Aspira Women’s Health Inc. (NASDAQ:AWH) Q1 2023 Earnings Conference Call May 11, 2023 4:30 PM ET
Company Participants
Nicole Sandford – President and Chief Executive Officer
Ryan Phan – Chief Scientific Officer and Chief Operating Officer
Marlene McLennan – Interim Chief Financial Officer
Conference Call Participants
Sally Yanchus – Water Tower Research
Operator
Good afternoon ladies and gentlemen and welcome to Aspira Women’s Health, Incorporated First Quarter 2023 Earnings Conference Call. During the presentation all participants will be in a listen-only mode. Following management’s prepared remarks we will open the call for your questions. [Operator Instructions] As a reminder, this call is being recorded today.
Leading the call today are Nicole Sandford, President and Chief Executive Officer; Marlene McLennan, Interim Chief Financial Officer; and Dr. Ryan Phan, Chief Scientific Officer and Operating Officer. After the prepared remarks we will open the call for Q&A.
Before we begin, I would like to remind everyone that forward-looking statements as defined under the Private Securities Litigation Reform Act of 1995 will be made during this call, including statements relating to Aspira’s expected future performance, future business prospects and future events or plans. Although the company believes that the expectations reflected in such forward-looking statements are based upon reasonable assumptions, actual outcomes and results are subject to risks and uncertainties and could differ materially from those anticipated due to the impact of many factors beyond 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 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 first quarter 2023 conference call. With me today are Dr. Ryan Phan, our Chief Scientific and Operating Officer, and Marlene McLennan, our Interim Chief Financial Officer. After my prepared remarks, Ryan and Marlene will provide a brief update on our product portfolio and financial performance respectively before we open the call for questions.
Let me begin with a review of our performance this quarter. In the few weeks since our 2022 yearend earnings call, we have continued to make progress on a number of fronts. Our sales and revenues for the quarter buoyed in part from the launch of OvaWatch in December reached new record highs. A total of 491 OvaWatch tests were performed in the first full quarter after launch, contributing about 8% to the total OvaSuite volumes.
Our strategy has been to leverage the trust and brand recognition that has been established with Ova1Plus for a rapid adoption of OvaWatch by the OBGYN community. Total product volume increased 29% over the first quarter of last year, one of the strongest performances ever recorded by the company.
Our pivot to a more physician focused portfolio approach and awareness marketing for the entire OvaSuite of tests appears to be effective. We have also seen progress with alternative sales channels such as our relationship with BioReference Laboratories and our Aspira synergy relationships. As a result of these efforts we achieved volume growth while simultaneously cutting sales and marketing expenses by 43% and nearly doubling the number of tests for full time sales representatives from 173 to 348.
We also saw increases in our new ordering physicians and average daily test volumes. As is common with newly launched products, the majority of OvaWatch tests in the first quarter were not covered by insurance, which led to larger number of patient bill accounts. Our historical collection patterns appear to be holding across our OvaSuite portfolio. However, we expect the shift in product volumes to create some volatility in the average selling price of our tests for the rest of the year.
We are focusing on securing broad reimbursement as a key driver to revenue growth and announced in March that OvaWatch will be covered under our existing contract with a leading national payer. In addition, our OvaWatch specific PLA code went into effect on April 1st. We expect to make an announcement regarding the publication of a sponsored Ova1 clinical utility study in the coming weeks and plan to use that as an accelerator to continue our progress with the remaining national payers for Ova1Plus and as a catalyst for the expansion of coverage for OvaWatch.
While we are confident that our reimbursement strategy will be successful, we cannot control the timing of payer coverage decisions. We intend to continue aggressively driving provider adoption as we execute upon our strategy, and we’ll closely monitor the resulting impact on our cash needs.
Let me now turn to our progress on our operational performance. I believe it remains prudent to extend our cash runway as much as possible through strategic reductions in discretionary spending. As a result of the personnel cuts in 2022 and continued focus on cost containment, we significantly reduced our net operating cash spending in the first quarter to $5.7 million compared to $10.2 million in the first quarter of last year. We reiterate our operating cash utilization target for the remainder of 2023 to be between $10.3 and $13.3 million.
Given our first quarter ending cash balance of $7.5 million, we are keenly aware of the need to identify additional sources of liquidity. We continue to meet with potential partners and I’m pleased to see the positive momentum the launch of OvaWatch has created. We have proven ourselves to be capable of launching innovative diagnostic products to address unmet needs in gynecologic health.
We are in a stronger position for partnership discussions than at any time since I joined the company. We have increased our efforts to attract investors and partners since the beginning of the year and will continue to make that a top priority. In the meantime, we have significantly increased our access to just-in-time capital by $22.5 million this quarter by implementing an ATM sales agreement with Cantor Fitzgerald and securing a committed stock purchase agreement with Lincoln Park Capital. We intend to utilize these facilities prudently over the next one to three years to close funding gaps. These are valuable tools that provide access to the market at an attractive cost of capital, especially compared to transactions that have been closed by microcap companies in recent months.
Aspira’s strategy and sciences sound [ph] and has helped us to attract talent and retain our top performers. Our attrition remains very low. We were also able to attract three outstanding new board members, Stefanie Cavanaugh, Jannie Herchuk, and Lynn O’Connor Vos. They bring the experience and passion we need in these challenging times.
With that, it is now my pleasure to turn the call over to Ryan for a closer look at our product portfolio.
Ryan Phan
Thank you, Nicole. I am very pleased to say that we continue to make progress on the development front. Let me begin with OvaWatch. OvaWatch has been very well received by physicians since the recent launch in December last year, as it provides a personalized risk assessment for women presenting with adnexal masses.
The OvaWatch clinical validation manuscript was accepted for publication in January. This peer review publication in the Frontiers in Medicine provides real evidence, so physicians can be confident in utilizing OvaWatch in the management of adnexal masses, including to safely decrease premature ovary removal and reduce surgical backlog.
As excited as we are to have OvaWatch available to patients, our work is not done. OvaWatch’s true benefit lies with its potential as a serial monitoring test for managing adnexal masses. Currently physicians view OvaWatch as a one-time test to determine the clinical management of a patient, including whether a woman can continue to be monitored or needs additional workup or surgical consideration.
As a serial monitoring test, physicians would use OvaWatch multiple times to follow up on the woman’s adnexal masses status. This personalized risk course will guide the physician’s decision to monitor the mass or to refer her for additional testing or surgery. We continue to follow enrolled patient in a prospective of a large multi-centered clinical study via additional periodic blood draws. As a result, we are collecting real-world evidence to support the use of OvaWatch as a serial monitoring assay. We anticipate this phase of the study to be completed in the third quarter of this year.
Moving to EndoCheck, our in development non-invasive test to aid in the diagnosis of endometriosis. We are making progress on both internal development efforts and the development program with a consortium of institutions led by Harvard’s Dana Farber Cancer Institute. Starting with our internal development progress, we recently succeeded in identifying and cataloging a large number of patients’ samples from our own biobank. This is a significant milestone given the previous concern about the accuracy of available samples needed for the development of our assays. We are in the process of validating our test using those samples. We remain focused on our launch of the first generation endometriosis assay in the second half of this year.
With respect to our partnership with Dana Farber, the endometriosis research collaboration continues to be productive. Through our collective efforts we have obtained sufficient cohort data enabling us to move forward. This project is on track to meet expect development goals for 2023.
Turning to the recent announcement on our partnership with Dana Farber Cancer Institute, we are very excited to expand the collaboration to include the development of a microRNA based ovarian cancer test because microRNAs are easy to extract from blood samples and appear earlier compared with other testing targets, like circulating tumor cells or proteins. They are a good target for an early stage diagnostic test.
This new non-invasive molecular base risk assessment test will become part of our OvaSuite portfolio. We look forward to having a deeper discussion on our portfolio during the Investor R&D Day on May 23rd, featuring our physician collaborator, Dr. Kevin Elias, a Harvard Medical School Gynecology Professor.
I will now turn to Marlene for discussion of financial performance. Marlene?
Marlene McLennan
Thank you, Ryan. Product revenue for the three months ended March 31, 2023 was $2.3 million, an increase of 26% compared to $1.8 million for the same period in 2022. The increase in revenue was primarily driven by an increase in OvaSuite tests performed during the quarter, which increased 29% to 6,259 compared to 4,846 for the same period in 2022. Revenue per OvaSuite test performed for three months ended March 31, 2023, decreased 2% to $370 compared to $379 for the same period in 2022. We expect revenue per test to be volatile during 2023 as we seek payer adoption on the OvaWatch test.
Total profit margin was 51.4% for the three months ended March 31, 2023 compared to 50.8% for the same period in 2022. Research and development expenses for the three months ended March 31, 2023 were $1.2 million, a decrease of 9% compared to $1.3 million for the same period in 2022. The decrease was primarily due to a reduction in clinical trial supply and consulting costs.
Sales and marketing expenses for three months ended March 31, 2023 were $2.6 million, a decrease of 43% compared to the same period in 2022. The decrease was primarily due to a decrease in personnel cost, including severance related due to our sales force reorganization in the first quarter of 2022.
General and administrative expenses for the three months ended March 31, 2023 were $3.2 million, a decrease of 27% compared to the same period in 2022. The decrease was primarily due to reductions in personnel, consulting and outside legal costs. Total cash and cash equivalent as of March 31, 2023 was approximately $7.5 million. Cash used in operations for three months ended March 31, 2023 was $5.7 million compared to $10.2 million for the same period in 2022. This is the result of cost cutting and personnel realignment activities taken in 2022.
In February, we secured an ATM sales agreement for $12.5 million, and in March we secured a committed soft purchase agreement for $10 million. As Nicole mentioned, we intend to utilize these facilities on an as needed basis over the next one to three years to close funding gaps. We generated a total of $162,000 in proceeds for these agreements in the first quarter.
I will now turn it back over to Nicole.
Nicole Sandford
Thank you, Marlene. May 8th was World Ovarian Cancer Day, which presented an opportunity to reflect on the need for better ovarian cancer diagnostic tools and the resulting potential for our business. We are extremely proud of the work we are doing to improve health outcomes for women and are excited to continue our forward progress across our strategic growth, innovation and operational excellence goal.
With that, I would like to now open the call for questions. Operator?
Operator
And I’d now like to turn the conference over to Marlene.
Nicole Sandford
Actually no, I think we’re ready to open for questions. Actually, I’m going to, I have one quick other thing to add and then we’ll open for questions. Thank you Grant. Sorry about that. Earlier this week, our shareholders overwhelmingly approved a reverse stock split between 1-for-10 to 1-for-20 during our annual meeting, management and the board undertook an extensive analysis of similar capital transactions from a wide variety of sources and considered alternatives that would be most likely to allow us to remain in compliance with NASDAQ listing standards and protect the interest of our existing shareholders.
Our Board of Directors approved a 1-for-15 split, reverse split that was announced earlier today and will be effective at the start of trading tomorrow morning. We remain optimistic that upcoming milestones, including the expansion of OvaWatch as a serial monitoring test and the launch of a first generation endometriosis test among others, will have a meaningful impact on Aspira’s stock performance to the end of the year and beyond. We are ready to look towards the future. I remain firmly committed to transparency with you, our shareholders, and focused execution of our strategy.
With that, I will open for questions.
Question-and-Answer Session
Operator
Thank you. [Operator Instructions] The first question comes from the line of Andrew Brackmann with William Blair. Please proceed with your question.
Unidentified Analyst
Hey everyone, this is Maggie Bowie on for Andrew today. Thanks for taking our questions. I appreciate the commentary on the OvaWatch momentum. Could you maybe give a little bit more color there? You know, what specific types of accounts are you seeing the traction in and anything you can tell us about how this launch has allowed for you to open new doors into accounts you maybe previously weren’t able to get into?
Nicole Sandford
Sure. Thanks Maggie. I appreciate the question. We’ve seen pretty broad interest in OvaWatch. Candidly physicians have been interested in a test like this and in this test in particular. We’ve been priming the pump for a while now. So we’ve had a lot of interest from our existing physicians. We had a record number of new physicians, new ordering physicians in the first quarter and of course some piece of that was related to OvaWatch. So it’s been helpful on both fronts in terms of driving repeat order physicians and bringing new physicians on board.
And just quickly adding to that, we’ve said that we really believe that the brand and trust that we’ve built up with physicians with Ova1Plus would create a great springboard and platform when we launched OvaWatch and so far that strategy has proven to be found.
Unidentified Analyst
Great. Thanks for that. And then just on the spend here, so it looks like another solid quarter of moderation. As you think about perhaps increasing spend, what specific areas are you eyeing and how are you evaluating potential ROI on that spend?
Nicole Sandford
I think that we would really focus on accelerating the remaining steps on development for products that are in the portfolio. So, or in development, for example we would want to open additional sites for the endometriosis study which we think will be helpful not only in our first generation test, which we have committed to launching by the end of the year, but for every — for the add-on tests that we expect to be part of that portfolio in the future. So that certainly would be one area that we would look to add resources.
Unidentified Analyst
Great. Thanks so much.
Operator
And the next question comes from the line of Sally Yanchus with Water Tower. Please proceed with your question.
Sally Yanchus
Oh, yes. Hello. Hi Nicole, do you expect sort of the same volume of tests to be sold in the next quarter? I mean, that’s a huge jump. It was, I mean, do you think you’re sort of at that kind of quarterly level or do you expect it to further increase?
Nicole Sandford
So it’s pretty early in the OvaWatch launch to draw too many conclusions about the trend. I will say though as we’ve kind of gone into Q2, we’ve continued to see strong demand both for the legacy Ova1Plus test and for OvaWatch. So we’re feeling pretty good. We’ve mentioned in the past that we have focused on physician educational events and conferences. That is — that continues to be a priority for us. We’re in conference season right now. We will be out and about and presenting and holding product round tables and theaters and other ways to present the test to large physician groups. And we have seen that after we attend and present at one of those events, we see a significant bump after that. So we’re feeling confident that that shift in focus has been has been appropriate.
Sally Yanchus
Okay, good. And then in terms of the, your marketing partner with Organon, you expect some sort of, some commercial sales this this quarter. Do you have any idea when they’re going to launch? Are they doing like a full launch meeting or anything like that?
Nicole Sandford
So I’m not sure what, we don’t have an announced partnership with Organon. You may be referring to our relationship with BioReference Laboratories that we launched last year.
Sally Yanchus
Oh right, yes, yes, yes. Okay, yeah.
Nicole Sandford
Yes, yes. Yep. So that continues to gain momentum. Our sales team is working very closely with their sales team.
Sally Yanchus
Oh, good. Okay.
Nicole Sandford
And that’s been very positive in terms of one of the drivers, frankly, for the increase in the test volume per sales reps, because the other channels are starting to produce more test volumes so we can get volume without adding a lot of costs in headcount. So we’re feeling pretty confident in the sales team that we have and, and the momentum that we’re getting from our alternative channels.
Sally Yanchus
Okay, great. Well, thank you very much.
Nicole Sandford
No, thanks. Thanks for joining, Sally.
Operator
And there are no further questions at this time. I will now turn the presentation back to the host.
Nicole Sandford
Well, thank you everyone. I just want to take another opportunity to thank you for joining us and encourage you to register for our May 23rd event. You’ll hear more about our forward progress across our three strategic priorities. Those have not changed; growth, innovation, and operational excellence. And we’ll give you additional color, commentary and detail around the expansion of our product portfolios. So please make sure you join us then, and thanks so much for being here.
Operator
That does conclude today’s conference. We thank you for your participation and ask that you please disconnect your line.
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