Precipio Q1 2023 Earnings Call Transcript

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May 17, 2023

There are 2 speakers on the call.

Operator

Welcome to the Precipio Q1 2023 Shareholder Update Conference Call. All participants will be in listen only mode. 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 upon our current expectations, forecasts and assumptions and are subject to significant risks and uncertainties.

Operator

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 negatives of these terms or other words or terms of similar meaning. Risks and uncertainties that could cause our actual results to differ materially from these set forth in any forward looking statements include, but are not limited to the matters listed under Risk Factors in our annual report on Form 10 ks for the year ended December 31, 2022, which is on file with the Securities and Exchange Commission as well as other risks 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 as required by law. Now let me hand the call over to Elan Danyat Lee, Precipio's CEO.

Operator

Please go ahead.

Speaker 1

Thank you, and good afternoon, and thanks for joining our Q1 2023 shareholder update call. Today, I'd like to spend some time discussing the progress we're making in our revenue growth and our journey towards breakeven. I'll start by sharing updates on the Pathology Services division and then follow-up with a more detailed discussion on the product division and in particular I'd like to provide some more color around the catalysts we provided in today's earlier press release. Let's start with the Pathology Services division. I'm pleased to report that this was yet another record quarter with revenues of over 2,000,000 Furthermore, with the addition of the customer announced earlier this month as well as other new business, we will surpass the $11,000,000 run rate and are advancing towards the breakeven mark for this division.

Speaker 1

Our case volume, average revenue per case, collections and other key metrics continue to trend upward as we drive this division towards anticipated profitability. Additionally, we're working on several operational cost cutting measures within the division intended to reduce expenses and increase gross margins, which will ultimately bring the breakeven number closer and help us refit sooner. Company management is focused on this goal. Now moving to the Products division. As we previously announced in the installment filing, we had a record quarter in product sales exceeding $750,000 per quarter, which is equivalent to a $3,000,000 run rate.

Speaker 1

We have since continued to add business and are moving closer to the $4,000,000 run rate. I'd like to take a few moments to share how we got there by reviewing the 3 catalysts we measure as indicators of growth and why we believe this trend will continue. As a recap, in late 2022, we signed agreements with major healthcare distributors such as Thermo Fisher and others, gaining access to over 200 world class sales reps. Needless to say, engaging such a large group is a massive undertaking and it happens gradually. Not all sales reps are born equally.

Speaker 1

They have different interests, different levels of aptitude to new technologies and different levels of comfort with taking a new product to their customers. Just like with many new products, the early adopters are quick to jump to the opportunity, while there are others who will sit on the sidelines for a while and watch how we progress to make sure that we as a new vendor deliver on our promise. As we showed in today's PR, The first catalyst we look at is rep engagement, which has increased from 16% to 37% since the start of the year. This is a solid accomplishment in such a short period of time and we will continue to drive to grow these numbers. One of the questions that came up was how do we measure rep engagement.

Speaker 1

We define this as when a rep brings us a qualified, vetted customer. This means that the rep has taken the time to learn about the product, understand our target customer, study the qualifying criteria for a customer and then conduct the research intended This leads me to the next catalyst we look at, qualified leads in our pipeline. Every new customer serves as another building block to our revenue Once onboarded, this customer will generate recurring revenue to the company. As we stated today, our qualified leads grew from 30 to 78, representing a 150% increase since the end of 2022. Sales is very much a sharp fungal process.

Speaker 1

The Tintall filter is to ensure the leads coming into the funnel are vetted to ensure there is a fit. We've created a high quality sales funnel with qualified, interested customers who are interested in our product. The last catalyst we shared today is the revenue pipeline, which increased from $3,300,000 to $200,000 over the same period since the end of 2022. While these are by no means huge numbers, there are 3 factors I'd like for you to keep in mind. First, the total available market for Heapskine is estimated to over $400,000,000 annually in the U.

Speaker 1

S. Alone. So we have lots of potential market share to grow into. 2nd, our breakeven point for the company is $8,000,000 of Heem Screen sales. And so the current pipeline when added to our existing business What this means is that as we continue to sign deals and convert pipeline into account pipeline accounts into actual customers As we have this quarter, this takes dollars out of pipeline because they are now actual customers and no longer pipeline.

Speaker 1

The increase in pipeline means that we not only fill the gap created by the conversion of pipeline leads into actual accounts, but also added more potential revenue to the pipeline. This happens because over time, more reps become engaged as they see the value of our product and they are bringing us more qualified accounts to offer the products too. We expect this trend will continue as more and more sales reps see the success of their customers' adoption of HeatStream into their lab. I'd like to end with an anecdotal story that recently took place. 1 of our HeatScreen customers recently added our AML panel.

Speaker 1

As a reminder, AML or acute myeloid leukemia is one of the most deadliest cancers. It's essentially the code red of hematologic malignancies. When the patient comes in presenting with acute leukemia or suspected acute leukemia, he or she is typically rushed to the hospital to begin immediate treatment and this treatment is oftentimes very aggressive. With the advent of target therapies, molecular or genetic tests Our key part of the diagnosis and development of treatment plan for the patient. However, most such tests take at least 7 to 10 days to receive results.

Speaker 1

If the doctor waits for those results to begin treatment, there's a decent chance the patient will not even make it due to the aggressive nature of the disease. Therefore, the doctor oftentimes has no choice but to begin treatment immediately without waiting for these important test results. Precipio's AML panel is designed to provide same day results to the patient And in this case, it did. The customer rushed the sample to the lab and the lab provided immediate results The clinician who was able to make a far more informed decision based on the molecular results received from the Hemescreen AML panel. Incidentally, the testing for this station found 3 mutations, which is quite a unique outcome that can completely change the course of treatment.

Speaker 1

Getting these results within a day versus a week was a life impacting game changer. Precipro's team Supporting the customer during their onboarding and launch of this test and we were proud to be part of the process that makes this an impact on the patients' lives. Lastly, I'd like to address the share price and several people's concerns of meeting the NASDAQ $1 requirement. As you know, we received an extension from NASDAQ and we now have until October to meet the $1 requirement. As our company continues to make progress and advance towards financial independence, Increasing revenue and reducing its cash burn, we believe this will be reflected in the share price as a multiple of these factors.

Speaker 1

Since the share price is the one thing we can't control, management and our entire company is laser focused on 2 goals, growing revenue and advancing towards breakeven. We are accomplishing both. In looking at other comparable companies in our sector, we'll be one of the few companies to achieve breakeven at such a low revenue number. Furthermore, the combination of large addressable markets, high margins and an engine that continues to develop new proprietary products at almost no cost I'd like to thank you for attending the call today, And I look forward to connecting with you again after our next quarter results are out. Thank you and have a nice evening.

Operator

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

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Precipio Q1 2023
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