Good morning, ladies and gentlemen, and welcome to Aspira Women's Health Incorporated Third Quarter 2022 Conference Call. My name is David, 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 call for your questions. As a reminder, this call is being recorded today. Leading the call today are Nicole Sandford, President and Chief Executive Officer, Bob Beechey, Chief Financial Officer, and Dr. Ryan Phan, Chief Scientific Officer and Chief Operating Officer. After the 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 Aspira Women's Health's control. 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 annual report on Form 10-K and quarterly report on Form 10-Q 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. At this time, I'd like to turn the call over to Nicole Sandford, President and Chief Executive Officer. Please go ahead, ma'am.
Thank you, operator, and thank you everyone for joining us today. We are very pleased to provide an update on our progress in the third quarter. Joining me on the call today are Bob Beechey, our Chief Financial Officer, and Dr. Ryan Phan, our Chief Scientific Officer and Chief Operating Officer. I will begin with an update on our key strategic initiatives and provide an overview of our third quarter performance. Ryan will follow with an update on our product development pipeline before handing the call to Bob, who will provide a financial update. After our prepared remarks, we will then open the lines for a question and answer session. In the third quarter, we continued to make sustained progress across our three critically important strategic dimensions: growth, innovation, and operational excellence. Let me start with an update on our innovation efforts and OvaWatch.
I'm confirming today that we will launch OvaWatch this quarter. Our sales team is fully trained and ready to go, and we have several well-respected physicians signed on to become early adopters, including Dr. Gerard Reilly of Axia Women's Health and Dr. Nicole Williams of the Gynecology Institute of Chicago. We applied for a unique PLA code for OvaWatch in October, and the CPT Advisory Committee reviewed the submission on November 7. We expect to be notified by the end of 2022 regarding approval of our request, which would be effective on April 1, 2023. We completed our manuscript related to an OvaWatch clinical validation study that will be submitted for peer review and publication this week. We believe this study will drive additional provider and payer adoption post-launch. The laboratory processes have been tested, are in the final stages of validation.
Kits are complete and ready for distribution, and we are waiting for New York State approval to launch the tests to New York patients. We have been receiving positive physician feedback on OvaWatch and are excited by its potential to change the practice of medicine for women with adnexal masses. Healthcare providers will now have access to a suite of non-invasive blood tests that, together with their clinical experience, provide unprecedented confidence in their chosen medical management decisions. In recognition of the applicability of our offerings to a broader population of women, our ovarian cancer portfolio will now be known as OvaSuite. For the first time ever, healthcare providers that identify a pelvic mass in a female patient have an OvaSuite tool that will provide potentially life-saving information whether the provider has decided to perform surgery or not.
This is a significant expansion of our patient population beyond Ova1 and Overa, our FDA-cleared assays. We believe the number of women who undergo premature or unnecessary removal of their ovaries on a preventative basis may be meaningfully reduced now that physicians have an opportunity to effectively assess malignancy risk in their initial assessment. The launch of OvaWatch will also provide an opportunity to expand the population of potential ordering physicians beyond gynecologists and gynecological oncologists who are the primary users of Ova1 and Overa tests. Following the launch of OvaWatch, our OvaSuite products will be marketed more broadly to other women's and family health practitioners. In fact, there is already some momentum in that direction. On July 5th, a policy and practice review article entitled Management of the Adnexal Mass: Considerations for the Family Medicine Physician, was published by the Journal of Family Medicine and Primary Care.
The article clearly identifies Ova1 as an effective tool available to family physicians for use in assessing ovarian cancer malignancy risk. With all that said, we have updated and refreshed our marketing strategy. We will shift more of our marketing spending to high impact presentations at key conferences where we can launch OvaSuite to a larger physician population. We expect to formally launch a physician advisory board before the end of the year and plan to implement best practices for physician programs in the field based on approaches that have worked in our most successful territories. This is just a snapshot of the new marketing strategy, which was developed as part of our OvaWatch pre-launch activities. Let's now turn to operational excellence, starting with our capital and liquidity position. In September, we closed a small public offering with $9 million in gross proceeds. The timing of this offering was opportunistic.
Our cash position has an impact on our ability to attract and negotiate with potential commercial or development partners, which is a critically important part of our strategic growth plan. I believe the net proceeds of $7.7 million, along with our aggressive cost containment efforts, will provide adequate liquidity to sustain the company through the execution of our strategy, including the launch of Ova1Plus this year, the implementation of an aggressive marketing campaign to drive provider and payer adoption of our suite of ovarian cancer risk assessments, and the development and commercial launch of EndoCheck. We have a clear view of our capital strategy, and I'm confident that we have the runway we need to achieve our key initiatives. Moving to another key aspect of operational excellence, our utilization of cash.
Managing our usage of cash without sacrificing progress in growth and innovation has been a top priority. Our cash utilization this quarter was $8.1 million, including a $852,000 payment to Harvard's Dana-Farber Cancer Institute for the development of our endometriosis testing portfolio and $130,000 in severance payments. Our guidance for cash utilization in the second half of 2022 was $14 million-$15.5 million, and we remain on track with that guidance. Throughout the year, we have focused our efforts on taking a very close look at our organization and ensuring we have the right people in roles that reflect the needs of our business at this point in time. We started with the reorganization of the commercial team, which we announced in the first quarter.
Since then, we moved through the rest of the organization, eliminating redundancy and excess capacity. We have reduced approximately 19% of our headcount since March 1 when I became the Chief Executive Officer. All other things being equal, the actions we will have taken by the end of this year will save over $3 million in payroll, plus the related cost of benefits and payroll-related expenses in 2023. I believe we are largely finished with headcount actions and that we have the right team going into 2023. As our business grows and we meet critical milestones, we will continue to hire for key roles. We are building a performance culture, one that stresses accountability and transparency at every level of the organization. Our goal is to make sure every person in the company understands our strategy and their role in achieving it.
While this process takes time, we are proud of the work we have done to improve employee performance, development, and retention despite the difficult staffing decisions we have made this year. Turning to our progress on growth. This quarter, we achieved $2.1 million in revenue with a volume of 5,524 tests performed. This represents a 29% increase over the same period in 2021. As has been demonstrated with other companies in the diagnostic sector, we tend to see volume growth tapering from the second to the third quarter. That was the case this year as well. Product volume increased 2% over the second quarter of 2022.
Our testing volume increased to 88 tests performed per day in the third quarter of 2022 compared to 83 tests performed per day in the second quarter of 2022 and 67 tests performed per day in Q3 of last year. We're doing everything we can to drive a strong fourth quarter performance, including adding sales incentives. In the first few weeks of the fourth quarter, we've seen some impact from Hurricane Ian, but we are back on track, and each of the last two weeks, we hit new daily highs for Ova1Plus volume. Looking at other achievements for growth this quarter, we were pleased to officially launch our co-marketing and distribution collaboration with BioReference Laboratories for our Ova1Plus product. BioReference is a committed partner and shares our mission of improving health outcomes for women and closing health equity gaps.
With the sales team for both BioReference and Aspira trained and working together, we are optimistic about the long-term potential of this relationship. As a reminder, we launched only a few weeks ago, and as previously announced, we expect a small impact on product volume in the fourth quarter as the commercial teams get started. We are optimistic for 2023 and intend to provide more guidance on sales as our experience working together grows. Finally, I want to provide an update on our genetics offerings, including our technology transfer relationship with Axia Women's Health. As previously disclosed, the Axia agreement was intended to deliver genetics carrier screening to our Aspira Synergy platform. Since we executed our agreement, the genetics carrier screening marketplace has changed dramatically.
Even the largest industry players have seen massive disruptions in the genetic screening area, and there are more high-quality, low-cost tests available to physician practices than ever before. Developing an in-house genetics carrier screening solution is far less attractive than it was when we signed our agreement. As a result, Axia notified us of their intent to cease the development of their testing capabilities and provided us with a notice of cancellation of our related agreement. As the platform had not yet launched, the cancellation had no material financial impact in this quarter. Our relationship with Axia remains strong, and we do not believe the cancellation of the Aspira Synergy contract will have an impact on Axia's adoption of our current or future product offerings.
In considering the cancellation and the same market forces that caused it, I took a close look at the genetics business and made the strategic business decision to walk away from all genetic testing effective as of September 30, 2022. Accordingly, we have discontinued offering genetics testing, and we will no longer provide our Aspira GenetiX products or genetic carrier screening on Aspira Synergy. This has been a very small part of our business, and it is difficult to see a path to achieve scale. I feel our resources are better directed to developing differentiated products that will improve outcomes for women and drive the highest return for our shareholders. As you've heard today, we are focused on much larger opportunities, including the imminent launch and commercial adoption of OvaWatch and the expected 2023 launch of EndoCheck.
I want to make clear that we are continuing the distribution of Ova1Plus through Aspira Synergy. We envision eventually offering both OvaWatch and EndoCheck through the Aspira Synergy platform. We do not expect that our relationships with other Aspira Synergy customers, including Women's Care and a number of regional labs, will be impacted. We've come a long way since the beginning of this year, and we have been through tremendous changes as an organization. The one thing that remains clear is the critical need for better ovarian cancer diagnostic tools for women and the resulting potential for our business. We are taking all the steps we believe are necessary to position ourselves for success and remain steadfastly focused on growth, innovation, and operational excellence. With that, let me turn the call over to Ryan for an update on our product development pipeline.
Thank you, Nicole. I am incredibly excited to announce that Aspira is on track and is positioned to successfully launch OvaWatch, our non-invasive next generation ovarian cancer risk assessment this quarter. OvaWatch, what is part of our OvaSuite portfolio of diagnostic tools, focuses on women with adnexal masses with initial clinical assessment that are indeterminate or normal-leaning. OvaWatch has a superior negative predictive value of 99%, giving providers a higher degree of confidence in their clinical management decision for their patients. The OvaSuite portfolio will offer, for the first time ever, a comprehensive toolkit to providers to help assess ovarian cancer risk for women with adnexal masses throughout all stages of their health journey. OvaWatch and Ova1Plus will be available with a single test requisition form, allowing clinicians to determine which test is appropriate for patients with an adnexal mass.
As Nicole mentioned, many providers have expressed a favorable response to the launch of OvaWatch, which we believe addresses an unmet medical need for the clinical management of women with adnexal masses. We believe OvaWatch will represent a significant expansion of our potential patient population by including women at an earlier stage who present with adnexal masses of benign or indeterminate risk. Utilizing a validated proprietary algorithm incorporating patient features such as age, menopause status, and an additional seven serum biomarkers, OvaWatch provides a risk assessment score with corresponding negative predictive value. A lower risk score indicates a low probability of malignancy, supporting a clinician's plan to manage and monitor. A higher score does not indicate the presence of cancer. Rather, it provides information that may assist the clinician in considering additional clinical assessment, specialty consultation, or surgery.
Together with our FDA-cleared products, Ova1 and Overa, the soon to be available OvaWatch, for the first time, healthcare providers will have a set of blood-based tests that when combined with their clinical expertise, imaging studies, and the patient history, will allow them to confidently develop a medical management plan and include the right specialist at the right time. As a result of the broader intended use, we expect the total addressable market for OvaWatch to be substantially larger than the addressable market for Ova1Plus. At our last update, I said that we complete enrollment for our prospective study based on real-world data in support of our plan to launch OvaWatch. A manuscript is being submitted for peer review publication. We are confident that the data provided in the analytical and clinical evaluation study will be sufficient to drive physician and payer adoption.
In addition, we plan to continue to support research related to the impact of race and ethnicity on the detection of ovarian cancer. In June 2022, a manuscript arising from clinical research efforts in the Philippines, which was sponsored by the company, was accepted for publication in the International Journal of Environmental Research and Public Health. The data show that our FDA-cleared Overa test exhibits better overall performance in detecting ovarian cancer regardless of menopause status compared to CA-125. Notably, Overa was shown to be more sensitive than CA-125 in detecting early-stage disease for this population. The study also showed that Overa had the best overall performance of all individual classifiers, including some of the most difficult to detect cancer cohort, such as premenopausal women and early-stage disease.
We expect that this study, along with the results of ongoing study in Israel, to drive both provider and payer adoption for our products to diverse women in the United States and around the world. Let's move on to our endometriosis product development. One of the first priorities I took on when I joined Aspira was to review and understand the prior data set we have collected throughout various phases of the EndoCheck development. I have now completed that due diligence. I learned a great deal about the science and the findings from the basis for our path forward to develop a meaningful blood-based assay supporting the diagnosis of endometriosis. In this regard, I hope to be able to discuss our development status by the first quarter of 2023 in support of the planned launch of EndoCheck in second half 2023.
As a reminder, we previously announced a sponsor agreement with Dana-Farber Cancer Institute, Brigham and Women's Hospital, and Medical University of Lodz for the generation of a multi-omics non-invasive diagnostic aid to identify endometriosis based on circulating microRNAs and proteins. We are pleased to report that the development efforts with this group of scientists and collaborators are on track to meet our expected development goal in 2023. Based on the scientific progress to date, we have also commenced enrollment in our multi-site clinical study for endometriosis. This is a prospective observational study with the primary objective to confirm the clinical performance of EndoCheck compared to laparoscopy surgical assessment. Participants are females older than 14 years of age who plan to undergo laparotomy or laparoscopy secondary to chronic pain associated with suspect endometriosis.
We are actively enrolling more study sites and anticipate reaching the target enrollment supporting second half 2023 launch. Circling back to Nicole's statement of our goal of improving operational efficiency and decreasing cash burn, I'm proud to say that in spite of prudent budget, we have sprinted forward and have made significant progress in our growth and innovation goals, and we are continuing to help improve women's gynecologic health. I will now turn to Bob Beechey for discussion of our financial performance. Bob?
Thank you, Ryan. Product revenue was $2,037,000 for the three months ended September 30, 2022, compared to $1,617,000 for the same period in 2021. The 26% product revenue increase is due to an increase in Ova1 test volume compared to the prior year, partially offset by a lower average unit price or AUP, which decreased from $378 in the third quarter of 2021 to $369 in the third quarter of 2022. The product revenue increase was also driven by an increased volume of tests performed by higher AUP payers such as those for Medicare and commercial insurance carriers, partially offset by a higher percentage of lower Medicaid AUP.
Medicaid represented approximately 13.6% of volume in the three months ended September 30, 2022, at an AUP of $88. This is compared to 12% of volume in the same period in 2021 at an AUP of $94. Our Ova1Plus AUP without Medicaid was $415 for the three months ended September 30, 2022, compared to $415 for the same period in 2021. The number of tests performed increased 29% to 5,524 during the three months ended September 30, 2022, compared to 4,281 product tests for the same period in 2021. The number of product tests performed increased 2% sequentially during the third quarter of 2022 as compared to the second quarter of 2022.
These increases are a result of increased access to provider offices and increased investment in our current commercial channel. Gross profit margin for Ova1Plus remained relatively flat at 57% for the three months ended September 30, 2022, compared to 56% for the same period in 2021. Research and development expenses for the three months ended September 30, 2022, increased by $639,000 or 42% compared to the same period in 2021. Compared to the second quarter of 2022, research and development expenses increased $747,000 or 53%. This increase was primarily due to clinical validation, product development costs related to OvaWatch, and costs related to our collaboration with Harvard's Dana-Farber Cancer Institute and Brigham and Women's Hospital and Medical University of Lodz, which involves our EndoCheck product.
Sales and marketing expenses for the three months ended September 30, 2022, decreased by $1.133 million or 22% compared to the same period in 2021. This decrease was primarily due to decreased personnel in the marketing area as well as decreases in recruiting expenses and external marketing expenses. General and administrative expenses for the three months ended September 30, 2022, increased by $907,000 or 24% compared to the same period in 2021. The increase was primarily due to issuance costs associated with issuance of warrants of $1.117 million, partially offset by decreased consulting expenses and legal expenses of $102,000.
As of September thirtieth, 2022, Aspira had $20.8 million in cash and short-term investments. We raised $7.7 million net proceeds in a public offering during the third quarter of 2022. We utilized $8.1 million in operating activities during the third quarter of 2022 compared to $6.4 million in the second quarter of 2022 and $8 million in the third quarter of 2022. As Nicole mentioned, the third quarter cash utilization includes significant investments in EndoCheck development as well as severance costs.
As we previously disclosed, on June 1, 2022, we received a deficiency letter from the Listing Qualifications Department of the Nasdaq Stock Market stating that for the preceding 30 consecutive business days, the closing bid price for Aspira common stock was below the minimum $1 per share requirement for continued inclusion on the Nasdaq Capital Market. If we fail to regain compliance on or prior to November 28, 2022, we may be eligible for an additional 180 calendar day compliance period, which would extend the deadline until May 27, 2023. We are preparing to submit the application for the 180-day extension. I will now turn it back over to Nicole.
Thank you, Bob. Before we take questions, let me take a moment to acknowledge the news we released today that you'll be leaving us for another opportunity. I'm personally grateful for your support during my transition and for your willingness to stay on in a consulting capacity to help us find and onboard your successor. On behalf of the executive team and the board of directors, I want to thank you for your contributions to the company and to wish you all the best in your future endeavors. With that, I would like to now open the call for questions. David?
Thank you. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. If at any time you wish to remove your question from the queue, please press star two. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Once again, to ask a question, please press star one. Our first question is from Ross Osborn with Cantor Fitzgerald.
Hi, good morning. Hope everyone's doing well. Bob, it's been nice working with you, and best of luck in your future endeavors.
Thank you, Ross.
Just looking at the quarter, you know, maybe the sequential growth was a little bit below what we were expecting. Just curious how the quarter shaped up relative to internal expectations and, you know, what the company can do to drive better growth going forward.
Sure. Good morning, Ross. Thanks for the question. You know, we're now in our first full year of adoption of Ova1Plus, you know, kind of post-COVID world. We are learning about the patterns, the ordering patterns of that test. You know, and what we're doing to drive growth for the rest of the year, we've instituted a number of additional sales incentives that we think will help pull through some additional growth in the fourth quarter, which has traditionally been a strong quarter for us and for other diagnostics as people have hit their deductibles and looking to get their check-ins with their doctors before the end of the year. Hopefully that answers the question.
Yes, it does. I may have missed this. I'm juggling a couple calls, but has Scarlet Health begun offering a test? If so, you know, to what level? If not, when do you expect them to begin offering?
I'm sorry. Could you repeat the beginning? I didn't hear the beginning of the question.
Yes. I was just asking about the Scarlet Health partnership, if they've begun offering a test?
Yeah. The Scarlet GeneDx relationship is part of the overall BioReference relationship. That was also launched in the beginning of October.
Okay, great. Thank you for clearing that. I guess last one for me, just how the rollout of Synergy's progressing, I guess specifically with Women's Care.
Sure. Yeah, we're very pleased with the rollout of Women's Care. As I've talked about, it is a multilayered sale. First you have to have the platform adopted, and then you still have to drive adoption with the physicians within the super group. We continue to drive that. We've had a number of very successful events with them to enhance the understanding and knowledge of the test within the physician group, but we're quite pleased with the progress so far.
Okay, great. Thanks for taking my questions.
Sure. Thank you, Ross.
Once again, to ask a question, please press star one. Our next question is from Andrew Brackmann with William Blair.
Hey, good morning. This is Griffin on for Andrew. Thanks for questions. Just first on liquidity. So the operational burn of about $8 million in the quarter, if you back out those one-timers that you mentioned, closer to $7 million. Is that the right way to, you know, sort of think about a baseline going forward in terms of operational burn?
Bob, do you wanna jump on that one?
Yeah. We expect that to compress marginally over time, you know, that we reaffirmed our guidance for cash utilization for the second half of the year, and we're on track for that, together with the first quarter. As we drive top line, we'll have kind of incremental cost savings, as we continue to execute on our operational initiatives, actions. We've taken the vast majority of the headcount actions, as Nicole had mentioned. You know, we'll see the full year payoff payback on the reductions we've made as we go into 2023. Obviously, as top line and adoption enhances, we see a compression of that cash flow activity.
Think in terms of kinda incremental cost change and then top line traction, we'll compress that significantly more in 2023, and we've already given the fourth quarter guidance.
Okay.
Yeah. Just to add to that, Oh, sorry, Griffin. Let me just add on to that a little bit. Thanks for that, Bob. You know, we've said in the past that we do not believe that we will need to incur significant additional sales and marketing costs to drive OvaWatch adoption. It's you know, similar marketing strategy, similar call points. You know, to Bob's point, we believe that we're gonna continue to see enhanced sales efficiency and actually overall spend efficiency within sales and marketing. I do believe that we'll see compression.
Okay. Thank you. Just a few on OvaWatch. Maybe just, you know, your high-level expectations on the revenue ramp. I think that TAM is about three times larger than Ova1Plus alone with the expanded label, and you've got some existing education out there. Just how you're thinking about OvaWatch, you know, should this be a meaningful growth driver next year.
Yeah, that certainly is the plan. We've rebranded as OvaSuite specifically so that when we talk to physicians, we're not bifurcating the conversation between one or the other. We're talking to the physician about this suite of products as a way for them to manage and make clinical decisions about any woman who presents with a mass, which is very different than where we were when we were talking only about Ova1Plus, which as you know is approved only for women who they've already made a decision to treat surgically. This is a very different conversation. We expect that it'll be easier to drive a change in behavior because doctors will see women with masses far more often than they will see a woman with a mass that they've decided is ready for surgery.
You know, the early indications in our conversations with providers has been very positive. They're also seeing this as a more comprehensive tool set. You know, certainly the plan would be to drive adoption of OvaWatch much faster than adoption of Ova1 and Overa in the past.
Okay. If I could just get two more in on, just quick ones on OvaWatch.
Of course.
On reimbursement, the unique CPT code application, are you still thinking, from a pricing perspective that a crosswalk to Ova1 is most likely?
Yes.
Okay. Then last one on that phase two of OvaWatch. Phase one, that one-time risk assessment that you're launching here this quarter, and then phase two will be more of that serial monitoring. Is phase two expectation still a launch next year in 2023? Any update on that prospective study?
Yeah, that still is the plan, but I'd ask Ryan to comment on the study.
Sure. Good morning. Yes, we are still on the plan for that one. Currently, the prospective study for the CRO is ongoing, and we don't have any reason to alter our plan for 2023.
Great. Thank you, and best of luck, Bob.
Thanks so much for the question.
Thank you.
Ladies and gentlemen, we have reached the end of the question and answer session. I would like to turn the call back to Nicole Sandford for closing remarks.
Thank you, David. Let me wrap up by reiterating our focus on sustained execution during the third quarter and reaffirming our planned cash usage for the rest of the year at $5.9 million-$7 million. With the imminent launch of OvaWatch, we will be laser-focused on driving payer and provider adoption of the OvaSuite portfolio, scaling our collaboration with distribution partners, including BioReference, and accelerating the development and launch of EndoCheck. The Aspira team is committed to achieving our goals through the disciplined allocation of resources and an eye towards the long-term future of the company. We're energized and more focused than ever on our mission to transform women's gynecological health. We're looking forward to a strong finish to 2022 and our best year yet in 2023. Thank you all so much for joining us today.
This concludes today's conference. Aspira Women's Health thanks you for your participation. You may disconnect your lines at this time.