Epigenomics AG (ECX) Earnings Call Transcript & Summary

Ladies and gentlemen, welcome to today's conference call annual results 2021. [Operator Instructions] Let me now turn the floor over to your host, Frederic Hilke.

Thank you very much, Nadia. 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. We currently have some issues with the presentation and hope to fix it, but I hope that you all can hear us. So we just move on with our call. On today's call, we will be discussing the results of the financial year 2021. This call is being webcast for anyone who would like to follow the presentation, hopefully later. The link can be found on the Epigenomics' website. Before I hand over the presentation to Greg, let me point out some of the user 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 2021 earnings call. The company is actively engaged in launch activities for the Epi proColon next-generation clinical trial. We are confident the next-generation assay meets the reimbursement criteria for Medicare and plan to publish preliminary test performance data this year. We estimate starting patient enrollment this summer and an FDA submission in the first half of 2025. We believe there is a significant market for a PCR blood-based test and that Epi proColon Next-Gen will address this unmet market need. While Next-Gen is the focus of the company, we continue to pursue Medicare reimbursement for Epi proColon via legislation. The Biden administration recently reignited the Cancer Moonshot initiative. We believe this initiative is strongly aligned with our pending legislation as 2 of the key priorities of the Moonshot program are to promote equitable and increased access to screening and investment in early detection technologies. We continue to have strong bipartisan support amongst our 66 cosponsors. Our biggest challenge to date is to identify a health care legislative vehicle. The war in the Ukraine is a significant focus of Congress at the current time. Epigenomics will continue to monitor the situation and push for inclusion of our bill in whatever legislative vehicle is viable. In 2021, Epigenomics completed capital measures in excess of EUR 24 million in gross proceeds. This capital will enable the company to initiate the clinical trial and supporting activities in 2022. However, the company will need additional capital to complete the trial and submit the data to FDA for approval. The company is evaluating numerous financing alternatives, including exchanges with more potential access to capital. The anticipated spend for the clinical trial in 2022 will be aligned with the company's ability to raise funds for the remainder of the trial in 2023 and 2024. One of the major goals of 2021 was to minimize cash burn while developing Epi proColon Next-Gen. The company was able to achieve this goal with one of the lowest cash burn rates in recent history. Revenue for the year was EUR 6.2 million compared to EUR 800,000 in 2022. The increase is 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 10.5 million in 2022 to negative EUR 1.8 million in 2021 because of the biobank sample sale and cost-cutting measures. Liquidity at December 31 was EUR 23 million. Our 2022 financial outlook for revenue is between EUR 300,000 and EUR 800,000, which is consistent with previous years, excluding the biobank sale. Adjusted EBITDA is estimated at negative EUR 15 million to negative EUR 17 million. We expect cash burn similar to adjusted EBITDA. As mentioned previously, the anticipated spend for the clinical trial in 2022 will be aligned with the company's ability to raise funds for the remainder of the trial in 2023 and 2024. If the trial is delayed or enrollment is slower than anticipated, then the forecast for the adjusted EBITDA is likely to improve. Epigenomics has a clear road map to success for Epi proColon Next-Gen. The trial design and FDA approval requirements are well established. Additionally, the FDA -- with FDA approval and 74% sensitivity and 90% specificity, which we believe Epi proColon Next-Gen will meet, Medicare reimbursement is guaranteed. This clarity removes many of the risks the company has faced previously. 2022 will incorporate the initial critical steps getting Next-Gen FDA-approved and simultaneously reimbursed from Medicare to address the 100 million patient U.S. colon cancer screening market. We look forward to providing additional updates throughout the year. Thank you for joining our 2021 earnings call. I will now open the call for questions.

[Operator Instructions] And the first question comes from Christian Ehmann.

I have only a question regarding the trial. So could you remind us about the overall cost of the trial? And when would be the financial inflection point to progress? At which point do you say, okay, we will -- we have enough funds to actually go forward with the trial? And how do you plan on getting all the 16,000 patients into the trial over the next 2 years?

Thanks, Christian. So the trial is tens of millions of dollars. It is an expensive trial. But obviously, others have done it, so it's well established. The way we can regulate cost and speed is really based on the number of trial sites and our enrollment rate of patients. So what you've seen from others that are in trials right now is they have anywhere from 150 to 200 sites in which they enroll patients. So we can start the trial this summer, but we control the speed at which we bring on trial sites and thus the speed in which we enroll patients. So that's how we can, in essence, control cost to ensure that, in essence, we don't spend the money that we don't have until we're able to raise the appropriate funds to complete the trial. But that's really the mechanism we have to do that.

And the next question comes from [ Nicole Simon ].

This is [ Nicole Simon ] from Pareto. I'm here instead of Dennis Berzhanin, who is taking part at another call. So I will proceed with his questions about the track. So maybe you could talk about the progress with the reimbursement, Epi proColon, I'm not sure if you have answered this already, specifically the legislative process would be interesting, and if there have been any major developments lately.

Thanks, [ Nicole ]. So we continue to make some progress on the legislation. We are increasing the number of cosponsors. However, at this time, health care is not one of the major issues being discussed in Washington D.C. As you can imagine, the war in Ukraine and the impacts of that work globally have been the main focus of Congress right now. And so what we're waiting on is for Congress to address health care with legislation. It's at that point that we could look to add our bill to some form of health care legislation. So that is what we mean by we're awaiting a vehicle. Our bill is too small to, in essence, go to vote by itself. It would be included in a larger health care legislative package. And so, ultimately, that is what we need. So that's -- we're monitoring the situation. If such health care legislation moves forward, we want to put our bill in position to be included right away, and that's, in essence, where we're focusing our energy on. Obviously, regretfully, with the horrific war that is going on in the Ukraine, rightly so, a tremendous amount of attention and resources are being focused on that. So it is just the reality of where we're at. But we do believe there is a possibility for reimbursement via legislation. We continue to actively work it. But as we've discussed previously, anything with legislation, we can't guarantee, and it's also more challenging for us to give any input on timing.