Good morning, ladies and gentlemen, and welcome to Aspira Women's Health Inc.'s first quarter 2022 earnings conference call. My name is Tom, and I will be your coordinator for the call today. At this time, all participants are in a listen-only mode. Following management's prepared remarks, we will open the line for your questions. As a reminder, this conference call is being recorded today. Leading the call today are Nicole Sandford, President and Chief Executive Officer, and Bob Beechey, Chief Financial Officer. After prepared remarks, we will open the call for Q&A. Before we begin, I would like to remind everyone that forward-looking statements, as defined under the Private Securities Litigation Reform Act of 1995, will be made during this call, including statements relating to Aspira's expected future performance, future business prospects, and future events or plans.
Although the company believes that the expectations reflected in such forward-looking statements are based upon reasonable assumptions, actual outcomes and results are subject to risks and uncertainties and could differ materially from those anticipated due to the impact of many factors beyond the control of Aspira. The company assumes no obligation to update or supplement any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. Participants are directed to the cautionary note set forth in today's press release, as well as the risk factors set forth in Aspira's most recent Form 10-K filed with the SEC for a description of factors that could cause actual results to differ materially from those anticipated in the forward-looking statements. Now, at this time, I would like to turn the call over to Nicole Sandford, President and Chief Executive Officer.
You may proceed.
Thank you, operator, and thank you to all of you for joining us today. I'll start with a business update before I hand the call over to Bob to review our Q1 financial performance. Our Commercial Leader, Michael Newton, and Executive Chairwoman, Valerie Palmieri, are also here with us and will be available for questions later in the call. During my first two months as CEO of Aspira, I have focused on validating our strategic priorities and aligning resources to the areas of the business that we believe are most likely to contribute to short and long-term growth. That effort has included focusing our attention on volume growth in our core business, allocating R&D resources to the products that we believe are most likely to drive commercial success, and rationalizing our cash usage across the business.
As I said the last time we were together, I believe the ability to achieve our mission to improve the health outcomes of women with gynecological diseases relies on our ability to make 2022 our most successful year across three dimensions, growth, innovation, and operational excellence. I've worked hard to align our leadership team around these value drivers, and I'm pleased with our initial progress. I can say with confidence that we are poised to see significant acceleration over the rest of the year. I'm going to speak to each value driver in a moment, but first I'd like to share an exciting development about our leadership team. Today we are announcing that Dr. Ryan Phan will be joining Aspira as our Chief Scientific and Operating Officer. Dr. Phan joins us from CareDx, where he currently is Senior Vice President of Lab Services and Medical Director.
His combined and extensive experience, ranging from world-class academic institutions, healthcare systems, and the commercial biotech industry, is rare and aligned with our strategic priorities. We believe this appointment will strengthen our operations and accelerate our targeted pipeline development. Dr. Phan was a key member of the CareDx executive leadership team, where he led clinical testing service operations, clinical development pipelines, manufacturing, supply chain, regulatory affairs and compliance, and automation and engineering divisions. In addition, he served as the licensed medical director of the company's CLIA and CAP-accredited laboratories and played a key role in the growth and expansion of the company's testing revenues and portfolio. Prior to joining CareDx, Dr. Phan was Managing Director and Head of Regional Molecular Genetic Pathology and Cytogenetics at Kaiser Permanente in Northern California, where he led a series of programs related to strategic clinical development, laboratory expansion, and clinical testing.
Before that, Dr. Phan was faculty member at the University of California at Los Angeles and the Los Angeles VA Medical Center. Dr. Phan is highly prolific in academic medicine. He has published numerous academic papers and co-authored a medical textbook, Atlas of Hematopathology. Dr. Phan received his bachelor's degree from the University of California at Berkeley and his PhD from Columbia University. He completed his postdoctoral training at Harvard Medical School, where he was a Cancer Research Institute Fellow and American Society of Hematology Scholar. I believe Ryan is the leader we need to enhance our innovation efforts, accelerate the expansion of our product portfolio, and scale our clinical diagnostic operations as we grow. Fortunately, Ryan saw Aspira's substantial potential and decided to devote his talents to providing health providers with better tools to treat women with gynecological diseases.
He will be joining us in just a few weeks and will be on our next quarterly earnings call. Now let's talk about our core business, starting with growth. Our commercial team faced both challenges and opportunities in the first quarter. Even though we started the year in the throes of another COVID surge, which threatened our aggressive growth plans, our volume recovered rapidly. Unlike other companies in the diagnostic sector, many of whom struggled with sales throughout the quarter, we saw improvements in volume, achieving top-line revenues of $1.9 million, an increase of 26.4% compared to the first quarter of 2021 and 2.1% sequentially compared to the fourth quarter of 2021. Perhaps not surprisingly, the COVID surge significantly impacted sales volume in January. Average daily OVA volume was 64.6 for the month of January.
By March, however, average daily OVA volume had increased to 84.3, a new record for the company. The increase continued into April when OVA volume per day achieved 86.7, an additional 2.8% increase over March. The early days of May are very promising, with average daily sales so far in the low 90s. Our new Head of Commercial, Michael Newton, wasted no time in making an impact. As previously disclosed, we executed a reorganization of the commercial team in March to effectively deploy personnel with the most relevant skills and experience for our portfolio. We have also taken a fresh look at territories and the incentive plans we have in place for our sales force. These efforts appear to be paying off in terms of sales efficiency.
We ended Q1 with 23 salespeople, up only two from the end of 2021, yet we achieved the previously mentioned record sales volume in March and incrementally increased sales volume in April. We are in the process of adding to our sales team in newly created roles and plan to have approximately 34 field sales professionals by the end of 2022. An important leading indicator regarding future growth potential is new ordering physicians. In the first quarter of 2022, approximately 600 physicians ordered an OVA product for the first time, a record high and an increase of 47% compared to the first quarter of 2021, and a 3% increase compared to the fourth quarter of 2021 despite the slow start in January. We expect these physicians to drive incremental volume for the rest of 2022.
Looking towards the rest of the year, our leadership team will focus on both volume and price as drivers of top-line growth. As part of our refresh of the commercial organization, we have improved the alignment of the sales and reimbursement teams to help ensure they are positioned for maximum impact. We will continue to push hard for new physician adoption, especially in areas of the country where we have secured favorable payer pricing and where there are large, relatively untapped physician pools, such as women's health super groups, hospital and other health systems, and clinics that work with underserved populations. To that end, we have launched a series of market-making sprints aimed at creating accelerated progress in areas of potential high-volume growth.
This includes active and retired military and their families, Medicare and Medicare Advantage nationally, and Medicaid populations in large states like New York, California, Georgia, and Illinois, where we have previously secured reimbursement. I want to assure you that we continue to explore strategic partnerships to rapidly expand the reach of our sales organization. In fact, while it is too soon to disclose detailed information, we are in the final stages of negotiating an agreement with a commercial partner to co-market and distribute our OVA products and expect to have additional information to share in the coming weeks. As we have said in the past, we believe these relationships are key to the adoption of our existing products and will drive rapid distribution of future products. Let's now turn to innovation and an update on our product pipeline.
We have already achieved several important milestones this year with respect to our OVA products. The OvaWatch manuscript, Analytical Validation of a Deep Neural Network Algorithm for the Detection of Ovarian Cancer, has been accepted for online publication in JCO Clinical Cancer Informatics. This study was a critical step towards the launch of OvaWatch, our next-generation ovarian cancer risk assessment tool. As a result, we have shifted to finalizing the commercialization and launch plan for OvaWatch, which will occur in two phases. We intend to launch the single-use OvaWatch test later this year. The timing will depend on the results of a clinical validation study that we expect to be completed over the summer with a plan to publish in the fall. We expect this interim study, which will include real-world data from patients, to be instrumental for driving both adoption and reimbursement.
We believe all other prerequisites for a successful commercial launch have been met. The launch of the serial monitoring test is planned for 2023 upon the completion of the ongoing clinical validation study. Looking ahead on our OVA product line, the strategic research collaboration agreement with Harvard's Dana-Farber Cancer Institute that we have previously disclosed will build upon strong initial findings. We believe the high specificity demonstrated by the microRNA technology, coupled with strong sensitivity of our protein-based technology, have the potential to deliver a groundbreaking personalized risk solution for patients who are genetically predisposed to ovarian cancer. With respect to our development of a commercially viable endometriosis diagnostic product, we have made a strategic decision to develop this diagnostic as an LDT, or laboratory-developed test, rather than pursuing breakthrough device designation.
One of the most attractive reasons for companies to pursue the breakthrough device path, which was achieving streamlined reimbursement through the FDA program, was eliminated last year. While we now believe the most appropriate path to market for our endometriosis diagnostic product is an LDT, we are not ruling out FDA breakthrough medical device designation in the future. Our final strategic priority is operational excellence. This speaks to how we operate the business and allocate our resources, especially with respect to people and discretionary spend. I've asked our leaders to focus on higher ROI activities, especially those that drive OVA adoption, sales volume, price improvement, and the accelerated development of our first-generation endometriosis diagnostic product. Outside of those priorities, we have implemented additional cost controls aimed at scaling our people, process, and technology infrastructure at a pace that is appropriately aligned with our growth.
In areas where we seemed to be spending in advance of business need, we have pulled back significantly and will continue to do so over the remainder of the year. Bob and I have also taken a hard look at discretionary spending and have challenged ourselves to be prudent with our cash reserves. To be clear, we will continue to focus time, talent and funds on driving broad adoption of our OVA products and to the development of our endometriosis products. However, we will continue to challenge the ROI of spending across the organization, and we plan to refrain from expanding our strategic focus to other priorities in the near term. As an executive team, we are firmly committed to managing our cash flow very closely for the rest of the year. With that, I'll hand it over to Bob to talk about our first quarter financial performance.
Over to you, Bob.
Thank you, Nicole. First quarter, 2022 OVA1 revenue was $1.83 million, an increase of 29% over prior year and a 1% increase sequentially. This 29% OVA1 revenue increase is primarily due to an increase in the number of tests performed in 2022, as well as an increase in the OVA1 average revenue per test in the first quarter of 2022 compared to the prior year. As Nicole has discussed and we discussed on our year-end call, the first quarter commenced with some COVID headwinds, resulting in modest sequential growth for the quarter. We are pleased with its sequential progression throughout the quarter and for the month of April.
The revenue per OVA1+ test performed was $308 for the first quarter of 2022, compared to $375 during the first quarter of 2021. The year-on-year price increased 1.2%, while the sequential price was a slight reduction from the $382 realized in the fourth quarter. This slight decrease is driven by patient pay collection challenges as patient deductibles reset in the beginning of the year, as well as our strategic initiative to serve the Medicaid population, which currently has a lower price when compared to our average. Gross profit margin on OVA1+ was 53% in the first quarter of 2022, compared to 54% in the prior year first quarter of 2021.
The year-on-year decrease was driven by the addition of laboratory personnel in advance of our anticipated growth in the coming quarters. Research and development expenses for the three months ended March 31st, 2022 were $1.3 million, an increase of $476,000 compared to the first quarter of 2021, and a decrease of $105,000 when compared to the fourth quarter of 2021 spending levels. This spending was focused primarily on product development costs related to OvaWatch and investments in Aspira Synergy. Sales and marketing expenses were $4.5 million for the three months ended March 31st, 2022, an increase of $1.4 million compared to the first quarter of 2021. The increase was driven by personnel costs as well as related travel and entertainment.
During the first quarter of 2022, we executed a reorganization, resulting in the separation of a number of employees. The changes were aimed at enhancing our national sales force and driving the accelerated adoption of OVA1+ as the standard of care for early risk detection of ovarian cancer in women who have been planned for surgery. The organizational changes resulted in the recording of severance, separation, and settlement payments, as well as legal costs in the first quarter of approximately $1.284 million, including estimated future payouts, partially offset by insurance reimbursement of $523 ,000. Severance paid for sales and marketing totaled $1.085 million. General and administrative expenses were $4.4 million for the three months ended March 31, 2022. We incurred $2.5 million in general administrative expenses in the prior year quarter.
The year-on-year variance is attributable to headcount and personnel expenses. We ended the first quarter of 2022 with approximately $27.1 million in cash equivalents and restricted cash. Cash used in the first quarter of 2022 was $10.2 million, including approximately $1.3 million of severance settlements and legal expenses associated with our first quarter reorganization and approximately $1 million for payments under our annual incentive bonus plan. With that, I'll turn it back over to Nicole.
Thank you, Bob. In closing, our executive team remains firmly committed to our strategic vision and will focus our efforts on execution for the remainder of 2022. Anyone that is betting against Aspira just has it wrong. We believe the wind is at our backs, and we are on the best path towards achieving our goals. Thank you for your time today. With that, we will open up the lines for questions.
Thank you. We'll now begin the question and answer session. If you'd like to join the question queue, press star then one on a touch-tone phone. If you're using a speakerphone, please pick up your handset before pressing any keys. To withdraw yourself from the question queue, press star then two. Our first question comes from Brian Weinstein with William Blair. Please go ahead.
Hey, guys. Good morning. Thanks for taking the questions. I wanted to start on what you're seeing from your physician cohorts that are ordering your tests. You know, you're talking about 600 docs, I think, that were first-time users here. I'm just curious, as you look historically, what you tend to see from new cohorts of clinicians when they start to order the test. Have you seen differences in the way that cohorts behave? Are more recent cohorts ordering more tests faster? I just wanna get some insight here because you have a significant number of doctors that are ordering, and you know, we continue to wait to see kind of revenue inflect here.
Can you give us some idea about what you're seeing kind of on a per doc basis or, kind of a cohorted basis or anything that would get us comfortable on kind of how we should think about future trends?
Brian, thanks for the question. Thanks for joining us today. I'll start, and then I'll give Michael Newton, our commercial leader, a chance to add to my thoughts. I think it is difficult to project based on prior trends because as you know, we've only had a short runway of historical experience. I think it's important to look at the most recent trends as opposed to going, you know, back over time. A lot has changed over the last year. Michael, I'll ask you to comment on what your sales team is seeing in the field in terms of adoption from the new docs.
Absolutely. You know, from that perspective, Brian, I appreciate the question. When you look at, you know, essentially behavior in this space, where, you know, kind of the biggest question mark comes in is when patients with a pelvic mass are going to present to these particular providers. You know, so that's really kind of the X factor as it relates to frequency of use and particular application based on our approved utilization within a clinic. But from that perspective, as we get new providers, what really becomes incumbent upon the sales team is to make sure that they're present from a standpoint of being there to remind or refresh that memory.
Like any habit, you know, when you first start something, it certainly takes much more, you know, effort on the front side, and, you know, really kind of first utilization for us is where the work begins to get that pull-through. As we look at, you know, particular cohorts, it's a little bit tougher to say in terms of that utilization because of the fact that, you know, again, patients for this type of test don't show up in a clinic every single day, you know, thankfully, obviously, based on what it is we're testing for. From that standpoint, there's not necessarily a big differential in terms of that patient influx from a particular provider based on, you know, how long they've been a user of OVA.
It's really just a matter of patient frequency, and then from there, it's incumbent upon us to make sure that we're present, to stay top of mind with those providers, with OVA1+, for them when those patients show up. You know, it's a little bit tougher to stratify in a more typical way of, you know, an initial user will kind of ramp up at this particular speed, because of, you know, again, the unknown of, when a patient's going to appear. Does that answer that question?
Yeah. No, it gives some color on top, and I appreciate that. Is there an update on Synergy-
Brian, I'm sorry to interrupt you.
Yeah, please.
Before we move on, I will say one thing. You know, we have learned that the back office plays a really important role here because those first few interactions that a physician has with our tests are really important in driving whether they choose to order the test again. That means making sure there are no surprises in terms of what it's going to cost the patient, making sure that the patient knows where to go if they have questions, making sure that we're bringing all of our customer service and clinical expertise to the table. It also means making sure that the test is given back to the doctor in a timely manner.
Obviously our focus on operational excellence is really important to make sure that those early interactions are positive because what we do know is that doctors who have good early experiences tend to continue ordering and those that don't do not.
Yep, that makes sense. Is there an update on Synergy? It was talked about a lot in prior calls. Didn't hear as much of an update here on that today. Can you just talk about where that stands, what the interest looks like, and how the first experiences have gone?
Yeah, sure. Excuse me. I'm recovering from a little illness here, so I apologize for my voice. Yeah, Synergy continues to be a very high potential opportunity for the company. In fact, since I've joined as CEO, I've come to believe that it's a very critical part of our future growth plan, even more so than I had before. You know, there's no backing off on Synergy as an important part of our strategy. Our first four clients are in the implementation phase. We do have ordering physicians coming through on, I think, three of the four.
As I mentioned in the last call, we wanted to be sure that we were getting the implementation right so that we have a playbook going forward that allows us to ramp up fast and to make sure that we're doing the implementation in the most efficient way possible in the future. So far, signals are very positive, and we're not backing off on that commitment at all.
Okay. I heard you talk about negotiating some sort of a partnership to distribute the product, and we get more information in the coming weeks. Can you just talk about the strategic rationale for thinking about bringing in a partner for distribution?
Yeah. I think it all comes down to how fast can you grow your sales organization on your own versus partnering with other strategic partners that have that are in the same marketplace that we are in. It's about driving adoption for our ovarian products, which is obviously critically important today, but it's also important as a platform for our future products. The rationale there is that we can get far more on the ground sales impact working with others than we could make growing the sales force on our own.
Okay. We'll wait till that is announced to come back with questions on-
Sure.
-kind of the operational logistics of that, but I look forward to that. Can you give us any update on timing for kind of next data readout or next steps with the Harvard Dana-Farber situation as well as what the LDT approach for endo means as far as timing and kind of next steps there?
Sure. Well, we've been very pleased with the partnership with Harvard Dana-Farber Cancer Institute. It's been an incredibly positive working relationship. It's moving along as we had planned, and I think that we will just see further development on that partnership going forward this year. Excuse me. You know, nothing incredibly interesting to say there, Brian, other than it continues to be an incredibly positive relationship for us and is helping us to accelerate our development on the ovarian cancer side for sure. The second question around endo, we're not making any specific changes to the timeline for our EndoCheck product in this call. We're still tracking, as we had said, for second half of 2023.
Okay. Then a question for Bob maybe or whoever on cash situation. Obviously the burn was higher this quarter. You have, I think you said 27.1, I think is what you said in cash. Just how should we be thinking about the cash burn for the year and plans you guys have to shore up the balance sheet?
Well, as Nicole discussed, we're anticipating some compression of the cash burn going forward. The issue, obviously we articulated a bunch of one-timers, which kind of impacts more the balance sheet. I would encourage people to look at that as not the new run rate. A combination of cost control, sales rep productivity and kicking in relative to the Synergy volumes. Recall within the relevant time horizon, we will launch OvaWatch. We've largely already done most of the preparation work in terms of the marketing work and things of that nature, and that will be incremental top line.
We see this thing compressing in terms of our cost structure and our margin expansion as well as as we look at ramping up volume over the course of the year. That will be narrowing in terms of cash burn as we commence into the quarters. That's the principal issue to communicate.
Okay. I got it. We'll follow up with you on that in the follow-up call. Okay, great. Thanks.
Again, it's star then one to join the question queue. Next question is from Ross Osborn with Cantor Fitzgerald. Please go ahead. Ross, if you're speaking, your line might be muted on your end.
Hey, sorry.
Ross Osborn. There you are. Yes, we can hear you.
Congrats on the quarter. I guess just as a follow-up from Brian's questions on physicians, what was the total amount of ordering physicians during the quarter?
Bob, do you have that number handy? Hold on, let me just grab this. I have it here. Hold on one second. Let's see. Bob, are you there?
It was-
I haven't.
Yeah, sorry. 3,275.
Okay, got it.
Thank you.
I guess turning to the operating environment, I realize average daily volumes improved throughout the year, and I appreciate that additional color. Just curious, are you still seeing any headwinds at this point that are limiting growth?
It's interesting. It seems to me that the COVID impact is turning into more of a just a general productivity issue. Not for us specifically. I'm speaking more kind of broadly, right? We're not seeing huge shutdowns, but we are seeing new cases that are resulting in people, you know, missing work and not being able to take salespeople in and that kind of thing. You know, I don't think I see anything macro beyond what everyone else is operating in this environment. We, as we said in the last quarter call, in the year-end call, we've been working really hard to make sure that we have good response plans for any additional slowdowns or macro issues that we find, whether they're related to COVID or otherwise.
I think some of those levers that we pulled in the first quarter helped us to recover quickly. For example, we very quickly, as soon as we saw the slowdown from COVID in January, moved to doing more KOL events via the web. We had one of our best-attended physician webinars in the history of the company in February. Resulted in quite a few new physicians being added in February, which would have, you know, been a reason that we were able to recover so quickly. You know, we're not seeing anything that we're super concerned about. However, we have developed a playbook to make sure that regardless of the reason that we might see headwinds, we have a playbook to respond.
Okay. Sounds great.
Bob, anything that you wanna add to that? I mean, is there anything that on your side that I missed? Bob or Michael.
No, I think we're you know, I don't want to speak on Michael's behalf, but you know, the access restrictions to doctors has largely subsided. You know, obviously there's you know, various variants that impact people going to the doctor. We're really planning operationally to resume to a normal environment, but you know, being ready to adjust as we move forward, as Nicole indicated. You know, we're not seeing COVID as a big headwind, but wary of the fact that that could resurge just like everybody.
Okay, perfect. No, it sounds great. Maybe one on ASP. Have you seen a willingness for payers to meet? Has that increased throughout the year? How does the pipeline look like in terms of coverage? Lastly, how many covered lives did you end the quarter with?
I'm sorry, Ross, could you repeat the first question? I didn't catch that.
Yeah, just on payer access. Have you seen any willingness, from payers to meet with you all? Has that increased?
I think it's been pretty consistent.
Okay.
Bob or Valerie, anything to add to that? We haven't seen any issues there.
No. You know, there hasn't been a big change in terms of acceleration, but we haven't had that as an access restriction over time. We've obviously mentioned, you know, a big effort we have in place is improving the ASP relative to Medicaid, you know, given the fact our product has a differentiation that can help to serve that underserved population. So, you know, currently, the Medicaid is somewhat dilutive to the average, and our objective is to increase that ASP over time. We've been really focused on credentialing and the like. It's less of a scientific sell, it's more of an administrative conversion effort.
We continue to, you know, to ramp that up over time, and we'll see some increase in the ASP there, but there hasn't been access restriction. What I would comment on is that a big effort right now is getting coverage, getting preparation for coverage as we get the appropriate publications for OvaWatch, which will be, we reiterated the plan to launch in Nicole's remarks in the latter part of the year. We did have a key publication in Q1 and, you know, a critical factor for us is getting that crosswalk, if you will, I think that's the appropriate term, to get reimbursement for OvaWatch. I think that's a big part of the dynamic to Brian Weinstein's question earlier in terms of physician behavior, is that there's just a broader indication and a more day-to-day usage is our expectation relative to OvaWatch.
You know, think about getting reimbursement for OvaWatch is the critical strategic thrust that we have in motion right now.
Okay, great.
Great.
Just, do you have the number of covered lives you ended the quarter with on hand? If not, we can get it later.
Yeah. I believe it was $194 million.
$196 million.
Okay.
$196 million. I think
Sorry to keep you up.
Got it. Thank you for taking my questions.
Thank you.
This concludes our question and answer session. I'll turn the conference back over to Nicole Sandford for any closing remarks.
Thank you, Operator, and thanks again to everyone for joining us today. You know, hopefully you found the information helpful. I think you're gonna hear over and over the rest of the year these three consistent themes, our hyper-focus on growth, innovation and operational excellence. The company is focused in these areas, and we're making great progress. Thank you again for joining us and we'll speak with you soon.