Sera Prognostics, Inc. (SERA) Earnings Call Transcript & Summary

Good afternoon, and welcome to the Sera Prognostics Conference Call to Review First Quarter Fiscal Year 2025 Results. [Operator Instructions] As a reminder, this call is being recorded for replay purposes. I would now like to turn the call over to Peter DeNardo of CapComm Partners for a few introductory comments.

Thank you, Andrew. Good afternoon, everyone. Welcome to Sera Prognostics First Quarter Fiscal Year 2025 Earnings Conference Call. At the close of the market today, Sera Prognostics released its financial results for the quarter ended March 31, 2025. Presenting for the company today will be Zhenya Lindgardt, President and CEO; and Austin Aerts, our CFO. During the call, we will review the financial results we released today, after which we will host a question-and-answer session. If you've not had a chance to review our quarterly earnings release, it can be found on our website at sera.com. This call can be heard live via webcast at sera.com, and a recording will be archived in the Investors section of our website. Please note that some of the information presented today may contain projections or other forward-looking statements about events and circumstances that have not yet occurred, including plans and projections for our business, future financial results and market trends and opportunities. These statements are based on management's current expectations, and the actual events or results may differ materially and adversely from these expectations for a variety of reasons. We refer you to the documents the company files from time to time with the Securities and Exchange Commission, specifically the company's annual report on Form 10-K, its quarterly reports on Form 10-Q and its current reports on Form 8-K. These documents identify important risk factors that could cause the actual results to differ materially from those contained in our projections and other forward-looking statements. As a reminder, a webcast replay of this call will be available on the Investors section of our website. I will now turn the call over to Zhenya, Sera Prognostics President and CEO. Zhenya?

Thank you, Peter, and good afternoon, everyone. It's been just a few short weeks since we last held our quarterly earnings call near the end of March, during which we shared a lot of updates regarding PRIME and commercial priorities. So I'll aim to keep my comments brief today. We've continued to make progress in driving the transition from our clinical evidence development phase with the full pivotal PRIME study results being communicated in January towards our next phase to pursue commercial growth opportunities. We are progressing nicely towards publication of the PRIME study results in a peer-reviewed journal. Today, I'll lay out our commercial road map over the next few quarters, which follows a geographically focused ecosystem playbook with 3 primary components, which we will look to perfect first in about half a dozen states and [Technical Difficulty] from here. First component is reimbursement. With a balanced approach towards commercial insurers, employers and Medicaid, which is a key payer for most physicians with about 43% of all births in the United States paid for by Medicaid program. [Technical Difficulty] building physician [Technical Difficulty] for formalized care recommendations. On reimbursement in Medicaid, in order to foster that reimbursement, we are simultaneously focused on the following. First, we're ramping up Medicaid plan pilots in the states most impacted with premature birth. We believe our [indiscernible] anchored by the science and evident cost savings and responsiveness and awareness by physicians gives us a solid shot on goal in states with higher premature births than the national average. For example, regarding cost savings and health care economics, the PRIME study results reported in January demonstrated that we can save one very expensive NICU day, on average, about $4,000 per day nationwide, but depending on the level of the NICU up to $20,000 per day by screening on average just 3 to 4 patients with the PreTRM test. Compared to other screening tools for risk of preterm birth, namely transvaginal ultrasound, physicians need to screen more than 3x fewer patients to save 1 NICU admission with the PreTRM test. The number needed to screen for transvaginal ultrasound to save a NICU admission is 150 expectant mothers and for the PreTRM test, only 31 expectant mothers. In addition to that, we've been following the patients for the first 12 months post birth and the data we are gathering on the savings during that first year is further strengthening our health economics case. That is especially critical because Medicaid states are now covering the first 12 months of health care for newborns, and this should further support the economic value of our test. We mentioned on our last call that we're looking at several states, where we have support from key opinion leaders and PRIME study type institutions. Advocacy from early adopter physicians can influence the Medicaid plans willingness to pilot the coverage of our test by sharing their experience with PreTRM testing. With that advocate support, our initial focus would be on Medicaid providers that are innovative and forward-thinking and where we can leverage our opinion leaders and our existing field sales representatives. We already have sales presence for key states like California and Nevada and recently added sales presence for other target states such as Texas. And we are targeting to direct our spend towards the best commercial opportunities by expanding our sales force in the target states. We are currently pursuing promising pilots for managed Medicaid plans across these geographies. Although there are no guarantees, we believe we should be able to close some of these within months. The second focal point for reimbursement is, of course, commercial payers with substantial member presence in our focus states that have a history of covering innovations in the maternal care space before medical society guidelines. And third, we will look to engage with dominant anchor employers and/or self-funded organizations. We want to further increase the percentage of physician office reimbursement mix that is covered by each part of reimbursement, whether it be by Medicaid, insurance or employer coverage. Our goal is to create as many possible reimbursement pathways as possible for each physician office that we are opening up. We also, of course, have patient assistance programs in place already. In building awareness, we're continuing to be laser-focused on spending with a measured approach that can yield high ROI. With geo-fenced digital education of providers, we have roughly 3,000 warm leads generated in recent campaigns, where we find doctors to be engaged and very responsive. We're working to develop a high-quality pipeline across our targeted areas. These leads will provide a strong starting point for the sales force we're expanding across the target states. Over time, we should be able to measure the cost effectiveness and time to close for each account, so we can improve our sales efficiently -- efficiency and success. So what does our commercial playbook look like when we open a new customer? Starting up new customer offices begins with integration with the office's electronic medical record system and practices patient communication tools. We then collaborate with the practice and external resources to educate physicians on the use of the PreTRM test and train nursing staff in the practice on deployment of our intervention bundle, low-dose aspirin, vaginal progesterone and weekly care management protocol. We also invest in educating patients ahead of the second trimester when the test is administered to help doctors to discuss the PreTRM test efficiently in the relevant office visit. A good example of patient education through external resources is our collaboration with What to Expect and Baby Center, which collectively reaches 80% of moms across their pregnancy journey to deliver targeted education and awareness at key pregnancy milestones. This partnership allows us to reach expectant mothers with relevant information about the PreTRM test and premature birth precisely when they need it the most. Building national awareness and share of voice quickly through broad media campaigns can be very expensive and inefficient for our stage of development. So we will take a measured and synergistic approach that starts off localized in specific states to maximize return on investment. This involves deploying a traditional toolkit that can include speaker programs, sharing studies from quality investigator-led initiatives within major institutions to engage physicians and deploying targeted research to contact and go in those areas most in need of a solution to spontaneous premature birth. PreTRM is the only molecular diagnostic test to predict risk of preterm birth on the market. Without other companies to contribute to building a groundswell of awareness, we must shoulder the burden of finding physicians, who have used our test, have seen its benefit on their patients and are passionate about improving on the status quo care. The strongest force in changing that status quo is, of course, medical society guidelines, which heavily influence how each obstetrician practices. At the same time, medical societies want to hear from physicians, who have used the test before they consider recommending it in their guidelines. We believe publication of our PRIME study results may generate commercial momentum by urging forward-thinking physicians, who want solutions for the country's intractable preterm birth problem to try the PreTRM test. We expect that pull-through can be further supported by continuing to provide real-world evidence and through early adopter physicians illustrating the benefit of PreTRM test with improved care and outcomes for moms and babies. These physicians see the critical need for screening provided by our test and the need for paradigm change in maternal care, so they can be one of the many voices to affect change. According to a recent study published by JAMA Network Open, a medical journal published by the American Medical Association, an increase in pregnancy-related deaths was observed in the U.S. between 2018 and 2022. The increase based on an age standardized annual and aggregated rate was staggering 27.7% during that period from 25.3 deaths per 100,000 live births to 32.6. Furthermore, maternal mortality review committees have reported that 80% of these deaths caused by pregnancy are preventable. These mortality rates occur with significant disparities such as a 2 to threefold increase during this period in maternal mortality among non-Hispanic black patients versus white patients. We believe we should all share the urgency of changing this. In fact, just this month, the American College of Obstetricians and Gynecologists, or ACOG, released an updated clinical consensus on tailoring prenatal care delivery for pregnant individuals. The report includes important updates to prenatal care related to incorporation of risk assessments based on medical, social and structural drivers of health. Recommendations include changes to the frequency of monitoring via visits, the use of telemedicine and support of services. In collaboration with providers, patients can elect to tailor prenatal schedules. For example, fewer proposed visits or evaluations for patients that lack risk factors, for example, prior pregnancy or medical conditions and more intense schedules and care for patients at greater risk. We recognize ACOG's emphasis on the importance of risk assessments in prenatal care. Our PRIME study supports the use of the PreTRM test as a component of comprehensive risk assessment in prenatal care, as the PreTRM test results can help direct interventions and limited resources towards those most at risk for preterm birth. We believe that PRIME publication in context of ACOG's updated statement may create an opportunity for clinical opinion leaders to evaluate and issue guidelines along -- around new technologies that can help with the risk assessments called for by ACOG. Any such developments could potentially influence the adoption of our PreTRM test and affect our future market opportunities. With that in mind, we will have a strong presence at the ACOG Annual Clinical and Scientific Meeting in a couple of weeks, where we will meet with attendees to cultivate interest in continued investigator-initiated evidence generation for PreTRM test and treat strategy. We have a lot of work to do in ramping up the commercial opportunities I've outlined today, and we plan to update you on our execution of these primary components of our growth strategy over the coming quarters. In summary, we believe 2025 will be a year, where we will kick off a flywheel of commercialization and build a movement across a broad range of stakeholders interested in better care outcomes, along with reduced health care costs with biomarker risk stratification strategies in pregnancy care. Now I'll turn it over to Austin. Austin?

Thanks, Zhenya, and good afternoon, everyone. Let me review our financial results for the first quarter. Net revenue for the first quarter of 2025 was $38,000 compared to nil for the first quarter of 2024. Total operating expenses for the first quarter of $9.3 million were up slightly from $9.1 million for the same period a year ago. Research and development expenses of $3.3 million were down approximately 9% relative to the prior year period, primarily due to lower clinical study costs, as third-party expenses related to PRIME study analysis have continued to decrease. Selling, general and administrative expenses for the first quarter of $5.9 million were up from $5.4 million for the first quarter of 2024, as we continue careful management of commercial activities focused on driving future growth, while adding some strategic head count and investing in targeted awareness and other initiatives, as we prepare for the publication of PRIME study data. Net loss for the quarter was $8.2 million, relatively flat with $8.1 million for the same period a year ago. As of March 31st, 2025, the company had cash, cash equivalents and available-for-sale securities of approximately $114.2 million. As Zhenya noted, we are being selective, where we deploy capital this year, as we evaluate commercial opportunities to elevate test adoption and increase revenue. We will continue to be prudent in our approach to building awareness among patients and physicians region by region, as part of our overall strategy. Operator, we can now please open the call for questions.

[Operator Instructions] Your first question is from Andrew Brackmann from William Blair.

This is Maggie on for Andrew today. Maybe first, if you could talk about the strategic head count investments you started to make. Can you talk about what you expect the progression of that to look like throughout the year? And how large of an investment you expect that to be for 2025?

Maggie, good to hear you. Thank you for the question. For now, we're planning to expand our commercial presence by 5 to 10 FTEs -- and of course, we'll monitor how quickly we make progress in our targeted states to first resource the states that I mentioned appropriately. And then if it goes very well, potentially extend to the next wave of states. So 5 to 10 for now, and we will report back probably in the next quarterly conference on how is it going and if we might want to increase that.

Okay. Great. And then obviously, I know it's hard to predict the timing, but any updates you can give us just in terms of how the PRIME study publication is progressing?

Thank you. I wish I could tell you precisely when it is going to be published. I really want to. Unfortunately, I don't have the precise estimate. However, I do want to report that we passed the next milestone in engagement with the target journal and are looking forward to the next milestone and hopefully, good news after that.

Your next question is from Dan Brennan from TD Cowen.

Great. Maybe the first one, you went over kind of quickly. Just what was the ACOG bulletin update? Could you just elaborate a little bit on that and just speak to what the potential impact is about your progress and your outlook going forward for getting in the guidelines?

Great question. Thank you. ACOG Bulletin last month was a huge development in our space. The guidelines for prenatal care protocol were put in place something like about 100 years ago, first in 1930s, and the overall protocol has not been significantly changed since then. Last month's ACOG Bulletin specifically shifted away from one-size-fits-all protocol to tailoring care based on risk stratification of expectant mothers in their pregnancy. It specifically talked about titrating interventions, including the frequency of visits, the particular medical interventions, not just based on medical conditions, but presence of risk in the pregnancy. So what got us very -- and the community very excited about it is our PreTRM screen and treat strategy suggests that biology of pregnancy is different for every mom and stratifying the risk based on biomarkers and clinical factors could direct interventions to much better clinical and health economic outcomes of the pregnancy. Specifically, in our case, we've seen across dozens of clinical trials that if we identify a higher-risk pregnancy mom in weeks 18 through 20 with PreTRM test and deploy our intervention bundle tested with multiple clinical trials that were published recently, namely AVERT in July of last year in diagnostics Journal and now PRIME study, abstract of which was published in January 2025 in the pregnancy journal, shows that deploying that intervention to PreTRM test identified higher-risk moms can have significant clinical outcomes improvement to those pregnancies. So in our product research, we've seen that tailoring care is enormously beneficial to the health of moms and babies. And seeing that in the guidelines from our top professional society, ACOG, has been wonderful to see. And in terms of the opportunity for PreTRM test, it's a first step of guideline-setting bodies in looking at the research available to date to start helping physicians risk stratify pregnancies. And of course, we're excited at the right time whenever the guideline-setting bodies prioritize reviewing care protocols for spontaneous preterm birth to take a look at the research that we are about to publish on and include their assessment and recommendation on how clinicians can use PreTRM test in risk certification for specifically the tailored care that they are recommending physicians to deploy.

Great. Maybe just as a follow-up, how often does ACOG do these updates? And I'm just wondering, just remind us -- I know we're super early post the data release earlier this year, but just kind of remind us now that you're a few more months into the process about contemplating all the things that need to get done. Like, a, how often do they update? And b, what's -- how do you think about kind of the predicate range of outcomes that could occur here if, in fact, you get into guidelines? What's the best-case medium term and like worst case in terms of timing?

Yes. No, great question. It depends whether it's general update to guidelines or specific bulletin that governs our topic, which is bulletin 234 from ACOG that governs treatment for spontaneous preterm birth. Each of these bulletins gets updated when a lot of new data becomes available. And on average, between 24 and 48 months in between the revisions. Our relevant bulletin 234 was last updated in August 2021. So we're coming up on time, where it would be natural for ACOG to refresh that. It also happens that 2025 is a very exciting year with a lot of new data coming out on spontaneous preterm birth, of course, one of which is our very exciting data in PreTRM trial. As you are asking about how could the guideline recommendation journey evolve, we see 3 scenarios. Of course, the guideline revision timing is entirely up to ACOG and Society for Maternal Fetal Medicine, the 2 sister societies that collaborate closely on developing these guidelines. They prioritize about 2, 3 topics per year for revision, then form about a 20-person committee that includes MFMs, OB/GYNs, nurses, neonatologists, statisticians, health economists to review all of the latest literature that has been developed by the community in the last 2, 3, 4 years and then upon the review and the insights, update the guidelines. So as we think about scenarios, given 2025 is likely to be a rich year, where we won't publish not just PRIME main publication, but also possibly 2 to 3 additional publications with further insights and sub-analysis on a very, very rich 5,000 patient data set and done by our illustrious 19% PI group and not only by Sera, but other institutions are conducting a lot of research in preterm birth space, we're hoping that 2026 or 2027 could be that year when the societies may prioritize preterm birth and spontaneous preterm birth as a bulletin to provide revisions to. So if that happens, then the scenario of when the recommendations could be updated is the year after, so '27, '28. So that's scenario #1. Scenario #2 could be that the latest data that I mentioned, the JAMA Network Open article that pointed to about 28% increase in maternal mortality and very unfortunately stable 10.4% premature birth rate in the United States is seen as the current -- by the current administration in public health opinion leaders as the top priority topic that might change the prioritization and bump it up on the priority list to be reviewed sooner rather than later. If that happens, then potentially the committee could be convened sooner than 2026 or 2027, and therefore, guidelines could be updated even before 2027. And option 3 is -- there are many other topics, of course, in priority queue for ACOG and SMSM, and it takes time for the spontaneous preterm birth and preterm birth to bubble up to the priority list of topics to be reviewed. And therefore, guideline change will occur more in the 3- to 5-plus year time frame. So these are the scenarios we see and the process that the societies follow. I hope that helps.

Great. Yes, that was great. Maybe just last one, and then I'll kind of go kind of back in the queue. Just obviously, Medicaid, you discussed it during the prepared remarks, you're pretty excited there. I mean that's an interesting opportunity. Just what have you learned so far? I know it's early in terms of this opportunity, the states that you're identifying. And if we're sitting here 18 months from now, like what are the potential outcomes with progress or success in some of these states?

Yes. No, great question. We are undoubtedly excited because typically, Medicaid trails commercial medical policy coverage by a couple of years. But for our test, it's been the opposite. We've seen a lot of engagement with state Medicaid plans, who all are governed -- of course, every state is different and sets their policy according to their priorities. And some states are doing great on preterm birth; others are really not. So depending on how critical preterm birth priority is for that state, of course, we started focusing on the ones that need solutions for preterm birth the most. Second, we take a look at what quality metrics the state sets for the plans and what outcomes do they measure state Medicaid plan performance on. And we target the plans, where we believe we can make a major difference for plan performance that they are measured on and the metrics, where the state is looking to move the needle on. Sometimes it's NICU admissions. Sometimes it's the rate of C-sections. Sometimes it's birth weight of the neonates. For us, we've analyzed and published through PRIME study abstract a lot of exciting outcomes we've already observed in the PRIME study and are looking forward to giving Medicaid plans opportunity to see on what deployment of a preterm test and intervention bundle strategy can do for their members in terms of clinical outcomes to meet their quality metrics in their state, and of course, the cost of care outcomes. What makes us particularly excited about Medicaid is in the year when overall Medicaid program is looking to cut costs, PreTRM test and treat strategy can cut costs without cutting benefits. And that is a huge opportunity. Of course, that's where the policymakers should look first at solutions that can reduce cost without reducing benefits.

Great. Actually, I'll sneak one more in. I know on the last call, you discussed Medicaid pilot programs, you could have 2 to 4 programs over the next 12 months. Is that still your thinking?

Yes. That's exactly right.

[Operator Instructions] There are no further questions at this time. I will turn the call over to Zhenya Lindgardt for closing remarks.

Thank you, operator. Before my closing remarks, I'll make one correction. I think I misspoke and stated that number needed to screen of expectant mothers in order to save 1 NICU admission was 31. In fact, it is 41, as stated in our corporate deck on our website. With that, thank you, everyone, for attending our call today. We are pleased that we have now entered a new commercialization phase empowered by our PRIME study results, which have garnered interest, and we expect to help open a lot of doors commercially. With those results in hand, we believe 2025 will be a build year for Sera, and we look forward to sharing our progress with you. I'll now turn it back over to the operator to conclude the call. Operator?

Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.