Predictive Oncology Q2 2023 Earnings Call Transcript

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August 10, 2023

There are 6 speakers on the call.

Operator

Good day, and thank you for standing by. Welcome to the Predictive Oncology Q2 2023 Earnings Conference Call. At this time, all participants are in a listen only mode. After the speaker presentation, there will be an opportunity to ask your questions. Please be advised that today's conference is being recorded.

Operator

And I now would like to turn the conference over to your speaker, Mr. Glenn Garmont, Investor Relations. Mr. Garmont, please go ahead.

Speaker 1

Welcome and thank you everyone for dialing into the Predictive Oncology First, you'll hear from our Chief Executive Officer and Chairman of the Board, Raymond Vannari Then our Chief Financial Officer, Bob Myers, will review our financials. Finally, Doctor. Pamela Busch, our Chief Business Officer, We'll join Raymond and Bob to answer any questions that you may have. Certain matters discussed on this call contain forward looking statements. These forward looking statements reflect our current expectations and projections about future events and are subject to substantial risks, uncertainties and assumptions about our operations and the investments we make.

Speaker 1

All statements other than statements of historical facts Included in this call regarding our strategy, future operations, future financial position, future revenue and financial performance, Projected costs, prospects, plans and objectives of management are forward looking statements. The words anticipate, Believe, estimate, expect, intend, may, plan, would, target and similar expressions are intended to identify forward looking statements, Although not all forward looking statements contain these identifying words, our actual performance, future performance may materially differ from that contemplated by the forward looking statements as a result of a variety of factors, including, among other things, factors discussed under the heading Risk Factors in our filings with the SEC. Except as expressly required by law, the company disclaims any intent or obligation to update these forward looking statements. And now, I'd like to turn the call over to Raymond Vounari, Chief Executive Officer. Raymond?

Speaker 2

Thank you, Glenn, and good afternoon, everyone. During the Q2 of this year, we continued to make significant progress in growing our pipeline with Biotech and Biopharma Companies as well as Research Institutions looking to incorporate artificial intelligence and machine learning into their early drug discovery process. The importance of our differentiating Petal platform, which includes Our vast proprietary biobank of more than 150,000 heterogeneous tumor samples and more than 200,000 pathology slides Combined with our CLIA certified pet lab is beginning to resonate in the market. We are the only AI powered company capable of predicting clinical success in the very early stages of This is only possible because we are able to introduce the human element of heterogeneity far earlier in the drug discovery process, essentially looking 5 years into the future of drug development in advance of clinical trials. As I have mentioned before and for those unfamiliar with our company, the word heterogeneous is a key descriptor for predictive oncology.

Speaker 2

Even though many patients are diagnosed with the same type of cancer, each of those tumors respond differently to a particular cancer therapy. Each tumor and every response is unique. Understanding drug response in a heterogeneous population is invaluable along the entire continuum of drug discovery through drug development. Our unique combination of assets and capabilities Offers drug developers a multifaceted value proposition that includes, 1st, the mitigation clinical risk at the most critical 2nd, identifying and validating drug targets sooner and thereby avoiding unnecessary trials that are likely to fail later in development, the potential exists not only to significantly reduce the cost of drug Replenishing pipeline and optimizing clinical development. The commercial life of these drugs under patent exclusivity Clearly, the emergence of AI is fundamentally changing And we are at the forefront of this exciting transformation.

Speaker 2

It is well known and generally accepted that approximately 95% of drug candidates are never approved. But with predictive oncology's capabilities, our partners essentially have the ability to look into the future of drug response It's a confidently anticipate clinical validation with much lower financial risk and therefore a much Greater likelihood of commercial success. The global artificial intelligence in drug discovery market was valued at 1 point $1,000,000,000 in 2022 and is expected to expand at a compound annual growth rate 29.6 percent from 2023 to 2,030. The growing demand for the discovery and development of novel drug Therapies, a fresh approach to drug repurposing and the need to replenish product pipeline as patents expire are the driving force behind this market growth. Again, with our highly differentiated portfolio of assets and capabilities, We believe that we are incredibly well positioned to occupy a leadership position in this emerging field.

Speaker 2

This year, for the first time, we had a very notable presence at the 2023 BIO International Convention, which was held in Boston in June. BIO, which stands for Biotechnology Innovation Organization, is among the most widely attended industry conferences in the world dedicated to partnering and business development within the life sciences. During the conference, our Chief Business Officer, Doctor. Pamela Busch, Active machine learning into that process, which as I just mentioned, is a key differentiator for us and an important component of the lab experiments that support or refute the predictions that come from Pedal. Also during the conference, we met with more than 30 customer prospects, several of which have led to substantive Annual conferences like BIO are critical to raising awareness of predictive oncology and unique value that we can For example, since Bio, we are in active negotiations with a key European player in the formulation space Effectively, we would expand our reach into Western Europe.

Speaker 2

Those discussions are ongoing and a term sheet is now being drafted. Again, for the benefit of those who may be new to our story, at the core of our offering is our Pedal platform. As we have said before, Petal is comprised of several interrelated components. Which is informed by the most significant resource at our disposal, which is a biobank of more than 150,000 tumor samples and the drug response data Derived from those samples, these three things comprise of the Petal platform. This brings us to our core machine learning.

Speaker 2

Core, which means computational research engine, which is a key differentiator. While artificial intelligence refers to Programming a wide range of human tasks, machine learning fundamentally is the ability to make predictions based on data. And the data that we are feeding into Core is data that our scientists provide As a result of scientific experimentation conducted in our laboratory and informed by our vast biobank tumor samples, We conduct laboratory experiments to validate in silico analyses to prove or disprove the viability of drug compounds scientifically, not just statistically. This is our value proposition. This is what sets us apart from all other AI drug discovery companies.

Speaker 2

As the term machine learning implies, The more data that we feed into the system, the more accurate its predictions become over time. Petal has been scientifically and technically tested, validated and verified. Petal can predict with 92% accuracy whether a tumor sample responds with certain drug compound or not. And in so doing, Petal can inform the selection of drug tumor combinations or subsequent in vitro testing and facilitating gono go decisions before investing in costly and time consuming later stage in vivo human trials. Last quarter, we spent a fair amount of time describing our recent contract successes, including the U.

Speaker 2

K. Cancer Research Horizons, which is abbreviated CRH, SieVRgenics, Flugen and Integra Therapeutics. CRH is the world's largest private funder of cancer research With a network of 4,000 researchers and an annual budget of more than $370,000,000 They have provided significant funding that has resulted in the launch of 11 cancer therapies currently on the market and provide critical support for an additional 160 compounds that are in clinical development. Our partnership with Siebogenix We'll leverage Pedal to develop the first ever genomic space approach to precision radiation therapy, utilizing artificial intelligence to identify or develop novel or repurposed radio protective or radio sensitizing drugs or therapeutic compounds. There are at least 3 paths for commercialization.

Speaker 2

1st, screening for interaction between patient tumor radio protective or radio sensitizing drug and third, screening of individuals for radiation sensitivity and personalized In addition to existing contracts with biotech and biopharma companies, Predictive Oncology and Flugen are collaborating on a next generation vaccine related to respiratory diseases for which a Phase 2b grant has been submitted to the NIH. And finally, we are working with Integra Therapeutics, a very well respected leader in the development of next generation gene writing tools to advance gene therapies. We are currently preparing to scale up expression of their novel gene delivery protein, which If successful, we'll secure a contract for the ongoing production of that protein. I highlight these contracts again not just to demonstrate that our offering is resonating quite clearly in the market, but also to illustrate As I mentioned earlier, we have a very robust business development effort in place. And I believe we will be announcing additional collaborations in the coming months, including new or expanded contracts with CRH.

Speaker 2

It is worth repeating that petal drug discovery contracts have significant value, But the sales cycle can be lengthy. To complement these efforts, we also have a very active biologics business wherein formulation development and solubility testing are provided and by which we are compensated by our pharmaceutical development partners on a CE for service basis. This is relevant because protein therapeutics play a meaningful role in almost every field of medicine from antibody to enzyme and hormone treatments, the number and frequency of protein therapeutics Rock to market has increased dramatically, but for these therapies to be effective, an Optimal dose of those therapies must be properly circulated, delivered and absorbed in the body. Not unlike the efficiently predictive accuracy of the Pedal platform for drug discovery, our biologics capabilities Enable us to effectively streamline and accelerate the formulation process, identify alternative and potentially more viable formulations and amplify the amount of protein actually being produced. I point this out because our company Is well positioned to generate near term formulations revenue in support of building a pipeline of milestone driven pedal contracts.

Speaker 2

I would now like to address And rather noteworthy additions to our newly formed Business Advisory Board, beginning with Doctor. Bernard A. Harris, Jr. Doctor. Harris brings a wealth of clinical, business and operational healthcare expertise to our Business Advisory Board.

Speaker 2

He currently serves as Chief Executive Officer and Managing Partner of Forselius Ventures, a venture capital firm that supports and invests in early to mid stage healthcare company. He is also the Founder and serves as Chief Executive Officer and Director of the Harris Institute and Foundation, a non profit organization that serves socially and economically disadvantaged communities striving to reach the most underserved populations in the areas of education, Doctor. Harris serves on several boards including Raytheon Technologies, U. S. Physical Therapy, MassMutual Life Insurance Company and the Texas Medical Center.

Speaker 2

He has a very diverse and distinguished including many years as an astronaut, serving on multiple space shuttle missions and being recognized as the 1st African American to walk in space. We also announced the addition of Biopharmaceutical Finance Veteran, Andrew Einhorn to our Business Advisory Board. Mr. Einhorn consults for Danforth Advisors, An agency with deep institutional knowledge of the business of life sciences from strategy through execution, where he provides financial advisory services to public and privately held companies and was appointed Interim Chief Financial Officer of Cognition Therapeutics in August 2022. Previously, Mr.

Speaker 2

Einhorn served as Chief Financial Officer of RBL Pharmaceuticals, formerly known as Osmotica, Edge Therapeutics and was Co Founder and CFO of Oceana Therapeutics, Esprit Pharma and ESP Pharma. As our momentum continues to accelerate, the Business Advisory Board's insights, expertise and perspectives We'll be invaluable in our efforts to deliver unique solutions to our drug development partners, while creating lasting value for our shareholders. We will continue to look for outstanding candidates who add to the diversity, backgrounds and perspectives We were seeking to round out our business advisory board. Before turning the call over to Bob to review the financials, I want to close with our recent announcement that we have moved our corporate headquarters from Eagan, Minnesota to Pittsburgh, Pennsylvania. Pittsburgh is a global life sciences, research and technology hub and the location of our main laboratory facility.

Speaker 2

With this move, Pittsburgh is now the epicenter of our company's center for artificial intelligence and clinical operations, further strengthening our commitment to scientific discovery and growth. At this point, I will turn the call over to Bob Myers, our CFO. Bob?

Speaker 3

Thank you, Raymond. We ended the Q2 of 2023 with cash And cash equivalents of $14,800,000 as compared to $22,100,000 as of December 31, 2022. In addition, we have $1,800,000 outstanding warrants that represent an additional source of capital. We have no debt, So our balance sheet is very strong. As of June 30, 2023, stockholders' equity stood at $14,700,000 as compared to $21,800,000 as of December 31, 2022.

Speaker 3

We recorded Q2 2023 revenue of $490,110 as compared to $371,005.91 for the Q2 of 2022. Our gross margin in the Q2 of 2023 was 67% as compared to 64% for the Q2 of 2022. Operating expenses We're just under $1,000,000 in the Q2 of 2023 as compared to $900,000 for the Q2 of 2022. Net cash used in operation activities was $7,000,000 in the first half of twenty twenty three as compared to $6,400,000 For the comparable period in 2022, net cash used in investing activities was $300,000 for the first half of twenty twenty three, which was consistent with the comparable period in 2022. That concludes our financial summary.

Speaker 3

You can find additional details in our 8 ks containing our earnings press release as well as our 10 Q, which is on file with the SEC and also available on our website. So with that, I'm going to turn the call over to the operator for Q and A. And as a reminder, Doctor. Pamela Busch, our Chief Business Officer, is also available for this segment of the call.

Operator

Thank you. We will now be conducting a question and answer session. Thank you. Our first question comes from Michael Broadbent, a Private Investor. Please proceed with your question.

Speaker 4

Hey, Ray and Bob. I appreciate the call. Wanted to ask the same question I've asked at a couple of the others. Given the trajectory of the company and the increase in expenses, obviously, there's a lot of Things still in place. So what is is there a new timeline that the company will achieve at least a breakeven On operations, because the cash burn still has me worried about a potential offering even though the warrants are still there.

Speaker 4

A second part of that question is, do the warrants at what price would they be exercisable, Given if there is a raise necessary in the next year.

Speaker 5

Bob, do you want to take that or do you want me to?

Speaker 3

Sure. Bob, I'd be glad to, Randy.

Speaker 5

Hey, Michael, how are you?

Speaker 4

Good. So to answer your question, our expenses in We had $18,500,000 in the bank at The end of March 31, and we're sitting at about 14.8% in by the end of June. So that rate is pretty consistent. We're solid certainly for moving ahead over the next year and the anticipation and forecast of revenue that we believe will be coming in. And let's take it that way, revenue.

Speaker 4

Let's say cash from deals that we have, revenues that recognize is different from the cash that we may earn From some of these deals, we'll certainly assist in maintaining our run. In terms of the warrants, right now the lowest price warrant is $14 And as you know, we were at 4.70 something today in terms of our price. So but there's a lot we can do with the warrants And there's also, as you said, always the potential of a raise. But Raymond and I have always been very honest and said to the shareholders that we're going to Try to do everything we can to not do another raise and to try to bring our cash levels up Through revenue and the business we do continually, and that is our aim.

Speaker 5

And Michael, I would add to that that we are obviously scrubbing the budget. There are a couple of ways that we're going to address this. One is In order for us to extend the runway, we have to reduce the cash burn. So we're certainly looking at that. The balance, of course, is To take advantage of these opportunities in front of us, we have to spend money to do that.

Speaker 5

So we win some of these contracts, they Need to hire people and get some equipment, then we're going to have to do that as well. But we are acutely aware of that balance, and we're Keeping an eye on it literally on a weekly basis.

Speaker 4

Okay. And then on the company's current trajectory, Is there a potential timeline for breakeven, at EPS? Are we still a year or 2 years out, 6 months? Any kind of indication you can give based on current forecasts? Well, Mike, it's a great question and it's A difficult one to answer based on forecast without a historical knowledge.

Speaker 4

As you know, Petal is new. We've had our first deal with CRH And I think we have a lot of prospective deals upcoming. But without seeing these come in and without knowing exact dates, It's difficult for me to give you an exact date with a breakeven. Our goal is to do so by the end of 2024 or Sooner, but a lot depends on how quickly we can turn those sales into revenue and close other contracts. Okay.

Speaker 4

Thanks, guys.

Speaker 5

I will say, Michael, that We've mentioned CRH several times, right? And I think everyone is very well attuned to The significance of that relationship and we are actively I'm here at the laboratory right now. I'm doing a call from the laboratory and we are working on that project As we speak. So no one is more anxious than we are to move that forward as quickly as possible. But as Bob said, we are doing on our end certainly everything we can do.

Speaker 5

We have to work through on the other end how long it takes Our partners, our customers, our collaborators actually get us what we need and give the approvals and just keep the projects moving.

Operator

Thank you. There are no further questions. I would like to turn the Floor back over to Raymond for closing comments.

Speaker 5

Okay. Well, Thank you, everyone. That concludes today's call. We hope that you can take away from this call the fact that All of us at Predictive Oncology are very excited about the growth trajectory of the company. What's been happening in the last few months, much of what we've been talking about The last few months is finally coming to fruition.

Speaker 5

So in the coming quarters, I would anticipate more collaborations and partnerships With some of the leading drug developers in research and academic institutions, they're critical to the process. We're also very excited to play an important role in the Discovery of new oncology drugs, that's certainly part of the relationship with CRH, which we believe and everyone on this call I truly believe understands that benefits the patients, but will also create enduring value for our shareholders. So, I want to thank you all for your support and I look forward to the 3rd quarter update. And I wish you all a good day and a good evening. Thank you.

Operator

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

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Earnings Conference Call
Predictive Oncology Q2 2023
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