Epigenomics AG (ECX) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen, and welcome to the Epigenomics AG conference call regarding the 9 months results 2021. [Operator Instructions] Let me now hand the floor over to Frederic Hilke.

Thank you very much, Heike. 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 be discussing the results of the first 9 months 2021. This call is being webcast for anyone who would like to follow the presentation. The link can be found on the Epigenomics website in the Investors section. 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.

Thanks, Frederic. Good morning, everyone, and thank you for joining our 9-month 2021 earnings call. The company continues to focus on Medicare reimbursement for Epi proColon via legislation. The U.S. Congress has recently passed the much-anticipated infrastructure legislation. Hopefully, in the near future, the administration will focus on health care and racial disparity, two key points of emphasis in the administration's agenda. It is unclear at this time if the reconciliation legislation will pass. If it does, what is clear is that the scope of legislation and total spend will be significantly reduced. Epigenomics will continue to monitor the situation and push for inclusion of our bill in whatever legislative vehicle is viable. The company has initiated the preparation for the Epi proColon Next-Gen clinical trial. This work includes preparation for the trial and optimization of the assay. Currently, the Next-Gen assay meets the reimbursement criteria for Medicare. However, we will continue to optimize the assay as the samples will be frozen and run towards the end of the trial. We estimate starting patient enrollment in the summer of 2022 and FDA submission in the first half of 2025.. In the quarter, Epigenomics completed a successful capital measure via convertible bonds that generated gross proceeds of EUR 16.5 million. In aggregate, the company has raised over EUR 24 million in gross proceeds this year. This provides us the necessary liquidity to initiate the trial and fund the company well into 2023. The financial results for the first 9 months of 2021 were within the company's latest estimates. Revenue for the first 9 months was EUR 6 million compared to EUR 541,000 in the first half of 2020 due to the sale of samples from the company's biobank in the amount of EUR 5.7 million. The adjusted EBITDA improved significantly from negative EUR 8.1 million in 2020 to negative EUR 209,000 in the current period because of the biobank sale and cost-cutting measures. Liquidity at the end of September was EUR 23.6 million. Our updated 2022 financial outlook from August remains unchanged at EUR 6 million of revenue; adjusted EBITDA of negative EUR 3 million to negative EUR 4 million; and cash burn of negative EUR 3.5 million to negative EUR 4.5 million. As we have completed one of our key goals for 2022, successfully completing our capital raise, we are now focused on accomplishing our remaining goals, achieving Medicare reimbursement and preparing for the Next-Gen clinical trial. We look forward to our year-end update. Thank you for joining our 9-month 2021 earnings call. I will now open the call for questions.

[Operator Instructions] And the first question comes from Dennis Berzhanin, Pareto Securities.

This is Dennis Berzhanin from Pareto Securities. I have a few. The first one is on the sale, the recent asset sale for the blood bank. I was just wondering if you could provide a little bit more information. It appears that the biological samples were sold, these were nonessentials. But what exactly does this mean? And how would this impact -- aside from the financial impact, how would this affect in the future of what the company can do now that your three samples were sold? And are you looking to sell any more assets in the future? Or are you still looking to potentially sell the company? Or is this really not the priority anymore? The second question is I was wondering if you could talk about the expectations for the next year. There definitely appears to be some work with the Next-Gen tests. And I was wondering if you could, not provide the guidance, but just what we should expect from cash burn for next year, for example? And then finally, just a modeling question in terms of convertible bonds. How much is currently outstanding as of today? I know there was some parts -- some of those were exercised recently from [ settled lease ]. So I just wanted to get a current outstanding amount of convertible bonds.

Thanks, Dennis. Appreciate the questions. So your first question in regards to the asset sale, this was an opportunity to, in essence, raise capital for the company by selling basically nonessential assets. So over the 20-year course of the company's history, we have banked on quite a few samples. So what we did is identify, "Okay, what do we need internally to optimize and continue to develop the Next-Gen assay?" We basically sequestered those and then we had samples remaining after that. And we were able to sell those samples for, as we said, EUR 5.7 million. So we took the opportunity to do that. At this time, we're not really looking at any other asset sales or anything like that for the organization. Our focus right now is really on the Next-Gen product and getting ready for the trials for that product. And then as we've always discussed, continuing to push for reimbursement for the existing products via legislation. So those are the two main focus areas of the company. In regards to next year's cash burn, we'll provide an update at the appropriate time for 2022. We're not giving guidance for '22 yet. But from a strategy standpoint, our goal is to start enrollment in the Next-Gen trial in the summer of '22. The reason is that there's work to do between now and then. You basically -- we've got to meet with the FDA, which cannot happen until after the beginning of the year. Because the FDA is not taking any pre-submission meetings at this time unless they are related to COVID. We have to finalize the trial design. We have to do site selection, IRB, all the stuff you do for clinical trials. So all that work is ongoing now. And then we'll be ready to enroll patients in the summer of '22 and initiate that trial. So that's really our focus at this point in time from an operational perspective. And we will give an update on guidance at the appropriate time, as we normally do, at our year-end call, which will happen in the early part of '22. And then in regards to the converts outstanding, I don't know the exact number off the top of my head, Dennis. But I'm thinking there is about EUR 18 million to EUR 19 million converts outstanding because we just issued the EUR 16.5 million. And we had, from previous capital measures, some converts still outstanding, so -- but I would suggest, just look at the 9-month financials, that will have the exact number in there.