Fulgent Genetics Q2 2024 Earnings Call Transcript

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Provided by Quartr
August 2, 2024

There are 8 speakers on the call.

Operator

Hello, and

Speaker 1

welcome to the Folger Genetics Q2 2024 Conference Call and Webcast. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It's now my pleasure to turn the conference over to Melanie Solomon, Investor Relations. Please go ahead, Melanie.

Speaker 2

Thank you, Kevin. Good morning, and welcome to the Fulgent Second Quarter 2024 Financial Results Conference Call. On the call today are Ming Hsieh, Chief Executive Officer Paul Kim, Chief Financial Officer and Brandon Perth Hughes, Chief Commercial Officer. The company's press release discussing the financial results is available on the Investor Relations section of the company's website, www.fulgentgenetics.com. A replay of this call will be available shortly after the call concludes on the Investor Relations section of the company's website.

Speaker 2

Management's prepared remarks and answers to your questions on today's call will contain forward looking statements. These forward looking statements represent management's estimates based on current views and assumptions, which may prove to be incorrect. As a result, matters discussed in any forward looking statements are subject to risks, uncertainties and changes in circumstances that may cause actual results to differ from those described in the forward looking statements. The company assumes no obligation to update any of the forward looking statements it may make today to reflect actual results or changes in expectations. Listeners should rely on any forward looking statements as predictions of future events and should listen to management's remarks today with the understanding that actual events, including the company's actual future results, may be materially different than what is described in or implied by these forward looking statements.

Speaker 2

Please review the more detailed discussions related to these forward looking statements, including the discussions some of the risk factors that may cause results to differ from those described in the forward looking statements contained in the company's filings with the Securities and Exchange Commission, including the previously filed 10 ks for the year ended December 31, 2023, and subsequently filed reports, which are available on the company's Investor Relations website. Management's prepared remarks, including discussions of earnings and earnings per share, contain financial measures not prepared in accordance with accounting principles generally accepted in the United States or GAAP. Management has prepared these non GAAP financial measures because it believes they may be useful to investors for various reasons, but these measures should not be viewed as a substitute for or superior to the company's financial results prepared in accordance with GAAP. Please see the company's press release discussing its financial results for the Q2 2024 for more information, including the description of how the company calculates non GAAP income or loss, earnings or loss per share, non GAAP gross profit, non GAAP gross margin, non GAAP operating profit or loss, and margin and adjusted EBITDA, and a reconciliation of these financial measures to income or loss, earnings or loss per share and operating margin, the most directly comparable GAAP financial measures.

Speaker 2

With that, I'd now like to turn the call over to Ming.

Speaker 3

Thank you, Melanie. Good morning and thank you for joining our call today. I will start with some comments on the Q2 and our two business lines. Then Brandon will review our product and go to market updates for our laboratory services business in the Q2. And Paul will conclude with the financial and outlook before we take your questions.

Speaker 3

We are pleased with our results in the 2nd quarter. With $71,000,000 of total revenue, we recognized $841,000 of revenue on previously billed COVID-nineteen test. Excluding COVID-nineteen revenue, 2nd quarter core revenue of 70 $200,000 was driven by momentum in precision diagnosis, particularly reproductive health and oncology. We were pleased with the growth in all three areas of our laboratory services business this quarter And we're seeing good momentum ahead as we continue to invest in reproductive health testing and have seen the benefit of those investments. We have reached a very important milestone in consolidating the labs acquired as a part of Informed Diagnostics transaction.

Speaker 3

With our new 96,000 Square Foot Lab Specific in Coppell, Texas, we believe we'll have an opportunity to triple capacity, fueling the potential future growth and expansion. Brandon will talk more about this. In our therapeutic development business, we presented Phase 1 clinical data using our lead therapeutic development candidate FID-seven to treat head and neck cancer at American Society For Clinical Oncology or ASCO Annual Meeting in June 2024. Of 11 head and neck, sequinus cell carcinoma or HNSCC available patient with weekly dose level from 50 milligram per square meter to 160 milligram per square meter, 5% or 45% had a partial response and 7% or 27% had a stable disease by risk. 3 out of 5 HNSCC patients with a partial response had previously been treated with the taxane.

Speaker 3

The duration of follow-up medium range is 4 months. No high grade neuropathy has been noted. FID-seven demonstrated preliminary evidence of antitumor activity in heavily pretreated HNSCC patients across different primary tumor sites with an overall response rate of 45%. As a result, we initiated Phase 2 clinical trial of FID-seven in combination with cetasumab in patients with HNSCC in January 2024 and enrollment began in the Q2. So far we have enrolled and dosed the first three patients in this trial.

Speaker 3

We expect to enroll approximately 40 patients in various sites to with the enrollment expect to complete in early 2026. We currently estimate the total patient clinical trial costs for the Phase 2 to be around $10,000,000 We continue to advance our second drug candidate FID022 and Nano Encaccelerate SN38 in preclinical studies toward an investigational new drug application by end of this year. While FID022 has shown superior efficacy of irantikin in various xenograft model include colon, bile duct, ovarian and the pancreatic cancers in our preclinical study, no significant unexpected toxicity were observed in both RAS and the monkey GLP toxicity studies. In addition, we also made a significant advancements in development of antibody drug conjugate using our novel patent linker and a payload platform technology. Our ADC has shown better efficacy overall over different tumors with a broad range of targeted antigen expression levels than some of the best ADC benchmark and the market in the preclinical studies.

Speaker 3

In meanwhile, ADC was novel targeted using our novel platform technology are also being prepared with the goal of generating leading candidate for clinical trials. As a reminder, all our drug candidates were formulated with our novel nano encapsulation technology, which input over 30 issued active patents and active patent applications and the targeted therapy platform designed to improve therapeutic windows and the pharmacokinetics profile for both new and existing cancer drugs. Overall, we believe we have a good strategy with both our core laboratory services business and our therapeutic development business. We are seeing momentum in our core business, which will be believed to continue to grow, strengthening our business model and fuel our therapeutic initiative. We continue to maintain a strong balance sheet to execute our strategy.

Speaker 3

I would like to thank our employees, partners, stakeholders for your hard work and loyalty in a very good Q2 for our business. We look forward to continue growth in the second half of twenty twenty four. I will now turn the call over to Brandon Pritters, our Chief Commercial Officer to talk more about our laboratory services business results during the Q2. Brendan?

Operator

Thanks Ming. As a reminder, our laboratory service business includes precision diagnostics, anatomic pathology and biopharma services. These 3 represent our core revenue streams and do not include COVID-nineteen testing. We had another very strong quarter led by Precision Diagnostics with all three areas showing strength. This is the first time we have seen all three areas post quarter over quarter growth since 2022.

Operator

In the past few quarters, we have experienced some headwinds in Anatomic Pathology and Biopharma Services, but we are seeing the investments we made in those areas begin to pay off. I'll talk more about each of those momentarily. Circling back to Precision Diagnostics, it was up $5,700,000 or 15% quarter over quarter and $11,200,000 or 35% year over year. The tremendous strength has been led by reproductive health testing, including Beacon expanded carrier screening. Beacon continues to be a bright spot for Fulgent.

Operator

We have captured significant market share, established strong B2B relationships and continue to have a sales pipeline that gives us confidence in continued growth. The laboratory continues to perform exceptionally well even with the record volume we are seeing. On average, our turnaround time has been 11 days, which is fantastic and a true testament to the power of our technology platform. To scale this rapidly and continue to provide rapid turnaround time is not trivial. We've also been able to give our clients the flexibility to custom tailor the Gene Panel to their specifications.

Operator

In addition, our strong engineering capabilities have allowed us to rapidly interface with client side EMRs, allowing for orders and reports to be delivered electronically. Beacon will continue to be a focus for Fulgent as we now find ourselves as one of the leading providers of expanded care screening services. Staying on reproductive health, last quarter we announced we have launched a non invasive prenatal test or NIPT for the first time, a test we have branded Nova. Nova is the 1st NIPT to include common aneuploidies, microdeletions and monogenic conditions caused by de novo point mutations. We continue to make good progress with our go to market strategy and anticipate seeing additional progress in the coming quarters.

Operator

As we have mentioned, we expect volume to be low for some time as we bring this novel test to market. However, we believe over time, clinicians will see the value of this new NIPT methodology. I wanted to provide a quick update on our oncology portfolio. We recently gained MolDX approval for our liquid biopsy assay for high stage solid tumors, complementing our previously approved solid tumor tissue and heme NGS assays. Our liquid biopsy offering is a comprehensive test, including over 500 genes, which detect tumor mutation burden, microsatellite instability, indels and copy number alterations in addition to single nucleotide variants.

Operator

The coverage rate is approximately $2,840 and is retroactive back to September 2023. This is just one more piece of the puzzle helping complete a near one stop shop for oncologists. Over time, the focus will be to continue to build out the commercial team and capture market share, leaning on this one stop shop offering and excellent quality, Q and S rates and turnaround time. Turning to Anatomic Pathology. We are pleased to see this area return to growth, albeit small.

Operator

Anatomic Pathology has seen multiple quarters of headwinds related to our integration of the acquisition of Informed Diagnostics and some macro factors, but we now see this area stabilized. And more importantly, the sales team is closing meaningful new accounts and the pipeline is strong. This is a result of a revamped go to market strategy and improved sales team and continued laboratory performance as it relates to quality and turnaround time. Also during the quarter, we relocated the operation to our newly purchased building at Capell, Texas and consolidated our New York laboratory. This was not trivial yet executed very well.

Operator

A special thanks to all the team members who worked so hard on this. We believe this investment will provide long term advantages related to capacity, efficiency and cost. Biopharma Services also returned to growth in the 2nd quarter. As we have mentioned in previous calls, we continue to expand our technical capabilities, allowing us to address a larger market. Have invested in additional sales headcount in this area and are building a robust sales funnel.

Operator

This market continues to expand as biopharma leans more on multi omic studies for their drug development, and we believe we are in a good position to continue to partner up on these studies. Nonetheless, this is an area we still expect results to vary from period to period due to the nature of the project and a lengthy sales cycle. There were some questions around the new FDA regulations on lab developed tests at the time of our last call, and we have gained some clarification, although many questions remain. At a high level, we interpret the new regulations as a potentially positive catalyst for Fulgent. Many of our tests are New York State approved and we have over 20,000 tests launched on our menu before the May 6, 2024 publication date, which is the operative date for the purposes of the currently marketed test enforcement discretion policy.

Operator

As long as they are not modified, it appears these tests will likely only need meet device regulatory requirements that become applicable at stage 1, stage 2 and stage 3 of the FDA's phased out timeline, and we don't presently expect material disruptions to our service offerings. Stage 1 includes FDA medical device reporting, which will require laboratories to report certain device related adverse events and product problems to FDA within a specific timeframe. Stage 1 also requires labs to maintain compliant files for each test they offer and to report any corrections or removals to the agency. Stage 2 requires each laboratory to be registered with the FDA and to list their commercial test with the agency. It also phases in device labeling requirements and certain other compliance rules.

Operator

Stage 3 applies certain other quality system regulations to laboratories and their tests with the specific requirements depending in large part on whether a currently marketed test is approved by New York State or not. These new regulations may make it more difficult for new labs to open or new tests to be launched at existing laboratories, potentially creating a competitive moat for our company. However, there is a federal lawsuit pending against the FDA, which argues that the agency did not have the authority to announce the LDT final rule. The plaintiffs in that case are seeking to vacate FDA's issuance of the final rule. The outcome of that lawsuit is highly uncertain and it may change the legal and regulatory landscape for clinical laboratories.

Operator

Accordingly, this is all very new and much could change. Ultimately, the effect of these regulations may not be as we currently expect. So we will continue to monitor the FDA's implementation of these new regulations and the ongoing litigation that is attempting to invalidate the final rule. In closing, we are very pleased with our progress so far this year and optimistic about the upcoming quarters. We believe with our large, diverse product offering and a powerful technology platform, we are primed to continue to build on our success.

Operator

I'll now turn the call over to Paul Kim, our Chief Financial Officer. Paul?

Speaker 4

Thank you, Brandon. Revenue in the Q2 of 2024 totaled $71,000,000 compared to $67,900,000 in the Q2 of 2023. $841,000 came from COVID-nineteen testing in Q2, which was not part of our guidance. Revenue from our core business totaled $70,200,000 GAAP gross margin was 37% and on a non GAAP basis was 40%. Gross margins continue to improve year over year showing the benefit of our continued efficiencies and streamlining of our business.

Speaker 4

Total GAAP operating expenses were $45,400,000 for the 2nd quarter compared to $43,900,000 in the Q1 2024, primarily related to higher R and D spend. Non GAAP operating expenses totaled $33,800,000 compared to $32,400,000 in the Q1 of 2024. Non GAAP operating margin increased approximately 5 percentage points sequentially to minus 7.4 percent, primarily due to higher revenue and gross margin in Q2. Adjusted EBITDA loss for the Q2 was $727,000 compared to a loss of $2,700,000 in the Q2 of 2023. On a non GAAP basis and excluding stock based compensation expenses and intangible asset amortization, income for the quarter was $4,700,000 or positive $0.15 per share based on 30,000,000 weighted average fully diluted shares outstanding.

Speaker 4

Turning to the balance sheet, we ended the 2nd quarter with approximately $838,000,000 in cash, cash equivalents and marketable securities. Cash used in the period included investment and building improvements and lab equipment for our Capell lab, which Brandon mentioned, we relocated our Texas lab in the 2nd quarter. Now moving on to our guidance. We're reiterating our revenue outlook for 2024 with minimal revenues from COVID-nineteen testing expected. We're guiding to core revenues, which is total laboratory services revenue for the company without COVID-nineteen testing revenue.

Speaker 4

We continue to expect the total core revenue to be approximately $280,000,000 for 2024, representing core growth of 7% year over year. There's no revenues from our therapeutics development business anticipated in our 2024 guidance. Turning to expected margins for 2024, excluding COVID-nineteen revenue and stock based compensation, we expect non GAAP gross margins to continue to be around the high 30% range that we saw in Q2 and reach our target of 40% by the end of the year. We expect to see slightly lower non GAAP operating margins in the quarters ahead as we further invest resources to grow our business and operating margin of approximately minus 16% for the year. We remain focused on managing our spend and continue to believe that our foundational technology platform supports a strong margin profile longer term.

Speaker 4

We continue to expect associated cash burn for our therapeutics development business to be about $15,000,000 to $17,000,000 this year, which is contemplated in our EPS and cash guidance. Based on the lower spend we achieved in the first half of the year and a more favorable tax rate forecast for the full year, we're lowering our expected GAAP EPS loss to approximately $1.95 per share, excluding any one time charges using a 30,000,000 average share count. Utilizing a non GAAP tax provision and average share count of 30,000,000 or lowering our expected full year 2024 net non GAAP loss to approximately $0.30 per share for our shareholders, excluding stock based compensation and amortization of intangible assets as well as any one time charges. Finally, our cash position remains strong. Excluding any stock purchases or 2024 with approximately $800,000,000 of cash, cash equivalents and investments in marketable securities.

Speaker 4

Overall, we see strength in our core business, which has grown organically and through strategic acquisitions and see good momentum ahead. Thank you for joining our call. Operator, now you may open it up for questions.

Speaker 1

Certainly. We will now be conducting a question and answer session.

Speaker 5

I think this one would be for Paul. I think it's really obvious right now that your cash management has been fairly terrific over the course of through all your different acquisitions. So with an 800 cash balance and you're kind of like proven cash discipline, is there any thought to capital allocation going back to M and A strategy? Or do you think you have maybe too many irons in the fire right now with all the different clinical trials coming up?

Speaker 4

I think our cash balance is certainly sufficient to do the things that we want to do to address wider market that we can with our capabilities. When we take a look at the efficiencies in our business, we see it combined overall with the companies that we have purchased over the last couple of years. As you remember, in 2022, our core revenues was approximately $181,000,000 In 2023, the core revenues were $262,000,000 In 2024, as of today's call, we're reiterating $280,000,000 of our core improvement But I think the other thing that we're very, very excited about is the improvement that we see in our overall operations, particularly our gross margins. If you look at the gross margins for the business, excluding COVID, the gross margins, excluding stock based compensation, the Q1 of 2023 was approximately 28%. When within 6 quarters for Q2 of 2024, even if you take out the COVID, our gross margins are 39.4%.

Speaker 4

That is over 11 whole points of improvements that we have in the gross margins. And then you get into the operating expenses. The operating expenses have been more favorable than we have anticipated. Now some of that was due to better collection experience that we had within our regular business as well as COVID. But yes, you are correct.

Speaker 4

The overall efficiencies in our business, the efficiencies that we had with integrating our acquisitions and cash management has been much better than we have anticipated.

Speaker 5

Okay, great.

Speaker 6

I'm sorry. Sorry, David, it's Brandon.

Operator

I just want to address the point. No, we don't have too many irons in the fire to answer your question. However, we're going to be very careful with our acquisitions going forward. But the management team consistently evaluates opportunities for M and A. We've done 2 M and As thus far and both have worked quite well.

Operator

That's not always the case with companies. If we do a 3rd or a 4th, we want to make sure it's something we can make work. But we don't have too many irons in the fire and we consistently evaluate opportunities.

Speaker 5

Great, great. No, thank you, Brandon. That was a great clarity there. And I'll stick with you in terms of the questions here, Brennan. Just in terms of the reproductive health business, that's a growing opportunity there.

Speaker 5

Can you talk about some of the differentiation you have in the NIPT test? We talked about this in EMA a couple of weeks ago, but I think it's pretty important to reiterate this. And if there is any guideline expectations, obviously not in the guide, but what's the latest there? And would you indeed benefit from both expanded carrier screening ACOG recommendation and in addition, microdeletions, particularly 22Q if that comes out and just in terms of timelines for when that could come out? Thank you.

Operator

Yes, thanks for the question. We also are hearing rumors of expanded ACOG guidelines going forward for expanded carrier screening. Certainly that would benefit the industry. Clinically, we're there. If you look especially on the infertility side of the business, expanded care screening is standard of care.

Operator

That is what doctors are ordering for their patients going through infertility treatments. So it would be great to see the guidelines become more aligned with practice today. Most the biggest benefit there being payers often fall in line with the guidelines. So we'll continue to monitor that. I know it's being worked on and I think it will be positive for the industry as it relates to expanded carrier screening.

Operator

In terms of our NIPT test, the main differentiator there is being able to screen for de novo point mutations. Most NIPTs out there are screening for an as well as microdeletion and some microduplications, but don't include de novo point mutations for these monogenic conditions. And these monogenic conditions are quite serious. They do cause severe disability. They are relatively common when you group them together.

Operator

So we think this novel approach over time could be something clinicians really see as added value when they think about picking an NIPT partner.

Speaker 5

Great. And then just because I haven't asked one for Ming, I'll ask one for you. Just in terms of the head and neck opportunity, you said in the call you have begun to start enrollment. When enrollment end and then how long would the study be? And then can you help us size the opportunity of head in neck cancer, particularly for FTI-seven?

Speaker 5

Thank you.

Speaker 3

Okay. Thank you, David. So we are excited with the performance or results of Phase 1 study of FID007. So we are doing the 2nd phase trial for the 2nd line head and neck cancer patients. So the expected enrollment to be end in early 2026.

Speaker 3

So and then we definitely based on that results, we'll probably move into the next phase, Phase 3. If the result is really impressive, which is around above 50% response rate, you might have a chance to apply for the fast track of the FDA approval process. So it's giving further that's the opportunity for the head and neck cancer patient. Currently, the first line treatment for head and neck cancer patient is using the immunotherapy using the KEYTRUDA for the treatment. Typically, the immunotherapy, the first line failed, there was no real standard for second line treatment.

Speaker 3

We see the opportunity and try to get into this market for the second line treatment. There's over 50,000 patients of head and neck cancer in the U. S. Alone. And that definitely globally is much, much bigger in terms of the cancer patient.

Speaker 3

So we are excited about the opportunity and we do see a tremendous potential for us to grow in that area. This is only for the FID-seven. Definitely, we're pushing for a next drug that will be into the market into the clinical study in 2024 25, I'm sorry.

Speaker 5

Thank you, guys. That's it for me.

Speaker 1

Thank you. Next question is coming from Dan Leonard from UBS. Your line is now live.

Speaker 7

Thank you. My first question, what changed on the expense side?

Speaker 4

Yes. What changed on the expense side? That's a good you're talking about operating expenses. Is that correct?

Speaker 7

Yes. That was the big change in your guidance. I'm curious what would functionally happen there.

Speaker 4

Yes. We had the biggest change that we had was we had a lower G and A cost than what we anticipated, meaning that we were anticipating the G and A expense for the 2nd quarter to $26,000,000 But we had favorable collections from what we had previously reserved for. So that reduced our expenses.

Operator

And so

Speaker 7

it was a change on the reserve side as opposed to headcount or anything like that?

Speaker 4

That's right. I mean the headcount and our operating plan, it was about what we anticipated, but we had a reduction in G and A due to better collections. And then the reason why we narrowed our EPS was due to that. And then to a lesser extent, we had some tax benefits and credits come through on the provision. But overlaying, right, the overall condition of the company, we've had better gross margins as I indicated before.

Speaker 4

Our revenues were slightly higher and then just the efficiencies that we have in running our business.

Speaker 7

Understood. And then Brandon, I appreciate the thorough discussion on the FDA regulation of LDTs, but you did flag the uncertainty there. And I'm curious, how does the uncertainty around implementation of that regulation impact how you manage your business?

Operator

Well, it's a good question. Thank you. And I think for the most part, it doesn't. We believe whichever way they decide to go, we're in a good position, especially benefiting from the tremendous size of our test menu. And we have over 20,000 tests on our menu, which would predate the new regulations.

Operator

And in addition, most a lot of our tests anyway are New York State approved. So should they continue down their current path, we think we're in a good position. And I mentioned on the call that maybe creates a bit of a moat around our business. If the lawsuit is successful and all this goes away, then we're back to where we were a few months ago running our business. So I think we're in a good position either way.

Speaker 7

Appreciate that. And then just final question, curious how the market share picture is evolving. Since we last caught up, one of your big competitors was acquired or at least the acquisition was finalized. And I'm curious if you've seen anything different in the market?

Operator

Yes, good question. A little bit, not a lot. The competitor, like I said, was acquired. So there was minimal, I think, disruption to their business there. I do think there was some and we did pick up some market share, but it wasn't like the previous event where we picked up very significant market share in reproductive health testing.

Operator

But certainly, there was some instability there and some market shakeup, but not to a large degree.

Speaker 7

Got it. Thank you.

Speaker 1

Thank you. Next question is coming from Andrew Cooper from Raymond James. Your line is now live.

Speaker 6

Hi, everybody. Thanks for the time. Maybe just first, I don't know if Brandon, maybe you're the right one to answer this, but just on NIPT, I mean talk to us about sort of what's happening now in terms of starting to detail clinicians and kind of how you see that process playing out when we should be thinking about potential ramp, potential further appreciation of some of the differentiation given you said it is going to take some education to get there. So just would love your thoughts on what that pathway can look like?

Operator

Yes. Thank you, Andrew. I think it's going to take some time. This is the first novel NIPT product to hit the market in some time. So you're spot on.

Operator

It is going to take some significant physician and clinician education. I do think there is a powerful message behind it. The de novo point mutations for the monogenic conditions really does add a lot of clinical value, but it is going to require a lot of clinician education. Right now, we have a pretty small sales team focused on that area. So I would expect some more meaningful volume probably not until 2025, as it really I said focus on the education part as well as doing some additional publication and validation studies and some expanded indications.

Operator

So I'm thinking more of a meaningful volume in 2025.

Speaker 6

Okay, helpful. Maybe shifting a little bit just to anatomic pathology, you talked about winning new accounts and some real positive things there. The business isn't necessarily growing materially though. So maybe just give us a sense, are these new account wins more recent or what's the moderating factor where maybe you're seeing some customers go out the door on the other side or some volume transition one way or the other to keep that business from growing a little bit better?

Operator

Yes. Well, look, it's been going in the wrong direction for some time, which we've been working on. Some of that was macro factors, some of that was around contracted rates and reimbursement and other situations. But either way, the business is going the wrong way. We've addressed most of those.

Operator

And I think the biggest thing we've done is make sure we adhere to our turnaround time at the lab, which we've done. Even during the move, which we did in the second quarter, we still maintained our turnaround time. We've also revamped the sales team. We've restructured the sales team. We restructured comp plans to more align with our corporate objectives.

Operator

So we've tackled this at all different angles and we're seeing it pay off. I know this quarter wasn't much growth, but it was some. So we think the business has been stabilized. And when we look at the sales pipeline and the recent wins, the very recent wins, the sales team is finding bigger deals. So I think the back half of the year for AP should continue to have some really good momentum.

Speaker 6

Perfect. That's super helpful. And then maybe for Paul, we've seen you guys active in terms of buybacks in some recent quarters. So just would love maybe any thoughts on that given not executing on M and A, having a great cash balance and doing well from that cash management side of things, maybe how you think about potential deployment of that capital, whether to more repurchases again or elsewhere?

Speaker 4

Yes. So as you remember, we have a $250,000,000 stock buyback program. To date, we bought back about $100,000,000 so there's $150,000,000 left. We do see buyback as one of the options that we have for the usage of our cash. There are times where we can buy and there are times where we can't buy.

Speaker 4

We've shown also in the past that we deployed that cash in making 2 significant acquisitions, CSI and FormDX. And I think the operational results show that we have had tremendous success in integrating and creating value from those acquisitions, which are being reflective in our overall results. And we believe the best way to return value to shareholders in an ROI is to continue to invest in this market and to expand our business.

Speaker 3

Yes. I think that Dan, adding the point for Paul mentioned, I think we are actively looking for the target for M and A. But taking a look at what we did for those 2 transactions, Informed Diagnosis and CSI Laboratory Services, Not only we spend money for the acquisition, but also we need to spend time and reinvestment to integrate those business. I did a rough calculation. Beside that we spend about close to $220,000,000 to buy those business 2 business.

Speaker 3

We also invested more than $60,000,000 of cash and tried to integrate and streamline those business. We do see those acquisition making this was very strategic move, which lead us the capability to grow our precision diagnostics business, which is we show the results. Without those insurance contracts, we're not able to get us into the position to be a major player in the reproductive health area. We continue to execute our strategy. We're looking for the old opportunities for the M and A and as well as our internal development.

Speaker 3

So that's the way we will spend our cash.

Speaker 6

Great. I'll stop there. Thanks again.

Operator

Thanks, Andrew.

Speaker 1

Thank you. We've reached end of our question and answer session. And ladies and gentlemen, that does conclude today's teleconference and webcast. You may disconnect your lines at this time and have a wonderful day. We thank you for your participation today.

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Earnings Conference Call
Fulgent Genetics Q2 2024
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