DermTech, Inc. (NASDAQ: NASDAQ:DMTK) reported robust financial results for the fourth quarter of 2023, with significant growth in test revenue and average selling prices for its Melanoma test. The company also announced restructuring actions to reduce annual operating expenses and is actively working to expand insurance coverage for its tests.
Despite a projected decline in test volumes for the first half of 2024, DermTech expects a substantial decrease in cash burn and has a cash runway extending into the first quarter of 2025.
Key Takeaways
- DermTech's Melanoma test average selling price increased by 55% year-over-year.
- Test revenue grew 38% year-over-year, reaching $3.7 million.
- The company achieved its highest gross margin in six quarters.
- Restructuring actions are expected to save approximately $40 million annually.
- The TRUST 2 study showed a 99.7% negative predictive value for ruling out Melanoma.
- DermTech is discontinuing the TERT Optional Add-On Assay to simplify testing and reduce costs.
- The company has a cash runway into Q1 2025 and anticipates a 40% reduction in cash burn in 2024.
Company Outlook
- DermTech projects DMT volumes to be flat to slightly down in H1 2024.
- Focus on driving average selling price improvements without specific guidance due to payer reimbursement uncertainties.
- Positive coverage decisions from payers are a key goal for the upcoming period.
Bearish Highlights
- A net loss of $19.1 million was reported, though it is a 32% decrease from the previous year.
- Test volumes expected to decline in the first half of 2024.
Bullish Highlights
- Total revenue for Q4 increased 31% to $3.9 million.
- The company added 42 million covered lives in terms of insurance last year.
- Ongoing efforts to reduce the cost per test, which saw a 6% reduction in Q4.
Misses
- No specific financial guidance was provided for future average selling prices.
Q&A Highlights
- The company discussed strategies to grow revenue, reduce expenses, and secure contracts with major commercial payers.
- Efforts to drive down costs include system improvements, labor efficiency automation, and technology advancements.
- The discontinuation of the TERT Optional Add-On Assay is expected to simplify testing processes and reduce costs.
In summary, DermTech is positioning itself for financial stability and operational efficiency, with a strong emphasis on cost optimization and revenue growth through its Melanoma test.
The company's strategic actions, including restructuring and the discontinuation of the TERT assay, align with its goals to improve margins and extend its cash runway. The TRUST 2 study is anticipated to bolster payer engagement and potentially influence policy decisions in favor of DermTech's testing solutions.
InvestingPro Insights
DermTech, Inc. (NASDAQ: DMTK) has demonstrated a commitment to financial stability and operational efficiency, as reflected in the recent financial results. To further enrich the analysis, here are some insights based on real-time data from InvestingPro and InvestingPro Tips.
InvestingPro Data:
- Market Cap (Adjusted): $29.45M USD, indicating a relatively small company size which can often mean higher volatility in stock price.
- Price / Book (last twelve months as of Q3 2023): 0.6, suggesting the stock may be undervalued relative to the company's assets.
- Revenue Growth (Quarterly for Q3 2023): 9.57%, showing some positive momentum in the company’s sales.
InvestingPro Tips:
1. DermTech holds more cash than debt on its balance sheet, which is a positive sign for the company's financial health and its ability to sustain operations.
2. The stock price movements are quite volatile, which aligns with the company's small market cap and may be important for potential investors to consider.
For those looking to delve deeper into DermTech's financials and strategic positioning, there are 10 additional InvestingPro Tips available. These tips can provide a more comprehensive understanding of the company’s financial nuances and market performance. To access these insights, visit https://www.investing.com/pro/DMTK.
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Full transcript - DermTech Inc (DMTK) Q4 2023:
Operator: Ladies and gentlemen, thank you for standing by. Welcome to DermTech's Fourth Quarter 2023 Financial Results Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. I would like now to turn the conference over to Steve Kunszabo. Please go ahead.
Steve Kunszabo: Thank you, operator. Welcome to DermTech's fourth quarter 2023 earnings call. With me on today's call are Bret Christensen, our President and Chief Executive Officer; and Kevin Sun, our Chief Financial Officer. Our call today will include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements made on this call that do not relate to matters of historical facts are considered forward-looking statements. Forward-looking statements made during this call, including statements regarding projections of the future performance or financial outlook of DermTech, the performance, patient benefits, cost effectiveness, commercialization and adoption of our products and the market opportunity for our products are based on management's expectations as of today, and are subject to various factors, assumptions, risks and uncertainties, which change over time. Actual results could differ materially from those described in such statements. Several factors that may continue to cause such differences are described in today's press release and our most recent filings with the SEC including our Annual Report on Form 10-K filed today. We undertake no obligation to update these statements except as required by applicable law. Our fourth quarter 2023 earnings press release and SEC filings are available on our Investor Relations website. A recording and transcript of this call will be available on our website later today. With that, let me turn things over to Bret.
Bret Christensen: Thank you, Steve, and thank you, everyone, for joining us. We are encouraged by the sustained improvement in many of our key performance indicators as they continue to head in the right direction throughout the second half of last year. In the fourth quarter, ASP for the DermTech Melanoma test, or DMT, grew 55% year-over-year. Test revenue increased 38% on the same basis. We also reported another all-time record high in the Medicare proportion of billable samples, which is about half of our addressable market and posted our highest gross margin in six quarters. But the additional restructuring actions we announced last month, we may see a total reduction in annualized operating expenses of approximately $40 million compared to 2022. We will continue to emphasize reimbursed tests and growing revenue. Before I take you through a few commercial highlights, let me briefly revisit the key pillars of our story. First, we have a proprietary non-invasive skin genomics technology that has demonstrated it can enhance the standard-of-care for evaluating lesions suspicious of Melanoma. Approximately 4 million surgical biopsies are performed annually to find nearly 190,000 new cases of Melanoma. Dermatologists are working hard to provide great patient care, but their practice can benefit from new tools that supplement existing methods. The DMT rules out Melanoma with a 99% or greater negative predictive value, or NPV, and can support decision making by clinicians. Second, we and many leading clinicians believe there's a place for the DMT in every dermatologic practice alongside established protocol. As a starting point with dermatologists, we're aiming to identify the numerous instances in which a healthcare provider doesn't want to biopsy a clinically suspicious lesion, but still wants to provide patients with peace of mind. Our customers and patients can trust the results when they use our test and there is room for it to be integrated into the current Melanoma care pathway. And third, we can introduce help -- we can reduce healthcare costs by providing genomic data to clinicians who can rule out the need for certain surgical procedures while also providing a better patient experience. On the payer front, all the insurance providers we brought on in 2023, which represent approximately 42 million new covered lives have started paying some claims for the DMT. We're determined to continuously improve the onboarding and reimbursement process with payers to speed up the revenue benefit. Finally, the Blues plan of Rhode Island and a Blues plan in the Mid-Atlantic recently issued favorable coverage decisions for the DMT. In January, we were incredibly pleased to announce positive top line data for the TRUST 2 study with a large cohort of more than 20,000 patients, the results reaffirmed the DMT's real world clinical utility with an NPV of 99.7% to rule out Melanoma, which is meaningfully higher than other currently available methods. For clinicians and patients, a high NPV delivers assurance that a suspicious pigmented lesion which tests negative is unlikely to be Melanoma. This study is an important way to continue to build trust with our customers and we're actively showcasing the clinical value of DMT in the field. The outstanding TRUST 2 study results will also allow us to reengage with insurance providers that don't cover our test. We're working to make the full study available in a peer reviewed medical journal and expect to have an article published in the next several months. We will continue to reinforce our message around the clinical and health economic benefits of DMT with all stakeholders. Our visibility with payers also improves through state legislative efforts. Bills mandating insurance coverage of genomic testing or biomarker bills are gaining traction across the U.S. as lawmakers advocate for improving access to potentially life-saving genomic tests. Legislation has now been enacted in 14 states and eight additional states introduced biomarker bills in 2023 that are making their way through the legislative process. Moving now on our commercial business where we continue to dedicate substantially all of our resources to growing reimbursed tests and boosting revenue. We now have two quarters behind us since we changed our approach. We believe it is evident these changes have had a positive impact on our top line, but we're still refining our tactics as we learn more. First, incentive compensation for our sales team continues to be linked to reimbursed tests and revenue over volume growth. We're also arming the field with robust analytics reporting to support these goals. More recently, we reduced the target list for our sales managers. This change also allows us to foster stronger relationships with our customers and increases touch frequency in the field. Second, as a result of additional restructuring actions we undertook in January, we dissolved certain sales territories and merged others to further optimize our footprint and focus on the highest value regions. As a result, we reduced our sales territories from approximately 60 to roughly 55. We are intentionally pursuing a strategy that prioritizes ASP and revenue growth over volume growth in the short term. In closing, we've significantly improved many of our key operating and financial indicators for two consecutive quarters. We believe this approach is the best way to reach a meaningful revenue inflection point. With that, let me turn the call over to Kevin for a more detailed financial review.
Kevin Sun: Thanks, Bret and good afternoon, everyone. I'll outline our key financial and operating metrics for the fourth quarter, then summarize how we're thinking about 2024. I'll wrap up by recapping our liquidity profile and cash runway estimates. All comparisons are to the prior year period unless otherwise noted. Test revenue was up 38% to $3.7 million, largely due to a higher ASP for the DMT. Test revenue was flat sequentially. Billable sample volume declined 11% to approximately 15,580 and was down less than 1% sequentially. Year-over-year and sequential decrease was partly due to prioritizing reimbursed tests ahead of total volume and the overall reduction in the size of our Salesforce (NYSE:CRM). As previously noted, we also stopped testing samples from pediatric patients and certain Fitzpatrick Skin Types in early 2023, based on guidance from our lab accrediting organization, which also affected the year-over-year comparison. The potential decrease was also partly due to seasonality we have previously seen during the year-end holiday season. Contract revenue was $0.2 million compared to $0.3 million. The decrease is from the timing of activity related to clinical trial progress of our biopharma customers. Total revenue increased 31% to $3.9 million, primarily on higher test revenue. Drilling into our test revenue drivers. First, ASP was up 55% to $238 per sample and up 1% sequentially. The Medicare proportion of billable sample volume hit another all-time record high, increasing sequentially from 27% to 28%. In the last three quarters, this proportion has increased by five percentage points and has contributed to the ASP improvement. We're beginning to see consistent payment from TRICARE, the VA as well as improving payment from certain of the Blues plans we signed on last year. The revenue benefit is ramping from the big increase in covered lives we've achieved, but we still need to clear administrative and billing obstacles in some cases before we improve payment behavior from certain insurance providers. Net positive prior period adjustments had a negligible impact on test revenue during the fourth quarter. ASP may fluctuate in the future if payers update their administrative procedures or other requirements for payment, even those payers with consistent reimbursement history. Second, we had approximately 2,200 unique ordering clinicians in the fourth quarter, down 2% sequentially. Because we're currently focused on building deeper relationships with clinicians rather than creating broad awareness for the DMT, the level of unique ordering clinicians may continue to be flat or even modestly down in the short term. Third, our average quarterly utilization or average number of tests ordered per unique ordering clinician with 7.1 billable samples in the fourth quarter up from 7.0 in the third quarter and versus 7.2 in the year ago period. Turning now to operating expenses. Cost of test revenue was $3.4 million, an increase of 4% yielding a test gross margin of 7%. Our quarterly test gross margin was the highest it's been in six quarters. The increase in cost of test revenue was primarily due to higher infrastructure costs related to our new lab. Sales and marketing expenses were $8.4 million, a 38% decrease largely due to lower employer related and marketing expenditures. Research and development expenses were $3.3 million, a 34% decrease primarily due to lower employee related and lab supplies costs. General and administrative expenses were $8.4 million, a 14% decrease driven by lower employer related costs offset by higher infrastructure costs related to our new facility. On a full year basis, including the impact from our comprehensive restructuring actions and other efforts to identify cost reductions, we expect an approximately $40 million annualized reduction in total operating expenses versus 2022. Total operating expenses for 2024 are currently estimated to be approximately $80 million. Net loss was $19.1 million, which included $3.2 million of non-cash stock-based compensation expense compared to a net loss of $28.2 million, which included $5.3 million of non-cash stock-based compensation expense. Net loss decreased 32% while test revenue increased 38%. Moving now to how we're thinking about 2020. We believe DMT volumes could be flat to modestly down for the first half of 2024 compared to the same period last year, primarily due to our focus on reimbursed tests and the impact in the field from a restructuring actions and the changing tactics. We'll continue to emphasize ASP and revenue growth. And lastly, a review of our liquidity profile and balance sheet. At year-end, we had cash, cash equivalents, restricted cash and marketable securities of $59.3 million. Cash burn is estimated to decline to $55 million to $60 million annually based on the fourth quarter 2023 run rate, a roughly 40% decrease from our net cash burn in 2022. We believe we have cash runway into the first quarter of 2025, not to exceed 12 months from today's 10-K filing. In summary, our plan demonstrated sustained results in growing revenue during the second half of 2023, while operating with a leaner organization. Now I'll turn the call back to Bret.
Bret Christensen: Thanks, Kevin. Before we wrap up and move to Q&A, I'll share a compelling patient story that inspires us as we forge ahead. A patient was seeing her dermatologist on a monthly basis for severe acne treatment without any other concerns. During her last visit, she mentioned a mole on her arm that she hadn't noticed before. The clinician evaluated the mole and wasn't concerned, but because the patient was worried a DMT was ordered. The test came back positive indicating a correlation with Melanoma. A biopsy of the lesion was then sent to a pathologist who confirmed it was Melanoma and the patient was referred to a surgical oncologist. The healthcare provider is still in shock that this patient may have otherwise walked out of the office. This story, much like others we hear on a regular basis, highlights the critical need for precision genomics as cancer is a disease of the genome and the current visual assessment standard is challenging even for an expertly trained medical professional. The DMT helps clinicians evaluate higher risk lesions alongside other traditional tools. With that, I'll turn the call back to the operator for Q&A.
Operator: Thank you. [Operator Instructions] The first question comes from Thomas Flaten with Lake Street Capital Markets. Your line is open.
Thomas Flaten: Hey guys. Appreciate you taking the questions. Just out of curiosity, I don't want to clarify. Kevin, you said that you expect volumes in the first half of 2024 to be down relative to the first half of 2023. Did I hear that right?
Kevin Sun: That's correct.
Thomas Flaten: Okay. So closer where we were in 3Q and 4Q or a lesser reduction from the 17, the high seven -- the mid to high 17?
Kevin Sun: Yeah. We're not providing specific guidance right now. We're happy with the performance in Q4 and again, we're our updated strategy to prioritize reimbursed volume drove a 55% year-over-year ASP growth and a 38% year-over-year test revenue growth. Q4 was that second quarter of, where we've achieved sequential growth in these top line metrics. So as we said, we believe the volumes could be down for the first half, because of the impact in the field from the restructuring and the change in tactics. We have about 15 fewer sales territories now than we did in Q1 of 2023. We do plan to continue to emphasize throughout the organization, our focus on driving a SP improvements. But providing any specific guidance right now, remains difficult without having a trend for several quarters in payer reimbursement behavior and the sustained effectiveness of our updated commercial tactics.
Thomas Flaten: Got it. And with respect to the $40 million reduction in OpEx relative to 2022, could you help us maybe spread those savings around? Is it kind of a pro rata cut across the three OpEx lines or how should we think about them?
Kevin Sun: It would be fairly, I think, consistently spread as we saw within the fourth quarter results. So it is all up and down the organization where we've made cost saving and efficiency efforts. And so I think as we said previously, looking at the fourth quarter of 2023 is kind of a benchmark going forward. That's a good kind of jumping off point for where we think expenses and costs will be in the future.
Thomas Flaten: And then one final line, if I might. Was there anything -- with speaking to the Medicare penetration, was there anything specifically you did tactically to drive that number up? Or was this just kind of a natural evolution of the business where that's starting to get closer to where it should be in the kind of around about 50%?
Bret Christensen: Yeah. Hi, Thomas, this is Bret. I'll take that one. If you remember, there's quite a few tactics that we deployed, starting the middle of last year and they evolved throughout the year, but many of those were around the focus for the mix that comes in the door reimbursed tests and certainly a big portion of that is Medicare. If you remember, we changed comp plans for our field sales personnel to focus on revenue and reimbursed tests versus strictly volume, which was historically how comp was laid out for them. We also provided them with the analytics and targeting tools to help them understand where most of their reimbursement was coming from. And we -- on top of that, we reduced the number of targets that each rep was calling on so they can go deeper into each practice. And all that has sort of paid dividends in the form of Medicare reimbursement, but also just overall ASP.
Thomas Flaten: Fantastic. Appreciate you taking the questions. Thank you.
Operator: One moment for the next question. The next question comes from Andrew Brackmann with William Blair. Your line is open.
Andrew Brackmann: Hey, guys. Good afternoon. Thanks for taking the question. Maybe just one on the major commercial payers, in the 10-K, I think you call out, you believe there's a possibility to secure some sort of contract from them over the next 12 to 24 months. Can you maybe just sort of talk about some of the confidence behind sort of putting that timeframe out there or anything, which has sort of changed over the last handful of months here? Thanks.
Bret Christensen: Yeah. Hi, Andrew. It's Bret. We've continued to have really good conversations with the national payers. We're happy with where reimbursement ended this past year, adding 42 million covered lives and finishing about 45% of all covered lives for DMT. We did get, as you remember, three negative policy decisions last year from three of the nationals. We were having good conversations with one, but TRUST 2 is an opportunity for us when that's published in the next several months to go back to all the national payers and continue those conversations. And as we've said in the past, we're just optimistic because the economics of DMT are so strong for payers that we know they'll eventually draft favorable policy and cover the test.
Andrew Brackmann: Great. And then Bret, you sort of talked about reducing the target list for your commercial team. Anything analytically that you can share, which sort of shows that the greater frequency and greater touch here leads to either greater utilization of the test or even movements towards more reimbursed tests for those providers? Thanks.
Bret Christensen: Yeah. Andrew, we're still learning a lot from the revised tactics last year, but one thing we know is that selling DMT in dermatology requires time and frequency in the field. And we revised the messaging with the salespeople to start with a clinical argument for DMT, making sure that dermatologists understand the clinical utility, the 99.7% negative predictive value that we showed in TRUST 2. Then, we figure out where we can integrate it into the practice. So it's a non-threatening message that gets them to say, look, I -- there's sometimes I don't want to do a biopsy and when I don't want to do a biopsy, yes, I would use DMT and whatever that percent of biopsies is, 20%, 25%, 30%, we work on integrating that into their practice so it becomes habit and just part of what they normally do. And that takes some time, it takes frequency, it takes a number of sales calls and so that's why we think fewer targets allows for that to happen quicker.
Andrew Brackmann: I'll leave it there. Thanks guys.
Operator: One moment for the next question. The next question comes from Mark Massaro with BTIG. Your line is now open.
Unidentified Analyst: Hey, guys. This is Vivian [ph] on from Mark. Thanks for taking the question. So I guess on the ASP front, are there any health plan wins that haven't turned on yet? I think you alluded to some administrative and billing obstacles preventing payment where you do have coverage. So just any more granularity you could give there on what's preventing the payment? Thanks.
Kevin Sun: Yeah. I believe, for the most part -- most of all of the wins that we had last year have started paying something. But there are certainly still upside potential in improving the payment rate. Because again, sometimes it's documentation, sometimes it's specific processes we have to follow to allow for better payment with them. So they are improving, but there is still more room for improvement to focus on those efforts to improve it as much as we can.
Unidentified Analyst: Okay. Perfect. Thanks, Kevin. And then, just any trends in utilization per ordering clinician to call out? I think we've chatted in the past that it takes a certain number of tests that clinicians need to get through, to get their first positive results and really understand the value proposition. So just anything else to call out there?
Kevin Sun: Yeah. No, I think, as we said before because we're trying to go deeper right now, the number of unique ordering clinicians in any quarter could be flat or even modestly down. But with that same rationale, we would expect the utilization to increase. Because again, if we're going deeper and making sure it's integrated in the practice, as Bret mentioned, making sure that the clinicians understand the clinical value and the best places to use the technology and how to get comfort to their patients with it. We do believe that it should drive increases in utilization on a per doctor basis, and that's where we're focused right now instead of broad marketing and awareness. It's really going deep and trying to get advocates and trying to get them to understand where to use it and integrate it into their practice.
Unidentified Analyst: Awesome. Thanks for taking the question.
Operator: One moment for the next question. The next question comes from Mason Carrico with Stephens. Your line is open.
Mason Carrico: Hey, guys. Thanks for the questions. Two quick ones up front for me here, if that's all right. Maybe on the news of discontinuing the TERT Optional Add-On Assay, could you kind of talk about the cost benefit there from a COGS per test perspective? And second, you guys had previously talked about some ongoing projects to drive down COGS. I think some of those depended more on volumes and scale, others were more project related. So could you just walk through where you stand on some of those today?
Kevin Sun: Yeah. Hey, Mason. So with TERT itself, again, what we assessed as part of the TRUST 2 data set is that there was limited improvement in some of the key statistical measures or performance metrics of the test when TERT was included. And we also have determined through getting feedback from clinicians who used our test that TERT didn't really impact clinical decision making too much. So the reason that we decided to simplify the DMT and stop testing TERT was just that to simplify it and based on the patient need and how it's being used in the clinical practice. As a benefit to that decision, though, we should get some improvement in COGS. TERT was a DNA mutation that was run on a separate piece of equipment. And so that was the only use for that equipment and there was also additional processing time and people needed to process those things. And again, part of the reason we also discontinued it is that we were only able to report out a test result in about a third of the time that was ordered or less. So we haven't quantified yet exactly what that will be because there will certainly be some direct cost savings from not having to use supplies and the labor. But as we're still working through what to do with the equipment and now we also have fixed costs that are spread to other parts of the processing. So it should provide some savings, but we haven't provided definitive detail on that yet. And then it relates to the other cost saving measures, so we'll continue to focus on all sorts of things, whether it's systems improvements, whether it's material costs related to the configurations or different things within the kits, labor efficiency automation, these are all things that we'll continue to work on as well as technology improvements. Some of them can go a little bit sooner than others. Some of them take some more work to validate and ensure that it doesn't affect how the test works. But we're committed to continue to improve the COGS profile. And as we saw just in Q4, we had just slightly lower volume than Q3, which meant that the fixed portion of the costs were spread over, again, a slightly lower base than in Q3. But we're also able to reduce the COGS on a per test basis, about 6% in Q4 sequentially, and that's the lowest cost per test that we've had since actually moving into the new laboratory. So we're committed to improving it and we've already demonstrated some improvements to it and we'll have some more information around TERT specifically once we get fully -- the change fully implemented.
Mason Carrico: Got it. Thanks, Kevin.
Operator: [Operator Instructions] One moment for the next question. The next question comes from Dan Brennan with Cowen. Your line is open.
Daniel Brennan: Great. Thanks. Thanks taking the question. Sorry, I joined a few minutes late. I just wanted to understand a little bit, and you probably already addressed this. But in terms of the outlook for '24, I don't think you're giving much, but I'm just wondering if there's any framework to at least consider from a price volume standpoint how we might think about it?
Kevin Sun: Yeah. We're going to continue to emphasize throughout the organization our focus on driving ASP improvements. But providing the specific guidance right now remains difficult without having a trend for several quarters in payer reimbursement behavior and whether or not there's the sustained effectiveness of our updated commercial tactics. So we're not providing any additional detailed guidance at this point.
Daniel Brennan: Is it fair to think like the Street got $20 million in revenue for 24 versus -- they call it $15 million this year? Is like -- rather than be completely off sides is -- I mean, is there any framework at all to think about magnitude or it's just impossible at this point?
Kevin Sun: It's very challenging and difficult at this point based on the factors we've just said. But as we said, we will continue to focus the team on driving those ASP improvements to drive revenue improvements, which we were able to demonstrate in Q3 and Q4 with the change in tactics, be able to get some improvements there. So that's where the focus will continue to be, but yeah, we're just not providing detailed guidance right now.
Daniel Brennan: And on the TRUST 2 study, I think you talked about it's really important to engage with payers. Like what kind of payers are you specifically looking to engage with and any potential timeline of like review and decisions?
Bret Christensen: Yeah. Hi Dan, it's Bret. Yeah. TRUST 2 is going to help us with all outstanding payers that don't have a policy, a positive policy yet for DMT, specifically the nationals. We think it's a large cohort, 20,000 patients, our highest in -- negative predictive value that we have to date of 99.7, but all of our publications show over 99%. So it will help with the majority of payers and the discussions that we're having to date. And we expect that publication probably in the next several months. So it's a really good opportunity you for us to put that in front of payers and restart any negative policy decisions, but also continue the ones that we're having to date.
Daniel Brennan: Got it. And just maybe one final one on that. So, is NPV definitely the most important metric to consider? Like what else would the payers look at in the study?
Bret Christensen: Yeah. Since it's a rule out test and what clinicians are looking to do is just rule out the need for biopsy and further procedures. The negative predictive value is really the -- by far the most important factor for us. It's what they point to as a rule out test and we're pleased with that result.
Daniel Brennan: Right. Okay. Great. Thank you.
Operator: One moment for the next question. The next question comes from Conner Chamberlain with Craig-Hallum. Your line is open.
Conner Chamberlain: Hey, good afternoon. This is Connor on for Alex. Thanks for taking my questions. So you've been working on getting these commercial payers online for years now. Can you maybe talk about how DermTech has evolved their approach in talking with these payers over time? Thanks.
Bret Christensen: Hey, Connor. Yeah. We've been working a while to get payers on board, but if you remember, we went public in 2019, had a bit of a blackout with COVID, but quickly got back on track with payers adding 42 million covered lives last year, seven of the top 10 Blues. So we're having really good progress. These discussions just take time and they take more time with the nationals who tend to drag their feet and do a little bit more analysis. So the discussions are going well. It's impossible to predict when they'll come through. But TRUST 2 again is a really good opportunity for us to put some strong data in front of these payers and we're optimistic that we'll continue to progress throughout the year.
Conner Chamberlain: Great. And then just one more here. With current OpEx pushing about $80 million run rate for '24 and we're still getting minimal gross profit, just how do we make this math work?
Kevin Sun: So we believe we have cash runway in the first quarter of 2025, not exceeding 12 months from today's 10-K filing date based on our cash on hand, our most recent cash usage in our future operating projections. We're going to continue to focus on driving ASP improvements to improve revenue, and we'll continue to focus on trying to find cost saving measures and efficiencies wherever we can.
Conner Chamberlain: Great. Thanks for the update.
End of Q&A:
Operator: I show no further questions at this time. This will conclude today's conference call. Thank you for your participation. You may now disconnect.
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