Michael Polyviou - Managing Member, EVC Group William Annett - President & CEO Mitch Levine - CFO Lyndal Hesterberg - SVP, Research & Development.

Bruce Jackson - Lake Street Capital Markets Raymond Myers - Benchmark Company Paul Knight - Janney Montgomery Scott Keay Nakae - Chardan Capital Markets.

Good day and welcome to the OncoCyte Conference Call to Discuss First Quarter 2018 Financial Results. Today’s conference is being recorded. At this time, I’d like to turn the conference over to Mr. Michael Polyviou. Please go ahead..

Thank you, Vicky and thank you for joining us on this afternoon’s conference call and webcast to discuss OncoCyte’s first quarter 2018 financial results and recent developments. If you have not seen today’s press releases, please visit OncoCyte' website at 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 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 these 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 approvals, the capacity of our third party supply blood sample analytic system, to provide consistent and precise analytic results on a commercial scale,, the need to obtain third party reimbursement for patients use of any diagnostic test we commercialize, our 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 under applicable law. With that, I’ll turn the call over to Bill Annett. Please go ahead.

Bill?.

Thanks, Michael, and welcome, everyone, to our conference call to discuss our first quarter 2018 financial and operating results. Joining me today on the call are; Mitch Levine, our Chief Financial Officer; and Lyndal Hesterberg, PhD, the Senior Vice President of Research and Development. They’ll be available during the question-and-answer session.

I am pleased to report continued progress in the development of DetermaVu our confirmatory noninvasive liquid biopsy test intended to facilitate clinical decision-making in lung cancer diagnosis. As I've discussed previously, we are currently carrying out a confirmation study of our DetermaVu lung cancer diagnostic test.

This study is being conducted on two alternative diagnostic testing platforms using newly discovered biomarkers and seeks to confirm the successful results of a previous 60-patient study which we reported on in March.

That study resulted in accuracy as measured by Area Under the Curve or AUC data, which was equivalent or superior to previously reported DetermaVu results. Although as a reminder that error bar of our potential range results from that small sample study is very wide.

So OncoCyte is now seeking to confirm those results in the larger study, which is now underway. In that study, we have now completed testing of an additional 100 samples on two alternative diagnostic testing platforms and begun analyzing the very large amount of data generated from all 160 samples in both studies.

As a reminder, this study is being conducted using 190 newly discovered, newly patented biomarkers as well as the existing biomarkers that OncoCyte has in-licensed from the Wistar Institute and that currently make up our DetermaVu assay and the objective of the study of course is confirming the positive results, which we previously reported.

There has been a lot of discussion recently about the application of Big Data and advanced IT analytic techniques to diagnostics R&D and a number of companies that are employing this strategy have received a lot of attention. OncoCyte is also taking this approach in a manner that is very focused on developing our lung cancer diagnostic assay.

Our two recent studies have generated a very large amount of mRNA transcript on [ph] data on 160 patient samples, including both the Wistar biomarkers and our 190 new biomarkers. This data is currently being analyzed by our biostatistician.

In fact, we have generated over 20 terabytes of new data on the mRNA transcript [ph] of lung cancer patients 1 terabyte is a trillion bytes and so our 20 terabytes of data is equal to more than 8 billion single-spaced type pages of information.

This data is being analyzed using advanced statistical methods define the optimum combination of biomarkers to incorporate in our DetermaVu diagnostic test.

The outcome of the study will determine whether the 190 novel biomarkers will further increased the accuracy of DetermaVu and whether the two diagnostic testing platforms being tested will provide consistent and robust support for the further clinical development studies that are necessary for commercialization.

We remain on track to meet our goal of having the results of this study complete by midyear.

Once the appropriate platform is selected, OncoCyte will work to train, optimize and lock a new algorithm based on the diagnostic testing platform and the new panel of biomarkers selected for the test and then conduct an R&D validation study, which will include an analytic validation study.

All samples necessary for carrying out these studies are already in-house, which enables rapid advancement through each of these studies. If these studies are successful, the company will conduct a clinical validation study which we expect to complete in 2018.

If that final study is successful, we anticipate that DetermaVu will be commercially available shortly thereafter. As a reminder and for those of you who may be new to the OncoCyte story DetermaVu is our confirmatory noninvasive liquid biopsy test intended to facilitate clinical decision-making in lung cancer diagnosis.

DetermaVu is designed for use following a low dose CT scan and before a tissue biopsy in at-risk patients where the scan shows evidence of a suspicious lung nodule.

We believe that widespread adoption of DetermaVu could result in a major reduction in the number of unnecessary expensive lung biopsies performed annually in the US with a corresponding reduction in the surgical risk to patients undergoing lung biopsy procedures.

This would be a fundamental advancement in the diagnosis of suspicious lung nodules by allowing physicians to determine more accurately, which patients need biopsies and which patients only need follow-up imaging. We estimate that approximately 1.4 million patients annually in the U.S. could benefit from DetermaVu.

Depending on market penetration and reimbursable pricing, this could translate into a market opportunity of up to $4.7 billion annually. Depending on a number of other recent develops at OncoCyte, in March we strengthened OncoCyte's balance sheet through a $10 million private placement of common stock with two current investors.

Also we continue to enhance our abilities to rapidly prototype, evaluate and develop lung cancer diagnostic products through the continued growth of our well-characterized lung cancer clinical sample bank.

The network of clinical sites that we have partnered with to collect the samples for our studies, now consists of about 68 different institutions from across the United States of which over 50 are currently active.

We also strengthen the company's Board of Directors recently by adding Ronald Andrews Junior an executive with over 30 years experience in the molecular diagnostics and genomics industries. In addition, Kevin Redmond our Director since 2015 was appointed Chairman of the Board.

Now I'll turn the call over to Mitch Levine for a brief discussion of our first quarter financial results.

Mitch?.

Thanks Bill and good afternoon to everyone. First for the first quarter of 2018 we reported a net loss of $3.8 million or $0.12 per share compared to a net loss of $4.7 million or $0.16 per share in the first quarter of 2017. Operating expenses for the first quarter of 2018 were $3.9 million as reported and were $3.4 million on an as adjusted basis.

Cash used in operating activities was $2.75 million for the first quarter of 2018 or just over $900,000 per month. The current quarter average spend per month of just over $900,000 is about an 18% reduction from the first quarter 2017 cash used in operations of about $1.1 million per month.

In recent months, we have focused on managing hours spent by prioritizing our activities, keeping critical capabilities in place while reducing staff and resources allocated to certain nonclinical activities and deprioritizing some longer-term projects.

We are making further cost reductions in order to achieve a lean operation with as low on monthly spend rate as is consistent with keeping our core capabilities in place and achieving our objective of developing DetermaVu and making it commercially available.

This includes reducing some staffing not required for the development or clinical validation of DetermaVu. This staff reduction will include some development and sales and marketing employees and consultants and we will offer sabbatical packages to some senior marketing and sales executive.

Importantly, none of the cost reduction steps we have taken will delay completing the DetermaVu clinical validation study.

As a result, we are reducing our cash burn by focusing on aligning our operating expenses with our primary goal of completing our key DetermaVu clinical validation study, which we believe is the activity that has the greatest potential to create value for shareholders over the next year.

Research and development expenses for the first quarter of 2018 were $1.5 million compared to $1.8 million for the same period in 2017. General and administrative expenses for the first quarter ended March 31, 2018 were $1.8 million compared to $2.0 million for the year ago quarter.

At March 31, 2018, we had $12.6 million of cash and cash equivalents and marketable securities valued at $950,000. An additional $2 million was received on May 10, 2018 as the final installment of the stock purchase commitment in a private placement of common stock during March 2018.

That concludes my remarks concerning our financial results and I'll turn the call back over to Bill..

Thanks Mitch. In summary, we are excited to have completed the sample testing phase of our confirmatory DetermaVu study on schedule. We're currently analyzing the study data and expect to announce a decision on the diagnostic testing platform of choice by midyear.

Once the appropriate platform is selected, we work to optimize and lock a new algorithm based on the particular platform and the new panel of biomarkers tested, selected for the test and then conduct an R&D validation study including an analytical validation study.

All samples necessary for carrying out these studies are in our possession, so we believe we can advance rapidly through each study. If these studies are successful, we will then conduct a clinical validation study, which we plan to complete this year. Operator that completes our formal remarks, so please open the call for questions..

[Operator Instructions] And we'll go first to Bruce Jackson with Lake Street Capital Markets..

Hi thanks for taking my question. So in terms of the confirmation study where you're analyzing the data right now, when do you think you might be releasing the results of that? I know you said midyear, but are we talking towards the end of Q2 and possibly in the Q3 or do you think this is something you will have completed by the end of Q2..

So as we mentioned during our prepared remarks, we've run all our samples and we have all the data and all of that information is now with the biostatistician.

Because it's such a very large amount of data and I mentioned 20 terabytes of data, that's going to take some time to run and so you we haven’t got an exact estimate of when all of that will be finished because there still a lot of variables involved in analyzing that much data.

But as we say it should be -- it could be by the end of June, it could be early into July, we're not sure at this point in time. So we'll just have to stand by and see what happens.

In terms of reporting the data we will of course report out on the high-level results of the study, but we also hope to be able to present this data at a scientific conference and so if that's the case, then of course we will be embargoed from giving specifics about the actual numerical results..

Okay. Great. That's helpful and then a question for Mitch, so looking forward at the operating expense profile for the rest of the year, would you -- what should we expect in terms of the SG&A and the R&D similar to Q1 or will be there -- will there be any variations as we move through the year..

We expect that the plans we've laid out will continue to help lower our cash burn. I think they'll be similar to Q1 with an emphasis on continuing to manage our cash prudently..

Okay That's it for me. Thank you..

And we'll go next to Raymond Myers with Benchmark..

Thank you. My first question is for Bill. Do the new blood biomarkers have potential to improve DetermaVu's accuracy or does it support potentially test and other indications beyond lung cancer as well..

So we believe as I think we discussed a little bit in the last call, we're excited about the new biomarkers. They do show a lot of signal and in fact in some ways a better signal length, some of the previous markers we had. So there is the potential if all goes well that it could improve the accuracy.

Now we don't know that yet until we obviously do the numbers, run the information and see, but that is a possibility. And in terms of other indications, we don't have any data on that at this point in time. This has only been focused on lung cancer, lung nodules people with either malignant or benign lung nodules.

So we don't have any other data at this point in time that's certainly an interesting question for the future once we do the DetermaVu test as possibly something that could be looked at..

Good, thanks and maybe you could describe the nature of these new biomarkers aren’t they similar to the RNA mRNA transcript markers that you had for Wistar Institute or is it more of the similar type or are they different types of markers..

These are also mRNA markers. So given my lay person's understanding when Wistar Institute did the initial discovery work some years ago now on the [indiscernible] platform, they were something like 10,000 mRNA markers available for testing on that platform.

When we reran the numbers, sorry the samples hear this year, through improvements in the technology, there were something on the order of 40,000 mRNA markers, which we tested our blood samples against and because of that, because of this major increase in the technology, we were able to identify these 190 new novel biomarkers and Lyndal let me ask you if you got any elaboration on those points..

You're spot on, on that Bill. These are biomarkers that were just simply weren’t available to the Wistar at the time they did their work and they are advised not reported and unrecognized for their involvement in lung cancer and [indiscernible] of benign [ph]..

Thank Lyndal..

Thank you. And then one quick question for Mitch, how many shares are outstanding currently..

We have 39.3 million shares outstanding..

Thank you..

Thanks Rick..

Operator:.

Hi Bill. The prior test had shown I think around 90% sensitivity and 54% specificity on one study. What would you like to see in order for your new panel? What would you like to see in terms of sensitivity specificity on the larger panel to make you feel like it merited supporting..

Right. So we did a comprehensive study of over 200 chest physicians and we asked them exactly that question. What level of sensitivity and specificity, do you have to see in order to use this test and in sensitivity, the numbers are very high because of course you don't want false negatives.

We don't want to tell patients they don't have cancer when they do. So the physician's response the tipping point it will be somewhere in the 85% to 90% sensitivity range.

So anything over that this should be usable from a sensitivity standpoint and certainly all of the results that the Wistar Institute and OncoCyte have received to date show sensitivity know in that 90% range. If we can get it above 90%, that would be great, but I don't think that is necessary for having a commercially successful test.

In terms of specificity, what the doctor said and of course specificity being our ability to eliminate false positives to be able to identify if a nodule is in fact a false positive, it's not cancer. The answer basically was well, the higher, the better, but today the physicians don't have a lot of tools to work with.

There is no other test like DetermaVu on the market and so today, they are basically doing things like looking at the size of the nodule and trying to figure out whether or not it's a candidate for biopsy. So they tend to err on the conservative side.

So anything in the range of specificity, which we have, which has been yes between the 50s and up to 73% specificity in some of our studies from last year, anything in that range is very exciting for the doctors, better than what they have now and that the higher we can get it the better it is for doctors and in particular better it is for insurance companies or payers because the higher the specificity, the more unnecessary biopsies we avoid and therefore the more cash you save.

And what goes without saying that it's great for patients as well..

Okay.

And then regarding your technologies, you're trying out as well did I read your press release that you're looking at two alternative platforms or is it your our current platform along with one? Could you talk to that?.

Yes so a good point. So it is two alternative platforms, NanoString, which we had been using previously.

We have done a fair bit of work on, but we're looking at two alternate and these are standard commercially available platforms that we're looking at as an alternative and when we get the data, we will consider between the three platforms than a string in the two others, what seems to give the most accurate, the most robust reading as well as being operationally efficient and having low COGS and all our servicing..

Okay. Thank you..

And we'll go next to Keay Nakae with Chardan..

Thank you, Bill. A couple questions for you.

What if any work related to algorithm optimization can be done in parallel while you're waiting for these results to be finalized?.

So at a high level, the biostatistician that we're working with will be crunching all this enormous amount of data and looking at every conceivable combination of the 190 new markers and the previously existing Wistar markers and so we're talking about many, many hundreds of markers and looking at every conceivable combination of those markers in order to see develop our algorithms, optimizing and figure out which are the best, which is the best combination of markers to put in the algorithm.

And so at the end of this study, we will have a preliminary algorithm which will be tested further in other studies out later this year.

Lyndal any other comments about that?.

Well Bill and cognizant is an iterative process that it's [ph] and it does go hand in hand together. So I am comfortable that when we complete the analysis [indiscernible]..

Thanks Lyndal..

Okay. I think I got the most of what he said.

I guess what I would also ask you Bill is in trying to optimize, how far do you actually want to go with this? You got a lot of new variables for lack of a better word that you may be introducing and while it certainly could ultimately provide a better outcome, what you have already is pretty good as long as it's repeatable.

So how are you going to cut that off and say this is good enough but let's go forward?.

Well, what we are doing and so you're certainly right that what we have already in the algorithm, which was developed on the NanoString machine and the previous work we've done, gives great results which we continue to be excited about.

So we are as I mentioned, we are basically crunching all the numbers and every combination of potential markers to see if we can get something better and when the biostatistician has completed that work by the as I said by about midyear.

We don't think anything else will be necessary in that sense except for of course doing the follow-on studies to see if that algorithm is going to work in the real world doing the R&D validation, the analytical validation and so on.

So I think brief answer to your question is we are going to be doing everything possible over the next month or two in order to get the best possible algorithm given the data that we have..

Okay. All right, Well that's all I had. Thank you..

Thank you..

And we'll take a follow-up from Raymond Myers with Benchmark..

Yes thank you for the follow-up. Aside from enhanced platform consistency on these new platforms, is there any indication yet that test accuracy might actually be improved by selecting the best of three platforms..

I think that remains to be seen with the data. Again Lyndal do you have any comments on that? Lyndal are you there. I believe that we lost Lyndal..

Okay..

So I think, I think the way we will see that with the data and we're going to compare all three platforms against each other and see if the combination of the new platforms and the new markers can get us a greater accuracy in the test..

Okay. Thank you. Good luck..

Thanks..

And that does conclude our question-and-answer session. At this time, I'll turn the call back over to Bill Annett for any additional or closing statements..

Thank you. And thanks to everyone again for attending our conference call today. We appreciate your continued support as we advance DetermaVu towards potential commercialization. So that completes today's call. Thanks everyone for your participation..

Thank you. That does conclude today's conference. We thank you for your participation..