Q1 2022 iSpecimen Inc Earnings Call

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Okay.

Good day, everyone and welcome to ice specimens first quarter 2022 conference calls.

At this time participants are in a listen only mode.

Question and answer session will follow management's remarks.

This conference is being recorded.

A replay of today's call will be available on the Investor Relations section of ice specimens website and will remain posted there for the next 30 days.

I will now hand, the call over to Allison Soss Investor Relations for introductions and the reading of the Safe Harbor statement. Please go ahead.

Thank you operator, good morning, everyone and welcome to <unk>.

First quarter 2022 results conference call with US on today's call are Christopher <unk>, Chief Executive Officer, and President JC poorly Chief Financial Officer, and Joe <unk>, Chief operating officer before we begin I would like to remind you that today's call contains certain forward looking statements from or manage that Nathan.

And then the meaning of section 27, a of the Securities Act of 1933 as amended and section 21 E of the Securities and Exchange Act of 934 as amended concerning future events.

Words, such as May should the jacks expects intends plans believes anticipates well.

Nick and variations of such words and similar expressions are intended to identify forward looking statements.

These statements are subject to numerous conditions, many of which are beyond the control of the company.

Pruning those set forth in the risk factors section of the company's Form 10-K for the year ended December 31 2021 five.

Filed with the SEC.

Copies of this document.

Are available on the SEC's website at Www dot.

<unk> Dot Gov.

Actual results may differ materially from those expressed or implied by such forward looking statements. The company undertakes no obligation to update these statements.

Or changes after the date of this call except as required by law now it is my pleasure to introduce Chris sorry, Natalie.

And president.

Chris. Please go ahead.

Thank you Allison and good morning, everyone and thank you for joining us today on our first quarter 2022 earnings conference call.

I'm excited to provide you with an update on our progress following.

Three completed quarters of operation as a public company with me, our Tracy Curley, our Chief Financial Officer, and Jim Mullen, Our Chief operating officer.

I'll begin by providing an overview of our operational performance followed by a review by Tracy of our financial performance. During the three months ended March 31 2022.

Following that we will open the line to take your questions.

Q1 was another exciting quarter for the company marked by a tremendous amount of activity and a few challenges the latter of which stems predominantly from the military conflict between Ukraine, and Russia, and the resulting geopolitical unrest.

Starting with our operational highlights.

As we have discussed on our prior calls following our initial public offering last June management has been intensely focused on expanding the capabilities of the ice persimmon marketplace platform accelerating the growth and utilization of our global supply chain and invigorating revenue growth for long term value.

I'll cover each of these separately starting with the work being done on our marketplace platform.

I'm pleased to let you know that several weeks ago, we announced a new release of the ice persimmon marketplace. This was the culmination of planning and work that began in the second half of last year.

It's important to stress that this update was the first of a series of updates we plan to release each aimed at delivering incremental get foundational improvements to our software platform that align with our long term strategy.

As we have discussed on prior calls our unique marketplace platform is a critical component of our business model and strategy to capture market share by deep fragmenting and automating a historically inefficient process by which valuable bio specimens are sourced and procured.

This latest software release includes new data integration capabilities to further grow and federate, our supply chain, such as automated data ingestion tools and data harmonization tools.

These new tools improve the ability of Biobanks and health care providers to add and maintain vials persimmon inventories to our platform <unk>.

Additionally, this release includes a redesigned easy to use interface for researchers to directly search for desired samples and ice persimmon is provider network by it and intuitive Google like search bar with support for additional search criteria.

These search capabilities have now been extended to our suppliers, enabling them to better manage their bio banking operations as well.

We are confident that the enhanced die specimen marketplace will better support our research clients needs for critical research specimens across the world and make it easier for our suppliers and customers to transact, resulting in increased new client interest and revenue opportunities.

In parallel to this first round of work on our software platform.

I'm also pleased to announce that we have moved forward into a significant data sharing arrangement with a major nationally recognized cancer Center.

Through this partnership we have begun ingesting large sets of deep clinical data that will ultimately be utilized by the marketplace platform to identify patient encounters many of which may serve as a source for prospective bio specimen collections.

We are actively pursuing other data sharing deals like this as part of our plan to accelerate and scale our ability to conduct the highly specific prospective bio specimen collections that represent a growing proportion of our business.

On the personnel side as we continue to advance our unique platform and approach we saw an opportunity to bring on another outstanding leader to the organization.

With this call we are happy to announce the addition of <unk> to the ice persimmon team as Vice President and the new head of product management.

Kevin comes to us from definitive healthcare and brings with him a deep understanding of the markets relevant to our value proposition and a set of experiences that align perfectly with those investments.

We are fortunate to have Evan on the teams working side by side with our CIO <unk> and the head of our growing engineering team Madhu Valerie.

It's important to stress the critical role that technology plays in our marketplace platform approach towards persimmon sourcing and procurement as well as our long term strategy we.

We are pleased with the progress we have made to date and the traction we are getting on this front and plan to continue investing in product design data engineering and software development throughout the year.

Rest assured we will continue to aggressively qualify and monitor these investments and these allocations of capital to maximize their return and long term value to the company.

We look forward to providing you with additional updates throughout the year, highlighting new capabilities to support the growing data needs of the research community. The development of workflow automation tools to streamline the procurement process and solutions that make it even easier for our health care provider partners to support the demand for prospective collections.

Turning now to the progress we've made with our supplier network.

Q1, we successfully expanded our geographic footprint securing new suppliers in countries that includes the United States, Estonia, Turkey, India and Venezuela. These.

These new supplier relationships helped expand the capabilities of our bio specimen network by providing us access to specimens such as sequence COVID-19 samples.

<unk> array of oncology bio fluids in tissues, and both fresh and cryo preserved hematopoietic cell products among others.

As part of this expansion, we added <unk> diagnostics clinical diagnostics laboratory.

<unk> platform is a services provider.

Throughout our relationship with the Cumulus diagnostics specimen.

Im sorry through our relationship with acute as diagnostics ice persimmon now offer sequencing services to its research clients assisting them with the genetic characterization of a wide variety of bio specimens to better assess the impact of specific mutations on diseases, such as COVID-19 and cancer.

Combined these efforts have allowed us to surpass 200 health care provider organizations and the ice persimmon marketplace supplier network ending the quarter Q1, we had 205 unique supplier organizations under agreement at ice Persimmon.

The growth of our supplier network was mirrored by similar growth in our customer base during the quarter again measured by the number of unique organizations that are procured specimens from my assessment.

As of March 31 of this year, we had successfully fulfilled <unk> orders for a total of 437 unique customer organizations and increase of 25% from the 349 during the same period last year.

These new organizations consisted primarily of commercial biotechnology pharmaceutical and diagnostic companies.

It also included some universities not for profit research centers and a number of government agencies.

Measuring the number of both supply side and customer side users that interacted with the ice specimen marketplace platform. During the first quarter of 2022. We are pleased to report an increase of nearly 35% and thats compared to the same period, one year earlier Q1 2021.

Taken together, we continue to form an increasingly solid base of customers and suppliers all connected by our marketplace technology.

We're confident that our investment in this technology platform will result in a return to growth later this year.

Additionally, we expect the recent investments that have been made to bolster our field sales force, which has essentially doubled in size over the past quarter will also have a material impact on revenue growth in the second half of the year.

These additional sales personnel are mid ramped or starting to ramp and will give us more complete coverage of territories and improved penetration of new accounts throughout the rest of the year.

Next turning to the challenges we encountered during the first quarter the first quarter.

The pandemic continues to pose some lingering issues for us on the supply side, some health care providers in our network continued to face intermittent constraints relating to regional COVID-19 outbreaks in their areas during Q1.

While we are now in a period of relatively low COVID-19 transmission and our health care provider sites are mostly open we do remain guarded about additional COVID-19 outbreaks that could disrupt our supply chain on.

On the customer side, we continue to transition from Covid related specimen requests dominating the order flow, meaning the heterogeneity of our order flow from customers continues to improve as the pandemic subsides.

We believe that our customer base is now on the tail end of their post COVID-19 ramp up back to a level of research activity and particularly preclinical research activity that existed pre pandemic Trey.

Tracey will provide more details around COVID-19 related revenue in her comments shortly.

Additionally in significantly during the first quarter, we experienced a sudden shutdown of our supply network in both Ukraine, and Russia due to the military conflict and the ensuing unrest.

While this affected approximately $1 million in open purchase orders, we demonstrated operational resiliency and flexibility by successfully transitioning the majority of both feasibility assessments and the majority of scheduled <unk> specimen collections to suppliers in other regions, which is a testament to our business model and the global reach of our network.

However, these unexpected supply site closures did have an adverse effect on revenue for the first quarter.

For Q1, 2022, we reported revenue of approximately $2 5 million.

Compared to approximately $3 million for Q1 of 2021.

This diminution in revenue was primarily attributable to the Ukrainian and Russian conflict and while we moved most open orders to suppliers outside of the region.

Fulfillment and revenue capture were delayed and are expected to take place throughout the remainder of 2022.

Despite this setback during the quarter, we remain extremely confident that the execution of our strategy along with our investments in technology and key personnel, especially the sales force will continue to.

Improve our position to gain additional market share over the coming quarters.

With that I'll now pass the call onto Tracy currently who will review our financial results Tracy.

Thank you, Chris and good morning, everyone.

I'll be reviewing our financial results for the first quarter of 2022 compared to the same period in 2021 for the first quarter of 2022, we reported approximately $2 $5 million in revenue.

<unk> to approximately $3 million during the same period last year a decrease in revenue was primarily attributable to the Russia and Ukraine conflict with shutdown supply sites in those region, along with a reduction in sales of COVID-19 specimens when compared to the prior year.

Heterogeneity, our diversity of our R&M Mark as the heterogeneity of our order.

Nick's returns we continue to experience declines in COVID-19 revenue for the first quarter of 2022, our COVID-19 revenue was approximately $479000 compared to approximately $682000.

For the same quarter in the prior year a.

$203000 or 30% decrease in COVID-19 revenue.

We anticipate that our COVID-19 revenue will continue to decline.

Not have specific guidance on the decline due to the uncertainty of the continued impact of COVID-19.

Thanks.

The question of the session during the first quarter of 2022.

Directly impacted by the Russia, and Ukraine conflict, which resulted in a decrease of approximately 1267 specimens are 20% to approximately 4924 assessments compared to approximately 6191 specimens that session.

Same quarter in the prior year.

A positive note there was a change in mix that resulted in an increase in the average selling price per specimen of approximately $10 or 2% compared to the same period in the prior year.

Cost of revenue decreased by approximately $458000 or 28% from approximately $1 6 million for the first quarter of 2021 to approximately $1 2 million for the first quarter of 2022.

Which was attributable to an 11% decrease in the average cost per specimen as well as a decrease of 20% and specimens of session for the current period compared to the same period in the prior year.

For the first quarter of 2022, we increased our cash spend for technology to approximately $600000 from $389000 for the same period last year. The increase in spend for the first quarter of 2022 compared to the same period in the prior year.

Directly related to our commitment to invest in our technology.

As evidenced by our recent launch of our enhanced <unk> marketplace platform for.

For the first quarter of 2022 cash outlay, let's come.

Price of approximately $339000 of capitalized internally developed software and approximately $261000 of technology expense that we were not able to capitalize and their power with capitalized with classified as technology expense the remainder of.

<unk> expense for the first quarter of 2022 was comprised of approximately $266000 of noncash amortization related to internally developed software total technology expense for the first quarter of 2022 with approximately $528000.

For the first quarter of 2022 sales and marketing expenses were approximately $747000 compared to approximately $529000. During the same period last year.

Increase was attributable to increases in payroll and related expenses external marketing efforts and general operating expenses for the first quarter of 2022 general and administrative expenses were approximately $1 $8 million.

Payer to approximately $916000 during the same period last year. The increase was primarily attributable to an increase in costs related to compensation stock compensation.

<unk> directors and officers insurance and operating and maintenance expenses.

As of March 31, 2022, our cash balance was approximately $26 $1 million compared to approximately $27 7 million as of December 31, 2021 based on an expected quarterly cash burn rate of approximately $1 $5 million 2 million.

For the foreseeable future we have a very long runway ahead of US. This concludes our prepared remarks, and now I would like to open the call for questions. Operator. Please go ahead.

Thank you.

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Our next question is from the line of Matt Hewitt with Craig Hallum Capital Group. Please go ahead.

Good morning, and thank you for taking the questions maybe first off regarding the.

Roughly $1 million in orders.

They were impacted by the Russia and Ukraine.

Situation.

I am wondering.

Is there any way to kind of help us with the cadence of those a little bit I mean, I think you said that it would be reflected or recognize over the remainder of the year, but.

Well the bulk of that be hitting in any particular quarter.

No. So when we looked at those orders and we reallocated them to new sites collection rates vary.

When we originally had them allocate it to the Ukrainian site. So it turns out we will be collecting the bulk of that over the next three quarters, and it's pretty evenly spread out.

And it's hard to project Matt. This is Chris that was Jill answering the first part it's hard to project because as we scrambled to move those orders, which we successfully did for the majority of them, we had to get into other queues and it's not as though those other sites could immediately drop the other stuff that they were doing and move to these so it's going to be really difficult to predict.

Where the bolus of those orders come out in the next quarter. So it is safest to say, they're going to spread out over the year.

That makes sense and obviously.

Yeah.

He is highlighting your abilities and the breadth of your platform. So I guess congratulations on that front.

Maybe shifting gears a little bit regarding.

The data initiative some of the changes obviously, congratulations on getting that first update out.

As you look at the platform today.

Think about the next update or in the next couple of updates what other areas of data.

Do you believe could add the greatest value to your platform.

So it's going to continue to be deep clinical datasets for a period of time and I would say that because what's most valuable is to be able to gain as much visibility into the <unk> phenotype or the characteristics of patients from whom our customers want those samples so for the foreseeable few.

Our intense focus is going to be on reaching more deeply into the electronic medical record.

To gain access to not only the sorts of datasets that we've been getting historically that describe the samples that exists in the pathology lab clinical lab or a biobank, but now trying to get those deep phenotypes, meaning do you want to have deeper diagnosis data you want to have information on how these patients are treated how they may have responded or not responded to those treats.

<unk> social history information like smoking status drinking family history that information is becoming increasingly important in our customer base for two reasons one when they go to select the sample.

We would source for them from a pathology lab clinical lab or a biobank, meaning an environment with a sample already exists they want to qualify that sample for selection and shipment to them by understanding these deeper attributes of the patients.

More so than they have in the past, but the second reason why it's important is because with precision medicine really picking up and we've been in a world of precision medicines for some time now.

Requests that we're getting are increasingly specific not only in terms of the patients that collections needs to be done from but the way that those samples are collected and we are seeing an increase and we've seen this for a while a steady increase in the number of prospective collections that are being requested of us meaning what is being asked for by the.

Customer.

Cannot be satisfied by a sample and elaborate already exists we have to have information about where the patient with those characteristics is and where they are likely to have an encounter with the health care systems. So that they can be approached informed consent can be gathered and we can do that collection. So it's deep data sets to really help with both arms.

<unk>.

Of collection that we currently run I don't know if Joe has anything to add to that.

No I think thats pretty complete.

That's very helpful. Thank you and maybe one more and I'll hop back in the queue, but I think you mentioned Tracy that the ESP actually during the quarter increased roughly 2% year on year.

How much of that is related to COVID-19 as you're seeing this shift back to I guess.

<unk> sample collection versus primarily Covid.

Last year and the year before and then how much of it is the newer samples that are coming with this greater dataset.

Just require or come with a higher ASP.

And kind of let Jill answer that because she is closer to the mix.

Of our assessment.

Yes, so when I when I looked at the mix of assessments, we saw as a slight increase in the overall percentage of the <unk> that we received that were based upon research use only prospective collections and typically those custom collections, where as Chris mentioned, we have to go out find the patient approach them consent them.

And get a sample from them have a higher price point than say something like a clinical remnant sample. So as our mix continues to shift more towards those higher value sample you typically will say that price increase.

The Covid effect the Covid part of it is a lot of the Covid request that we had gotten certainly in the early days of Covid and throughout last year, or two where clinical remnant samples. So those lower value samples and so as the COVID-19 mix shifts.

Out of our overall mix and these other samples increase as a percentage of the overall samples I would expect you would continue to see increased overall asps.

Yes.

Yes, as I say it may be lumpy on a quarter by quarter basis, because it really depends upon the projects, but overall if you look at our history is that has happened the asps have gone up.

That makes sense. Thank you. Thank you very much.

Thanks, Matt.

Our next question is from the line of Constantine Dvds with Jeff Hutton. Please go ahead.

Thanks, Good morning, Chris.

You highlighted how much cash you have on the balance sheet and.

Obviously.

Industry valuations lately or are under some pressure and I was just wondering.

That change.

The rising cost of capital does that change your mindset in terms of looking for assets on.

On the acquisition front and maybe you can just help us understand.

To the extent you are looking for assets to bring in house, what what are the criteria of some of the properties with target.

Yeah. So it certainly does the macro environment that we now find ourselves in along with everybody else in the valuations that are being.

Assigned by the market certainly does change our attitude towards M&A cash is king right now, but we are continuing to look and be very selective in what we look at.

We have not announced or made public what those criteria are.

I'll sum it up by saying we are going to be very opportunistic I think.

A number of the competitors in our space are going to be feeling the sting from what may be a recessionary environment that we enter into but certainly a pullback given what's happening in the market. So we will be looking for very opportunistic opportunities for us to go in and bring in assets that can bolster our supply side and give us deeper and better access to that.

Powers our platform.

But also it gives us access to the customer base that some of those competitors may be.

Certainly in addition to looking at look alikes to ice persimmon in the sense that we're looking at low tech competitors, where we can be opportunistic. We're also looking at opportunities, where we can start to get into.

New offerings that are very related.

I don't want to say tangential because theyre very adjacent to what we do know and providing access to primary patient material, meaning primary tissue biological.

Biological samples, but there is an opportunity for us to add value to what we currently do not only would we be able. One example of this would be not only getting access to the right patient and the right sample whether its a bio fluid or a piece of tissue from that patient, but being able to separate different cell types and then sell isolated.

Cell types from that tissue and Thats something that were looking at because.

We have access to such a large network and access to so many different types of tissue and we can start to create some inventory around very specialized cell types that we know are in demand in the market and Pat of sites being one of them. So that gives you a little clue as to some of the things that we're using to qualify these.

These potential targets for M&A or partnership things that we can be opportunistic and things that we can sensibly extend our offerings to our customer base given that we have their attention on the platform and with our sales force.

The economic parameters financial parameters around which we would qualify these opportunities we have not yet disclosed that and I don't think I'm ready to do it on this call, but that will be coming out as we make more progress.

Do you feel like Youre far enough along in some of these discussions that we.

That's absolutely clear transaction this year or is it more of a 2023 of them.

Yes.

Yes.

I would shutter constituting to say to tell you what's going to happen. This year, because there's so much uncertainty in the market and we do want to hold onto cash and see the value of that so.

I would say unlikely this year and much more likely in next 2023 and subsequent years.

Alright, thank you.

Yes.

I show no further questions in the queue at this time I will turn the call over to Mr. Christopher <unk>, CEO and president for closing remarks.

Okay.

Alright, Thank you operator, I'd like to thank everybody again for joining us on today's call and for your continued interest and investment we look forward to having follow up conversations with many of you and seeing many of you at upcoming events. So with that thank you and everyone have a great day.

Right.

That does conclude the conference call for today.

Thank you for your participation and ask that you. Please disconnect your lines.

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