Sera Prognostics, Inc. Q3 FY2025 Earnings Call

Good afternoon, and welcome to the Sera Prognostics Conference Call to review third quarter fiscal year 2025 results. As a reminder, this call is being recorded for replay purposes. I would now like to turn the call over to Jennifer Zibuda, Sera's Head of Investor Relations for a few introductory comments. Sera, please go ahead.

Thank you, operator. Good afternoon, everyone. Welcome to Sera Prognostics Third Quarter Fiscal Year 2025 Earnings Conference Call. At the close of market today, Sera Prognostics released its financial results for the quarter ended September 30, 2025. Presenting for the company today will be Evguenia Lindgardt, President and CEO; and Austin Aerts, our CFO. During the call, we will review the financial results we released today, after which we will host a question-and-answer session. If you've not had a chance to review our quarterly earnings release, it can be found on our website at sera.com. This call can be heard live via webcast at sera.com and a recording will be archived in the Investors section of our website. Please note some of the information presented today may contain projections or other forward-looking statements about events and circumstances that have not yet occurred, including plans and projections for our business, future financial results, and market trends and opportunities. These statements are based on management's current expectations, and the actual events or results may differ materially and adversely from these expectations for a variety of reasons. We refer you to the documents the company files from time to time with the Securities and Exchange Commission, specifically the company's annual report on Form 10-K, its quarterly reports on Form 10-Q, and its current reports on Form 8-K. These documents identify important risk factors that could cause the actual results to differ materially from those contained in our projections and other forward-looking statements. I will now turn the call over to Zhenya.

Thank you, Jennifer, and good afternoon, everyone. Building on the momentum from our PRIME study and ongoing commercialization efforts, the third quarter of 2025 marked continued progress in our transition towards PreTRM Test adoption. We advanced our geographically focused strategy. In these regions, we are executing an integrated approach to achieving payer coverage, physician education, and patient awareness. We've continued to build visibility through key industry events and data presentations. Earlier this week, we presented health economics data at the International Society for Pharmacoeconomics and Outcomes Research, or ISPOR, Europe Conference. In October, Dr. Brian Iriye delivered a compelling presentation of PRIME study outcomes at the Inaugural Renaissance Conference, titled 'Dismantling the Preterm Barrier: Biomarker-guided Bundled Care to Improve Neonatal Outcomes.' Links to both the poster and the presentation are now available in our press release issued today. We remain on track to publish the full results of our PRIME study in a peer-reviewed journal by the end of the year. We are very far along in the process of preparing a publication, and we look forward to sharing it with all stakeholders. What you can expect from us is a press release upon acceptance for publication, followed by an investor and analyst event with our principal investigators to discuss the strong primary outcomes we shared earlier this year, as well as some new and compelling data points from the study, demonstrating the efficacy of the PreTRM Test. Following PRIME, we plan to maintain a steady cadence of data publications and presentations focused on key topics, including health economic benefits, subpopulation analysis, such as first-time moms versus other moms, and Medicaid expected cost savings associated with Sera PreTRM Test. These data subsets will build on the robust evidence base already established by our PRIME and AVERT clinical studies. Together, they will not only reinforce the clinical and economic value of preterm, but also help support its adoption into standard prenatal care. Let's now shift to our commercial strategy and progress. For those newer to our story, I'll start with a quick overview. Our sales and marketing efforts are concentrated in select regions where we see strong alignment across several factors: headway with payer and Medicaid program discussions, support from influential local opinion leaders, engagement from early adopter institutions, and presence of PRIME study sites. By focusing on areas where these elements converge, we are creating conditions for meaningful clinical uptake of the PreTRM Test. We've made real strides with Medicaid plan pilot programs, and our inaugural pilot in Nevada is actively enrolling patients. We're engaging payers in our first wave of 6 started states, collectively representing a strong commercial opportunity, covering approximately 33% of U.S. births and 35% of Medicaid births annually. Beyond this first wave, we've initiated outreach to the next year of target states, expanding our footprint of states in discussion to 13 in total. We're also in discussions with organizations with regional and national reach across multiple lines of business. These early signals of market engagement give us confidence that we are well positioned to drive meaningful coverage and adoption in our target states and beyond. Our commercialization strategy is anchored in getting coverage first. It is built on a two-pronged approach. First, targeting state engagement across first and second wave states, for example, Nevada, Texas, and Massachusetts that have shown interest and face high preterm births and have leveraged tools to adopt innovative programs in prenatal care. Second, payer-driven adoption through pilots and alignment to value-based care programs. By engaging state and payer leadership and connecting to the efforts of local institutions driving improvement in prenatal and maternal care quality outcomes, we're building a local flywheel of adoption that aims to accelerate provider buy-in and lays the groundwork for broader coverage. With Medicaid financing over 40% to 3.6 million U.S. births annually, the opportunity to drive meaningful cost savings and improve outcomes is substantial. We believe the PreTRM Test offers a differentiated, data-driven solution for states seeking to reduce neonatal complications and manage Medicaid expenditures more efficiently. Our health economics data shows potential in-year savings from PreTRM Test screening of low-risk pregnancies. The path from initial state Medicaid director engagement to a state coverage decision takes time. Initially, we anticipate a cycle of about 24 months or more driven by the nature of prenatal testing and claims data availability. For example, the blood draw occurs between weeks 18 and 20 of pregnancy, followed by 4 to 5 months until delivery, and another 3 months or so for claims data to become available for analysis. Once the data is reviewed, we present the pilot results to the Medicaid plan and other state stakeholders to inform coverage decisions. As additional pilots launch, we will use the resulting data to demonstrate feasibility and build a strong business case for statewide coverage. Our commercialization strategy in the immediate term will focus on the target geography adoption wave by wave until guideline inclusion. Success of these efforts depends on achieving coverage in Medicaid and commercial plans, value-based care arrangements, and activating physician adoption and advocacy. Engagement with clinical leaders and alignment on target populations will be critical to securing guideline inclusion and accelerating adoption. Post-guidelines, we will scale nationally with a field sales force aiming for broader payer coverage and expand national awareness building through traditional marketing channels. Although guideline inclusion is a longer-term milestone, our focused efforts, both in evidence generation, KOL engagement, targeted state coverage, and physician adoption are all needed to support it. Ultimately, the strategy positions us to drive meaningful revenue growth while improving outcomes for mothers and babies nationwide in helping address health care utilization trends, including rising costs associated with increasing NICU admission rates and longer hospital stays surrounding maternal and neonatal care. To provide clear visibility into our accelerating commercial execution, even at this early stage, we will begin sharing some key traction indicators such as Medicaid pilot momentum, including a number of live pilots, enrollment completion milestones, and expanding pipeline of states in discussions that will serve as tangible markers of progress as we build towards sustainable revenue growth. We're gaining meaningful traction across the payer landscape. We're actively engaging with 10 payers across 13 states, a diverse mix of both national and regional, Medicaid and commercial, who are focused on offering competitive health care benefits while managing rising costs. Our strategy targets forward-thinking organizations with strong member bases in key states where our sales reps are well positioned to maximize pull-through. We're also prioritizing institutions with value-based payment models, aligning incentives for providers and payers in preventing preterm birth complications. PRIME and AVERT data strongly support the value-based approach and can accelerate preterm uptake where positive outcomes translate into payer, provider, and patient success. To recap our commercial progress, momentum is building. Our first Medicaid pilot is now live. We are in active dialogue with all 6 of our initial target states, and we've already begun engagement with the next wave of states, setting the stage for broader adoption and impact. To support our fundamental, clinical, and commercial efforts, we've made high-impact leadership appointments to the Sera team. As announced in October, Dr. Tiffany Inglis was appointed Chief Medical Officer, an accomplished OB/GYN with over 20 years of experience, including a decade in clinical practice and recent leadership at Elevance Health and Carelon Health. Dr. Inglis excels at driving women's health initiatives, payer coverage, and cost-effective outcomes. She will spearhead our medical affairs and strategy to accelerate PreTRM Test adoption and establish it as a standard of care for preterm birth risk. In preparation for broader adoption of the PreTRM Test in our target states and beyond, we appointed Marisol Urbano as the Head of Commercial Operations. With 20 years of health care experience and a proven track record in diagnostics, her leadership will be instrumental in accelerating customer onboarding and supporting clinical integration, key enablers of commercial traction during this foundational growth period. Complementing this leadership, we have successfully completed the hiring of sales representatives across all 6 of our target states and are well positioned to expand market access and preterm utilization. Lastly, beyond our progress in the United States, we continue to explore Europe in a region that fully appreciates the pressing gap in preterm birth risk screening. We remain engaged in productive discussions with European regulatory bodies and are on track to submit our dossiers in early 2026. In closing, we've made significant strides in laying a strong foundation for adoption and reimbursement, setting the stage for future growth. Looking ahead, we're optimistic about the flywheel effect on these initiatives, which we believe will drive meaningful adoption and contribute to better maternal and neonatal outcomes. With that, I'll turn it over to Austin, our CFO, for a review of our financial results. Austin?

Thanks, Zhenya, and good afternoon, everyone. I'll provide an overview of our financial performance for the third quarter of 2025 and our balance sheet position. Net revenue for the third quarter was $16,000 compared to $29,000 in the same period last year. During the quarter, we received a $100,000 prepayment from the first Medicaid pilot in Nevada, which increased our deferred revenue balance as of September 30, 2025. Total operating expenses for the quarter were $9.0 million compared to $8.9 million in the third quarter of 2024. Research and development expenses were $3.3 million, down from $3.5 million for the third quarter of 2024, primarily due to lower clinical study costs following the completion of the pivotal PRIME study and as the company shifts towards commercialization. Selling, general and administrative expenses were $5.7 million, up from $5.4 million for the prior year period, a modest increase as we carefully invest in targeted commercial activities and strategic headcount additions while building market awareness in preparation for the publication of PRIME study data. Our net loss for the quarter was $7.8 million, down from $7.9 million in the third quarter of 2024 as we continued our focus on managing our capital resources ahead of revenue expansion in the future. As of September 30, 2025, we had cash, cash equivalents, and available-for-sale securities of approximately $102.4 million. We are encouraged by the commercial momentum that Zhenya discussed, including our first Medicaid pilot program in Nevada. We are diligently working to translate our foundational progress into tangible outcomes and significant growth opportunities. In the meantime, we continue to manage our capital prudently, prioritizing high ROI opportunities to support commercialization while maintaining a strong balance sheet to fuel our growth strategy.

And your first question comes from the line of Dan Brennan from TD Cowen.

Great. Regarding the Medicaid pilots in Nevada, there are five other states involved. During the Q2 call, you mentioned having two to four pilots signed. Are you feeling that progress is on track? Do you believe you are ahead or behind schedule in getting Nevada signed up? When do you anticipate finalizing the four or reaching six pilots?

Dan, thank you so much for the question. We are very much on track. One pilot is launched in recruiting, and another one is in contracting. So that gets us to 2. And we believe a couple more will follow shortly. We are in active discussions with the payers in other states. The fact that we've expanded to the next wave of states indicates that we're very much on track in getting a foot in the door in each of the states and going beyond because we feel we have good traction even in the first wave of the states. We'll definitely continue communicating progress once the pilots are up and running. While we're in contracting, we will probably not communicate specifics about the states and the payers but will share that once we are underway with their permission.

And how big are the pilots? So Nevada, you said $100,000 prepayments. Just how do we think about it? I know the criticality is to get it established so you can eventually get state Medicaid coverage. But just speak to the economics during the pilot phase. What are you getting paid to run these tests? How big is the Nevada program? Just any color around that?

Sure. The trade-off here, Dan, is how fast we want results. The fewer patients in the pilot, the faster the decision on coverage, which would be best to drive outcomes for moms and babies sooner. The drive to have a bigger pilot, of course, is powering the pilot to show great results, because we are looking at reasonably rare events of significant preterm birth that we want to ameliorate. The typical size of a pilot would probably be a few hundred patients. However, as we engage with plans and state Medicaid directors, we are not only suggesting that we pilot, but we are in active discussions with some value-based health care arrangements and contracts where we can show what the test can do when screening the moms in the state with quality metrics.

Okay. And are you collecting the full preterm birth price when you're running the pilot, or is there a discount? How does that work?

So again, the specifics I won't get into. But we are very happy with the price realization in these early engagements with payers and state Medicaids. We don't know how that will evolve when we reach full-scale coverage for the state, but we're optimistic about what we've seen to date.

Got it. And then just in terms of PRIME, you guys still feel confident it will come before year-end. So we've got about 6 weeks left. So you think it will come before then? Any more color on that?

Yes, Dan, we've been mentioning 'any day now' for a few quarters, but it really is very close now, and we are confident it will arrive in the coming weeks, ideally before the end of the year. Regarding specific data, it's not possible to disclose anything until the publication is released. However, once it is available, we'll hold a detailed event to discuss all of the new insights. These insights are derived from discussions with the reviewers. We have advanced some of the insights initially intended for future publications at the reviewers' request. We look forward to sharing that.

Got it. And maybe one more. Just in terms of the path forward, you mentioned $100 million in cash, pilot studies in the background, and the PRIME study ahead. As we think about the next 1, 2, or 3 years, getting PRIME out, the guidelines, is your timeline still the same? So if the publication comes out in the next month, are we thinking more like end of '27 or '29 for guideline inclusion?

Yes, that is still a pretty good estimate of 24 to 36 months. We are working to mine the data and add real-world evidence to our portfolio. This critical work stream aims to create literature for the guidelines to be updated with the new tools available to clinicians. Until the guidelines, the key focus is driving density of adoption in specific states. Given our first target states represent over 1/3 of births in the U.S., that is significant volume to work with. It’s much broader than just pilot engagement, including positive policy coverage achievement across plans and value-based care contract arrangements and driving physician adoption.

And your next question comes from Andrew Brackmann from William Blair.

This is Maggie Boeye on for Andrew today. Maybe first, just to start, can you walk through just once you have the PRIME publication, what your plans are there? And how you think about organizational readiness at this point once the PRIME publication comes hopefully before year-end?

Thank you so much, Maggie. Organizational readiness has been a priority; we've prepared for quite a few quarters for PRIME to come out. We've prepared the dialogue that can commence once the data is out, specifically policy reviews by payers. Engagement without a peer-reviewed publication is on a pilot basis. Once we have the publication, the formal review processes can start. Our number one priority post-publication will be securing coverage and reimbursement. Second, of course, is disseminating information to clinicians and building awareness. You can anticipate presence at conferences, education events, and engagement to get the data out to as many physicians and opinion leaders as possible. Our field force is prepared to drive physician adoption with the publication in hand.

And then maybe just on the commercial team. How should we be thinking about that build-out as we get into 2026 once the PRIME publication is out there? And how should we think about SG&A expense in 2026?

What we're aiming to do as we expand our engagement with states and payers post-PIRME publication, we plan to grow our sales force to drive engagement on the ground. Each of the waves covers about 4 to 6 states, so we've staffed the first wave. As traction is achieved in subsequent geographies, we will bring new sales reps and medical science liaisons. We'll invest behind wins to ensure field personnel support engagement with physicians and practices.

We're aiming next year to keep expenses relatively similar to how they are this year while shifting capital allocation certainly towards sales and marketing activities. We expect to see a relatively significant increase in the sales and marketing line while overall expenses remain flat.

We are excited to reallocate capital to commercialization from our previous evidence-generating activities over the last couple of years. Thank you so much. Before we close the call, I just want to emphasize the strong foundation we've built this quarter with advancing the evidence generation, accelerating commercial execution, and strengthening our leadership team. With the first Medicaid pilot live and active engagement across 13 states and key hires in place, we're really well positioned to drive adoption of the test and deliver meaningful impact on maternal and neonatal outcomes. Looking ahead, we remain focused on disseminating PRIME results, expanding payer coverage, and working towards guideline inclusion. Thank you all so much for the continued support as we work towards transforming prenatal care and creating long-term value for patients, providers, and shareholders. Over to you, operator, to close the call.

Thank you. And this concludes today's call. Thank you for participating. You may all disconnect.