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PRPO Precipio

Participants
Ilan Danieli Chief Executive Officer
Call transcript
Operator

Good day and welcome to the Precipio’s Shareholder First Quarter 2021 Shareholder Update Conference Call. All participants will be in a listen-only mode. [Operator Instructions] Please note that the conference is being recorded. Statements made during this call contain forward-looking statements about our business.

You should not place undue reliance on forward-looking statements as these statements are based on upon our current expectations, forecasts, and assumptions, and are subject to significant risk and uncertainties. These statements may be identified by words such as may, will, should, could, expect, intend, plan, anticipate, believe, estimate, predict, potential, forecast, continue or the negative of these terms or other words or terms of similar meaning. Risk and uncertainties that could cause our actual results to differ materially from those set forth in any forward-looking statements may include, but are not limited to the matters listed under Risk Factors in our annual report on Form 10-K for the year ended December 31 of 2020, which is on file with the Securities and Exchange Commission, as well as the other risk detailed in our subsequent filings with the Securities and Exchange Commission. These reports are available at www.sec.gov. Statements and information including forward-looking statements speak only to the date they are provided unless an earlier date is indicated and we do not undertake any obligation to publicly update any statements or information, including forward-looking statements, whether as a result of new information, future events or otherwise, except required by law.

Now, let me hand the call over to Ilan Danieli, Precipio's CEO. Please go ahead sir.

Ilan Danieli

Thank you very much. Good afternoon, everyone and thanks for joining our Q1 2021 shareholder call. On this call, I'll provide a recap of our Q1 activity and an update on the progress our company has made since the start of the year and our thoughts going forward in 2021.

Let's start with pathology services.

Following the doubling of our annual revenue in 2020 from the previous year, Q1 shows continued growth with an increase of approximately 50% in Q1 2021 revenues over the same period last year in 2020 from 1.2 million to 1.8 million. We've also seen an increase in the number of patient cases received of approximately 70% in Q1 2021 over the same period in 2020.

Now, let me give you some color behind those numbers.

Although the situation regarding the pandemic appears to be easing up in several regions, many of our existing customers and certainly potential new customers have maintained a policy of not allowing visits by sales teams, which continue to make it challenging to both maintain these existing relationships and create new ones. Within that context, our team's ability to continue to grow our revenues is a testament to its ability to deliver our value proposition to our customers.

So, what are the key drivers that enable us to continue achieving this growth? There are several factors I'd like to highlight for you today.

First and foremost, we have a dedicated team that believes in our vision and delivers that message to our customers every day. Among our sales team, we have cancer survivors, we have people who have experienced the tragedy of misdiagnosis and how it can derail a patient’s battle against cancer. To borrow from one of my favorite speakers, the talented, Simon Sinek, this is our why. This is the reason we get up for work every day. That passion resonates throughout the team and its power is felt by our customers.

Second, we have a strongly differentiated value proposition.

While our lab competes for – while other labs compete for price cost and see the results, we focus on accuracy. We believe that at the end of the day, the only thing that matters when we're delivering a diagnosis is to get it right. That's our duty to the patient, and that's why our company exists. And our field [or mistake] is made in approximately one in five patients, we've achieved above 99% accuracy. Unfortunately, we have a terrific lab and operations team that enables us to deliver that level of accuracy without compromising on other factors of cost and speed of results.

So, our customers get the best of both worlds.

The third aspect of our success is the value we create for our customers [indiscernible]. Through the various programs we offer, we ultimately helped a doctor's practice be more successful, grow, and improve [indiscernible]. After all, a doctor that's armed with the correct diagnosis will likely take better care of their patients. And with technology such as our HemeScreen for physician office labs, we are now providing them with a program that both helps them provide unparalleled patient care through rapid turnaround time, as well as a new and profitable revenue source. These are just three of the many factors that drive our success and our continued growth of our pathology diagnostic business.

Going forward as we see states loosening up restrictions, we expect to continue to see organic growth in our pathology revenues.

In addition, we intend to grow our sales team and add new members of the team, which will allow us to expand into new regions, complementing our organic growth.

On the product side of our business, HemeScreen continues to be one of our golden bullet product, as we continue to add practices to the program.

We are seeing solid traction within the market and we continue to believe that by the end of the year, HemeScreen will be a substantial component of our revenue, and a handsome contributor to our margins.

With the recent launch of our HemeScreen AML panel, a panel that provides an unparalleled testability for doctors and laboratories to identify and get the patients with acute leukemia on the right treatment within the same day, we expect to see our increased organic growth within our customer base.

In addition, we also expect to see increased interest for prospective customers.

As we continue to grow and broaden the offering, the setup of HemeScreen within their lab becomes a more and more attractive value proposition. We're also focusing on expanding our market penetration to three additional market segments to complement the physician laboratory markets we launched our HemeScreen offering with.

The first is the hospital market. There are approximately 6,000 hospitals in the U.S.

Excluding the smaller hospitals that may not have sufficient volume and the larger institutional hospitals, we estimate there's a total market of approximately 4,000 hospitals that could be potential candidates to running HemeScreen in-house. Most of these hospitals either run the same test using alternative technologies, resulting in poor turnaround time and even poor economics or they send them out receiving poor time and no economics. We believe that HemeScreen is changing that landscape and can enable hospitals to bring the technology in-house, improving both turnaround time and providing economic to the laboratory.

The second segment is large commercial laboratories.

Although we've experienced the challenges, hurdles, and the lengthy timeline it takes to introduce and incorporate a technology into a large laboratory, we believe HemeScreen presents an opportunity to deliver value to that segment as well.

We will be exploring this market which comprises of approximately 25 large laboratories in the U.S., and we hope to see some success in that field as well.

The third segment is international markets.

Now that we've seen the initial success and the adoption of HemeScreen domestically, in the latter part of this year, we intend to begin exploring the potential of expanding our offerings internationally. After all, presumably most, if not all laboratories worldwide face the same challenges that U.S. laboratories face.

As travel restrictions due to COVID gradually ease, we anticipate that some of the laboratories outside the U.S., which we've been in contact with will be more open to exploring bringing this valuable technology into their own lab.

Our R&D team continues to work on building additional panels and expanding the HemeScreen suite of products to provide solutions to other diseases. The AML panel is an extraordinary product, but it's not the last one. And we are working on a strong pipeline of additional panels, each of them strengthening the overall offering of the HemeScreen product line.

We will keep our shareholders updated on these developments and the progress we make and the impact that we expect HemeScreen will have on the market and for our company.

Now to IV-Cell, we faced many challenges in bringing IV-Cell to the market, but none of those uphill battles have discouraged us nor did they reduce our belief in the value of the technology. We believe that the main roadblock has been a sales process issue. It is not a market need issue nor is it a technology or a product performance issue. I believe this year our [proposition] will finally bear some fruit. From late last year, we've been working with several laboratories both in the U.S. and overseas, to introduce IV-Cell and have them bring it on board. This is not an [easy sale] in a normal environment, and while I hate seeing pandemic as an excuse, the reality is it's a sale that does require face-to-face interaction, and we've been extremely limited with that. Furthermore, some of the laboratories we've been working with have experienced either staff shortage or staff turnover. The reason this inhibits our sales process is that these sort of exploratory evaluations of new technologies always take a backseat to the day-to-day patient samples within the lab as they should. Unfortunately, this means that an internal project is evaluating IV-Cell by a new lab, oftentimes gets pushed to the backburner until the labs that we focus on. The combination of inaccessibility due to the pandemic, plus the lack of focus on laboratories due to internal operational issues has made the sales process slow and difficult, but not impossible. We remain optimistic as to the potential of IV-Cell.

The first sale is always the toughest one, but I'm confident that we will get there.

We will of course continue to update our shareholders when we win our first testing.

Lastly, let me give you an update on where we stand with our [COVID products].

For those who haven't heard me say this previously, and I know that we have many new shareholders, again, I'd like to re-emphasize that COVID testing is not our core business. In contrary to other companies in the industry, at no time do we ever abandon our core business to refocus on COVID testing.

However, we were delighted to reach a major milestone accomplishment a couple of weeks ago, by getting approval to offer Nirmidas’ COVID antibody rapid test of the largest retail platform in the world, Amazon. This is a complex undertaking that involves overcoming business and regulatory hurdles. And we've been working on this for quite a while.

So, we were delighted to finally be able to announce publicly, and it was certainly nice to see the strong market response. I believe at that day, we were among the top five most highly rated companies. And for a small company out of Connecticut, I must admit, that [was neat].

So, what's next? First of all, to be clear, as for the FDA approvals, the products currently sold on Amazon is for point of care only, and is not yet available for retail.

We will of course be spending resources to ensure that we maximize the opportunity Amazon has given us to place this product on their platform and make it available to physicians and other point of care facilities.

As we stated in the past, we believe that the true value of this product is the ability for anyone to test themselves within the comfort and safety of their home. And we will continue to work with our partner Nirmidas to reach that goal. Needless to say, as with the previous approvals, were at the behest of the FDA. And while it will seem clear to all of us that there's a huge need for the test to be available for at home usage, it's really impossible to predict when the FDA will grant [indiscernible] authorization.

As I stated before, the way we're looking at it, this initiative might deliver a nice bonus to our company and to our shareholders, providing additional revenue and cash. But whether that happens in the magnitude are difficult to control or predictable.

So, we prefer to look at this as a nice bonus which may or may not happen, and which we'll celebrate if it does, and if it doesn't, we won’t miss a beat.

As we continue to make progress, we will of course update our shareholders accordingly. In summary, despite a tough year of COVID, we have strong winds at [our backlog]. Pathology business is growing at a [healthy clip].

Our product is showing traction slow with IV-Cell, but solid progress with HemeScreen.

We continue to invest resources into the highest gross revenue and profit potential areas for the company. And I feel fortunate that we have several of these areas. Rather than putting all our eggs in one basket, we believe in diversifying risk for creating alternative avenues for the company.

Fortunately, we've managed to do that while remaining true to our vision of battling cancer amidst diagnosis.

I think we're going to have a very good year and make lots of progress and I look forward to sharing that with you every step of the way. Thank you all for your support, and have a great evening.

Operator

The conference has now concluded. Thank you for attending today's presentation.

You may now disconnect.