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Oncocyte Corp (OCX)·Q2 2024 Earnings Summary

Executive Summary

  • Q2 2024 was defined by the successful beta launch of GraftAssure (RUO dd‑cfDNA assay) with initial sites in the U.S. and Southeast Asia, and funnel engagement representing ~25% of U.S. transplant volumes, signaling early product‑market fit and a credible “land‑and‑expand” trajectory .
  • Financially, revenue was $0.10M, gross profit $0.05M, operating expenses $4.68M, and loss from continuing operations $(4.53)M or $(0.36) per share; non‑GAAP loss from operations was $(4.95)M; cash and restricted cash ended at $10.96M, aided by the April financing that included Bio‑Rad .
  • Management reiterated plans for Q‑Sub feedback by YE24 and targeted FDA IVD clearance in late 2025 (best‑case), with modest RUO revenue prior to IVD adoption; cash burn expected to remain similar in Q3–Q4 2024 while supporting FDA submission and site activation .
  • Catalysts: expanding beta placements (target >20 centers by end 2025), regulatory milestones (Q‑Sub feedback, IVD progress), growing clinical validation (NEJM felzartamab study; daratumumab case series) and the Bio‑Rad commercialization channel .

What Went Well and What Went Wrong

What Went Well

  • Rapid traction in beta launch: first external runs of GraftAssure at a major U.S. center and in Southeast Asia within days; funnel interest equals ~25% of U.S. transplant volumes, exceeding expectations .
  • Strategic validation and channel leverage: Bio‑Rad partnership and investment; co‑marketing in U.S./Germany and exclusive distribution ex‑U.S/Germany to reach concentrated academic centers efficiently .
  • Strong clinical narrative: NEJM randomized Phase 2 showing dd‑cfDNA monitoring of felzartamab efficacy; additional daratumumab case series demonstrating longitudinal dd‑cfDNA declines and biopsy resolution, reinforcing therapeutic efficacy monitoring use cases .
  • Quote: “We expect to maintain a capital‑light business model, focus on site adoption in the U.S. and Germany, and deliver an IVD product to the market” — CEO Josh Riggs .

What Went Wrong

  • Limited near‑term revenue: Q2 revenue of $0.10M derived from pharma services; RUO revenue acknowledged as modest until IVD is cleared and reimbursed; commercial focus pivoted away from LDT services to site activation .
  • Ongoing operating losses: Q2 loss from continuing operations $(4.53)M, non‑GAAP loss from operations $(4.95)M; sequential R&D up 6% as the company invests for IVD submission .
  • Balance sheet still thin despite improvement: cash and restricted cash of $10.96M post financing; execution hinges on disciplined burn while advancing regulatory and commercialization milestones .
  • Analyst concern: timing risk and modest RUO revenue until late‑2025 IVD clearance; management guideposts acknowledge potential drift into early 2026 depending on FDA processing .

Financial Results

MetricQ4 2023Q1 2024Q2 2024
Revenue ($USD Millions)$0.30 $0.18 $0.10
Gross Profit ($USD Millions)~(0.10) $(0.10) $0.05
Operating Expenses ($USD Millions)R&D $2.5; S&M $0.6; G&A $1.8 R&D $2.17; S&M $0.85; G&A $2.67 R&D $2.45; S&M $0.85; G&A $2.41
Loss from Operations (GAAP) ($USD Millions)$(16.18) $(9.27) $(4.63)
Non‑GAAP Loss from Operations ($USD Millions)$(4.19) $(5.03) $(4.95)
Net Loss from Continuing Ops ($USD Millions)$(16.00) $(9.13) $(4.53)
Diluted EPS – Continuing Ops ($USD)$(1.99) $(1.13) $(0.36)
Cash & Restricted Cash ($USD Millions)$9.40 $7.28 (begin) / $10.96 (end per CF) $10.96

Notes: Q1 total operating expenses reflect credits due to change in fair value of contingent consideration .

No formal segment reporting; Q2 revenue came from pharma services performed in Nashville .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Cash BurnQ3–Q4 2024Not specified“Hold cash burn in Q3 and Q4 relatively in line with Q2” Maintained low burn target
RUO Revenue2H 2024Not specifiedRUO revenue expected to be modest pre‑IVD; build as sites validate Clarified modest near‑term
Q‑Sub Feedback2024Not specifiedExpect Q‑Sub feedback by end of 2024 New timeline set
FDA IVD ClearanceLate 2025 (best‑case)Not specifiedTarget late 2025 clearance; may drift into early 2026 depending on FDA processing New timeline set
Center AdoptionThrough YE2025Not specifiedAim >20 centers running GraftAssure by end 2025, incl. 15 in U.S. New operational target

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2023, Q1 2024)Current Period (Q2 2024)Trend
Bio‑Rad Partnership & ChannelAnnounced partnership and equity placement; co‑marketing U.S/Germany; ex‑U.S/Germany exclusive distribution Reaffirmed strategic importance; Bio‑Rad investment and channel engagement ongoing Strengthening
RUO Launch & Site ActivationOn track to ship RUO in Q2; build early adopters; expect validation and initial revenue late Q4 Successful beta launch at U.S./Asia sites; funnel ~25% of U.S. volume; incremental investment to support FDA and inventory Accelerating
Regulatory Path (Q‑Sub, IVD)Target IVD kit pathway; FDA rule LDTs unlikely to alter approach; aim for FDA clearance by end Q4 2025 Q‑Sub planned; hope for feedback by YE24; late‑2025 clearance best‑case; possible slip to early 2026 Clear milestones with timing risk
Clinical Validation & Use CasesNEJM felzartamab efficacy monitoring; DSA‑positive AMR detection earlier than SOC Daratumumab case series: dd‑cfDNA declines and biopsy resolution; continued emphasis on therapeutic efficacy monitoring Broadening evidence
Business Model & Unit EconomicsCapital‑light, high‑margin kit strategy; local lab testing economics vs central lab Reiterated capital‑light model; modest RUO revenue pre‑IVD; recurrent testing opportunity Consistent
Cash DisciplineBurn reduced; targeting < $5M quarterly average Burn to remain in line with Q2 while supporting submission/launch Maintained

Management Commentary

  • “We expect to maintain a capital‑light business model, focus on site adoption in the U.S. and Germany, and deliver an IVD product to the market… and deliver exceptional margins.” — CEO Josh Riggs .
  • “Our product development team expects to deliver a completed data package to the FDA by summer next year… earliest we could expect a positive coverage decision is in late Q4.” — CEO Josh Riggs .
  • “We have great indications of product market fit… strategic investment and partnership with Bio‑Rad really, really is a big deal.” — CFO Andrea James .
  • “We aim to have more than 20 transplant centers running GraftAssure tests through the end of 2025, including 15 in the US.” — Shareholder letter .
  • “VitaGraft Kidney has high potential to be the most useful biomarker for monitoring the effectiveness of anti‑CD38 therapy for AMR.” — CSO Dr. Ekkehard Schütz .

Q&A Highlights

  • RUO vs near‑term revenue: RUO revenue expected to be modest pre‑IVD; graphic illustrates slow RUO ramp per site; meaningful acceleration post‑IVD clearance and reimbursement .
  • Throughput and CLIA lab investment: Nashville lab capacity expanded to support FDA program data generation; commercial efforts pivoted toward RUO site activation .
  • Adoption strategy and concentration: Top 100 U.S. centers perform ~80% of transplants; reaching 10–20 sites captures meaningful local market; current U.S. funnel ~25% of volumes .
  • Regulatory milestones: Q‑Sub in ~6–8 weeks; detailed design control phases through verification/validation; best‑case clearance late‑2025, potential drift into early 2026 .
  • TAM and recurring revenue: ~3–3.5M testing opportunities globally growing ~9% annually; transplant inherently recurring due to long‑term monitoring needs .

Estimates Context

  • Wall Street consensus (S&P Global) for Q2 2024 revenue and EPS was unavailable via our S&P Global integration due to a CIQ mapping issue for OCX; as a result, we cannot provide a formal consensus comparison. Coverage appears limited; management did not provide explicit financial guidance beyond burn and regulatory milestones .

Financial Details and KPIs

KPIQ4 2023Q1 2024Q2 2024
R&D Expense ($USD Millions)$2.5 $2.17 $2.45
Sales & Marketing Expense ($USD Millions)$0.60 $0.85 $0.85
G&A Expense ($USD Millions)$1.8 $2.67 $2.41
Cash & Restricted Cash ($USD Millions)$9.40 $10.96 (end) $10.96
U.S. Funnel Coverage (% of vols)——~25%
Centers Targeted by YE2025——>20 (incl. 15 U.S.)

Guidance Changes (Operational Milestones)

MilestoneTimelineDetail
Q‑Sub Submission & FeedbackYE2024Formal validation plan submitted; seeking FDA feedback
FDA IVD ClearanceLate‑2025 (best‑case)510(k)/De Novo pathway; potential slip to early 2026
RUO Center Activation2024–2025>20 centers targeted by YE2025; 15 in U.S.
Cash BurnQ3–Q4 2024Maintain burn relatively in line with Q2

What’s Driving Results

  • Revenue softness reflects pivot from LDT service revenue toward RUO kit site activation; management explicitly deprioritized near‑term CLIA commercial efforts to support FDA data generation and RUO onboarding .
  • Operating expense mix shows sequential discipline: S&M flat while commercialization ramps; G&A down 10% sequentially; R&D up 6% as regulatory submissions and IVD development accelerate .
  • Liquidity strengthened via April financing (net ~$9.9M after costs, including Bio‑Rad participation) and redemption of remaining preferred shares, streamlining capital structure .

Key Takeaways for Investors

  • Early product‑market fit: Beta launch traction and ~25% U.S. volume funnel suggest a credible path to scaling RUO placements and future IVD adoption at concentrated transplant centers .
  • Near‑term revenue likely modest until IVD: Expect RUO contributions to ramp gradually; material revenue potential aligns with late‑2025/early‑2026 IVD clearance and reimbursement .
  • Strong strategic partner leverage: Bio‑Rad co‑marketing in U.S./Germany and exclusive distribution ex‑U.S/Germany provides global reach without heavy opex, aligning with a capital‑light model .
  • Clinical validation tailwinds: NEJM felzartamab data and daratumumab case series support therapeutic efficacy monitoring use cases, potentially expanding addressable testing and recurring revenue streams .
  • Execution risks: Regulatory timing (Q‑Sub feedback, clearance) and the need to maintain burn while scaling manufacturing/inventory and site support remain critical watch items .
  • Trading lens: Stock likely reacts to incremental site activation updates, regulatory milestones (Q‑Sub feedback), and additional clinical publications validating dd‑cfDNA utility—each a potential catalyst .
  • Medium‑term thesis: If IVD clearance and reimbursement timelines hold, distributed kits at high‑volume centers with Bio‑Rad’s channel support could drive a high‑margin, recurring model with significant operating leverage .

Sources: Q2 2024 8‑K press release and exhibits , Q2 2024 earnings call transcript , Q1 2024 8‑K , Q1 2024 earnings call transcript , Q4 2023 earnings call transcript , and relevant press releases .