Epigenomics AG (ECX) Earnings Call Transcript & Summary
May 12, 2021
Earnings Call Speaker Segments
Operator
operatorLadies and gentlemen, welcome to the Epigenomics AG's conference call regarding the results of the first quarter 2021. [Operator Instructions] Let me now turn the floor over to your host, Frederic Hilke. Please go ahead.
Frederic Hilke
executiveThank you very much, Julia. Hello, and welcome to Epigenomics Investor 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. On today's call, we will discuss the Q1 2021 results. This call is being webcast for anyone who would like to follow the presentation. The link can be found on the Epigenomics website. 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
executiveThanks, Frederic. Good morning, everyone, and thank you for joining our Q1 2021 earnings call. The company is still actively working to achieve Medicare reimbursement for Epi proColon, the first ever FDA approved liquid biopsy product for CRC screening via legislation. And we continue to await the new leadership appointments within CMS to begin the appeals process. In March, the Donald Payne Sr. Colorectal Cancer Detection Act was reintroduced into the new session of Congress. To date, the legislation has 56 cosponsors, which is nearly double the amount from the previous bill. The main reason for the increase is due to strong support from the Congressional Black Caucus and other members of Congress who wish to address racial disparity in health care. Colorectal cancer affects people of color at a significantly higher rate than others. Epi proColon, as the only FDA-approved blood test, has the opportunity to address this disparity by providing another effective alternative to increase screening rates and thus reduce the mortality of the disease. Since racial disparity in health care is a major initiative of the Biden administration, we hope to capitalize on the legislation to increase visibility, to get the bill passed and Epi proColon reimbursed. In regards to the appeal process, the new administrator of CMS still has not yet been appointed. Until this critical leadership position is appointed and the supporting management team has been put into place, it does not make sense to initiate the appeals process. Once these items occur, then we will pursue the appeal. As disclosed previously, the company is also in the process of evaluating strategic alternatives, including the sale of the company and/or assets. Due to disclosure requirements, all we can say at this time is the process is ongoing, and we will update everyone at the appropriate time. In March, BMC Gastroenterology published study results that demonstrated Epi's liver cancer panel tests performed significantly better than the standard of care. We believe these data demonstrate Epi's liquid biopsy capabilities beyond colon cancer. From a financing perspective, the first conversion period of the company's convertible bond resulted in an increased share count of approximately 4 million shares. Subsequent to the end of Q1, the company also announced a rights offering of approximately 2 million shares. The purpose of the capital raise at this time is to increase the strength of our balance sheet as we evaluate strategic alternatives. Deutsche Balaton, our largest shareholder, has indicated they intend to participate. The financial results for Q1 2021 were within the company's latest estimates. Revenue for Q1 was EUR 106,000 compared to EUR 239,000 in Q1 2020. The adjusted EBITDA improved approximately EUR 1.6 million to negative EUR 985,000 because of continued cost cutting measures and a positive foreign exchange impact of approximately EUR 600,000. Liquidity at the end of Q1 was EUR 7.4 million. Our 2022 financial outlook remains unchanged at EUR 400,000 to EUR 1 million of revenue and an adjusted EBITDA and cash burn of negative EUR 7 million to negative EUR 9 million. We believe Epigenomics is a valuable liquid biopsy technology platform. We are focused on maximizing the value of this platform for our shareholders at this time. We look forward to future updates. Thank you for joining our Q1 2021 earnings call. I will now open the call for questions.
Operator
operator[Operator Instructions] We have a first question from Dennis Berzhanin from Pareto.
Dennis Berzhanin
analystYes. This is Dennis Berzhanin from Pareto. My first one is related to ongoing sale process. I know you said you can't give too much information there. But from [Technical Difficulty] it appears you're already in discussions with several potential parties. So I'm just wondering if you could speak a little bit about the timing of the process, if we are still in the very early stages? Or has this really progressed since the last conference call? And the second question is in regards to the rights issue that was done after the reporting period. Just looking at the cash consumption, the cash consumption for the first quarter has really decreased a lot, like you mentioned. And it appears, if the current cash burn rate continues, you should be very well through this year, definitely and perhaps early next year. So I'm just wondering what is the rationale to do a rights issue and is there a particular reason for that?
Gregory Hamilton
executiveThanks, Dennis. Thank you very much for the questions. In regards to the sale process, regretfully, we can't give any more updates because, clearly, we're in the middle of the process and we can't disclose anything. So we'll disclose what we can at the appropriate time and are excited to do that in the future. But right now, we can't say anything about the process at all. In regards to cash, it is important that we strengthen our balance sheet during this process. Our burn rate is down, but you'll notice that we haven't changed our full year guidance on burn of EUR 7 million to EUR 9 million, which is still very low and is still a significant improvement. But we do know that, for example, the post-approval study that we are currently running will continue. And as COVID becomes less of an impact here in the United States, that trial and the participation in that trial increases, and those costs go up. So in Q1, we still saw a lower amount than normal relative to people getting screened and thus impacting our trial for the post-approval study. So we do expect those numbers to go up in the second half. So it is important for us to have a very strong balance sheet during this process because we don't want it used against us. And ultimately, that's not in the interest of shareholders; hence, why we're doing the capital raise.
Operator
operator[Operator Instructions] There seem to be no further questions.
Gregory Hamilton
executiveWell, thank you, everyone. We really appreciate you taking time to participate in our Q1 2021 earnings call. We look forward to future updates. Thank you.
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