Sera Prognostics, Inc. (SERA) Q1 2023 Earnings Call Transcript

Sera Prognostics, Inc. (NASDAQ:SERA) Q1 2023 Earnings Conference Call May 10, 2023 5:00 PM ET

Company Participants

Peter DeNardo - CapComm Partners, IR

Greg Critchfield - Chairman, President & Chief Executive Officer

Jay Moyes - Chief Financial Officer

Conference Call Participants

Tom Stevens - Cowen

Dan Brennan - Cowen

Andrew Brackmann - William Blair

Operator

Good afternoon, and welcome to the Sera Prognostics Conference Call to review the First Quarter Fiscal Year 2023 results. At this time, all participants are in listen-only mode. We will be facilitating a question-and-answer session towards the end of today's call. As a reminder, this call is being recorded for replay purposes.

I would now like to turn the call over to Peter DeNardo of CapComm Partners for a few introductory comments. Please go ahead.

Peter DeNardo

Thank you, Darcy. Good afternoon, everyone. Welcome to Sera Prognostics first quarter fiscal year 2023 earnings conference call. At the close of the market today, Sera Prognostics released its financial results for the quarter ended March 31, 2023.

Presenting from the company today will be Greg Critchfield, Chairman, President and CEO; and Jay Moyes, our CFO. During the call, we will review the financial results we released today. After which, we will host a question-and-answer session. If you have not had a chance to review our quarterly earnings release, it can be found on our website at seraprognostics.com. This call can be heard via live webcast at seraprognostics.com, and a recording will be archived in the Investors section of our website.

Please note that, some of the information presented today may contain projections or other forward-looking statements about events and circumstances that have not yet occurred, including plans and projections for our business, future financial results and market trends, and opportunities. These statements are based on management's current expectations, and the actual events or results may differ materially and adversely from these expectations for a variety of reasons.

We refer you to the documents the company files from time-to-time with the Securities and Exchange Commission, specifically the company's annual report on Form 10-K, its quarterly reports on Form 10-Q and its current reports on Form 8-K. These documents identify important risk factors that could cause the actual results to differ materially from those contained in our projections and other forward-looking statements.

As a reminder, a webcast replay of this call will be available on the Investors section of our website.

I will now turn the call over to Greg, Sera Prognostics Chairman, President and CEO. Greg?

Greg Critchfield

Thank you, Peter, and good afternoon, everyone. The start of fiscal 2023 has been both exciting and encouraging for us in our pathway toward more broadly commercializing PreTRM test while fostering early revenue growth. Key of what we expect will be a strong year of solid developments for Sera Prognostics with the announcement in February of positive top line results from our AVERT PRETERM TRIAL conducted at ChristianaCare, Willing and Delaware.

We are pleased to see increased numbers of tests being ordered by physicians as we continue to expand the number of providers who are offering preterm testing to their patients.

A year-over-year comparison of the first quarter of 2023 and 2022 showed a 320% increase in tests reported. While these are admittedly on a small yet growing base, we are continuing to see demand grow. While we are unable to speak about many or most of the early adopter customer groups, we are making progress with hospital systems and selected physician practices who are beginning to contribute to the increased numbers of orders we are seeing.

They're also early adopter integrated networks who are requested to see a AVERT PRETERM TRIAL and other clinical data that are being prepared for submission to scientific and clinical terms. A bit more on the preterm trial. If I may remind you of some key outcomes for this trial, both the co-primary outcomes, reduction of severe neonatal morbidity or neonatal death and decreased length of neonatal hospital stay met their endpoints with the improvements in outcomes with our preterm test-and-treat approach being statistically significant.

Notably, these results demonstrate the generalizability of the AVERT PRETERM test and treat strategy in achieving meaningful clinical results in more widely diverse US populations. The AVERT PRETERM TRIAL builds on solid results from prior studies, including paper, TREETOP accordant and prevent PTV.

There are two key points I would like to highlight with regard to the AVERT PRETERM TRIAL findings. The announcement of these results in February resulted in our seeing increased interest from health systems parties with discussions underway. Some of the volume of our PRETERM testing has been driven by early adopters as they have learned of the first public availability of compelling new AVERT PRETERM TRIAL data showing the clinical utility of our PRETERM test and treat strategy in a previously unstudied diverse population.

And as mentioned on our last call, the detailed results of the AVERT trial, including secondary and endpoints and additional subgroup analyses are being prepared for submission to a pre-review scientific journal in the coming months. We are encouraged that the publication of these results should drive growing interest by physicians, payers and health systems. We believe that the results of AVERT and prior studies show a growing body of evidence for the PRETERM test clinical benefit the mothers and babies.

And now a bit on the PRIME study. Let me briefly recap a few important points about Prime and how it relates to the positive results of our AVERT study. For starters, during the recently completed quarter, increased PRIME study subject enrollment continued, surpassing more than 2,800 subjects required to be enrolled for the trial -- in the trial for the interim analysis to occur.

And we continue to believe that the interim look analysis will take place by year end. The timing for this event requires delivery, discharge of mothers and babies from the hospital and final data cleanup prior to this analysis.

We provided quite a bit of transparency on the similarities and differences between the AVERT and PRIME studies in our -- on our last call. So I'll simply summarize them today. The Avert and Prime studies have identical co-primary endpoints for reduction in neonatal hospital length of stay and decreased neonatal morbidity and mortality.

Both have diverse demographics and pre-existing risk profiles. And finally, multimodal clinical intervention strategies prescribed in the protocols for both including care management are similar. These similarities are compelling for the potential for positive PRIME study results, but we caution that there may be -- there are some noted and possible differences that could cause results to be different.

AVERT was performed in a single health system versus in at least 15 sites for Prime, leading to a possible differences in administration of the study and adherence to the clinical protocol across this number of sites. Another difference is that all enrolled patients that reach term in AVERT were treated before COVID was prevalent in the study area and ended the study early.

While some prime patients will have been treated during the pandemic and others ask after the pandemic substantially weighing. PRIME subjects are receiving the same interventions whereas AVERT subjects were able to elect for some interventions and off of others.

The AVERT PRETERM TRIAL analysis is expected to report out data from a composite set of 1,453 actively enrolled patients and approximately 10,000 historical controls who had completed pregnancies during the two years before the trial began. We anticipate and currently believe that the PRIME study will provide strong clinical utility evidence as a rigorous multi-center RCT design by enrolling concurrently randomized control and active arms.

To clarify a point from last quarter's call on the numbers of patients in each study, PRIME is a much better power, broadly representative in contemporary randomized controlled study compared to AVERT, by including approximately twice as many prospectively enrolled subjects, 2,800 total, with 1,400 active and 1,400 control patients at the interim look and almost four times as many at full enrollment.

Most important, we believe it is PRIME's strong statistical power of approximately 80% at the interim look analysis with even greater statistical power at final readout with higher numbers of completed pregnancies.

Ultimately, although the results are encouraging and no guarantees of a similar outcome for PRIME and we are hopeful the results will be positive since the availability of compelling data is a key enabler of driving test volumes as well as revenue over time. In addition to PRIME, we anticipate further publication of new compelling clinical data to take place later this year.

And now more information on Sera's pregnancy pipeline. We continue to make good progress on our robust pregnancy pipeline using our biobank and advanced data science meters to create meaningful predictions.

A first step in developing products is to discover and validate the predictions. To that point, our pre-term Indiscernible] c data are ready for submission for scientific review prior to publication.

We also made excellent progress on validating a time to berth prediction to better inform patients on the personalized timing of individual delivery for planning purposes.

We have discovered a strong mid-pregnancy gestational diabetes predictor. We will determine the best timing and ways to monetize these predictions and we'll communicate the timing as appropriate.

We believe all these efforts help Sera in its quest to be the pregnancy company, providing valuable pregnancy information to improve the well-being of mothers and babies and the economics of health care delivery.

I'll now turn over the call to Jay for a review of our first quarter financial results.

Jay Moyes

Thanks Greg and good afternoon everyone. Let me review at a high level our financial results for the first quarter and our general view for 2023. Revenue for the first quarter of 2023 was $100,000 compared to $38,000 for the first quarter of 2022.

As Greg noted, we experienced an increase in test volumes, which is a promising indicator of both improved adoption of our pre-term test and our potential for revenue growth.

Total operating expenses for the first quarter of $11.4 million were down almost $1 million from $12.3 million for the same period a year ago. Research and development expenses were $4.1 million compared to $3.3 million for the first quarter of 2022 due primarily to increased prime study costs.

Selling, general, and administrative expenses for the first quarter of 2023 were $7.3 million. This was a marked decline from $9 million for the same period a year ago and resulted primarily from our successful steps prior to the end of last year to carefully reduce costs without impairing our ability to more broadly bring our pre-term test to market.

The net loss for the quarter -- for the first quarter of 2023 was $10.6 million, down from $12.2 million for the first quarter of 2022. As of March 31, 2023, the company had cash, cash equivalents, and available for sale securities of approximately $100 million.

We continue to prudently manage our cost structure and cash balances to enable us to operate into 2026 without having to raise additional capital.

We are excited by the increases we've seen in testing volumes and by increased interest in our PreTRM test following the availability of new positive data announced in February for the AVERT PRETERM TRIAL.

While this and other readouts later this year are expected to help drive adoption, we are not changing our business outlook as shared on our fourth quarter earnings call when we noted our belief that, 2023 revenues will be less than $1 million.

I'll turn the call back to Greg.

Greg Critchfield

Thanks, Jay, and thanks, everyone, for attending our call today. We look forward to updating you on our progress through year-end 2023, along with the positive AVERT study results, continuing to be an encouraging tailwind.

We see other potential catalysts for our business, including publication of additional study results as well as updates on our pipeline. We continue to build on Sera's market position and reputation for providing valuable pregnancy information.

This is important for mothers and babies for health care costs and for our society as a whole. We wake up every day excited as we work to achieve our vision and mission to make Sera Prognostics, the pregnancy company leader, in this important health care space.

And now, I will open up the line for questions, operator.

Question-and-Answer Session

Operator

Thank you. We will now begin our question-and-answer session. [Operator Instructions] The first question comes from Tom Stevens from Cowen. Please go ahead.

Tom Stevens

Hi guys. Thanks for taking the question. I also had a question on, if you've seen a competitive data set that came out yesterday looking at self-eDNA and also try to assessing PreTRM list there. I wonder if you had any response to kind of publication approach versus your kind of proteomics approach and kind of maybe how time will be differentiated to that? Thank you.

Greg Critchfield

Yeah. The details of that publication are under review right now. What I can say is that our proteomics approach has superb sensitivity, nearly 90% for finding spontaneous PreTRM delivery. And the negative predictive value of our test approaches 99%. So it's a very well-performing predictor itself.

The second point I would make is that, we have actually used our predictor in clinical studies where its utilization has been demonstrated to improve the well-being of babies in particular. The clinical trial data are very strong and that we -- the biomarkers were measuring risk and that we actually improve the outcomes by being able to proactively intervene in patients who have higher risk.

So those are some differences. There are a number of technologies that people have been trying to employ to build predictors. Our, is rigorously validated in a proper U.S. intended use population and in populations around the world. We have a very large amount of data showing that we can stratify and furthermore, stratification can be employed to improve well-being. That's really our thesis.

Tom Stevens

Great. And then, I just had a follow-up maybe more on the kind of longer-term picture. So I mean, given kind of the positive of our results and the idea that the full prime results will kind of bleed over time. I guess, could you talk a bit about the cadence of payer adoption that you expect, assuming interim hits later this year for results here in 2024. And I guess that kind of provider cadence, that would be really helpful for our modeling.

Greg Critchfield

Yes. What I can tell you is I can give you a qualitative picture of it. The PRIME study, as I said before, is multicenter. It's broadly diverse -- it is a -- we believe it is, in many ways, a definitive data set for what the impact of using our technology will be in a US population.

We believe this will be very appealing to payers, those that we are in discussions with those that have been supporting the company, all of them see this study as being an important step forward. They also view the AVERTA study as being a reasonable harder for what one might expect to see in PRIME.

As I said, there are differences between the two, but they're both there. But as far as revenues go, it takes time to build revenues. We believe that one of the key enablers of building revenues is getting payers to reimburse. That's certainly one of them getting the professional organizations knowledgeable about the benefits that we believe can eventually lead to guidelines.

And getting out and actually putting the test in the hands of doctors that use it can demonstrate utilization and benefits. So all those things take time. We see our current data that we're reporting out soon as being enablers. We see prime has a stronger enabler and the pathway to us is fairly clear about how we get there.

Tom Stevens

Great. Thanks. I'll hop back in the queue.

Greg Critchfield

Thank you, Tom

Operator

Thank you. [Operator Instructions] Your next question comes from Dan Brennan from Cowen. Please go ahead.

Dan Brennan

Guys you're getting two for the price of one. How are you?

Greg Critchfield

Good, Dan.

Dan Brennan

Maybe a question on the burn. So what do we think about the burn for this year?

Greg Critchfield

Yes. Jay, do you want to talk about that?

Jay Moyes

Sure. I mean, I think that based on our explanation last quarter that we felt we were in great shape to – to transportation cash through our well in into 2026, that hasn't changed. So I think you can extrapolate that from the fourth quarter to the first quarter, I mean our burn rate is pretty modest.

Dan Brennan

Okay. Is there -- is there certainty that assuming PRIME is successful that, that study will be enough to trigger really kind of notable guideline and kind of payer coverage, or is there a chance that the payers and the guidelines would want two large prospective studies. I know certainly, the AVERT study is an important one, but it did have that surrogate arm. So I'm just wondering, is there clarity like ahead of it that prime is going to be enough?

Jay Moyes

Yes. There are actually three prospective studies that we've done, okay, that we're completing. The first was the Prevent PTB study. That was a prospective randomized controlled trial. The AVERT study is the second one, and then PRIME is the third. So as far as numbers of stains go, we believe that if someone is simply counting numbers of studies, we've done ample work to provide prospective data.

Another thing that people are going to be looking for in the future is real-world evidence by health systems that are using the technology. And those are the type of discussions that we're in now as we move forward. And those -- some of those can be announced at the right time, and we will certainly be doing that as another piece of evidence.

So to say, is it possible that someone a certain payer might not want to cover. That's possible. But I can tell you with the support of payers that we know very well and their interest with positive results, the likelihood of being able to reach an end point that they like is fairly high. ultimately, they make the decision of what they cover what they don't. But we believe we're on track. And the design of these studies were actually done in conjunction with payers so that they would meet their needs for showing clinical efforts.

Q – Tom Stevens

Great. Thanks, Greg. And just on the impact of the interim look alone assuming it's success, I know it's powered well, but you still do know payers and guidelines, we'll still likely want to see the full data. What -- let us assume that you are successful knock on wood, what kind of impact could that have like, say, in 2024 before -- because the full data is not going to be out just remind us when the full data actually will be out – so two questions on the timing of full data and impact of interim.

A – Greg Critchfield

Okay. It's a fantastic question, Dan. Let me explain it in very clear terms. If the interim look is positive and the safety monitoring committee does start the trial because it's positive, it's no longer ethical to have patients enrolled in a control -- where they don't have access to a protocol that is superior. So if that happens, than all the patients that have enrolled up to that time that have been -- that have completed deliveries all those patients are analyzed. And we add to the 2,800 that are in the interim look that is pre-specified. You have those remaining ones. They've already delivered.

So it's just a matter of doing data cloud it will take -- it's a matter of months to be able to get the data if that happens, okay? So I think that there's a good chance -- let's assume for a discussion sake that the interim look is positive and the trial is stopped. There's a good chance in that event that we would have completed data and a completed readout during 2024. So we don't have to wait to up for much longer because the patients have already delivered -- the trial is ended, you don't have two groups that you're comparing our following outcomes. You've got the outcomes done at the time that the interim -- of the deposit interim look occurs. Does that help?

Q – Tom Stevens

Yes. Yes, that helps. And okay, I guess that's it. I'll get back in queue. Thanks

A – Greg Critchfield

Okay. Thanks, Tom.

Operator

Thank you. Your next question comes from Patrick Donnelly from Citi. Please go ahead.

Q – Unidentified Analyst

Hi, there. You got Jason on for Patrick. Maybe first just on AVERT and the submission to a peer-reviewed medical journal what needs to take place for that to happen? And I guess what implications broadly do you see that having across physicians, health institutions and payers?

Greg Critchfield

Yeah, great question. So when the data were -- let's remember, the data became known and available in mid-February, okay? And the PI is writing up the publication now. We anticipate that it takes a couple of months for that to be completed and for the data to be submitted.

But the key would be that once we have the complete readout, we look forward to seeing what the reviewers say and there are possibilities of making data available under certain formats that are allowed by journals and authors. So we're looking into ways that we can do that. We will announce -- we will make announcements, of course, when these articles are published, and we'll use those. But under CDA, we're able to share things even earlier with certain health systems with whom we're having discussions. So that's something we're looking forward to doing.

What will the impact be? We've already seen doctors that have become aware and say, yeah, this shows me you've got two studies that have been done, both prospective studies. This is a large study, there is evidence that, in fact, the test-and-treat strategy does work. It makes a positive difference. And that is partially responsible foreseeing increased revenues along with other things, okay?

Q – Unidentified Analyst

Got it. That's helpful. And maybe just one on the guide for the year, reiterating that from the 4Q call. How should we think about that phasing throughout the year for modeling purposes? Could we see a sequential ramp during the second half, whether it be volumes or further traction of payers continues to grow? And just how should we be thinking about that?

Greg Critchfield

I'll make one comment. Our focus on systems as early adopters is a good one. You don't need to build out a gigantic sales force in order to do that. So that's one way of generating revenues in the early days, so that doesn't need much of a build-out. And we're looking at ways to efficiently see where we're going, the modeling that you might be thinking about doing, you always have a cost associated with revenue. But we feel that we're in a very good position to do things in a cost-efficient manner as we begin growing revenues.

Once price takes place, then the company will be in a position to decide how much expansion, how do we get out to the larger number of patients that are, in fact, our antenna [ph] use market of three million pregnancies a year for the PreTRM test alone. Those discussions are taking place now, and we will be looking at doing it ramping up in a very cost-effective way.

You don't want to hire too much in advance and wait for the revenues to come. You want to build the revenues and go to places where there's promise in demand, and that's really the way to build it out.

Q – Unidentified Analyst

Got it. Thank you very much.

Greg Critchfield

You bet.

Operator

Thank you. [Operator Instructions] Your next question comes from Andrew Brackmann from William Blair. Please go ahead.

Andrew Brackmann

Hi guys, good afternoon. Thanks for taking the question. I think on PRIME, you noted that it had the same intervention across the entire study versus AVERT, which didn't. But maybe, I guess, when you're talking to current users here of the test, what interventions are they using for their patient population? And how does that sort of compare to what you used in PRIME? Thanks.

Greg Critchfield

Okay. The interventions that are in PRIME that we're in AVERT and were in the PREVENT PTP study, they were as follows. The patient was offered a quorum of progesterone. There was more intensive monitoring and care management of the patient by the physician that they were offered a low-dose fast-print -- and then if the patient developed signs or symptoms of early delivery, very early delivery, they were encouraged to be prompted with the administration of steroids because that has been shown to be very effective in imminent delivery that occurs early. Those are the kinds of things that are in there.

These are things that one typically does with patients that are at higher risk. And so the protocols, as I stated, the 2 clinical protocols, which includes those elements our presence in AVERT. They are present in the PRIME study. And the difference being in prime everyone had access, everyone had the interventions in PRIME and AVERT some patients could elect not to do one form of treatment or the other. And that's one of the features of the study design and reverse. Okay? Even so, Andrew, even so when they didn't do it, we actually saw a positive result. So that's very encouraging, actually.

Andrew Brackmann

Yeah, certainly. Maybe if I could, just one on the pipeline here. I think you caught out making progress on the preeclampsia test. Can you just sort of talk at a high level about what else needs to get done there to take that through final validation and into commercial launch? Any other color that you might be able to provide there? Thanks.

Greg Critchfield

Yeah. Great question. So our pre-class test is a preterm preeclampsia. Preterm preeclampsia is the most serious clinical condition where there is a dilemma. If you -- if it's early in pregnancy, when do you actually deliver the baby because delivery is definitive treatment for preeclampsia. So it's a challenging situation. The others, both the mother and baby have more severe outcomes in preterm preeclampsia. We've done a proper validation. As I said, the data are ready for submission. One of the first steps you would want to do is publish those data. And then we are looking at ways of how this might be made available to the market. We haven't decided exactly how to do it yet, but we are learning and actually planning on ultimately making this test available to the market. There are other tests in our pipeline that may actually be -- come suited the pre-classio. We've not made any definitive decisions about which ones come when, but that's the kind of work that we're doing across all of our pipeline right now.

Andrew Brackmann

Okay. Thanks guys.

Greg Critchfield

Yes.

Operator

Thank you. [Operator Instructions]. Your next question is a follow-up from Tom Stevens from Cowen. Please go ahead.

Tom Stevens

Hi, guys. Thanks for taking this last question for me. So just on your prior commentary earlier on the call on kind of ramping that sales force and there's always a cost benefit associated with that. I guess, is there any potential acquirers out there or partners out there? What kind of investment would really accelerate growth? And kind of what would be overcall. I guess what's your pitch to potential acquirers out there?

Greg Critchfield

Well, the -- there are some companies that could be interested in acquiring an asset like Sera. As we build more value, we think there could be more interest. We're not looking at selling the company at this point because we believe we have significant value to create before we'd like to consider doing that. But at the right price, of course, anything is possible. But our focus is really to stick to our knitting, to make -- to grow the commercial revenues in a cost-effective manner.

One other thing you could do rather than that outright acquisition, you could collaborate with someone with an asset like this that nobody else really has with the data that we have, there could be some interesting collaborations with certain parties. And we may find even with new tests, there are ways to partner in order to get to the utilization of tests in novel ways that haven't been explored between groups. So, all these things are things that we're exploring actively as we look at ways to monetize things.

At the end of the day, we have a very robust pipeline of pregnancy tests. These tests provide valuable information to others to doctors and to health systems. Getting these utilized, and there are a variety of ways to do it. We're exploring efficient ways of doing that. And that's how we think about it in the early days of commercialization.

Tom Stevens

Great. Thank you.

Greg Critchfield

You bet.

Operator

Thank you. This concludes our question-and-answer session. I'd now like to turn the conference back over to Mr. DeNardo for any closing remarks.

Peter DeNardo

This concludes the call, and thank you for joining us today. Afternoon, everyone.

Operator

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.