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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