OncoCyte's (OCX) CEO Bill Annett on Q4 2016 Results - Earnings Call Transcript

| About: OncoCyte Corporation (OCX)
This article is now exclusive for PRO subscribers.

OncoCyte Corporation (NYSEMKT:OCX) Q4 2016 Earnings Conference Call March 6, 2017 4:30 PM ET


Michael Polyviou - Argot Partners

Bill Annett - Chief Executive Officer

Lyndal Hesterberg - Senior Vice President of Research and Development

Kristine Mechem - Vice President of Marketing

Russell Skibsted - Chief Financial Officer


Paul Knight - Janney Capital Markets

Raymond Myers - Benchmark


Good day and to the OncoCyte conference call to discuss the latest developments, in addition to the Fourth Quarter and Full Year 2016 Financial Results. Today’s conference is being recorded.

At this time, I would now like to turn the conference over to, Mr. Michael Polyviou. Please go ahead sir.

Michael Polyviou

Thank you, Cody. We appreciate everyone joining us on this afternoon's conference call and webcast to review this morning’s press release announcing the successful result in the company’s lung cancer diagnostic test, R&D validation study as well as the fourth quarter and full year results and other recent developments. The fourth quarter results were announced on February 27 and the news release is available on the OncoCyte website. On the call today are members of OncoCyte's senior management team, including Bill Annett, President and Chief Executive Officer.

Before turning the call over to Bill, I would like to remind you that during the course of this conference call the company will make some projections and forward-looking statements regarding future events. We encourage you to review the company’s filings with SEC including without limitation the company’s Forms 10-K and 10-Q, which identify the specific factors that may cause actual results or events differ materially from those described in this forward-looking statements. These factors may include without limitation, risks inherent in the development and/or the commercialization of potential diagnostic tests, uncertainty in the results of clinical trials or regulatory certifications, uncertainty in the training reimbursement authorization from third party payers, need and ability to obtain future capital and maintenance of intellectual property rights. Therefore, actual results may differ materially from what is expressed or implied by these forward-looking statements. OncoCyte expressly disclaims any intent or obligation to update these forward-looking statements except as otherwise may be required by applicable law.

With that, I would like to turn the call over to Bill Annett, President and Chief Executive Officer. Bill, please go ahead.

Bill Annett

Thank you, Michael and welcome everyone to our conference call to discuss the successful outcome of our 300-patient lung Cancer diagnostic test, R&D valication study as well as the Q4 and full year 2016 results. Today I am joined by Lyndal Hesterberg, our Senior Vice President, Research and Development; Kristine Mechem, our Vice President of Marketing; and Russell Skibsted, our Chief Financial Officer. They will be available during the question-and-answer session.

So I’m conducting today’s call from Boston, where I’m attending the Cowen Health Care Conference and I’m presenting the company on Wednesday morning at 9.20 AM, rest of the team is in our Alameda, California Headquarters. With that let me now focus on the clinical progress. For the purposes of today’s call, I’ll first review the key developments regarding our lung cancer test and discuss our breast cancer test.

This morning we reported the successful results of the R&D validation study of our lung cancer diagnostic test, a critical step in the development of our first product. While the key performance metrics of our diagnostic cannot be revealed until they’re presented at the American Thoracic Society Meeting in May, we’ve now reached the point where our prediction algorithm is set and we’re ready to move to the final stage before commercial launch.

The data from the study exceed our endpoints and the levels that we believe are necessary for a commercially successful test and as a result OncoCyte is moving forward with plans to launch the lung cancer diagnostic test during the second half of 2017. The analysis of the samples that we collected from approximately 300 patients at 26 oncology centers in the U.S., produced results that are consistent with those presented by the Wistar Institute at the CHEST Conference in October 2016. The data will be presented in May by Dr. Anil Vachani, Associate Professor of Medicine at the Hospital of the University of Pennsylvania, at the 2017 American Thoracic Society International Conference in Washington DC.

As a reminder the study presented by Wistar at the CHEST Conference last October examined 610 blood samples that were sourced from six collection sites and were from patients with nodule sizes from 3 to 42 millimeters. Using the top 100 biomarkers, the study produced an area under the curve or AUC of 0.82 with a sensitivity of 90% and specificity of 62%.

The AUC of a test is a measure that combines sensitivity and specificity to express its total accuracy, with 1.0 being perfect accuracy and 0.50 being a random result. Sensitivity and specificity are statistical measures of test performance, with sensitivity measuring the percentage of malignant nodules that are identified correctly by the test and specificity measuring the percentage of benign nodules correctly identified.

We’ve initiated the next steps as we prepare for our planned commercial launch in the second half of this year. We’ll continue to carry out analytical validation studies to the finer operational stage laboratory processes. The studies required for analytical validation have been established in the Clinical Lab Standards Institute guidelines. These guidelines cover the testing for such matters as limits of quantitation, precession, reproducibility and interfering substances. When completed, these Analytical Validation studies establish the performance characteristics of the assay system for subsequent clinical validation in the CLIA laboratory.

In parallel, we’re planning for CLIA certification of laboratory and we would expect to receive our first certification in Q2. In preparation for certification, our CLIA lab is now operational, the lab equipment has been qualified for clinical use and the lab is staffed with a Board Certified Laboratory Director, a clinical supervisor and a licensed technologist. This team has been trained in our lung product testing methodology and a director of quality assurance has been hired.

Upon CLIA certification, we’ll conduct a small CLIA lab validation study of approximately 100 samples previously tested during the R&D Validation stage. The purpose of this study is to demonstrate that the full assay system utilized in the CLIA lab provides the same results on clinical samples as those obtained in the R&D lab.

OncoCyte will then begin a clinical validation study in the CLIA lab using the finalized algorithm and operational procedures on a new set of at least 300 blinded prospectively collected samples to confirm and replicate our findings in the CLIA operational setting. We’re continuing to collect samples and now have 43 community based academic and government sites across the United States, actively collecting for us. If we receive the CLIA lab certification and successfully complete the clinical validation study, we then plan to launch our Lung Cancer Diagnostic Test in the second half of 2017.

As a reminder lung cancer remains the deadliest in the U.S., with approximately 160,000 per year. Life expectancy as measured by the five year survival rate is about17% and unlike many other forms of cancer, it has not increased much over the past four years. This is primarily because over half of lung cancer patients are diagnosed in Stage 4, by which time treatment options are limited from our stations.

Early detection is paramount, survival rates rise significantly for lung cancer that is detected in Stage 1, which is why early detection of lung cancer is now a high priority for the U.S. healthcare system. Guidelines from the U.S. Preventative Services Task Force, now stipulate that high risk patients should have annual low-dose CT scans or LDCTs to ail the early detection of lung cancer.

It is estimated that there are between 7 million to 10 million people in this category in the U.S. and having an annual low-dose CT is becoming the standard of care for this population. Since lung cancer is our near-term product launch candidate, I’d like to provide some background on what our team has determined is the market potential for our lung test.

Based on our assessment of the market, we believe we’re positioned to be the first company to provide highly accurate, non-invasive, confirmatory blood test for lung cancer. Estimating from public sources, lung cancer Lung RADS guidelines and National Lung Screening Trial data, there could be approximately 1.4 million patients annually in the U.S. for such a test. I’d like to explain how we derive this estimate.

As we said previously, our test is designed to complement the emerging standard of care in lung nodule management, which is known as Lung RADS. Lung RADS is a set of guidelines from the American College of Radiology or ACR, for managing patients with lung nodules and it’s a corollary of the ACR guidelines for breast cancer known as BIRADS. Both guidelines separate patients into benign, probably benign and suspicious categories and indicate treatment recommendations for patients in each category.

Lung RADS 3 is the lung corollary of BIRADS 3 and indicates a patient with a nodule that is probably benign. Nodule size is an important factor in Lung RADS categories and Lung RADS 3 includes patients with nodules from 5 to 8 millimeters in size. Typically, patients in this category are referred for follow-up LDCT scans at more frequent intervals than annual screening.

Patients with nodules larger than 8 millimeters are in the Lung RADS 4 category. Lung RADS 4A patients are typically referred to quarterly surveillance and those with Lung RADS 4B are typically referred to biopsies. OncoCyte’s diagnostic is being developed with the first intended use for patients with nodules classified as Lung RADS 4.

There may be potential from the test to have extended or second intended use in Lung RADS 3 and for our studies, we’re collecting both malignant and benign samples from 5 to 30 millimeters in size. This is the size range presenting the greatest diagnostic challenge to clinician. For patients with these size nodules, physicians must weigh the risk of cancer against the risks posed by costly and potentially dangerous invasive biopsies to confirm whether the nodules are malignant or benign.

The size of the potential market for our lung cancer test can be estimated from Lung RADS data. According to the ACR, the prevalence of Lung RADS 3 is 5% of our patients screened. Lung RADS 4 represents another 4% of our patients screened. Since the U.S. Preventative Services Task Force estimates there are 7 million to 10 million Americans at high risk for lung cancer and this group is recommended for annual low-dose CT screening.

In addition to these patients whose nodules are discovered by LDCT screening, there are currently approximately 5 million patients in the U.S. each year who’re not in the high risk category, but have lung nodules discovered incidentally. For example, via X-rays performed for other reasons. Consequently, in total there are probably about 10 million to 15 million people in the U.S. each year with lung nodules.

Given the ACR prevalence estimates, we believe there are up to 600,000 patients per year in Lung RADS 4, our first intended use and approximately another 800,000 patients per year in Lung RADS 3 are potentially second use. Consequently, the total number of patients for OncoCyte’s test is approximately 1.4 million patients annually. Assuming this number of patients and our currently planned pricing for a confirmatory lung cancer test, the total addressable market could potentially exceed $4 billion per year and this of course depended on reimbursable pricing.

We believe that our blood based lung cancer test can provide Medicare and private insurance companies with significant savings, if the price of our product is about 20% to 25% of the cost of an inevasible lung biopsy, which according to recent Medicare estimates averages approximately $15,000. Potential revenue to OncoCyte will depend in large measure on the test market penetration and on actual approved reimbursement by Medicare and health insurers.

As I stated earlier, subject to obtaining certification of our CLIA lab and the successful completion of the remaining product development steps, we plan on launching our Lung Cancer Diagnostic Test in the second half of 2017. Because of the study’s successful results, we’re now focusing on commercialization and ramping up our commercial capabilities in anticipation of the potential launch of the test.

There are a number of components of our commercial strategy that I would like to discuss. During 2016, we presented positive data for our lung, breast and bladder tests at scientific meetings such as ASCO, CHEST and the San Antonio Breast Cancer Symposium. And the results on our lung cancer study that we just announced will be presented at the American Thoracic Society in May of this year.

As our product development work continues, during 2017 we expect to submit other abstracts on our lung cancer test for presentation at leading conferences. We’re also planning on submitting papers to peer reviewed scientific journals as our R&D efforts continue. We believe that publishing papers and presenting at scientific conferences helps to validate our progress and the robustness of our product development pipeline, while garnering additional interest from our intended physician audience.

In addition to the abstract presentations, we’ll be sponsoring three clinical sessions at the ATS conference to engage with physicians and raise our corporate profile with our targeted audiences of pulmonologists and thoracic surgeons.

Having a robust sales and marketing capability is essential for effective commercialization of a product. We plan to take our lung cancer diagnostic to market using a specialized internal sales force. Based on our successful study results, we’re beginning to recruit for many sales and marketing job functions and today posted on our website, job descriptions for positions that we will be filling including heads of sales, sales operations, customer service, a national account manager, a product manager and sales representatives.

We’re planning of having a small number of sales representatives in place when we launch the lung test and we’ll continue to build up the sales team by focusing on the addition of individuals with domain expertise in specific geographies that we’ll be targeting. The sales team will leave its free efforts of our marketing team who’re focused on creating market awareness, stimulating product trial and starting to build customer loyalty.

Given the characteristics of the lung cancer diagnostics market and our lung cancer test, we believe that initiating commercialization with a small dedicated sales force is prudent and sufficient to detail the specialist, especially pulmonologists, thoracic surgeons and radiologist, who’ll be our primary targets. Many of these specialists are highly concentrated in our near large screening centers, which help to focus our sales sizing, sales planning and territory alignment activities. Building relationships with pulmonologists and large LDCT screening centers will be of particular importance for OncoCyte.

We’re also beginning to build out our commercial operations function, including the business processes and systems necessary to score the commercial launch. These include areas such as market access, customer service, billing, customer relationship management, data management and reporting. Having a comprehensive proactive approach to pursuing coverage by and reimbursement from Medicare and private payers is of critical importance in the successful diagnostics product launch.

We’re finalizing our coverage and reimbursement strategy and have designed both our product development efforts and our commercial activities to attempt to maximize our opportunities for coverage and reimbursement. We’ve developed our evidence plan and clinical utility study designs, discuss with a group of ten key commercial and public payers representing 77 million covered lives to get their feedback. The initial feedback from the payers suggests that if we meet our evidence plan and if our clinical validation and clinical studies are completed successfully and then published, they should lead to broad coverage by both public and private payers.

Our health economic analysis has indicated that with our targeted product profile of sensitivity and specificity, our lung cancer assay can not only improve health outcomes by reducing the comorbidity and death rates resulting from avoidable biopsies, but also significantly reduce the overall span for lung cancer screening. In order to receive favorable coverage decisions and our desired reimbursement levels, it’s necessary to provide payers with objective proof of these economic and clinical benefits.

Now like we’re planning to carry out several post launch clinical utility studies that will be designed to use relevant evidence illustrating both patient results and physician behavior. In particular, our studies would focus on whether a physician is using our test to forego unnecessary biopsies if the results show no evidence of malignancy. If successful, these studies may present payers with the evidence they need to convince them that our test will reduce avoidable downstream procedures.

We estimate that if adopted as part of the standard of care in lung cancer diagnostics, our test may provide cost savings well in excess of $1 billion a year, while maintaining the benefits of low-dose CT screening; that is detecting lung cancer at an early stage. However, as with any molecular diagnostic, until we give fully developed and published evidence, establishing the clinical utility of our lung test and receive favorable coverage decisions from payers, our revenue will be modest and will come primarily from patient payments and appeals of insurance company decisions on individual patients. Based on the experience of other diagnostic companies, reimbursement decisions by payers can often take two to three years.

In addition to the U.S. market, we believe that there may be opportunistic revenue available through cash pay, distribution agreements outside of the U.S. and are exploring opportunities in areas such as Europe, Asia and the Middle East. Should we be successful with these domestic and international strategies, we could recognizes some revenue from the lung cancer diagnostic test during 2018.

Now, I’d like to update you on our second test under development, our confirmatory diagnostic for breast cancer. Similar to our lung cancer test, the breast cancer test is a confirmatory diagnostic that’s being designed to be used after mammogram screenings, but before follow up biopsies are performed. Each year approximately 38 million women in the U.S. have mammogram screenings, lot of these women screen for breast in the U.S., about 1.5 million to 2 million women have follow on lung biopsies to determine for massive, malignant or benign. For the majority of these women, the results are benign, with only about 20% of biopsies resulting in cancer diagnosis.

Consequently, about 80% of breast biopsies are unnecessary. Unfortunately this experience of having an unnecessary biopsy is causing women to lay or skip the mammogram altogether. This is highlighted in the recent latest health story which featured a study of over 260,000 women published in the journal Cancer and Epidemiology Biomarkers and Prevention. The study found that women who had an unnecessary biopsy tended to delay their next test by additional 13 months compared to a three to six months delay for women who didn’t have a biopsy. The study also found that this pattern can reduce the chances of detecting the cancer in the early phase since the delay of even a few months can impact survival rates.

Our test is being designed to reduce the number of unnecessary breast tissue biopsies carried out often to reduce patient anxiety and the negative experience of an unnecessary breast biopsy as well as unnecessary cost of the health care system. In addition to women recommended for breast biopsies, there is a second potential intended use for our test. Mammography alone does not meet the needs of many women, who in order to receive an accurate diagnosis tell supplemental procedures such as MRIs. This group includes women with tense breast tissue, but women with a genetic pre disposition to breast cancer.

These women often end up having to endure both the mammogram and a supplemental screening MRI as part of their required annual examinations. We’re planning to study the use of our test in this group as well and believe that there are approximately 6 million women in the U.S. in this category. At the San Antonio Breast Cancer Symposium this past December, we reported data on our initial 100 sample study of protein biomarkers designed to allow for the non-invasive and sensitive detection of breast cancer in BIRADS category four patients. The 15 marker model resulted in an area under the curve of 0.92, with sensitivity of 90% and specificity of 76%.

As you imagine with results like this we generated considerable attention and interest from clinicians and researchers at the San Antonio Breast conference and as a result we’re continuing to dedicate resources to our breast cancer diagnostic test development program. We’re conducting a follow up, multi-center study to further develop and verify these results in a large set of prospectively collective patient samples. As we disclosed in January, if our research and development efforts are successful, we believe that we may be commercially launch the breast cancer diagnostic test in the second half of 2018.

Lastly, before we open up the call for questions, I’ll touch on the financials. As reported in the 10-K that we filed with the SEC last week, at December 31, 2016 we had 10.2 million of cash and cash equivalents in addition to available for sale securities valued at 2.2 million for a total of about 12.4 million in liquid assets. Subsequent to the end of the year we received proceeds of approximately $2 million from the early exercise advance. We also entered into a secured loan agreement with the Silicon Valley Bank, providing access to $2 million of additional working capital. During 2016, we used approximately $8 million of cash and had an overall net loss of $11.2 million or $0.42 per share.

In summary, we’re continuing to make progress carrying out OncoCyte’s strategic plan and are very excited by the successful result of our lung patient study. We’re initiating the next steps necessary to complete the development process and launch the test during the second half of 2017. These steps include, applying for clear certification of our diagnostic testing laboratory, initiating a clinical validation study to confirm and replicate our findings in an operational CLIA lab setting and expanding our commercial capabilities by building the marketing, sales and other functions required for a successful launch. Assuming successful completion of these steps, we will launch our lung cancer test during the second half of 2017.

In addition, we’ll continue the assay development for our proprietary breast cancer diagnostic test and hope to extend the successful findings that were presented in December at the San Antonio Breast Cancer Symposium. We’re excited about our progress and by the recent attention and significant investments being made in the liquid biopsy sector, we believe that these recent investments help to validate the size of the market opportunity we’re pursuing and the investments that OncoCyte has made since its inception. As we prepare for the launch of our first commercial product, we will continue to focus on providing value for our shareholders in developing diagnostic products that will create significant benefits for patients, physicians and payers.

Operator we’ll now open for questions.

Question-and-Answer Session


[Operator Instructions] We’ll take our first question from [indiscernible].

Unidentified Analyst

Yes, thank you. Bill, in cognizant that you need to be careful about what you can disclose with respect to the study due to the presentation coming up in May, in using the language that you did that the results were consistent with the Wistar results, can we infer from that that given a similar AUC and similar setting of sensitivity at 90% that the specificity is within a couple of percent plus or minus of the number posted by Wistar?

Bill Annett

Thanks, Kay. As we mentioned, the data is embargoed until the presentation by Dr. Anil Vachani at the American Thoracic Society Conference. Now, so we can't go into the details of it. All that we can say really is that our data is very consistent with what Wistar has reported out.

Unidentified Analyst

Okay. I appreciate that. And, Bill, just in terms of the 2017 operating expense, any guidance you can provide there would be helpful. Obviously, 2016 you had basically 11 million kind of split evenly between R&D and SG&A. As we think about 2017 with the ongoing and planned clinical studies along with the ramping up on the commercial side, can you give us any sense of what the overall OpEx in 2017 relative to ‘16 might look like?

Bill Annett

Yeah, but we're not giving any guidance at this time about our potential expenses in 2017. I think it is fair to say that as we go into launch our commercial expenses, we’ll be ramping up. Again as we mentioned, we're trying to do this in a very cost-effective way. We're going to have a relatively small sales force, which we believe is not only prudent from a financial standpoint, but it's what we need in order to effectively detail the relatively small number of specialists in this field. So, we will spend appropriately in terms of what we need to get good penetration of the market, but we're certainly not going to overspend or hire a huge commercial infrastructure.

Unidentified Analyst

Okay. That’s all I had. Thanks.

Bill Annett

Thank you, Kay.


Thank you. We’ll now move on to our next question from Paul Knight with Janney Montgomery.

Paul Knight

Hi, Bill. Can you talk about your shooting for this long approval here in two each, , can you talk about addressable size and then specifically talk about commercial reimbursement process? Do you think it's a year or 18 months? Give us the gauge on where you see this market initially under CMS and then timing on commercial?

Bill Annett

Sure. So, as we mentioned, we are planning on launching in the second half of the year as soon as we finished our clinical validation study. And as I mentioned in the discussion here, our first intended use is going to be Lung RADS 4. That again is nodules which are eight millimeters and larger. And those today, as we mentioned, we think that there is that that's about 4% of the overall population with long nodules. So, it's probably in the 400,000 to 600,000 patients per year range.

Now, assuming that all patients got their screening test, number of screening tests that is going on is increasing fairly rapidly, so it is a rapidly growing market. So, that bakes to the potential addressable market. As we also mentioned, given that we are doing studies, our studies with lung nodule sizes right down to five millimeters, we believe that we have a potential second indication in Lung RADS 3 the five to eight millimeter lung nodules and that of course is another potentially up to 800,000 patients.

That gets us to that 1.4 million patients per year total addressable market number. I think your second question was about reimbursement. Reimbursement, as you know, is in the lung space, in the diagnostic space in general, is it can take a number of years. And what's really important is that we are building out our product development plans, our R&D plans, as well as our commercial plans to give the highest potential opportunity for reimbursement.

So, the way that CMS and other insurance companies look at this, they want to see not only the strong clinical validation studies, which we hope to complete this year, but also the ongoing clinical utility studies, which would show after launch are the doctors actually avoiding the biopsy. So, we are planning and doing enough of those that we will give the insurance companies, the CMS, the payers in general what it is that the data that they need.

So, I think that it's difficult to predict the time, but we have seen with other companies with tests of this sort is it can take up to two to three years to get the reimbursement. There will be some reimbursement as we said before that. We also hope to get the coverage with data development from CMS, which is at their discretion, but that is something, which could come potentially a little faster.

So, those are - I think we're facing the same kind of reimbursement challenges that the rest of the industry does, but we are building out our science and our commercial practices to try to maximize that opportunity.

Paul Knight

Thank you.


[Operator Instructions] We’ll now take our next question from Raymond Myers with Benchmark.

Raymond Myers

Yeah, thank you, Bill. Congratulations on this milestone.

Bill Annett

Thank you.

Raymond Myers

My first question and I understand if you can't answer it at all, but I understand that there was a preliminary analysis of the first hundred patients in this lung study and then there was a continuation of enrolment beyond that to the full 300, so you have 100 patients and 300 patients. Was the 100 patients meaningfully different than the study overall in terms of sensitivity and specificity?

Bill Annett

Yeah. So, we can't go into that again because of the data embargo, but basically to your question, the deadline for submission of abstracts for ATS was I believe it was December. And at that point in time we had done the analysis of the first 100 patients and we did submit an abstract based on that and were accepted. And now Dr. Anil Vachani who is the lead author on the study, is going to be presenting. And we briefed him fully on the 300-patient study, so he has got all of the data. And so, he will be presenting the data at ATS in May.

Raymond Myers

Okay. Great. Well, we certainly look forward to that. I know you've been speaking with payers, you mentioned doing studies and samples of payer groups to understand their interest and willingness to pay for the studies you're bringing to market. After those discussions, what reimbursement rate are you now targeting for the lung test?

Bill Annett

So, we're trying to get a reimbursement rate that is based on two things. So, one factor is taking a look at the pricing that other similar oncology diagnostic tests or the MAAA test and the multiple analyte algorithmic analysis tests are getting currently and if you look at tests like [indiscernible] and Genomic Health’s Oncotype DX. You're looking at $3000 plus reimbursement for those kinds of tests.

The second thing we look at is the comparators, meaning it’s the health care economic view of the world, which is how much money can we save the health care system, CMS, and the insurance companies with our pricing. And what we found in our health care economic study is that if we position our test, our pricing at something like 20% to 25% of the cost of a biopsy, it does provide significant cost savings to the insurance companies.

And as we mentioned, the recent Medicaid study put the all-in, the full costs of lung biopsies on average at just under $15,000. So, those two factors, those two variables are helping us to determine the pricing.

Raymond Myers

Okay. Very good. And then one last question if I may. Can you - a bit better sense of the timing and magnitude of the sales and marketing budget? We understand that it's not a large scale expense. But when do we expect that expense to start to layer in? And give us some sense of how many people you intend to be employing, say, by the end of next year - at the end of 2017?

Bill Annett

So, at the end of this year 2017?

Raymond Myers

Yeah, sorry, that’s this year.

Bill Annett

Yeah. Okay. So, again we haven't made any announcements yet about our plans in terms of specific numbers, but we will start off with a very small sales team, handful of people. And I think that's all we will need. We will scale that up over time. And so, again be relatively modest and I would say that we're going to cater then in the call today that we posted the half a dozen job descriptions on our website today. So, we're going to begin the process of hiring.

We're not going to hire all those people at once, but over this year we are going to be developing the various areas that I mentioned, the marketing sales, sales operations, and so on. So, we will be ramping up our commercial spend cautiously, but again not understanding we want to spend enough so that we can have an effective watch, but not over spending, so that we exceed our financial capabilities.

Raymond Myers

That's great. Thank you. And then last question is as you characterize the relative either difficulty or critical risk and the studies remaining for lung, how do they compare to the studies you've already now completed?

Bill Annett

Okay. Well, I would say, as we mentioned, there are some in-house internal studies like the happening in the CLEA lab. And then there is the clinical validation study, which is the final study of 300 plus blinded prospectively collected samples. And I would say in science you can never tell until it's done. However, I think it's safe to say that we are very happy to see that our independent study got results, which were consistent with what Wistar got. That's a very good sign. Lyndal, do you have any other thoughts you might want to add there?

Lyndal Hesterberg

I think going forward it would be what’s pretty much standard in the industry is that as part of moving the test system into the clinical lab, we have to comply with all the Clinical and Lab Standards Institute guidelines and those will be under - under way - sorry, we will be doing those studies over the next few months as well.

Raymond Myers

Lyndal, I believe those studies are fairly straightforward. I think it’s the clinical validation study that we're looking to see with the final results.

Lyndal Hesterberg

Correct. That is - the clinical validation study is the one that then demonstrates the performance of the essay in the clinical laboratory under what we expect to be commercial circumstances and conditions.

Raymond Myers

Great. And are those conditions much different than what you had experienced in that study that is just announced?

Bill Annett


Lyndal Hesterberg

Yes. The conditions themselves won’t be other than now, it will be the fully - the full CLEA staff with all the CLEA-licensed personnel performing the operations.

Bill Annett

Yeah, so my understanding is very similar.

Raymond Myers

Okay. All right, very good. Thank you and congratulations.

Bill Annett

Thank you.


Thank you. And that does conclude today's question-and-answer session. I would now like to turn the conference back over to Mr. Bill Annett for any additional or closing remarks.

Bill Annett

Well, thank you again very much everyone for attending our conference call today and I look forward to updating you on our continued progress.


Thank you. That does conclude today's conference. Thank you all for your participation. You may now disconnect.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.


If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!