Precipio, Inc. (NASDAQ:PRPO) Shareholder Update Earnings Conference Call May 6, 2019 5:00 PM ET
Miri Chiko-Radomski - In-House Counsel
Ilan Danieli - CEO
Ori Karev - Chief Strategy Officer
Conference Call Participants
Good afternoon, and welcome to Precipio's Shareholder's Update Conference Call. [Operator Instructions] Please note, today's event is being recorded.
I would now like to turn the conference over to Miri Radomski, In-House Legal Counsel. Please go ahead.
Good afternoon. Statements made during this call contain forward-looking statements about our business. You should not place undue reliance on forward-looking statements as these statements are based upon our current expectations, forecast and assumptions and are subject to significant risks and uncertainties. These statements may be identified by words such as may, will, should, could, expect, intent, plan, anticipate, belief, estimate, predict, potential, forecast, continue or negative of these terms or other words or terms of similar meaning.
Risks and uncertainties that could cause our actual results to differ materially from those set forth in any forward-looking statement include, but are not limited to the matters listed under risks factors in our Annual Report on Form 10-K for the year 2019, which is on file with the Securities and Exchange Commission, as well as other risks detailed in our subsequent filings with the Securities and Exchange Commission. These reports are available at www.sec.gov.
Statements and information including forward-looking statements speak only to the date they are provided unless an earlier date is indicated, and we do not undertake any obligations to publicly update any statement or information including forward-looking statements whether as result of new information, future events or otherwise, except as required by law.
Now, let me hand over the call to Ilan, Precipio's CEO.
Thank you, Mary. Good afternoon. I'd like to thank everyone for joining the call.
Before I begin I'd like thank everyone for the recent outpour of support. This may surprise you but I read every email that comes into our investor mailbox and I appreciate every positive sentiment shared with us. We've been through some tough times which are hopefully behind us now. Many of you have echoed the vision of the company and the importance of the work we do here and your words of encouragement has fueled the fire of mine and my team's engine. So thank you for that and please keep your emails coming.
On today's call, I'd like to cover a few topics. First, I'd like to discuss the reverse split, share the rationale around the split we started last week and provide you with a bit more transparency as to our thought process and the resulting steps we took. Second, I'd like to share some of the progress we are making on key aspects of our business.
And third, I'd like to introduce you to our recently hired Chief Strategy Officer, Ori Karev. Ori has vast experience in domestic and international healthcare systems and networks and he joined our team in order to take Precipio services and technology business globally. I have asked Ori to join us so you can hear from him about his background, as well as some of his thoughts on our global expansion. And lastly, I will provide information on the much anticipated Precipio [Best].
Before I jump into this topic, I think it's important to reiterate our company vision so both our existing, as well as many of our new shareholders will have an understanding of why our company exists. Cancer is the scariest word in healthcare, and I am quite sure there is nobody on this call who whether directly or indirectly hasn't been touched by this terrible disease. Unfortunately, the phenomenon of that misdiagnosis is a growing yet unspoken and unaddressed problem in the healthcare industry.
Over the past seven years since Precipio was founded, we developed a best-in-class solution to deploy at the highest academic expertise there exist to solve this problem. And the hardcore solution is the knowledge that no two diagnostic conclusions are the same. It's all about expertise and experience which is a matter of life and death in some cases for the patients being diagnosed. Our company is prepared each patient and the biopsy we achieve with a world class academic sub-specialist expert that has trained their entire career in not sub-type of disease.
This has resulted in substantially higher levels of accuracy, and today we have the data to demonstrate that. The value we bring is first and foremost the patient who is properly biased on the battle with their disease. Second, the treating physician who receives accurate pathology support to understand the correct diagnosis, and third the insurance companies who can avoid billion dollars of tremendous raise that results from patients being misdiagnosed.
We're glad to share that what we hear from our sales force is that we make a difference that's the first aspect of our business which is the pathology services side. The second aspect of our business is development of proprietary technologies in the diagnostic fields. Our laboratory functions not only as a cliental laboratory but also as a testing ground for new technologies we develop in-house.
Specifically speaking technology such as HemeScreen and IV-Cell saw a real world problems in the diagnostic industry. With regards to these proprietary technologies, we've identified challenges labs worldwide space every day. We develop solutions we take them around and try them in our lab until they work. We use them clinically in our lab and then once we're comfortable and ready we bring them to market.
We filed patents on both HemeScreen and IV-Cell so we own the IP and we've identified numerous customers who have demand from both these products. With HemeScreen, we've already had several customers using the test as we've announced. With IV-Cell we have identified major customers who are in the process of testing and validating the media, as well the manufacturing partner who will produce the media according to our stat.
We expect both of those technologies to become substantial contributors to our revenues and business growth this year and I assure as progress is made you will be amongst the first to hear about it. We continue to work on commercializing our existing technologies including ICE-COLD PCR and services as well on developing new innovative problem solving technologies for our industry.
Now let's turn to the reverse split, for many investors have had questions I'd like to address some of those questions as best I can. In the company's view being delisted from NASDAQ was not an option. In order for us to remain a NASDAQ listed company our share price needed to trade above $1 and with NASDAQ here illuming the company had to make a decision.
There were two ways to achieve the required compliance with NASDAQ the first was by organic appreciation through performance. The second one was by doing a reverse split. Our goal was to achieve compliance through the first way of organic appreciation. We saw the share price increase by around 400% in the weeks leading up to the decision point before we expected the split but we were still trading at around $0.50 which was obviously not enough to comply the departments so we had to utilize the second method.
When implementing a reverse split there is several regulatory timelines and guidelines which a company needs to adhere to. In order to comply with these requirements we have to make a decision on the ratio and provide close to two weeks' notice to NASDAQ for the reverse split process to proceed in the final manner. This means that when the share price was increasing from $0.12 point on its way up to $0.50, we had to make decision.
So let's talk about the considerations that went to making the decisions. When contemplating which ratio the company should consider, we started from the end thinking of what would be the target price we've aimed for post reverse. One of the scenarios we took into our account when considering the ratio of the reverse split was the potential downward market reaction posted debt. As some of you may know, often times with company's effective reverse split short see this was an opportunity to hit a company that is weak.
Also there are some assumptions in the market that the company will immediately do a capital raise which will further dilute investors. So if a company aims for our post reverse target price of $1, the company runs the risks of dropping back under the threshold the next day and ending up lack in square one. In order to protect the company from that risk we talk about a reasonable buffer and a target price which we aim to achieve thousand split.
The other consideration we have with the universal investors, we have an opportunity to open up too, provide the kits that if we were already doing - going to the process of doing a reverse split, we're going to get to a share price that potentially enable a broader item to investors.
As I mentioned in my previous letter to shareholders and I am sure you are aware of, many brokerage firms will not trading of stock below $2 unless ticking or if be filled out by the investor, which usually causes the investor to turn away.
And in institutional investors often have a higher thresholds of $5 before they could consider investing in the company. So our logic was, if we're going to do this, let's do it by picking a number to most and get those into that range.
I hope that helps provide some transparency into the thought process and considerations that management and the board went through in infatuating the reverse split. I am pleased with the staff performance over the past weeks but we have no intention of stopping here. We have much work to accomplish and along we have the best and we remain focused on achieving our goals and continuing to generate value for our shareholders.
Lastly on the financial side, unfortunately Carl was unable to join us on the call today. However, our company is working frivolously on the completion of the first quarter results to be filed in our upcoming 10-Q and at that point, we'll provide our earnings and other financial metrics.
Second, I would like to reiterate a point that response to many questions and that is about our capital raise. At this point, the company has no plans about the capital raise. We continue to manage our cash flow very carefully as we'd actually grow our business.
Now, I'd like to introduce Ori Karev, our Chief Strategy Officer. Ori and I met early this year and I think it's fair to say we were both infected by mutual appreciation. I'll let Ori speak to what he thought of our business and why he decided to join our team. I am needless to say, Ori's background and experience provides a tremendous boost to our Executive team.
His understanding of the healthcare insurance industry, which is the key player of our business is priceless, as it is vast network of global contact. In the past few months we've been working together, we have planted an incredible number of seeds, posting very promising global business growth.
Now let me hand it over Ori to say a few words. Ori?
Thank you, Ilan. Good afternoon, everybody.
My name is Ori Karev and I am delighted to have join Precipio's team as a Chief Strategy Officer. In fact, my background in this area of global healthcare suggests, if you are clearer about your brand, about its position, its quality and accessibility you may have a winning formula at your hand.
As a person with extensive background in global healthcare market, I can clearly state that healthcare is usually a domestic matter, unless the locations where you live lacks expertise to solve or address your clinical or medical challenges.
In that case, most upper cast people take solution globally but today this capacity is also available to middle and upper middle folks through dedicated and specialized insurance vehicles. What I saw in Precipio is a unique best-in-class solutions or otherwise solvable challenges, more specifically, the challenges we've assist to resolve is why should my living in Beijing or Kuala Lumpur or Delhi limit my ability to receive the highest quality cancer pathology?
That was the question we put out there to find the solution for. And in order to solve this challenge, what we did is we embarked on a process of defining workflow option coupled with distribution alternative s and sort out key stakeholders in various markets, who can make Precipio's product and services available in their countries.
Now I am delighted that our initial market reaction has been nothing but positive. Consequently, I anticipate that by Q3 and Q4 we will have already expects relationships to be established and beginning to produce the kind of revenues we have estimated.
I am hopeful that our strategic moves will respect to globalization of Precipio coupled with our drive to improve accessibility thorough the development of sophisticated technologies or have position Precipio as the leader in global cancer pathology work.
Now let me turn it back to Ilan for some final comments. Ilan?
Thank you, Ori and welcome again to the team.
I hope this call would help for me providing some transparency in the rationale behind the reverse split as well as give you a flavor of some of things we're working on.
I have never been more excited and market is beginning to take notice of us, understand our value proposition and see the value we generate mostly patient care, through healthcare system as well as to our investors. We have a terrific dedicated team that believes in the vision I outlined in the start of the call. With the initiatives we have in our pipeline, I believe this is going to be a transformative year for us.
Now last but not least, I know many of you are waiting anxiously to receive information about the now famous sweater best. I got to tell you that my wife and daughters are quite alas out of the notion of me being a fashion statement.
However, I do serve the pleasure of my shareholders. So I am pleased to announce that effective this afternoon, if you go to our website at wwwprecipiodx.com/best, you may now place some orders for your Precipio sweater best. We will be taking orders until the end of May and at the end of the month we will produce a batch and send your order to you.
I must say that fashion statement [indiscernible] side, I am personally touched by the outpour of support. Many of you not only wrote in perking the best but also shared your stories of yourselves, relatives or friends that have been hurt by the problem with diagnosis and with each email you have strengthen us in our cause.
There is nothing that comes closer to motivation those emails provide to my team and I, which we will be appreciate will be held. So please keep on coming. I want to thank you all for the continued interest and support in the company and I look forward to speaking with you in our next call. Wishing everyone a nice evening. Thank you.
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.