Michael Polyviou - Managing Member, EVC Group William Annett - President and Chief Executive Officer Al Parker - Chief Operating Officer Mitch Levine - Chief Financial Officer Lyndal Hesterberg - Senior Vice President, Research and Development.

Bruce Jackson - Benchmark Keay Nakae - Chardan.

Good day and welcome to the OncoCyte Conference Call to Discuss Second Quarter 2018 Financial Results and Operating Highlights. Today’s call is being recorded. At this time, I would like to turn the call over to Michael Polyviou of EVC Group. Please go ahead..

Thank you, Ann, and thank you everyone for joining us this afternoon’s conference call to discuss OncoCyte’s second quarter 2018 financial results and recent operating highlights. If you have not seen today’s financial results press releases, please visit OncoCyte's website at www.oncocyte.com.

Before turning the call over to William 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.

Any statements that are not historical fact, including, but not limited to statements that contain words such as “will,” “believes,” “plans,” “anticipates,” “expects,” “estimates” and similar expressions are forward-looking statements.

We encourage you to review the company’s SEC filings including without limitation the company’s forms 10-K and 10-Q, which identify the specific risk 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 OncoCyte’s 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 the company commercializes, our need and ability to obtain future capital and maintenance of IP 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 second quarter 2018 financial results and operating highlights. Joining me on today’s call are; Mitch Levine, our Chief Financial Officer; and Lyndal Hesterberg, PhD, the Senior Vice President of Research and Development.

Mitch and Lyndal will be available during the question-and-answer session. In addition, I would like to introduce our new Chief Operating Officer, Al Parker. Al has had a distinguished carrier in the Life Sciences industry, including senior roles at companies such as Wyeth and Sunovian.

He also has an extensive background in business development and creating partnerships with key industry players. We’re very pleased to have Al join the OncoCyte team and are confident that he will add a great deal of value for the company and the shareholders. I’d like to ask Al to say a few words by way of introduction.

Al?.

Thanks for the introduction Bill, and good afternoon to everyone on the call. I appreciate the opportunity to participate today, despite coming on board just little over a week ago. I want to take a few moments to express my enthusiasm about joining the company.

From my perspective, this is an exciting and promising time in OncoCyte’s history, and I look forward to contributing to the company’s success going forward. There are many reasons for my optimism regarding the company, but I’ll touch on just a couple now.

First, I believe the research and development led by Lyndal and his team has significant potential that could position the company to become a leading player in the molecular diagnostics market, especially liquid biopsies.

The innovation in science and technology at the company has the potential to address significant unmet medical needs and ultimately could deliver meaningful benefits to patients, physicians and payors, which could also create substantial shareholder value.

Leveraging those assets will be a will be a particular focus as I settle into my position, and I believe there may be considerable opportunities in the future.

Second, the company has assembled a strong, capable management team with diverse perspectives, skill sets, in areas of expertise, the combination of which will enable the company not only to be creative and flexible in developing business strategies, but also to be nimble and adapt in execution.

Further with the benefit of an engage board with significant industry, financial, and business experience, I believe they’re strong prospects for growth and success at the company. I look forward to working with Bill, Mitch, Lyndal, and the rest of the team in OncoCyte and hope to have more the same in future calls.

With that, I’ll turn the call back to Bill..

Thanks Al. I’m very pleased with the progress that OncoCyte has made in the last two quarters. And I believe that it’s accurate to say that we have turned a significant corner in the development of DetermaVu, our confirmatory non-invasive liquid biopsy test intended to facilitate clinical decision making in lung cancer diagnosis.

As you know, in Q4 of 2017, OncoCyte encountered problems with the reagents for the diagnostic testing platform that we were using to develop DetermaVu, and these problems caused a delay in our development timeline.

We’ve now shown that DetermaVu can use two other platforms as they are standard in the industry and have transitioned our product development program to one of these platforms. Consequently, our program is about to be restarted and we project that will be completed in the first half of 2019, if all of the studies and the program are successful.

Furthermore, as Mitch will discuss in the finance section of the call, we have carried out several financings recently that together have provided us with sufficient capital to carry us through at least the next 12 months. In summary, well, OncoCyte has been through a difficult period.

We have successfully dealt with the issues we faced and we’re now back on track. We’re excited about the potential for DetermaVu to address the very large unmet need for our confirmatory lung cancer diagnostic product. I like to go into a little more detail about these recent developments.

During the second quarter, our primary focus was on completing a second larger study of clinical samples in the development of DetermaVu, using two alternative commercial diagnostic testing platforms, the Illumina Nova Seq 6000 and the Thermo Fisher Chef-S5.

Earlier this quarter, we were pleased to report that the study unambiguously concluded that we can continue the development of DetermaVu on either of these two leading clinical diagnosis platforms. In addition, the study incorporated newly discovered biomarkers into a new next generation version of DetermaVu.

These biomarkers appear to be more robust than those used in the earlier biomarker panel and may enhance the utility and accuracy of DetermaVu.

The use of the new biomarkers in combination with the existing Wistar biomarkers achieved encouraging results even without the inclusion of clinical data such as nodule size, while the original DetermaVu algorithm included nodule size as a contributing factor.

We found that the enhanced algorithm yielded accuracy results as measured by area under the curve or AUC, equivalent or superior to results of previous studies using the first-generation biomarker panel and algorithm.

With this successful outcome, we’re now in the process of moving the biomarkers and assay to the new diagnostic testing platform that we have chosen. We believe that the precision of this new platform may further increase test performance.

In the near-term, we’re carrying-out a series of steps necessary to develop and validate our new version of DetermaVu. We have acquired the new diagnostic testing platform and ordered a custom panel from the manufacturer, intending only the biomarkers and control housekeeping genes that we need for DetermaVu.

Once the new panel is ready, we will initiate a large approximately 700 clinical sample study to train and develop the new algorithm. Then we will begin a perspective blinded R&D validation study on approximately 250 clinical samples to access the performance of the second-generation algorithm on the new platform.

If successful, the R&D validation study will be followed by an analytical validation study and a clear validation study in the company’s CLIA laboratory. Finally, we plan to conduct a Clinical Validation Study to confirm test performance.

Since we have already collected all the samples needed to perform the remaining studies, at least through the R&D validation study, we believe that we can proceed much faster compared to the previous studies that we conducted during 2017. We’re continuing to collect samples from a network of over 50 clinical sites across the United States.

Also, since we have the necessary patient samples in-house, we’re planning to expand the R&D validation study protocol to include a larger number of samples than were used in the comparable 2017 R&D validation study.

This larger sample set is intended to provide us with a clear picture of the potential accuracy of DetermaVu and to give us added confidence in the results expected in the clinical validation study that will follow.

Our goal is to complete the expanded R&D validation study by the end of 2018 and then complete the clinical validation study during the first half of 2019. Our plan is to have DetermaVu commercially available, shortly after completion of the clinical validation study, assuming that that study is successful.

We believe that this should be sometime in the second half of 2019.

However, as we have discussed previously, like most diagnostic products we anticipate that obtaining reimbursement for DetermaVu from Medicare and private payers will take a considerable about of time and will be dependent on successful completion of a clinical utility study, which we are planning.

The development and execution of our commercial strategy and the clinical utility study will be dependent on OncoCyte raising sufficient capital.

Based on the results we have experienced to date, and assuming that we continue to see results similar to those we have obtained previously, we believe there is a tremendous opportunity for OncoCyte to create a highly accurate test that could successfully address an estimated $4.7 billion annual U.S.

market for confirmatory lung cancer liquid biopsy test, depending on pricing market penetration and the availability of Medicare and private payer reimbursements.

As a reminder, and for those of you who may be new to the OncoCyte story, DetermaVu is our confirmatory, non-invasive liquid biopsy test intended to facility 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 their 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 and risky lung biopsies performed annually in the U.S.

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 with much greater accurately, which patients need biopsies, and which patients only need follow-up imaging.

Although we have not focused a lot of management attention on markets outside of the U.S., we believe that there may be significant opportunities overseas, including in China and the European Union. The development and approval of diagnostic products in these markets have some differences from the situation in the United States.

Significantly, the use of the new platform that we have chosen could allow for decentralized operations beyond our CLIA laboratory, potentially enabling development of a CE marked kit product for distribution in Europe and other markets. As we develop DetermaVu for the U.S.

market, we will begin to turn our attention to creating a plan for their potential expansion into these external markets. At this time, I’ll turn the call over to Mitch Levine for a brief discussion of our second quarter financial results.

Mitch?.

Thanks Bill, and good afternoon to everybody. At June 30 2018, we had $10.3 million of cash and cash equivalents and marketable securities valued at $728,000.

An additional $3.3 million, net of financing expenses was received on July 31, 2018 as a result of a successful at-market registered direct offering of units comprising of common stock and warrants. This offering was led by management and the Board of Directors and included institutional investors new to OncoCyte.

The financing provides us with additional resources to advance DetermaVu through the remaining development steps that must be completed prior to commercialization. The participation by management and members of the board reflects our continued commitment to success and confidence in the company’s long-term growth prospects.

For the second quarter of 2018, OncoCyte reported a net loss of $4.5 million, or $0.12 per share, compared to a net loss of $3.8 million, or $0.13 per share, in the second quarter of 2017.

Operating expenses for the second-quarter of 2018 were $4.2 million, as reported, and were $3.0 million, on an as adjusted basis, which excludes certain non-cash operating expenses.

We have provided a reconciliation between GAAP and non-GAAP operating expenses in the financial tables, including with our earnings release, which we believe is helpful in understanding our ongoing operating expenses.

Cash used in operating activities was $3.96 million for the second quarter of 2018, which included over $800,000 in aggregate cash payments for legal fees, financing related costs, and bonuses paid for retention and performance.

Cash and cash equivalents, including the proceeds from the financing we just completed, enable us to maintain our core capabilities and complete the development of DetermaVu as we continue to align our operating expenses with our primary goal of completing DetermaVu, essential for creating long-term value for our shareholders.

Research and development expenses for the second quarter of 2018 were $2.3 million compared to $2.0 million for the same period in 2017.

The second quarter of 2018 also includes a $625,000 non-cash impairment charge related to our noncore, therapeutic intangible assets that we had acquired for therapeutic uses that we no longer plan to develop or commercialize as we continue to devote all of our research and development resources to cancer diagnostic test, and particularly to our primary goal of completing development of DetermaVu.

General and administrative expenses for the second quarter ended June 30, 2018 were $1.3 million, compared to $1.1 million for the year ago quarter. That concludes my remarks concerning our financial results. Now, I’ll turn the call back to Bill..

Thanks Mitch. In summary, we believe that we have turned an important corner and are back on track in developing DetermaVu. We continue to make important progress and we remain very encouraged based on the results we’ve recently reported.

The results of the larger clinical sample study were positive and we have selected a new next generation sequencing diagnostics platform that we have now installed.

In short order, we will begin optimizing a new algorithm based on the new platform and the combination of new and earlier biomarkers selected for the test and then conduct a series of studies, including a 700 clinical sample algorithm development study and a 250 clinical sample R&D validation study.

Based on our current time line, we expect to complete the R&D validation study by late 2018. Subsequently, we will perform the analytical validation and clear validation studies. If these studies are successful, we will then conduct a clinical validation study which we intend to complete in the first half of 2019.

We project that DetermaVu will be commercially available, shortly after the successful completion of the clinical validation study and project that this could occur in the second half of 2019. We are excited about the potential for DetermaVu to address the high unmet medical need in the diagnosis of lung cancer both in the estimated $4.7 billion U.S.

market and potentially in overseas markets as well. Operator, that completes our formal remarks. Please open the call for questions..

Thank you. [Operator Instructions] We’ll take our first question from Bruce Jackson with Benchmark..

Good afternoon, and thank you for taking my questions. First question is for Al, welcome aboard.

In terms of leveraging the assets that covers a lot of territory and I was wondering if there was something in particular that you were looking at initially such as the bladder testing program or maybe the breast program?.

Hi Bruce, thanks for the welcome. At this point, Bruce, it’s – I have a very wide lens, so working with the team at OncoCyte and the board, part of my remits there is to evaluate all of the various assets there at the company and figure out how best to create a shareholder value..

Okay. Thank you for that.

And then for Mitch, I was wondering if you could just comment briefly on the operating expense profile for the rest of the year and the anticipated burn rate?.

Hi Bruce, I think that our expenses will range in just under $1 million to just over $1 million for a month based upon the budget that we have in place and that should get us through clinical validation..

Okay.

And then last question on the 250 patient R&D validation study, are we going to get the full range of statistics in terms of the AUC and a sensitivity specificity, and then are you going to look at the algorithm with and without the nodule size included?.

Yes, thanks Bruce, this is Bill. So, the R&D validation study, we will be of course producing all of the accuracy statistics, the AUC sensitivity specificity and so on and of course we may apply to present those statistics and the results of the study at an industry conference, a medical conference.

So, they may not be immediately available when we complete, but we will certainly let everyone know about the outcome of the study in broad terms. So that’s our planning on that..

All right. That’s it from me. Thank you very much..

Thanks Bruce..

Thanks Bruce..

We’ll go next to Keay Nakae with Chardan..

Hi, thank you. Bill, I'm just wondering if you can maybe go on a little deeper to the activities required before the R&D study, just a complexity of it.

First, in terms of getting the personal comfortable with new equipment, getting the appropriate panels from the manufacturer, how long does all that take and then as you move into the training set exercise, should be straight forward, but again in terms of being able to use the indiscernible platform what challenges might that represent?.

Sure. Thanks, Keay. So, we are in the process now of – and we have the equipment installed, we are having our team trained on the equipment. Luckily, one of our key Philip McQuary has used this particular equipment extensively in the past. So, that is all underway. And as I mentioned, we have ordered the panel. And we’re awaiting for that to arrive.

So, all of these things are going to take a little while, and we anticipate a starting – the actual algorithm training study, which again is based on 700 patients. It’s a 700-patient trial. So that’s a fair-size trial. And that should begin in the not-too-distant future. Sometime after Labor Day. In September, we are anticipating that will begin..

Just in terms of doing the test on the new platform, in terms of any additional steps of fewer steps, is it easier harder or the same as the prior platform?.

Lyndal, can you answer that question?.

Yes. If I understood the question, it’s operationally how does it compare to the prior platform. And I would say on that it’s about same. We don't see a large amount of difference in time or any other materials we’re working with. So far, we’re encouraged by what we're seeing..

Okay.

And then just finally in terms of the number of samples are you thinking you will need to conduct the analytical CLIA in clinical validation studies, do you have a ballpark of how many additional samples you're going to need?.

No. We have a very – we have a larger number of samples right now. We will in order to get all the way through clinical validation. We are going to have to continue to collect, and we believe we should by the end of this year or early in 2019, we should have enough samples for all of the studies.

So, right now, we have somewhere over 2,000 samples in total, and as I mentioned, we’re going to be using 700 in the training set. We are using another 250 in R&D validation. And then we will continue to collect.

And it’s important to get a good mixture of both malignant and benign samples, as well as geographically well-represented samples from across the U.S..

Okay. That’s all I have. Thank you..

And we have reached the end of the allotted time for today's call. At this time, I would like to turn the call back over to Bill Annett for any additional or closing remarks..

Thank you very much. And thank you everyone for joining our call. We appreciate your interest and support of OncoCyte..

And this does conclude today's conference. We thank you for your participation. You may now disconnect..