Danke an Jo, der mir das zur Verfügung gestellt hat.
Epigenomics AG, H1 2020 Earnings Call, Aug 13, 2020
13.08.2020 Operator Good afternoon, ladies and gentlemen, and welcome to the Epigenomics AG's conference call regarding the half year results 2020. [Operator Instructions] Let me now turn the floor over to your host, Mr. Frederic Hilke. Go ahead, please. Frederic Hilke Thank you very much, Julia. Hello, and welcome to Epigenomics first 6 months 2020 conference call. My name is Frederic Hilke, I'm the Investor Relations manager for Epigenomics. With me on the phone is the CEO of Epigenomics AG, Greg Hamilton. Before I hand over the presentation to Greg, let me point out some of the usual legal information. The following presentation will contain expressly or implicitly certain forward-looking statements concerning Epigenomics AG and its business. Such statements involve certain known and unknown risks uncertainties and other factors, which could cause the actual results, financial condition, performance or achievements of Epigenomics AG to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Please find some of these factors described in the safe harbor statement. And now I would like to hand you over to CEO, Greg Hamilton, who will continue with the presentation. Gregory Hamilton Thanks, Frederic. Good morning, everyone, and thank you for joining our first half year 2020 earnings call. We have made tremendous progress in the last 6 months towards our goal of Medicare reimbursement. The operational highlights during this time include: CMS' initiation of the National Coverage Determination process for Epi proColon in late February of this year; inclusion of Epi proColon in the 2020 NCCN guidelines; and just last week, the publication in the Journal of the National Cancer Institute which concludes that Epi proColon is the test of choice for patients who are not willing to participate in FIT or colonoscopy screening. Additionally, we completed a capital raise in March, which, coupled with cost-cutting measures taken in connection with COVID 19, ensure the company is financed well into Q1 2021. Within approximately 2 weeks, CMS will issue their preliminary National Coverage Determination for blood-based CRC screening tests, including Epi proColon. We are more confident than ever that CMS will issue a positive coverage determination for Epi proColon because we have checked every single box of CMS' coverage criteria. CMS' ultimate criteria is whether a test is reasonable and necessary for Medicare beneficiaries. We believe Epi proColon has met this standard. The test meets the reasonable criteria because it is FDA-approved documenting its safety and efficacy. There is peer-reviewed published clinical utility data. The overwhelming positive support during the public comment period. The test is included in the NCCN guidelines. And now with the JNCI publication, there is published peer-reviewed evidence that Epi proColon is cost-effective and the test of choice for patients unwilling to participate in FIT or colonoscopy screening. The test is necessary as there are an estimated 9 million Medicare beneficiaries who are not willing to participate in FIT or colonoscopy screening. As the only FDA-approved blood-based test available for these patients, Epi proColon has the opportunity to save over 225,000 Medicare lives. Clearly, there is ample evidence Epi proColon is reasonable and necessary for Medicare beneficiaries. In April of this year, NCCN included Epi proColon, Septin9, into their 2020 guidelines. Specifically, Septin9 is not recommended for routine screening but can be considered for those who refuse other screening modalities. This language is consistent with our FDA label, which is for the unscreened and aligns with the recent Journal of the National Cancer Institute publication. Last week, the Journal of the National Cancer Institute published a key study that stated Epi proColon was the test of choice for individuals not willing to participate in FIT or colonoscopy screening. Annual Epi proColon testing was found to be clinically more effective than Cologuard every 3 years and annual FIT testing. This key publication was authored by individuals who are investigators for the CISNET network. CISNET is the National Cancer Institute sponsored group who uses simulation modeling to improve our understanding of cancer-control interventions in prevention, screening and treatment. This group and specifically the cancer models they develop are used as the basis for USPSTF and ACS guidelines. In addition, this is the group CMS uses to analyze cost effectiveness and coverage determinations for CRC screening strategies. We believe the MISCAN colon model used in this publication will not only influence the upcoming CMS coverage decision, but it will also be the basis for the upcoming USPSTF guidelines in 2021. The key clinical outcome data from the publication is summarized in figure 1. Without CRC screening, approximately 110 individuals will develop colon cancer and 44 will die per 1,000 patients. As you can see from the graph, annual testing with Epi proColon will reduce the incidence and mortality of CRC more than annual FIT and Cologuard every 3 years. What is interesting to note is the clinical benefits of annual stool DNA testing in comparison to Septin9 testing. Despite 92% sensitivity versus 68% sensitivity, the incidence of CRC is nearly identical, and the mortality is equivalent between the 2 tests. The clear implication is that even if future blood tests have increased sensitivity, their impact to clinical outcomes will be negligible. On top of that, nearly all future blood-based test and development are next-generation sequencing-based. This technology is expensive and will require a price point close to stool DNA. Based upon the publication, we know that annual stool DNA testing is extremely cost ineffective. Thus, we believe Epi proColon is well positioned to be the test of choice for an extended period of time. Revenue for the first half of 2020 was EUR 322,000. The decrease between the first half of 2019 and 2020 was due to the effects of COVID-19 during Q2. Our adjusted EBITDA improved to negative EUR 5.7 million from negative EUR 7.2 million from the same period the prior year. We finished Q2 with EUR 8.7 million in cash and marketable securities. Our current liquidity gets us well into Q1 2021. Due to the continued uncertainty surrounding the effects of COVID-19 and like many publicly traded companies, Epigenomics is pulling our revenue guidance for 2020. However, the company maintains its previous adjusted EBITDA guidance of between negative EUR 10.5 million and negative EUR 12.5 million and cash consumption guidance in the same range. During the first half of 2020, we executed all of the necessary steps towards our 2020 operational goals of Medicare coverage and preparing for commercialization in 2021. In order to drive commercial success in 2021, we must secure growth capital post reimbursement to effectively market the product in 2021. We believe the positive momentum we have seen over the last 6 months will culminate in a positive coverage decision by the end of this month and position Epigenomics as an organization with a significant growth trajectory in 2021 and beyond. Thank you for joining our first half 2020 earnings call. I will now open the call for questions. Operator [Operator Instructions] And we have a first question. It's from Dennis Berzhanin from Pareto Securities. Dennis Berzhanin This is Dennis Berzhanin, Pareto Securities. One question I have on the guidance. I know you mentioned that you pulled the guidance given the COVID-19 interruptions, but you've already seen some positive trends in June and July. Could you expand a little bit on that? How exactly has testing come back? And looking to the future, do you expect any change in colorectal cancer testing patterns, considering the fact that people might be more careful going to the doctors and so forth? Gregory Hamilton Yes. Dennis, thank you very much for the question. So what we are seeing in the United States is that screening rates for all cancers are down significantly. So colon cancer screening rates are down, breast cancer, cervical cancer, and it's really all tied to the fact that patients are not going in for the routine physicals and routine screening right now because of COVID-19. So what happened is -- what you've seen is that testing across the United States, other than COVID-19 testing, was down dramatically in April and May. And we, like everyone else, has seen some uptick in July and August. The problem is, is that with COVID-19 right now, no one knows what's going to happen next week, next month, 3 months from now. So the reality is, it didn't make sense for us to continue revenue guidance on. We just have no idea what's going to happen with COVID 19. I mean what we do know is that there's a lot of people not getting screened right now. So we think there is a unique opportunity that once Epi proColon is covered with the final coverage determination at the end of November, there's actually going to be a lot of pent-up demand for patients who haven't been screened, and we believe the blood test will be a unique alternative for many of those patients. So we do believe 2021 will be a very, very positive year for us. But for right now, the revenue guidance is not really part of our story. We have a very low revenue guidance for this year because reimbursement is not going to kick in until the end of November. So what we focus on is managing our cash and our cash burn, and that's why we know, and we feel very confident about our forecasted adjusted EBITDA, which is a more relevant guidance number for us right now than anything else. Dennis Berzhanin Perfect. That makes sense. And just a follow up. I know you mentioned that there is, of course, a lot of uncertainties, not just with COVID, but also with this reimbursement decision coming up in 2 weeks. But assuming it is positive, and obviously, there is a lot of factors speaking for that, could you give us a little bit, maybe not all the numbers, but just a flavor of how you expect the ramp-up to be in 2021? Which -- how should we expect to be the first year of Epi proColon? How high can the sales theoretically go? And also, do you still need to spend a lot of -- in marketing investments and so forth, how much should that be? And also second question, would you have a conference call on August 28 when CMS issues the proposed decision. Gregory Hamilton Thanks, Dennis. Yes. We're very much looking forward to the announcement within a couple of weeks. We -- like we've said many times, we do believe it will be positive. We would envision having to call upon that news. So as we look at volume estimates in 2021, we haven't given guidance yet on test volume or revenue volume for '21. We do believe -- I mean there is significant growth potential in 2021. I mean if you just think of the unscreened market alone, there's 35 million patients who haven't been screened. With this recent Journal of National Cancer Institute publication, the data is very clear that our test is very effective, more effective than Cologuard. So we expect that the market will respond positively to that. Not only is it performance outstanding relative to reducing the incidence and mortality of cancer, it is also much more patient-friendly and it's a blood test. So we think there's huge opportunity for us going into 2021. As we get closer to 2021, we'll give guidance at the appropriate time. Dennis Berzhanin Great. Appreciate. I look forward to the proposed deadline for CMS. Gregory Hamilton Thank you. Operator The next question comes from Randy Baron from Pinnacle BioLabs. Randy Baron I have just two quick questions. One is a broader one and one is specific to this NCD process. On the NCD, I'll just give them to you both. But on the NCD, whichever way the decision comes later this month, can you just walk us through the decision tree between then and November? In other words, if you do get approved, what happened between then and November? I assume you can't sell or anything until November. And then on the counter decision, if you don't get a decision that goes your way, is there an appeal process? Like what happens? And then separately, my broader base question is because you're so close to the space, what's happening with the recommendations that people get their first colonoscopy at 45 versus 50? I think there was some talk about that. I'd just be curious the state of the industry on that. Gregory Hamilton Okay. Thank you, Randy. First of all, in regards to the NCD process, the way it works is that on -- by August 28, CMS will issue what's called their preliminary National Coverage Determination. So that is, in essence, a draft decision, okay? As soon as they announce that, then there opens a 30-day public comment period in which anyone can comment on that NCD. So very similar to the 30-day comment period when the NCD opened. And then that comment period will close. And then with 60 days of the closing of that comment period, Medicare is required to issue their final determination. So what that would mean is if they issued their preliminary decision on August 28, their final decision would have to be issued by November 28. So whether actually the decision is positive or negative, there is nothing in effect until the end of November anyways. Nothing is covered. We're not covered until the end of November. So if it's positive, we have the comment period, and then they would issue a final determination at the end of November, which we believe would be positive as well. The day the final decision is issued, reimbursement goes live. So any Medicare patient that actually has a data service on their test, that day or after would be covered on a positive coverage determination. If the draft decision is, for some reason, negative, in essence, we have the 30-day public comment period between ourselves and others to write in and try and change the mind of CMS. And then they will issue a final coverage decision in November. If at the end of November, that final coverage decision is also negative, then at that point, there is an appeal process. It's called a reconsideration process that we could go through. So hopefully, that answers your question on the NCD. And then in your question in regards to what's happening on the colonoscopy at 45. So what happened there is that all of the guideline societies had been aligned in their screening age recommendations. It was 50 to 75, and that included USPSTF, ACS and the Multi-Society Task Force. They're the big 3 guidelines and then NCCN as well. So those that -- they're actually the big 4. So all 4 of them were aligned. In 2018, ACS, the American Cancer Society lowered their screening rate to 45. And so now there's a discrepancy between the guideline committees as to when screening should start. It was fairly controversial when it first came out. The decision was made by ACS because of the increasing incidence rate in patients under 50. And so they actually used the microsimulation models by this MISCAN group that just published in JNCI to calculate out that it actually was efficient and appropriate to start screening at 45. That's actually how the determination was made for ACS to lower their age to 45. So the USPSTF has then, in essence, decided to initiate their guideline review again based upon ACS' decision. So last year, they issued their research plan that said they were going to reevaluate their decision and evaluate whether or not they should lower their screening age to 45. Also in that research plan, they did state that they are going to review Septin9 as part of that research plan and will be evaluated as part of their next guideline. So everyone in the industry expects those guidelines to be issued sometime in 2021. My guess personally is that USPSTF will lower the screening age to 45 to align with ACS. Now is colonoscopy the right choice for patients who are 45? That's really going to be a guideline determination. At the end of the day, colonoscopy is a very good test. I think the data clearly justifies that. But what we do know ultimately is that screening rates and increasing screening rates are dependent on choice. The more choice we give patients and their physicians, the higher these screen rates. So post reimbursement, one of the key projects that we will work on is actually expanding the label of Epi proColon from 50 to 75. We will actually do a trial to expand the label for patients 45 to 50. Hopefully, those answer your question, Randy. Randy Baron Yes. That's great. And again, good luck this month. We're all pulling for you guys. Gregory Hamilton All right. Thanks, Randy. I really appreciate it. Operator And right now, there are no further questions. [Operator Instructions] Okay. There are no further questions. Gregory Hamilton Okay. Thank you very much, everyone, for joining our first half year 2020 earnings call. We look forward to communicating with you again in a couple of weeks upon the news on the preliminary NCD. Thank you very much, and have a good afternoon or good morning, wherever you are. Thank you. Bye.
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