Q1 2020 Earnings Call
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Now what to turn the conference over to your Speaker today, Miss Caroline corner. Thank you. Please go ahead man.
Thank you operator welcome to personnel since the first quarter 2020 earnings call.
Stays call or John West, President and Chief Executive Officer, an air Antosh Ivana Chief Financial Officer.
Call will include forward looking statements, including statement regarding the markets, which we operate including potential market sizes trends and expectations for products services and technology Trentham demand for our product personalities as expected financial performance expenses and position on the market and the impact of covert 19 on our operations and our customers.
Operation you.
These statements is subject to risks and uncertainties that could cause actual with all the different materially from our current expectations.
Encourage you to review our most recent filing with the F.D.C., particularly the risk factors described in our 10 k. filing for fiscal year 2019, and in our 10 Q. filing for our first quarter ended March 31st 2020.
Looking statements we provide during this call including projections for future performance are based on a reasonable beliefs and expectations as off today personnel to undertake no obligation to update these statements except as required by applicable.
Our press release with their first quarter 2020 result is available on our website W.W.W. dot <unk> dot com under the investors section and includes additional details about our financial results.
Website, <unk>, just a P.C. filing, which we encourage you to review.
A recording of today's call will be available on our website by five P.M. Pacific time today now, we'd like to try and the color over to John first comments and first quarter 2020 business highlights.
Thank you girls <unk>.
Q1 was our first quarter dealing with the impact of <unk>.
When we saw the <unk>.
We took action two extra work across from him samples in the population sequencing part of our business.
To make sure we finish overall goals take a quarter until we've as much loved capacity as possible performance samples which might be delayed.
We did experience some delays, but we were still able to achieve $4.4 million in revenue for bio farmer and all other customers, which was within the range vehicle that's for the core.
In part because we had accelerated the processing of samples and the population sequencing part of our business.
Revenues, where the V.A.M.B.P. program achieved new hard for 14 quite $8 million.
As a result, or total competent revenue rich 19, quite $2 million or two quarter of sequential growth.
Record.
We have received strong orders and our bio for my business started going to three last year for the launch of our next platform.
10, Q1, we received new bio farmer orders totaling more than three times or bio farmer revenue in the corridor.
Those orders included a large order from a single existing customer.
We do not expect that or to repeat every quarter.
Even if we excluded from our two one orders or whatever amount would still be well above or two one revenue.
Population sequencing and Biopharmas businesses share a unifying theme in the comprehensive large scale genomic characterization human samples.
Both of our whole genome sequencing.
Platform cover all 20000 human James.
Because of their shirt underlying technology is the operational implementation, we achieve considerable synergy between the two businesses.
Next I would like to provide some additional updates on the impact of codeine Jane or organization.
First we're focused on the health of our employees at our community.
We had been under shelter and place orders since March 17th wished Alex and at least through Bay 31st.
Most of our employees are working from home.
Our laboratory is out to run samples have reduced capacity with appropriate safety and social distancing measures.
Or commercial team is still engaged with our customers. We received a record bio pharma received record biopharm a customer orders in Q1.
Remained encouraged by engagement and order float getting too too.
Continued to receive pharma customers samples that with some delays.
We received record batches of samples from the V.A. during the month of April and assuming we can maintain adequate sampling of our lab. We expect they will keep us busy for most of the rest of this year.
Our cash level puts a set of position of spring.
We remain focused on adoption of our next platform development of new products and supporting our customers.
Shifting focus to our progress this quarter there are several factors, which give us confidence in the long term growth of our business.
You do one we continue to scale.
Bring over 14000, poultry and then genomes, which is more than a 90 per cent increase from two one of last year.
We have now delivered more than a thousand genomes from cancer samples and then Q1 also completed sequencing or 100000 sample overall.
The potential value of new orders received from Biopharmx and all other customers.
More than three times the amount of our by a former revenue in Q1 and new orders have now increase sequentially since Q3 2009 too.
In April.
Continued with orders again exceeding revenue from our biopharm of customers.
As we've explained before it takes time for orders to convert to revenue the actual revenue recognize from or what or maybe less than expected due to the failure of individual customers samples to meet our sample of quality requirements and other factors.
Growth in orders gives us confidence in our future revenues trade.
At the end of Q1.
What do you six different customers have now placed orders for next.
Up from 19 at the end up to four.
We continue to be happy with how next as being adopted by our existing and new customers.
Well it will take time for a new customers to complete pilots. We are pleased with the number of customers engaged and look forward to deepening our relationships.
We are establishing a lab commercial operation and the People's Republic of China.
Several global pharmaceutical companies have asked us about China.
Scoring our belief that it's a good time to expand their.
In January before the club at night change disruption members of our management team traveled to try not to start this process.
We continue to build a commercial team in both the U.S. and Europe, which has grown by 50 per cent since our I.P.O.
In particular, we have added business development stuff with extensive commercial experience in companion diagnostic development.
And as a result here now engaging with an increasing number of pharma companies for potential companion diagnostic development programs.
We've also expanded our quality and regulatory came to support these efforts.
In April we applied to the F.T.A. for a priest submission meeting for a single site.
M.A. for next.
Represents another investment we were making for our future growth.
We are also leveraging the technology, we developed for cancer to capture opportunities outside of cancer.
For example, it is beginning to be appreciated that meal antigens it'd be created outside of cancer.
And Q1, we were contracted by a major biotechnology company to apply are proprietary neoantigen fireworks from medical expertise to their non cancer gene therapy drug development.
Have also announced our farm of research solutions suite of D.N.A. sequencing data analytics support pharmaceutical developing across a wide range of disease indications.
Personnel us had a total of 10 scientific coasters accepted for presentation at this year's A.A.C.R. and the Esko conferences.
Genuinely our scientific leadership in the field.
These are listed on our website under conferences and they will be presented online in May and June.
In March we welcome Steve Moore is our new General counsel.
Steve has a long career at state or the our companies and the genomics field. He was most recently Pacific Bio Sciences as general counsel, having joined them in 2010, when modern D.N.A. sequencing was in its infancy.
Prior to that he was at the consumer genomics company Navigenix.
Before that spent many years had happy methods welcome Steve.
Hmm.
And now like to update you on the population sequencing part of our business, which is sometimes referred to in the field as population genetics.
Well work with the V.A.M.B.P. represents.
The largest population sequencing effort within the United States.
The V.A. now targets enrollment of 2 million veterans and over 825000 bedrooms have enrolled so far.
Since 2113 personnel US is completed sequencing cool human genome was from over 60000 C.A.M.B.P. samples.
Personally I also has been contracted so far the sequence over 116000 V.A.M.B.P. samples.
In 232019, we received our largest V.A.M.V.P. order ever and later this year, we expect to begin work on it.
With a large difference or samples we have recently received [noise].
We now have all of the samples in house that we will need to complete the 100000, Oh human genome for the V.A.
If we have to sequencing apparate, we achieved in Q1, we would expect to complete that 100000 genome Gore the V.A.M.B.P. by the end of this year.
However, given the challenge a crooked 19 or sequencing production rate is uncertain.
We think it is possible, though that personnel us could become the first four proper company. However, the sequence 100000 <unk> in the United States.
Since the V.A. has recently doubled the number of veterans day plans will enroll.
Leave this program is likely to continue for many years.
We expect our unparalleled commercial experience with the V.A.M.B.P. program.
<unk> for other opportunities and population sequencing.
Given our clinical experience, we also see an opportunity.
Transition population research to population health.
We have already received population sequencing orders for over $145 million and we plan to expand our commercial team to address what is projected to be a multibillion dollar mark.
But now like to update you on three proprietary new products.
First in January we launched start diagnostic readout on next all next T.X. to be used by by a farmer customers in clinical trials and by research collaborators.
The core of next T.X. achieves over 1000 cold D.N.A. sequencing coverage.
Driver chains, enabling sensitive detection, a companion diagnostic biomarkers that have already been approved by the F.T.A. on other platforms.
We believe that this may eventually qualify next D.X. for reimbursement under an existing C.M.S. national coverage decision, which could be very helpful for personnel its customers.
Seeking to develop companion or complexity diagnostics with our platform.
Because next year is based on the same underlying next platform for samples where a next year. Next report is trained rated we expect also provide our farmer partners with additional data covering all 20000, human genes and a broad range or biology outside the coding regions of the James.
Accessible by a standard excellent.
This rich biological content covers would make next particularly suitable for database development, both that procell us and and personalities customers.
Lastly, the broad footprints of next allows it to capture more cancer mutations this would make it an ideal front end or liquid biopsy products, which can subsequently use those barriers for tracking groomer evolution.
That brings me to the development of our liquid biopsy product line.
Our first product in this product line is expected to be per used together with our tissue based assets.
Both are tissue and liquid biopsy based products provide data on all 20000 human genes, but with the addition of the liquid biopsy product, we expect to enable monitoring up patients that comprehensively at local time points.
Many new cancer drugs extend the lives of patients, but do not eradicate the disease, that's a growing segments of the cancer survivor population.
Consists of patients who are still undergoing active disease management.
Excellent scale liquid biopsy product as being designed to track the evolution of what can be thousands of cancer mutations in a single tumor and.
And importantly, it is expected to be capable of detecting new mutations as they emerge younger therapeutic pressure.
This would represent a significant expansion of our addressable markets.
Serving pharmaceutical companies building, our database and increasing critical opportunities.
Well coping 19 has impacted our r. and D. lab staffing, we still plan to launch of liquid biopsy product. This here.
Lastly, we have been working over three years combined laboratory and informatics project to advance, our new adage and characterization capabilities.
We believe that neoantigens or the crucial centerpiece well the new generation a companion diagnostic biomarkers.
We expect are far more customers will apply this capability to mainstream cancer drugs, such as checkpoint inhibitors and also to experimental personalized cancer therapies, which explicitly target neoantigens.
Our new advanced capability.
Also be used for developing of drugs that are designed for use outside of cancer.
As gene therapies.
Personnel as R. and D. project has required multiple proprietary technologies, including genetic engineering up proprietary human cell lines that spectrometry to identify a modified peptides.
The H.L.A.
And the training of the novel machine learning algorithms.
Or data shows like this project has achieved a leap frog advance in this field <unk>.
We expect to launch this capability as part of our next platform before the end of 2020.
<unk>.
In summary personnel assist continued to receive strong orders from our pharmaceutical and biotech customers continued to build commercial capability and has a great sweet new products already launched and with more to come.
We believe that together these factors among others.
It isn't as strong position for longterm grow.
Walk little bit 19 is causing some delays population sequencing business with its backlog of orders and samples and we have already received help support us near term.
That.
Strong cash position, let's let's continue investment in our future growth initiatives.
Well now handed over to Aaron for our financial results.
Thank you John and good afternoon, everyone.
Revenues for the first quarter.
Housing 20 $19.2 million.
6% sequentially for meeting point 2 million for the prayer quarter end up 36% from 14.1 million for the same period prior year.
The $19.2 million, what's a new record high for quarterly revenues.
Sequential quarterly revenue growth was driven by an increase in volume for testing services provided to the V.A.N.B.P.
For the first quarter.
Yeah, U.M.B.P. revenue $14.8 million was 7% higher sequentially compared with 13.8 million for the prior quarter and was 77% higher compared with 8.3 million for the same period of the prior year.
The V.A.M.B.P. unfulfilled orders at the end of the first quarter 54 million.
Based on current estimate.
We expect the unfulfilled orders to convert revenue over approximately.
Four quarters.
File farmer and all of their customers accounted for revenues of $4.4 million for the first quarter.
Centrally the same as Q4 and was within the range, we expected entering the per quarter.
Gross margin.
21.1% for the first quarter compared with 36.2% for the prayer quarter and 28.3% in the same period of the prior year.
The V.A.N.B.P. gross margins continue to be solid.
Higher than the corporate gross margin reported for the first quarter.
The V.A.M.D.P. being higher volume and it's single service offering has an automated and does not require a significant amount of labor and has a very efficient sample test process.
The first quarter sequential gross margin decline 15.1 percentage point was due to a few factors.
First.
For 2019 included a one time cost reduction for certain materials.
Accidentally 5.5% is going but did not repeat in the first quarter.
Second we had some elevated expenses in the first quarter help mitigate any near term just can supply due to cope with 19, which reduced gross margin by 3.3 percentage points.
In addition, we had a few customer projects with lower margins in the first quarter compared with Q. for.
And for the most significant that'd be.
Incurred additional costs related to a major new customer, which are not expected to recur now that we are up and running with them.
As mentioned in the past.
Gross margin variability in the future and there are a few moving parts.
Sample receipt linear already from customers.
Mixup customer projects.
And capacity utilization of labor and equipment.
In addition.
We recently renewed or at least in Menlo Park, California for which rent expense will increase later this year and into the future.
Also.
We will be building out elaboration in China, This year, which will add startup expenses and 2020.
Most of these expenses will be classified as S.G.N.A. this year.
We expect revenue from China to begin ramping throughout 2021.
And during this rampant period, we expect to have gross margin headwinds from the Underabsorbed labor and overhead.
We are very excited about the China growth opportunity in front of us.
Operating expenses were $13.7 million in the first quarter compared with 9.4 million for the same period prior year.
The expense with 6.4 million in the first quarter compared with 5.2 million for the same period last year and S.G.N. expense.
7.3 million for the first quarter compared to 4.2 million for the same period last year.
Most of the S.G.N.A. spending increase was related to headcount growth in public company color.
Net loss for the first quarter with $9.1 million compared with the net loss at 5.7 million for the same period at the prior year.
Net loss per share for the first quarter for 29 cents and the weighted average basic and deluded sure account was 31.3 million compared with the net loss per share a one dollar and 84 cents and a weighted average basic into literature account of 3.1 million for the same period 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.
No wonder the balance sheet.
We exited the first quarter with a strong balance sheet with cash in short term investments $120 million.
First quarter cash flow from operations with a usage at 8.6 million, primarily due to the net loss and working capital neat.
During the quarter, we added approximately $1.5 million extra inventory to help mitigate potential supply chain disruption and these incremental purchases will be paid for in the second quarter.
With a strong cash position $120 million, we have flexibility to operate over the next couple of years.
Near term, we will continue to invest prudently and critical areas.
So we can be well positioned to accelerate grow once the cobin 19 situation is behind it.
Regarding our investment in China, we expect the cash requirements to be in the range of four and a half to $6 million from the second half of 2023, the first half of 2021.
Now for discussion about our guidance.
Honor last call.
We withdrew or 2020 revenue guidance do uncertainty from the code in 19 pandemic.
We still do not have enough clarity near term or through the into this year and therefore, we're not providing revenue guidance for fiscal 2020 at this time.
Let me explain what we did see during the first month and Q. too.
In April we receive some customer orders and samples.
However, we were also aware of some delays that will result in sample shipments moving from the second quarter into the third quarter.
Regarding our largest customer the V.A.M.B.P.
We did receive a large batch and samples during the month of April.
And we now have enough samples inhouse to process over the next two to three quarters.
In addition, our lab is operated with a limited number of employees from mid March through the end of April which limited output capacity.
We expect to bring back more employees into the lab during May and June which will help increase output.
It's still too early for us to quantify the magnitude of this disruption or determine how long will take to resume normal operation. Therefore, we're not providing 2020 guidance until we know more.
We plan to provide enough data this information during our next earnings call.
Now I will turn to call back over to the operator to begin acuity session.
As a reminder.
As a reminder to ask a question you will need to press star on your telephone keypad to withdraw your question press the pound key.
Standby, while we compiled the killing day roster.
[noise] [noise]. Your first question comes from David Lewis Morgan Stanley.
Hi, guys. This is adamant on for David David. Thank you for taking the question I was just wondering on the N.B.P. side. What is your current capacity looking like now versus the last update what percent of the last person I was able to continue your parts of the samples and how much do you expect to increase that pie in me and.
June and do you have any sense of what that's looking like the M.B.T. size and Oh, you're expecting digital examples come in in the near future.
Hi in Memphis is Aaron I'll take the first question. So in terms of the capacity, we don't have a specific number or per cent. We can give you said, we're getting we did $14.8 million in Q1.
The month of April <unk>.
Was a little bit lighter than what we had process on average in the queue. One time frame permanently because of fewer people in the lab. The V.A.M.B.P. is highly automated and doesn't it doesn't require as many people in the lab does the bio apartment business.
However, we still do you need people to load and unload samples from robots and things of that nature in terms of going forward. So we're going to be bringing more people back into the lab in may and June increase the output capability.
And so you know whether or not we'll get back to the level of we did and Q1, it's hard to tell there's still a wide range of variability in terms of what we can produce primarily because of the number of people and we don't know exactly when we'll have certain levels of people in during the month amazing So there's still some questionnaire.
In terms of the second part of your question with the V.A. samples. So we didn't receive a large batch of samples in the month of April which we were very pleased about the V.A. has all of their sample stored in a refrigeration systems in Boston, Massachusetts.
Under sheltered in place as well and so it's not clear exactly Rumble, receiving next batch of samples from the V.A., but again like what we sat here and prepared remarks, we have enough samples in house the process over the next two to three quarters.
Great. Thanks, very helpful and on the Biopharmas <unk> calls a little bit you provide some more color here that one large customer order that you recorded in this quarter. This is a different clusters.
Sorry.
Since we lost you.
Yeah, So edmund in terms of the large customer <unk>.
Whereas this new customer had a place to mortars in the queue for timeframe, we process some samples for them into four as well as in Q1. So in terms of this customer you know during Q1, we were going through some of the ramp up phases and in terms of thought it didn't require.
You know more the material and labor costs to go and get things right for them. This is a customer that previously was using a different service providers impersonality.
So they lose business over to us and.
Anytime you're taking the data from one lab like ours, comparing it with another lab that was somebody another supplier doing work for them you know, there's some correlation timeframe in terms of making sure that the data is consistent and so we went through a lot of that during the Cuban timeframe just to help ensure that they were seeing.
The thing we were seeing in the data and they could feel comfortable with it you know in in terms of the data.
We're providing it to a very high quality and so you know we believe that were beyond you know some of those initial startup challenges.
Got it and for the 26 total new customers on next.
This include customers that are still piloting the product or have they already incorporated this into the saudis.
Maybe this is to try unless I could speak to the next step uptake here. So I think.
We're we're actually thrilled with the uptake of of next they when we receive pilot orders like that they are generally costs are paid orders or they can range up to close to a million dollars an order. So that's that's called a bad start yeah.
Change in our business a couple of years ago, a pilot order might have been.
$20000, but we've had several large pharma companies starting what elsewhere.
Actual order from them was between $500000 on a million dollars. So that's been.
Although we did.
Over the last couple of quarters about a group of pharmaceutical companies that we had never worked with or at least for my close friends in.
2018, and with next their adoption, we had identified in particular for pharmaceutical company as well that was the case and we had mentioned last for her that's more of them have now given to us <unk> happy to say now.
Both of those customers of extra given us follow.
And with a total value.
If we have more received from those two big pharmaceutical companies, which we're new to us now totals over $2 million.
The other two that we had identified are ones that are actually an active negotiation and there's a third one is ball.
On top of that they're cheap other large pharmaceutical companies that we started working with for the first time into one one of them is headquartered in Europe. The other one is headquartered in Japan. Those are more traditional pilot orders were optimistic that those can become very large accounts for.
Let's be I'd say, we had one large pharmaceutical customer that we actually had worked with a little bit over the years and they finally fried neck. When we introduce that last summer we received a pilot order if I look at that point.
They they you know depending on the date it wasn't clear how that would go actually it's gone terrifically now head.
Orders from them. The most recent one was over a million dollars. The total of the words. They received from the customer is over $2 million from a single customer that was the right next for the first time sort of decided last year. So we were actually thrilled with the uptake of of the plus one it's been a terrific quarter.
And actually it's been surprising.
Than the covered disruption the customers have continued to actually be quite accessible any of them or not off traveling and the ways. They've put have been before and so actually it's been a a remarkably good time for us from a a commercial sample.
That sounds great and one final one for me just in terms of cash burn what love is you guys have <unk> <unk> <unk> <unk> given the.
Coded.
Environment and how are you prioritize your investments that's a good question. So in terms of you know.
Cash and burn so in terms of delivers that we have it's really about the type of headcount, we're bringing into the company. So even with the Kobe situation, we have been hiring people. Fortunately I'm looking to prioritize for critical areas and development on the commercial side first and foremost we don't have a big need today.
From capacity build out standpoint, the operational capacity, we have is sufficient with headcount as well as on the equipment side and so you know we can d. prioritize that area and also in the G.N.A. area. You know we don't have to go Fort board to fill out the infrastructure. We can take some time you know what the Kobe situation.
In terms of anything together, yeah I'm looking forward here you know 2020, the cash burn will be elevated compared to 19, obviously into the Casper and is probably going to be in the range of $50 million and that could be plus or minus 10%.
Okay. Thank you guys were much.
Thank you and.
Your next question comes from Doug <unk> <unk>.
Hey, guys physics Super on for a dog you talked about <unk>.
New into forward and I.B.B.C. 17 Q1.
<unk> slow down associated with not closing would you expect there to be materials catch up in revenue it samples coming in much more quickly than normal.
Open up or do you expect that bat local wouldn't be worked through with a normal Kate and.
This is trying to think it's a little early to know how quickly labs will open up we have customers all over the world and we have customers in pharmaceutical companies were conducting clinical trials, where their samples are all over the world and so the you know the sample flow coming to US is not just a matter of laboratories.
Putting in the United States, but we receive samples from Europe from Singapore from many other places in Asia and so they you know the opening and some of those places that is actually a head of the United States and and other places may may lagged behind where we are in California. So I think it's a little bit uncharted territory.
I think we're being.
Cautious normally the orders that we receive would still take anywhere in the range of 618 months to go from in order to being revenue on an average I'd say with hope that there could be more delay isn't that I think we're discovering it as we go along the way, but we are actually pretty pleased with.
The samples per se so far so I guess that we're being being cautious that that I think that the strong orders helps a lot.
And so this is Aaron so the other thing to remember is.
Most of our business today and bio pharma is retrospective analysis, meaning samples are already.
From patients and <unk> some type of storage facilities. So it's really up to the customers to get the samples and get them sent to us.
In terms of out into the future you know.
Shut down just laughs and kleenex right now.
We're not quite sure what that impact would be you know in terms of future sample flow to us, but right now is joined had mentioned.
Sample flow into S. has been you know relatively healthy and in terms of work coming from all geography is around the world is where our samples will come in from except for China. Obviously.
Because of the export requirements.
God, if that's helpful and you alluded to this in the previous question, but.
You have <unk> customized.
Member at the time, a fucking phone call in deep launch it sounded like Oh does it started to slow with this this elephant opportunities became tougher.
Just from physical interaction perspective, so how you evolving you'll be do practices at all are you able to increase to get in front of people continue to hiding. These eight is or how are you thinking about it ended up for the for the rest of the.
Yeah. This is to try and maybe I could speak to that I think they.
The end of March on our calls <unk> shut down that we were facing it really just started and so we weren't quite sure. How that was wanting to go and I think a lot of our customers. It was a little chaotic for them as well. They were you know perhaps in the process of shutting down and or you know they're getting to work from home I think it was a little unclear for them also what they were going to be able.
To do I think what we've found is that we've been able to be <unk> remarkably resilient in terms of our operations, even though we're operating on this very distributed basis.
Actually most of our commercial team normally works on a distributed basis and so yeah. I think the fact that it's turned out that the customers.
The rest of just go home and stop working they actually in general have gone home and and continued to work and that's actually made them somewhat more accessible. So it doesn't necessarily mean that samples will flow because you know that has to do with what happens in laboratories, some of which are shut down but in terms of customers engagement with the ideas behind what we're doing.
And see them to think about the advantage of having that brought biology accessible to then I'd say the the uptake has been perhaps more encouraging than than we were thinking on the queue for call I would say that I I think the personnel is is likely to come out of the covered situation in quite a bit stronger position then.
When we started.
That's both because of customer orders and engagements that but I think what we're seeing as it were on the right track there and there's there's increasing by into the next platform.
<unk>, Okay. So let's case.
Thank you nice.
Your next question comes from Kevin Degeeter.
<unk>.
Hey, guys. Thanks to pay my questions.
Can you just talk a little bit about the belt off the child facility really I guess two parts start first.
<unk> at least the initial demand being primarily from existing customers, perhaps global customers. Yeah. <unk> is this really yeah potentially surveying you know new customers her personality and secondarily.
There's a little bit about decision to build your own lives versus perhaps.
All right with a a local organization in China as an alternative.
Hi, Kevin This is there and so I'll I'll take a shot at this and then John can expand.
In terms of China. So in terms of the customers. So right now we've been working primarily a global pharmaceutical companies around the world and a lot of them are headquartered here in North America and so these are the ones that are typically asking about China. So the likelihood is.
Those are going to be our initial customers to to help us bringing China in terms of other demand. So you know trying is a very large market you know from a population standpoint, and so you know we're going to hire a commercial people pretty close to right out of it shoot as well and go.
Pursued that business with the local pharmaceutical companies as well it'll be the same same type of business model. We have here in the U.S. It will be a fee for service and so in terms of the lab operation we won't be selling two clinics hospitals are in colleges it'll be two pharmaceutical companies in terms of the second part of your question.
Building out our own lab and or.
Waiting a partner and so these are all the types of things we've been considering I'm sitting here today, we're not prepared to you know talk too much about which direction, we're going Oh, we'd like to say today is that you know we are in the process of the planning and going forward to go and commit to building something out here in China.
Our different ways to do it for sure.
<unk> and then maybe <unk> a little bit about your update.
For the Neoantigens outside of oncology I think more generally yeah. The the sound gene therapy opportunity you know one thinks about clinical trials and patient populations from of cell therapy or gene therapy opportunities.
Relatively narrow patient populations, but it seems like the the value proposition. Your bring is particularly differentiated from some other he'll laugh companies I guess farm going with this is if one thinks about you know pricing and volumes of some of those initiatives you know.
Will the opportunities all sort of similar Chew on college you are we talking about you know potentially.
You know very different economic models, the first now us.
Yeah. This is fine I could speak to that I I think it's I think it's the first time that we're seeing people really appreciate the idea that there can be neoantigens outside of cancer. So I I think that's an idea that we think will.
Will spread.
Mutations that happen in a variety of different settings, not only and and in cancer and also there can be either.
Engineered product so I'd say that we think that there's opportunity there. The point that we were trying to make there was more that some of the technologies that we've developed for cancer and our Neoantigen capability is is one of them are things that where there's a market that's broader than just cancer and so we've had people from like from a cynical.
Place, we've come to visit Us where a sensibly. The first part of focus of the meeting was on our cancer products that they would say you know actually you know I'm also responsible for the you know biomark hurt efforts in our company are pharmaceutical company.
No across all different medical indications and the things you guys are doing are amazing could we also use this and you know a variety of other areas and so the fact that we can look comprehensively at the immune system Lacey interest from people and working on drugs to the auto immune.
Uses certainly a whole genome sequencing is sensible for almost any medical education and provides a little comprehensive do so I think there's a whole suite of things that personnel. So it's already developed where there's a broader market than we've been tapping into before so this is sort of the main point that we were trying to make is that in addition to what we're doing a cancer which for.
Pretty happy with how that's going we do see a broader opportunity and it's an opportunity where the products already exist largely it's really a a commercial initiative to tap into that.
Grey that they may one last one if I may really housekeeping I think if I heard you air incorrectly.
You you call it out tantrum.
20 cash from around $50 million I think if that's correct. It would suggest around 14 million and a quarter prefer to extremities identically over the next three quarters.
Yeah.
Is that a reasonable way to think about saying this is being reasonably distributed from her arm perspective, kinda given to put syntax yeah.
Five and yeah. The other components in the second half a year, you know or or is there some quarterly variability like concurrent got to think about.
So that's good question, Kevin So yeah.
The million dollar burn for the year. So the that piece that we also have that's tied to.
In terms of the net loss. In addition, we had the customer deposits. So you recall that the V.A. pre paid 70% of the order value up front and so our customer deposits in 2020, we're probably going to use $12 million to $13 million of cash coming off the balance sheet from the customer.
<unk>.
Merrily because you know back in 2018, we were receiving cash from the D.A. and <unk> you recall, we didn't process a lot of samples because we didn't happen received or in house to be able to to get that done now that the V.A. has accelerated the sample flow to us we're actually recognizing revenue.
And shipping samples sample data back to the V.A. at a higher level than what was prepaid and so we're going to be eating that prepayment off the balance sheet. So that's that's about $15 million and then the rest of it would come from the net loss.
Terrific. Thanks, so much gosh.
<unk>.
No further questions at this time I would now like.
Over to your house next Carolyn corner.
Thinking that topic today.
Ladies and gentlemen, this cuckoos today's conference call. Thank you for participating you may now disconnect.
Okay.
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