Cerenome, Inc. (CNSY) Earnings Call Transcript & Summary

Good morning and welcome to the Serenome Third Quarter 2026 Business Update Conference Call. At this time, all participants are in a listen-only mode. [Operator Instructions]. Before we begin, we want to advise you that, over the course of the call and the question and answer session, forward-looking statements will be made regarding events, trends, business prospects, and financial performance, which may affect Serenome's future operating results and financial position. These statements include, among others, statements regarding unaudited third quarter gross billings. That figure is subject to completion of our quarter-end close and review by our independent registered public accounting firm, and final results will be reported in our Form 10-Q. Any annualized run rate figures discussed today are illustrative calculations. They are based on list prices, our run rate goal, and historical order rates from the platform's prior owner, and they are not forecasts of revenue, gross billings, or collections. See inside test volume adoption and our annualized test order run rate goal, the timing of new see inside assay launches, the order rates for those assays, covered lives targets, Medicare expected effective date, Medicaid and commercial coverage, reimbursement rates and the timing of cash collections, the build out and productivity of our commercial team, our forecasted cash runway and the availability of future tranches under our 3i financing facility, market size and epidemiology estimates, and the timing and results of our Rheobic clinical programs. All such statements are subject to risks and uncertainties, including those described in Serenome's annual report on Form 10-K, and quarterly reports on Form 10-Q. Serenome advises you to review these risk factors in considering such statements. In addition, comments made during this conference call contain information that is accurate as of the date of the live broadcast today, September 30, 2026. Serenome assumes no responsibility to update or revise any statements to reflect events, trends, or circumstances after the date they are made, except as required by law. Please note the call is being recorded. If you require operator assistance, please press star then 0. It is now my pleasure to turn the call over to Dr. Marc Hedrick, Serenome's President and Chief Executive Officer. Dr. Hedrick, you may begin.

Thank you, Drew. Good morning and thank you for joining the call today. The goal for the call today is to provide investors in the capital markets with an update specifically around Serenome's diagnostic division, C-INSIDE. The team has made great progress over the last three quarters, and we have a number of updates, more than we can typically provide on a quarterly earnings call. As a note, we will have our full Q3 earnings call in Q4, but today the focus is on C-INSIDE, and Russell Bradley and Andrew Sims are here with me to provide more detail. One note, you will be able to review our most recent corporate presentation on our website later today. First, though, before we talk about C-INSIDE, I would like to provide some context. On August 3rd, our new name, Serenome, and brand became official. That was really just a public acknowledgement of the two previous years of operating as an integrated CNS oncology company, combining diagnostics, therapeutics, with advanced data analytics all under one roof. Simply put, the rationale behind the integrated strategy is that CNS cancers represent systems diseases, and therefore an integrated or systems approach is ultimately what is needed to make meaningful progress for these patients. In contrast, if you look back over the past five decades of companies taking traditional, narrowly focused approaches, they have yielded few commercial developments or regulatory wins in both diagnostics and therapeutics. A new approach is desperately needed. There are two multi-decade trends that define the CNS oncology problem and the opportunity. Trend 1 is the abysmal track record of gains in CNS cancer survivals. Over the past four decades, the median overall survival for non-CNS cancers has improved nearly fourfold from roughly 35 months in 1980 to approximately 138 months today. In contrast, the median overall survival for patients with CNS cancers stands at about 15 months, and it has barely moved across that same period, despite dramatic advances in imaging and despite the major systemic therapy advances deployed around it. It seems that every oncology revolution of the last 50 years has stopped at the blood-brain barrier. Trend 2 is the epidemic in CNS cancers. As patients live longer with advanced cancers or metastatic disease, the incidence of CNS metastases is rising. By any definition, metastatic CNS cancer is both an epidemic and an underappreciated one at that. CNS cancers represent the largest underserved market in U.S. oncology. So then how does one define that market opportunity more specifically? Of the 18.6 million U.S. cancer survivors across all sites and stages, it's estimated that approximately 2 million Americans are in the central nervous system cancer at-risk pool. Specifically, these are patients with metastatic CNS tropic disease or non-metastatic tumors at elevated risk. Of these, an estimated 600,000 patients per year receive a symptom-triggered or guideline-directed CNS workup. Furthermore, approximately 190,000 patients per year will be diagnosed with parenchymal brain metastases, and an estimated 345,000 patients per year have leptomeningeal metastases, or LM. This epidemiology drives the multi-billion dollar addressable markets for both C-INSIDE and our lead drug, Rheobic. For C-INSIDE specifically, we sized the C-INSIDE Diagnostic Market Opportunity, or TAM, at approximately $2.7 billion for LM alone, with additional approximately $2.8 billion across the broader CNS, at-risk, workup, and brain mets populations. In our view, this represents a multi-billion dollar hole in the current U.S. diagnostic market that we recognized when we acquired C-INSIDE, and now with three quarters of early commercial experience, our conviction around that opportunity hasn't changed. I would now like to invite Russell Bradley, President and General Manager of our C-INSIDE Group Diagnostic Division, and Andrew Sims, our Chief Financial Officer, to join in on today's call and take you through the 2026 C-INSIDE progress and provide a look forward for the remainder of 2026 and into 2027. Russell?

Thanks, Mark, and good morning. This quarter, C-INSIDE began submitting billing claims to payers. For two years we have been building a reimbursed business in cerebral spinal fluid, or CSF, diagnostics, building clinical evidence, payer contracts, a proprietary reimbursement code, Medicare enrollment, laboratory accreditation, and the billing infrastructure. We are no longer building towards reimbursement. We are billing for it. We set five goals for 2026, and here's where we are. We have commercial coverage beyond 150 million lives for our TCE test, achieved ahead of schedule at approximately 158 million covered lives. Medicare and Medicaid coverage on track with Medicare enrollment complete and a published Medicare rate expected to be effective January 1, 2027. A run rate of 1,250 total tests per year on track. Additional tumor characterization tests on schedule with C-INSIDE CSF molecular profile planned for October 12 launch and first C-INSIDE CSF cellular biomarkers focused on breast cancer and will be launched at the Society for Neuro-Oncology annual meeting in November. 50 or more ordering physicians on track with 39 physicians ordering today among 43 ordering providers. So let me take you through the details supporting our goal achievements here today. First, commercial coverage, which we achieved ahead of schedule. We entered 2026 with approximately 67 million covered lives, people whose health plans have contracted to pay for the test, from United Healthcare and Humana. New agreements this year, led by Elevance Health at approximately 45 million, The service corporation at approximately 27 million, took us past our 150 million goal in August. With Blue Cross Blue Shield of Michigan in September, we now have approximately 158 million covered lives under contract, and we continue to pursue agreements for additional covered lives. When Medicare preliminary pricing for our TCE test takes effect, which is anticipated January 1, 2027, we expect to add approximately 34 million beneficiaries subject to coverage through Novitas, our local Medicare contractor in Texas. We're here in Medicaid coverage and we're on track. On May 7th, we received our Medicare billing number. Our proprietary reimbursement code took effect July 1st. And Medicare prices new laboratory test codes through an annual process. The Centers for Medicare and Medicaid Services, or CMS, reviews each new code with input from an independent advisory panel and public comment, then publishes a rate. We expect CMS to publish a preliminary rate for our proprietary reimbursement code effective January 1, 2027. Coverage for traditional Medicare is a separate decision by Novitas, a local Medicare contractor in Texas, and work is underway. Third testing volume, we are on track to achieve a run rate of 1,250 total tests per year in 2026. That is approximately 100 tests per month. The first half was access led by design, limited early access through March, then broader availability from April 1st. The first quarter volume was up 64% over the first quarter. We expect to close the third quarter at approximately 203 C-INSIDE tests, up about 41% over the first quarter, over the second quarter. The fourth quarter is supported by the coverage access now in place, onboarding wait lists, widening ordering breadth, and the offering of additional tumor characterization tests. Our fourth goal is adding tests to the platform and we are on schedule. On October 12th, we plan to launch the C-INSIDE CSF molecular profile, our DNA and RNA sequencing tests. Today a spinal fluid specimen arrives at the lab and we run one test. From that launch, the same specimen can also be sequenced across more than 300 DNA genes and more than 1,600 RNA transcripts to help guide therapy. More high-value clinical tests from the same specimen mean more value to our physician partners for the patients they serve and for C-INSIGHT. As the testing menu grows, one specimen can support several tests. For illustration only, the full plan menu once launched would carry a combined list price of up to approximately $15,000 per specimen. Of course, list price is not what we expect to be paid. Reimbursement will depend on payer contracts, coverage, and which tests our physician partners order. Alongside sequencing, we are adding CSF, or C-INSIDE CSF cellular biomarkers, our branded protein expression tests. These are now being validated in our Houston laboratory. These tests measure specific proteins on the tumor cells that we are already capturing. The first group is focused on breast cancer. They are estrogen receptor, progesterone receptor, and the HER2 biomarker. Breast cancer is the most common source of leptomeningeal metastases, or cancer that has spread to the fluid around the brain and the spine. So these are the natural first biomarkers for us to launch. The aim is a C-INSIDE result that tells the physician not only whether tumor cells are present and how many, but what can help guide the next therapy. We plan to launch this first breast cancer focused group at the Society for Neuro-Oncology (SNO) meeting in Philadelphia this November. And in June, our Houston laboratory earned College of American Pathologists Accreditation, which is a prerequisite for both our ordering academic centers and payers alike. Behind those numbers is adoption, which is our fifth goal. 50 or more ordering physicians in 2026, but the pattern matters as much as the totals. Ordering institutions, five ordering institutions in the first quarter when access was capped by us to now 24 ordering institutions today. Ordering providers 13 in January to 43 today, including 39 physicians. The test ordering data we care about shows C-INSIDE as becoming part of routine patient care. Repeat ordering, so 15 of our 24 institutions have ordered in two or more separate months, and they generated 97% of our commercial test volume this year. Monitoring. 10 out of our 24 institutions, or 42%, are already testing the same patients more than once to follow them through treatment. That is consistent with national cancer treatment guidelines from the NCCN, which support re-evaluating spinal fluid every four to eight weeks during treatment for this disease. It is the foundation of a recurring diagnostic, not a one-time test. That adoption now turns into claims. So let me walk you through how a diagnostic gets paid. Vocabulary sounds complicated, but the sequence is not. Five steps for our TCE test to date. A code. Our proprietary reimbursement code was effective on July 1st. Contracts, 158 million covered lives. Medicare, enrolled in May, rate expected to become effective January 1st, 2027. Billing infrastructure. XIFIN, a leading outsourced revenue cycle management company selected by us in August, is now live. And then claims submissions began this quarter. Our first submissions include tests performed earlier this year as well as new cases. We are also making sure cost is not a barrier for our patients. Our patient financial services team verifies benefits, supports appeals, and offers income-based financial assistance and interest-free payment plans to our patients. Which brings me back to the sales force. Samantha Fowkes joined us on September 16th as the Vice President and Head of Commercial Sales. Samantha brings more than two decades of oncology diagnostics experience, most recently at Caris Life Sciences and earlier at Genoptix and Labcorp. She's building our field team now and our first representatives are being hired in the fourth quarter. Samantha's mandate is to turn the physician demand we already have into a repeatable commercial model. Three priorities. Number 1, deepen current ordering institutions. Make the C-INSIDE routine across the neuro-oncology teams at our 24 ordering institutions, and activate the approximately 97 signed online ordering agreements behind them. Goal #2, reengage past ordering institutions. So 120 U.S. cancer institutions have ordered C-INSIDE since 2020. That is a known list, not a start from zero. And finally, Cell-Free DNA menu. From the fourth quarter, one spinal fluid specimen will support our tumor cell count test, the C-INSIDE CSF molecular profile test, and the C-INSIDE CSF cellular biomarker test. On timing, a new diagnostic representative typically takes two to three quarters to reach full productivity. The fourth quarter is the build quarter. 2027 is the first full year of a field selling organization on top of the physician demand we already have. Growth also needs laboratory capacity. In September we moved our lab to Levitt Green, a new life science campus here in Houston. At Levitt Green, we are constructing a purpose-designed laboratory to support our growth, with capacity of up to 50,000 tests per year. As sequencing and protein expression join the testing menu, we want capacity in place well ahead of demand, so the laboratory is never the constraint on growth. Over the next few months, here's what to watch. The published preliminary Medicare rate for our proprietary reimbursed code, effective January 1, 2027. Menu expansion, the C-INSIDE CSF molecular profile planned for launch on October 12th and the first C-INSIDE CSF cellular biomarker tests focused on breast cancer at the Society for Neuro-Oncology (SNO) Annual Meeting in Philadelphia this November. The 1,250 total test run rate with the field sales team standing up behind it. To sum up, this quarter we began billing with 158 million covered lives, a Medicare rate expected January 1, 2027, and 43 providers ordering, all without a single sales force in place. With that, I'll turn the call over to Andrew Sims, our Chief Financial Officer.

Thanks Russell and good morning. As we move to a company with revenue, I would like to provide the market with an explanation of our approach on how we plan to communicate commercial business progress that will ultimately lead to revenue and cash flow guidance. In 2016, we focused our public remarks on the high-level commercial building blocks of physician adoption, TCE tests performed, and covered lives. Behind the scenes, we built out the critical systems and processes for a scalable commercial business, namely operational infrastructure, revenue cycle management, and marketing commercial support. As a result, we have now begun billing on claims submitted quarter to date, representing approximately $1.55 million of gross billings on 222 performed TCE tests. That is an unaudited number and the final figure will be reported in our third quarter Form 10-Q. We anticipate the collections will lag billings. However, given the commercial and financial plumbing we put in place earlier this year, as Russell mentioned, we anticipate cash collection starting in Q4 2026. Going forward, in advance of any payer experience in collections history, we will look at gross billing as a logical way to communicate business progress in advance of a revenue or cash number. Ultimately, it will be a solid lead indicator of cash flow, but how much we will know later, once we have more real-world experience. In terms of our gross billing run rate as we finish the year, using the 1,250 annualized test order run rate and new test offerings that are in our 2026 goals. That test number would correlate with an approximate annualized gross billings run rate range of $10 million to $12.5 million as we enter 2027. The detail behind that range is based on our gross billing number times 1,250 tests per year plus a forecasted contribution from our expanding test platform Russell mentioned. Specifically, the C-INSIDE CSF Molecular Profile Test, launching the week of October 12th, and the C-INSIDE Breast Cancer Protein Expression Assays, launching at SNO in November. We have made assumptions around that product mix based on the 11,000 commercial tests performed by the C-INSIDE developer and other factors including physician workflow and evolving practice patterns. We will be able to tighten up that range as we get more data over the ensuing quarters. In terms of actual revenue guidance, I suspect we will have enough data points once we have two to three quarters of billing and collections in place to be able to guide to a go-forward revenue estimate. Prior to that, we will focus on gross billings. In terms of our balance sheet, as mentioned in our press release of September 10, we entered into a debt royalty financing with 3i to help support the balance sheet as we scaled the commercial team for C-INSIDE. Our balance sheet with current sources of cash is estimated to extend our cash runway into 2028. Looking forward to 2027, we think with the commercial team in place, we should be able to significantly scale beyond the gross billing run rate of $10 million to $12.5 million I mentioned earlier. With that, I'll turn the call back to Mark.

Thank you, Andrew. Before we open the call up to questions, let me recap where we stand against our 2026 corporate milestones and what's next. So on the C-INSIDE platform, we will continue to expand the U.S. commercial payer coverage from the approximately 158 million contracted lives we have today to an estimated 200 million or so by the beginning of 2027. Advance Medicare from billing to collections as described by Russell and we are building the Medicaid coverage state by state. We are on track to meet or exceed the 1,250 annualized test run rate. That run rate should continue to expand as we feel the national sales team increase physician and institutional adoption and expand the test testing platform with additional CNS tumor characterization tests as described. In addition, we anticipate revenue collection beginning to scale in Q4, anticipate greater visibility to financial guidance and revenue in mid-2027. In terms of Rheobic, we remain on track with all key publicly reported objectives and plan to discuss these more in detail on our Q3 earnings. So with that Drew, let's open up the floor for questions and we'll take it from there.

Thank you. We will now begin the question and answer session. [Operator Instructions]

Yes, Drew, we'll go ahead and take questions from the listeners.

Thank you. The first question comes from Kyle Mixon with Canaccord Genuity. Please go ahead.

Hi, this is Charlotte Maurer on for Kyle Mixon. Thank you so much for taking our question. I was just wondering, as you expand beyond the C-INSIDE, beyond the TCE, you've highlighted up to like that $15,000 in reimbursement potential for the full testing episode. Well, it's still early. How should we think about the expected patient utilization of the full menu versus like just ordering an individual assay? And then kind of like once Medicare reimbursement is fully in place, I know it's still early, but how could we kind of think about the economics of a typical C-INSIDE testing episode? Thank you.

Yes, hi, so I'll take the question. This is Russell Bradley here. So the $15,000 that we mentioned is really illustrative of list prices. And as we said, it's based on the contracted amount ultimately and what the physician orders. And that's for an initial workup. So the way we're thinking about running the test that we're going to be offering when we launch next quarter is that there would be an initial diagnostic workup that would include full sequencing, the protein expression assays, and of course the tumor cell enumeration. And we use the list prices of those to come up with that illustrative number. What happens in practice is that that initial workup is done on the initial diagnosis episode, and then what's more likely to happen is after that there'll be monitoring tests that will include just the tumor cell enumeration. So I want to make sure we're clear that that's all the tests ordered on the initial workup. Initial diagnostic workup and then after that we would go to a tumor cell enumeration monitoring which obviously wouldn't be $15,000. So that's the numbers behind there. And we're still working with Medicare, obviously. There's... You know, they have made some preliminary determinations. There's an open comment period currently. I think next month, and then we expect the published rates for the CellSearch test for the tumor cell enumeration test in November to become effective in January.

Of January 1. And Charlotte, if I, thank you for the question. If I may, on the Medicare mix, which I think is part of the question. Leptomeningeal cancer, which is sort of the core market, at least today for us, it actually tends to disproportionately affect patients prior to age 65. So if you look at it from an age perspective, perhaps it's a little bit more about 15% or so of the patients that we're seeing are going to be Medicare patients. The rest will be in a pre-Medicare market and be covered by private payers or other sources. So that will obviously materially affect the overall mix. And we'll start talking about that more in detail going forward in future quarters.

Great, Thank you. The next question comes from Chad Messer with Lake Street Capital. Please go ahead.

Just on the multi-test, wondering about the... we should think about the reimbursement path there. Is it relatively similar in, um, what you have to do and how long it takes, or is there opportunities now that you're already Now, have you already kind of engaged on the original test to compress the.

To compress some of the timelines around the steps. So, Chad, I just want to make sure I understand the question. So when you say the multi-test, are you talking about sort of the monitoring of the patient, or are you talking about the comprehensive menu? Okay.

Yeah, the menu. You're adding the breast cancer and the additional things that can be run on one sample. Reimbursement for that. How should we think about the reimbursement for that?

Yes, so the other tests that we're launching next quarter already have established CPT codes in place. So unlike the tumor cell enumeration test that we launched earlier this year, we're... That has a proprietary CPT code or a PLA code, which we, you know, we separately contract and negotiate pricing with the private payers and with Medicare. The additional tumor characterization test that I mentioned come with established CPT codes. So for example, the DNA profiling CPT code that we'll be claiming against is around about $2,900 for reimbursement for that profile. And there's a separate one for RNA as well. The protein expression for the breast, the breast cancer focused panel that we're putting together and launching next quarter, they also have established CPT codes. So initially we'll be billing against those established codes. Those are lower reimbursement, but they do make up, depending on what the physician orders, you know, there can be several of those, three or four in a test. So, they'll be separately billed against the existing CPT codes. And that's how we derive that total number of $15,000 if all the tests would be requested hypothetically by a physician with the list prices and CPT codes in.

And Chad, just to maybe pile onto that, just as a, as a heuristic of thinking about this, about $15,000 number that Russ mentioned for the full complement of testing, about half of that is related to the TCE test, about half is related to the RNA and genomic profiling, and then a smaller fraction of that is for expression test. So the majority of the economics are on the multiomics and the TCE test. And that split kind of, you know, roughly 50-50.

All right, very helpful. And then you mentioned you've got 125 institutions that have previously ordered C-INSIDE. Just as Samantha, you know, builds out Salesforce starting in Q1, how you think about that? Prioritizing those, obviously, you know, getting existing customers to order more is generally considered the lower hanging fruit. But it sounds like there's quite an opportunity to expand the base there.

Yeah, Chad, so yeah, we have like a number of things converging here to help us accelerate the growth in the testing that we're doing, we're seeing. So we have the existing sites, that's true, there was 120 institutions that had ordered the test since 2020. So there's a fair bit of familiarity already in place in those institutions. A lot of the backlog we have in onboarding involves people at those physicians at those institutions that were familiar with the test so part of the initial goal is to go out and to make sure that we have all those existing physicians that want to order the test onboarded and able to do that. And that's part of the backlog we have for the onboarding. We also see an expansion in the accounts that are currently ordering the test as they move from onboarding, the diagnosis of a patient to moving to monitoring the patient. You have the same institution implementing the same approach. It's not the same institution implementing the TCE test, the enumeration test, and then they're using it to monitor patients so there's more testing coming from those institutions we have onboarded. I think the next opportunity for us from a growth point of view is to go out beyond the 120 cancer centers that are familiar with our test and want to order it to the community oncology-based institutions where the medical oncologists are, not so much the neuro-oncologists that have a high level of familiarity. So we see the next phase of growth and the build-out of the commercial organization is now moving beyond those 120 institutions to community-based oncologists that are treating and managing these patients and building awareness there. We think there's, based on our own primary research, there's quite a lot of upside there in building that awareness. And if you think about the way we're scaling the commercial organization, it tracks with that opportunity. So the initial salespeople we're recruiting and hiring next quarter will go out and establish the relationships with those cancer centers. And then as we move through 2027 and we see the results of those activities grow the testing requests, we will expand the commercial team to start focusing on those community oncology centers where a lot of the patients are managed and diagnosed. So we'll see the commercial organization expand through 2027 in response to the the level of access we get to the existing institutions, those 120, and then the medical oncologist beyond that, which, you know, there's about 10,000 to 14,000 of those, so that's that's that's a, a really large opportunity that we are going to go after.

Yes, 10,000 to 14,000 is quite a lot. Is there sort of an initial circle of higher prospects that you would go after in '27? Is that hundreds? Is that 1,000? I just... You have to have some kind of strategy for the 14,000 and prioritizing there.