Biovica International AB (publ) (BIOVICB) Earnings Call Transcript & Summary

Hello, everyone, and welcome to the Biovica Interim Report for our third quarter. Today, it will be me, Anders Rylander, Warren Cresswell, Henrik Winther and Anders Moren presenting and we have Helle Fisker helping to produce the webcast. And the agenda for our presentation is, first, a short introduction and general presentation about the company by me. And also the highlights from the quarter just -- we just closed. Then Warren will go into the details a little bit more around our U.S. business and give an update. Henrik will do this for our Pharma Services business. Anders will round off with the financial update for the quarter. I'll do a summary, and then we will open up for questions-and-answer session until the end of the hour. So we expect this to take an hour for the entire presentation. And we'll start with our analysts, and then we will also take questions through the chat feature. [Operator Instructions] So let me start with the introduction of the company in a few slides, very -- again overview. So our core product that we developed and is now bringing to the market is DiviTum. And DiviTum is a blood-based assay that measures cell proliferation. And as you all know, cell proliferation is [ a whole lot ] of cancer. And by measuring cell proliferation, we can provide very important information for the patient and the treating physician. The application we have chosen initially is monitoring our treatments within metastatic breast cancer, where there's a very strong unmet clinical need currently, and we have data that shows that we can add real value. And now we also have results from being used in the clinic as well. So it's very encouraging. Also, the demand is further highlighted are strengthened by initiatives, several initiatives by the FDA called Project Optimus, for instance, that requires efficiency and monitoring biomarkers and DiviTum, that's precisely what DiviTum can offer. This is, of course, super important for the patient, making sure that the treatment that you're on that is really effective. So it's easier to tolerate its side effects but also from a health economic perspective as these treatments are priced at a pretty significant level with over $10,000 per month and patients within the metastatic breast cancer area. And of course, you want to make sure that this money is well spent. The product has been throughout documented in more than 30 clinical trials that has been peer reviewed and published. The majority is within breast cancer, our first commercial area. And they -- but we also have proof of concept data outside of breast cancer and other cancer areas. And it supports the use as a clinical biomarker tests for monitoring of treatments in cancer, but also have a strong prognostic value of how the disease will progress both in earlier phases and the metastatic setting. These collaborations have been done together with some of the leading oncologists and the institutions in the world, which, of course, is important for us in order to reach out with the message convincing all the oncologists, the potential customers out there using this for their patients. And as I said, we don't now only have the data from clinical trials. We now see this works very good in the clinical setting, which Warren will give some very exciting [ sample results ]. This is, of course, the foundation for our commercial activities, starting from getting the 510(k) clearance from the FDA, which we have as well as getting reimbursement and in the end, driving demand for the product. When it comes to the market potential, we have, as I said, focused initially on the metastatic breast cancer setting. And when it comes to territories, we initially focus on, first of all, the U.S. market and also selected markets in Europe where we primarily focus on the big countries in Europe and the Nordics. This market potential is estimated based on the -- an average price in U.S. at $400 and also now being on the market and receiving price for Medicare, we are more certain than ever that, that assumption holds, which, of course, is very, very important. If you look at the next level, it's the pharma area, pharma services, where the business model actually consists of 3 different phases, which Henrik will go through. And we also see that there is a huge potential, and we have a big -- a strong market position, especially within companies that are developing so-called CDK inhibitors for the future. So it's very exciting. And beyond that, we have -- we see several indications where there's a great potential. One area that we can mention is the use of immunotherapies and to monitor them in a good way where we have similar clinical needs as within the breast cancer area, where we also both have data together with Karolinska Institutet published and also an ongoing patent application. That's what the market potential. If we now move on from the more general information to the highlights from this third quarter of ours. I have divided them by business area to say. First of all, U.S. I would say the most important milestone from the last quarter was the decision that we got that we now have been included in the Medicare price list starting January 1. And we are already seeing payments being made by Medicare on that new price level. So it's really good. And another major milestone for us was -- here is, San Antonio Breast Cancer Conference. This year, we had 3 posters or -- are collaborating partners, different universities, Yale and WashU -- Washington University in this case, presented data on our product on this conference. And it's an excellent opportunity for us to meet world-leading oncologists to reach out with our messages about the value of the product. In Europe, we continue to sign commercial agreement, both for the Nordics, a company called Axlab. And now the latest one, Palex, that covers Spain and Portugal. We also did a rights issue that we closed by end of the year. That enables us to continue the market introduction of the assay all the way to making our goal of becoming cash flow positive on June 2025. And after the end of third quarter, we continue in the U.S. to launch a new trial with Washington University, which also has a great potential and value for us, which we're able to cover and the pharma services area is continuing to develop well. We have signed 2 master services agreement. And on those agreements, we have also taken the first work order of collective value of SEK 2.9 million. So with that said, I'd like Warren to take us through the U.S. status.

Great. Thanks a lot, Anders. I'm really excited to talk about the U.S. business and give an update in regards to the positive progress that we've made in this last quarter. Through my presentation, I'm really going to focus on 5 separate topics, one of which is sales and contracting performance. I'm going to talk about the reimbursement milestones and progress we've made there, along with regulatory progress. I'm going to touch based on clinical activities. And then I'm going to end the presentation on real-world patient data using DiviTum. And what this will do is really illustrate the clinical utility of DiviTum. So look forward to that. Next slide, please. So with respect to sales performance, we had a very good Q3. Our sales performance doubled over Q2, which is fantastic but also which was very interesting was that we were able to get additional medical institutions to order DiviTum as well. So that number went up from 5. So prior in Q2, we had 7 ordering institutions and now we have 12. So that's very, very beneficial to our business. There are 2 very good indicators as well of our business, one of which is that we have 93% of physicians that have ordered DiviTum, has ordered more than 1 test. And this is a really good indicator for us. The other thing is that when we take a look at patients that are being tested with DiviTum, we have 47% of patients to date that have had more than one DiviTum test and many of these have had several. That number will probably go up as well because we've had a number of patients -- new patients in the last month or 2, and they will most likely get additional testing as well moving forward. I can tell you in my experience in this particular market, that number is incredibly high. So -- and that's my experience and my team's experience. So I think these are incredibly good indicators for our business that the clinical utility with DiviTum is very significant in the marketplace. And we look forward to future growth as well. From a hospital contracting perspective, our goal -- our ambitious goal at the beginning of the year was to sign 10 contracts. To date, we've executed 3. The important thing here, though, is that we have about 14 in the pipeline. Many, many of these are NCI, NCCN designated cancer centers. And many of those as well are currently ordering DiviTum for us. We're just submitting those claims to the standard reimbursement process. So we'll see moving forward some of these getting across the finish line. Unfortunately, some of these institutions, unfortunately, they're very, very large, and it takes a bit of time to get those contracts through the system. So we're very encouraged with the progress we've made both on the sales side of things and on the hospital contracting side of things. Next slide, please. From a reimbursement perspective, we're really happy about the progress that we've made here. I think the takeaway messages is that we're getting paid in all 3 separate channels, which is fantastic. If we take a look at #1, which is Medicare, as Anders indicated, our PLA code was priced at the end of last year, and that pricing went into place or it was activated January 1. So all DiviTum test as of January 1 on, we submit a claim using our PLA code with this particular price, and we've been getting paid on it, which is absolutely fantastic. So we're starting to get those claims -- those payments in the door. Secondarily is private insurance. And with private insurance, private insurance has kind of 2 components, one of which is a person that's on private insurance. The other is a person that is on Medicare but is managed through private insurance has called managed Medicare. And we've been getting paid on both of those customer segmentations within private insurers as well. All of the managed Medicare claims have been paid at the Medicare price, which is fantastic. And in fact, the private insurance claims, we've been getting paid more than we've expected. So this is fantastic news as well. And then from a client build perspective, we've been getting paid what we've contracted and that's what our expectations were. And that is still our core strategy within our businesses move as much business as we can into that hospital contracted channel. The 2 indicators here that are really, really impressive is with respect to all of the claims that we've made through Medicare and private insurance along with client bill, there has been zero claim denials based on medical necessity or clinical utility. And this is unbelievable, quite frankly. If you take a look at other organizations, especially in the molecular field, you will see claims denial rates up in the area of 50%. We've had zero. This is fantastic. We haven't even had to submit an appeal yet to get paid. So I think all of the work that we've done, whether it's getting the PLA code, the pricing of the product, the clinical utility of the product, it's been, I think, very spot on for the organization. And I think the other point, as Anders had mentioned this previously is that when we take a look at the payments through these 3 channels, whether it be Medicare, private insurance or client bill, that blended average of payments, we believe that we will be at that $400 price range as these channels develop based on the payments that we're receiving today. So we're very, very encouraged by that news. Next slide, please. With respect to kind of our regulatory side of things, as I reported in the past, we do have a CAP accredited CLIA lab, we're Medicare credentialed. Up till now, we've been working on licenses from different states so that we can provide DiviTum. And today, we can actually provide DiviTum to 49 of the 50 states plus Washington, D.C. So the only remaining state that we are working on is New York State, and we've already submitted all the necessary information in New York. We've interacted with them. We are only waiting for their audit data at this particular point in time. We've spoken with them, I think it was 2 weeks ago and they indicated that before the end of H2, their audit team will show up, audit us and then we can expect to be able to be licensed to do business in New York State, which adds another 20 million lives. So we're really encouraged by that. This has gone incredibly smooth for us. Next slide, please. So with respect to clinical, clinical is one of the most important areas of our business. We've just added a third prospective interventional trial. Today, we have 3 of them. So we have one from Yale University that we're working on, and that really identifies potential medical compliance and drug-to-drug interaction and kind of the secondary end point, I would say is, is dose adjustment. And this trial is up and running. We're seeing samples roll through almost on a daily basis. The second trial is through Washington University in St. Louis, also known as WashU. That trial is also recruiting patients, and that's called TK IMPACT. And TK IMPACT really explores how to use DiviTum and how oncologists change, how they manage those particular patients, one of which is should they do imaging earlier? Should they hold back on imaging? What other type of testing should be done? So this is a very, very important clinical trial for us as well. And thirdly, we just signed a clinical trial called BettER. This also is through Washington University. And with this particular trial, this really focuses on early therapeutics switching when patients are no longer responding. So when a patient gets tested and they have a very high TKA level, one of the things these physicians will do is understand do we switch these patients to another CDK4/6 inhibitor or do we switch to another line of therapy. All 3 of these very important to us in regards to the data really helps us with supporting the clinical utility. We will use this data from a guidelines perspective and we've made really great progress here. The other thing that we're doing as well is we're taking a look outside of metastatic breast cancer because early indications indicate that DiviTum will work in not only earlier stages of breast cancer, but other disease states as well. And one thing we're doing is we're looking at the adjuvant breast care -- adjuvant breast cancer setting. And this has been really the #1 thing that medical oncologists have spoken with us about. So we're doing a retrospective analysis of a CDK4/6 inhibitor clinical trial. This is a big one. This has 1,250 patients and a little bit over 3,200 patient samples. We're evaluating those now, and we believe that the data readout will be before the end of H2 2024. We're really hoping that we'll be able to have an abstract at San Antonio Breast Cancer Symposium. So stay tuned there. But we're excited about the preliminary data that we're seeing. The real benefit with the adjuvant market is as well as that it's an enormous market. It's significantly larger than metastatic breast cancer. Also, from a sales perspective, it's the same call point. So those medical oncologists that are getting used to using DiviTum with their metastatic breast cancer patients they're actually measuring -- managing a significantly large number of adjuvant breast cancer patients as well. So it's the same call point. So it's great that we've educated or educating folks today on DiviTum with medical oncologists, they'll be the same medical oncologists that are managing those adjuvant patients. In addition, we used the same product number for our test. We use the same PLA code number for our test and we use the same price for our test. So that all of aligns perfectly with regards to our business. So we're very, very excited about this and the work that's been done there. Next slide, please. So I'm going to talk through 4 separate case studies here. These are -- this is data from real patients, real data. And as you can see on the bottom of each one of these charts that will pop up, you can see that the data is very, very recent. So in this particular case, this is data from October, November, December. All 4 of these case studies are women with metastatic breast cancer that are hormone positive. If we take a look at this first one, this patient has metastatic breast cancer, is on a CDK4/6 inhibitor plus an endocrine therapy. The patient is feeling very good, no issues whatsoever in that regard. They had a CT scan and the CT scan did not show any disease progression. They had blood chemistry work done, liver enzymes are slightly elevated. This particular oncologist has been using DiviTum, and they decided to try to test this particular patient. The value came back incredibly high. It came back at over 2,000. And so instantly, the medical oncologist thought, well, based on the liver enzymes as being a bit high, but especially because the TKA level was so high, let's do a liver biopsy. They did a liver biopsy 2 to 3 weeks after that DiviTum score, and they found liver metastases. Now those liver metastases were confirmed to actually be triple-negative breast cancer. So that's super important because how you manage triple-negative breast cancer is different from hormone-positive breast cancer. So immediately, the oncologist switch courses of therapy, moved from a CDK4/6 inhibitor plus an endocrine therapy to an immunotherapy plus chemo, and that patient is responding. And the doctor told us without DiviTum, I would not have done a liver biopsy, imaging did not show disease progression and it's incredibly important for us to be able to put these patients on the right therapies to maximize their overall survival. So this is absolutely a huge win for the patient. Next image -- thank you, Anders. The next one I want to talk about is dose reduction due to tolerability issues. So in this particular case, a patient was on abemaciclib and fulvestrant and they had an issue with -- they had a side effect. In this particular cases, patient had diarrhea, and it was not -- they were not able to control it unless they took the patient off this particular therapy. So they took the patient off the therapy. They manage the diarrhea. But then the oncologist said, before I switch CDK4/6 inhibitors, I'm going to try to dose adjust this patient down to see if we can manage the tolerability side of things. They did that. They took that patient. When we tested the patient off therapy, you could see it's 408, very high number. They put that patient on a lower dose of abema and the value dropped significantly down to 40. And this gave the peace of mind to the patient and to the physician that the patient was responding to this therapy. So again, another great demonstration of clinical utility of DiviTum. The next image, please. This is one where a therapeutic switch was made by the medical oncologist. So in this particular case, this patient was on ribociclib plus an anastrozole, and they had an issue -- the intolerability issue. They actually had 4 separate side effects that they were facing with this particular drug. One of which was nausea and they could not manage that. So the medical oncologist made the decision to take the patient off this therapy. We tested the patient when they're on the therapy and they were responding very, very well at 18. This is incredibly low score but they had tolerability issues. So when they took the patient off that score shot up to 265, which is a clear indication of cell proliferation. Then they put the patient on palbociclib plus anastrozole and then the value dropped down significantly -- dropped all the way down to 38 and then you could see that 1 month later, it dropped to 23, very, very low scores. In this particular case, the patient could tolerate palbo better than ribo and they have -- they're not suffering from any side effects. So again, a great way to be able to see this. And there's no way a doctor would be able to see whether a patient is responding other than realistically doing imaging and waiting for disease progression. So again, very good clinical utility. And if you can provide the next image as well, Anders. Final one, I think this is fantastic for the patient. This patient has been on ribo and fulvestrant. And in this particular case, from October, November and December, you can see these values are incredibly low. And in fact, I know for a fact that with this particular drug, the patients on therapy 3 weeks and then off therapy, they have a drug holiday 1 week, these samples were taking during their drug holiday, and you saw no rebound effect of that value going up. So not only is this patient responding incredibly well to this therapy, but also this really aligns with Project Optimus from the FDA where the doctor is looking at instead of providing the maximum tolerable dose, maybe we should dose adjust down and give the minimal effective dose. And again, another clinical utility of this product. So I just wanted to share this with you. I think this illustrates the different utilities of DiviTum and this is, I think, why myself and the entire organization is just so motivated and energized of what this can do to help women with metastatic breast cancer. And with that being said, I'm going to pass this over to Henrik.

Thank you very much, Warren. So I'm here to present the pharma servicing collaboration business, and as always, a great pleasure to present that part of our business also because we have really got a momentum there. So, two slides. The first slide here is just saying that we have a continued strong progress during Q3. And as we have communicated earlier on, the prime goal of this business is really developing compelling diagnostic products, bring them to the market and bring in to the market in collaboration with pharma and of course, based on our TKA testing technology. So currently, we are onboarding pharma and biotech companies. We're getting them familiar with our powerful TKA technology, and they use it as a tool to monitor whether their drug is efficacious. We typically onboard pharma through master service agreements, the MSAs. And during Q3, we were negotiating 2 new MSAs and we were also negotiating additional work orders. And this all led to the recent press releases on 2 new master service agreements. And it also led to a significant increase in our work order book. So at the end of Q2, our work order book had a value of SEK 8.5 million, as is stated here. And it was actually coming from only -- not only -- it was coming from 12 master service agreements we have with different pharma partners. But by the end of February, that's 1 month into Q4, we have work order book value of SEK 11.4 million and now coming from 14 different master service agreements. We also saw an increase in the upper limit of the revenue value per project to SEK 2.5 million per project simply because the pharma projects they are including more and more TKA testing monitoring in their studies. During Q3, we also experienced some of the more typical bumps when working with pharma. Three of our current pharma projects, they had delays in their clinical studies, which impacted our TKA testing service level and move some sample testing into Q4. However, when I look at the significant increase in testing activities in the beginning of this Q4, we are more than back on track. Next slide. Now if we take a closer look at our current customer portfolio and CDx product market potential that we present to us, on this slide here. We have classified our former biotech customers into 3 tier levels based on their yearly revenues. Tier 1 and 2 companies being those companies that typically move into collaborative CDx development and collaboration projects. And the Tier 3 companies typically being companies that are developing new drugs based on their proprietary technologies but then selling off these new drug candidates to Tier 1 and 2 companies afterwards. Biovica obviously needs to engage with all tier levels. And this is to get our TKA technology built into the earlier drug development phases as a tool to increase the safety and effectiveness of these drugs and then hence become a companion assay when they are commercialized by the Tier 1 and 2 pharma companies. As you can see on this slide, the far majority of our pharma biotech customers, they are developing drugs within the next generation of CDK4/6 inhibitors. And hence, we also on this slide here, have tried and provide an estimate of the CDx product total addressable market potential. Only within this one drug type CDK4/6 inhibitors or next generation of those. We assume that the CDx product revenue potential represent 2% to 4% of the drug revenue potential. This is the market guidelines. And here, we only look at the CDK4/6 inhibitor potential in North America, that means U.S. and Canada. And the total addressable market potential for a CDK inhibitor CDx in North America in 2030 has an impressive value of USD 1.2 billion. And we have a solid footprint with our TKA assay being used by 95% of all relevant pharma biotech companies developing these next-generation CDK4/6 inhibitors. As a final comment to the slide here, you can also observe how some of the very innovative Tier 3 companies. They are starting to also use our assay outside the CDK4/6 inhibitor drug field. Actually, 6 out of the 13 -- sorry, 7 out of this 30 -- sorry, 6 out of the 13 Tier 3 companies as almost 50% are using TKA together with other drug types, which will further expand our CDx market potential. And by that, over to you, Morén.

Thank you very much, Henrik. See if I can get this to work. A few slides on the financials there. So Q3, we had sales of about SEK 1.1 million, a little bit short of that. As Henrik said, that was negatively impacted by some delays in clinical trials, but there was no cancellation of work orders. It's more a timing difference. So we are confident that it will sort of bounce back in Q4. For the full -- year-to-date numbers, it's SEK 5.4 million. Zooming in on the U.S. sales. It's -- as you can see here, it's still small numbers, but you can see an impressive uptake as Warren was talking about in his section of the presentation. If we start looking at the different payer segments, you see here, client bill, it's only 20% of the test distribution, but it's an impressive 50% of the revenue distribution, and that comes from that we have a confirmed price, which is quite high and we have confirmed payment terms. So that's really where we want to be in our business. Medicare, we have a new price now from 1st of January this year. It's about 50% of the test distribution, about 40% of the revenue distribution. The tricky part here is the private insurance. That's about 33% of the test distribution, but only 12% on the revenue distribution, and that comes from that we are quite conservative when we recognize the revenues from private insurance because we know from past experience that private insurance can be quite tricky on pricing and also on payments. However, we have seen now that start seeing payments as Warren was referring to that these payments are actually quite much better than we anticipated in our assumptions around revenue recognition is actually a factor of somewhere 2x to 4x what we are currently using in our conservative estimate, but the numbers are quite small. So we are still using that conservative estimate when we do revenue recognition on the private insurance payer segment. But as we see this sort of numbers grow, and we have confidence in that we will actually continue to having significantly higher -- we will actually increase that, and that will have a positive impact on our revenue recognition in the U.S. business, of course. Quickly on the cash position. We had close quarter 3 with SEK 105 million, and that is in line with our prospectus that we shared with the market for the rights issue at the end of last year. Net operating cash flow by quarter, we see an improvement here going from minus SEK 28 million up to minus SEK 23 million. Majority of that is coming from change in working capital. On a side note, we communicated in the prospectus that we would go for an equity bonus rather than a cash out bonus. We have investigated this quite significantly. And at the end of the day, we concluded that it's more -- from a shareholder perspective, it's actually better to keep the cash out bonus rather than accepting the dilution of equity bonus. So that's -- we still think that, that will fit within our business plan that we had in the prospectus. So with that, I'll hand it back to Anders for a summary and Q&A.

Thanks. Just to sum it up, we have product DiviTum that addresses a very important clinical unmet need. We know that for quite some time. We have significant documentation and from collaborations with some of the leading key opinion leaders in the world. Now we also see that the product performs very well in the clinical setting. So we're even more certain about the potential of the product. Same with the market potential, we made assumptions there as well, which seems to hold, and we also see potential outside what we defined, which we are also documenting now which is, yes, earlier phases of breast cancer that Warren mentioned. And with the market share or the footprint that we have in the next generation of CDK inhibitors, I think it looks very, very promising in that area as well. So if you look at the progress made, I think we made progress within all our 3 business areas. We went through the U.S. Really, we see significant growth in Q3, still small numbers, but very strong trend. And we have all the investment we've done now in our go-to-market work. It's starting to pay off in terms of revenue, in terms of patients being monitored, in terms of oncologists and institution. And we have the beauty of our business model is that we know. We see patient and treatment. We see that they are coming back monthly or actually even more frequently, sometimes to get feedback on how the patient is performing on the -- or how the treatment is -- how effective the treatment is. And so it's repeat sales. And we are keep adding new oncologist ambition as well also. Pharma services, strong growth even after we closed the quarter that order book value, we also see that we have a great potential to grow, and that will translate into revenues, of course. And in Europe, we're also starting now to see progress with 2 new very important agreement signed with larger partners in Axlab and Palex and also the first order from one of those partners, and they're also recruiting sales reps, especially for DiviTum. So progress there as well. We look at the short-term targets. We have -- we want to continue on our client build strategy and sign more agreements with U.S. hospitals. As Warren said, we have a strong pipeline there and working to convert the [ meeting ] agreements. However, I think we're able to sell outside the client bill agreements and get paid. So that's good, very promising. And in Europe, we had our goal of 4 commercial agreements, which we already met, so we continue to expand there as well. And the important milestone here is to be able to show -- to translate this into revenues. So SEK 10 million in revenues by end of fourth quarter is our goal, and we've been -- yes, they had a good foundation for that and also have a strong pipeline going forward. So that's really good. And the long-term important goal, of course, still remains. That's to make cash flow positive, by mid-25 at the sales level of more than SEK 50 million per quarter. So a good start towards that long-term goal. So you could say that we've always believed in the potential in the product and especially and now seeing it in action in U.S. and from the companies using it, we are more certain than ever about the product's potential. With that said, I'd like to open up for questions. And we start with our analysts. I think this time, we said that Chien is the first one to start. So Chien, if you can -- yes, I see that you're unmuted. So please.

Yes. Sure. So two questions from me. So since there seems to be no real material sales pickup in this quarter, but you also believe that it will start to become significant in the next quarter. Is there any clear signs that you see? Or could you maybe elaborate on that?

Yes. Well, if you look at the overall numbers, you're right that the -- we also disclosed the U.S. sales that you shared, so if you break it down to U.S., it was a significant sales uptick from a very low level, but still, now we're seeing that our work is paying off. It takes time to open up new accounts, setting up the order processes, getting the oncology start ordering and monitoring. And now we're seeing that pay off. If you look at the overall picture, we've been -- our sales has mostly or almost 100% has come from our pharma services. I think like Henrik said, we've been successful in the areas as well. However, we're a bit exposed in our business model, if there is a delay in a clinical trial or 2, revenues is not lost, but they are pushed forward. So that's what happened. So hence, when I'm saying that we are confident, our pipeline is strong. That's also work sold but not yet delivered. We also have taken measures to minimize that risk in our business model, so going forward, I think we'll be less exposed, although it's difficult to totally eliminate it, but we can at least minimize it, which we've done by changing our agreement slightly. Was that an answer to your question?

Yes, definitely. Thanks for the clarification. Also, you mentioned in your report that you have been receiving regular reports that DiviTum significantly improve clinical routine, and allows alternative treatment to be more tailored to their needs. So this is very interested and could you maybe add more color to that? Do you receive any feedback from the physicians or [ that ]?

Yes. I think, Warren, you did for those cases, maybe you could do the coloring here.

Yes. Absolutely. If I understood your question correctly was kind of the feedback from kind of the tailored or precision maybe therapy or diagnostics. But yes, the feedback has been overwhelmingly positive from all of the medical oncologists that we've engaged where they've been testing patients. And I think the biggest is one of the largest or most beneficial pieces here is that today, medical oncologist to understand if there's disease progression that use imaging. And they can't image a patient every month or every week, they typically spread out those -- the imaging and it may be every 6 months. And the feedback that we've gotten is that really, DiviTum gives oncologists kind of this window into what's happening with the patient other than signs and symptoms, and they can see whether or not patients are responding to therapy, whether or not if they switch therapies, are they responding? Can they dose adjust? And how does that impact that thymidine kinase value as well. So I think from that perspective, it's incredibly encouraging. And I think also, we're also -- since this is practice changing, this is almost like when the iPhone came out. Nobody knew that they needed an iPhone until the iPhone was out, and then everybody needs one. It's a very similar situation with timing kinase or with DiviTum anyways is that physicians haven't used it in the past. So from our perspective, it's us educating them in regards to the value of the product. And typically, when we start getting -- when we educate oncologists, what they typically do as well as they will find these kind of unique patient cases for us to evaluate. And they build clinical experience before they do wider adoption. So I hope that answers your question.

Yes. Thank you for the color, Warren, and I think you can see that from -- when you meet our sales rep also that they really, yes, get a lot of interest in the product. If I add some facts, I think examples you're asking for in Warren's first example, they discovered that this patient was, actually has developed triple-negative breast cancer, a different type of breast cancer and which is treated differently. So that's a very good example when it was treatment changing. And the way they saw that is that if you have triple negative and not responding then hence to the CDK, you see elevations in [indiscernible] assay, you see months ahead, and then they started looking and in combination with liver biopsy, they found out. So that's a good example. I think another good example to Warren's example is these different, there are CDK4/6 inhibitors on the market. They all work a little bit different and have different side effect profiles and different dosing. And so when you add that up, it's a lot of combinations and managing those combinations and with the side effects because their side effects are tough. It seems from the patient cases that we see now that we can add a lot of value and find ways that was difficult to find or took at least months more to find. And if you have many combinations and take many months to test on each combination, yes, it's a game changer. So yes, I hope that answers your question, Chien.

Yes. Perfect. Congrats with the progress.

Thank you very much. Should we move on to Luísa Morgado from Van Lanschot Kempen?

Can you hear me?

We hear you very well.

Yes. Okay. Maybe if we could discuss a bit the master service agreements. I was wondering in terms -- so you mentioned that you have quite a few -- well, potential revenues from the order books, so I'm expecting that to kick in into 2024. And beyond that, I also wanted to ask. So one order, what does that equal to, let's say? And how long do you expect -- well, let's say, this more of an estimation that a master service agreement could turn into a companion diagnostics joint venture with one of those companies?

Yes. They are all good questions. So first of all, yes, you are correct in work orders. They typically go from 8 to 18 months, typically in a one work order because more and more pharma are using our assay in prospective studies, big clinical studies. So we're talking many patients. We're talking between 500, 1,000 -- 1,500 samples. So it differs a little bit between the different studies. We see a clear tendency of being included in the bigger and bigger trials. And that's also we are very optimistic about moving from this service phase into true collaboration with pharma. And we expect that to happen within, hopefully, in a short time frame. We have some really promising discussions with pharma companies, especially the Tier 1 companies is, of course, where we believe it's going to happen. It is interesting with the Tier 3 companies as well because they are bringing a lot of new exciting drugs to the market or developing new drugs that are going to be acquired by the bigger pharma companies. And that's why it's interesting for us to be in there kind of very early on. But we have some really good communications discussions with the Tier 3 -- sorry, Tier 1 companies. And we have 3 known players within the CDK4/6 inhibitors, and then we have upcoming also Tier 1 companies that are really focusing on that area. I don't know if that is -- hopefully, it's answering your question.

Yes, yes. That was very helpful. And maybe just one last question. In terms of the adjuvant setting, how is the process here? So do you need to -- how do you proceed here? Do you need any authorization? Do you need to submit anything? Or can you already use DiviTum as is?

Yes. That's a good question. And then to be very clear, when it comes to our intended use from the FDA, it covers metastatic breast cancer. So if we want to continue and market the product for adjuvant, we need to expand the intended use. We can do that, either using a supplement to the FDA or we could, as we now have the lab, CLIA lab of running and certified. We could also expand it using an LDT, so I think we're -- we believe that expansion is less of a hurdle than the actual 510(k) clearance, especially during those times during the pandemic. And with the clinical trial that we are doing, it also has the numbers, the volume that it will provide an excellent clinical validation material. So that's very good when it comes to the regulatory perspective. Then there is another perspective, and that's the commercial perspective, and that starts with the reimbursement and then, of course, the sales efficiency. So if we start with the reimbursement, it's actually in our P&A code as one very briefly mentioned, it's already covered because our PLA code and the scope for that is wider than our 510(k) intended use. It's a bit complex here, but -- so when that was decided, we have data, of course, covering more than only in metastatic breast cancer that was considered. And in the end, we got a PLA code that covers breast cancer. So it's not tied to any state or phases. And also, I think the beauty here with the sales efficiency is that to a great extent, it's the same oncologists treating in the different phases of breast cancer. So we would then be able to target those overlaps, our goal plans, et cetera, that we're targeting right now. Yes. Hopefully, that, that answers your question?

Yes. Very clear.

All right. Johan, we are now 8 minutes, but -- to go. So Johan, if you have, if you can unmute, see if we can get your questions. I think you're on mute. I saw you were unmuted. So I think it should work if you just choose unmute on your Teams app. All right. I think Johan, he will soon sort it out. So in the meantime, I will take some questions from the Q&A, and then as soon as we get the sound from Johan, we will let him in. So I'll take with the first one. It's from anonymous. So, it's -- the question is, does this product work on all or different cancer forms or it's only breast cancer? And then it's a really, really good question. And the question is, we measure cell proliferation. Cell proliferation is a difficult word to say, obviously, a cell proliferation is generic for cancer. That's how cancer grows, basically. And the more aggressive the cancer grows, the higher the self proliferation measured by our assay is. That's documented. So the potential is all cancers. So it's more of a commercial and resource perspective. We have chosen to start with metastatic breast cancer because there's such a clear unmet need, with the treatments that are being used there, and we also have excellent results from clinical trial is a good match. So it's a good way to the market. And from there on, we can expand, and that's our ambition. So excellent question. I have one, which I think you maybe can elaborate a little bit on, Warren, it says so far -- I read it for you. So far, hospitals does not seem to ordering a lot of tests. Have you seen any ramp-up regarding orders, specifically from hospitals since the quarter closed. Maybe you can elaborate a little bit how the starting procedure works, Warren?

Yes, absolutely. So whenever we do contract with institutions, there is a bit of a ramp-up process. We need to put in place logistics and things of that nature. Again, with these hospital contracts, it does a couple of things for us. It does engage the molecular formulary committee with institutions to determine if there's medical necessity for the product. So it gives us greater access to those institution. So I think the utilization on the -- with the hospital contracts have been good. They will continue to increase with additional usage and experience with DiviTum. We're still not completely up and running and at full capacity with these institutions. It does take a bit of time, and we will see this as well with future agreements as well. But certainly, all signs point to utilization moving forward will certainly increase in these institutions. Thank you, Johan.

So now we have Johan on the line.

Can you hear me?

Yes, we hear you well.

Excellent. I had some problems earlier. Let's see. I can start with Warren, and it seems like some of the master service agreement has not yet converted into work book, work orders. What's the outlook on that side? And also, the prospects of the existing work orders to expand further.

So Warren, the client bill should be -- I think yes, so if you can elaborate. Thank you.

Yes, absolutely. So yes, we have -- so we have those 3 particular institutions that we've signed contracts with. With one of them, it is in -- it's doing quite well with the ordering progress. With another one that we had signed, there are essentially 2 separate ways that samples come in. They will either come in through in service, what's called in-service or out service, the in-service is blood that's drawn within the laboratory within a particular facility. With that particular institution, we do have access because of the agreement, and we actually have a few doctors ordering from that particular institution. They do draw blood internally. So you're not going to see that in that client bill segment. But what that contract did for us is open up that particular institution. We will start seeing some samples come through that particular channel, as we add additional physicians. But some will -- it just depends on which physician uses which access point for a blood draw for that institution. In the other contract, we are still working with them to be able to get that channel open. We've done all kind of the heavy lifting in regards to getting the contract in place, working with the formulary committee, working with physicians. So we anticipate that really being active soon. So we're doing all the right things, but you will see moving forward that these contracts and new ones will really kick in.

So the prospects of -- we have 14 direct bill in the pipeline. And are they sort of different dynamics and then different stages, presumably?

Yes, absolutely. And with all of these contracts, I think if you've seen one, you've seen one because each institution has a different set of dynamics based within those institutions. They are at different stages of discussion. And in some cases, we're in much deeper stages than others. But nevertheless, many of those institutions that we're receiving samples from today, we are in discussions with -- to contract that particular business. So I think that's very positive. So in those particular cases, we've already worked out all the logistics in regards to -- the path in regards to getting samples to us as well as getting test reports to the right physicians or the portal, let's say, within those particular institutions. So yes -- so I think once those get across the finish line from a contracting perspective, we will already have samples set up to come in because we already have that path open now and are receiving samples from those institutions.

You have clearly increased clinical use even though the absolute numbers are modest at this stage. You also explained earlier that it seems like some of the physicians and labs that they take the approach of trying a few patients, perhaps patients where they need for an earlier response or changing therapy is particularly high. How should we look at it? Is that what to be expected from new additional hospitals and physicians that they will go through a period of trying a few patients before using it more often?

Yes, exactly. So as we engage oncologists, the sales process is really us educating them on thymidine kinase and the role of DiviTum. Since we've launched the product, the real benefit that we have now versus when we launched the product is we have real-world cases. So those examples that I showed, those 4 examples, if you looked at the dating below, these are very recent cases, and we can show the clinical utility of those particular patient -- the patient cases. So we use those as part of our sales efforts to be able to educate and show the utility to individual oncologists within institutions. The process is really educating. And then when physicians decide to try the product, they typically would never just kind of flip the switch and incorporate this with every one of their metastatic breast cancer patients. What they do is they themselves want to get real-world experience to see the clinical benefit or clinical utility of the product, and then they move into a routine use on a wide range of their particular patients or all patients. Ideally, then we get to a point in the process where we get incorporated into that institution's care pathway. And what that means is that they write in their protocol that with a particular patient type, automatically, the order would get -- a patient would get a DiviTum test regardless of what oncologists is managing that particular patient. So if you kind of look at the overall sales process, we're kind of in that area where we're educating and oncologists are evaluating the product with specific patient samples or patient cases, and we have some that are really a little bit further down the pathway. So -- and we can expect this probably for quite some time and until we get greater critical mass.

So it sounds like you're making progress, but the sort of visibility of the actual ramp-up is still modest at this stage.

Yes, the ramp-up is pretty significant, but the volumes are modest. And so you're right. And we tried to guide also set the expectations. We know that it takes time to start generating revenues. And as Warren also said, our strategy has been with our experienced sales force to go for the high potential, the so-called Tier 1s or [indiscernible], the ones that are the highest prescribers of CDK4/6 inhibitors. And so those are the one that now is testing out. And of course -- and that's why it's so important that the test performed so well that they see the value of it. And that's basically what's been achieved now the -- yes, that we showed evidence of in this presentation. So yes, really good, and that is laying the foundation for revenues down the road. Yes. And that's, I think, is the right strategy to reach those pretty aggressive goals that we have set both short term, but especially the long-term goal of SEK 50 million per quarter to breakeven. And that, of course, will be Henrik's part of the business at pharma services that we will be contributing to that a lot as well.

Yes. And also, since you opted to go for cash incentives instead of shares. And the reason seems to be that it's less dilutive. That also suggests that you're pretty confident that you will reach breakeven based on the current financing.

Yes. That was based on a lot of parameters, one, that we were able to manage our cost and cash out very well and also to find the best solution, in this case, for the shareholders because we would, in the end, we thought it would be too expensive and also not compliant with the Swedish [indiscernible] to set up and attract it. So we went back to the cash out. And yes, I believe that's the right thing to do. We really looked into trying to find a solution, but I don't think it was good enough. So this -- in the end, turned out to be the rest, especially since we're able to manage the cost in line with what we said in the prospectus with the cash out bonus.

Yes. And finally, Henrik, on the issue then on work orders and master service agreement, you're making a lot of progress. The average size of the work orders suggest that there are still several master service agreement that could turn into work orders. What's the outlook on that side?

Yes. I mean so the way you need to understand the master service agreements is that from each master service agreements, we have several work orders, and what we see is that in the beginning, when we signed master service agreement, the work orders were rather small preclinical activities and what have you. What we have learned recently is now that pharma is using the assay in bigger studies, really big studies and hence, the work orders coming out of each master service agreement is really large and also a significant number of work orders from each master service agreement. We have one company where we are now with the sixth or seventh work order from that company. So we have several projects running with each pharma partner.

Excellent. And also, a clarification then since you alluded to that the average size was 2.5, that -- I suppose that's an average from the master service agreements that are active reached the sort of work order stage. Is that correct?

Correct. I mean it's because early on, when we have communicated on the master service agreements and the value of each work order, it was up to approximately [ said SEK 500 million to SEK 2 million ] per work order. And now we experience that is not enough within that frame because we have recently signed work orders that are bigger than SEK 2 million. And that's why, so we just increased and say, okay. So when we report on it, it's now typically between [ SEK 500 million and SEK 2.5 million ] per work order.

And is there anything to be said, I mean you disclosed and share the level of -- the totality of the present work orders? What's -- anything to be said about the prospect of adding new?

Yes. We have 2 technical evaluations ongoing and technical evaluation is where new companies are trying out our TKa technology. And in 90% of those cases, we will end up signing a master service agreement. So I guess that's as far as I can go. But we have 2 companies currently testing out our technology, and I would be surprised if it's not ending in master service agreements.

And also, of course, the next stage and eventually the companion diagnostic stage, you are optimistic about reaching that. And reasonably near term, is it possible to give any less than 2 years, possibly within 1 year? Or is it possible to -- just add any flavor on that?

My optimism is increasing fro every quarter, which I guess is just reflecting that we are having some really good discussions with the right pharma companies on moving this assay, not only from a service assay but really into a companion assay. I guess as far as I can go, just saying, my optimism is going in the right direction.

Yes. And if and when you reach that stage, is it realistic to expect some kind of upfront part of this business opportunity?

If it's possible to...

Upfront payment.

Upfront payment. Oh yes, absolutely. I mean the way I'm used to running pharma collaborations is really the you need to onboard resources to be able to execute on developing a companion diagnostic assay and hence, you need some upfront payments. So absolutely, yes.

Thank you, Johan, and thank you, everyone. We are actually 10 minutes over time. So I'm grateful for your interest, and I think we covered most questions also in the chat. There's one that we didn't cover, and that's only 93% says the orders are returning customers. What about the 7%? Yes. I think you need to consider it's really difficult to get into 100% because we roll out new customers, and sometimes they don't have time to submit their second order before we close the quarter. So -- but I think 93% is still really, really good. And we see that they come back for more. So we're really happy with that. Thank you very much for your interest and great question. I appreciate that. And I want to run off and say that, yes, the volume still are low, but the trend is really, really good, and we're more optimistic and we have a stronger belief than ever in the potential of DiviTum. So we're looking at the future and believes it's really bright. So thank you very much for joining the call today. Over and out.