Q2 2021 Fulgent Genetics Inc Earnings Call
Please standby we're about to begin.
Good day and welcome to the full junk genetics to Qs 21 earnings conference call. At this time I would like to turn the conference over to Nicole <unk> with Investor Relations. Please go ahead.
Great. Thanks, Good afternoon, and welcome to the Fulgent Genetics second quarter 2021 financial results conference call on the call today are <unk>, Chief Executive Officer, Paul Kim Chief Financial Officer, Dr. Larry Weiss, Chief Medical Officer, and Brendan person Who's the company's Chief commercial officer, the company's press release discussing its financial results.
And is available and the Investor Relations section of the company's website at Fulgent genetics, IR day genetics Dotcom and audio replay of this call will be available. Shortly after the call concludes please visit the Investor Relations section of the company's website to access the audio replay management's prepared remarks and answers to your questions on today's call will contain forward looking state.
These forward looking statements represent managements estimates based on current views and assumptions, which may prove to be incorrect.
Adult matters discussed and any forward looking statements are subject to risks uncertainties and changes in circumstances that may cause actual results to differ from those described and the forward looking statements.
The company assumes no obligation to update any of the forward looking statements. It may make today to reflect actual results or changes and expectations listeners should not rely on any forward looking statements as predictions of future events and should listen to management's remarks today with the understanding that actual events, including the company's actual future results may be materially different than what has described.
And or implied by these forward looking statements. Please review the more detailed discussions related to these forward looking statements, including the discussions of some risk factors that may cause results to differ from those described and these forward looking statements.
And in the company's filings with the Securities and Exchange Commission and cleaning. The previously filed 10-K for the year ended December 31, 2020, which is available and the company's Investor Relations website management's prepared remarks, including discussions of earnings and earnings per share contain financial measures not prepared in accordance with accounting principles generally accepted in United States.
For GAAP.
Management has presented these non-GAAP financial measures because it believes and may be useful to investors for various reasons, but they should not be viewed as a substitute for or superior to the company's financial measures prepared in accordance with GAAP. Please see the company's press release discussing its financial results for the second quarter of 2020, 1 for more information, including the description of profit.
Company calculates non-GAAP income and income per share and a reconciliation of these financial metrics to income and income per share and mostly most directly comparable GAAP financial metrics with that I'd now like to turn the call over to Mike.
Thank you very much and you go and good afternoon, and thank you for joining our call today to discuss our second quarter 2020.
We have a number of exciting items to highlight.
For our call.
I am pleased to be joined by our recently appointed Chief Medical Officer, Dr. Larry Weiss.
Who will present you pardon today discussing our emerging strategy around the Melissa diagnosis.
And the oncology testing.
So with that in.
We had.
2 very exciting strategic and announcement today.
The acquisition focus CSI luxuries and.
And the commercial partnership was the Hulu.
We should we will cover more in detail a few minutes.
And I'm also joined again by our Chief commercial Officer.
Brendan Curfews, who will cover updates to.
Our go to market and strategies.
And our CFO Paul Kim.
Who will discuss our financial results and outlook in detail.
Yeah.
Taking a look at our second quarter results.
Revenue totaled $154 million, almost 719% compared the second quarter of 2020 and.
And down sequentially from the first quarter.
As we expected.
Okay.
And test.
Quarter.
Almost 9 times, the volume of the second quarter last year.
The sole driver of the revenue and the volume shortfall and the quarter was fostered and expense.
PCR test for COVID-19.
This was.
It was a broad and basic causes has the market and not specific to Fuji day.
And the accelerated pace of vaccination and the decrease and need support has been a cause of the country.
We fully expect to see the slowdown in the pace of demand.
The drop was somehow faster than anticipated.
W.
Our <unk> revenue, which we now called core revenue.
Except for the our expectation in the second quarter and the growth.
296% year over year to $25.7 million.
Paul we will.
Okay.
However in the field.
Our father loves the majority of our core revenue.
It was not really COVID-19.
I see.
We also remain the worry profit pool in quarter Jim.
Generating $2.59.
<unk> per share in the GAAP EPS and the 76.1 million.
Dollars in operating cash flow.
While we are disappointed with.
Our topline results fell short of our.
Expectations in this quarter.
We are looking at our opportunities beyond the Covid and we're excited about the future holds.
And while we still have a number of agreements in place.
Covid testing across the country both for.
And she has passed.
And we remain well positioned to capture demand for Covid testing as the market dictates.
And that would be youll see that we are focused on expanding our capabilities and our commercialization on the area of genomic testing.
We believe our response to the COVID-19 pandemic has demonstrated.
The ability to scale and execute with a high level of precision and the <unk>.
Excellent and then we hope to translate these capabilities into other areas genomic testing with.
Our core business.
The acquisition of CSI lapse rates is a prime example of how we.
And to strategically.
And our business for long term sustainable growth.
Acquisition and with CSI Laboratory, we are excited to add diverse.
Menu of oncology testing and the Molitika attack and knowledge solutions to our menu.
She has a has operations in Georgia.
And Florida, and they will add approximately 400 and unique test.
And our already expensive Ngls test menu yeah.
And you see as well.
Very strong relationship on the reimbursement from <unk>.
We opened our menu to car worth 160 million incremental covered lives across United States.
We brought a doctor Weiss on board to manage and oversee operations and.
We look forward to leverage and he has expertise in conjunction with our next generation sequencing platform and the best in class execution capabilities to scale, our price and in this market.
Otherwise, we'll discuss this opportunity in more detail shortly.
And another exciting announcement is the commercial partnership.
Agreement and the strategic investments, we have made in <unk> health and.
And emerging liquid biopsy company focus on early detection of cancer.
With this partnership we are gaining a foothold in the early detection liquid biopsy space in both.
And the U S and the China market.
We will maintain exclusive commercial rights who heroes.
Distribution in North America.
Which could translate into a very large opportunity for us going forward.
And finally, we announced today.
There have been <unk>.
Completing the acquisition of our.
Sure Jamie in China.
Taking majority ownership of the entity.
As discussed in the past this day, we gave us direct access to the large growth in genetics testing market in China.
With an established presence.
From the ground.
And the same operations excellence.
Our labs in the U S.
We are excited about this opportunity to expand our presence in China in the years ahead.
Alright, and what we're excited about this investment opportunities.
They are creating for fulgent in the post pandemic world.
Our value remained unchanged.
We continue to be disciplined.
Our spending and and remain focused on driving you've regionally and across our business, while delivering the best in class products and services to our customers and the partners.
Look before what are the future.
And in store.
Is that were turning over the call to start the wise too.
To further discuss our initiative on the molecular diagnostics and oncology from this recent investment of the west.
Thank you may I am very pleased to be here today and excited to be part of the expanding cogent G.
I joined Fulgent, because I saw what they were doing and mgs and Covid testing and was very impressed with their operational strength and expertise was no fluke as folger was able to pivot from a germline and G. S company to rapidly become among the leaders and Covid testing.
And when you combine folgers operational strengths with its leadership and Ngls and makes for a very powerful combination.
I believe that this combination will allow bolger to quickly transition to become a leader and somatic oncologic testing.
Somatic mutation testing is different from Germline testing and several aspects, but the processes are essentially the same and are those fulgent has already mastered.
I am excited to be taking ownership of the operations and integration of CSI labs into the full <unk> platform.
<unk> fulgent and anchor into cancer testing as it combines a strong platform of traditional cancer testing with superb customer service.
With this acquisition, we plan to leverage Csi's basis cancer testing and the access assessments to rapidly develop a west coast day to day, our cancer testing laboratory. This new lab will complement and CSI, South east location and quickly established and national presence for Fulgent Oncologic testing.
Paul.
I'm also very excited about the strategic partnership we announced with Yoyo help our relationship with Helio gives us.
Large markets for early cancer screening again, expanding folgers footprint and cancer testing.
My past experience at Neogenomics taught me and the value and providing a full range of testing options for oncologist combined with excellent customer service with.
And with CSI base of cancer testing, and Fulgent operational capabilities and expertise and N G S wheat.
We hope to differentiate ourselves relative to companies, who provide primarily ngls testing without expertise and other areas of oncologic testing as well as companies, who can provide a wide range of oncologic testing, but lack the focus and operational excellence necessary for providing optimal and G. S services.
And the acquisition of CSI Fulgent is well positioned to execute on our goal of developing a complete package of cancer testing solutions on a national level with particular expertise and Ngls combined with a superb customer experience.
I am very excited about this opportunity and look forward to developing folgers oncologic testing program and the years ahead.
I'll now turn the call over to Brandon for Hughes, our Chief Commercial Officer Brandon.
Thanks, Larry while the dramatic improvement and the pandemic led to lower than expected cost.
Especially in June.
And for our country to see progress and fighting the pandemic at the same time much of this progress is being threatened by the spread of the highly contagious Delta variant, while COVID-19 testing came in under expectations and the second quarter, our core business shattered records in terms of cases assertion and total revenue.
For us to be able to handle the incredible amount of COVID-19 testing volume that we have with no turnaround time or quality issues.
From New records for our core business really highlights the power of the folds and technology platform.
This is not something that could have been done with systems that were bolted together or off the shelf.
And this level of execution gives us tremendous confidence and our ability to continue to expand and play a role as a consolidator in this space.
The growth and our core business continues to be driven by clients taking advantage of our expanded test menu new opportunities created by more competitive pricing continued expansion of our commercial partnerships for both sequencing as a service and our core testing menu and COVID-19 genomic studies.
And the quarter, we had core business orders from over 400 unique institutions and many of these clients are not using fulgent for our full services rather some of our unique test. Therefore, we see this and there's significant opportunity for further client penetration and it will be a focus as we expand the sales team.
As Ming mentioned, we made our first ever acquisition with the purchase of CSI laboratories, CSI offers 400 unique test and molecular oncology flow cytometry fish and cytogenetics and histology. We believe the combination of Fulgent and CSI creates an industry first by being able to offer traditional cancer test and.
She has cancer tests, so that liquid biopsy and and Mardi hereditary cancer tests and comprehensive test menu for rare disease and adult genetics by.
By combining fulgent NGF cancer test with CSI testing platform, we become a true 1 stop shop for oncologists and pathologists from a commercial.
<unk> perspective, our focus will be on expanding <unk> reach beyond the southeast of the United States.
Our sales team, we plan to dramatically expand the sales team and build out our specialized oncology testing lab on the west coast to establish a national footprint for CSI, We believe CSI menu turnaround time quality and medical professionals combined with pools and technology platform operational excellence and presence and.
Houston and Los Angeles is poised to make a disruptive impact and this market, which historically has been dominated by only a few companies.
1 other area that the acquisition of CSI really benefits potent is with managed care contracts. We have only recently begun putting more emphasis on securing these contracts.
And has to be successful with institutions and other cash pay clients. However, our managed care team has been successful and expanding our coverage network and the acquisition of CSI brings our reach to over 180 million covered lives in network.
And this essentially opens a new market for Fulgent and we now have we now can more effectively sell into those accounts that require insurance billing be it hospitals private clinics obgyn maternal fetal medicine neurologists and many other sub specialties, our existing sales team now has many more clients to call on and as we onboard.
New sales team members and they will be able to sell it without the limitations of minimal insurance contracts.
In addition to the acquisition of CSI folds, and I've made a $20 million investment and Helio health and emerging liquid biopsy company for early cancer detection.
This investment gives full Jane and exclusive license to Helios commercial LTC products, which are currently in clinical development. The first product we plan to bring to market will be a liquid biopsy test for liver cancer.
This is a large market considering liver cancer is projected to be the third leading cause of cancer death by 2030. It is the sixth most commonly diagnosed cancer in the world and a fourth leading cause of cancer death and the world.
In addition, there has been a 1.5 fold increase in liver cancer and the United States over the last 15 years.
While the existing guidelines for surveillance of liver cancer recommend and ultrasound every 6 months ultrasounds lack the sensitivity and is dependent on the size and location of the lesion skill and training of the operator instrument quality BMI et cetera, We believe Helios new approach will be a paradigm shift and the way liver cancer is diagnosed.
<unk> and monitored.
Multiple studies have confirmed the survival benefit of liver cancer screening and cirrhotic populations and surveillance is associated with improved and early detection and receipt of curative therapy and overall survival.
We will be working diligently to bring this exciting new tests and market with an initial launch goal of later this year.
In addition to our launch effort Helio has and ongoing clinical study and the United States.
Patients of which 800 and have been completed in our goal of having these data to submit to the FDA and the coming quarters.
In addition to liver cancer, Fulgent and Hulio will develop early cancer screening other cancers, including using Helios methylation based technologies to further expand our capabilities and liquid biopsy and oncology testing.
Switching to COVID-19 testing decrease from the highs we saw in the first quarter. However, it is still a very meaningful revenue contributor to <unk> and we continue to secure meaningful wins and.
Along these lines, we are excited to announce that folds. It was chosen to continue testing for New York City schools for the fall semester. This decision came after New York City put the fall semester. It out for competitive bid. We believe our web based platforms turnaround time quality and medical staffing all contributed to the decision we are honored to be chosen and look forward to.
Doing our part to keep New York City School safe in.
In addition to New York City schools, we are securing meaningful wins on the west coast and southeast related to back to school testing.
We have also seen some states mandate testing for health care and government workers, which are also significant opportunities for fulgent.
While we saw a significant improvement and COVID-19 during the second quarter.
Still much uncertainty, especially around the rapid emergence of the Delta variant.
As of August 6th the 7 day average of new cases, and the United States was 106000 compared to 55001 year ago, and a daily New cases recently had been as high as 168000, which is equivalent to the November time period and in recent weeks, we have seen a significant increase and our <unk>.
<unk> volume and positivity rate across our customer base.
During the second quarter, we saw positivity rates dip as low as <unk>, 5%, However, and the recent days, we have seen that as high as 8%. We are monitoring the situation as closely as we can and we expect COVID-19 testing to remain a meaningful part of our revenue for the remainder of 2021.
We look forward to helping local and state agencies colleges K through 12 schools and companies with testing, where we can as well as contribute contributing meaningfully to the cdc's efforts to track and monitor variance with genomic testing.
It continues to be a dynamic time at Fulgent and we're very excited about the trajectory of our business with CSI and Hulio transactions complete we have dramatically broadened the footprint and addressable market of full jet and we look forward to continuing to invest resources to expand our capabilities and fuel long term growth and success.
I'll now turn the call over to Paul Kim Our Chief Financial Officer Paul.
Thanks, Brandon revenue and the second quarter totaled $154 million and increase of 790% compared to the second quarter of 2020 and.
And billable tests in the quarter totaled almost $1.6 million growing almost 9 times the volume of Q2 last year.
The majority of this revenue was related to covenant.
Anthem, and our core business, our core revenue, which we previously called <unk> revenue was up 296% year over year and 54%.
And then.
Meg and Brandon mentioned, we were disappointed that our overall revenue came in below our expectations and this was due to rapid vaccinations and drop off and demand and drive thru sites, particularly in California.
Demand for Covid testing has been volatile and as a result, we have.
And generally taken a conservative stance on future revenue expectations from Teva testing with a drop in Q2 was more drastic than we anticipated that being said, we have invested significant time and resources laying out the foundation for a successful post COVID-19 growth opportunity through bringing on senior talent investment and <unk>.
M&A and we're well on our way of achieving this goal.
ASP and the second quarter was $99 and slightly higher than the 95, we saw in the first quarter, while our ASP.
And it's largely remained stable over the last few quarters. The modest increase is due to the increasing mix of.
Core test that we saw in the quarter cost per test and the quarter was $23 slightly higher than the first quarter due to the increased mix of Ngls testing.
Gross margin ticked down slightly and the quarter to 76, 7% compared to Q1 as expected given the lighter volume and shop.
Moving over to operating expenses total GAAP operating expenses were $18.9 million and the second quarter up from $18.4 million and the first quarter non-GAAP operating expenses totaled $16 million down from $16.1 million last quarter.
Our operating expenses increased primarily due to investments and strategic headcount across our organization as well as an increase and legal and accounting costs associated with our M&A activity non-GAAP operating margin declined <unk> 8 percentage points from the first quarter to 66, 7%.
Adjusted EBITDA for the second quarter was $105 million compared to $4.3 million and the second quarter of 2020.
On a non-GAAP basis, and excluding equity based compensation expense and income for the quarter was $78.7 million or $2.55 per share based on 38 million weighted average diluted shares outstanding This takes into account and a tax effect, our stock based compensation and the quarter.
Now turning over to the balance sheet, we ended the quarter with 777 million and cash cash equivalents in marketable securities.
We generated $76.1 million of cash from operations during the quarter fueling our cash balance.
Cash balance includes the impact from our investment and the Helio, which was $20 million and Q2, and our investment and the China, JV, which was $19 million. This does not yet include the impact of the CSI acquisition, which could be up to $60 million and cash and.
And which also closed in early August.
Now moving onto our outlook, we are making a small change into how we discuss revenue guidance due to the moving parts were taken into consideration, including the dynamic curve of testing landscape, our acquisition and CSI and the consolidation of our China JV.
We will be breaking out our guidance by Covid and core revenue.
And the future with core reflecting what we previously called Ngls revenue, what's the assertion of CSI contribution.
Our Covid revenue includes all revenue from RT, PCR testing, including picture at home Covid tests are core revenues.
<unk>, our traditional <unk> business contribution from our China JV contribution from CSI and our revenues from our Ngls Covid tests.
While these revenue segments haven't really changed.
Or reflects.
Better reflects our non Covid business, given the addition of CSI and Helio.
Starting with covered revenue as we discussed we saw a sharper than expected decline and testing volume in Q2 due to rapid vaccinations and lower demand from drive thru sites. We expect the volume will continue to decline through the balance of the year. However, the proliferation of a delta variant has created additional moving parts.
Duration for our guidance.
We have seen test volume trend higher with new cases, whilst the governmental agencies and scores are seeking more regular testing and met a more uncertain environment and.
We also believe that ongoing assessment of vaccine effectiveness could drive incremental testing.
With that we expect Covid revenues.
For the year will be at $690 million down slightly from our previous guidance of $730 million.
This reduction of $40 million is essentially due to our Q2 shortfall and we believe testing volumes in Q3, and Q4 are still on track to meet the expectations, we set last quarter.
Moving onto our core revenue guidance, which is brokered and 2 for Ngls.
Covid Ngls and the impact from CSI, we expect our core NGF business will be strong as we continue to build momentum with customers and capitalize on investments and recent key hires we expect core Ngls revenues, while total $80 million up from approximately $70 million and our <unk>.
Previous guidance.
Or COVID-19 Ngls revenues from the CDC, we are lowering our guidance from 15 million to $30 million.
Though we are optimistic about this contrast, it appears volume is largely predicated on positivity rates, which fell to a record low during the quarter. This situation with Covid and the Delta variant is obviously very fluid.
As such we're taking a very conservative view as it relates to revenue from the CDC contract.
And finally, we anticipate CSI will contribute approximately $15 million of revenues for the remaining part of 2021 altogether. We expect our total core revenues will it be a $110 million for the year.
What the $690 million and covered revenues combined with a $110 million of core revenue. We expect revenues will be approximately $800 million for the year down slightly from our previous guidance of $830 million.
From a profitability standpoint, we continue to expect to show ongoing leverage and our business, which drops to the bottom line and price cash flow generation.
We continue to rely on our foundational technology for operating our business, which has produced superior growth and operating margin, we still anticipate that to be the case, though those percentages will likely be slightly lower as we get more active and M&A hiring and internal investments.
As such for the full year of 2021, utilizing a 27% tax rate and a share count of $31 million. We expect net income to be approximately $387 million or to $12.50 per share for our shareholders excluding stock based compensation.
This EPS estimate is unchanged from our previous guidance from Q1, even though with us lowering our revenue estimate by $30 million to $800 million.
And the third quarter, specifically, we expect total revenue in the range of $125 million to $150 million with core revenue growing to approximately 32 million and COVID-19 revenues to be in the range of $93 million to $118 million.
We hope the detail we're providing today is helpful and it reflects the confidence we have and our outlook for the year and we have posted slides on our Investor relations website that outlines our guidance and detailed.
This quarter has once again proven the viability of our business model and the power of our technology platform given the ability to drive nearly $100 million of cash flow and a single quarter. In addition, we have demonstrated our ability to execute on strategic initiatives through M&A with our investments and China, Helio and CSI, all which should.
Their immediate fruit from a strategic perspective, we intend to get bolder and more active in M&A and the future and are evaluating a range of <unk>.
And companies and technologies, we feel very good about our positioning as we expand our platform to drive sustainable growth and the post Covid World. Operator, you may now open it up for questions.
To signal for a question. Please press star 1 on your telephone keypad also if you are using a speaker phone. Please make sure that your mute button is turned off to allow your signal to reach our equipment. Once again. It is star 1 at this time for questions and we'll pause to give everyone the opportunity to signal.
Okay.
We'll take our first question from Kevin.
With Oppenheimer.
Yes.
Hey, guys. Thanks for taking my questions, maybe just 3 from me and <unk>.
And Si and.
Interesting transaction, maybe you can talk a little bit about <unk>.
Buy versus build.
And for those assets and seamless apps.
And our capability that might have been able to T cell towers and household.
Perhaps some more quickly through M&A.
Paul I think you highlighted.
Continuously high interest and M&A.
And you maybe you can frame for us a little bit in terms of how we should think about focusing.
Is it primarily oncology are you interested kind of broadly outside of oncology.
Any perspective, there and then just with regard to reimbursement, which I think is maybe 1 of the more interesting topics for today, how do you sort of average share CSI.
<unk>.
Infrastructure for reimbursement to gain.
Perhaps broader reimbursement footprint for some of the and gas.
Testing and thank you.
Yeah, Thank you Kevin and for the questions.
I think we're probably cover in more like the <unk>.
And what level of strategic level.
We do believe with the cancer diagnostics it is a big market.
And is $80 billion market.
<unk> genetics has been.
And as a market in the only represented in the.
Germline testing market.
We do have our capabilities and in liquid biopsy.
Whether we're.
Melezitose diagnostics.
So by adding the CSI and.
And the Helio cohort.
2 together.
Dave will food and genetics.
Pretty broad coverage in the cancer diagnosis space.
From the early cancer detection market.
2 the germ line, so the solid tumor to them, meaning and move these user.
And so this is a $80 billion of market and.
This is a much much larger than the cogent genetics initially.
And at the IPO focuses on the rare disease and market where another missing.
The dismissed.
Rare disease market.
We are clearly want to be a major player.
In the cancer diagnosis and market with other assets with otherwise the ethylene and more Florida.
So as you heard our intention is to get involved and the cancer market.
And we have intention of developing our own laboratory on the West coast.
The acquisition of CSI really jumps jumpstarts, our entry into the cancer market.
First of all they have a base of clients and they already have and extensive test menu and areas such as immuno histochemistry.
Low fish and cytogenetics, and we're going to emulate that on the west coast, even more importantly for the West Coast lab they have.
Specimen access assessments that is very hard to find when you're just starting out and our laboratory.
I didn't have a base of the sales team that we are going to dramatically expand and the future. So.
Although I think we could have done these things without CSI CSI clearly gives us a huge jumpstart into being a major player and the cancer business.
Yeah, Kevin and Brian and I'll, just add a little bit there, so which is really goes to your third question.
Why do we buy versus build.
In addition to what Larry detailed buildup.
Building would have been much more difficult, especially as it relates to the managed care contracts and reimbursement. So I think Larry spot on it is a quick way for us and entered the market we address the insurance and network issue by buying versus building. In addition, we're highly confident.
We can expand that business.
They have a wonderful business and.
And it's been very.
Very successful they have and amazing customer base.
But it's a little bit geographically hum.
Focused with a small sales team and we think with a national presence and a much larger sales team.
And in a big way, so I think for those reasons justifies sort of our buy versus build a thought process.
I think a come and adding the total was and Brendan's comments.
In addition, we do believe with forging genetics.
So technology, we could.
Significantly improve the <unk> operations efficiency.
It is a profitable.
<unk> business.
With our technology insertion.
And.
Technology combination, we will significantly improve the bottom line.
Yeah and.
Kevin If you just won't work through the rest of your question. So your second question was on M&A, you know, we specifically focus on oncology or a more broad area. I mean, obviously oncology is of particular interest to US you can see by the moves we've made that said no. Our M&A strategy is going to be broad, it's going to be broad, it's going to be bold and it's going to be aggressive and <unk>.
First we are looking forward to deploying this capital and continue.
Continuing to leverage the technology platform to bolt on tuck and these acquisitions and a meaningful way, but if you want to add any comments there.
Great. Thank you Kevin.
Yes.
Moving on and we'll go to Steven Mah with Piper Sandler.
Yeah.
Hey, guys. Thanks for taking the questions.
I got a question on Helio.
Helio.
The commercial exclusivity is that going to cover all of their <unk>.
And not just liver because my understanding is they're also developing.
Test for colorectal cancer breast and lung.
Yeah, Steven I think.
It is a word or go to the questions I think we've taken by the steps we are going to helpful Helio, who commercialize that day.
It works sensor tester.
So we already studying taking.
Action, but it definitely is a mass solution technology and that they are biomarkers of force.
And liver.
Colin.
And and.
And the long so they are they are slightly different.
We do have with the opportunity to adding and the more test in.
In the coming quarters.
Okay got it and does this year.
And does your partnership with Helio and your investment.
Could you talk about the potential for launching.
These tests through your China, JV, and no liver cancer and lung cancer, a big problem in China.
Is there some way to leverage your China, JV with helium, yes, yes us.
And it is the words of the question ask you Helios and independent study.
Our liver cancer test that you China.
This was slightly ahead of the U S. We do expect the true.
China and lunch will be sooner than the U S launch.
Okay.
And your year over your exclusivity is just for U S testing or is it also for China testing for.
For commercialization.
Exclusive Timothy powers in the in the.
North American which is both the U S and Canada.
And whether in China or be jointly.
Working together.
<unk> genetics will provide to our laboratory services and the Helio Helios that already.
In the process of finalizing is.
See FDA approval processes for is the newer cancer test is a slightly different cancer tests and use them D. P. C. R.
And you assume the methylation and in the U S.
Both technology and will be available.
For both China and the U S.
Okay, So in China, and some more of a color collaboration and then okay.
Yes.
Okay got it.
Okay and then.
Maybe a question for Larry and I'll, let Larry and welcome welcome to the team.
Thank you.
Could you could you let us know.
What percent of CSI revenue.
As molecular that can be migrated over to Fulgent Ngls.
Platform because.
And I understanding of CSI, and and I might be a little outdated as yes, they were mostly.
More traditional and non molecular tests like immunohistochemistry fish side.
Cytogenetics and flow. So maybe just give me give me a sense of the potential synergies.
It was Fulton.
Yeah, Steve and I will cover a little bit.
<unk> currently offers some.
Genetic testing, but theres all sorts of true third party.
With this.
The transaction.
I will be directed all used to.
Current director <unk> genetics that hasnt to forging side.
And it really windows CSI as a as a standalone units they have been not much of promoting too much.
For the liquid biopsy and genetic testing.
But with this combination we do plan to accelerate the process and.
And also make digital true.
Transition.
From the pathology transition that they are becomes a more modern and.
And.
More margin.
Digital pathology.
Yes being stated.
CSI is basically a traditional pathology provider its assets.
And even as chemistry flow.
<unk> genetics and fish, they do a fair amount of single gene testing.
But there are <unk> outsourced and presence that's why we think this is such a complementary acquisition because we at Fulgent and provide the Ngls and the molecular testing and really supplement.
CSI strengths.
So we see as a win win win for CSI and a win for Fulgent, historically, CSI and client base has been with pathologists, but when we provide the molecular background and I'd say I think we can see a large expansion into and oncology customer base as well.
And.
Yes. This is.
Paul we intend to put our fall resources behind this acquisition of CSI and we also would not be surprised if that business grew and a considerable way.
We took a look and a lot of different companies.
This is the 1 that we like very very much from a philosophical standpoint.
They happen and operations for you and a longer timeframe that we have we took a look at the quality of our customers the flow of the samples.
And our offering.
And just kind of the way the business was structured I mean, unlike other smaller businesses. They don't lose money. So a lot of things line up with US I think the piece that they weren't lacking because they have they were private and <unk>.
While our company and.
And being able to tap into the resources to get the capital that can really move.
Move that business and a meaningful way.
Meg and Larry and brand and talked about the reasons why and the synergies and.
And it's our intention to fully capitalize on this asset and to grow that business.
Okay, great Yeah. Thanks for all that color and then maybe if I could just squeeze in 1 last 1.
Do you have any sense for the back half of the year upcoming flu season, you know there's been we've been hearing some.
RSV popping up and the southern hemisphere and and.
And in addition to that could you give us a sense of if youre going to be developing a combination test for our broader respiratory panel that includes I know you guys have flu, a and b plus COVID-19, but developing a panel that includes RSV as well.
Hey, Stephen it's Brandon.
Hey, Thanks for the question Stephens Brandon we are we're gonna be developed and what we call a full respiratory pathogen panel.
Thank you have somewhere around 20 to 30 or so respiratory pathogen. So yes. It would cover COVID-19, and we cover flu a b RSV and many other respiratory pathogens. This will be delivered on the same automation and the same equipment. The same robotic liquid handling of their COVID-19 test. So it's something that we can ski.
<unk> tremendously and continue to take advantage of the what we believe to be best and cost cost best in class cost structure of our PCR based assays, so for and answer we are.
Okay, great. Thank you.
Yes. Thank you for the questions and next we'll go to Katy <unk> with credit Suisse.
Hi, Thanks for taking my question.
Just on some of the return to work and return to school testing them and can you just speak maybe a little bit further to outside of the New York.
School system, how you can participate there and what extent are those conversations actually progressing we've heard that.
There may be progressing a little bit slower than previously anticipated, but just and in recent weeks with the Delta variant is that starting to pick up and and how should we think about the implications for you for the back half of the year there.
<unk>.
Yeah, Hey, Katie and thank you Brendan.
We're not revising the back half of the year Covid guidance range Q to Q3 and Q4, we're maintaining our guidance. So I think that says something to the strength of the opportunities. We see outside of New York, We're seeing very meaningful progress opportunities and the southeast specifically, the Texas, Louisiana area, Florida.
And as well as some schools coming online and the Midwest and then on the West Coast, We're seeing many back to school and opportunities. So we think our experience in New York.
And is.
It is incredible we've done a lot of testing and New York and we've done a very good job and that's a large school district and the United States. So these other school districts.
They lean on that they look to that experience, we've had and we can show how when and at an incredibly successful program. We've run up there. So I fully believe we're going to be continuing.
With back to school testing and a big way.
And I think Covid testing is going to be very meaningful in the back half of the year.
Okay, Great and then Steven please.
<unk> talked quite a bit about some of your other investments and helio and CSI, but just curious on the FSD and biotech JV I know you mentioned your intention to investor further last quarter, but just curious if you could provide maybe a little bit more insight on how that.
And that JV has performed since you initially invested.
Which I know was quite some time ago as well as how it's performed more recently like in the second quarter.
Yeah. Katy this is Paul that's an excellent question, so I'm going to take.
Piece of that and I'm going to be turning it over to men, who can give you.
Okay.
And based strategic and the market reasons on why we took controlling interest of that so during this quarter and Q2.
We already booked $2 million of topline genetic testing revenues from China.
As a result of that consolidation and.
And we believe.
And.
Second half of the year, we'll be able to required anywhere from $5 million to $10 million of additional business from that.
And from that from that China market, but I'll turn it over to name who can comment on the thought process on why we test the controlling interest the potential market size and China.
Sure.
As well as the product and service offerings that we intend to.
Put out in the marketplace.
Yes Katy.
As you may recall, we used to own around 30%.
This JV.
And the.
Structure and.
So back to 4 years ago.
Really the hour function was providing our technologies and the products and led.
Our partner mainly interest.
The sales and marketing.
And.
Running the operations.
As we see the more and more <unk>.
Demand is coming from China in terms of oncology women's health a rare disease.
Thanks.
And the better for <unk> to put more of our.
Our focus in the China market.
So we have discussed with lower.
Pardon me.
Willing to <unk>, the control and we start and taken over the operations, we have put our focus.
And the growth requirement.
The current management team and then we're also adding the more of the.
Our.
New newly record.
So exactly for the operation.
Including the handling the our relationships in the Helios operations in China, We do see is that.
We're or compared to the market.
Is that a quarterly and market.
And those those churning day market, but we do see the demand.
Is there and.
A lot of opportunity for us to expand and growth of the market.
Okay, that's great. Thanks.
And this concludes today's call. Thank you for your participation you may now disconnect.
Thank you.
Okay.