Good afternoon, and welcome to the Sera Prognostics Conference Call to review Third Quarter Fiscal Year 2023 results. [Operator Instructions] 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, operator. Good afternoon, everyone. Welcome to Sera Prognostics third quarter fiscal year 2023 earnings conference call. At the close of the market today, Sera Prognostics released its financial results for the quarter ended September 30, 2023.

Presenting for the company today will be Zhenya Lindgardt, President and CEO; and Austin Aerts, 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’ve 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 a recording will be archived in the Investors section of our website.

Please note that some of the information presented today may contain projections or other forward-looking statements about events and circumstances that have not yet occurred, including plans and 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 on the Investors section of our website.

I will now turn the call over to Zhenya, Sera Prognostics President and CEO.

Zhenya?.

first, on our new product development progress as we’ve moved to 2 new products in the next stages of their development; and second, on the improvements we are making to logistics of blood collection to enhance our customer experience. With that, I’ll now turn over the call to Austin for a review of our third quarter financial results.

Austin?.

Thanks, Zhenya, and good afternoon, everyone. Let me review our financial results for the quarter, and then I’ll provide a bit of detail on our steps to reduce cash burn and extend our runway following our moves to better align our commercial approach to the market we serve.

Revenue for the third quarter of 2023 was $42,000 compared to $87,000 for the third quarter of 2022. Gross revenues were $87,000 for the quarter but were offset by adjustments on old accounts as a result of our regular review of our revenue estimates.

As a reminder, on our last call, we noted our expectation that 2023 revenues will be less than $400,000. Total operating expenses for the third quarter of $8.2 million were down significantly from the $11.3 million for the same period a year ago as we continue to streamline our operations.

Research and development expenses were $3.5 million compared to $4.2 million for the third quarter of 2022 due primarily to improved efficiencies in our lab operations and lower clinical study costs.

Selling, general and administrative expenses for the third quarter of 2023 were $4.6 million, down significantly from $7.0 million for the same period a year ago, due primarily to steps we’ve taken over the past year to streamline commercial operations to better focus our commercial strategy while also streamlining administrative costs to match our current level of operations.

Net loss for the second quarter of 2023 was $7.2 million, down from $10.7 million for the third quarter of 2022. As of September 30, 2023, the company had cash, cash equivalents and available-for-sale securities of approximately $85 million.

In addition to the aforementioned year-over-year operating cost reductions, we’ve taken additional steps in the early part of the fourth quarter to further improve our cost structure across the organization, while carefully aligning our commercial focus and development activities on what we believe are the best near- and long-term revenue opportunities.

Our 2023 gross cash expenses are expected to be approximately $34 million for the year compared to approximately $39 million for the year in 2022, an approximate $5 million or 14% decrease. Our gross cash expenses for 2024 are expected to be less than $29 million as we fully recognize the impact of the streamlining efforts we’ve made in 2023.

This represents an additional annual decrease of approximately $5 million or 15%. We believe our plan for managing operating expenses in the future should enable us to operate into 2027 given our very strong cash position. Operator, we can now please open the call for questions..

[Operator Instructions] The first question is from Patrick Donnelly at Citi..

Hi. This is Brandon on for Patrick. Congrats on the quarter. And I wanted to start off by asking – so last quarter, you guys talked a lot about establishing partnerships and possibly licensing some of the in-house data.

I was wondering if you guys had any updates there? And who may possibly sound like your ideal either partnerships or people you want to place in some of the data to?.

Thank you so much for the question. I will start off and then see if Austin would like to jump in and add anything. We are still incredibly excited about the opportunity to partner with other companies both on our products and on our data. We actually have a lot of live discussions underway. I am not able to share specifics.

However, for our product collaborations, we are looking for companies that have relevant capabilities in commercializing products in our space, overlap in lab presence, commercial footprint etcetera. On data, we continue developing the definition of our product, the target audience and the commercial model.

So, the type of partners that we will be seeking will be driven by where we land on what is the optimal place for us to contribute with this unique asset. But, we are very excited to share more in the coming analyst calls about how those products are shaping up and alongside with them potential partnerships..

Great. Thank you and then one follow-up. For the timeline for the AVERT publication, I know you submitted those documents this year.

Any timeline of when that may be published, whether it would be next year or kind of later into ‘24, ‘25?.

Great question, the publication is currently under review. I cannot estimate the timeline. I am hoping not 2025, but there are no guarantees, but we know it’s under review at the publication where we submitted. So, the process is moving..

Got it. Thank you guys again..

Thank you..

The next question is from Andrew Brackmann at William Blair..

Hey everyone. This is Maggie Boeye on for Andrew today. Thanks for taking our questions.

I wanted to start maybe just on the KOL feedback you have gotten from AVERT thus far, and maybe talk about how that’s kind of shaping your conversations with institutional customers as you continue to add them?.

Great question, the early conversations have been really powerful. The data that we were excited to produce brings a couple of really important takeaways that our key opinion leaders noted. And of course, the data is achieving the goal, which of course is creating more opportunities for us to add additional customers.

So, what are those, number one is everybody is delighted by the diversity of the patient population and seeing the impact of test-and-treat strategy with PreTRM with varying populations because AVERT study had a significant portion of the high-risk treated patients that was of diverse backgrounds, unlike the previous studies we have shared before.

Number two is the incredible impact on the babies that are born the earliest. As you probably know, for some of the babies that are born before 32 weeks, it could be the matter of life and death as well as severe morbidities becoming some of the health impacts that can go away over time.

So, the improvement in gestational age has been noted as a really significant powerful, if not breakthrough improvement in what exists today for some of these earliest births because for earliest to be born babies, 2.5 weeks, matters incredibly versus for babies who are, let’s say, after 37 weeks of gestation, extending their gestational age by 2.5 weeks is powerful.

However, it doesn’t carry significant – as significant outcomes as it does for babies under 32 weeks of age. So, those two have been highlighted as the most striking insights from the data, and we are really excited to share more as we engage with more and more customers.

I will also add that due to the nature of the study with significant historical arm, we are looking to explore if we could pull out the economics-impact of the clinical endpoint results that we have shown on the customers. So, all of these will be very valuable in discussions with as important with providers as they will be with payers..

Great. Thank you. That was super helpful. And then maybe just a follow-up there, just on your service care offerings.

How are you viewing those as expanding the moat down the long-term?.

It’s a great question. As you know, care management offerings exist by many providers. Majority of the time, they are generic. They are not specifically for Ob/Gyn nor are they standardized with protocols that can be replicated from one customer to another customer.

So, when we engage with new customers, especially the large institutional players where we began our focus the last six months, we found that they get intrigued and excited about achieving full scale of outcomes we have demonstrated in our clinical studies, and they are interested in seeing how the protocols we have tested in randomized clinical trials will impact the patient population and their institution, even if they have their own general care management offering.

So, we found it as a great catalyst having that offering to engage to show the impact of our product.

Over time, however, I would say that our strategy will be to drive standardization of care management offerings in the institutions themselves, so Sera doesn’t need to do that and present that standardization and ability to achieve outcomes for payer coverage to really drive the conversations with the payers that these results are replicable across institutions, time and again, for broader adoption..

Great. Thank you so much..

Thank you, Maggie..

[Operator Instructions] The next question is from Tom Stevens at TD Cowen..

Hi all. Congrats on the extension of cash burn. I had a couple of follow-up questions on PRIME and kind of some of your comments around the interim readout.

So, I guess my first one is, have you seen any data from PRIME? And I guess, could you give a bit more color as to why you are waiting for the full readout to give results there? Yes, I guess let’s start with that, and then we can follow-up afterwards..

Yes. It sounds great. I was anticipating somebody was going to ask a follow-up question. So, thank you for teeing that up. It fundamentally has to do with a number of high-risk treated patients that we need in the study to show the outcome and the benefit of the test-and-treat strategy.

When we initially set our PRIME patient population, both for the interim and for the final, we had an estimate of how many high-risk patients we will see in this national population from the initial single study site data that we have seen from, for example, over at ChristianaCare.

Second is we estimated what will be the overall compliance by the physicians with the treatment we are offering. And third is we had a model for how to estimate the number of patients needed for power in order to show the outcomes we are seeking.

So, with all of these three levers in the last three months to six months, we saw significant new data that allowed us to update our model and see how many patients we need in order to achieve full outcome. Again, we are not increasing the study by a lot, only by about 15% of patients, and we may not even need that many.

And it doesn’t extend the study significantly. And as we have been reporting on a quarterly basis, we are really far along in recruiting the patient population even along our original estimates.

So, when we updated our model for what is needed, in terms of the number of high-risk patients, what we saw is with the single-site studies, the high-risk population rate with homogeneous population in a single site was different than from the national, which is the study that PRIME is.

Second is, we had a different rate of compliance with treatment, higher. And last but not least, we now have the benefit of the AVERT data to see what impact was achieved with the high-risk treated population, as I just shared in my remarks, in that study.

So, armed with those three new pieces of data, we felt that given we are so far along at recruiting the full patient population, it is better if we are fully powered for the final readout and just go ahead and complete the study, then miss the timeline of interim look by enrolling more into the interim study. So, that’s why we made that call.

Now, your question was specific. Are we going to see any data? The answer is no. Unfortunately, we are not going to see the data. That said, we are very confident now with the updated model that we will see very, very strong results when PRIME is completed because we are seeing now the benefit of the AVERT study.

And of course, we are in communication with the sites, so far everything is going well.

So, we will be delighted when we hear from DSMB, which is reviewing the interim data without showing us and will give us a feedback in December, and we are counting on continuing the study to full enrollment and coming back to all of you with great results, hopefully, by the time the study concludes.

Does that help?.

Yes. That’s really helpful color there. If I could ask just another follow-up there, should we expect in the PRIME study that there is any kind of incremental information on potentially widening the patient population or maybe narrowing the patient population? Any color you have around that would be really, really helpful. Thank you..

Another excellent question with a lot of discussions we are having underway with the learnings from the recent papers we submitted for publications and the questions we are getting from payers and providers. We are exploring how rich can we make the data set from PRIME and reviewing that right now.

I don’t have a specific answer for you right now on extension or narrowing of the target population, but I promise to come back to you when we know more. I will tell you that the endpoints are very similar or they are exactly the same between AVERT and PRIME.

So for sure, expect the same data we reported from AVERT today to come from PRIME, and I believe given we have a bit of time to continue shaping what analysis are done, we will do our best to make this very significant – actually the most significant investments Sera has made to-date into PRIME data to really help drive adoption with our customers by answering as many questions as we can.

So, thank you for raising that..

Thanks. I am going to squeeze one more in just because I guess in your other test offerings coming on the pipe, do you have any timelines as to when you could give us potential timelines on that part of data readouts and maybe just updates in kind of alpha development? That would be wonderful for our own calendars..

Yes, absolutely. We are focusing to bring them to market as quickly as possible.

I will say that for the products we have described that are on our corporate deck, we have moved each one of them into the next stage of our development this quarter, which is a big milestone, a lot of work underway with completing research and teeing up for clinical validation.

While I don’t have for you exact launch date, as I mentioned in my remarks, we are hoping to give you a much deeper update on new product timeline stage in Q1 analyst call – Q4 analyst call that will happen early next year..

Perfect. Thanks very much..

Thank you..

[Operator Instructions] No further questions. I would like to turn the conference back over to Zhenya Lindgardt for any closing remarks..

Thank you, operator, and thank you so much everyone for attending our call today.

We continue to be really excited about the study results and the data that our studies show, including the word that we shared today that support the benefits for patients, physicians and insurance companies in the form of improved healthcare outcomes and care cost reductions in utilizing PreTRM test-and-treat strategy.

These results indicated that our technology can afford better futures, better health for expectant mothers and babies, along with reduced healthcare costs. We see Sera’s role as a pregnancy company, key in enabling a paradigm change that is overdue going forward to help reduce the impact of premature birth on families and our society overall.

And we are really grateful to all of our investors for their support and pursuit of that endeavor. Thank you so much, and we are now turning it over to you, operator, to conclude the call.

Operator?.

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