Predictive Oncology Inc. (POAI) on Q4 2022 Results - Earnings Call Transcript
Operator: Good day and thank you for standing by. Welcome to the Predictive Oncology, Inc. Q4 2022 Earnings Conference Call. At this time, all participants are in a listen only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions]. Please be advised that today’s conference is being recorded. And I would now like to hand the conference over to your speaker today, Ms. Theresa Ferguson, Senior Director of Marketing for Predictive Oncology. Ms. Ferguson, please go ahead.
Theresa Ferguson: Thank you. Welcome and thank you everyone for dialing in. They will share about our latest updates first you’re going to hear from our Chief Executive Officer and Chairman of the Board, Raymond Vennare, then our Chief Financial Officer, Bob Myers will give you an overview about our financials. Finally, Dr. Pamela Bush, our Chief Business Officer, will join Raymond and Bob during the Q&A portion. Certain matters discussed in 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. All statements other than statements of historical facts included in the 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 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. Thank you for bearing with us with that, and now we are going to welcome Raymond Vennare and we’ll get him on the line.
Operator: One moment please. Pardon me, Raymond Vennare is now able to present.
Raymond Vennare: Thank you very much. So good morning, everyone. I apologize for this slight little glitch here and for the delay. Thank you all for taking your time to participate in the call. I look forward to -- we all look forward to answering any questions that you have at the end of our presentation. So, I think it’s important for me to reiterate a bit what I shared with everyone on March 7 in the Letter to Investors. And that is basically that since I joined the company in November, it’s not several months before that, there has been a concerted effort to completely rebrand and reposition the company if not to consolidate the assets. As Predictive Oncology as a science-driven company, right, a science-driven company applying our proprietary artificial intelligence and machine learning capabilities to accelerate drug discovery, enable drug development. So it’s a -- that phrase is extremely important because that’s who we are, what we do, it’s the market in which we play and they are the -- and it is the customer base to which we appeal, drug discovery -- the entire continual drug discovery and drug development. So that platform, our platform, the PEDAL platform includes, of course, as you all know, access to our own biorepository of more than 150,000 tumor samples and more than 250,000 -- I’m sorry, 200,000 pathology slides, both of which are not only core assets of the company, but they are key differentiators for us in the marketplace. As I also mentioned in that letter, although briefly, we are also completely reevaluating and expanding our intellectual property portfolio and you will be hearing more about that in the coming weeks or possibly in the next quarter. I should also point out, I think I’ve had an opportunity to speak with literally hundreds of our shareholders literally, either by phone, through email, conference calls, town halls any venue that we could. And one thing is clear to me is that it’s unclear to some of the investors how distinct that we are and how innovative this platform is. So, not to be obvious, but not all artificial intelligence platforms are the same. They’re simply not created equal. Our platform is quite unique, not only because of the platform itself and machine learning, but an access to the biobank, but our ability to actually do scientific experiments to validate those in-silico analyses in our own CLIA laboratory in our own wet lab. So, the point is that the -- an AI, the intelligence, an artificial intelligence is that which makes us unique. It’s not the algorithms themselves, it’s the comprehensive approach to incorporating artificial intelligence and machine learning into the access to heterogeneous tumor samples utilizing the wet lab that we have at our disposal. And that is completely unique in the marketplace and that’s what sets us apart. So, the value proposition for Predictive Oncology, again, this is for context, this is that it’s the intelligence that is derived by what we do and the actionable information that we provide that distinguishes us in the marketplace. It’s important for me to emphasize that because I think artificial intelligence by many people are seen as some -- as a widget really and ubiquitous and it’s not -- it’s the application of our -- it’s our science-based that allows our artificial intelligence engine to differentiate us. So, in the last few months, as I said, we have moved from R&D and product development to the validation, commercialization and launch of Predictive Oncology’s PEDAL drug discovery platform. And by commercialization and launch, what I mean is that we just signed -- the company just announced that we have partnered with Cancer Research Horizons. We refer to it as Cancer Research UK, which is the largest private funder of cancer research in the world, the largest private funder of cancer research in the world. The purpose of this collaboration is to drive the development of oncology drugs by incorporating our platform, our PEDAL platform, Predictive Oncology’s PEDAL platform into the CRH drug discovery process. By which we not only gain visibility and credibility, we also gain access to many of the drug discovery and drug development companies in the world. So what the significance of this contract is that we have entree through CRH to every major or most -- major and even mid-cap biopharmaceutical companies in the world, they become a funnel for us through which we can access these companies. The fact that they are incorporating our platform into drug discovery is a significant accomplishment for the company that cannot be underestimated. We also announced that the company had entered into agreement with Cvergenx, Inc. to develop the first effort genomics-based approach to precision radiation therapy and drug discovery, also using our PEDAL platform. Cvergenx is a spin-out of the Moffitt Cancer Center, where the Cvergenx precision genomics platform is being used right now in a Phase II prospective clinical trial for triple negative breast cancer. So, there are three things in that statement that are significant. One is that the Cvergenx platform is being used in a clinical trial, which as everyone knows, is necessary for drug development and FDA approval for anything in drug discovery – sorry, in development of the drug. The second is that, it’s the first ever genomics approach to precision radiation therapy. So the work that we will be doing with Cvergenx is going to leverage that novel platform to focus on radiation oncology, which has been grossly under the utilized vendors served for the last 30 years. At least in terms of drug discovery, drug development, but also in terms of the ability to screen and monitor patients receiving radiation therapy. And anyone who wants to ask questions after this can certainly feel free to do that. And the third thing again is that our platform is going to drive that. And there are other utilities other than clinical application for this collaboration, which I’m also happy to discuss later. So as importantly, at least we think internally and we believe as importantly, at least in terms of identifying future drug discovery and drug development opportunities, Predictive Oncology has launched the -- it’s called the Accelerating Compound Exploration program, ACE, by which we partner with academic and research institutions to do exactly what the name suggests, to proactively accelerate and participate in their own drug discovery initiatives. So as you all know, because Pamela has been introduced to you in the past, either directly or indirectly. Pamela, is now our Chief Business Officer. And in that role, she will lead the company’s business development, partnering and growth strategy and all of those efforts. So, at the end of the call, please feel free to ask her any specific questions about any of these initiatives, contracts, objectives that you’d like to ask. In support of all of this commercialization and launch strategy and to further inform, if not accelerate our growth strategy, the company has begun to expand or at least supplement the Board with two leading experts in biopharma. Again, they should be known to you because we’ve made it public. These are biopharma life science intellectual property experts. They are David Smith, a life science and intellectual property attorney and a leading authority, nationally recognized the authority on legal issues surrounding therapeutic use of human tissues and cells, which should be the significance of that, should be obvious to everyone that’s interested in what Predictive Oncology does in the biobank that we have. And the other is Matthew Hawryluk, Ph.D./M.B.A, who is currently the Executive Vice President and Chief Business Officer of Gritsone Bio, which also has an artificial intelligence component to it. But he is also the former Vice President of Corporate and Business Development of Foundation Medicine, which is I’m sure most of you know was subsequently acquired by Roche. The significance of Matthew being on the Board should be equally obvious. That Foundation Medicine, what Foundation Medicine does, why Roche acquired them, the fact that there’s an artificial intelligence component to this, it should make everyone comfortable. In fact, we have someone on the Board who really understands not just the artificial intelligence but the application of that in genomics and specifically for drug development and even more specifically for positioning the company in terms of valuation in the marketplace. So, in parallel with that, we’re also rebuilding our Scientific Advisory Board around the emerging market opportunities and with respect, of course, to artificial intelligence, oncology drug discovery and drug repurposing. So in addition to current members, Dr. Marc Malandro, Vice President of Operations for Sciences at Chan Zuckerberg Foundation and with machine learning and analytics pioneer. Robert Murphy, actually the inventor of the CORE platform, CORE platform that drives PEDAL. We’ve added just recently, actually I think Bob can address this in a bit. Just yesterday, signed the agreement with Christoph Reinhard, I’m sorry, PHMDA, who is the Senior Director of Translational Research Oncology Pharmaceuticals and Therapeutics at Eli Lilly and Company. He also established the next generation sequencing program there preclinical and clinical and in preclinical and clinical space for them. So he too should be an obvious asset to the company. He’s coming from industry like Pamela. Pamela also came from Eli Lilly. And like Pamela, he’s a Ph.D MBA, so he understands the business of science, not just the science itself. And most recently, we have engaged the largest integrated investor relations firm in healthcare and life sciences in the world. They have global operations across North America, Europe and Israel. The company’s life science advisors, again, this was made available, this information was made available to our shareholders. They were engaged to raise awareness about predictive oncology among their Wall Street constituents, including life science analysts and institutional investors. To supplement that, we have also and lastly engaged DLA Piper, a global law firm with very deep experience in life sciences, artificial intelligence and intellectual property. So collectively, this overdue should make it clear that we have moved -- we’ve moved from R&D, we’ve moved from validation into the marketplace through Cancer Research UK and in collaboration with Cvergenx, Inc. a relationship by which we have significant control over. And through which we can control our own destiny risk with respect to differentiating ourselves in the radiation oncology market or radio sensitizers and radio protectors. And then building the team around us with the board, expanding the board, Scientific Advisory Board of Directors, that is Scientific Advisory Board, our law firm and our Investor Relations firm. So since this is an earning call, sure, the person you really want to be talking to and hearing from is Bob. So I will pass this off to Bob now and welcome any questions at the end of the presentation. Thank you.
Bob Myers: Thank you, Raymond. I will give you all a financial summary and then we’ll be able to go to our question and answer period. The 2022 financial summary, we concluded the full-year of 2022 with $22.1 million in cash and cash equivalents and that was compared to the prior year of $28.2 million. The stockholders equity completed at $21.8 million in 2022 against $40.3 million in 2021. Predictive Oncology recorded revenue of $1.5 million in 2022 compared to $1.4 million in 2021 and our gross profit margin was stable at 66%. Expenses increased in 2022 compared to 2021. The increase in 2022 was primarily due to a higher payroll cost, higher cost related to laboratory expenses as well as increased cost in sales and marketing, expenses that are driven by business development initiatives as we transition from research and development into commercialization. Net cash used in operating activities was $12.3 million in 2022, which is a slight increase from $12.2 million in 2021. We’re very consistent in monitoring our cash flow. Cash used in investing activities was $475,000 in 2022 compared to $10.6 million in 2021. The cash flows used in investing activities were primarily related to purchasing fixed assets and maintaining other intangibles. And our cash flows used in investing activities were primarily related to the acquisition of zPREDICTA one of the initial subsidiaries. Our net cash provided by financing activities was $6.7 million in 2022 compared to [$50.3 million] (ph) provided in 2021. Cash flows provided by financing activities in 2022 were primarily due from proceeds from the issuance of common stock and warrants of $6.5 million during the first half of 2022. Cash flows provided by financing activities in 2021 were primarily due from proceeds from the issuance of common stock in warrants of $50.5 million and from the proceeds in exercise of warrants of $4.5 million all of which was offset by a debt repayment of $5.2 million. The company is currently debt-free. During the year ended December 31, 2022, we recorded an impairment of goodwill of $7.2 million for the full impairment of goodwill of zPREDICTA, which was acquired in 2021 predominantly for GAAP and accounting related issues. We recorded a full impairment of the zPREDICTA intangible assets at $3.3 million during the year of 2022. And according to GAAP, we impaired some intangible fixed assets totaling $185,000. We incurred net losses for the year in December 31, 2022 and December 31, 2021 predominantly the losses were comprised of impairments. And that would be our financial summation, which you could see in our earnings report that was done with the press release and 8-K yesterday, or in our 10-K on file with the SEC and reachable in our website. So with that, I’m going to turn the call over to Raymond, and I believe Raymond, we can start question and answers.
Raymond Vennare: Hi everyone, whomever would like to ask a question or whomever it is you want to speak with, please do.
Operator: Thank you. [Operator Instructions]. Our first question will come from Michael Broadbent, the analyst. Your line is open.
Operator: [Operator Instructions]. Our next question will come from the analyst, [Robert Antioni] (ph). Your line is open.
Operator: Hi, Ms. Bush. Pamela Bush. Your line is open. Ms. Bush if you can please unmute your line.
Operator: Thank you. And I’m seeing no further questions in the queue. I would now like to turn the conference back to Raymond Vennare for closing remarks.
Operator: Yes, sir. [Operator Instructions].
Operator: You’re welcome, sir. [Operator Instructions]. And we have a follow-up from -- we do have two questions. One moment. We now have a follow-up from the analyst, Michael Broadbent. Again, your line is open.
Operator: Thank you. One moment please for our next question. And our next question will also be a follow-up for the analysts, [Robert Antioni] (ph). Your line is open.
Operator: Thank you. [Operator Instructions]. I am not seeing any questions in the queue. I will turn the conference back to Raymond Vennare for closing remarks. One moment. It looks like we do have another question, one moment. We do have a question from Danny Garcia of KSU. Your line is open.
Operator: Thank you. [Operator Instructions] And we do have another question. Question will come from Brenda Thompson. Your line is open.
Operator: Thank you. [Operator Instructions]. I’m seeing no further questions in the queue. If you like, I will hand the call back to Mr. Raymond Vennare for closing remarks.
Raymond Vennare: Thank you, Chris. And thank you, everyone. Hopefully, this has been helpful and you have a deeper understanding and perspective of where we are and what our tensions are moving forward and the efforts that are being made. But as usual and as I promise from day one, if anyone has any question, about anything, please contact us directly and we’ll do our best to answer that question as honestly as possible. So unless there are any other questions today, I just want to thank you all for your time. We’ve gone a little long, but I’m grateful for the fact that you’ve stayed on this long and been so interactive with us. Thank you.
Operator: Thank you. There are no questions in the queue at this time. So this will conclude today’s conference call. Thank you all for participating. You may now disconnect and have a pleasant day.
