Q1 2021 Progenity Inc Earnings Call
[music].
Okay.
Good afternoon, everyone welcome to <unk> first quarter 2021 earnings call.
And this time all participants are in a listen only mode and later, we will conduct a question and answer session and instructions will follow at that time.
And at once and require assistance during the conference you May Press Star Zero on your Texas Zone telephone.
And I will now turn the call over to Robert <unk>, managing director with West week, I hear preventative Investor relations firm.
Thank you operator, good afternoon, and welcome to <unk> first quarter 2021 financial results Conference call. Joining me on the call our Doctor Harry styles, <unk>, Chairman and Chief Executive Officer, and Eric des Barnabas Chief Financial Officer.
Before I turn the call over to Doctor Stylee I would like to remind you that today's call will include forward looking statements within the meaning of the federal securities laws, including but not limited to the types of statements identified as forward looking in our quarterly report on form 10-Q that we will file later today and our subsequent P.
Arctic reports filed with the SEC, which will all be available on our website and the investors section.
These forward looking statements represent our views only as of the date of this call and involve substantial risks and uncertainties, including many that are beyond our control. Please note that the actual results could differ materially from those projected in any forward looking statement for a further description of the risk.
<unk> and uncertainties that could cause actual results to differ materially from those expressed in the forward looking statements as well as risks related to our business. Please see our periodic reports filed with the SEC on <unk>.
Slide deck with some supplemental first quarter financial information is also now on the website, but it will not be directly referenced by the speakers on the call today with that I will now turn the call over to Dr. Harry Stylet, Chairman and CEO of progenitor.
Thank you Robert and thank you all for joining us this afternoon.
We made significant progress during Q1 with a revenue generating business, but especially with our innovation pipeline programs and this.
This is the area I want to focus on first during our call today as a company plans to enhance its focus on strategic biotech areas, having in our opinion and the highest possible value generation potential as our geologic position medicine and preeclampsia programs.
And it has become clear to us the investors are currently placing more value on large unmet medical need that can be alleviated by high margin and therapeutics and molecular diagnostics. We have made clear progress and are precluded tests with several recent studies showing a high probability of accuracy that could lead to significant commercial use and.
We have already initiated assets are on a pro on a full validation study, which upon satisfactory completion will trigger a commercialization phase by Q4 2021.
As a reminder, our preeclampsia and the second most common cause of maternal mortality and the U S with more than 700000 women presenting each year with signs and symptoms of possible preeclampsia.
Preeclampsia is a global scout and effective operator independent tests, the age and diagnosis is simply not currently available.
<unk> is associated with a range of signs and symptoms hypertension protein urea, but also for example, headaches demos and Gi pain.
The only way to currently treat preeclampsia effectively to deliver the baby before 37 weeks, resulting and premature delivery with an increased risk and health consequences and health care costs, if that were to occur.
A test rooting out preeclampsia and women with signs and symptoms such as preclude you has the potential to transform patient management, especially in on intended use population, which was primarily represented by the obgyn.
And in order to roll out a symptomatic women clinicians need a high degree of confidence and a negative score and this is why preclude you is optimized for negative predictive value or NPV, which has driven statistically by sensitivity and the prevalence rate.
Adherence to the <unk> guidelines and generates at best and NPV of 83% and this performance represents the standard of care today and the U S. Indeed, a coke and net 2019 guidelines for preeclampsia discourages approaches based on positive predictive value or PPV.
<unk>, which is statistically driven by specificity, which is not as important for our high NPV tests are.
A force positive means our tests cannot rule out the risk of the patient for developing preeclampsia. So these patients would be subject to the same existing standard of care.
We had we identified a protein biomarkers through our research initiatives into the disorder and have developed a multivariate algorithm based test is an LPT immuno diagnostic.
Furthermore, over a number of years, we have developed a sophisticated and growing understanding of actual clinical practice and insights into the clinical heterogeneity and relationship management and the U S.
<unk> is designed to have a high NPV of at least 95 as a reminder, our MPV has consistently exceeded 97% at a 10% prevalence and the intended use population corresponding to a gestation and wage of 28 weeks to 37 weeks the window.
Most preeclampsia occurs.
With our clinical verification study, which was presented last week at the <unk> annual meeting, we determined a rule out wind up.
Up to 14 days this was corroborated and pre validation and we will be pressure tested and a 104 validation study in other words, our MPV test result rules out with high confidence preeclampsia for up to 14 days.
Patient that is rolled out can be managed less conservatively and ideally the pregnancy can be extended.
With many patients it is possible that more than one tests or one of our tests will be used per patient and this will be determined by the physician based on signs and symptoms of patients distinction and wage whether the patient and drawdown and where the testing is occurring on either a one or two week cadence.
We announced on Wednesday last week the results of our pre <unk> pre validation work, which demonstrated commercial and laboratory readiness and also showed test performance and our intended use population to be consistent with our pro once and I and verification study, we sensitivity greater than 87% and and and.
And PV greater than 97% at a prevalence of 11% and a rollout window of 14 days.
The specificity was determined to be 66%.
These day to reflect the ongoing derisking and Ah <unk> program and they position us strongly for validation study and as a reminder, we also announced we completed assay testing and.
And now initiating and data analysis of the probe on a full clinical validation study samples.
We plan to share headline performance data from this study in the June July timeframe I am pleased to report that we are on track to meet our previous disclosed validation milestone.
Assuming a preclude a rule out test performed as expected and the pro <unk> and.
Validation study we plan to begin a targeted launch by Q4 2021 and believe the performance level, we have seen sofa, coupled with market education should facilitate initial commercial adoption and the clinical utility study.
As a result, we are now just a few months away from launching our new products and and our existing channel addressing a clear unmet need and a multi billion dollar U S market.
And I could not be more excited about the potential for these tests to positively change clinical practice and the management of preeclampsia and to generate economic benefit to the health system.
B and important complement to our existing women's health test portfolio and provide a differentiated test menu for Obgyns and and defense beginning 2020 to preclude years expected high margins and anticipated adoption rates should positively contribute to our revenues and helped drive our core business.
And to profitability.
We recently completed research on payers using a third party to better understand how they would characterize the value of liquidity and testing we were very encouraged by the findings indicate and payers and have an understanding of the economic burden on preeclampsia and of the precluded test value proposition.
This pricing study and reinforced our initial work signaling compelling reimbursement and the support of U S $2 billion to $3 billion opportunity and performance levels consistent with the verification and validation studies.
<unk> future publication of our work to date, including validation and clinical utility study and additional health economic studies should drive reimbursement goals <unk> has potential as an IBD immuno diagnostic and also has a global market opportunity.
The other area of major progress this past quarter is that Gi precision medicine pipeline.
We continued during the first quarter to advance key preclinical and clinical studies, especially for drug pipeline now using fully autonomous devices.
Let's start with our drug programs. The first program update is around the significant progress we've made and our targeted therapeutics program.
Go of this programs to deliver high dose pharmaceuticals to specific locations along the Gi track.
This could become a multi billion dollar platform. If we are successful partnering.
With major pharmaceutical companies and and advancing our pipeline.
And I am pleased to share that in the quarter. We met our previously reported key milestones for the drug delivery system Tds.
And this program we are developing drug device combination products that deliver proprietary <unk> formulations of drugs without DDS to the site of disease and the Gi track, thereby maximizing the available dose and tissue and achieving pan colonial distribution and important for disease impacts.
Furthermore, our platform.
Of the monoclonal antibodies, but also other proteins peptides of nucleic acids.
Our prior proof of concept studies using endoscopic placement of of non automated robots repeated delivery system of Bds achieved 27% bioavailability as a percentage of of IV for Humira of monoclonal and <unk> FC fusion of to two GOP.
One's in porcine models.
Representing unprecedented bioavailability from monoclonal <unk> and the fusion protein.
Recently, we initiated preclinical studies of our lead candidates PGM zero would be one at the Lehman matter of of monoclonal in PGM zero <unk> GOP, one agonist peptide utilizing a fully autonomous <unk>. The goal of the studies to demonstrate bioavailability of a lease of utilized drug candidate.
With an automated op eds and those of our pharma partners in comparison to Parenteral administration.
We believe that the yogurt es platform, which includes the mechanical device has the potential to transform how biotherapeutics are delivered orally potentially opening a vast market.
This platform can be utilized with multiple different therapeutics that meet a broader envelope of operating envelope and PK PD characteristics of.
The first partnership with the major pharma is advancing as expected recently, we announced an exciting new partnership with ion is leveraging our mutual capabilities to explore the use of the <unk> platform for delivering antisense oligonucleotides.
If successful this work has the potential to lead to a broader partnership with our owners, but may also enable further partnerships based on antisense RNA AI and.
Chile vaccine delivery.
As we indicated previously now that we have a fully autonomous device and are generating preclinical data. We are witnessing an acceleration of interest in partnering with US. We are confident that given the advances to date and hopefully continued compelling preclinical data, we will have opportunities to enter into additional partnerships.
Of provide validation risk sharing arrangements and a significant non dilutive capital.
Component.
We look forward to providing further updates.
Moving to our Gi diagnostic activities.
And the appeal Dx CFO of program, we continue to advance the technology with ongoing assay validation and on track to initiate a clinical pilot study, we fully autonomous devices in the second half of the year.
The progress made so far with ultra location performance in the Tds programs translated into additional Derisking for both the Rss and the purity ex programs.
As a reminder, the <unk> ex capsule can perform a range of in situ fluorescent based assays for a variety of Gi related pathologies without the need for cash for recovery.
In this regard it as a digital technology that you can ingest at your convenience.
And transmit the data two of wearable receiver.
Our first product of the smart capsule of bacterial detection system.
Bgs for evaluating small intestinal bacterial overgrowth for CFO.
Over 100 million annual patient visits with patients.
Showing signs of symptoms resembling the CFO and current diagnostics of invasive and rely upon cost of the endoscopy of microbiological culture.
For a natural handoff inaccurate breath tests.
Just on feedback from public statements from our Kols.
Including the American college of cash rents voltages.
This presents the opportunity for the CBD assets to become the standard of care for evaluating suspected placebo.
Beyond Seabaugh acuity ex program is beginning to generate potential interest in other infectious disease areas.
And also inflammatory bowel disease colorectal cancer pancreatic disease in the liver diseases.
Moving to our sampling.
Our program based on the recoverable sent for system. The Rss a capsule designed for both discovery and diagnostics. This continues to progress well.
Initiation of the first clinical study with a fully autonomous devices is on track to begin in the second quarter. This year.
To conserve financial resources, we are currently focusing of the maturity of efforts too.
One of our drug programs as we look to generate non diluted capital to supplement our other potential sources of funding.
Completing our innovation pipeline update as a single molecule detection platform, we continue to make progress over the past quarter.
While the development of the platform and its first assay a next generation.
<unk> test and therefore.
We continue to believe the NII of four has the potential to reduce sign up of cheap direct costs by up to 50% and achieve equivalent performance to traditional sequencing.
In addition to genomic solutions, such as <unk> single molecule detection platform has the potential of GT tech non RNA epigenomics and protein Biomarkers with high sensitivity and low cost. This platform has the greatest potential however for oncology tests day.
<unk>.
Now I will discuss our molecular testing business.
Our core business achieved revenue growth of 72% quarter over quarter with 46% growth off of Q1 2020.
The turnaround of our core lab business continues to gain momentum, especially with strongly improving asp's.
That are already ahead of our internal year end targets.
Revenue cycle improvements beginning of last year, having an increasingly accretive impact, which we believe will accelerate momentum in the second half of 2021 and into 'twenty two and beyond.
The average risk and <unk>, all sort of being reimbursed faster than our internal forecast as the new carrot.
All of our new carrier testing panels, the margin contribution from this should accelerate with volume as we further improve liquidation.
Im also pleased to share that Aetna selected progenitor <unk> as one of their preferred and IP providers.
We have come a long way with Aetna.
The restructuring process to our sales channel because of our in network transition and billing improvements initiated in Q4 of last year is advancing and the account attrition, resulting from it continued its path to stabilization in the first quarter 2021.
We continue to see provider acquisition of Verizon tests from new and existing providers, we are close to turning the corner with volume as we strengthen our sales force.
Of processes and our productivity.
Our affiliate of Vero molecular that provides COVID-19 testing is diverting resources from covered to focus on core revenue opportunities of <unk>, maintaining a COVID-19 testing offering, but we stopped promoting the service primarily because the demand characteristics of change and we are focusing.
Our commercial efforts on our core business.
Im also pleased to share debt during the first quarter Progenitive further increases in network covered lives with an additional $3 3 million lives from our new contracts with regional pass separately, we're advancing in our efforts to achieve in network status with the remaining two large commercial payers and we're hopeful we can add a significant.
Inefficient number of covered lives with access to a protocol portfolio in the second half of 2021, which should lead to a further expansion of our commercial presence.
Going forward into the balance of 'twenty, one and into 'twenty. Two we anticipate a number of catalysts that will continue to drive margin improvements and should increase test volumes. These being benefiting from rising demand for average risk in IPG and carrier testing and improving reimbursement for <unk> advanced.
Our in network transition from the anticipated launch of our precluded the test by Q4 of <unk>.
Highly differentiate the product in our existence channel. Furthermore, in 'twenty, two which should be fully benefiting from broader average risk reimbursement. The expected margin improvements may also help provide a differentiated advantage and drive increased demand for our diabetes services, especially from other labs and health systems.
Molecular testing business is beginning to show signs of returning to be a positive contributor to our success.
That will synergize with the launch of our preclude yet tests and we expect this to become more explicit as we progress into 2021 and beyond.
With that I'll now turn the call over to Eric the Spa of Us for a discussion of our financial results for the first quarter of 2021.
Thank you Harry and good afternoon, everyone I will provide a brief overview of our financial results and also invite you to review our first quarter financial release, and our 10-Q for a more detailed description.
We reported $25 million in revenues in the first quarter of 2021 in line with our prior guidance. This represents a 72% growth quarter over quarter end of 46% growth from Q1 2020, as we now can reported revenues without any accruals our reserves.
We continued to see ASP improvements in the quarter, which gives us confidence in our revenue cycle management efforts will sustain increasing net liquidation.
We believe the vast majority of the operational improvements we have implemented last year combined with the benefits of our growing of network position and increasingly favorable average risk <unk> coverage by government and commercial payers will all converge to deliver a progressively strong financial performance in 2021.
So far in the first quarter of 'twenty, one we generated in the ASP upside of nearly $2 million.
Compared to the first quarter of 2020, most of which is related to <unk> average risk upside on.
On a full year run rate basis that represents almost $8 million upside before adding volume growth and further expected liquidation improvements, which is a very encouraging sign.
Based on current trends, we expect Q2 2021 overall revenues to return to growth competitive first quarter 'twenty one.
As a result, we're maintaining our 2021 core revenue guidance range, we believe the transition to growth of our core monitor the testing business will continue to progress through the 'twenty, one and we expect to see the benefits of growing volume demand and rising asps.
And hiring previously mentioned COVID-19 was a transient of Fortunately for us and since we are focused on our core business. We are choosing to no longer provide 2021, COVID-19 volume and revenue guidance of <unk>.
It was very much an important and steak offering we generated a positive on growing our lie on debt original investment.
Our first quarter Cogs in Cogs per test increased slightly compared to the fourth quarter due to nonrecurring compensation expenses, but remained stable otherwise.
The following implementation of cost control measures in Q4 2020, we continued to maintain a disciplined approach to managing our operating expenses to ensure it is more in line with the progression of our top line revenue performance, but in parallel we're maintaining appropriate resourcing of our key R&D programs.
We also are increasing our focus on opportunities to extract non dilutive capital and reduce cash burn as we continue to drive towards breakeven and profitability ex R&D for the core business by the end of 'twenty two early 'twenty three time frame.
SG&A expenses were $36 9 million during the first quarter of 'twenty, one a slight increase compared to the fourth quarter largely the result of nonrecurring compensation expenses, but remained stable and otherwise.
R&D expenses were stable at $11 7 million during the quarter first quarter. The result of stage gated investment strategy, where we are.
Allocate incremental R&D spend based on programs, achieving various derisking milestones or key R&D projects that are progressing very well as I have explained earlier and I'll remain well funded for.
First quarter of 21 net loss was $32 3 million, which includes $14 8 million of income from change in fair value of the Devry.
Dave Let me liability associated with the 2025 convertible notes we issued in December for.
The first quarter 'twenty, one operating cash flows were negative $48 6 million compared to negative $72 3 million in the fourth quarter of 'twenty.
The main difference between the two quarters relate to $39.
$2 million in schedule of government and payers settlement payment net in December of 'twenty. As a reminder, we now have $24 $3 million remaining and settlement payments, which are payable over the next three years. These payments will significantly diminish beginning in 'twenty two.
To continue reducing our capital requirements and debt respects.
During the first quarter, we raised $25 million in gross proceeds through a private placement and had a cash balance of $65 million at the end of the first quarter of 2021 with that I will now turn the call back over to Harry.
Thank you Eric progenitor has several catalysts that are anticipated to create value in the coming quarters and we are excited about the future.
The key examples of strengthening performance of the core revenue business, including strong contribution from <unk> average risk reimbursement precluded of validation study results in the June July of 'twenty, one followed by targeted launch by Q4 of 2021 of multiple GI program clinical milestones that I described earlier couple of tube.
Partnerships lightly plant continued partnerships.
The milestones we discussed today and is presented as supporting materials in normal course should enhance value as we made progress for that core business in advance of innovation pipeline a number of other innovations address of the vast markets and in certain instances of the potential to be commercially transformational.
So the certain for the certain of our innovations kind of readily support multiple significant partnerships, which we expect to realize as we continue to de risk of programs through execution.
But generate true data.
We are working towards achieving breakeven and profitability of our core business and intend to fully exploit various options that reduce capital needs by generating for example, non dilutive capital through various means available to us whilst reducing our operating costs.
We are excited by the near term potential and the Optionality, we provide for value creation with that operator, we are now ready for questions.
As a reminder, if he has any questions. At this time, you May press star and the number one on your Touchtone telephone.
Thanks for your question has been answered or you wish to remove yourself from the queue.
You May press the pound key.
Our first question comes from the line of Steven Mah Piper Sandler Steven Your line is now open.
Okay, great. Thank you.
Thanks, guys for taking the questions.
Hey, Steve.
So for.
First one I. Appreciate you guys are not giving COVID-19 volumes going forward, but is there any way you guys could give us the core women's health volumes.
And the reason I'm asking I'm doing some quick math here to try to back into the volumes and revenues.
Just rough on top of it looks like the volumes in women's health for was sequentially flat.
And I was just hoping if you guys can just square away.
If they are sequentially flat help us square away the disconnect is.
Typically Q1 is typically a very strong quarter for for MPT testing and given some of the other women's health testing companies, we expected volume volume should be a lot higher so any color would be appreciated.
Yes, Steven Thanks for the question, so, yes, theyre generally flat for both core and the COVID-19.
The difference is largely related to previous statements. We made at the one of the conferences, where February was a little bit challenging in Texas had some bad weather.
Net effect affected demand dynamics, a little bit.
And secondly have you talked about it we're still in the process of the some of the transitions on the sales channel.
That is both combining two to the.
The stable quarter over quarter volume hopefully that helps.
Yes, Okay, yes.
Alright. Thanks.
And then the next question on the Crohns and colitis funding.
Zinc in the way you can give us some more detail or color potentially the amount of the funding the timeframe of the funding and any limitations of use on the funding.
Yes. So this is Eric I'll cover this.
This is a cost sharing arrangement so it will not necessarily shows the revenue it's more of a.
I had joined spending on the studies that are targeted by the program. So.
It's not overly.
The critical in terms of the dollar what matters is really the studies that it supports.
And it's the contribution towards the maturing of the DDS further cuts the main focus and that leads to studies.
Okay got it okay. So the funding is strictly for the DDS development.
Correct.
Okay, Alright, great Thats helpful and maybe if I can sneak in one last one you guys mentioned gave us a little bit of an update on the needle for but could you remind us again on the timing and next catalyst for the nasal for development.
The next catalyst is probably going to be Q3.
I'm, hoping that it will be demonstration debt.
Technology has got to the point, where now we can move it into what I'll call optimization, and then onto verification and validation.
<unk>.
Based on current run rates I would say progress I would say, we should be ready to commercialize probably towards the end of the second quarter beginning of the third quarter next year.
Okay.
Okay, great. Thank you so much.
Thanks Steven.
Next question comes from the line of Andrew Cooper from Raymond James.
Thanks for the question guys.
Maybe first.
Just kind of looking at the gross margin and sort of the cost of goods understand there's there's always some moving parts, there, but with volume sort of flattish it looks like the cost per test moved around a little bit.
Is there anything that you're really point you there specifically I know you talked about couple of things in the script, but can you just kind of size.
What maybe was the progress the gone in.
The <unk> cost per test to help us think about the margin trajectory from here as volumes continue to recover.
Yes, so I would.
I tried to mention in the in the section on finances debt the.
The temporary increase in Q1 is really more related to a combination of stock based compensation accruals and other related expenses.
The actual Cogs per test otherwise remained stable. So if you want of forecast cost profile.
The.
If you back that out of the prior quarter level is more indicative of the of the run rate.
Okay. So closer to what we saw kind of in the for key level is that correct of true direct conflict. Okay. That's very helpful.
And then maybe one on on some of the data we've gotten in the Gi precision medicine.
I guess can you help me think about what majority means when we think about majority of pay.
<unk>, reaching their target.
How that plays into the sort of the clinical utility of our drug in.
Yes.
What.
Our payload not reaching the target might mean, and how we think about that clinically and sort of what the bogies are that you need to get there.
It would be helpful.
Happy to do that so generally most drugs have situations, where they don't meet.
The objectives, okay. So it's not uncommon in our world.
So here for the human study, which is the one that's the most important.
For your question is 11 out of 12 of the devices.
Actually hit the targets.
For the only one that didn't was an interesting phenomenon.
The device left the stomach and then was sought back in.
And that's really a small software tweak to overcome that sort of.
Rare event, but it occurs.
So then beyond that what we found what we found is the majority of the devices eight out of the device of those.
12 devices actually released.
The drug and the reasons, where they didn't release was that this was the first batch of manufactured.
Devices.
There were some learning curve tweaks that we need to make so ultimately by the time, we're ready to the human studies.
D in.
Two way, which is way in the future of these devices should be way better than 90, and 95% or even approaching.
Beyond 95% in terms of areas of their effectiveness now if they don't discharge you will not receive of dose which is.
Not the end of the world.
In the correct place, okay, so that would be really the the <unk>.
On the sort of issue around that.
And you can recover the device if you wanted to.
The confirm that bump.
But that would be really your primary downside here now other than that the devices based on the input that we received.
<unk> seen.
Seem to be our use of words say from well tolerated.
Bye bye bye the human subjects.
So it's really.
Safety of it's better than we expected.
At this point of the evolution of the device and it's remarkable that we were able to hit the secret junction, which is exactly where you want to be.
The beginning of the colon, while the very terminus of the alien So we're able to hit the 11 out of 12 times already.
And achieve pan colonic distribution when that occurred.
Okay.
And again, what you need what you need to see because because of colitis begins in the rexam and usually makes its way up.
The <unk>.
Okay perfect that's super helpful context, maybe.
Maybe just one more shifting shifting a little bit but.
Preeclampsia annual it sounds like Everything's moving moving as expected and moving forward well. So just maybe the latest and greatest thinking on.
Building the sales force around that back in your existing force to really hit the ground running there in.
If anything has changed and started the last conversations need add about about any of those dynamics.
No I don't think anything's changed.
In the beginning we're not going to go with Penn National.
The test is.
B of targeted launch and there's more than enough capability.
The capability across the value chain is being trained.
The materials are being produced.
Once we have the validation data, we're going to publish and then we're going to expand our education programs.
So.
Everything is lining up just as expected there is not going to be of need to really ramp the sales force for that per se because it's already a fairly substantial sales force.
We may need to bring in.
Additional skill sets into the sales force and into marketing and into the.
Of the support functions.
So thats really just in increments of investment because one of the exciting things about this.
<unk> is that it's the primary client if you like is the obgyn, which is where we're already focused on today.
So we expect to get operating leverage and other benefits as we go forward.
I'm quite excited.
Quite excited because these are very difficult.
<unk> two the navigate in a very difficult clinical environment to navigate and hopefully hopefully with the success of the validation study.
We get to see how it's received in due course and plays in the market and how the direction right advances and of course.
Reimbursement proceeds.
Courage by way of hearing about it but the other way.
Great. That's it for me I appreciate the questions again, thanks guys.
Thanks Sandra.
Next question comes from the line of Catherine Schulte of Baird.
Hey, guys. Thanks for the questions I guess first just on the core business you guys of the second quarter up sequentially any further comment on what you expect in terms of the magnitude of that increase.
What youre expecting for sequential volume growth first of all day.
Okay.
Yes, so we'll probably going to stay with the statement that I made all of it earlier because you have a lot of moving pieces. So I think we feel comfortable that we're going to be in a position to grow.
We'll have to provide further updates as we progress.
On the quarter.
Okay got it.
And then you mentioned seeing a lot more interest in.
Some of your precision medicine applications are there particular platforms other risks.
CBS for the sampling device, where you're seeing the most interest what are your ex.
Vacation for additional partnerships for next year I'd say the the most interest is in the <unk>.
And the.
You just have to take my word for it the <unk>.
Interest is growing.
And we have mega caps, who are interested in.
And.
And of what we've noticed as we generate more data there will be more feasibility studies with pharma, but the the day.
Demand for the series of energy studies the softening.
As we generate more data and I think and I think we continue to execute and generate data youre going to see you're going to see broader relationships. There's also interest in the DDS.
There are discussions ongoing now.
They are not as advanced as the over the years.
Also discussions all of the platforms.
With various parties that have expressed interest.
For instance for the <unk> capability.
And also there is a transaction in the works and it's for.
For the Rss.
Okay. So there's broad interest, but where we believe the greatest impact is going to result is with the drug programs I mean the.
Based on the feedback we've received that we've shared with you today is profound.
And.
Soon you'll be seeing evidence of human performance.
And I think it's quite profound as we go along.
The devices even at this relatively early stage in the evolution the C.
For functional.
They actually are performing better than we thought.
Other than we anticipated at this stage now all sort of see both opportunity, which we're getting a little slow is that we're going to take it to the point, where we generate clinical data.
That where we could then use.
Two.
Two of hopefully adventure.
In partnership with others. So that's on the vast opportunity and what excites me. The most of the feedback we get from the G of the Gastroenterology community, including the college.
Yes.
Have a thirst for.
For a technology that can do what we're proposing the.
CBS can do so.
So this is beginning to go since everyone. Once the feedback other guys you need revenue validation.
His data that's validating okay and it's both.
Performance States in terms of the device.
The Tolerability data couple too.
It looks like efficacious Ness and gives us a sense of what the the tolerability profile might be for these heavy drugs.
This is quite Powerpoint zone right.
The risks things for us.
And then the risk.
Happen in due course.
Okay got it and.
Unless from for me you mentioned the Obs partnership the signed last year is progressing as expected. The what are the next steps for <unk>.
What kind of updates should be ex U.
Expecting on that partnership and then.
This partnership is divided into the few parts. So whats the timeline about hearing about guidance.
Sure.
And the other thing.
Yeah, absolutely so the.
<unk>.
The first partnership is moving into the preclinical stage.
With the partners drug.
And we expect to.
Have data on the appropriate Q3 Q4.
So in other words, it's clearing its initial from.
While stones.
And we're getting down to.
And we're making the sausage right, which is because of the device work.
The other thing I want to share with you, which is interesting there's an evolution in thinking.
Way from canine as model into than into the porcine modal for number of reasons, because it's actually much more representative of the human Gi So.
That's a learning that we as a group have now the onus.
Partnership is is that the ground floor, but the spinning up very rapidly.
And again it really is a mutual partnership we understand what we know and they understand antisense arguably better than anybody.
Their needs and that's the whole area that requires the oral delivery for it for those markets to really come come to pass.
So it's a meeting of two partners.
And hopefully in the next two quarters.
Have a preclinical update on.
The onus arrangement no I will say that for some risk that some of these don't work because of the nature of the the molecule for example.
But at this point based on the data we're seeing.
We feel quite optimistic.
And I'll leave it other than you should expect to see.
Other partnerships in this space.
And.
I would say that is shifting.
Im going to say the timing of them, but I would say the.
There is of interest from other parties and what gain net of what I would add is we're getting to the phase where we're generating our internal preclinical data.
And because we're really talking about changing the bioavailability.
Sure.
Demonstrating bioavailability that is the endpoint because of lot of these drugs are well known and well characterized.
And they are in the pipelines are there on the market today for a number of these partners. So the burden of proof is preclinical data.
Perfectly in the porcine modal.
Thats. It then I think if that goes well without drugs and remember the on the other thing I would add is that we've already demonstrated that if you take the <unk> from not in an automated phone and use an endoscope to position it that we get we get compelling bioavailability for.
Proteins and peptides.
So we've already demonstrated that we know that now.
Now we're trying to show that we can do it with a standalone fully automated device east.
Essentially it looks like a pill that you ingest and then it takes over from now and then delivered the drug.
That's what we're trying to show that's where we're at.
Of replicating our initial data and observations, but within the ultimate a fully automated device that effectively looks like a normal pill.
Okay.
So we're very close to generating this data.
That will fuel.
Additional partnerships, but also I think.
I think our prospective partners will forego feasibility studies because it fits of Lee we're generating that data.
In advance.
Okay, and we'll share that as that story unfolds.
<unk>.
Great. Thank you.
Thank you Catherine.
Again, if you have any questions. Please press star one on your Touchtone telephone.
The next question comes from the line of sung <unk> Nam I'll speak Yankee.
Oh this channel calling in for Sanjay.
Thanks, so much for taking the question so first of all Asia.
So.
First of all at this point, what kind of impact are you seeing.
On the revenue from the average risk population.
Thank you your assumptions for the average risk contribution in your guidance for 2020.
The line.
Right. So it is definitely increasing.
And as I mentioned, just in Q1, we had about $2 million of of.
Of upside associated with this so you are already at the $8 million annual run rate.
And if you had add.
Payers are gradually covering it.
Once once you get through the normal ASC 606 trailing revenue recognition.
The requirements you can see that it can grow during the course of the year.
We're not providing the breakdown of exactly how much from average risk in the PT is in the core revenue guidance.
The guidance because we have a lot of different moving pieces that contribute to this but it's material and thats why we wanted to highlight its contribution to this quarter hopefully that helps.
That's helpful. Thank you so maybe just one more on <unk>.
Given the recent data are presented.
Would love to hear of any additional feedback you might be double from clinicians ahead of the launch.
Well the next step as of the validation study and the feedback we're getting.
And especially from the <unk>.
The quite excited of this test could make a difference for helping the obgyn.
<unk> said that in the fair amount of fine use.
They really believe it can really aid the obgyn because of very large number of cases.
The patient may complain.
With the.
Headaches for example, and that could be of Red alerts. So so they like the profile.
The light the performance to date and it really hinges on on validation, Okay, ultimately, which is just weeks away.
So, let's wait and see.
Around the corner now what I will add is all of the studies today have been consistent we're getting a good reaction aged coke.
It was definitely very supportive.
Supportive of an invoice and accepting our.
Work the SEC shows their interest so overall things are in of <unk>.
<unk> spoke given for where we are but very shortly we will have a validation study with over 1300 subjects.
And Thats gone too late.
The lay the foundation for launch of the ODT.
Primarily targeted towards Obgyn's, but also helpful to <unk> in some cases.
Alright.
Does that makes sense.
Okay.
Paul.
Thank you thanks again for taking the question.
Thank you. Thank you.
Next question comes from the line of Dan Leonard of Wells Fargo. Your line is now open.
Thank you just a quick housekeeping question as we're on the hour here. So you mentioned that of Arrow is no longer marketing COVID-19 testing is the corporate agenda. The labs are they still marketing COVID-19 testing or have you shut down the marketing of both brands.
Yes.
Essentially stopped marketing COVID-19 testing.
And the.
The business, we are receiving from existing.
Clients.
Maybe the some incremental activity, but effectively we're refocusing all of our efforts onto our core business.
And even though it was accretive to us.
The the.
The volatility that we were seeing.
Just made it less interesting and really it's all hands on deck for the core business.
And that was that's exactly what we did.
Even though it was an accretive business.
And we will continue to be accretive because of its covenants costs.
Sure Okay. Thank you.
That's good.
Thank you again.
Dan If you have any questions. Please press star one on your Touchtone telephone.
And there are no further questions at this time I will turn it back to Dr. Thanks Tyler.
Thank you.
Thank you all once again for participating on the call and thank you for your interest in progenitor.
Have any additional questions. Please feel free to contact us have a good evening everyone.
Okay.
Thank you so much to our presenters. Thank you everyone for participating.
This concludes today's conference call you may now disconnect have a great day.
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