OncoCyte Corp’s Earnings Call: Optimism Amid Challenges

OncoCyte Corp ((OCX)) has held its Q1 earnings call. Read on for the main highlights of the call.

The recent earnings call from OncoCyte Corp conveyed a cautiously optimistic outlook for the company. Significant progress was noted in clinical trials, with strong interest from transplant centers and pharmaceutical partners. However, the company faces challenges in managing revenue volatility and cash burn, which were highlighted during the call.

Central IRB Approval for Clinical Trial

OncoCyte has achieved a significant milestone by finalizing their clinical trial design and receiving central IRB approval. This marks a crucial step in ensuring the safety and ethics of their upcoming trial, setting a strong foundation for future developments.

Strong Revenue from Pharma Services

The company reported impressive revenue from pharma services, amounting to $2.1 million, which exceeded expectations. The gross margins stood at 62%, bolstered by a large order late in the quarter that enabled invoicing of $1.4 million.

Interest from Top Transplant Centers

OncoCyte is poised to welcome at least three of the top ten U.S. transplant centers as participants in their clinical trial. This involvement represents nearly 10% of U.S. transplant volumes, indicating strong interest and potential for growth in this sector.

Global Expansion of RUO Sites

The company is expanding globally, with ten sites currently running OncoCyte’s RUO assay across the U.S., Germany, U.K., Switzerland, Austria, and Southeast Asia. This expansion highlights their commitment to broadening their research footprint.

Digital PCR Differentiation

OncoCyte is demonstrating the value of digital PCR as a technology differentiator. This method offers simpler, faster, and more cost-effective solutions compared to traditional NGS, positioning the company as a leader in innovative diagnostics.

Positive Feedback on DetermaIO

DetermaIO is gaining traction in the drug rescue category, with potential partners expressing admiration for its promising results. This positive feedback could lead to new partnerships and opportunities for OncoCyte.

Strong Cash Position

The company concluded the first quarter with a robust cash position of nearly $33 million, including restricted cash to be accessed later this year. This financial strength provides a buffer as they navigate revenue volatility.

Volatile Pharma Services Revenue

Despite strong Q1 results, OncoCyte anticipates pharma services revenue to be less than $500,000 in Q2, with no services invoiced in April. This highlights the lumpiness and unpredictability in their revenue stream.

Negative Free Cash Flow

The company reported a negative free cash flow of $6.2 million for the quarter, aligning with their target average quarterly cash burn of $6 million. This reflects the ongoing investment in their growth and development initiatives.

Potential Delays in FDA Submission

While OncoCyte is on track for FDA submission by year-end, they acknowledge potential risks to timelines due to the need for several work streams to align. This cautious approach underscores the complexity of the regulatory process.

Forward-Looking Guidance

OncoCyte’s guidance for the fiscal year includes finalizing their clinical assay and trial design, completing a clinical trial to submit a data package to the FDA by the end of 2025, and ramping up revenue in 2026. They aim to expand the number of sites trained on their GraftAssure workflow to 20 by the end of 2025, doubling their current presence. These objectives reflect their strategic focus on growth and market penetration.

In summary, OncoCyte Corp’s earnings call highlighted a cautiously optimistic outlook, with significant progress in clinical trials and strong interest from key partners. While challenges remain in managing revenue volatility and cash burn, the company’s strategic initiatives and robust cash position provide a solid foundation for future growth.