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Transgenomic, Inc. (NASDAQ:TBIO)

Q2 2014 Results Earnings Conference Call

August 07, 2014 05:00 PM ET

Executives

Paul Kinnon - President and CEO

Mark Colonnese - Chief Financial Officer

Analysts

Adam Hutt - Leviticus Partners

Operator

Good day. And welcome to the Transgenomic Second Quarter 2014 Financial Results Conference Call. All sites are currently in a listen-only mode. But please note there will be a question-and-answer session later on in the call. (Operator Instructions).

Also note today’s conference call will be recorded and will be accessible both by phone and internet. Please refer to the press release about this conference call on the company’s website transgenomic.com for further detail.

The company has asked that I read the following statement. Management will make comments today that contain forward-looking statements. Forward-looking statements are any statements that are made that are not historical facts. These forward-looking statements are based on current expectations of the management team and there could be no assurance that such expectations will come to fruition. Because forward-looking statements involve risks and uncertainties Transgenomic’s actual result could differ materially from management’s current expectations.

Please refer to the press release, the company’s 10-Q, 10-K, and other periodic SEC filings for information about factors that could cause different outcomes. The information presented today is time sensitive and is accurate only at this time. If any portion of this call is rebroadcast, retransmitted or redistributed at a later date Transgenomic will not be reviewing nor updating this material.

I will now turn the call over to Transgenomic’s President and Chief Executive Officer Paul Kinnon. Please go ahead, sir.

Paul Kinnon

Good afternoon everybody and thank you for joining us for today’s conference call. I am joined today by our Chief Financial Officer Mark Colonnese. I will start by providing an overview of our continued progress in improving Transgenomic’s commercial focus and find our strategic direction. Then Mark will walk us through the operating results for the second quarter 2014. We will then open the call for questions.

As noted, when I came on Board last year creating a revitalized company would require a serious of initiatives and actions overtime. During the second quarter, we continue to make good progress in putting emplace the key elements needed to make Transgenomic the dynamic, growing organization we believe it can be and will be in the future. Mark will review the numbers for the quarter in some detail. But at the outset I want to note that our overall revenues for the second quarter showing double-digit percentage growth above revenues in the first quarter 2014 led by an encouraging bright spot of patient testing business which we view is a key growth area and which continues to show renewed strength.

We expect that this trend will continue and we also project -- we are also projecting growth beginning this quarter from new projects in our biomarker identification business unit, which provides contract services to the pharmaceutical industry.

Gains in this business slowed in the second quarter as a result of a delay in starting a relatively large project. And this project is now underway and additional new projects are started in the second -- in the third quarter. We’ve targeted to biomarker identification business as a growth area and expect activity to further accelerate with the introduction of our multiplexed ICE COLD-PCR technology which offers pharmaceutical and biotechnology companies important advantages over current approaches.

Since our last call, we completed two significant agreements that are important for the business today and also illustrate element of our roadmap for creating shareholder value. The first of our major licenses from Dana Farber Cancer Institute for worldwide rights commercialized multiplexed versions of our ground breaking ICE COLD-PCR technology in all field and all platforms, which makes possible simultaneous detection of hundreds of DNA mutations, a very high sensitivity from a single tissue, all liquids simple such are both such as blood or plasma including both mutations known to scientists and those have not previously deducted or identified in patients. The new license is exclusive of Transgenomic and significantly expands and reinforces our existing relationship with the cancer leader, Dana Farber.

Importantly, the new license provides us with the critical advantage because multiplexed ICE COLD-PCR is far more enabling by allowing multiple regions of DNA to be targeted in one assay. And improving the overall efficiency of the cancer diagnostics leading to the adoption of personalized cancer therapy is part of routine clinical practice in the future.

This reflects the need for invasive and positive tissue biopsies to obtain [cleaner] DNA has been a barrier to the implementation of personalized medicine. We estimate that the U.S. healthcare system currently spends in excess of $1.5 billion on tissue biopsies for lung and colon cancer alone with approximately 120,000 being carried out annually in North America at a typical cost of $10,000 or more for procedure.

Additionally, the fact that these mutations can often change during the course of treatment means that tissue biopsy collected in the early stage of the cancer doesn’t provide the information needed to adjust therapy as a treatment proceeds.

The ability to rapidly and easy method of detecting blood mutations in real time during the course of the therapy will allow oncologists to optimize therapy over time and improve patient outcomes. We expect over time this new capability will greatly increase the number of liquid biopsies are performed compared to the number of tissue biopsies performed today.

Mainly due to its potential transnational nature, there is a surge of interest in liquid biopsies and a number of companies are working on liquid biopsy technologies. However, multiplexed ICE COLD-PCR has a significant advantage over potential competitors on historical methods that we believe makes it superior to competing approaches while giving a potential and the potential to revolutionized cancer screening, diagnosis, monitoring and treatment selection.

Multiplexed ICE COLD-PCR targets and amplifies the specific region of the mutated DNA in tumors that is critical for cancer diagnosis monitoring and treatment and it detects mutated DNA at a very high sensitivity. Initial validation and studies show that 100 to 400 felt more sensitive and conventional approaches of current platforms.

Uniquely in multiplexed ICE COLD-PCR enabled identification of all tumor mutation presence. Both of those already know to cancer researcher as well as unknown mutations not detected before.

We have built this by amplifying the key mutation regions of interest. In addition, multiplexed ICE COLD-PCR is distinguished by its platform independent and relative simplicity of use. Multiplexed ICE COLD-PCR can analyze DNA from (inaudible) cold biopsies or direct in tumors, as well as importantly from blood and urine. And it can be used with widely accepted sequencing and PCR platforms.

A simple way of describing the difference between multiplexed ICE COLD-PCR and other DNA detection technologies is that multiplexed ICE COLD-PCR is a broad approach that amplifies all known and unknown mutations where as other methods target only known mutations, thereby missing the unknown mutation that maybe present in the tumor.

We believe that this attribute combined with the multiplexed ICE COLD-PCR superior sensitivity making a breakthrough technology and enabling technology.

Our work with researchers is leading cancer centers such MD Andersen, Dana Farber is producing a grown body of data that (inaudible) performance in multiplexed ICE COLD-PCR technology. As you see at ASCO Meeting in late May, many researchers, cancer specialists, potential commercial partners and potentially strategic partners visit our booth to use scientific posters to provide a validation of the key features of multiplexed ICE COLD-PCR.

The studies in the data highlighted the ability of multiplexed ICE COLD-PCR that detects relevant tumor mutations from blood clot plasma with high sensitivity on different platforms. They confirmed the multiplexed ICE COLD-PCR can detect known and unknown mutations and it can be done repeatedly overtime. And importantly the study (inaudible) ICE COLD-PCR sensitivity of less than putting 0.1% the level needed for accurate detection of DNA mutations liquid sample, such as (inaudible) blood. We are actively pursuing a number of activities to develop and (inaudible) multiplex ICE COLD-PCR opportunity and technology. It holds significant promise for Transgenomic and is important for the future and past lives medicine can’t be (inaudible).

As we mentioned previously we expect to see the first revenues from multiplex ICE COLD-PCR projects and our biomarker identification business later this year. As our initial former and biotech partners launched early studies to low level mutation detection in key cancer targets. While these will be pilots studies there are important indicators the early progress we’re making with this exciting technology. Following these initial commercial efforts we expect to (inaudible) commercialize (inaudible) our multiplex ICE COLD-PCR begin generating revenues by next year.

We’re excited about potential value that we believe multiplex ICE COLD-PCR can bring to the company and our shareholders and we also motivated in this effort by tremendous impacting we could have on cancer patients treatment monitoring in a future. The liquid biopsy market is now (inaudible) but the interesting and the demand for this technology suggests the potential for rapid and broad adoption multiplex ICE COLD-PCR across many customers and sectors is in huge and growing (inaudible) is building and we’re working on capitalizing and monetizing this technology rapidly.

A second important implement of the company’s relaunch strategy is to focus resources on key growth areas for the just after the end of the second quarter we announced an agreement to sale the rights of SURVEYOR Nuclease technology and assets to Integrated DNA Technologies or IDT for minimum of $4.25 million.

So, their invitation to technology case to provide research is a simple robust and versatile method for detection of mutations and polymorphisms in DNA from a variety of organisms. IDT made an upfront payment of $3.65 million and an additional payment of $0.06 million or more to Transgenomic during the first year of this agreement.

Importantly as part of the agreement IDT exclusively sub licensed rights of clinical and diagnostic applications of SURVEYOR technology back to Transgenomic. The sale of SURVEYOR Nuclease technology to IDT for the non-core research market allows us to focus more of our resources on commercialization efforts in our three core business units and on our clinical opportunities. The monetization of this asset will also provide resources for expedition of our development and commercialization efforts for multiplex ICE COLD-PCR.

During the quarter, our relationship with PDI for our cardio predict testing to an end for a variety of reasons outside of our control. The PDI effort was not able to gain significant traction and we both thought it would be best to be move on. We continue to believe in the importance and viability of the product and has a good commercial potential. We're currently developing and commercializing a plan for relaunching cardio predict. We'll have more to say about this topic later in the year.

We continue to work closely with other partner including (inaudible) Amgen and these the relationships are showing signs of progress. We plan to expand these strategic approach for partnering in areas that benefit the company to be along market, regional or commercially driven parameters.

Although notable actions during the quarter include our posting to NASDAQ, which is important symbolically and also brings the company enhanced visibility and liquidity. We also added another outstanding life science business leader to our Board this quarter John Thompson to play the key role industry heavy weight in Invitrogen and Life Technologies and is the second high-caliber individual we have recruited in the past few months.

Overall, we are optimistic the company's turnaround is well underway and three business units are starting to make significant progress on our drive commercialization and monetized key assets is paying off. In the coming months we intend to share more information on our regulatory strategy and commercialization plans for key parts of the business, including our Multiplexed ICE COLD-PCR technology that we believe has great transformation potential and diagnosis and treatment in cancer.

With that, I'll now hand the call over to Mark. Mark?

Mark Colonnese

Thanks Paul and good afternoon everyone. We released our financial results about an hour ago, so I hope that you have had a chance to review the numbers. I'll start today with our analysis of the second quarter results. Net sales for the second quarter of 2014 were 6.8 million compared with 7.3 million for the same periods in 2013. The comparison is due to decreased in the Genetic Assays and Platforms segment as a result of fewer instrument sales. And in the Laboratory Services segment, resulted from lower sales of contract laboratory services in our biomarker identification business unit.

Instrument sales as we all know by their nature of vary from quarter-to-quarter. Well the lower sales of contract lab services from the second quarter were mainly due to a delay in one of our larger projects which since the results. We are confident that revenues from this projects and other new projects will result in an increase in the biomarker identification business unit revenues in the third quarter.

In the quarter we did see higher sales of patient test by a number of new products that we launched late last year. This is the second consecutive quarter of increases in the patient testing business a trend that we expect to continue. Gross profit was 2.4 million or 35% of net sales compared with gross profit of 3 million or 41% of net sales for the same period in 2013. The decrease in gross profit was a result of the lower instrument sales and the reduced contract laboratory revenues that I mentioned previously.

Operating expenses were 6.3 million in the second quarter of 2014 compared with 5.9 million in the prior year quarter. The increase was primarily due to higher non-cash stock compensation costs totaling about 300,000 along with a higher bad debt provision that was higher by about 200,000 over the prior year.

Regarding the bad debt provision, let me take a moment here to address our accounts receivables and their growth over the past two quarters now. We begin implementation of a new billing and collection system and have been working through the learning curve of the system as well recently as it’s integration with our laboratory management system. Replacement of our old systems was a necessity to improve the efficiency in automation of our processes which were antiquated and as some of you will recall had caused collection problems in the past for the company.

Nevertheless this has been in the planning for sometime and was a necessary improvement that caused a disruption in our billing and collection activities this quarter. The implementation and integration activities are close to complete now and we are beginning to see progress in improving our collections. Encouragingly our collections in July were almost double that of June. As such, we expect to ketchup in our collections and improve our overall cash flow in the second half of the year.

Getting back to the income statement review. In the other expense category in the second quarter of this year and last year, we recorded $200,000 of non-cash income related to the warrant revaluation. So, there is really no impact on year-to-year comparison.

In summary, the net loss in the second quarter was $3.9 million or $0.57 per share compared with the net loss of $2.9 million or $0.41 per share in the second quarter of 2013. Modified EBITDA was a loss of $3.2 million in the second quarter of 2014, compared to a $2.2 million loss for the same period in 2013. And you can find a reconciliation of EBITDA to net income in our earnings release.

Turning to the six month financial results. Net sales for the first half of 2014 were $13 million compared with $14.7 million for the same period in 2013, reflecting the 12% decrease in the genetic assays and platform segments as a result of fewer sales in 2014 compared to the prior year. This shortfall was largely a first quarter shortfall as sequentially the second quarter sales were considerably higher than we saw in the first quarter of this year.

Our sales declined in the Laboratory Services segment for the six months ended June 30, 2014 versus 2013, resulted from lower sales from the contract laboratory services that I mentioned earlier, which should rebound in the third quarter. And from a higher than usual level of sales in the first quarter of 2013 that resulted from working down of backlog that we had in our NuclearMitome test from the previous year.

Again, we did see higher sales in patient test from both new products launched in late 2013 and an increase in our core laboratory services business. Gross profit for the six months ended June 30, 2014 was $4.9 million 38% of sales compared to gross profit of $6.2 million or 42% of net sales for the same period in 2013. The decrease in gross profit again was due to the lower contract laboratory revenues and fewer instrument sales that I mentioned earlier.

Operating expenses in the first half of 2014 were $12.4 million, a reduction from the $13 million that we incurred in the first half of 2013. We actually had lower bad debt provisions in the first half of 2014 as compared to 2013 and this along with lower employment related costs due to mid 2013 reduction in our Laboratory Services sales force were the main reasons for the lower expenses.

Income tax expense was approximately $0.5 million in the first half of 2014 compared to about a $100,000 in the first half of 2013. As a reminder, during the first quarter 2014, the company recorded about a $0.5 million in income tax expense to establish a deferred tax liability related to tax amortization of goodwill.

In summary, the net loss for the first six months of 2014 was $8.1 million or $1.17 per share compared with a net loss of $6.5 million or $0.95 per share for the same period in 2013. Cash and cash equivalents were $1.2 million at the end of the quarter compared with $1.6 million at the end of the prior year-end. Of course after the quarter, we sold the rights to our SURVEYOR Nuclease technology and for a minimum $4.25 million of which we received $3.65 million in July. The net proceeds received reinforced our financial position and were used initially to partially pay-off our revolving credit line which can be redrawn by the company as needed and will also be used for working capital purchases going forward.

At this point, I’ll turn the call back to Paul.

Paul Kinnon

Thank you Mark. At this point operator, we’re ready to open the call to questions.

Question-and-Answer Session

Operator

(Operator Instructions). Our first question comes from Bill Bonello with Craig-Hallum Capital. Please go ahead.

Unidentified Analyst

Thanks. Good afternoon, guys. This is actually (inaudible) for Bill. Thanks for taking the questions. Just a quick couple or three from us here. You alluded to a lot of things on the call, so thank you for all the color. I just want to probe a little bit on a couple of other things, more specifically.

Thinking in terms of milestones that we may look for ICE COLD-PCR over the next call it 6 months to 12 months or perhaps a little bit longer, you mentioned earlier the ASCO presentation in May, the biomarker ID pilot studies coming up in the second half. Are there other things that we might look for on that front in terms of kind of validating the technology whether it’s additional academic data or the collaborations or what not, anything there would be very helpful. Thanks.

Paul Kinnon

Yes, I appreciate the question. We're trying to work away that we can actually share with you the clarity of what we need to do in terms of what the timeline is, what milestones could be around multiplexed ICE COLD-PCR. There will be a few presentations coming out. And as I think I mentioned, we’re building a regulatory path and a commercial path. To actually disclose some of that information, we think it’s bit premature. We think towards the middle of -- at end of the quarter, should I say beginning quarter we'll be able give a bit more clarity on it. Bottom-line is that we're looking at revenues this year from our biomarker business, revenues then starting up to ramp up in 2015 with an aggressive plan to commercialize the technology. As I say it's very, very active marketplace, we do believe the technology is enabling and we're trying to obviously product out rapidly and commercialize it in a way that will create much value for the shares possibly also while we show that we can capitalize on the liquid biopsy market by understanding who the key customers are and what the patient outcome needs to be and working with regulators to make sure it happens quickly and effectively.

So I'd say there isn’t really a lot of specifics we can give you today, but in the next maybe two months we will able to share a bit more. Mark and I work sort of some guidelines we can provide to the market a little bit more clear to make you help you understand what could be.

Unidentified Analyst

Sure, that makes sense. How much of the kind of laying out those breadcrumbs if you will, are you hamstrung by the fact that some of your potential partners might want it look at the technology without dipping their hand?

Paul Kinnon

Not particularly. I mean I've worked for most of these companies, almost of these companies and we do believe that the technology can be enabling to the oncology market as a whole in terms of the treatment to maintain monitoring the and tracking of the patients during the cost of treatment. So a lot of these people are customers already, there are partners already. So I don't think that's going to be challenge from our perspective and in fact that might enable us even more. I think the strategy we are building in house and with the Board’s guidance will actually be one that will enable us to take this forward very rapidly.

Unidentified Analyst

Okay, very good. You called out patient testing here as a growth driver again or growth item in the quarter, second quarter in a row. And I know, from your comments that new product introduction is a big part of that. Just wondering how much qualitatively or quantitatively for that matter, Steve Miller's addition and his team might be playing a role in that now they've been on-board for a few quarters?

Paul Kinnon

I mean 100% I mean Steve is a great addition to the company and his team has revitalized the business and revenue is definitely tracking up as we have said two good quarters is perfect, it shows the focus the clarity of what we need to do to build the business and focus on it, and that’s to invest sharing dividends first but then again the other businesses which had issues in them in Q2 that should have not happened but they did happen. We think we are over there now so we are looking forward to Q3 what that will bring how we can move that forward in terms of a buoyant Q3 and buoyant Q4 to continue the growth of the business for Steve’s benefit and Steve’s focus is definitely paid dividends in the patient testing.

Unidentified Analyst

Great. One more and I will let somebody else hop in. So after the end of the quarter as you mentioned SURVEYOR sale and then license back, what -- I guess to the extent you can speak to it, do you see other opportunities in the portfolio to monetize an asset, whether it is outright sale or whether it’s situation like SURVEYOR where you still get the exclusive license back?

Paul Kinnon

I mean one of the things I said very first couple of months I was on Board is we are a wealth of technologies inside the company inside the portfolio, that haven’t been developed properly, haven’t been commercialized properly and we have the opportunity to commercialize and monetize the first one the biggest one was ICE COLD-PCR we are taking that forward we have expanded on it we have added multiplexing to it and that becomes ultra-important to company and very clearly focused because it’s a massive opportunity that could transform the company they are all the gems inside the business that we can look at and identify the key focus is get the revenue back on, get the business back on track and identify where the big things are and capitalize on them and that’s what we are doing like any other company, we have board meetings strategically we discuss things and we review things so we are doing everything a good company should do on that front.

Unidentified Analyst

Okay, great. Thank you.

Operator

Thank you. We'll go next to Adam Hutt with Leviticus Partners. Please go ahead.

Adam Hutt - Leviticus Partners

The risk of repeating somebody else's question has to dig out for a second, but Mark cash burns, can you address cash, going forward, if and when we might expect another secondary, which obviously we all hope you can avoid.

Paul Kinnon

Yes. So, because I mentioned our cash position at the end of the quarter was about $1.2 million and that does not include the benefit of the $3.7 million that we received from sales or the additional payments, I think we've indicated that there is going to be another $600,000 of payments that will be made periodically over the next year as a minimum. So that doesn't include those payments either.

So this cash that came in obviously is going to help under operations in the near term. In addition, Adam I think you referred that we did have some disruptions in our collections as we put in a software system that new improved automated system that I think probably been a long overdue, but it's been long in the planning for the company.

And that's already I think largely done with that and we are starting to see improvements already in the month of July and I think that will continue. So, I think that will help us well.

We expect that work, working on this backlog receivables in the second half will help reduce our cash burn starting this quarter and to the rest of that.

Adam Hutt - Leviticus Partners

Okay. And talking about million or two?

Mark Colonnese

I wouldn't put a specific number on it yet, but I think I'd like to get a little more experience to see if this is how much we can grow the collections in the next few months before I estimate a number.

Adam Hutt - Leviticus Partners

Okay. You are guys are still doing cash should, we expect you to blow through $5 million again before profitability?

Mark Colonnese

No I think if we achieve the sales that we expect to in the second half of the year, we’ve said that we expect these trends to continue, but we expect the sales to grow up the collections to improve and with the cash that we have from SURVEYOR. We’re moving along with the cash we have today.

Adam Hutt - Leviticus Partners

Ultimately, I mean if all this (inaudible) you’ll need to raise I would imagine play a money or do you think that’s possible that you can be self funding?

Mark Colonnese

No, we don’t have any plans to raise money as of today.

Adam Hutt - Leviticus Partners

Sounds good. Thank you guys.

Mark Colonnese

Sure.

Adam Hutt - Leviticus Partners

Good work.

Mark Colonnese

Thanks.

Paul Kinnon

Thanks.

Operator

Thank you. (Operator Instructions). We’ll go next to [Mike Wallace with Lifeline Capital]. Please go ahead.

Unidentified Analyst

Yes, hi guys.

Paul Kinnon

Hi Mike.

Unidentified Analyst

How are you doing? Paul could you guys give us some sense of what kind of business model you’re thinking to wrap around ICE COLD, maybe some that 20,000 foot view so give us some idea of what the progress here?

Paul Kinnon

Sure. I mean if you look at the ICE COLD technology and technology that for liquid biopsies, it varies from every aspect from running a clear laboratory for doing pharma testing and also for doing patient testing in house, foundation medicine for Invitrogen or other companies kind of look at liquid biopsies and charging for them through doing projects in companion diagnostics to pharmacokinetics like our partners Amgen as all the way through to licensing it through the companies, partnering with the companies and also selling it direct to the clinical oncologists with the right regulations in Europe and the CIBD and in U.S. 510(k) so all those options are open to us, Mike What we're doing is, we're building a very robust commercialization plan and subject to capitalize on the key one, the first one and fastest one to bring this to market in a most rapid efficient way to generate significant revenue for the shareholders and ourselves. And we do think it will be transformational in terms of technology. We actually think throughout that the solution that we're going to bring out from commercialization point of view will be transformational as well.

So, again we're being a little bit close --we're holding things close. We're not telling everyone everything but we think that we have got good news, we have got good roadmap where refining the strategy and the milestones and the goals for (inaudible) and earlier on I think they were go and trying put out there next couple of months to show people what that is. But we do think that all of those aspects of their they're available options to us and we are evaluating which one is the best one to go first, second and third but then actually to execute on them, generate the revenue and move onto next one.

Unidentified Analyst

Does this strategy include leveraging the lab?

Paul Kinnon

Yes

Unidentified Analyst

Or you are thinking more selling sort of more of kit type structure and licensing it out that way or something?

Paul Kinnon

We plan on utilizing the assets that we got which is (inaudible) Omaha and our manufacturing facilities and stuff that we need to commercialize the products. We'll use all the avenues we got but we don't want to distract the teams from the focus they got for instance Steve Miller’s business focus on oncology, cardiology and neurology today. I wouldn't expect them to sell an oncology test. So, we have to look at is that the right partner or right do by in-house or should we part of it somebody else. We could run the test in house ourselves and sell it to the partner or strategic partner or license it to someone.

So all of those things are open discussion and we're evaluating those opportunities now as we speak.

Unidentified Analyst

My understanding is that test can be run on any PCR platform is that right and…

Paul Kinnon

Yes. I mean…

Unidentified Analyst

The Multiplexing now from data fiber even opens up the market, even broader to utilize all the Multiplexing technology that's already out in the laboratory research space, is that right?

Paul Kinnon

Yes, I mean. The fact that we've now got the broad application from a Multiplexing allows us to uses technology on any platform for any application for any sample and Multiplexing allows us to look at multiple regions simultaneously and identify the unknown and the known mutations. Most technology ordinarily all other technologies can’t identify the unknown mutations, because you can’t target them with an earlier specific prime, so that's compelling. In terms of platforms prior sequencing Sanger, NextGen, digital portfolio all of them can use our technology, it's doesn’t matter how we target and how we bring it to market, now which is a key thing.

Unidentified Analyst

Okay. So did you put together some sort of kit or something that people could do a prep kit on the sample prior to run and through existing infrastructure and then…

Paul Kinnon

You could do. That's one of the options we are looking at.

Unidentified Analyst

Okay. But we have a lab, we got a figure what to do that too, so I suppose you could do it either way, you run it on your stuff, your equipment or send it to us and we can run in our equipment?

Paul Kinnon

Correct. All those options are there for us, well we are trying to optimize which ones are going to generate the most revenue for us, allows to penetrate the market, the quickest and generate the largest value of shareholders and technology.

Unidentified Analyst

Okay. And is there anything if you did a kit or something out in the field that would be difficult for them to adopt as your some is there some procedures or something that are somewhat challenging done exactly correct that the results don’t come out as expected?

Paul Kinnon

No. At present, we find a fairly robust technology in-house, we are working on optimizing it and building it. The kit issue becomes you’ve got to go through the regulatory hurdles with the FDA and with Europe to make sure the kit complies with the regulations. Additionally you’ve got to figure out how you can market it and who you market it with. So we are working through all of those things. The questions you asked are right ones. So we are working through all those parameters, is that case, is there test, which test where do we test it, who do we test it with and also that how do we kick it and market it and productize it and generate revenue. As we said, this year we estimate that we will have revenues from our partners and phama customers in doing test in-house and we will talk about that. And then next year we will start to see real revenues come through. And additionally we’ll rollout as we rollout the announcements will come out, the partnerships, new information and that will start to show the trend of where it’s going whether it’s directly to the life sciences company whether to a clear lab whether it’s to our own clear lab, or whether it’s a kit. And all those options are sort of in the mix and we are prioritizing which one is the right one to go for first.

Unidentified Analyst

And do you think in the next two or three months you’ll be able to outline a business plan for us on this?

Paul Kinnon

I think Mark and I were talking about that. We have had the same question from other investors and shareholders and we are trying to figure out how we can do that. Again we don’t want to disclose too much information some of the information but we think we can probably put some outline together. We’ll probably be able to do around the next earnings call but we got to work through that. Again, we don’t want to -- as a company, we don’t want to overpromise and under deliver. We want to over promise but we want to do it in a way that guarantees that the shareholders benefit the value and the company grows and the organization grows. But again, the technology comes adopted rapidly in the marketplace.

Mark Colonnese

And there is also a competitive aspect of this that we do want to tip our hand before it’s the right time.

Unidentified Analyst

What scares you about that? What is it about tipping your hand that would -- concerns you the most; can you share some of that with us?

Paul Kinnon

I mean the life science market is very, very competitive and ultra aggressive. The basic question you asked Mark at the beginning is how much cash have we got, where are we from a cash point of view. It's an aggressive marketplace, we want to protect the company, we want to protect the employees and we want to take this technology and develop as rapidly as we can. So we want to be given the chance to build room, to make it successful and make the company successful. So to do that we’d rather keep the information within and then when we bring it out, we’ve got all our books in a row, we’ve got the strategy and we’ve got the partners in place and then it becomes very compelling and we are very successful. And that's what we are paid to do, make the company successful and get your good retain on your investment.

Unidentified Analyst

Is it competitive from a pricing perspective, or is it competitive from a discrediting perspective of the different technologies that are out there or maybe it's a combination of both?

Paul Kinnon

Not necessarily, I think what Mark’s alluding to is that we're doing some groundbreaking science, the technology is groundbreaking, the product is groundbreaking and enabling. We want to make sure as we bringing it out that is adopted as quickly as possible, as effectively as possible and whichever channel we use. Additionally. We don't want to warn people and who could be a pseudo competitor or could be a competitor that we're going to do something. But again as we bring it out, it will enable some other competitors and it will not enable some of the competitors. So we want to try and work with the ones we need to work with, get the relationships going and do what we need to do. And then it comes out into the public information. So it's a challenge, if we were a much bigger company with significant revenues and with a great track record, we'd probably be a lot more open, but we're trying to rebuild the company grow technology, so it is ready for primetime and then when it comes out in primetime basically make a big statement and show people that this is really, really empowering.

Unidentified Analyst

Okay. Thank you.

Paul Kinnon

Appreciate it, Mike.

Unidentified Analyst

Thank you.

Operator

Thank you. (Operator Instructions). And ladies and gentlemen, this will conclude our question-and-answer portion of the call. I’d like to turn it back over to management now for additional closing remarks.

Paul Kinnon

Thank you very much. I hope we conveyed to you a sense of the progress that we’re making in vitalizing Transgenomic, which is already resulting in an increased revenues and well we believe reduce losses as we advance towards our goal of achieving profitability. We appreciate your concern, your interest and your participation in the call, and we look forward to speaking to you in the future.

Operator

Thank you. Ladies and gentlemen, this does conclude the conference for today. We appreciate your participation and you may now disconnect. Have a great day.

Paul Kinnon

Thank you.

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Source: Transgenomic's (TBIO) CEO Paul Kinnon on Q2 2014 Results - Earnings Call Transcript
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