Aspira Women’s Health Inc. (NASDAQ:AWH) Q4 2022 Earnings Call Transcript

Aspira Women’s Health Inc. (NASDAQ:AWH) Q4 2022 Earnings Call Transcript March 22, 2023

Operator: Good morning ladies and gentlemen and welcome to Aspira Women’s Health, Inc. Fourth Quarter and Year-End 2022 Earnings Conference Call. As a reminder, this call is being recorded. Leading the call today are Nicole Sandford, President and Chief Executive Officer; Marlene McLennan, Interim Chief Financial Officer; and Dr. Ryan Phan, Chief Scientific and Operating Officer. 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 subjected to risks and uncertainties and could differ materially from those anticipated due to the impact of many factors beyond the company’s 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 actual — 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 good afternoon, everyone. It is my pleasure to welcome you to our 2022 year-end conference call. Today, we plan to share with you highlights from a year of company-wide necessary change for Aspira Women’s Health. Since stepping into the CEO role last year, I have said that achievement of our mission rested on focused execution in 3 areas: growth, innovation and operational excellence. I made a commitment to be transparent with our stakeholders and to earn your trust by clearly stating our intentions and then following through. I’ve also given my word that I would utilize our resources, your capital and our time, as effectively and efficiently as possible in pursuit of the long-term success of the company.

While it has not been an easy year, I am proud of our progress and believe we have emerged stronger than ever before. I hope you will feel the same before this call is over. Let me pause and introduce Dr. Ryan Phan, our Chief Scientific and Operating Officer; and Marlene McLennan, our Interim Chief Financial Officer. You will hear from each of them shortly with an update on our product portfolio and financial performance, respectively, before we open the call for questions. Let me start with an overview of our commercial progress in 2022. We grew product revenue last year to $8.2 million, a 20% increase over 2021. At the same time, we increased gross profit 8 percentage points and reduced sales and marketing expense by 13% on a full year basis.

Test volumes increased to 21,423, a 23% increase, continuing the sequential and year-over-year growth trends that we have sustained for every quarter since I became CEO. OvaSuite test volumes have continued their upward momentum in the first quarter of 2023. Despite major weather events that caused weeks of delivery disruptions around the country, we saw a dramatic daily volume growth in both January and February. In 2022, we rebranded our ovarian cancer portfolio under the name OvaSuite. Our Ova1Plus test which has now been ordered more than 60,000 times, continues to displace inferior but deeply entrenched single biomarker test. With the successful launch of OvaWatch in December 2022, we now offer a noninvasive risk assessment test for all of the more than 1 million women a year that develop adnexal mass.

Our OvaSuite tests have the potential to replace fear with data when women and their healthcare providers make decisions about how, when or even if they remove a women’s reproductive organs. With one of the most extensive ovarian cancer biobanks and decades of bioinformatics expertise, we believe there is no one better positioned to become the market leader in the development of the most advanced diagnostic tools for this devastating and deadly disease. Before moving on, I want to remind you that we face no competition in the market for OvaWatch. It is a completely new risk assessment blood test with a clinically validated 99% negative predictive value that can significantly reduce the number of indeterminate masses and provides a previously unattainable level of confidence in a physician’s decision about the care of their patients.

We learned a great deal about our OvaSuite sales and marketing strategies in the last year. In addition to completely rebooting our marketing program, we reallocated funds to high-impact provider conferences, streamlined our KOL program and reworked our incentive plans to drive behaviors that results in provider adoption. In 2023, we will engage in more market focused, high-impact media, starting with an interview on lifetime channels morning show, The Balancing Act in April. Last year, we announced an Ova1Plus co-marketing and distribution agreement with BioReference. Following an October launch, momentum among the joint sales teams has been lower than anticipated. However, we believe our partnership continues to be an important part of the women’s healthcare program.

We are working together to implement more effective sales incentives as part of a relaunch between the commercial team. We intend to make the most of this experience and the lessons learned, as we look towards the development of commercial partnerships for our other products, including OvaWatch. On the reimbursement front, we are actively pursuing payer adoption and fair pricing for the OvaSuite test portfolio, hitting a number of important milestones in 2022. Starting with OvaWatch, the American Medical Association moved quickly to assign OvaWatch a unique PLA code which will facilitate efficient coverage and reimbursement when it goes into effect in April of 2023. We also secured OvaWatch coverage from an industry-leading global payer just 2 months after our official launch and only weeks after the publication of our clinical validation study.

Meanwhile, we continue to press hold out commercial payers on Ova1Plus coverage, adding Sentinel of Oklahoma and Molina of Ohio coverage in the first quarter of 2023. The OVA1 clinical utility study which experienced significant COVID delays, has been completed and a manuscript has been submitted for publication. On the Medicare front, we joined with ovarian cancer advocacy groups to educate Congress on the failures of single biomarker tests and the need for better diagnostic tools to save women’s lives. Our combined efforts resulted in the call for national Medicare coverage for multi-marker ovarian cancer test the Omnibus spending bill passed late last year. While we continue to pursue the crosswalk of OvaWatch coverage via our Novitas OVA1 LCD, the implementation of this provision by CMS in 2023 would potentially provide a national coverage determination for all of our ovarian cancer testing portfolio.

Photo by National Cancer Institute on Unsplas

On the Medicaid front, we became credentialed in a number of additional states in 2022 and are actively engaged with Medicaid decision-makers since launching OvaWatch in December. Turning to our operational excellence initiatives, we have aggressively reduced back office and discretionary spending and reallocated funds to activities that drive our strategic goals. We are a smaller, more nimble organization today compared to a year ago. We eliminated nearly 30% of the workforce, creating significant payroll and payroll-related savings that we will see in 2023. While this has meant that the team that remains must do even more to support our success, I know each individual shares a passion for our mission to improve outcomes for women with gynecologic diseases.

Last quarter, we used $7.1 million in cash, a meaningful step down from the trajectory we were on at the beginning of 2022. We will continue to streamline spending while growing top line revenue. In 2023, our cash usage for operations is expected to be between $16 million and $19 million. A significant reduction when compared to the $32.3 million of cash used in operations in 2022, while this is meaningful progress, we recognize that our cash needs exceed our year-end cash balance of $13.6 million. We are actively identifying additional sources of liquidity and in February, put a $12.5 million EPM in place with Cantor Fitzgerald. I’m confident in our ability to secure additional funding to meet our needs and in our ability to navigate these difficult market conditions without sacrificing revenue growth.

That being said, our cash needs will drive how quickly we can move some of our programs, products and activities forward. Now, I will turn the call over to Ryan for a closer look at our product development and innovation progress.

Ryan Phan: Thank you, Nicole. I am proud to say that in spite of challenges, we have found opportunities and have made significant progress in our growth and innovation goals. I will spend the next few minutes updating you on our overall product development and pipeline progress. Let me start with OvaWatch which we will launch in December. OvaWatch is the first and only of its kind noninvasive ovarian cancer reassessment test. It provides health care providers with a personalized result based on 7 biomarkers, age and menopausal status for women presenting with benign and indeterminate adnexal masses. Historically, patient might have chosen preventative surgery, potentially causing lifelong implication for women, who have their ovaries necessarily removed.

With the launch of the OvaWatch, clinicians are able to make better informed care decisions for women than they were previously possible. I am also pleased to say that the OvaWatch clinical validation management will publish in the peer review journal of Frontiers in Medicine just a few weeks ago. This publication highlights real-world evidence to support the clinical usefulness of OvaWatch in the management of adnexal masses. It demonstrated OvaWatch’s high negative predictive value across diverse data sets. And so its utility as an effective assessment tool for clinician to safely decrease premature or unnecessary surgery. Enrollment in the prospective OVA1 study has been committed. However, we continue to follow with end goal patients via additional periodic blood draws.

As a result, we are collecting real-world evidence to support the second phase of the OvaWatch launch, a serial monitoring assay for women with adnexal masses who are not identified for surgical intervention. Let’s move on to EndoCheck, our in development test for the identification of endometriosis. You may recall that we expanded our development activity in 2022. The result of our internal development of a protein-based test was expanded to consider a multiomic noninvasive diagnostic tests via a sponsor agreement with a consortium of academic institutions led by Harvard Dana-Farber Cancer Institute. I will provide an update on each starting with the internal efforts. While I’m pleased that we have made much progress on the development of an effective assay, the speed of development and commercialization of any endometriosis test will depend on the availability and cost of usable high-quality samples that align with our test’s intended use.

While we have recently succeeded in identifying and cataloging a lost number of patient samples from our own biobank. Additional samples from other sources will be needed to develop a commercially viable test. The surplus sufficient symbol continues and we remain focused on the launch of the first-generation assay in the second half of the year. With respect to the small cell research agreement with Dana Farber, we are pleased to report that the development efforts with this group of scientists and collaborators are on track. Sufficient and highly qualified endometriosis patients and controlled cohorts were obtained for this study and the development efforts are well underway, utilizing a next-generation sequencing-based approach and proteomic analysis for the identification of microRNAs and proteins.

We believe that the project of this collaborative effort will meet our expected development goals for 2023. To support the development of endometriosis diagnosis assay, our multicenter clinical study for endometriosis were designed and is currently enrolling patients to confirm the clinical performance of EndoCheck as a noninvasive tool to aid the diagnosis of endometriosis. This is a prospective observational study. We are pleased with our enrollment upside and patients so far. We are closely monitoring progress and potentially competitive efforts, both in the U.S. and globally but are optimistic about the competitive positioning of our EndoCheck test. We believe asking what gynecology diseases is and our ability to develop and validate the clinical assay in our clear laboratory setting offers an advantage over others.

The strategy and approach on EndoCheck launch will be discussed at an R&D Day that we plan to host on May 21. We will also highlight the potential for the 0 margin application of our OvaWatch test and our plans for growing the OvaSuite portfolio. It has indeed been a very dynamic and exciting time for Aspira. I’ve been with the company for less than a year and are focused on building momentum through the first phase along on OvaWatch and a steady progress in the development of EndoCheck. I am confident in the progress we made in the development of powerful products will help improve women’s gynecology health. I will now turn to Marlene for a discussion of our financial performance. Marlene?

Marlene McLennan: Thank you, Ryan. Total product revenue was $8.2 million for the year and $2.1 million for the quarter ended December 31, 2022, compared to $6.6 million and $1.9 million for the same period in 2021. The 20% full year and 16% fourth quarter revenue increases were due to an increase in Ova1Plus test volume compared to the prior year, partially offset by a lower average unit price of $372 for the year and $369 for the fourth quarter of 2022 compared to $378 and $381 for the same period in 2021, respectively. The overall number of tests performed increased 23% for the year to 21,423, with the fourth quarter volume increasing 18% to 5,642 test. Gross profit margin for the year was 53% compared to 45% in 2021. For the fourth quarter, gross profit margin was 57% compared to 55% in the same period last year.

Margin improvement is primarily attributed to targeted cost control measures in the laboratory and information technology spending. Research and development expenses for the year increased 12% to $6 million, primarily due to costs related to our sponsored research collaboration agreements and increases in employment-related expenses, partially offset by decrease in costs attributed to clinical trials. R&D for the quarter decreased 29% over the same period last year, primarily due to personnel expenses. Sales and marketing expenses decreased 13% for the year to $14.9 million and 40% for the quarter to $2.9 million, primarily due to decreases in employment-related expenses, consulting expenses and other marketing expenses, offset by an increase in travel costs.

General and administrative expenses for the year increased 22% to $16.2 million, primarily due to legal costs, severance for role eliminations and incremental cost of the Executive Chairperson and costs related to our capital raise. For the quarter, G&A expenses decreased 21% to $2.9 million, primarily due to a decrease in outside legal expenses. As of December 31, 2022, Aspira had $13.6 million in cash and short-term investments. Cash used in operations for the year was $32.2 million compared to $27.4 million in 2021. We utilized $7.1 million in operating activities during the fourth quarter of 2022 compared to $7.6 million in the fourth quarter of 2021 and $8 million in the third quarter of 2022. Cash to be used in operations in 2023 is anticipated to be between $16 million and $19 million.

I will turn it back over to Nicole.

Nicole Sandford: Thank you, Marlene. In closing, we’ve come a long way since the beginning of 2022 and we have been through tremendous change as an organization. But the one thing that remains clear is the critical need for better ovarian cancer diagnostic tools for women and the resulting potential for our business. We’re taking all the steps we believe are necessary to position ourselves for success and continue to be steadfastly focused on growth, innovation and operational excellence. With that, I would like to now open up the call for questions. Operator?

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Q&A Session

Operator: Our first question comes from the line of Ross Osborn with Cantor Fitzgerald.

Ross Osborn: Congrats on the progress. I thought we’d start off on ASP this year. There’s a lot of moving dynamics. So maybe focused on OvaWatch initially. How should we think about ASP following your ability to sign a national payer? And then as a follow-up, when looking at the corporate ASP, can we just walk through the change in payer mix there and how that should evolve over this year?

Nicole Sandford: Sure. Well, on the OvaWatch side, as you know, it does take some time to get those payer relationships lined up. We were very pleased with the progress that we’ve made so far. But of course, the business is — or the test market is really divided in a number of parts, including Medicare which is really important for an ovarian cancer test, as women are at higher risk as they age. So we continue to be optimistic about the crosswalk of the Novitas LCD and as I mentioned in my earlier remarks, we are looking at a potential NCD for multi-market ovarian cancer blood test based on the provision in omnibus bill. So still work to do there, of course but ultimately, we expect in reasonably short order, sometime towards the end of the year to start to see the OvaWatch, ASP start to line up with the Ova1Plus price.

And to your point around the changes — I’m sorry, Rob, I think you were asking around OVA1Plus average selling price, what to make of that in the mix. It is true. It had additional Medicaid sales this year and that mix has sort of resulted in a little bit of erosion on the sales price. But on the upside, that gives us a great platform to go back to those states which we have been doing aggressively in the last several weeks to go back to states and say, your patients — your Medicaid patients are benefiting from this test. They’ve been ordered frequently. We’ve been able to provide statistics and have had very positive conversations with a number of state Medicaid administrators, to make them see that the test is useful and is being used for the population and to encourage them to accelerate, adding over plus to the fee schedule.

Ross Osborn: Okay, great. And juggling a couple of calls, I may have missed this but how are conversations going with potential partners for co-marketing distribution agreement for OvaWatch? Any idea on the time line there?

Nicole Sandford: So as you probably know, the important issue that people are looking to is very similar to the question you already asked which is what does the reimbursement look like for this test, because that is an important risk factor for any potential partner on a commercial partnership for OvaWatch. So every time we have an announcement which we’ve had many in the last couple of months which is great, we get a more captive audience with people to talk about, the market potential for the test. No time line here to — no time line here to announce. Believe me, we’ll be happy to tell you when there’s something there.

Ross Osborn: Okay, got it. And then maybe on your cash burn, does a signing of a potential partner for OvaWatch, does that include in your cash burn guidance positive or negatively?

Nicole Sandford: No. We have not included anything relative to cash for OvaWatch partnership.

Ross Osborn: Okay, great. And then lastly on — nice reiteration for your plan to launch on that test. So I guess between now and launch, what needs to happen from both a development and regulatory perspective?

Nicole Sandford: So we’ve mentioned in the past that we are pursuing a number of different potential paths for the launch of an endometriosis test which could include an FDA path or an LDT. So we’re not ruling either out at this point or remove them all in, I guess, I would say. So from a regulatory standpoint, that’s still sort of developing as we continue to think about what makes the most sense from a launch perspective. What needs to happen, as Ryan mentioned, the biggest barrier to a completed test is in remains, the availability of acceptable samples for the validation of the test. That has been a challenge and it continues to be a challenge. It doesn’t do us with any good whatsoever to try to validate or continue development with samples that are not high quality and that don’t line up exactly with the test that we’re developing.

So that is a challenge. So we continue to seek out additional sources and as we said in the remarks earlier, we were very pleased to see that we were able to identify a number of additional samples in our own biobank as we continue to refine the test and the requirements.

Operator: Our next question comes from the line of Andrew Brackmann with William Blair.

Griffin Soriano: This is Griffin, on for Andrew. Thank you taking our questions. Maybe just to start on OvaWatch, can you talk a little bit about the stock feedback that you’re getting on OvaWatch? Are you seeing an expanded ordering population that you have that expanded label? And then I think there was some expectation for some cannibalization of OVA1Plus, has that played out as sort of expected so far?

Nicole Sandford: Thanks for the question. I’ll say on the cannibalization side, we have not seen that. We’ve continued to see growth in OVA1Plus. We were really thoughtful about how we presented the test to the physicians and the intended each very, very clear. We’ve found that they’ve been able to understand very easily which test is appropriate given the intended use. So happy to say that has not materialized as of yet. Of course, it’s early days. And in terms of physician response, so far, it’s been overwhelmingly positive. As you know, it takes a while to get the word out on a new test. So we continue to go out in the field and also as a company, we’re investing in a lot of additional physician conferences and higher impact at the conferences were attending to get the word out.

But people seem to be really open to the intended use and they understand the value of taking what turns out is a pretty significant number of masses that sort of fall into the indeterminant category which frankly means they really don’t have a good sense of what to do with that patient; and it’s a large percentage. Having a tool that helps them to reduce that number or to just have better insight into that number of patients is incredibly valuable. We’ve heard that time and again. So as they’ve learned how the test works and the value of being able to isolate the patients that really do need additional scrutiny or additional clinical intervention and rule out to some extent, the women that are in that indeterminate category has been very, very valuable.

Griffin Soriano: Okay. And that corporate deck, I think, has a potential of watches $300 million to $420 million. Obviously, serial monitoring is really a big part of that. Can you just go in a little bit more detail on the time line for the serial launch indication? I know you talked about a prospective study that’s enrolling but any sense of time lines for launch there?

Nicole Sandford: Yes. Yes. So I’ll start and then Ryan can add any color to the study. The study is actually — the study that we’re using for the serial monitoring test is actually an extension of the OvaWatch, clinical validation study which is frauds, we continue to take draws and monitor those patients through additional drugs. Our commitment has been to launch that serial monitoring test in the second half of 2023. Ryan, anything else you’d like to add?

Ryan Phan: No, I think that Nicole mentioned everything needed, ask that question. You answered right. I think the OvaWatch serial monitoring assay is going to be key for the patient and the physician as well, particularly for this particular population, many of them was either by selection or by clinically makes sense but not selected for surgical intervention. So they need a tool to follow up and OvaWatch is serving that purpose. The great news is our clinical study has come late but we continue to follow those enrolled patients. So we know exactly what the . So those data are going to help us to set the stage for what the time line and also at the dosage, if you will. If you think therapeutically, how did this frequently how the woman should see the OvaWatch we may have those information when near to the time that we can launch the test which we intended — we remain intended for the second half of the year.

Griffin Soriano: Okay. And then — sorry.

Nicole Sandford: Sorry, let me just say one thing. We understand that in the market that we are in right now but the market conditions being what they are, investors, both current and potential investors, are hyper focused on companies with revenue. We continue to believe that the OvaWatch serial monitoring test is going to drive material revenue for the company and has been really put to the top of the list in terms of things we think about every day. And we do believe that our revenue estimates that we’ve talked about in the past are very, very realistic for a serial monitoring test.

Griffin Soriano: Okay. And then last one, maybe for you, Marlene, on just burn $16 million and $19 million for the year. Anything on how do you think about pacing, first half, second half split? And then I know you had previously sized the reduction forces being maybe something a little over $6 million year-over-year savings in 2023. Is that sort of still how you’re thinking about that?

Marlene McLennan: We are definitely on target for that and monitoring it very closely. It’s pretty evenly spread over the quarters. Most of our savings will be realized towards second quarter going forward, because they were just initiated in first quarter. But overall, we are on target for $16 million to $19 million.

Operator: Ladies and gentlemen, there are no further questions at this time. I’d like to turn the call back to Nicole Sandford for any closing remarks.

Nicole Sandford: Thank you so much and thanks for the questions. We appreciate the attendance today and the continued support and interest in the company. We’ve been through an awful lot of change this year, as I said but I’m more optimistic than I’ve ever been. I’ve said before and I’ll say it again that as companies that are further away from commercialization of their product, are really going to struggle. And as we see the fallout of that happening all around us, I believe that we’re going to be comparatively a very, very attractive investment, especially as we kind of move through the year and we continue to deliver on all of the things that we’ve promised. So, I appreciate your time today and look forward to continuing to bring you additional news and insight as the year goes on. Thank you so much.

Marlene McLennan: Thanks, everyone.

Operator: This concludes today’s conference. You may disconnect your lines at this time. Thank you for your participation and have a great evening.