Management of specialty cancer diagnostics company Precipio,
Inc. (NASDAQ: PRPO) provides the following update to its
shareholders on various business matters looking towards mid-year.
1. Business
growthIn September of 2023, Precipio’s pathology division
exceeded its breakeven point of $15M annualized revenue run rate,
resulting in a Q4 cash burn of less than $100K for the quarter. In
the following quarter, as previously discussed, due to several
operational issues, revenue declined below that point.
We are pleased to report that the company has
addressed the operational issues and as a result, pathology revenue
is heading back towards its breakeven point. We anticipate that in
the next quarter, Q3-2024, the pathology division will return to
exceeding its breakeven point.
On the products side, the company had several
delays in product releases due to several technical and supply
chain issues which often occur in this line of business. These
hurdles have been addressed, and revenue growth is resuming.
Recently, two major new customers received state regulatory
approval for implementing our technology in their practice and we
anticipate them going live early next quarter.
These two customers are much larger than our
average customer and we expect that they, along with several other
customers in various onboarding stages, will provide a significant
boost to product revenues and significantly advance us toward the
necessary $6M annualized product revenue run rate goal that is part
of our overall plan to reach profitability.
2. Change Healthcare
hacking & cash impactAs we previously mentioned, like
many healthcare companies, Precipio too was impacted by the Change
Healthcare hacking and subsequent freeze on cash inflow from the
pathology services division (this does not impact the products
division). We appear to be at the tail-end of this situation, with
Change Healthcare in the process of resuming normal operations. The
company has taken measures to supplement its cash situation through
short-term loans, both from Change Healthcare and independent
sources, ensuring it has sufficient funds to continue
operations.
We expect a return to normal operations in
Q3-2024, and to a quick return of any Change Healthcare loans.
Furthermore, with the expected revenue growth discussed in the
previous point, we anticipate a gradual reduction in cash burn,
heading towards anticipated breakeven later in the year.
3. FDA ruling on
LDTsThe recent FDA ruling will ultimately transition
Laboratory Developed Tests (LDT) that are currently under the
regulation of other federal and private agencies such as CLIA and
COLA, to fall under the FDA’s jurisdiction as FDA-approved tests.
This will require filings by test manufacturers and/or laboratories
to register LDTs with the FDA. Requirements will be phased in over
the next 4 years.
This rule creates two options to comply:
- Laboratories submit their LDT
assays for FDA approval – placing the burden on the
laboratory.
- Manufacturers submit their product
for FDA approval – placing the burden on the manufacturer.
This impacts both our pathology services
division and our products division as follows:
Pathology services division:
- The FDA rule has stipulated that
any tests that a lab was operating before the ruling on May 2023
are “grandfathered” into approval and do not require any additional
work. This applies to all our current tests.
- Should Precipio’s laboratory decide
to add a test in the future, it will most likely add FDA-approved
tests which will not place any burden on our laboratory.
- Therefore, the company does not
expect any substantial budgetary impact to its pathology services
division due to this ruling.
Products division:
- Precipio has decided to adopt
option B listed above, which is to submit its products for FDA
approval, alleviating our laboratory customers from the need to
submit their assays to the FDA for approval. This will reduce the
burden on Precipio’s customers and place Precipio in a competitive
advantage compared to companies that choose not to take this
route.
- According to the ruling, Precipio
has four years to complete this process (if the timelines are not
extended further, which many anticipate due to the expected burden
on the FDA to process all these requests).
- For most manufacturers, this is a
heavy and complicated process that requires obtaining patient
samples, testing them in a laboratory, collecting, analyzing, and
submitting the data to the FDA. The advantage for Precipio is that
since we operate a clinical lab, we already have hundreds, and in
some cases thousands of patient samples with both test results and
other data that has been collected and analyzed. Therefore, while
this will be a substantial administrative task, we do not
anticipate that the process will be cost prohibitive.
- Precipio estimates the cost to be
in the range of $250,000 over the course of these 4 years.
“We have endured quite a few challenges over the
past six months, and I’m proud of our team for not only meeting and
overcoming these challenges but working hard to come out better and
stronger”, said Ilan Danieli, Precipio’s CEO. “I believe we are
well positioned to execute on the first stage of the company’s goal
which is to reach breakeven this year. From there, as a financially
independent growth company with high-margin proprietary products in
large markets, we can build significant shareholder value. I am
excited for the second half of this year and to share more upcoming
positive results”.
4. Upcoming Shareholders Meeting
Management would like to take this opportunity
to remind its shareholders that the Company’s 2024 Annual Meeting
of Stockholders is scheduled for Thursday, June 13th, 2024 at 10:00
a.m. Eastern Daylight Time to be held virtually via live webcast at
www.virtualshareholdermeeting.com/PRPO2024. It is important that
your shares are represented and voted on at the annual meeting
regardless of the size of your holding so please take a moment to
cast your vote. If you have already voted on your shares you do not
need to vote again and we thank you for your support.
About Precipio
Precipio is a healthcare biotechnology company
focused on cancer diagnostics. Our mission is to address the
pervasive problem of cancer misdiagnoses by developing solutions in
the form of diagnostic products and services. Our products and
services deliver higher accuracy, improved laboratory workflow, and
ultimately better patient outcomes, which reduce healthcare
expenses. Precipio develops innovative technologies in our
laboratory where we design, test, validate, and use these products
clinically, improving diagnostic outcomes. Precipio then
commercializes these technologies as proprietary products that
serve the global laboratory community and further scales Precipio’s
reach to eradicate misdiagnosis. For more information, please visit
www.precipiodx.com.
Please follow us on LinkedIn, Twitter
@PrecipioDx and on Facebook.
Forward-Looking Statements
This press release contains “forward-looking
statements” within the meaning of Section 27A of the Securities Act
of 1933, as amended, and Section 21E of the Securities Exchange Act
of 1934, as amended, including, among others, including other
financial projections and potential market opportunity, plans and
prospects. Except for historical information, statements about
future volumes, sales, growth, costs, cost savings, margins,
earnings, earnings per share, diluted earnings per share, cash
flows, plans, objectives, expectations, growth or profitability are
forward-looking statements based on management’s estimates,
beliefs, assumptions and projections. Words such as “could,” “may,”
“expects,” “anticipates,” “will,” “targets,” “goals,” “projects,”
“intends,” “plans,” “believes,” “seeks,” “estimates,” “predicts,”
and variations on such words, and similar expressions that reflect
our current views with respect to future events and operational,
economic and financial performance, are intended to identify such
forward-looking statements. These forward-looking statements are
only predictions, subject to risks and uncertainties, and actual
results could differ materially from those discussed. We caution
investors not to place undue reliance on the forward-looking
statements contained in this press release. You are encouraged to
read our filings with the SEC, available at www.sec.gov, for a
discussion of these and other risks and uncertainties Important
factors that could affect performance and cause results to differ
materially from management’s expectations, or could affect the
company’s ability to achieve its strategic goals, includes factors
that are described in the sections entitled “Risk Factors” and
“Management’s Discussion and Analysis” in the company’s Annual
Report on Form 10-K for the fiscal year ended December 31, 2023, as
updated from time to time in the company’s Securities and Exchange
Commission filings. The company’s forward-looking statements in
this press release are based on management’s current views,
beliefs, assumptions and expectations regarding future events and
speak only as of the date of this release. The company undertakes
no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events
or otherwise, except as required by the federal securities
laws.
Inquiries:
investors@precipiodx.com
+1-203-787-7888 Ext. 523
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