Good morning ladies and gentlemen. Thank you for standing by. Welcome to the MDxHealth half year 2019 results conference call. At this time, all participants are in a listen-only mode. There will be a presentation followed by a question-and-answer session.

[Operator Instructions]..I also must advise you that this conference is being recorded today, August 29, 2019. Before we commence today's call, please note that the forward-looking statements are at the bottom of the half year results press release.

I would now like to hand the conference over to your speaker today, Michael McGarrity, CEO of MDxHealth. Please go ahead..

Thanks Robbie and thank you all for joining us for our 2019 mid-year release of results for MDxHealth. With me today is our new Chief Financial Officer, Ron Kalfus. Ron is joining the company at just the right time to apply his strengths in the critical initiatives ahead of us. Ron's experience in both U.S.

and international markets with the CLIA laboratory model, billing and reimbursement and public company financing will significantly strengthen our team, operating execution and results. In addition, I would like to announce the appointment of John Bellano to the position of Chief Commercial Officer.

John brings a unique combination of sales, marketing and business development domain experience in the diagnostics in the CLIA lab space in particular to drive focus, execution and accelerated growth.

John is well-regarded and respected in the industry and having worked with him in the past know he brings to MDxHealth expertise that fits our need and timing. John will most definitely advance our business with a clear focus and experience in building teams and performance.

We are very fortunate to have John join at this time and I am confident that this will become obvious in the coming quarters.

As this is my first commentary since joining MDxHealth in February of this year, prior to reviewing results, I want to reiterate how excited and fortunate I am to be joining the MDxHealth team and how confident I am that we have a clear path to building value for all of our stakeholders, patients, customers, employees and shareholders.

There is no greater evidence of this than our draft LCD for SelectMDx issued late last week. This is a milestone development for the company and we are confident it will serve as the foundation for growth and the opportunity to be the clear leader in clinically actionable tests in the diagnosis and treatment of prostate cancer.

I will comment of Select further and before turning the call over to Ron to review our financial results, I would like to comment on my initial assessment of the business and my view of her opportunities for growth. First I would like to state upfront that MDxHealth has the opportunity to be the clear leader in prostate cancer diagnostics, period.

Our current test menu affords clinicians, patients and providers with clinically actionable information capable of defining well-characterized and scientifically backed data that can accelerate diagnostic confidence while improving outcomes and healthcare economics.

It is also very clear to all of you that have been around the company that there is a significant set of data and assets that could provide opportunity in not only prostate cancer but bladder, kidney and additional diagnostic pathways.

While we will endeavor to unlock the value and monetize some of these assets, I want to make it very clear that our focus will be on operating execution of our current menu, while potentially expanding market access and building out our prostate cancer portfolio.

With that qualification, I can say that having taken an early stage growth company through the path from introduction, launch through validation and marked adoption, I am not surprised by what I found in my initial assessment of MDxHealth.

It is not uncommon to experience a significant amount of instability in the early stages of commercialization related to focus, sales structure and selling against the standard contributing to the adoption curve that MDxHealth has experienced in the recent past.

However, what is clear is that the efforts to date have served to provide the basis for improved execution on the commercial side of the business, all the while relying on our core demonstrated capabilities and best-in-class execution on the laboratory operations in clinical and scientific side of the business, which is at the core of our significant body of peer-reviewed data as well as broadly accepted and well characterized clinical utility of both Select and Confirm.

It should also be noted that our proven expertise and leadership in the coverage of our menu with all categories of payors, both public and private with Confirm, is very predictive of the same execution as we take Select through the coverage process.

I will comment further on our focus and initiatives going forward but first let me turn the call over to Ron to briefly review financials in our press release.

Ron?.

Thank you Mike. Before reporting on the mid-year numbers, I would like to say how excited and privileged I am to be joining such a professional and dedicated team at MDxHealth. While there is a lot to accomplish in the coming quarters, I am confident that we have the right people and the right tools to get the job done.

On to a brief overview of our results. Total revenue for the first half of 2019 was $10.9 million compared to total revenue of $17.2 million during the first half of 2018.

Revenues from ConfirmMDx and SelectMDx declined by 31% to $10.6 million in H1 2019 compared to $15.3 million in H1 2018, impacted by instability in the commercial organization in the latter part of 2018, as well as nonrecurring revenue in H1 2018 from utility studies of approximately $2.3 million.

Excluding the nonrecurring revenues, year-over-year decline in product revenue was 19%. On a sequential quarter-over-quarter basis, product revenue increased 37% from $4.5 million in Q1 2019 to $6.1 million in Q2 2019.

Gross profit, excluding royalties and patent income, was $4.7 million or 44% of product revenue for H1 2019 compared to $10 million or 60% of product revenue for H1 2018. The reduction in gross profit percent is primarily due to declines in net revenue, impacted by variances in volume, accounts receivable adjustments and payor mix.

Our operating expenses in the first half of 2019 were significantly lower compared to the first half of 2018 and were $18.8 million, representing an improvement of $6.7 million. Operating loss of $13.9 million improved by $1.1 million over the same period last year as a result of optimization and focus driven reductions in operating expenditures.

Therefore, despite the reductions in our net revenues versus H1 last year, our net loss was reduced by $1 million compared to last year, a $0.03 per share improvement. Our cash balance as of June 30, 2019 was $12.2 million.

Excluding nonrecurring restructuring charges of $1.3 million in 2019, our half year burn was $12.7 million, down from $15 million in the previous year. Based on our current cash position and our projected revenues and collections, management believes that we have sufficient cash into the first quarter of 2020.

Furthermore, the company is evaluating all financing options, including non-dilutive funding, to extend its cash runway. This concludes my brief overview of the results. I will now turn the call back to Mike.

Mike?.

Thanks Ron. While our commercial execution state has been uneven, it is clear that we have validated a number of key drivers of growth for our current menu. I will first focus on Confirm.

MDxHealth has unquestionably delivered a diagnostic with virtually no comparator or competitor that can very clearly assist in the disposition of patients suspected prostate cancer. The challenges associated with Confirm to date follow a common adoption curve with a standard changing diagnostic.

From my experience to date, here is what we confidently believe. One, we have unquestionably validated the value proposition of our Confirm test into the U.S. urology marketplace. Two, we have experienced initial interest in understanding of and proof of clinical utility into a meaningful share of this urology base.

Three, the company's initial commercial strategy and associated challenges all led to instability in sales organization. My perspective again is with the benefit of experience we will now better characterize our sales process, sales rep productivity and incentive-based execution.

Four, my experience in working for, with and building world class commercial teams is rooted in results-driven productivity not activity-based management and we see a strong opportunity to drive focus, execution and accelerated utilization into our current customer base.

In addition, we are advancing data-driven market segmentation through our commercial team for better return on investment with regard to our payor mix.

It should be noted that the efforts of the team over this period have served to produce a clear clinical pathway to better characterize and direct sustainable adoption of ConfirmMDx that will serve as the catalyst for increased utilization and growth into this valuable base.

Our menu is further strengthened by the Select liquid biopsy test that has been demonstrated to provide a standard changing value proposition for again the disposition and approach to diagnosis and treatment of prostate cancer.

As evidenced by our volume progress, we are very confident and excited about the growth prospects for Select based on the following. Again, we have a body of clinical data that demonstrates the value proposition of Select and our market adoption state has clearly proven appetite, need and clinical utility from the urology community.

There is no greater current example of this progress than are recently issued draft LCD from Medicare in the US. We will now move in the next phase of the process and will anticipate completion of an issuance of our LCD in the form of the final coverage decision in the next four to six months.

It is important to note that a large part of our current customer base and opportunity is in the Medicare coverage.

We believe that this is a clear leading indicator of growth and revenue associated with payment on what is largely now unreimbursed market building and it will also allow us to focus on commercial and private payor coverage following the same approach we took with Confirm.

It should be noted that we believe in the market opportunities for Select is broadened by our potential to target not only urology but point-of-care through alternate site testing and primary care. We believe the market has been conditioned to moving diagnostics closer to the patient and our SelectMDx test meet that appetite and expectation.

We will have more to come on this initiative as we go forward.

In order to summarize, I will commit to all of our stakeholders that we will be relentlessly focused on execution in the following key operating areas of the business, topline revenue growth through strategic and performance-based focus of our sales team, continued focus on broad-based coverage of both confirm and Select with our current and prospective payor base, continued focus on our cash collections and billing and reimbursement operation to drive P&L optimization and continued discipline in our operating expense management to drive efficiency and appropriate capital allocation.

I am very confident in our ability to execute on all of these goals and believe we have the team now in place to deliver on that promise to build value for all of our stakeholders, patients, customers, employees and shareholders. Thank you for your interest in and support of MDxHealth and I will turn the call over to Robbie for questions..

[Operator Instructions]. Your first question comes from the line of Lenny Van Steenhuyse. Please go ahead. Your line is now open..

Good morning and thanks for taking my questions. First question from my side is on ConfirmMDx. Revenue has shown a strong recovery in the second quarter, considering the stable volume.

Main question here, of course, is on the dynamics behind this and specific reason for past weakness and current strength definitely in the second quarter? And additionally, of course, how do you look at that going forward?.

Yes. Thanks Lenny. Yes. So we are positive about our Q2 results with regard to Confirm. I will say, there is always some timing aspects to the quarter with regard to volume, as Ron commented on, payor adjustments and payor mix. But we feel there is nothing but positive news in the quarter related to that growth from quarter-over-quarter.

That's part of the reason that we pointed to sequential growth because we know that there has been year-over-year comparisons with regard to unit volume, our mix, due to some nonrecurring volume and revenue associated with the first half.

So we look for sequential quarter-to-quarter progress to continue in both Confirm and then Select as we move through the coverage phase. Based on my comments, we see significant opportunity to build revenue right in to our current base..

Okay. Thank you.

And perhaps a comment on how do see this going forward because of course now we have a very strong quarter? Do you any indication of sustainability on this?.

Yes. So I don't want to get ahead of projections here at the risk of -- we have set expectations in the past. We want to stay ahead of our expectations. I will not be providing guidance for the next two quarters as we continue to build out our restructuring and refocus for the business.

However, our expectation is that we will make progress on a quarterly basis and at the end of the year, I will provide 2020 guidance that I think we will demonstrate and illustrate progress against everything I have spoken to today..

Okay. That's clear. Perhaps a more general question on strategy going forward.

Could you perhaps elaborate a bit on specific changes you have made to sales strategy or let's say to force continued operational improvements or basically a bit of an overview of what differentiates MDX right now to MDX of six months ago?.

Yes. So I think on the commercial side what I spoke to is a real focus on performance through our sales organization. I know that can be driven by our current install base. So I think we have built out a considerable percentage of urologists in the U.S. who have adopted Confirm to some degree.

We also are adding in metrics and measurements to where to best focus. At this stage of the company, it just as important where we don't spend time as where we do. And I think we have a better visibility to that and John is driving that focus-driven execution into our base.

If we never got a new customer on the Confirm side, we have plenty of leverage within our current customer base to drive significant growth and contribution to the P&L and I think you will start to see that as we go forward.

I think from an operating discipline perspective, we have got a clear view on delivering on our execution to support that customer base and then we will focus very, very significantly on advancing the coverage metrics for Select.

And if you look at our base and apply Medicare coverage rate towards the end of the year, beginning of next, I think it's clear that we have an opportunity and I will provide visibility to that as to how we immediately run leverage through the payor base of our current adoption..

Okay. That's clear. Perhaps a last question from my side. Could you perhaps say a word about the current views on the noncommercial assets in the pipeline and in what ways these might be leveraged? I can remember that there are still several tests in the pipeline, perhaps several biomarkers that might be non-relevant for the company.

Perhaps a quick view on that?.

Yes. I don't want to set up any expectations there, but I think you alluded to it appropriately, right. We have data associated with applications of our technology into a number of different disease states that have been advanced and significant data and feasibility, I would say, within our R&D group.

I think separately we have access to some biomarkers as evidenced previously by our work with Exact Sciences that we believe we can explore monetizing. I think I will be able to provide better visibility as we go forward. Nothing in the immediate term.

But my main message there is, we will not mix the value opportunity from those prospective assets and our current focus and execution, taking the company through to growth and profitability with our current menu..

Okay. Clear. Thanks very much..

Thanks Lenny..

We have no further questions coming from the phone lines. [Operator Instructions]. We now have your second question coming from the line of Karen Peters. Please go ahead. Your line is now open..

Okay. Good morning. Thank you very much for taking my call. My question is, you are burning a lot of cash right now.

How are you going to keep financing your operations?.

Yes. Karen, so as we commented, I obviously will keep my comments here general. I won't to specific financing but we are confident that we have a path forward to finance the company. And as Ron commented on it, we will also evaluate non-dilutive sources of capital.

But that's all I can speak to at this point as far as our path forward and we are confident that we will have capital to carry operations forward and take the company to breakeven and profitability..

Okay. Thank you..

Thank you Karen..

[Operator Instructions]. Okay. Ladies and gentlemen, does conclude our conference for today. Thank you for participating. You may now disconnect..

Thank you everybody..