Epigenomics AG (ECX) Earnings Call Transcript & Summary

And what would be a potential time frame for this kind of endeavor?

We are looking at those right now, and we would want to do those as quickly as possible.

The next question comes from Marietta Miemietz.

I have one question on the data that you're going to be releasing. Have you sort of made up your mind what venue you're going to choose? Are you just going to put it all into a press release once you're ready? Or are you actually going to wait for a high-profile medical meeting? And I mean, can you sort of like give us a rough feel of what the time frame could be and also slightly more detail on what you're looking to publish? I mean, are we looking at preliminary preclinical data or full preclinical data or even some clinical data? And maybe I'll pause there. And then I do also have some marketing-related questions.

Sure. So in regards to the data, it will more than likely be a combination of the two. So we will be presenting a full data set via a scientific conference. That is the plan, and that's typically more detailed, right? Probably just prior to that, we will release -- we would envision releasing some of the high-level data. But overall, the data set is going to be extremely robust. We are looking at what we would consider a full preclinical data set. So a significant number of cancers across all stages to show how strong of an assay we think we have and the performance and to really demonstrate that we believe we're going to definitely exceed the reimbursement criteria for CMS. And that strong data set, we believe, is necessary because we want investors and we want partners and the opinion leaders to really embrace what we think this assay can do in the market. As you'll see, some of our competitors have really released data sets via abstracts and like that. And they've released data on 30-or-so cancers and the performance of their test, we will exceed those numbers. So we'll have a very strong data set. We really are looking forward to publishing this data. We've said we will do it this year, and we are still on track to do that.

Okay. That's great. I mean just in terms of marketing, if we look some years out when next generation will hopefully be approved. And I appreciate that it is early days to discuss this, but just for our modeling, I mean, what sort of marketing budget do you think you would need to have sufficient share of voice against the competition to get to sort of low to mid-single-digit penetration, high single-digit penetration, double-digit penetration? And somewhat related to that, in terms of the actual marketing on the ground, I mean, I appreciate that the system is very much incentivized to use your test, but what would actually happen if a patient walks into their physician's office and said, "I saw this great DTC advertising, I'm paying for test XYZ, and I really want to be checked for colorectal cancer with that test." Do you think that a physician would actually then fight your battle in a way and say, "You know what, actually, the epigenomics test is a lot more convenient and cost-effective and ultimately more reliable?" And if so, I mean, how do you sort of like get the physicians to then counter those patient's argument as opposed to just fulfilling the patient order. So just from my own understanding.

Well, thank you. Great question. So when we look at how Epigenomics will market, what we will spend on marketing is in two ways. Number one is direct-to-consumer. Clearly, in today's day and age, that's becoming a standard for both drugs and diagnostics. You're seeing that more and more. So we do want the -- when we actually officially brand the Next-Gen test with its name, we want patients to know what that name is. We want physicians to know what that name is. And so there will be a direct-to-consumer portion of that. If you look at our competitors, the biggest one out there and they do a pretty significant amount to direct-to-consumer, we believe they spend approximately $50 million a year in kind of direct-to-consumer marketing. Now I don't know that we'll need quite that much, but that's kind of the range that you see our competitors at for direct-to-consumer. The other portion of marketing is really physician education, and that has to happen with every new product. You need -- the physician needs to know about your test and the performance of the test. That is obviously more focused and done via conferences and journals and other things that physicians are interact with. And that's a much lower end, but can't be forgotten. So to your point, we want -- when that patient comes in, we want the doctor to know why we believe Next-Gen is the right solution, okay? So we will be doing physician education, but it is important -- our strategy of selling this product to all the labs so they can participate is we're not the only ones educating the physician, the labs are as well. So LabCorp and Quest, as example, each have thousands of sales reps, and they meet with all of these physicians regularly because they provide a vast majority of the testing that these physicians do. And so we also will be educating those sales reps as we're selling product to their labs, so that they can also educate the physician and make -- so the physician understands it's easy access, these tests are going to the same place that I'm running all their other tests and the benefits of it. So we believe we'll have a very robust solution for the physicians on making them aware of the benefits of the test and making it easy for them to order it because in essence, it will be the same process for every other test. They work with that patient that day like a [ strobe ] test or a lipid test. You basically tick one more box and now that patient can be screened, and they'll get the result, the same report that they got. So we think it's going to be a very easy solution and one that will really play into the existing methods that are available today.

Great. And can I just quickly follow up? I mean in terms of the sensitivity of your penetration or market share to the marketing spend, I mean, I know it's very, very early days, but do you have any sort of rough feel on where you can say, well, we could basically get to mid-single digits just through the labs educating the physicians. And then basically, we have a $20 million a year DTC budget, that could get us to mid- to high single digit and if we really wanted double-digit, then we would need to almost match what the competition is doing? Or is there any sort of like can you give any detail for that how that...

So I think one way to think about it is how does the market look right now? So there's 100 million patients that are 45 and older that are supposed to be screened, right? So -- when we look at the big buckets available to us, there are two really that we believe really lend itself to the Next-Gen test. So the first is out of that 100 million, there's about 45 million to 49 million that we would consider unscreened. So those patients are the 30-plus million patients that were 50 and over that historically have gone unscreened. And then the guidelines have recently reduced in the last couple of years from 50 to 45, that puts another 20 million patients into the screening paradigm. And by default, most of those patients are unscreened because they've never had access to screening before because the guidelines really have just lowered in the last year or two. So out of that kind of, call it, 50 million patients, we think obviously easy-to-use blood test incorporated into the standard of care is a very unique in what I would say, fertile opportunity for Next-Gen. In addition, there's about 12 million FIT tests sold in the United States per year and FIT's a very good test. It works very well, but it's stool-based and it's annual and compliance is the biggest issue. The number of patients who actually -- they have the test at home and then they actually send it in. Typically, the lab only gets about 1/3 of the samples that are given to patients actually come back to lab for processing. So just in the 12 million, we think Next-Gen has a huge opportunity to replace that volume because now we can say, "Hey, here's a test that we -- better than FIT and is out of blood," so your patients are going to be much more compliant. So we think that is very low-hanging fruit. So we think there is significant opportunity. And so when you look at our competitors, the market is so big, you don't need a huge percentage to be successful. I mean if you look at Cologuard, they're selling about 3 million tests a year. So it's about 3% market share. and they're very successful with that. So we believe that mid-single digits to potentially, at some point, even to low upper digits and market share is viable. But that said, I believe multiple players are going to be in the market, and we believe products will be successful. But when you have 100 million patients, that's okay. That's the reality of the market.

Okay. So at the moment, there seemed to be no further questions. [Operator Instructions] Okay. There seemed to be no further questions, so let me hand back over to your hosts for some closing remarks.

Thank you, everyone, for joining our 9-month 2022 earnings call. I appreciate everyone's time, and I hope everyone has a fantastic remainder of the afternoon, and we look forward to providing updates shortly. Thank you so much. Bye.