanks, Sally. Yes, so we are confident in the team that Ryan built. I’ve spent a couple of days just confirming with Ryan and meeting with the key people in both product development operations. We have what we need to keep moving forward. So we are in the process of reaching out to potential folks to come in, but at this point, there’s – we want to make a good decision not a fast decision, and there’s no reason to rush since we have a great team in place that’s moving things forward.

Sally Yanchus: Okay. And how long was he at Aspira?

Nicole Sandford: He was here for just about a year.

Sally Yanchus: Okay. All right. And then, I guess, my other question is, are you aware of any of the competitor companies like Guardant Health, even liquid biopsy companies, Guardant Health or Abbott. Are they close to developing a liquid biopsy test for ovarian cancer yet? I mean, what’s your sense in the competitive environment?

Nicole Sandford: Sure. At this stage, we are the only company that has a portfolio of tests available for clinicians for assessing ovarian cancer risk for any woman with adnexal mass.

Sally Yanchus: Okay.

Nicole Sandford: So whether or not they’ve been identified for surgery, whether or not the physician believes they’re looking at a benign or more likely an indeterminate mass that’s more than 50 or up to 50% of masses are indeterminate. We are the only company that has a product portfolio available today. I’m not aware of any market competitors that are entering the market at this time.

Sally Yanchus: Okay. All right. And just one final question, I mean, you exhibited good cost control this quarter. Do you expect that to continue going forward? I mean, it certainly looks like the company’s doing fine with the lower expense rate.

Nicole Sandford: Well, we’ve put out our cash guidance utilization for the rest of the year as between $6 million and $8 million. That includes everything that we need to spend in order to do the things we’ve talked about today includes launching our EndoCheck test and our commercial refresh strategy. As I mentioned, we may see a slight increase in expenses, especially on the commercial side for the rest of the year, but all of our – the cash guidance that we gave is inclusive of everything we expect to spend for those initiatives.

Sally Yanchus: Okay, great. Well, thanks very much.

Nicole Sandford: Thanks, Sally.

Operator: Thank you. [Operator Instructions] Our next question comes from the line of Andrew Brackmann with William Blair. Please proceed with your question.

Andrew Brackmann: Hi guys, good afternoon. Thanks for taking the questions.

Nicole Sandford: Hey, Andrew.

Andrew Brackmann: Maybe if we can start just on the clinical trial frontier – hi, Nicole, I think Nicole, you sort of talked about some of the trials in the past that you’ve run for OvaWatch, but maybe can you just sort of give us a refresher on any ongoing or future trials there? I’m just sort of trying to think about some of those initiatives just as you guys are trying to get some additional payer when any data that you think might be necessary to sort of get them over the hill. Thanks.

Nicole Sandford: Sure. Sure. Yes. So we have an ongoing study with OvaWatch for longitudinal monitoring. We expect to publish a manuscript for that test application in the – sometime before the end of the year, which will drive provider adoption and will also I believe be helpful in securing additional payer adoption as well. And on the endometriosis side, as we’ve talked about and I briefly touched on, we have a ongoing clinical study for EndoCheck that we have nine sites secure and we’re looking to add sites to that as well. We’ve designed that study to really meet a lot of different needs in terms of payer and provider adoption for EndoCheck. So we believe that will meet most of the needs that we would have. Hopefully that answers your question.

Andrew Brackmann: Okay. Thanks for that. Yes, it did. And then maybe just on Ova1Plus here for a minute, if we sort of look at the implied volumes there, it looks like they moderated a little bit sequentially. Can you maybe just sort of speak to that, was that related to anything seasonally or sort of seasonality in the business, or is it any impact from the OvaWatch launch here? How could we just be thinking about that Ova1Plus business looking forward? Thanks.

Nicole Sandford: Yes. So there’s probably a little bit of seasonality there as we know that women tend not to go to the doctor as frequently in the summer months, and they certainly don’t tend to schedule surgeries that, that can be avoided optional surgeries in the early part of the summer as well, so it’s possible. And the other piece as well is that we believe that as people are – as physicians are adopting OvaWatch, they will pull back a little bit on off-label use of Ova1Plus, which we would – we don’t get paid for. So if there’s a slight shift in volume there to from Ova1Plus off-label to OvaWatch, that’s a good thing because those are tests that we can submit for reimbursement as they were in line with the intended use.

However, we are not seeing a major shift or a moderation in the business. We’re continuing to be aggressive in displacing CA-125, which is, as we all know, an inferior but deeply infringed test for that doctors have used off-label for women for surgical triage and so we’re being as aggressive as ever in displacing that test.

Andrew Brackmann: Okay. I’ll leave it there and follow-up offline. Thanks, guys.

Nicole Sandford: Great.

Operator: Thank you. There are no further questions at this time. I would like to turn the floor back over to President and CEO, Nicole Sandford for closing comments.

Nicole Sandford: Thank you, operator, and thanks to everyone who joined us today. Appreciate the time and the ongoing support and we’ll talk to you in the third quarter.

Operator: Thank you. This concludes today’s teleconference. You may disconnect your lines at this time. Thank you for your participation.