Q4 2019 Earnings Call
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I'd now like you had the conference over to your Speaker today, Ms. Caroline corner Athletic I see our please go ahead.
Thank you operator, welcome to personnel for fourth quarter and full year 20, Nike earnings call. Joining me on today's call, our John with President and Chief Executive Officer parents, Touchy bonus Chief Financial Officer, I couldn't use all chief business Officer. This call will include forward looking statements, including statements regarding the markets.
In which we operate including potential market sizes.
And then expectations for products services and technology trends on demand for products personnel, because expected financial performance expenses and position in the markets and the impact of Cobot 19 on our operations and our customers operation.
These statements are subject to risks and uncertainties that could cause actual results could differ materially from our current expectations. We encourage you to review our most recent filings with the FCC, particularly the risk factors described in our 10-K filing for a full year ended December 31st 2019.
Forward looking statements we provide during this call including projections for future performance are based on a reasonable beliefs and expectations as of today personnel undertakes no obligation to update these statements except as required by applicable wall.
Our press release with our fourth quarter and full year 2019 results is available on our website www dot personnel dotcom under the Investor section and includes additional details about our financial results. Our website also has our latest SEC filings, which we encourage you to review a recording of today's call will be available on our website by five P.M. Pacific.
Hi today.
Now I'd like to turn the call over to John for his comments on fourth quarter and full year 20, Nike business highlights.
Thank you Carlos and welcome everyone to our fourth quarter and full year 2009 chain earnings call.
Before going into detail on our performance in 2019, and we'd like to address the impact of posted nine chain organization.
The virus, that's caused disruption across the globe, which affects us or customers and suppliers first and foremost we are focused on the health and wellbeing of our employees their families and our community.
On March 16, several counties within the San Francisco Bay area issued orders for individuals to shelter other place to residents meeting people work to leave there.
Homes only for central purposes.
For personal loans. This work that we had to directly majority of our employees to work from home.
The exception of those needed to keep laboratory operations running so we can support customers that are critical to the health care ecosystem.
Like many of our peer companies, we've seen a slowdown with certain customers and suppliers, although we have not been able to quantify the full impact just yet.
We are proactively taking measures to increase our inventory of lab supplies UK supply disruptions occur or prolong.
We cannot be certain however, how long the situation will wash.
We are in communication with our customers and their partners regarding the status of new orders and the receipt of samples for pending orders.
Certain customers, how bad disruptions well continue to central samples and worked with us. So that we can deliver crucial information to them in a timely fashion.
We can't see certain any of our customers will continue to sandoz samples for processing during this disruption.
For the Seakeeper employees, we have implemented strict leading visitor group meeting and other protocols for office and I'm glad to help keep employees safe and healthy.
In addition, the special Committee of our Board of Directors has been for me to oversee and advise on our club at Nike in response.
This meeting regularly.
Given the evolving conditions related scope at nine chain and precautions taken for the safety of our employees, who may not be able to maintain adequate staffing onsite.
Yes, that's all of our customer samples for some period of time.
In addition, certain customers and their partners are operating at a limited capacity due to covert nine chain, which may delay orders or the should kind of samples to us for processing.
Although we have seen considerable traction in new orders for our next platform, which will discuss later in the call. We expect there will be an impact from call. It 90 into our business in the short and medium term, which we are not able to quantify at this time.
As such we are suspending revenue guidance until we have greater visibility.
Hi, Good 19 has created a challenging environment for many across the globe and while we acknowledge the disruption we remain focused on what we can control specifically on increasing the adoption of our next platform and ensuring our customers are well service.
Our largest customer it'd be a NBP remains a strong and committed partner.
Plant you continue to serve them as we work through the significant backlog we have today.
Fair for future orders.
Our cash and short term investments balance of $128.3 million as of the end of 2019.
Puts us in a position of strength is the situation with cobot nine chain continues to evolve.
We understand that the corporate 19 situation is weighing heavily on investors' minds and we plan to update you further on our first quarter earnings call as the impact on our business becomes more quantifiable.
If we appreciate your patience in that regard.
Now I'd like to shift focus to our progress in the quarter and walk through some of our performance highlights and recent successes.
Well also talk about some of the exciting growth drivers, we see ahead for the company.
Turning to our full year report I'm happy to say 2019 was an exciting year for personnel with the launch of our new next platform receipt of our largest NBP were ever.
Oh sure whole genome sequencing for cancer samples and the release of our next diagnostic.
I'd like to offer my heartfelt thanks to our employees for their unwavering efforts and building a strong foundation for our future growth.
In June of 2019, we successfully completed our initial public offering listing on NASDAQ exchange raising $140 million in financing proceeds providing us with a strong balance sheet and cash to fuel our growth plans for several years.
As you can see from our press release in Q4, we generated revenues of $18.2 million.
38% from the same quarter last year and setting up another overall revenue record.
The fourth quarter marked our 14th consecutive quarter revenue growth.
For the full year 2019 revenues were $65.2 million exceeding our revenue guidance and growing 73% year over year.
Finally in Q1 of 2020.
Process, our 100000 sample.
Our Biopharma business is an area, where we continue to see clear long term opportunity.
Our biopharma revenue in the fourth quarter was $4.4 million well within the range, we expected and provided in our 2019 guidance.
Looking ahead I'd like to point out four factors that give us confidence in the long term growth of this business.
First I'm happy to report that in the fourth quarter as in the third quarter, New orders significantly exceeded revenues in fact orders were more than twice the amount of revenue in the fourth quarter.
Although we have not yet completed our current quarter I can say today that this trend has continued and we now have Q1 orders more than tripled our expected revenue in Q1.
Some of this is due to a large order from a single customer which is not expected to repeat in every quarter.
Even without this large new orders, though our new orders are larger than the revenue we expect in Q1.
As was the case in the third and fourth quarters of 2019 as well.
As we had mentioned before given the nature of our business. It takes time for in order to be cut began to convert to meaningful revenues, but this growth in orders gives us confidence in our future revenue stream.
Second you may recall that on our third quarter earnings call I mentioned that we were in advance discussions with four multinationals pharma companies, who are not customers in 2018.
I'm happy to know that two of these for pharmaceutical companies placed orders with us in the fourth quarter.
And through Q1 Twentytwenty as of this week, we have received orders from a few more large pharma customers.
Expect to let additional large customers over the coming year, diversifying our customer base driving growth and reducing choppiness in our biopharma business overtime.
Third as at the end of December a total of 19 customers have not ordered next compared with the 10, we reported at the end of the third quarter.
We continue to be pleased with how next is being received by our existing and new customers.
Well it will take time for new customers to complete pilots because of the extensive data validation work they typically perform.
We're pleased with the number of customers engaged and look forward to deepening our engagement with those customers overtime.
Lastly in the fourth quarter, we continued to build on our commercial team as planned hiring additional business development employees, both in both the U.S. and Europe.
In total at the end of 2019 are complete had 182 employees compared to 130 a year ago.
I'm happy to report and we have now grown our commercial team by 50% since the IPO.
Giving us a much stronger capability to connect with customers.
But this foundation in place we are well positioned for long term growth within our Biopharma business, but of course acknowledge that uncertainties related to Cook at 19 will have an impact on our original growth plans for the back half of 2020.
I'd now like to update you on the population sequencing part of our business and the solid progress, we're making would that be a and b piece.
As you may recall in the third quarter, we received our largest order ever from the and VA NBP.
We started working with the VA eight years ago, and 2012 and the program now represents our largest single source of revenue.
To be a MVP project is one of the largest population sequencing efforts in history with over 825000 enrollees to date.
Since 2013 personnel says sequence for human genomes from over 50000, BA NBP samples at our population sequencing business continues to be significant growth driver for us.
We value our business, whether it be a and b P tremendously given the significant long term revenue potential and the importance of their mission.
Our engagement with the VA MVP is unable to us to invest in technology and build considerable scale of automation slowing us to deliver high quality should that information both to the VA and other customers.
As we've described before we're continuing to work through our backlog with the VA NBP as we recognized revenue over the next several quarters, we expect the backlog to increase substantially if we receive an additional order under our current for your contract in Q3 of Twentytwenty.
As has been the case historically.
As a side note. We're excited to report that recently, the White house submitted a budget, which calls for continuing support of the MVP program at levels similar to prior years.
We are in communication with the VA BP about the currently evolving impact to cope with 19 on their organization.
We look forward to maintaining argument at relations are important relationship with them as they continue to deliver on their ambitious goals.
Taking a step back we increasingly see the VA NBP. It's just one example of the growing opportunities for us outside of cancer.
While we focus on expanding our cancer technology and platforms. We feel we can leverage those same core capabilities and other domains.
For example, we expect our experience with the MVP program to position us for future opportunities to work on other ambitious population sequencing efforts.
We are focused on building out a commercial team to fully address these opportunities.
We are well positioned in this multibillion dollar market with a large foundation.
Hey, NBP provides and expect opportunities in this area to fuel considerable long term growth.
Other examples include ongoing discussions with bio pharmaceutical partners for application of our next platform and analytics to therapy development for inflammatory diseases and genetic disorders.
Capture more of these opportunities outside of cancer, we anticipate further expansion of our business development team and activities in this area.
Before turning the call over to errand to review the our financials I'd also like to update you on two exciting new product initiatives that will allow us to expand our market and provide new proprietary products to our customers.
I'm happy to report that since our last update we launched our diagnostic readout on next to be used by Biopharma customers and clinical trials as well as researchers with whom we collaborate.
This better positions us to potentially develop a companion diagnostic and will help us continue to build our proprietary database.
We also plan to offer this diagnostic to leading research centers, intending to build an undercurrent of clinical adoption.
Secondly, we are continuing the development of our liquid biopsy product offering biopharma customers comprehensive view of 20000 jeans using plasma samples from patients with cancer.
Look forward to bringing this to customers this year.
We believe our liquid biopsy will be used in concert with and downstream of our tissue based profiling assays.
We think that.
With the liquid biopsy products enhance our sales team will be able to better serve our existing tissue customers and win business from customers that need data from both tissue and blood.
This represents a significant expansion of our current addressable market as customers gain the ability to test individual patients multiple times in a more practical matter then they can with tissue based tests.
In closing I'd like to reiterate our excitement about the traction we've seen over the last quarter expanding our customer base to include additional large pharmaceutical companies and seeing very favorable reception of our next product reflected in the 19 next orders we have reported so far.
As I mentioned that the outside of the call given evolving nature of the corporate 19 pandemic. Our first priority is the safety of our employees. Unfortunately as it's currently the case for many companies there will be an impact to our business in the short and medium term related to this global construction.
However, we believe you have the right foundation in place for long term growth evidenced by a growing number of next orders as well as the strong long term partner in the VA NBP.
With that I'll now hand, it over to Aaron for more details on our financial results and guidance.
Thank you John and good afternoon, everyone.
I will first provide an overview of our full year 2019 result, and then more detail about the fourth quarter.
2019 was a great your for personnel.
We increased revenue, 73% over the prior year and released two important new products for future growth.
Our next platform was released in the first half of 2019, and we have seen great customer traction thus far and also we completed the development of the next diagnostic test at the end of the year.
In addition, we raised $140 million from our IPO last June which provided us with the capital needed to invest in growth initiatives and also maintained a healthy cash position, which is very important during this time of uncertainty.
Revenues for the full year 2019 were $65.2 million up 73% from 37.8 million in 2018 and exceeded the upper end of our guidance.
Yeah BP revenues were 43.5 million for the full year 2019 up 134% from last year and Biopharma revenues were 21.7 million for 2019 up 13% from last year.
Gross margin for the full year 2019.
33.9% compared with 31.3% in 2018.
The increase was primarily due to operating leverage some higher volume mostly from the VA NBP samples that we tested.
Operating expenses, including R&D NSG in a $44.5 million for 2019 and that loss with 25.1 million with a net loss per share of $1.39 cents based upon a weighted average share count at 18 million.
Now onto details about the fourth quarter.
Revenues for the fourth quarter 2019, $18.2 million, 38% from 13.2 million for the same period at the prior year.
18.2 million was a new record high for quarterly revenues.
The sequential quarterly revenue growth was driven by an increase in volume for testing services provided to the end to the BA NBP.
For the fourth quarter. The VA NBP revenue of 13.8 million was 124% hired 6.1 million for the same period the prior year.
Hey, NBP unfulfilled orders at the ended the fourth quarter.
$68.8 million and based upon current estimates, we expect the unfulfilled orders to convert to revenue over approximately the next five quarters.
Bio pharma and all other customers accounted for revenues of 4.4 million for the fourth quarter compared with 7 million for the same period the prior year.
Gross margin was 36.2% for the fourth quarter compared with 32.8% for the prior quarter and 36.7% in the same period of the prior year.
The V.A. NBP gross margins continued to be solid and were much higher than the corporate gross margin of 36.2% reported for the fourth quarter.
The big MVP being higher volume and one service offering has been automated and does not require a significant amount of labor compared with the bio pharma sample test process.
The fourth quarter sequential gross margin increase of 340 basis points was primarily due to a onetime cost reduction of approximately 550 basis points for certain materials, partially offset by underutilized direct labor and overhead from Biopharma and also.
Mix of bio pharma customer projects.
As mentioned during prior conference calls.
We may see gross margin variability in the future as there are a few moving parts such as sample processing volume sample received any R&D from customers the mix of customer projects.
And capacity utilization of labor and equipment.
Operating expenses were $13.8 million in the fourth quarter compared with $8 million for the same period the prior year.
R&D expense was 7.4 million in the fourth quarter compared with 4.3 million for the same period last year. The majority of the increase in R&D was attributed to head count growth in lab supplies for new product development.
SGN a expense was 6.4 million in the fourth quarter compared to 3.7 million for the same period last year.
Most of the spending increase was related to head count growth and public company costs.
Net loss for the fourth quarter was $6.6 million compared with a net loss of 3.6 million for the same period of the prior year.
The net loss per share for the fourth quarter was 21 cents and the weighted average basic and diluted share count with 31.2 million compared with a net loss per share of one dollar and 16 cents and a weighted average basic and diluted share count the 3.1 million for the same period of the prior year.
The number of shares last year is significantly lower because it did not include the conversion of approximately 18.5 million shares of preferred stock.
Nor did it include the 9.1 million shares from the initial public offering.
Now onto the balance sheet.
We exited the fourth quarter with a very strong balance sheet with cash and short term investments of $128.3 million.
Fourth quarter cash flow from operations was positive 2.4 million, primarily due to pre payments received from the VA MVP and we paid 1.9 million for capital equipment.
For the full year 2019 cash flow from operations with negative 18.1 million and we paid 8.4 million for capital equipment additions.
With a very strong cash position of $128 million.
We have sufficient runway to operate over the next couple of years.
Near term, we will be able to invest in critical areas and continued to higher exceptional talent. So we can be well positioned to accelerate growth once the cobot 19th situation is behind us.
Now for discussion about our guidance.
Due to uncertainty from the Cobot 19 pandemic, we're withdrawing the previous revenue guidance for fiscal 2020 that we provided during our last conference call.
At this point in time, what we can't tell you is that over the last couple of weeks, we have continued to receive customer samples of purchase orders.
However, at a slower rate than we expected.
In addition.
We now have a limited number of employees working in our lab to process samples, which may affect near term revenue.
It's still too early for us to quantify the magnitude of this disruption for determine how long it will take to resume normal more normal operations. Therefore.
We're not providing 2020 guidance until we know more.
We plan to provide an update to this information during our Q1 2020 earnings call.
Now I will turn the call back over to the operator to begin the Q in a session.
Operator.
As a reminder, ladies and gentlemen, if you would like to ask a question at this time. Please press. The Star then the number one key on your Touchtone telephone.
To withdraw your question press the pound key I.
Again that is star then one if you'd like to ask a question at this time.
Please standby only compiled acuity roster.
Our first question comes from a line of David Lewis with Morgan Stanley. Your line is now open.
Hi, guys. A this is edmund on for David can you guys made me okay.
Hi, admin.
Okay thinks of fighting the color in the updated on Cotai Corona virus situation.
And I appreciate that you guys will be providing financial guidance on 2020 until the next call, but could you help us think about next year or specifically.
Yes, and we'd like to your clinical all your NBP side. When a task orders received does that mean the sample is already there and just needs to be corporate biobank incentive course knowledge or does it still.
Like I'm trying to think about whether or not this can be a cooling evolves and Pat on sample acquisition from a that'd be side and similarly on the Biopharma side I know like a lot of clinical trials.
The enrollment hasn't slowed down significantly for Biopharma companies.
What have you been getting from their customers over the past month and how's it going back and personnel is now and what are you expecting in terms of houses is going to play out. So let me answer those two pieces Edmund So first I'll talk about the NBP.
So as we had mentioned on our last couple of calls the.
MVP sample flow had been accelerated from five to six months ago and so.
Sitting here today near term, we have sufficient samples in house to continue to process.
The key question since we are on this order from the county in the state. We do have a limited number of workers in house processing samples in the lab and so that could impede the amount of revenue we can produce for the VA NBP. So it's not really going to be sample flow near term, it's gonna be capacity and capability.
Turning to sample flow from the VA. So right now we're in close communications with them, we don't have any indications that.
Sample flow is going to slow down anytime soon however, if the D.A. laboratory is on any type of an order or shut down just like we are over here in the Bay area.
That could affect a sample flow to us down the road, okay, and so sitting here today to answer the question, we have sufficient sample near term, it's going to be a capacity question in terms of the bio pharma sample flow. So we had been seen sample flow over the last couple of weeks in terms of.
The information about clinical trials.
Enrollments going slower and in some cases has stopped a in terms of samples that are coming in we're going to do is prioritize those samples that are needed for our personalized cancer therapy customers because patient in those trials are relying upon our customers to be able to manufacture a drug or therapy equipped for them in.
So we're prioritizing.
So sample right now we are seeing some sample flow however, again.
All of our customers and suppliers are taking measures to protect their employees families in the community and so you know that could slow down overtime as well just too early for us to tell exactly what that magnitude, it's going to be or how long, but the way we see it.
Business is not going to go away, it's probably going to be shifting out to the right. So the growth curve is going to move out and it's hard to tell if it's six months is at nine months right, but it is moving out based upon what we see today.
But this is clinton just to be clear about the sample collection. The large majority of our samples have already been collected in both parts of our business. So the VA NBP samples have been collected in the majority of the work that we do on the Biopharma side is retrospective as well so most of the samples have been collected.
Got it and in terms of the Biopharma side, Oh, I'm, assuming the retrospective studies.
Less affected by.
The cooling the voters who called in terms of the processing samples do you can you give us a mix of would stand today in terms of retrospective we're supposed to Texas.
Yes so.
Edmund in terms of the sample flow. That's cool. That's generally correct retrospective are not going to be is problematic, but this cobot 19 as prospective samples coming in however, if our customers have to.
Going locked down or or shut down some of their lab operations or their suppliers. The CR Roes have to shut down their operations then it could affect the sample flow that comes into us eventually near term as Clinton had mentioned, we do have samples in house, but overtime that dynamic can change in terms of the mixture today. So today.
A more of our business is weighted towards retrospective.
In the bio pharma business.
It's still more than half on the retrospective side.
[noise] great.
And in terms of your.
Next Tx.
Test your clinical cost I'm wondering how can we think about the revenue contribution and the Vamping and do you have a price points I can give us.
Quite confirm that kind of correctly it sounds as though.
Hey, John do you want to pick up yeah, Yeah, maybe I could answer that one so.
We focused our next the excess as being something we would use to work with pharmaceutical companies and so this is as you know thats really the positioning of the product to start with its for companies that in fact, we're already buying into the comprehensiveness of the next platform. But then also wanted to be able to have a diagnostic test read out.
At the same time from the same very limited sample. So that's the that's the positioning of that.
We are interested and the regulatory path for that and I've been exploring that we'll probably have more to say about that.
In future quarters.
Great. Thank you very much guys.
Thank you Ed.
Our next question comes from Derik de Bruin with Bank of America. Your line is now open.
Hey, good afternoon.
You mentioned that you Sunday couple large pharma customers recently, this and the compared to the for you were talking with you sort of talk about what services, they're buying basically user like what would have been menus that they're choosing for me.
Yeah. This is John last I'd say that the area that we have.
Senior adoption that we're really happy about has been with our next platform.
And so this is our or how far we introduced a number of last year that looks not only at all 20000 genes and both the DNA and they are today, but also provides a comprehensive view of the immune system with the both the adaptive and these days side of the immune system being.
Captured so that's a that's probably our front line product.
There are cases, where customers want to have a subsets of that or who are still working with earlier products that we have but the real focus and actually part of what we're probably most excited about has banned the adoption of the the next platform. So we mentioned 19 customers now having placed orders for next obviously a number of.
Those are these large pharmaceutical companies that we also mentioned.
And so how many of your prior customers that you step up to next I'd.
Yes, so when we.
Talk last year about the business I think we were saying we had between 45 in 50 Biopharma customers and said that we're saying that we have 19 customers who have been looking at those who have ordered our next platform. So it's probably you know approaching 40% of in terms of numbers of customers at this point I would say that there is.
Is there a lot of interest and the in the platform and the capabilities and so unless people have a reason that they need to stay compatible with something with the prior platform.
Existing customers, who are already using our earlier generation often are quite interested in next and that's that is some of the adoption. We see and it's also new customers that are coming in because of next.
So on the debt into program, you mentioned that you've got a incremental funding.
Just in the last budget can you talk a little bit more detailed and I guess some of the questions I'm getting from clients are basically just wanting to know how secure that funding is it could be repurpose re could be re purpose. They basically is there any indication to all from the veterans program that.
Money could be pole from that program to go elsewhere to be redirected suits in the current fight.
So I would say this is Chad we have not seen any indication of that being re purpose and.
To give you an idea the.
New budget that was proposed by the White house would be for fiscal year, 21, which could conceivably lead to a purchase order for us in September of 2021.
And so that's a year and a half from now that the purchase order might kind of more the that's you know they the new new contract might come at that point.
And then we would be talking about samples to be processed in the time following that so it's.
That's that's some distance out I think if if there were going to be re purpose, saying it potentially could be from nearer term you know current year budgets, but in fact the contracts we have for those budgets are largely paid in advance.
We've largely received those payments at this point. So I think I think we're feeling pretty solid about that I think they see a million better. This program is actually quite a priority for the VA and the resources that it that are used for it largely our separate from the clinical resources of the veterans administration.
Great. Thank you for the additional color on that one and I guess I I can appreciate the uncertainty and sort of.
The situation I mean, obviously all companies are going to be facing headwinds I get the question I. The question I want on on you have some.
You don't have some sort of sense on are we looking for a.
Yeah, I get them to forgive me, if any sort of direction on the amount of decline you could possibly Caesar and based upon current trends.
I mean by for example, we've heard that like wellness visits to diagnostic labs are down 50% right. I mean, just were questioning it's like what are you is receiving your current outlook or anything like that is sort of give us any sort of direction for the next couple of quarters.
Yes. So this is trying to I guess I would say that the in things like wellness business or not the source of our SAP, Yes, obviously, we're working with cancer patients and yeah.
The flow of cancer patients is not very much changed by the yeah frac of the of the virus I think that said you know there when you're talking about experimental therapies, which might be try and trials by pharmaceutical companies. Some of those trials may be delayed so to the extent that were involved in those prospectively.
That could lead to delays in samples and I'd also say that if you know just at many of our pharmaceutical customers large fractions of their workforces are working from home.
And so although we're actually so remarkably engaged with any of them. There are going to be things, where you have to assume there will be.
Slowdowns there either in uptake of both of the platform people adopting it for the first time.
And that that could be reflected a year from now or.
You know people being able to get samples shipped to us if some samples are being held right. They see our ROE and the CRM was shutdown or that kind of thing. So I'd say that you were I think looking for some color on kind of the magnitude of all this and I would say you know we're currently seeing shipment of samples from customers and that that some of them after that is continuing.
We also have had customers they've had to push out dates.
Some cases somewhat uncertain, what the dates will be because of the disruption. So it sort of it's not 100%, it's not zero its sort of in between I think we'll have a better idea of being able to quantify that potentially on our Q1 conference call. Okay said just.
Summarizing this is like.
So you're V.A. business stable for now, but just to climb but the question on what your own operations Archer lab, and whether or not you can staff beds and.
So people, there and sample flow and the Biopharma, probably we take that down more just given some of the trial delayed some sort of thinking about how to sort of like put together the that they hit on this.
Yeah of course, I'd say that the on they and the V.A. side that because guaranteed had said we have a substantial number of samples in the house already that we receive from the B. I think the challenge there will be on being able to whether we can in fact process all of them I would say, it's a very dynamic situation I mean, we havent Taylor Mondays last week.
Can you know even there were no government orders by Monday afternoon, We had this in an order from the six county areas around the San Francisco Bay Here and then on Thursday evening that was in different order from the state of California. So it's just a very dynamic situation and it's not only the orders that affect our geographic location.
That obviously there are governments around the world that are taking action that we have customers who are located almost all around the world. So it depends on what's happening in their countries as well not just in the United States.
Great Thanks to the color.
Thanks.
Our next question comes from Doug Schenkel with Cowen and company. Your line is now open.
Hey, good afternoon, guys. Thanks for taking the questions.
Glad to hear your safe and that figure voices, thanks for doing so.
Right and recognizing most of your Biopharma work is retrospective as you mentioned a few times and you have most of those samples with not all of them.
And recognizing that'd be a sample access is pretty streamlined at this point <unk>.
Is it fair to assume that that the revenue timing.
In trying to time the impact of Kogan 19 on your company.
It could be a little different for you then for others in the sense that that you have a little more control over Q2, because you have the samples obviously not perfect controlling there's there's lot of unknowns out there.
But what most of the samples in house as it is it fair to assume that to the extent there is a pronounced revenue impact on your business it might be felt a little bit later for you then for others, meaning it probably requires a prolonged period of pandemic impact before it hits your European now.
I think thats going to be clear, maybe I can answer that one that the when we talk about retrospective samples from biopharma customers that it may be that but that the pharmaceutical company has the samples that's typically what they view the case and a retrospective study that but it doesn't mean that they're able to send them to us because they often they have them you know stored and.
The biobank for people, who operate the biobank may no longer be going to work.
And maybe being held at a contract research organization, sometimes we received samples from almost every country in the world.
And so those organizations are having delays or shutdowns, if we can be a delay in us receiving samples so although.
It's not likely that there will be so much delay. It didnt retrospective case is obviously the samples already have been taken so it's not it's not that there's a delay in the samples being essentially created to start with.
But the the sort of chain of custody of those samples coming from where they were originally collected.
To actually I know, but our laboratory and have a lot of steps and we do see.
Issues and delays with that that chains I think it's.
We will have some impact from samples where a customer already has the sample, but they're already pushing out the data on what you will get sent to us.
Okay. Yeah. That's helpful. I mean, it sounds like a lower hurdle that having to go out and get a new sample from.
A patient at a prospective study, but still it.
Yes, if a customer shut down our folks are working from home.
That's obviously going to have an impact okay. So I'm with you if that's helpful. Yeah.
Does the pandemic impact timelines for any pipeline products, including but not limited to your liquid biopsy product, which I believe was targeted for later this year.
So yes.
This is go ahead.
I guess I'd say, yes. This is a actually a very it's never going to have this kind of disruption, but whenever you're bringing out a product like that there would be people would be you know busy in the in the lab working on.
Initial samples and characterizing them getting reticle product launch and analyzing that data and so forth and.
All of the activity that we can do remotely by computer a you know can continue but the part where we're actually running samples and typically at this stage of a product development you really trying to ramp up the number of samples you're characterizing and potentially working with collaborators and so forth. So you know a lot of that really comes to a halt during this period of time, so theres little.
It depends on how long. This happened. This week, we do have samples that we have run prior to this situation happening. So we have lots of work with and stuff where the product development is not not halted but it but there definitely is a delay there were still thinking about that being released in 2020.
But I'd say, we really can't say for sure because we don't know how long.
The situation with covered 19 is going to happen.
Okay understood.
It has your ability to have discussions with.
Existing customers about expanding into new programs are new new potential customers. It I imagine that's been impacted but I I also wonder if there are some potential for you to move those discussions Ford maybe not in person, but you know kind of along the lines of what you just describe.
Right well folks are working from home I mean, I guess, a longwinded way of saying that the selling process have to come to a halt or have you found ways to keep that going even with folks working remotely.
Yeah. So absolutely I think we've been on more video conferences in the last two weeks and then you can shake a stick at.
At the same here yeah, you probably have been to I'd say the.
With existing customers, where we already have a relationship then if we're talking about new things and so whether you know, there's obviously a lot of engagement with those customers and and some of those kinds of discussions can continue there's probably a percentage reduction, but but in general those can continue but we also talked quite a bit at our script about adoption.
End of next by new customers who've never worked with us before and in those cases, you know getting in front of somebody in person and walking them through things and be able to answer their questions in real time, and they know the feedback the back and forth discussion.
It's pretty are important and so I think we when we look at the impact of Coca 19, obviously, we're doing everything we can minimize that but I think part of it is not just which samples choke on which day in the next one or two or three quarters bet, but also you know what's the adoption by a completely new come.
Summers to us and if that's adoption that that would have happened. This year as orders you know that could be revenue that happens in 2021. So it's a it's a little longer term. There I think we're kind of thinking about this is something as Aaron describe where the revenue growth curve as we look forward probably shifts to the right by someone.
Mountain it depends a little bit on that on how long this process goes on.
It also depends on whether our customers are impacted.
There is an economic downturn as well then you know there could be some slowdown there we don't know.
Okay.
That's all really helpful. Thanks for taking all the time to think through this with us and I know, what's a difficult and fluid situation. So thanks, Scott Thanks, Doug Thanks, Doug.
Our next question comes from Kevin to here with Oppenheimer. Your line is now open.
Thanks for taking my questions I'm.
During prepared comments you called out some opportunities to expand the biopharma business into indications outside of oncology I believe inflammatory disease and genetic disorders among potentially others.
So we think about the current product menu you are there specific components isn't menus and feel really lead within your discussions you know outside of oncology that and probably more to the point of our thinking.
How do we think about the need for potential menu expansion to do really kind of capitalize on some of those additional opportunities.
Yeah, Kevin Thanks for being on the call. This afternoon I'd say one of the reason is that we've begun to pay more attention to that is that customers started to approach us and say Gee. We saw you have this product in Europe, you know maybe working with people in our pharmaceutical company in cancer, but actually we can also use that in these other areas I think he does the initial opportune.
Any that we're seeing is something where we work with you know the existing products, we have sometimes that maybe some changes in the and they.
Informatics and reporting and so forth, but that many of the kind of capabilities. We have from an essay standpoint, or a laboratory standpoint or work flow standpoint, many of those are applicable to these other.
Areas. So I think were is what we're seeing isn't as an opportunity where there may not need to be along.
New product development to address those markets, we maybe able to at least begin making progress in those markets. In fact, we've been beginning to see some progress there using products that we already have I would say one of the things. It's interesting is and as you know in cancer, we focus on a lot on immuno oncology.
And of course, the immune system is really important and a lot of other diseases as well and so our ability to see that and the combined and those genetics with the genetics that we're seeing that would impact the other aspects of the disease is quite helpful. And the you know in many of these diseases or the arent inside of what we.
Who is also tremendously informative and so you know the combination of those capabilities that we have let's address these other opportunities.
In some cases with a more or less our existing products. It's the opportunity has got to be larger will think about menu expansion, but.
Even with the existing menu, we think there are opportunities.
And you also called out population sequencing opportunities beyond the MVP program is being yeah, one area, where you see a potential increased opportunity I guess, particularly against the backdrop.
Expanding public sector spending across the board, but from an operational perspective.
Yeah that would seem to be a pretty concentrated list of opportunities. So you see.
Investment there really about.
How to better identify potential opportunities earlier ours is really about you know the ability to properly resourced, yeah, our cheese or are there specific contracting work feature the hearing about are already in the public domain.
Yeah, So I'd say that the obviously, we have visibility to a lot of the population sequencing efforts I know a number of you have had written the pieces on that that space and the I think before we were public company, we probably would not have considered things that were in other countries, but but two things have happened. One is obviously the company is much better capitalized.
At this point and that makes it more possible for us to think about this but but also the progress we've made in developing the scale, we've need to build out for the NBP and the automation that we've had to build out there at this point I think we've described on prior calls sequencing over 10000 human genomes per quarter.
That's a lot of robotic automation and so that makes it easier for us to think about well what if we have to do that in another country.
Her with with another country and some of the countries that are developing these projects have their own high end sequencing laboratories, and probably will do those.
In those laboratories, and often those are university affiliated and so forth.
And there are more countries on the list than have.
Large scale sequencing efforts and this is not just a matter of.
Buying a few alumina instruments plugging them in and getting started.
And so our ability to do this in a commercial fashion with bringing in the kind of automation and the optimization that we you know we've worked on working on this since 2012, so we're pretty far down the learning curve and.
Other people could talk about in principle, having the possibility to sequence that large numbers of genomes, but we've already done it we've already sequence over 50000 whole human genomes up there's almost no other companies in the world.
I have done that that are based in the United States. Obviously alumina did that would you know, England and that you know, there's some efforts going on in China, and so forth. It actually there are not very many.
Companies that have this kind of capability and so as we begin talking with groups. We've had people approach us and say is this something that you would be interested and then to be honest as we've gotten better at it.
It has gotten more interesting I'd say, we also saw a huge expansion in our VA business last year. When we were getting ready for IPO, we had been a position where samples from the VA, taking some time to arrive because or.
Operations that need to be late on the VA side that has begun into Q2, particularly Q3 last year.
We were really clean almost surprised by the though the rate at which samples were able to common all the preparation work we've done really let us ramp that up so I think Aaron commented that are we a business increased more than 100% last year. You know, it's clear that happened not only because the availability of samples and our ability.
Two.
Process them and so I think we see there is that there's a capability and that you know it's something we've gotten good at and there's a need for it and were more open to thinking about operating in multiple countries now.
Than perhaps we would've been prior to our IPO.
Makes sense, then maybe just a housekeeping questions from me you did call out one large order a and.
One Q that may not repeat.
It was that order from.
An existing customer that was already a top end customer was that from one of your your new large pharma customers.
Yeah. So this is a customer we started working with if we've got our first order from them in the fourth quarter.
Got it received a much larger order in the first quarter.
And the relationship we are building with them is one where you know if things going on go according to their plans and ours, we would expect that there could be additional orders in future quarters, but but they've given us orders that sometimes you know might take a few quarters to be executed on so it's not that if we think of this is a onetime thing that may never repeat.
It's just that it may not repeat every single quarter.
And so you know the baby quarters, where there's an order there that could be a substantial in size and then maybe the following quarter. We're working on executing on it. So it's not a let's say a smooth every quarter thing from an order is perspective, but it is a it is in cancer.
And.
Uh-huh, leveraging a lot of our or capabilities there.
Well, great congratulations on the progress of the business.
Great. Thank you Kevin Kevin.
And that will conclude today's question and answer session.
Ladies and gentlemen, this concludes today's conference call. Thank you for purchases.
Thank you.
Thank you.
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