Q2 2022 Fulgent Genetics Inc Earnings Call
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Okay.
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Please standby good day and welcome to the Q2 2022 Oh, Thank genetics earnings conference call cause a reminder, today's call is being recorded.
This time I would like to turn a corporate over to Nicole port.
Sir Please go ahead ma'am.
Great. Thanks, Good afternoon, and welcome to the Fulton Genetics second quarter 2022 financial results conference call on the call today are being shaped Chief Executive Officer, Paul Kim Chief Financial Officer, Dr. Larry Weiss, Chief Medical Officer, Brendan purpose, Chief commercial officer, the company's press release discussing its financial results is available.
In the Investor Relations section of the company's website Fulgent genetics Dot com an 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 statements. These forward looking statements represent managements.
Based on current views and assumptions, which may prove to be incorrect.
As a result matters discussed in any forward looking statements are subject to risks uncertainties and changes in circumstances that may cause actual results to differ from those described in 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 in expectation.
The nurse 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 them.
The company's actual future results may be materially different in what is described in or implied by these forward looking statements.
Please review the more detailed discussions related to these forward looking statements, including the discussions are some risk factors that may cause results to differ from those described in forward looking statements contained in the company's filings with the Securities and Exchange Commission, including the previously filed 10-K for the year ended December 31st 2021, which is a bit.
<unk> on 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 the United States or GAAP management has presented these non-GAAP financial measures because it believes they 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 results prepared in accordance with GAAP. Please see the company's press release discussing its financial results for the second quarter of 2022 for more information, including the description of how the company calculates non-GAAP income and income per share and a reconciliation of these financial measures to income and income per share the most directly comparable GAAP.
She measures with that I'd now like to turn the call over to me.
Thank you very much Joe good afternoon.
Thank you for joining our call today to discuss our second quarter 2022 results.
We had the word good quarter as well.
Continue to focus on execution and the pool of our core business.
I will cover some highlights.
From the quarter before turning the call over our Chief commercial Officer Brendan.
To discuss this product.
And the go to market update.
Then Dr. Larry Weiss.
<unk> updated our CSI expansion strategy.
And finally, Paul will cover our financial results and the outlook in detail.
Taking a look at our second quarter total revenue of $125 million was in line with our guidance.
However, all for ones that you our core business offset some softness in COVID-19 revenue.
Which we view as a net positive.
<unk> were to over $1 3 million tests in the quarter.
About 14% compared to Q2 of last year.
The decline in the test volume and revenue is directly tied to the slowdown in COVID-19 testing.
<unk>.
Came down materially relative to Q1, and the Hi Inn.
Of 2021.
Paul will cover the breakout between our core and our COVID-19 business in more detail.
But at a high level, our core business will grow over 100% year over year to 45.
Ahead of our guidance of over $40 million.
We continue to drive positive EBITDA and cash flow.
We expect our increasing investments.
<unk> generated 37 per share and GAAP EPS.
One one.
<unk> 1 million in operating cash flow in the quarter.
The second quarter was marked by a successful acquisition of <unk> agnostic, which closed in late April our.
Our team has been working diligently on a smooth integration of <unk> and also businesses into <unk> platform.
Brendan will cover this transition in more detail.
We are pleased with the early momentum we are seeing across the business.
The platform will help build with <unk>.
Diagnostics and the CSI marks a unique suited to deliver a full suite of genomic testing capabilities to our biopharma clients. We have been building. This is sequencing as a service businesses over the last few years and we see meaningful opportunity.
To continue expanding.
Our operation in the years ahead.
Part of this effort we brought.
Dr <unk>.
Qunar Waller from Neogenomics.
<unk> run tier pharma services Division.
We are excited to welcome Gina to the <unk> team.
Continue to have great momentum.
Tracking top industry talent to cogent as we further build our capabilities and the footprint as the one.
One stop genomic testing platform.
To that end.
We're also pleased to announce the appointment with two new members to our board of directors Dr.
Dr. Michael <unk> and the darker Leo not post joined our board as of August 1st 2022.
<unk> is a highly respected scientists with extensive operational and R&D experience in both <unk>.
<unk> and the new drug discovery.
Coupled with a strong background in corporate strategy.
<unk> role as CSO of January the medicine.
He has a whereas the roles of increasing responsibility at Amgen, where ultimately oversaw a four building R&D budget across multiple divisions.
<unk> policy is team therapeutics industry veteran who has how the board and advisory positions at multiple privately held.
Across the genetics and therapeutic industry.
The addition of Dr <unk> and the Tulsa pose to our board with a cigarette.
Our relationships across the pharmaceutical and biotech industry.
Proved to be were available to us.
We expanded differed into the therapeutics opportunities in future.
Their commitment to <unk> is also a testament to the industry's increasing recognition of forging.
We expect the contender in the genomics testing landscape.
As we continue build up on genomic testing capabilities to offer more comprehensive suite of services.
For customers, we also recognize the ability to apply our learnings and expertise in Ngls and the genomics to the therapeutics industry, we've seen a number of opportunities to drove better treatment and the patient outcomes leveraging combination of our advanced.
Testing capabilities, and Biopharma relationships, which have continued to expand in recent quarters with.
We look forward to share more of this initiative in the <unk>.
Quarters ahead.
Overall, I'm very proud of business that we have built.
And our teams ability to opportunities.
Execute to X and our businesses during the time that others in the injuries are facing challenges and apparent impact on operations.
We have a consistent run <unk> with a focus on efficiency.
And recent volatile thoughtful investment and.
And this strategy has paid off meaningfully through the COVID-19 pandemic.
Our philosophy has not changed.
And we plan to drive long term growth.
Profitability, leveraging our differentiated technology platform.
We are excited by the opportunity that lay ahead for cogent.
I will now turn over the call to brand and <unk>, our chief commercial officer.
Thanks Ming during the second quarter, we continued to execute on our post COVID-19 strategy of becoming a national one stop shop for conditions across a wide variety of specialties, including oncologists Hematologists pathologist pediatricians neurologists reproductive help clinicians and more.
We have also taken big steps to expand our sales team and capabilities around pharma services historically referred to as our sequencing as a service business, which has been an impressive growth driver for us over the past couple of years.
Starting first with our recent acquisition of informed diagnostics. The integration is going well and nearing full completion, we've right sized the company and tap into synergies across the organization, including leadership at <unk>.
<unk> and operations.
We have also launched multiple projects to leverage commercial synergies and cross selling capabilities, including marketing adult neuro genetics to the vast virology client base and inform diagnostic and selling helio liver to our Gi client base.
We have additional services, we will be launching that will be targeted at the large national inform diagnostics client base.
In regards to the sales team and go to market. We have identified multiple expansion territories were informed diagnostics has not had a historical sales present, but has all the right managed care contracts to be successful.
We're actively recruiting these positions and plan to fill them in the third quarter.
Leveraging test menu teens and technology from our recent acquisitions, we are excited to announce the formal launch of <unk> oncology.
By combining the power of our recent strategic acquisition of CSI Laboratory and inform diagnostics, along with our <unk> technology and World Class Bioinformatics team. This new division will be focused on penetrating the dynamic market a precision medicine.
We have assembled the initial sales team recruiting oncology experienced oncology sales executives.
Along with an experienced industry commercial leader with a proven track record of success Paddy Murphy patio.
Paddy I spent most of her career in the oncology division of one of the largest national labs in the United States and brings with her a wealth of industry knowledge.
Larry will discuss our <unk> oncology product launches momentarily.
We're also excited to announce that we are investing in our pharma services division as we intend to be the Goto lab for pharma for all of their laboratory research and clinical trial needs.
Both the offers a breadth.
Okay.
Including our complete NGF offering as well as other cutting edge technologies, such as our proteomics and spatial genomics that serve a wide range of therapeutic research areas, including cardiovascular immunology and neuroscience.
With our recent acquisition of <unk> diagnostics in our new state of the art cap CLIA lab no market, California.
We intend to round out our oncology offering with customized testing services across all platforms, which include multiplex immuno fluorescence and image analysis services.
Alongside our ability to provide technology for research. We can also offer pathways for customers seeking FDA approval of the companion diagnostic on any modality from immunohistochemistry stains to an NGF panel.
With the clinical offering a full <unk>, we believe our ability to take products from early stage development to commercialization will be an exciting offering through our pharma services clients.
Switching to helio liver the soft launch is going quite well and we have now onboard over 75, new clients and we continue to build a robust funnel of new opportunities.
We announced in early July that the AMA has issued a new category one proprietary laboratory analysis CBT codes for helio liver, enabling a reimbursement pathway for potential increased access and broader adoption of innovative surveillance tests for liver cancer in the United States.
The code will be effective starting October one 2022.
With our much expanded expertise and market access.
We will begin to approach payers with a technical outcome and healthcare economic data, we have gathered to show helio liver to be a very important test in a detection and fight of liver cancer.
We're also happy to announce that the primary enrollment in a client study is wrapping up this month climbs a 600 patient prospective clinical trial designed to evaluate the performance of helio liver in ultrasound using gold standard multi phasic MRI as a clinical truth.
Study take all comers, who are at high risk to hepatic cellular carcinoma due to liver cirrhosis.
Climate designed to be the gold standard in clinical evidence to support the clinical performance of Helio liver.
To our knowledge a large scale prospective study such as this has not been completed and the liver cancer diagnostic space as most of the studies are case controlled.
While we are while we feel we are making executing on our go to market strategy. We have identified some challenges slowing market adoption.
One of these challenges has been accessed the phlebotomist and patient draw centers. However, we have just executed a collaboration with quest diagnostics and patients will now be able to have their blood drawn they're patient service centers across the United States.
Another issue was the lack of a CPT code, which has now been addressed.
While we have been using the unlisted molecular pathology codes. This co create extra work for everyone and we hope the new CPT code makes this process easier for customers and drive faster adoption.
The Florida sales team continues to expand and is much larger and diverse than ever before with a broader geographic footprint and deeper expertise across different areas of genomics. We currently sit at 47 individuals across the United States with approximately 10 open positions.
We have been able to recruit some amazing talent that we believe will contribute meaningfully to our growth for years to come.
Switching to infectious disease.
Our COVID-19 volume is trending down we continue to process a meaningful number of tests.
Additionally, we are pleased to announce that we have been awarded a new contract from New York City Health and hospitals for search testing Covid.
COVID-19 testing demand its hard to predict but should there be a need in the fall we will be ready to help New York City the.
The remainder of our COVID-19 business is running well and volumes will be tied to the overall positivity rate number of cases and demand for screening.
We announced this morning, we are launching a PCR test for the detection of Monkey pox.
We are pleased to further demonstrate our operational excellence with this launch, bringing new products to market rapidly, especially in the face of health crises.
While demand is hard to predict we want our clients to know, especially our large county clients that we have a test available in.
In addition, antiviral medication for monkey passes available however, clinicians want to see a positive report before prescribing. Thus the test is used in some manner as a companion diagnostic.
We will stay in close contact with our clients on this new health crisis and update our investment community as needed.
Okay.
Our Chief Medical Officer, Dr. Larry Weiss Larry.
Thanks, Brandon we have made exciting progress in our oncology initiative on a number of fronts first we can declare our CSI integration accomplished in a complete success you may recall that we acquired.
<unk> and our first serious move into oncology diagnostics.
CSI was a major regional player in the pathology oncology space with a great reputation for high service levels, what was not really growing with the integration into <unk> platform. CSI is now set on a path of becoming a formidable player on a national basis, we've injected new capital and expanded the sales team S geographic reach.
<unk> again, leveraging CSI service excellence and we are successfully attracting new clients. We've also been very pleased with the contributions that the CSI team has made to our integrated business.
We have an extremely talented team across our employee base and we have been less leveraging these individuals to help manage the more recent acquisition of informed diagnostics.
With the CSI integration essentially complete we are turning our attention and resources to the integration of informed diagnostics leveraging a similar playbook inform diagnostics expands our opportunity within our client base opening up new cross selling avenues, expanding our footprint in oncology testing with their.
<unk> oncology business line and enhancing our interest in digital pathology.
We believe as others do the digital pathology has the potential to transform the practice of anatomic pathology.
We are in the early stages of the integration, but we have already identified numerous opportunities for cost synergies and other opportunities to to upgrade their technology and systems. For example, we are placing their eight color flow cytometry, which state of the art 10 color flow capabilities.
As Brandon mentioned, we are excited to announce the launch of Fulgent oncology, including a suite of oncology specialty testing products under the <unk> brand name Loom mirror.
Our flagship profile luminary XP mgs for solid tumor a powerful profile of 523 genes encompassing both DNA and RNA methodologies and including MSI and TMT gene signatures will provide first second and third line therapy guidance as well as clinical.
Miles in immunotherapy eligibility guidance.
And this assay can be easily combined with an extensive menu of immunohistochemistry assays, such as PDL, one or her two testing as well as appropriate fish studies by combining multiple testing disciplines and expert pathology review and the power of NPS technology with AI driven analytics.
We aim to revolutionize the term personalized diagnostics.
<unk> suite of products will soon include a complete suite of hematopoietic allergy services, including a powerful heene mgs profile, a best in class Cte DNA liquid biopsy for solid tumor assay release as well as HRD testing for PARP inhibitor eligibility among other specialty assays and profiles.
<unk> told you in oncology aim is to become the premier boutique single source provider for laboratory for oncology special specialty testing in the community oncology space will mirror XP Mgs for solid tumor was launched in July 2022, and the law Merit comprehensive hematology.
<unk> will follow very shortly we anticipate additional product launches under the <unk> brand in Q4 2022.
I will now turn the call over to our Chief Financial Officer, Paul Kim Paul Thanks, Larry revenue in the second quarter totaled $125 million compared to $154 million in the second quarter of 2021 in line with our overall guidance of approximately $125 million as Meg mentioned.
While our core testing business continued to moderate which we view as a net positive and in line with our long term strategy billable tests in the quarter totaled $1 3 million compared to $1 6 million in Q2 of last year the year over year decline was again due to COVID-19 testing dynamics.
Going down revenue.
Further roughly $80 million came from COVID-19 testing in Q2 compared to our guidance of $85 million revenue from our acquired business totaled $45 million, which exceeded our guidance of $40 million and grew 102% year over year. As a reminder, our core revenue includes our Ngls business.
<unk> from our Chinese JV, CSI, and inform diagnostics and exclude mgs COVID-19 testing from the CDC as demand for covered PCR testing remains volatile and generally trending lower we continue to take a conservative stance on expected revenue from Covid testing, we remained focused on X.
<unk> on our post Covid.
Growth opportunities, which include the integration of <unk> diagnostics, expanding the reach of Csi's capabilities executing on additional investment and partnership opportunities ongoing work with Helio and joint.
Commercialization opportunities and growing the footprint from our China operations, our ASP in the second quarter was $94 slightly lower than the $99. We found the first quarter of 2022, our ASP has fluctuated along with a mix of kind of a casting and this quarter, we saw an outsized impact from.
Lower asp's on kind of a test due to pricing changes in the market cost per test in the quarter was $45 versus $24 in the first quarter of 2022 due to largely.
Shifting mix away from covered testing to more of our core testing, including testing from informed diagnostics as a reminder, our cost per test in our core portfolio is generally above $200. So October testing continues to decline in the average cost per test will increase to more normalized level.
<unk> for our core genetic testing portfolio gross margin was 52, 1% down 25 percentage points year over year and down 24 percentage points sequentially. The reduction in gross margin was again due to testing mix, including higher costs associated with our core genetic testing portfolio.
Including testing from inform diagnostics as a reference point gross margin in 2019, our last year before ramping cover testing was approximately 50% plus which is a more realistic long term target for our core business. We also are in the process of investing in our operations, while adjusting acquisition.
<unk> and plan to enhance automation and efficiency in our overall cost structure in the future.
Turning to operating expenses total GAAP operating expenses were $52 5 million in the second quarter up from $46 million in the first quarter of 2022, non-GAAP operating expenses totaled $37 1 million up from $35.
$6 million last quarter, our operating expenses increased mostly in G&A due to ongoing investments and strategic head count across our organization fees and services associated with our heightened M&A activity, including additional operating expenses under informed diagnostics non-GAAP operating margin deep.
<unk> 41 percentage points sequentially to 24, 3%, while the expense structure of our legacy Folgers business remains lean we have incurred a number of incremental expenses as part of our recent acquisitions as expected.
We have made significant investments in people infrastructure and operations to support our growth and these investments are putting pressure on our operating margins in the near term.
We remain confident that these investments will translate in to demonstrate all ROI and drive outsized future growth in our core business at the same time, we're pleased to.
We report our ability will still generate positive EBITDA and cash flow. During this transformative time for our business.
Adjusted EBITDA in the second quarter was $37 7 million compared to $105 million in the second quarter of 2021 on a non-GAAP basis, and excluding stock based compensation expense intangible asset amortization and restructuring cost and acquisition costs related.
Income for the quarter was.
Julian or <unk> 78.
<unk> per diluted share based on $31 2 million weighted average diluted shares outstanding turning to the balance sheet. We ended the second quarter with approximately 931.
And the marketable securities we generated $11 $1 million of cash from operations during the quarter. Despite the significant investments we made in our business during the quarter I would also like to highlight that we were active with our share purchase program in the second quarter, we repurchased over 215000 shares of our common stock.
For an aggregate cost of $10 6 million and an average price of $49.
<unk> under the stock repurchase program announced in March as of June 32020 to a total of approximately $239 4 million remains available for future repurchases of our common stock under the stock purchase program now moving onto our outlook for 2022.
Starting with covered revenue as demand for October testing continues to taper off we expect.
To see ongoing declines in our revenue from Covid testing our expectations for <unk> revenue for the full year remains unchanged. Despite the pressure on Teva test pricing, we expect approximately $480 million and tailored revenues for the year inclusive of the 375 million.
The rest of the year this breaks out into roughly.
$51 million to $54 million in each Q3, and Q4 clearly revenue from kind of a testing has been hard to predict in volte.
Volatile spikes and outbreaks that we remain prudent with our expectation for <unk> revenue contribution.
Moving onto our core revenue guidance, which will include contributions from informed diagnostics.
As the transaction closed on April 26, we expect core revenues will be approximately $185 million for 2022, representing growth of 99% year over year, which takes into account our performance we achieved in Q2 and factors and some conservatism.
Given the volatile macro environment with $480 million and covered revenue and $185 million and core revenue. We expect total revenues will be approximately $665 million for the year.
We expect there will be continued volatility with COVID-19 testing and remain focused on executing on our strategy to drive momentum in our core business from a profitability standpoint, we remain focused on investing in our business to drive sustainable long term growth that being said, we expect to see meaningful pressure on operator.
Margins in the quarters ahead, as we integrate further and invest resources in our recent acquisitions. In addition, our conservative assumption for Covid testing demand will result in lower gross and operating margins relative to the record high margins that we experienced during the Covid crisis long term our foundational technology.
<unk> supports a strong margin profile and we will continue to manage our spending with discretion to drive operating leverage.
Our full year 2022, utilizing a 28% tax rate and share count of $32 million. We expect net non-GAAP income of approximately $6 per share for our shareholders. Excluding stock based compensation amortization of intangible assets restructuring costs and acquisition costs related to inform diagnostics.
This is consistent with our non-GAAP income guidance provided on our last call. While the acquisition of <unk> diagnostics is accretive from an adjusted EBITDA standpoint on a standalone basis, we are anticipating heightened operating expenses due to integration costs associated with the transaction aggressive investments in our organic business such.
The build out of sales ramp on our west coast oncology lab as well as lower gross margins as a mix of Carlos has been decreases in the coming quarters for the third quarter of 2022, specifically, we expect total revenues of $105 million. This breaks down into core revenues of $54 million, representing a growth of 100.
1% year over year, and as I mentioned, we expect approximately $51 million in pilot testing with third quarter will Mark a notable milestone for Fulgent to where we expect core revenues will exceed current revenues for the first time since the early days of the pandemic. We will also be setting a bar for our core business at <unk>.
$200 million annual run rate going forward.
Our updated guidance is posted on slides.
On our Investor Relations website, which shows a detailed breakout I just discussed.
For joining the call today, operator, you may now open it up for questions.
Thank you.
I can ask a question. Please take note prior things are earned on your telephone keypad. If you are using a speaker phone. Please make sure. Your mute function is turned off to one of your signal to reach our equipment.
Again, ladies and gentlemen that is star one to ask a question.
And we'll pause for just a moment.
Okay.
Well take our first question from David <unk> with Piper Sandler.
Hi, guys. Thank you for taking my question and congrats on the.
Paul Gene oncology setting that up so we'll have some questions on that.
So let's start with the $45 million in core revenue that was a pretty big number I know you don't like to break out specifics in terms of.
Product mix, but is there any kind of.
Testing modality, you might want to call out is performing pretty well in the quarter that helped you get to that $45 million in core revenue.
Sure.
So as we indicated when we announced the farm acquisition.
We anticipated that the contribution on a quarterly basis from an <unk> would be approximately $22 $5 million per quarter. So when we take a look at the outperformance of acquired revenues that really has to do with.
The beginning of the momentum that we're seeing for our core business, which includes CSI CSI was a asset that we acquired over a year ago and what that the integration of that acquisition, we're really beginning to see the momentum building that.
That we have based on the investments that we've made and CSI combined with the investments that we've made here in the west coast.
Part of the momentum that we're seeing in our traditional <unk> business.
Groundwork that we have laid out with the elevated platform called.
Paul that genetics that is driving the momentum that we have into core revenues now in terms of the testing mix of our core business I'll turn it over to Larry and Brandon but.
It's obvious to say that the mix includes NGF.
Oncology and that includes both Ngls as well as molecular.
It also includes our sequencing as a service of the Biopharma business and it also includes the.
<unk> revenue contribution from <unk>.
Farm, Dx, which largely consists of Gi and derm.
Yes, I don't have a whole lot to add to that I mean, we have one of the largest testing menus in the United States. So it's good to have that diversification. So it's hard to pull out any particular area. That's outside the other but as Paul mentioned the assets, we've acquired and CSI inform diagnostics are meeting expectations.
Unfortunate oncology didn't contribute to the revenue growth in Q2, but we think it will going forward in a meaningful way.
I'll touch on our Biopharma businesses, but we've.
We've taken Ngls and we scaled it across multiple different markets and just overall the business continues to perform well. So we will continue to invest in sales and we'll continue to invest in technology platforms and hopefully continue on continuing momentum into the quarters ahead.
Thank you guys.
And then maybe you can talk about or if you can and I know, it's pretty tough because you've integrated these businesses and it is hard to tell what is organic and inorganic at this point because you probably are getting a lot of us revenue synergies, but I mean is there any during the frame about the the prior.
Bulge in business that.
And in terms of growth or.
More and more even if you maybe you can give some some access growth relative to what you thought it would be from some of the inorganic stuff in.
I know <unk> was probably flat at this point is it.
Are you tracking.
Gross out of it for example.
So David.
Definitely we see the Morgan timber from our war and Gis business as the wheat, adding the additional capabilities.
We do see the attraction for US a tool provides our war.
<unk> services to some of the core.
We'll see.
As our premium solutions provide the quick turnaround time.
The complex was services and those are the areas we see.
Organic growth meaningfully.
Got it okay.
Let's move on to Ted to folds in oncology that is that this is pretty exciting development for you guys.
I know you have the biggest.
Kind of menu are one of the biggest menu in the U S. But in terms of oncology I mean area are there any holes in the business and what I'm thinking about testing categories I'm going to cover the neogenomics for a little while so I kind of think of like the the flow the IH see the the cash the Ngls the PCR.
It is that you.
You have all of those parts of a comprehensive oncology business.
And I guess, well, we'll stop there and I'm going to ask kind of on the sales force how nationally.
In terms of handling the volumes.
Outside of regional but so, but I'll ask that exploration sorry.
Yes, we can check all those boxes that you mentioned.
For the West Coast Lab alone let alone that.
CSI on the East Coast also has similar technologies may be without the Ngls.
So we have all the technologies to provide a one stop shop or oncology services East Coast lab is concentrating on <unk>.
<unk> clientele and as previously discussed the West Coast lab is oriented towards oncologists as we're just starting out we're focusing on southern California.
But we are using this as a test model and plan to go.
Fully national in the near future.
Yes, I'll just add that we check all those boxes, we check all the boxes. You mentioned in addition, we have one of the largest hereditary cancer test menu in the United States. So we really think boards in oncology is something unique we think pieces of <unk> oncology exist with our competitors and peers, but if you look at all of our service offering layer on really.
Comprehensive hereditary cancer offerings, we think fully in oncology stands out amongst our peers.
Got it.
I'm going to stick with that okay. So you are keeping minute regional.
Do you think you picked the right region. I know you guys are in southern California yourself, but you think about I think about the existing structure of of that kind of lab and there was a clarient that was focus there there was a genoptix that was focus there.
Is that a high impacted market competitively and versus other parts of the country.
Well I mean, we've been live now for one or two weeks.
And I would say Larry.
The number of clients. We've won in the first one or two weeks is well ahead of our expectation.
So we think we picked a region, where we can take advantage of logistics turnaround time in this market is incredibly important.
Some of our first clients, we on boarded here recently, and we're delivering turnaround times and a 5% to six day range. When they were getting three four weeks from their previous lab. So.
Again. This is just sort of our beta region. This will be a national launch but.
So far I think commercially from an Onboarding perspective were well ahead of where we thought we would be we're seeing a lot of pent up demand David.
Got it that's great I am going to hop out of queue in case, there's any others and then I'll hop back in if there are no others.
Thank you and once again, if you would like to ask a question today you may do so by pressing star one.
Thank you have a follow up from.
David.
Berke.
Alright, alright, thank you guys.
And going back to the pharma services business.
You are setting up is this pharma services business is going to be mostly.
Complementary to the oncology side of the business and specifically focused on kind of the Fulton oncology business.
Not necessarily I mean, we think oncology is an important area.
As relationships right now span a wide variety of health care and clinical trials. So maybe we are.
They are particularly strong in oncology, but short answer is no. I mean, we are a multi ohmic approach now to our clients.
<unk> service and test menu as we've mentioned for our pharma services.
Proteomics spatial biology IAC flow.
So we're ready to tackle that market on Holistically.
Got it okay, great and then congrats on the on the Monkey pox assay.
Im looking at case numbers in the case numbers are still pretty low.
Is this actually a revenue.
Contributing assay or is this kind of just a good thing to do for kind of society as we don't really have that many good monkey testing options today.
So the answer is both there is a proposed rate for the new CPT code that would be favorable to <unk>. So certainly the revenue would be there, but we also want to help we realize that testing for monkey pox has been restricted.
A lot of options. There has been a few labs that have launched test and we spun this up pretty quickly did a good thorough validation, but with our technology and platform. We were able to get this going pretty quickly and we can leverage the the COVID-19 platform, we built from ordering and reporting.
Our barcode system, our drive throughs.
For this we will be able to respond in a big way.
Got it alright, well. Thank you. Thank you and then back to the some of that the capital deployment strategy and I guess the Scott.
Question for Paul.
You did do some stock buybacks is that kind of the direction youre going to take or you think youre going to take care for kind of the remainder of 'twenty, two or near term and then.
In terms of.
I know you do have commercial.
Commercial infrastructure that you're probably planning and my guess is is that if fulton oncology winds up being a very successful business youre, probably going to allocate money for a nationwide.
Okay.
Launch so anyway, if you can kind of tell me, how we should think about.
Capital appointment strategy in context of the things I just mentioned.
Yes.
Thanks, David.
I believe that.
When you have cash cushion and we have cash generation like Fulgent all your options are open.
That said stock buyback as one of the ways that we can indicate to the market value that we see in our equity but that is not the primary uses of our cash the primary use of our cash is first and foremost investing right into our core business to penetrate our core markets, even deeper and <unk>.
Later, and then I would say also the priority is to deploy the assets or technology has a lot of business acquisitions that can enhance our position.
Got it no that's fair.
Very helpful. And then my last question here is can you talk about COVID-19 testing by region.
And kind of what I'm getting at is is.
And I guess Covid testing is down all over but I mean, I think you mentioned.
In the past things like New York teachers.
Some of the stuff that's going on in Southern California is theyre still testing in those markets or is COVID-19 fatigue here.
Even those places.
Well, Dave I think I said on the call that we're still processing a meaningful number of test.
Paul laid out our Q3 and Q4 guidance for Covid.
So a lot of those programs are still running some of them are winding down some of them have winded down completely but as we've seen before as quickly as things wind down they wind back up so.
Is incredibly hard to predict all we can do is calibrate our operations.
<unk> adjusted is ups and downs.
And should there be ups in the fall, which some people.
Are predicting we will be ready to respond.
I don't know what more I can say beyond that.
Alright, Thank you guys.
Thank you.
Thank you Guillermo and that therefore.
Please proceed.
No.
Please go ahead. Thank you.
This disclaimer that everyone knows that there are no further questions at this time.
And I would like to conclude today's conference. We do appreciate everyone's participation you may now disconnect.
Thank you.
Hum.
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