Michael Polyviou - Argot Partners Bill Annett - President and CEO.

Bruce Jackson - Lake Street Capital Markets Carolina Ibanez-Ventoso - Janney Montgomery.

Good day and welcome to Third Quarter 2017 Financial Results Conference Call for OncoCyte Corporation. Today’s conference is being recorded. At this time, I would like to turn the call over to Mr. Michael Polyviou. Please go ahead sir..

Thank you, operator. We appreciate everyone joining us on this afternoon's conference call and webcast to review OncoCyte's financial results for the third quarter of 2017, product development update and anticipated near-term milestones. If you have not seen this afternoon's press release, please visit www.oncocyte.com.

Before turning the call over to Bill Annett, OncoCyte's President and Chief Executive Officer, I would like to remind you that during the course of this conference call the company will make projections and forward-looking statements regarding future events.

We encourage you to review the company’s filings with the 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 to differ materially from those described in this these forward-looking statements.

These factors may include without limitation, risks inherent in the development or the commercialization of potential diagnostic tests, uncertainty in the results of clinical trials or regulatory certifications, uncertainty in timing of the training reimbursement authorization from third party payers, need and ability to obtain future capital and maintenance of intellectual property rights.

Therefore, actual outcomes and 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, please go ahead.

Bill?.

Thank you Michael and welcome everyone to our conference call to discuss our operating and financial results for the third quarter ended September 30, 2017.

Joining me on today's call are Lyndal Hesterberg, our Senior Vice President Research and Development, Kristine Mechem, our Vice President of Marketing and Russell Skibsted, our Chief Financial Officer. Kristine and Russell will be available during the question and answer session.

Before I move on to the quarterly update, I'm pleased to let you know that we have just hired a full-time Chief Financial Officer, Mitch Levine. Mitch is a very experienced financial executive with a tremendous healthcare track record and I'm confident that he will be a great addition to our senior leadership team.

His addition demonstrates our commitment to strengthening our senior management team to execute our long-term growth strategy based on the development and commercial commercialization of novel liquid biopsy diagnostic tests for the early diagnosis of long and other cancers. We'll be announcing Mitch’s appointment in a press release tomorrow morning.

Mitch is also on the call with us today. So with respect to the third quarter, during this period we made significant progress. As we successfully completed the analytical validation study of DetermaVu, our liquid biopsy lung cancer diagnostic test and received certification and licensure of our CLIA laboratory.

These were the primary goals of the quarter and we achieved both on budget and in a timely manner. The analytical validation study data were presented by OncoCyte at the International Association for the Study of Lung Cancer or IASLC in Chicago in September.

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 quantization, precision, reproducibility and interfering substances. OncoCyte completed all of these studies successfully.

The completion of the analytical validation study established the performance characteristics of OncoCyte’s lung cancer diagnostic test. And if the clinical validation studies are successful will allow for industrial scale operations under real world conditions.

The accuracy results of the analytical validation study reported at IASLC demonstrated sensitivity of 94.4%, specificity of 67.5% and area under the curve or AUC of 0.93, which means that 93% of the samples tested during the analytical validation study were correctly diagnosed.

These data are consistent with the data reported in May at the American Thoracic Society 2017 International Conference.

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.

The area under the curve or AUC of a test is a measure of overall global accuracy of combined sensitivity and specificity with 1.0 being perfect accuracy and 0.50 being a random result. The score point of 0.93 reported at the recent IASLC meeting means that 93% of the samples were correctly terrified.

I now want to provide an update on the progress of the DetermaVu clinical validation study, which is the final development step prior to commercial launch. This step involves essaying approximately 300 blinded prospectively collected samples to assess the performance of the full diagnostic system against clinically confirmed diagnoses.

The goal of the study is to demonstrate that the full essay system utilized in our CLIA Lab run by our CLIA staff and on certified instrumentation provides the same results on clinical samples as those obtained in the analytical validation and other studies carried out in our R&D lab.

Our expectation was to complete this study during the fourth quarter. However, during the initial process of running samples for the clinical validation study, our technicians observed in consistent analytic results.

During our analysis of the results of the first samples of the validation study, we noticed some anomalous results with control or housekeeping markers. As well as the biomarkers in the tests that are used to identify whether or not a lung nodule is benign. We include a number of synthetic housekeeping markers that act as controls.

These synthetic biomarker controls are designed to be very stable and they're quantization should remain virtually identical across all tests.

In this instance, we noticed that the measured levels of certain housekeeping markers varied significantly from expected levels, thereby revealing variability in the consumables that was not related to the test performance.

And consequently we believe that the inconsistent results were caused by a variance in a recently received lot of the consumables that are used in the processing system that analyzes blood samples. To address this issue, OncoCyte has ordered and is waiting to receive new lots of consumables from the supplier.

Once the new consumables are received, OncoCyte will conduct internal quality control procedures to ensure that they meet our requirements. Upon confirming that the new consumables will allow the analytic device to generate data with the consistency and precision required for DetermaVu, we will initiate the clinical validation study.

Due to the time required for these steps, OncoCyte now anticipates that completion of the clinical validation study necessary for the commercial launch of DetermaVu will be delayed into 2018 depending on the successful rectification of the causes of the inconsistent analytic results.

OncoCyte has only observed this issue in the most recent lot of consumables that we found problems with. Our earlier studies were conducted using different lots of consumables where this problem was not conserved. Consequently, the previous studies were not impacted by this issue and the positive results reported to date have not changed.

The positive result seen on those studies are valid and repeating the earlier studies is not necessary and is not being considered. As a reminder, during the American Thoracic Society 2017 International Conference in May, DetermaVu demonstrated an impressive sensitivity of 95%, specificity of 73% and area under the curve of 0.92.

And in addition, just two weeks Dr. Anil Vachani, an Associate Professor of Medicine at the hospital of the University of Pennsylvania and the Philadelphia Veterans Administration Medical Center represented the data at the ATS meeting also presented data on that study at the CHEST Annual Meeting held in Toronto.

We remain confident in the positive results reported to date and believe that the broad clinical use of DetermaVu you can contribute importantly to early lung cancer diagnosis and improvements in therapeutic outcomes for lung cancer patients. Upon successful completion of the clinical validation study, we anticipate launching DetermaVu.

With respect to the commercial side of our business, we continue to make progress building our commercial team including the hiring of an experienced Vice President of Sales Mike Vicari.

Mike brings to OncoCyte 35 years of successful sales and marketing leadership within the health care industry including the launch of several important diagnostic products.

Before joining OncoCyte he was with Eurofins Scientific as Vice President of Sales and Marketing in the clinical diagnostics business and was also Vice President of Sales for Sequenom where he led sales and strategy for nearly five years. He also served in senior commercial leadership roles at Genentech, Corixa Oncology, and MedImmune.

Mike is now in the process of building out our sales team. On the commercial operations side, we've now finished the ramp up of our commercial systems and processes and are ready to launch DetermaVu once it successfully completes the clinical validation study.

In addition, we have developed a comprehensive evidence plan to drive coverage and reimbursement.

We aim to demonstrate that DetermaVu will not only improve health outcomes by reducing the complications and death rates resulting from avoidable biopsies, but also significantly reduce the overall spend for lung cancer screening by reducing unnecessary biopsies.

Following the launch, we intend to initiate several clinical utility studies to obtain real-world evidence of both patient results and physician behavior.

In particular, our studies will look at whether physicians use DetermaVu will forgo unnecessary biopsies if DetermaVu results show no evidence of cancer and whether use of DetermaVu leads to cost savings.

We believe that over time, positive results from these studies should help satisfy payers that DetermaVu can reduce the number of avoidable downstream procedures and lower the cost of care while maintaining the benefits of low dose CT screening.

In addition to the US market, we believe that there may be a market opportunities through cash pay and distribution agreements outside of the US, including in Europe, Asia and the Middle East. We are currently in discussions with certain parties and hope to be able to announce our first international distribution agreement soon.

Success with this strategy could lead to additional DetermaVu revenues beginning some time in 2018. Now let me move to our second test under development, our liquid biopsy confirmatory diagnostic for breast cancer.

At the upcoming San Antonio Breast Cancer symposium next month, an abstract of the positive data from the company's NICE BC or Non-Invasive Confirmatory dEtection of Breast Cancer follow-on study will be presented in an abstract.

The data confirm the findings from OncoCyte’s previous breast cancer study presented at the San Antonio Breast Cancer Symposium in December 2016. In the earlier study, the 15-marker model resulted in an area under the curve or AUC of 0.92 with a sensitivity of 90% and specificity of 76%.

Given this level of accuracy and subject to successful completion of further R&D and clinical studies, OncoCyte’s novel panel of serum protein biomarkers could become the foundation of a highly accurate, non-invasive breast cancer diagnostic test.

As a reminder, OncoCyte’s breast cancer diagnostic is a blood test designed to be an adjunct to mammography to help physicians avoid unnecessary breast biopsies. We believe the test may significantly reduce the number of avoidable biopsies with a substantial savings of healthcare system.

Our breast cancer test is a confirmatory diagnostic intended for use following a suspicious mammogram and before a biopsy. Each year, approximately 38 million women in the US have mammogram screenings. Of all the women screened for breast cancer in the US, about 1.7 million have breast biopsies to determine whether lungs are malignant or benign.

In most cases, the results are benign with only about 20% of biopsies resulting in a cancer diagnosis. Thus, about 80% of breast biopsies are potentially avoidable. Lastly, before I summarize my remarks and open up the call for Q&A, I will discuss our financial results.

At September 30, 2017, we had 11 million of cash and cash equivalents in addition to available for sale securities valued at 1 million per total of about 12 million in liquid assets. In July, we received proceeds of approximately 5.74 million from the early exercise of warrants.

During the first nine months of 2017, we used approximately $9.3 million of cash or about $1 million per month. In the third quarter, we used approximately 3.2 million of cash or just over 1 million per month and had an overall net loss of 6.9 million or $0.22 per share.

I would note that a large amount of this loss, over $3 million was a non-cash charge related to the issuance of warrants in the July 2017 financing. In summary, we continued to make solid progress. Our lead product candidate continues to generate positive data and our goal is to begin the final clinical validation study for DetermaVu in short order.

We continue to plan for DetermaVu launch in 2018 and believe that upon launch, it will be the only commercially available liquid biopsy lung cancer diagnostic product, and but we estimate is the US market opportunity of up to $4.7 billion annually.

In addition, we will be presenting the most recent data on our breast cancer diagnostic test at the San Antonio Breast Cancer Symposium early next month. Operator, this completes our formal remarks. Please open up the call for questions..

[Operator Instructions] And we will take our first question from Bruce Jackson with Lake Street Capital Markets..

If we could dive into the delay in the commercialization with the consumables, consumables covers a pretty wide area of inputs for the testing and we're talking something it's as simple as like buffer or is it more complicated than that. And then what's your best guess as to the launch date.

Would it be sometime in Q1 or early 2018? So that’s the first question..

Thanks, Bruce. So the consumables in question are cartridges which contain the reagents that are used in the processing system that analyzes the blood samples. So that is what we have ordered a new launch. In terms of the launch date, we're not giving a projection at this point in time.

We're waiting for the next lot of consumables and when we get them, when we get the next lot of these cartridges, then we will begin clinical validation. And so as I say, at this point, we're thinking the completion of clinical validation will be in -- will be moving into 2018..

And then looking at the other development programs, you talked about the breast cancer tests, is the idea there that you're going to launch that one about one year after the lung cancer test, is that still kind of the timeline?.

So we are going to talk more about the test of course at the San Antonio Breast Cancer Symposium. And we haven't given a final date yet for the launch date of breast cancer, but again, yes, it will be sometime after we launch our lung cancer test, at least a year..

Last question, the bladder cancer tests, that one is a good candidate for partnering type of setup.

Any news on the bladder cancer tests?.

Yeah. We haven't been actively pursuing out-licensing that at this time. It's been lower on our priority list than the lung cancer and breast cancer. So no new developments on bladder..

[Operator Instructions] And we will move next to Carolina Ibanez-Ventoso with Janney Montgomery..

Regarding the issues you had with consumables, were you able to save part of the samples to analyze them again or will you have to collect new patient samples?.

Hi, Carolina. So we have all of the samples we need. We only use a small amount of the samples when we run them. So we have reserves. So we don't have to collect more samples. We have all of the 300 samples that we require for the study on site in our freezers and they’re ready to use..

And then regarding the data that you already have collected, what are your plans on publications, publishing this data?.

Well, the presentations which have been given on the analytical validation study at IASLC and the 300-patient study we presented at American Thoracic Society and most recently at Chest, we're not planning on publishing any of those at this point in time, but we hope to publish results of future studies as we finish clinical validation..

[Operator Instructions] And we will take our next question from [indiscernible]..

Bill, so with respect to the early analysis of the samples, can you tell us how the fact that you have these inconsistent results, how does that affect the overall reporting of the performance characteristics that you will publish at the end of the study..

So it shouldn't impact at all. So in effect, we haven't begun the clinical validation study yet and because we ran into these anomalous results, so once, as I mentioned once, we get the new lots of cartridges and consumables and then we will start clinical validation.

And so we have no results at all at this point time in turn on the clinical validation study. Once we get the consumables, launch the study and complete it, then we’ll know what the results are..

So maybe just for clarity, as you were preparing to analyze the results, as you were trying to dial in the control side, is that when you noticed the problems and therefore you hadn't yet run any of the samples you had received..

Yeah. So we started running samples, which we had received. We ran a relatively small number of them and in the QC process, our team noticed that there were anomalous results in these housekeeping or control markers. And as I mentioned earlier, basically, these are synthetic controls.

They're highly stable, chemical compounds and they're quantitative in their numbers, the level of them shouldn't change at all between different tests, but in fact, we saw there were significant variations and that was -- that's what the controls are for of course is to show you when something is off.

So we were able to see fairly quickly that there was some sort of problem and our technical team was able to do the analysis, investigate the causes and find that it was, we believe, a problem of the consumables..

So because you didn't have the control set up, you never ran and actually, never ran the test to an actual result for any of the samples..

We ran for some of the samples first, a relatively small number of them, but the results were not valid because of the problems with the consumables. So we're going to -- we have to, in essence, we have not started the clinical validation study yet, although we have run a relatively small number of samples..

[Operator Instructions] And it does appear there are no further telephone questions at this time. I would like to turn the conference back over to Mr. Bill Annett for any additional or closing remarks..

Thank you. Thanks to everyone for attending our conference call today. I look forward to updating you on our continued progress towards the achievement of our stated goals, including the planned launch date of DetermaVu. Thank you very much..

This concludes today’s conference. Thank you for your participation. You may now disconnect..