Good afternoon and welcome to the Sera Prognostics’ Conference Call to review First Quarter Fiscal Year 2022 Results. At this time, all participants are in a listen-only mode. We will be facilitating a question-and-answer session toward the end of today’s call. As a reminder, this call is being recorded for replay purposes.

I would now like to turn the call over to Peter DeNardo of CapComm Partners for a few introductory comments..

Thank you, Betsy. Good afternoon, everyone. Welcome to Sera Prognostics’ first quarter fiscal year 2022 earnings conference call. At the close of the market today, Sera Prognostics released its financial results for the quarter ended March 31, 2022.

Presenting for the company today will be Greg Critchfield, Chairman, President and CEO; and Jay Moyes, our CFO. During the call, we will review the financial results we released today, after which we will host a question-and-answer session.

If you not had a chance to review our quarterly earnings release, it can be found on our website at seraprognostics.com. This call can be heard live via webcast at seraprognostics.com and the recording will be archived in the investors section of our website.

Please note that some information presented today may contain projections or other forward-looking statements about events and circumstances that have not yet occurred, including plans or projections for our business, future financial results, and market trends and opportunities.

These statements are based on management’s current expectations and the actual events or results may differ materially and adversely from these expectations for a variety of reasons.

We refer you to the documents the company files from time-to-time with the Securities and Exchange Commission, specifically the company’s Annual Report on Form 10-K, its quarterly reports on Form 10-Q and its current reports on Form 8-K.

These documents identify important risk factors that could cause the actual results to differ materially from those contained in our projections and other forward-looking statements. As a reminder, a webcast replay of this call will be available in the Investors section of our website.

I will now turn the call over to Greg, Sarah Prognostics’ Chairman, President and CEO.

Greg?.

commercial development and support of revenue expansion; further demonstration of value of the pre-term strategy through expected study readouts; and pipeline progress of new products. First, I will discuss the commercial development progress.

Commercially, we noticed on our last call that COVID-19 had complicated and created disruptions in normal healthcare delivery, physician engagement, and enrollment in clinical studies.

In addressing these challenges, we have adjusted and streamlined our sales messaging based on experience and made changes in how we address the market opportunity efficiently.

We believe these disruptions are currently abating and our sales team delivered improved order volumes beginning in the second half of the first quarter, with orders accelerating in the February through April timeframe.

In fact, to quantify this, orders during the 3-month period of February through April increased 171% compared to the preceding 3-month period of November to January, with at least 25% order growth in each month during that time.

While we may not disclose such figures going forward due to their potential variability, we see this as a good sign that our revised sales methodologies are working.

Physician reorder rates have also improved, while process simplifications have decreased order to sample collection days, which is also a positive since it yields earlier revenue recognition in the overall testing process.

We have begun billing under recently executed agreements, including our agreement for in-network pricing with MultiPlan that we announced in February. As a reminder, 700 healthcare payers and 1.2 million healthcare providers participate in MultiPlan’s provider networks.

As a consequence, MultiPlan network participation encompasses a large number of pregnancies annually in the U.S.

We view our MultiPlan agreement as evidence of recognition of the unique health and cost benefits of using our pre-term test, the first and only commercially available blood test for proactive interventions by measuring each expected mother’s risk of spontaneous pre-term birth months ahead of when it occurs. Payers don’t make decisions in a vacuum.

They are constantly watching to see what other payers are adopting and providing payer coverage for innovative new tests. And they want to see data validating that such adoption will lead to beneficial improvements in health and reduction in healthcare costs that improves their bottom line.

Our upcoming presentation of health and economic benefits of the pre-term strategy scheduled later this month provides additional insights into the value of our technology from a clinical and economic perspective. As the market develops, we believe new payers will then be encouraged to sign up leading to a cascading effect over time.

A tipping point phenomenon could then occur in the introduction of our innovative pre-term technology as more payers are contracted and where the decision to adopt by a new payer is derisked by other payers who have already contracted.

We look forward to sharing information as we complete new contracts with strategic early adopter commercial payers, healthcare systems, physician network groups, governmental third-party payers, and self-insured employers. It is believed that about 64% of U.S.

employees with employer sponsored health insurance are in self-insured plans and the sales cycle in contracting with these plans tends to be shorter than with other payers. So, this is an attractive market opportunity for us.

While they use third-party administrators to carryout necessary functions for payment to take place, it is the employer who ultimately decides what is included in their benefits package.

One effect of the pandemic and current economic conditions is that the intense competition for employees is driving the move for improved employee benefits, including a package that supports expecting mothers and their newborns, which is viewed as an important feature of Sera’s story for self-insured employers.

And now, a word on healthcare disparities. We continue to be focused on underserved individuals and segments of society where access to high-quality healthcare services is low. While Medicaid patients comprise approximately 42% of pregnancies, they account for half of all pre-term births.

We are engaged in active dialog with government officials, political leaders, Medicaid leaders, health insurers, and organizations focused on improving the well-being of mothers and babies by reducing healthcare disparities among the underserved.

Our pre-term test is ideally poised to enable a real positive difference in these populations by objectively identify pregnancies at risk for spontaneous pre-term birth, enabling healthcare practitioners to intervene proactively to promote better care and outcomes for these mothers and babies.

Our recent announcement of our collaboration with the newborn foundations, Every Mother, Every Baby Project is one of many examples of Sera’s work to make a real difference. Now, for a brief update on forthcoming data on the use of our pre-term tests.

Later this month, we are scheduled to present a new clinical utility and health economic data analysis that illustrates the value of Sera’s test-and-treat strategy.

This is an independent cohort of patients for whom pre-term testing was performed and where the impact of applying proactive interventions in patients identified to have higher pre-term risk was evaluated. While the analysis is embargoed until its presentation at the conference, we expect to share more very soon about this work.

I am also happy to report that we are seeing a ramp up of enrollment in our large multi-center prime study within the Anthem network, with new sites bringing the total of enrolling centers to 13. We believe Prime will add to the already large and growing body of published data on our pre-term test.

The Prime study is on track for an interim look readout to occur in 2023. We anticipate that this study will provide additional compelling evidence to payers of the value of implementing the pre-term test-and-treat strategy. Finally, let me take a moment to discuss progress on our pipeline development – our pipeline product development.

We continue to progress our pipeline beyond the pre-term test, an industry first and only broadly validated and commercially available blood test in evaluating the risk of spontaneous pre-term birth months ahead of time.

We are also on track by mid-2022 to validate yet another industry first with our proteomics prognostic biomarker pre-eclampsia test. This is a complement to our pre-term test. This additional important test is designed to provide a prognostic assessment of the risk for pre-eclampsia.

Pre-eclampsia affects approximately 5% to 8% of all births, while pre-term birth occurs in about 10% of pregnancies. Sera’s goal is to provide both tests from a single blood draw to give clinicians a more complete picture of the risk for two of the most common and important adverse conditions of pregnancy.

We believe that the successful validation of our unique pre-eclampsia test will further establish Sera’s expertise in providing valuable pregnancy information designed to improve maternal and neonatal health.

This should in turn strengthen our competitive lead as the first mover, offering more comprehensive pregnancy information and thus solidifying our position as the pregnancy company. I will now turn the call over to Jay for a review of our first quarter financial results.

Jay?.

Thanks, Greg and good afternoon, everyone. Today, I’ll briefly review our financial results for the first quarter and then provide some general commentary on our outlook. For the first quarter of 2022, we reported revenue of $38,000 compared to $13,000 for the same period of 2021.

Earlier, Greg had mentioned that we are seeing some encouraging signs that awareness of our preterm test, which is the only commercially available test of its kind on the market, is leading to increases in orders, ordering providers, and providers with MultiPlan orders among other things that we are tracking, Although, we are early in the commercialization process and building from a rather small revenue base, the increase in revenue for the quarter that we just reported is promising.

Total operating expenses were $12.3 million, up significantly from the $6 million for the first quarter of 2021. The increase was primarily due to the scale up of operations to support marketing and commercialization of our preterm test.

Research and development expenses for the first quarter of 2022 were $3.3 million, compared to $2.4 million for the prior year period, due primarily to increased laboratory operations and clinical study costs.

Selling, general, and administrative expenses for the first quarter of 2022 were $9 million, up from $3.6 million for the first quarter of 2021, due primarily to increased headcount, as the company has scaled commercial operations and general corporate infrastructure, as well as increased costs related to operating as a public company following our IPO in July 2021.

Net loss for the first quarter of 2022 was $12.2 million, compared to $6.4 million for the prior year period. As of March 31, 2022, the company had cash, cash equivalents and available for sale securities of approximately $130 million.

We continue to believe we have sufficient capital resources to implement our strategy in 2025 without the need to raise additional funds. As I mentioned earlier, we are seeing encouraging and positive signs in our commercialization process.

Nevertheless, we do not expect any change in – the revenue projections, expectations that we – for 2022 we provided on our pre prior teleconference and still do not expect to provide any guidance going forward unless material positive changes would call for us to do so in order to keep you updated and transparent fashion.

In the meantime, we plan to continue to deploy our significant cash position in a careful and prudent manner in executing our commercialization and product development strategy, which we believe will build shareholder value in the future. I will now turn the call back to Greg.

Greg?.

Thanks, Jay, and thank you to all of you for attending our call today. We continue to be encouraged by our progress across commercialization, our ability to further illustrate additional, clinical utility, and beneficial health economics.

All the while, as we move our product pipeline forward, while the company pioneering a new era – pioneering in a new era in neonatal and maternal healthcare is not easy, it is immensely rewarding to be able to make a positive difference for mothers and babies.

With ample cash on the balance sheet and a keen focus on execution, we expect that it will also be rewarding for investors joining with us as we further establish our vision as the pregnancy company. And with that, we will open up the line for questions.

Operator?.

[Operator instructions] The first question comes from Patrick Donnelly with Citi. Please go ahead..

Hey, guys. Thanks for taking the questions. Greg, you talked a little bit about some of the data that’s coming as soon as within a few weeks here.

Can you just talk about, I guess, the sense you have for payers waiting on that data, waiting to see the health and economic piece, particularly before making their decisions? I mean, how much is this a catalyst for bringing on additional payers? Do they want bigger data sets? What’s the right way to think about the size of this catalyst on the ability to bring on extra payers once they see it?.

As you know, Patrick, we were engaged in a number of activities on the on the R&D side, on the clinical development side, where we demonstrate the value of identifying proactively who’s at risk for preterm delivery.

Payers are very interested in this because the ability to improve health and in so doing save them money is something they are very interested in. We already published a very large study with Anthem about the value of our test in being able to achieve those benefits from preterm testing early in pregnancy.

We have further data now on a different set of patients that we will be reporting on soon. We’re looking forward to seeing that. We believe that we continue to add to the large amounts of evidence we are amassing that show there is a benefit to the strategy, and – payers are very interested as they see these kinds of data..

Yes. No. That’s helpful. And you talked a little bit about the order increase sequentially through the quarter there. Can you just talk a little bit about what you’re hearing from the field in terms of what’s driving? Some pretty big numbers there, obviously, in terms of the growth you talked about.

What pieces of the sales methodologies are working? Maybe just expand on that a little bit in terms of what you’re hearing from folks out there?.

Sure. What’s happening – there are several things that we believe have helped us to accelerate our testing in recent weeks. Drivers include lessened disruption from COVID-19.

We’ve adjusted our sales messaging, and the third thing that we’ve done is, simplifying the process for patient identification and intake for preterm testing in the physician office. All those things we believe are contributors to the increased performance that we’re seeing in our sales team..

Okay. That’s helpful. And then maybe last one, just in terms of maybe a two parter, just in terms of the sales force build out. Can you just update us there? And then, Jay, maybe just on the balance sheet, can you update us in terms of the burn in position you guys are in there as well? Thank you, guys..

Let me address the sales force build out first and let Jay answer the second part. At this point in time, we have people deployed in population centers. We are distributed very well.

As we said earlier, across the Anthem Network and – as we deploy our sales force, we are making sure that they are effective where they are, and that we’re spending money in a very effective way with the simplification and the kinds of tools that we put in place. Right now, we will be looking constantly as we monitor what the progress is.

We spend our money where there is opportunity, where things are growing. That’s what you tend to double up on – as you – as the sales team performs. And that’s really the position that we’re in currently at this point in time.

Jay, any comment?.

Yes. I mentioned in my remarks, we believe we have sufficient capital resources to get us in 2025. You can see from the financial statements approximately what our burn rate is. And I think that we plan on continuing to build revenue over time before and after prime reports out in 2024.

And we believe that we can carefully managed burn rate by selectively hiring people on the commercial team. And we believe that we can ensure that all of the sales, marketing, and other corporate activities are productive against the bottom line..

Thank you, guys..

You bet. Thanks, Patrick..

The next question comes from Brian Weinstein with Blair. Please go ahead..

Hey, guys. This is Dustin on the line for Brian. I’m wondering if you can talk about the structure of your minimum payments with Anthem. I know that was the topic of discussion last call. Are you able to quantify what they are and how we should think about that for modeling purposes for this year and next? Thank you..

Yes. I’ll mention – I’ll talk about this briefly and I’ll let Jay add color to it. There are minimum payments that Anthem has with us under contract without disclosed the amounts. But we – what we have said is, this is a multiyear contract. And there are minimums that are – paid by Anthem as the company moves forward.

That was recorded as deferred revenue in the financials that you saw earlier. We see the same phenomenon being present in upcoming – in the upcoming years that the call for that payment..

And – yes, I don’t really have a lot to add on Anthem. We’re limited in what we can actually disclose, so I think it’s fairly well documented in the 10-Q and we’d refer you to that document..

Okay, got it. Thank you. And then last quarter, you also talked about a change and a shift in your strategy to more diverse, high risk population.

Can you talk a little bit more about that? How has that shift been progressing? And you have got pricing more uptake with that strategy compared to…?.

Clearly, the society has an interest in reducing healthcare disparities that occur in underserved populations. As I mentioned in my remarks, we are in discussion with – a number of parties that are really then on making a difference.

That includes governmental officials, it includes Medicaid officers, it includes insurance plans, it includes organizations that are keenly focused on making a difference. We the – to put thought processes in place take some time, we are discussing how best that to be done. But there is no make no mistake. This is a large opportunity, an important one.

And for society and the individuals and their families, it’s a critical thing for us to accomplish as we move forward, and we are excited for that opportunity. The more – the more data that we generate, the more we are engaged with people, the more widely known that our test is.

And when I say data we generate, that includes payment by a number of payers. As that happens, we believe we reach a point where things – things will change and it will really move things forward. We are not waiting for any one event. We are actually pushing the envelope on several dimensions as we commercialize and bring the test to market..

Okay. Thank you. And one last one, I am wondering if you can talk about any just numbers around number of border acquisitions. I know you said you saw an increase as a result of the simplified sales process, but just any metrics you can give us on that to help see how the ramp is going? That will be great. Thank you..

But we haven’t disclosed the number of working physicians. But what I can tell you is a number of physicians are already is increasing. And you can see from the month where we reported those periods of time that reporting differential growth, you get some idea of the kinds of volume increases that we are – that we are seeing.

Not only are we getting more physicians to order, we are also getting more orders written by any given physician in practice as well. You want to deeply penetrate those practices because having sustained ordering, that becomes part and parcel of how the – how their practice is conducted, how they take care of obstetrical patients.

That’s what the goal is ultimately. And we are seeing – we are seeing good signs of progress as we move towards that..

Okay, great. Thank you..

The next question comes from Anita Dushyanth with Berenberg. Please go ahead..

Hi. Good afternoon. Thanks for taking my questions, Greg.

I just wanted to clarify what you had mentioned about the sites that are open to conduct the prime study is, did you say there was an increase in the number of sites? And if it is, then do you think those enrollment rate could be higher which would implies, I mean there is opportunity to have an advancement in the data readout earlier than first half of ‘23?.

Great question Anita. First of all, when the PRIME study was designed, we envisioned approximately ten sites. As we got into it and as we saw slowing, we increased the number of sites that actually joined in.

And there has been greater interest from a large number of centers that are run by a very well-respected maternal fetal medicine experts to join in the efforts to generate the data. As we add new sites on, we do expect to see increases in the rate of enrollment over the next – from now through the time that they will be completed.

The one thing about pregnancy that’s important to understand is when you enroll a patient in the program, she gets a blood test in mid-pregnancy. But from that point forward there are a number of months that must take place before she actually delivers the child.

And so, while we will see increases in enrollment and we will – we set the goal of reaching 2,800 deliveries before year end, that’s clearly what we are on track to do.

If we still have to wait for those deliveries to take place for the last patients who are enrolled, that could be – they could be brought in for actually affecting the interim analysis that would occur in ‘23. So, we don’t really see it moving forward much at all, given the timeframes that we are talking about.

But, we will be enrolling at much higher rates as we bring on more sites, and these sites really get into the swing of actually running some tests. We will see more of these coming on and the acceleration to get to the end and even beyond the interim looks at the final number of the study.

We believe that, that puts it closer to the time that we will have the interim work. So, it’s a process work. We are very encouraged. We’re gratified by the interest of the reading centers that are joined in as we increase the number of sites..

Thanks. That was very helpful, Greg.

And then just to clarify, did you mention that the sales team is actually working to increase the number of accounts, or actually they are working towards increasing utilization per account?.

Great question. They are doing both, okay. So, they are not only increasing the number of physicians that are ordering the tests, but they are also increasing the number of tests that are ordered per a physician practice. So, both are important.

The increase in the number of physicians means that we are reaching out and broadening the number of doctors that are beginning to incorporate the testing into their practice. And then making sure there are more orders generated from a practice.

That’s how you get a sense that a physician is really buying into the idea that this is beneficial, something that he or she should offer to all of the cancer patients. That gives us sustained growth as we continue expanding out.

Those that are ordering – our overall orders of the test, we want to convert them into reorders of the test after we do so..

I see. Okay. And then lastly, in your sort of internal expectations and in your experience having done diagnostic before, reasonably speaking, how many studies do you think would actually warrant for – to impact guideline revision? I know that you have a great partner for just Anthem and the PRIME study is being connected with their help and support.

But how many studies do you think would actually be needed to make a revision in guidelines to include tests like pre-term as part of routine care?.

But as far as insurers are concerned, that is necessarily the number of studies, it’s the quality of the studies and how compelling are the data. And what I can tell you now is that we have payers who have already made the – who are already making decisions.

We have groups of people that are healthcare providers who are saying this is – this is ample for me to move forward. And we have contracts that we have signed with groups as we are moving forward, even in the early stages of commercialization. Typically, a payer wants to see that a test works.

We have compelling data that we are able to stratify populations. And in fact, in U.S. and non-U.S. populations, our tests can identify patients who are at higher risk.

With that, then the question is, if you use the test, what do you see, we have compelling health economic models, one published and one that is going to be presented before the end of this month, that demonstrate the value of that strategy.

And then lastly, we also have prospective intervention studies where patients have been tested, those that have higher risk are our interviewees upon much more proactively, and we show benefit.

So, those are the kinds of things that payors are looking for as they evaluate the technology and decide whether it is worthwhile to make this a routine test for the population that they are serving..

Great. Thanks, Greg..

You bet..

[Operator instructions] This concludes our question-and-answer session. I would like to turn the conference back over to Peter DeNardo for any closing remarks..

This concludes today’s call, and we look forward to providing an update on our business when we report second quarter 2022 financial results. Thank you and good afternoon, everyone..

The conference is now concluded. Thank you for attending today’s presentation. You may now disconnect..