Q2 2023 Predictive Oncology Inc Earnings Call

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Good day and thank you for standing by welcome to be predictive oncology Q2, 2023 earnings conference call. At this time, all participants are in a listen only mode.

After the speaker presentation, there'll be an opportunity to ask your questions.

Please be advised that today's conference is being recorded.

And I now would like to turn the conference over to your Speaker, Mr. Glenn Gourmand Investor Relations. Mr. Gar Mark. Please go ahead.

Welcome and thank you everyone for dialing into the predictive oncology second quarter 2023 earnings call first you'll hear from our Chief Executive Officer, and Chairman of the Board Raymond Minority then our Chief Financial Officer, Bob Myers will review our financials finally, Dr. Pamela Bush, our chief business Officer will join Ray.

And Bob to answer any questions that you may have.

Certain matters discussed on this call contain forward looking statements. These forward looking statements reflect our current expectations and projections about future events and are subject to substantial risks uncertainties and assumptions about our operations and the investments we make all statements other than statements of historical facts included in this call regarding our strategy.

<unk> future operations future financial position future revenue and financial performance projected costs prospects plans and objectives of management.

Our forward looking statements. The words anticipate believe estimate expect intend may plan would target and similar expressions are intended to identify forward looking statements. Although not all forward looking statements contain these identifying words, our actual performance future performance may materially.

Differ from that contemplated by the forward looking statements as a result of a variety of factors, including among other things factors discussed under the heading risk factors in our filings with the SEC.

Except as expressly required by law the company disclaims any intent or obligation to update these forward looking statements and now I'd like to turn the call over to Raymond minority Chief Executive Officer Raymond.

Thank you Glenn and good afternoon, everyone.

During the second quarter of this year, we continued to make significant progress in growing our pipeline with biotech and biopharma companies as well as research institutions looking to incorporate artificial intelligence and machine learning.

They're early drug discovery process.

The importance of our differentiating pedal platform, which includes.

Our vast proprietary biobank of more than 150000, heterogeneous tumor samples and more than 200000 pathology side.

Combined with our CLIA certified lab is.

It's beginning to resonate in the market.

We are the only AI powered company capable of predicting clinical success.

In the very early stages of drug discovery and supporting those predictions that actual in silicone modeling and bench level of experimentation.

This is only possible because we are able to introduce the human element of heterogeneity far earlier in the drug discovery process.

Essentially looking five years into the future of drug development and advance of clinical trials.

And I have mentioned before and for those familiar with our company.

The word heterogeneous is a key descriptor for predictive oncology.

Even though many patients who are diagnosed with the same type of cancer each of those tumors respond differently to a particular cancer therapy.

Each tumor and every response is unique.

Understanding drug response.

Heterogeneous population is invaluable along the entire continuum of drug discovery true drug development.

Our unique combination of assets and capabilities offered as drug developers.

A multifaceted value proposition that includes first the <unk>.

Mitigation clinical risk at the most critical stage of drug discovery.

Second by identifying and validating drug targets sooner and thereby avoiding unnecessary trials that are likely to fail later in development.

Potential exists not only to significantly reduce the cost of drug discovery, but potentially to expand the drug development pipeline.

And third.

By accelerating early stage discovery.

Plantation pipeline at optimizing clinical development.

The commercial life of each drug under patent exclusivity.

And it and expand it.

Clearly the emergence of AI, it's fundamentally changing how drugs are discovered and subsequently developed.

And we are at the forefront of this exciting transformation.

It is well known and generally accepted that approximately 95% of drug candidates are never approved.

But with predictive oncology capabilities, our partners essentially have the ability to look into the future of drug response.

Confidently anticipate clinical validation with much lower financial risk and therefore, a much greater likelihood of commercial success.

The global artificial intelligence into drug discovery market was valued at $1 $1 billion U S. In 2022.

And it is expected to expand at a compound annual growth rate.

29, 6% from 2023 to 2030.

The growing demand for the discovery and development of novel drug therapies.

A fresh approach to drug Repurposing.

And they need to replenish product pipeline as patents expire.

Are the driving force behind this market growth.

Again.

With our highly differentiated portfolio of assets and capabilities. We believe that we are incredibly well positioned to occupy a leadership position.

In this emerging field.

This year for the first time we.

We had a very notable presence.

At the 2023 Bio International Convention, which was held in Boston in June .

Bio which stands for biotechnology innovation organization is among the most widely attended industry conferences in the world dedicated to partnering and business development within the life Science.

Okay.

During the conference.

Our chief business Officer.

Pamela Bush was invited to deliver a presentation on the importance of addressing patient heterogeneity in drug discovery.

The advantage of introducing active machine learning into that process, which as I. Just mentioned is a key differentiator for us and.

Important component of the lab experiments that support or refute the predictions that come from pedal.

Also during the conference we met with more than 30 customer prospects. Several quick chip by two substantive ongoing discussions.

Annual conferences like bio are critical to raising awareness of predictive oncology and unique value that we can deliver to our customers.

And we will certainly be participating in additional industry related events in the future.

For example since style.

We are in active negotiations with a key European player and the formulation space.

Out license, our proprietary rapid formulation technology for use in a proscribed territory, which effectively would expand our reach into western Europe .

Those discussions are ongoing and a term sheet is now being drafted.

Again for the benefit of those who made the newswires story.

At the core of our offering is our pedal platform.

As we have said before pedal is comprised of several interim related components.

The application of artificial intelligence as a tool.

That is directed by rigorous scientific experimentation conducted in our own laboratory.

Which is informed by the most significant resource at our disposal.

Which is a biobank of more than 150000 tumor samples.

And the drug response data.

From those samples.

These three things comprised the pedal platform.

This spring to our core machine learning core.

Which means computational research engine.

Which is a key differentiator.

While artificial intelligence refers to the programming of a wide range of human tasks machine learning fundamentally it's the ability to make predictions.

Just on data.

And the data that were feeding into core.

These data that our scientist provide as a result of scientific experimentation.

Conducted in our laboratory and informed by our vast biobank of tumor samples.

We conduct laboratory experiments.

Validate in silicone analyses.

Or just prove the viability of drug compounds scientifically not yet statistically.

This is our value proposition. This is what sets us apart from all other AI drug discovery company.

As the term machine learning implies.

The more data that we see into the system the more accurate predictions become over time.

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Alidade embarrass side.

Hello can predict with 92% accuracy.

Whether a tumor sample responds with certain drug compound or not.

And in so doing.

Pedal can inform the selection of drug tumor combinations or subsequent in vitro testing and facilitating go no go decisions before investing in costly and time consuming later stage in vivo human trials.

Last quarter, we spent a fair amount of time, describing our recent contract successes, including the U K cancer Research Horizons, which is appreciated C. R. H.

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So again.

And in take rate therapeutics.

E. R. H is the world's largest private funder of cancer research with a network of 4000, researchers and an annual budget of more than $370 million U S.

They have provided significant funding.

That has resulted in the launch of 11 cancer therapies currently on the market.

And.

Provide critical support for an additional 160 compounds.

That are in clinical development.

Our partnership with cheaper journey.

We'll leverage pedal to develop the first effort genomics based approach to precision radiation therapy, utilizing artificial intelligence to identify where developed novel or repurposed radio protective or radio sensitizing drugs or therapeutic compounds.

There are at least three path for commercialization first.

Screening for interaction between patient tumor samples and therapeutic compounds.

Second the identification and development of a novel or repurposed radio protected or radio sensitizing drug.

And third the screening of individuals where radiation sensitivity and personalized response.

Therapeutic compounds.

In addition to existing contracts with biotech and Biopharma companies.

Addictive oncology and flew Gen are collaborating on a next generation vaccine related to respiratory diseases for which a phase II B grant.

It's been submitted to the U N.

H.

And finally.

We are working with Integra therapeutics, and very well respected leader in the development of next generation gene writing tools.

To advance gene therapies.

We are currently preparing to scale up expression of their novel gene delivery protein, which.

If successful with secure a contract for the ongoing production of that protein.

I highlight these contract again.

Just to demonstrate that our offering is resonating quite clearly in the market, but also to illustrate the many ways in which our capability can be incorporated and very disparate clinical development processes.

As I mentioned earlier, we have a very robust business development effort in place.

And I believe.

We will be announcing additional collaborations in the coming months, including new or expanded contracts with CRH.

It is worth repeating that hurdle.

Federal drug discovery contract has significant value.

But the sales cycle can be lengthy.

To complement these efforts we also have a very active biologics business. We're in formulation development. Its tolerability cutting are provided and by which we are compensated by our pharmaceutical development partners on a fee for service basis.

This is relevant because <unk>.

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Antibody to end time hormone treatments, the number and frequency of protein therapeutics brought to market has increased dramatically.

But for these therapies to be effective.

An optimal dose of those parakeets must be properly circulated deliberate and absorbed in the body.

Not unlike the efficiently predictive accuracy of the pedal platform for drug discovery, our biologics capabilities enable us to effectively streamline and accelerate.

The formulation process.

Identify alternative and potentially more viable formulation.

And amplify the amount of protein actually being produced.

I point this out because our company is well positioned to generate near term formulations revenue in support of building a pipeline of milestone driven pedal contract.

I would now like to address some rather noteworthy additions to our newly formed business Advisory Board.

Beginning with Doctor Bernard a areas junior Dr.

Dr. Harris brings a wealth of clinical business and operational health care expertise to our business Advisory Board.

Currently served as Chief Executive Officer, and managing partner of for Celiac debentures adventure.

Venture capital firm that supports and invest in early to mid stage healthcare company.

It's also the founder and serves as Chief Executive Officer, and director of the Harris Institute and Foundation, a nonprofit organization shared socially and economically disadvantaged communities striving to reach the most underserved populations in the areas education health and wealth.

Dr. Harris serves on several boards, including Raytheon technologies.

U S physical therapy.

Mass mutual life insurance company.

And the Texas Medical Center.

Yes, it's a very diverse and distinguished background, including many years as an astronaut.

Surfing on multiple space shuttle missions and being recognized as the first African American to walk in space.

We also announced the addition of biopharmaceutical finance veteran.

Andrew Einhorn to our business Advisory Board.

Mr Einhorn consults or Dan fourth advisors.

An agency with deep institutional knowledge of the business of life Sciences from strategy through execution.

He provides financial advisory services to public and privately held companies and we.

With appointed interim Chief Financial Officer of cognition Therapeutics in August 2022.

Previously.

Mr. Einhorn served as Chief financial Officer of R. E L Pharmaceuticals.

Formerly known as <unk>.

Edge therapeutics.

And was co founder and CFO of Oceana Therapeutics, Esprit pharma and ESP farms.

As our momentum continues to accelerate.

The business advisory boards insights expertise and perspectives will be invaluable in our efforts to deliver unique solutions to our drug development partners.

Creating lasting value for our shareholders.

We will continue to look for outstanding candidates to add to the diversity.

Backgrounds and perspectives we were.

Seeking to round out our business Advisory Board.

Before turning the call over to Bob to review the financials.

I want to close with our recent announcements.

We have moved our corporate headquarters from Eagan, Minnesota to Pittsburgh, Pennsylvania.

Pittsburgh is a global lifestyle says research and technology hub.

And the location of our main laboratory facility.

With this move Pittsburgh is now the epicenter of our company's center for artificial intelligence and clinical operations further strengthening our commitment to scientific discovery and growth.

At this point I will turn the call over to Bob Myers, our CFO .

Bob.

Thank you Ronald.

We ended the second quarter 2023, with cash and cash equivalents of $14 $8 million.

$22 $1 million as of December 31, 22.

In Boston, we have one 8 million outstanding warrants.

Represent an additional source of capital.

We have no debt so our balance sheet is very strong.

As of June 32023, stockholders' equity stood at $14 7 million as compared to 20 point $21.8 million.

At December 31, 2022.

We recorded second quarter 2023 revenue of $490110.

As compared to $371591.

Second quarter of 2022.

Our gross margin in our second quarter, 2023 was 67% as compared to 64% for the <unk>.

Second quarter of 2022.

Operating expenses were just under $1 million in the second quarter of 2023 as compared to $900000 for the second quarter of 2022.

Net cash used in operation activities were $7 million for the first half of 2023.

Compared to $6 $4 million.

The comparable period in 2022.

Net cash used in investing activities was $23 million for the first half of 2023.

Which was consistent with the comparable period in 2022.

That concludes our financial summary, we can find additional details on our April obtaining our earnings press release as well as our 10-Q, which is on file with the SEC and also available on our website.

So with that I'm going to turn the call over to the operator for Q&A.

And as a reminder, factor Pamela Bush, our chief business Officer.

Also available for this segment of the call.

Yeah.

Thank you we will now be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad.

Confirmation tone will indicate your line is in the question queue.

You May press Star two if you would.

Like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys, one moment, please while we poll for questions.

Thank you our first question comes from Michael broadband.

Private Investor. Please proceed with your question.

Hey, Ryan Bob.

First of all recall.

Wanted to ask the same question I've asked a couple of the others.

Given the trajectory of the company.

The increase in expenses.

Obviously, theres a lot of things still in place so.

What is their new timeline that the company will achieve at least a breakeven on operations because of that.

The cash burn still has to be worried about a potential.

Offering even though the warrants are still there.

A second part to that question is do the warrants.

At what price would they be exercisable.

Given that there is a raise necessary in the next year.

Bob.

You want to take that or do you want me to.

Be glad to ratings.

Hey, Michael how are you.

Okay, great. Thanks, guys.

Good good so to answer your question.

Our expenses are in terms of burn are still rolling along at about a one to 1112.

We had $18 $5 million in the bank at the end of March 31st and we're sitting with about 14 eight and at.

At the end of June so that that rate is pretty consistent.

Our solid certainly for moving ahead over the next year and any anticipation in forecasted revenue that we believe will be coming in and.

And let's take it that way rather than let's say cash from deals that we have already recognized the statements from the cash that we may earn from some of these deals.

We will certainly assist in mint.

Maintaining our rod.

In terms of the warrants right now the lowest priced wine $14.

And as you know we were at $4 70, something today to in terms of price.

So.

But there's a lot we can do with the warrants and there's also as you said, there's always a potential below arrays, but at Raymond and I as always.

Very honest can say to the shareholders that we're going to try to do everything we can to not do another raise and to try to bring our cash flow works up.

<unk> revenue in the business, we do continually and that is already.

And Michael I would add to that.

We are obviously scrubbing the budget.

There are a couple of ways that we're going to address this one is.

In order for us to extend the runway we have to reduce the cash burn. So we're certainly looking at that the balance of course is to take advantage of these opportunities are in front of us.

We have to spend money to do that so we win some of these contracts need to hire people and get some equipment that we're going to have to do that as well, but we are acutely aware of that balance and we're keeping an eye on it literally on a weekly basis.

Yes.

Okay, and then on the company's current trajectory is there a.

Is there a potential timeline for breakeven on that.

So we've got still a year or two years out six months.

Any kind of indication you can give based on current forecasts.

Well, Mike lesser.

Great question, and it's a difficult one to answer based on forecast without a historical knowledge because as you know pedal as new.

First you will see our H and I think we have a lot of prospective Jos.

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But without seeing these come in without knowing the exact dates it's difficult for me to give you exact date with a breakeven.

Our goal is to do so by us by the end of 2024 sooner.

But a lot depends on how quickly we can turn those sales into revenue and close other contracts.

Yeah.

Okay. Thanks, guys.

I will say Michael that.

We've mentioned CRA several times right and I think everyone is.

Very well attuned to.

The significance of that relationship and we are actively.

I'm here at the laboratory right now I'm drinking coffee and laboratory and we are working on that project as we speak so no. One is more anxious than we are.

Move that forward as quickly as possible, but as Bob said, we are doing on our and certainly everything we can do we have to work through on the other hand, how long. It takes are our partners our customers our collaborators actually.

Get us, what we need and get the approvals and just keep the projects moving.

Thank you.

There are no further questions I would like to turn the floor back over to Raymond for closing comments.

Okay, well. Thank you everyone that concludes today's call.

We hope that you can take away from this call the fact that.

All of us at a predictive oncology.

We're very excited about the growth trajectory of the company.

What's been happening in the last few months much of what we've been talking about for the last few months is finally coming to fruition.

So in the coming quarters, I would anticipate more collaborations and partnerships with some of the leading drug developers and research and academic institutions. They are critical to the process. We're also very excited to play an important role in the discovery of new oncology drugs.

Certainly part of the relationship with <unk>.

H.

Which we believe and everyone on this call I truly believe understands the benefits for patients.

Also create enduring value for our shareholders. So.

I want to thank you all for your support and I look forward to the third quarter update.

And I wish you all good day and a good evening. Thank you.

This concludes today's teleconference.

May disconnect your lines at this time, thank you for your participation.

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Tom.

Uh-huh.

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