Biora Therapeutics Inc (BIOR) 2020 Q2 法說會逐字稿

Welcome to the Progenity's Second Quarter 2020 Earnings Call. (Operator Instructions) Please be advised that this conference maybe recorded.

I will now turn the call over to Robert Uhl, Managing Director with Westwicke ICR, Progenity's Investor Relations firm.

Thank you, operator. Good afternoon, and welcome to Progenity's second quarter 2020 financial results conference call. Joining me on the call are Dr. Harry Stylli, Chairman, and Chief Executive Officer; and Eric d'Esparbes, Chief Financial Officer.

Before I turn the call over to Dr. Stylli, I would like to remind you that today's call will include forward-looking statements within the meaning of the federal securities laws, which are subject to significant risks and uncertainties that could cause the company's actual results to differ materially from the forward-looking statements.

Please review the forward-looking statements disclosure contained in Progenity's earnings press release, which was filed with the SEC, and posted on the company's website immediately prior to this call. As well as the risk factor section of our registration statement on Form S-1 as amended, filed in connection with our IPO, and our quarterly report on form 10-Q for the quarter ended June, 30, 2020 to be filed with the SEC.

With that, I will now turn the call over to Dr. Harry Stylli, Chairman, and CEO of Progenity.

Moving to Slide 3. Thank you, Robert, and thank you all for joining us this afternoon. We are pleased to be with you on our first investor call as a public company. At Progenity, our mission is to combine a cutting-edge diagnostic testing business with innovation into precision medicine and reality.

We focus on diagnostics across the women's healthcare spectrum, including NIPT, and carrier testing. We're also developing a preeclampsia rule-out tests based on our proteomics platform, and advanced in the development of our non-sequencing platform with Innatal 4 NIPT at the first targeted application.

We believe growth of our core business and our innovation will support our goal to be the leader in the women's health reproductive health market. In parallel, we're also developing orally administered technologies to deliver what we expect to be first-in-class GI focus therapeutics and diagnostics to provide true GI Precision Medicine. Later in today's call, we'll provide an update on our innovation pipeline, but I'd like to start by reviewing some of our Q2 corporate highlights.

Slide 4. despite the pandemic, the second quarter was productive time for Progenity. We settled the previously disclosed investigations with the government and received a total of the $122.7 million in funding from our IPO gross proceeds, and through provisions of the CARES Act.

Operationally, we showed resilience in sales in the face of COVID-19, may progress with payors and our affiliate lab Avero Diagnostics, added SARS CoV-2 testing to their molecular infectious disease, and to support our southeastern regional customers. We continue to advance our in-network transition and compliance efforts and expect to see the benefits from these in the coming quarters. Meanwhile, we continue to advance our pipeline of both women's health and GI Precision Medicine products.

Slide 5. Let's begin by reviewing our current molecular testing business. As we illustrate on this graph, Progenity has a strong history of volume growth, and we believe our commercial organization is well positioned to build on that track record.

As a reminder, our entire volume and revenues are essentially derived from our OB/GYN and MFM channel. We must recognize that the COVID pandemic influence demand dynamics, and starting in March, growth slowed, and certain R&D projects were also adversely impacted. We aggressively adapted to the new conditions and achieved Q2 volumes at 95% of those in Q1, and ended Q2 on an upward trajectory. We view this as a strong performance under challenging circumstances.

Slide 6. Looking our Q2 quarterly volume in more detail. Our business began to stabilize in May, while June ended the quarter with higher volumes than the start of the quarter, strengthened by our enhanced digital sales capabilities and additional remote patient support.

Our NIPT demand was most resilient, which helps support a carrier screening volume. We anticipate accelerating sequential quarterly volume growth through year-end. COVID-19 testing began to make initial volume contributions in Q2. As pregnant women represent a high-risk COVID-19 group, we are evaluating opportunities to expand this launch more broadly in the second half of this year.

Slide 7. Now, let's move to our progress within network payors and compliance. We had the 34 million covered lives in the first half of 2020, including signing in-network contracts with Aetna in January and Cigna in June. We are now predominantly an in-network company with approximately 144 million lives covered nationally.

In addition, our affiliate lab, Avero Diagnostics is already broadly in-network with commercial payors in its target markets. This in-network status is an important transition for Progenity. As we see material future upside from the expected increase in percentage of tests paid, improved ASPs, and increased access to a much larger in network patient base.

We have initiated an expansion of our sales force to maximize this opportunity and expect this hiring will have a positive effect on volume growth in Q4 of this year and beyond. We believe combination of growing in-network position and progressive sales force expansion will further increase our competitive advantage in the OB/GYN MFM channel, and will help maximize our ability to market our plan preeclampsia rule-out test.

One of the benefits that we capture from our in-network status was endless decision in April to cover NIPT for average risk women through the end of 2020, due to the COVID pandemic. While temporary measure, we are cautiously optimistic that payors, physicians and studies will continue to support this trend and it may become a longer-term change across all payors. In that event Progenity, as an example, would have realized approximately $10 million more in revenue during the second quarter, based on our pricing and volume.

We view the quality of our relationship with payors as an important aspect of our future success. And Progenity has successfully concluded constructive agreements with private and government payors over the last year.

As part of our work to improve our compliance program, including an internal auditing and monitoring functions, we commissioned the third-party review of our coding and billing processes. In connection with that audit, we identified that we had not appropriately transitioned the implementation of the new billing requirements for larger carrier screening panels, which were introduced in early 2019.

As a result over the last 18 months, we received an overpayment of approximately $10.3 million from government payors during 2019 and early 2020. And this is reflected as a chart in our second quarter financials. We anticipate that a portion of the CARES Act tax refund expected this fall will be used to satisfy some of our obligations to government payors this year. We intend to continue to apply rigorous compliance processes going forward.

Slide 8. Now, turning to the part of the business that especially excites me, our R&D pipeline. Slide 9. Let's begin within Innatal 4, our next generation NIPT tests. NIPT is expected to be the first application based on our novel, single molecule counting platform. I am pleased to say in July, we achieved the key development milestone that enables us to measure fetal fraction. This is a novel non-sequencing, non-polymorphism-based method.

We are confident that Innatal 4 will have degenerate that rivals sequencing, but at a lower COGS and with much faster turnaround times. The single molecule platform that also have the potential to quantify a range of analyte, including DNA, RNA, epigenomics, and proteins. And it's expected to have compelling advantages in liquid biopsy or a range of diseases, including cancer. We anticipate sharing further key advancement regarding our Innatal 4 product this year or in Q1 next year.

Slide 10. Now, let's move to the development of our preeclampsia rule-out tests. As we presented before there is significant unmet need for a preeclampsia test, which represents a $3 billion opportunity in US along with a large global market.

Our test is a proprietary multi-analyte platform with biomarkers that are involved across multiple pathophysiological drivers of preeclampsia, not merely angiogenesis. It is designed to a position to rule out preeclampsia in symptomatic patients, which allows them to pursue the best clinical management plan. How it goes to improve patient outcomes or lower the cost burden of preeclampsia to the health system.

Slide 11. Initially, we are developing a laboratory developed tests or LDT or preeclampsia, as well as planning the development of an in vitro diagnostic or IVD version of the test. In early Q1, we announced a successful completion of optimization for our LDT with strong performance and a cohort of over 800 patients.

I am pleased to say our operations group has initiated analytical verification for the preeclampsia LDT with the commercial platform. We expect to complete analytical verification in Q4 with over 400 patients. We also anticipate completing validation with samples from over 1,600 patients by mid-year 2021. With a targeted commercial launch plan for the second half of 2021, we recently filed a pre-submission with the FDA for the IVD version of the test and have secured a meeting in October.

Slide 12. Turning now to the development of our GI Precision Medicine platform. We expect this will be a transformative platform for GI research diagnostics and therapeutics. Let me begin with our biopharmaceutical and therapeutic platform. The goal of delivering biopharmaceuticals orally to achieve effective systemic distribution, long being considered significant clinical unmet need. I am pleased to say that last week we entered into our first collaboration with a major pharma company for a clinical stage asset for this platform.

The asset is technically challenging, but high reward and the collaboration is structured in stages. Consequently, it has the potential for being expanded in the future based on the program's results. We also have growing interests from other pharma, one of which commissioned a third-party consultancy to undertake due diligence that resulted in positive feedback, and concluded that we have a promising first-in-class and versatile platform. Any of us can target the small intestine, autonomously releasing biopharmaceuticals and solution to achieve systemic distribution.

We believe this technology has the potential to transform the way many proteins and peptides are delivered systemically compared to traditional IV and subcutaneous administration. Our lead internal candidate is an oral version of adalimumab, which will be supported by an emerging pipeline. We showed in early studies a bioavailability of 27% of IV for adalimumab in swine via the oral route.

This is exceptional performance. We own to replicate or exceed that with our autonomous device by the adalimumab and other proteins. During the second quarter, we completed a prototype of a fully functional autonomous device, the oral biotherapeutic delivery system, or OBDS or short. This program is advancing towards preclinical studies with the first PK data readout expected in Q1 2021. We believe that pharma interests in the OBDS will only escalate as we generate more data.

The second program within our therapeutic platform is a pipeline of investigational product device combinations that are designed to treat disease such as inflammatory bowel disease or colon cancer at a site from the GI tract. Proof-of-concept studies with animal models of colitis show that we can achieve high concentrations in the affected tissues or the potential to drive efficacy and minimize systemic exposure and toxicity.

Our targeted therapeutics pipeline includes GI targeted solution-based formulations of adalimumab and tofacitinib. Its candidate is planned to leverage our targeted drug delivery system or DDS capsule in an effort to deliver therapeutics to the site of disease in the GI tract, and incorporate drug formulations, designed to improve stability and uptake in the GI tract.

During the second quarter of 2020, we received written feedback from the FDA and response to our pre-IND dossier, which now guides our development activities. In Q4, we expect to use a DDS to initiate a clinical study in normal healthy volunteers, where we intend to demonstrate targeting of the ileocecal junction and delivery of a radiopharmaceutical detectable by gamma scintigraphy. This program is also attracting interest from pharma.

On the therapeutics manufacturing plant front, we completed GMP scale up of our adalimumab that met the required parameters for similarity and quality, and also produced adalimumab API to support our development programs through completion of the first human clinical trials for both OBDS and DDS.

I will now switch gears to highlight our progress on the diagnostic side of our GI Precision Medicine program. The first is the recoverable sampling system or RSS and in just a little capsule design to [paronymously] target a specific site in the GI tract, and take two samples that are preserved and then can be extracted and aligned in the lab using a broad range of analytical platforms.

The RSS could offer a simple, relatively non-invasive, yet powerful tool to help characterize biology, complex diseases, and patient response to therapy. We anticipate initiation of our clinical proof-of-concept study in healthy volunteers in Q4 2020. We also believe that data generated by this technology will prove both unique and valuable to us and we'll support partnerships with both biopharma and leading academia.

A second GI Precision Medicine diagnostics program is the PIL Dx diagnostic capsule, that has been designed to analyse using fluorescence in situ samples from specific locations of the GI tract. We intend to show that once ingested by the patient, the PIL Dx, autonomously samples, analyses, and communicate the results wirelessly to wherever receive a womb by the patient.

Basically, it's an ingestible digital lab in a capsule that does not require recovery. I'll go as to build a broad menu of the rest and assays for GI diseases. Our most advanced PIL Dx program is a test designed to measure the concentration of live bacteria in the [duodenum], the overabundance of which is a sign of small intestinal bacterial overgrowth or SIBO.

In the US, there are over 105 million annual patient visits for symptoms like SIBO and a projected $36 billion US market. We believe this technology is successful in receiving a De Novo pathway approval. The PIL Dx has the potential to become the standard of care for diagnosing SIBO. We expect to initiate preclinical studies for this technology later this year, and the first clinical proof-of-concept study in the second half of 2021.

Slide 14. During the first half of the year, we presented five posters supporting the clinical utility of our products and services at the SMFM and ACMG conferences and published a manuscript in The Journal of Molecular Diagnostics, describing the design and reporting considerations for genetic screening tests.

Shifting to the GI precision medicine side of our business. I am honoured to report there are two abstract submissions to the American College of Gastroenterology Conference in October has been accepted for virtual presentation at the meeting.

With that, I'll now turn the call over to Eric d'Esparbes for a discussion of our financial results for the second quarter of 2020.

Slide 15. Thank you, Harry, and good afternoon, everyone I'll provide a brief overview of our financial results, and also invite you to review our earnings release and our 10-Q for a more detailed description.

In today's call, I'll describe our sequential quarterly financial performance focusing on our first and second quarters of 2020, while we also include year-over-year performance in our disclosures. We believe this sequential conversion is currently more meaningful, since the 2020 financial performance, illustrates Progenity's transition to a largely in-network operation and reflects the impact of the COVID pandemic, which obviously was not a factor in 2019.

Slide 16. Starting with revenue. We reported consolidated revenue of $17.3 million in the second quarter, compared to $16.8 million in the first quarter. We should note that our first quarter 2020 revenue includes a $13.2 million settlement accrual. And our second quarter revenue includes a $10.3 million provision for refunds. Without the accruals for Q1 and for Q2, our test revenues were relatively stable in the second quarter, matching quite closely our volume profile during the period.

This gives us confidence that our revenue should experience sequential quarterly growth during the second half of 2020, assuming volume demand continues to progress. This is even more important as our in-network transition efforts are ongoing and are expected to be a positive contributor to revenue through the second half of this year and into 2021. This provides upside potential going forward, as we expect to gradually see the benefits of that transition materialized through higher percentage of test paid, and broader access to in-network patients.

Slide 17. I've then explained the revenue progression between the first or second quarter of 2020. We cannot explain the evolution of our ASP between the periods. While our first and second quarter's ASP was unusually low due to accruals that reduced revenue. Our second quarter ASP also reflects two main contributing factors. The first factor relates to the resilience of our NIPT volume demand during the quarter leading to a higher proportion of NIPT tests in our total volume compared to the first quarter.

The average reimbursement rate for NIPT tends to be slightly lowering for carrier screening and as a result, our portfolio ASP reflects that temporary shift during the second quarter. On a long-term basis, we believe our NIPT to carrier screening ratio should normalize to 1.2:1, our typical ratio as we've previously disclosed.

The second factor influencing our ASPs are ongoing in-network transition, where lower average rates have not yet been fully compensated by an expected higher percentage of test paid and increased in-network volume numbers. Our second quarter 2020 cost of sales were lower than in the first quarter, largely the result of slightly lower volumes and lower supplies and logistics costs.

Our SG&A expense of $29.9 million in the second quarter of 2020 was lower than in the first quarter, largely the results of savings due to the COVID work from home policies, and lower travel and commission expenses. The savings were partially offset by an increase in our stock-based compensation expense following our IPO in the second quarter of 2020.

R&D expense was $12.2 million in the second quarter of 2020, marginally higher than in the first quarter, due to an increase in our stock-based compensation expenses following our IPO. We expect our R&D expense to increase slightly in the second half, as our different programs progress to expected key milestones and de-risking steps.

Our net loss in the second quarter of 2020 was $53.1 million, compared to a net loss of $17.2 million in the first quarter. The variance relates to the negative accruals against revenues in both the first and second quarters, and the $37.7 million income tax benefit related to the CARES Act, which was recognized in full during the first quarter.

Our second quarter 2020 operating clash cash flow was negative $13.5 million, compared to a negative $30.9 million in the first quarter. The variance is largely attributable to the receipt of $22.7 million of income tax refund in June related to the CARES Act. We expect to receive the remaining $15 million in the fall.

Cash and cash equivalents at the end of the second quarter of 2020 was $113.6 million, representing a substantial increase compared to the first quarter, explained by the receipt of $22.7 million income tax recovery and $88.7 million in net proceeds from our IPO.

At the end of the second quarter of 2020, we had $78.9 million in indebtedness, the majority of which relate to our $75 million secure debt facility, which matures in October of 2022. We believe our balance sheet gives us the runway to achieve critical value creating milestones in 2020 from our R&D pipeline, and to show continued progression of our molecular testing business.

While we are a net cash [bal] operating company, we proactively manage our capital structure. And one of our stated goals is to be thoughtful in managing our capital stack and the forms of capital we secure in the future, and we intend to execute on that strategy.

With that, I will now turn the call back over to Harry.

Thank you, Eric. As we look at the rest of 2020 into 2021 and beyond, we see many drivers of value creation and revenue generation at Progenity. We believe, we will continue to experience resilience and return to sequential quarterly growth in our existing business over the coming quarters, driven by the differentiation of our products and services, and by recognizing the benefits of increased in-network coverage.

We are particularly excited with the progress and potential of our R&D pipeline. From now to December, we expect to launch new product line extensions and to achieve significant milestones in several of these R&D programs.

In 2021, we expect to meet development and launch milestones in our preeclampsia and Innatal 4 programs. We expect that progress for that precision medicine platform will continue to gain momentum. And we anticipate further significant partnerships. Both the immediate term and near future for Progenity is bright.

With that operator, we are now ready for questions.

(Operator Instructions) Steven Mah, Piper Sandler.

Great, thank you. And thanks for taking the questions, and congratulations on the strong testing volume during a really tough quarter.

Thank you, Steven.

Okay. So, first question. Can you provide some color on the $10.3 million refund accrual? And my understanding from your comments was that it was a third-party audit. Was that audit part of the corporate integrity agreement or it's part of the settlement?

No. To be clear, that was a self-driven process. As you are aware, we've really invested in briefed up our compliance and made a lot of changes. And this was -- we've actually performed two audits using third parties to really help us get to a clear understanding of how our operations in billing and coding are performing.

Okay. And --

Steve, it's completely self-reporting and self-driven. So, in a way, I'm proud that the process was implemented any words.

Okay. That's great. And given that you perform two audits, should we expect more accruals in the future or --

I don't believe so. I think, we took a very conservative position on this repayment. And whilst you can never rule that out, you can never really out-state for any company, even one like us, who is very rigorous and focused on it. We feel fairly optimistic that we won't have more accruals to deal with.

Okay, great. Thanks. And then the next question is, so your volumes held up really well. Can you talk about some of the trends on that? Can you give us a sense of the test volumes coming from the mobile phlebotomy surface?

Yes. I'd be happy to. The majority of our business is from in-office. So, the flip books in we really played a role early on in COVID, and I think it was more of a reassurance to doctors and their patients. But it really is a minority part of our business. The majority of our business is inpatient visits. Now, of course, we're still virtual. So, we have to do the detailed support remotely in the majority of cases, probably about 20% is direct and it fluctuates. But that should give you a good view.

The other aspect is COVID testing, which we introduced, I believe, in may and that's -- if you recall, we did that as a -- really to help our local community, who are overwhelmed and trying to be continue to be overwhelmed, and it was well received. But now we realize, and we've learned as a society that pregnant women are at a high-risk target of COVID. We're in the process of figuring out how and where we offer it more broadly.

Okay. Can you give us a sense of the volume of the COVID testing you've done?

Yes. I don't want to -- it's a smaller amount, but it's lightly, especially as we go forward, it's lightly to become a more material amount as we go forward, and then I think we'll maybe, be able to share a little bit more about that.

Okay. All right. Thanks. And then my last question and I'll hop back in the queue. Can you give us a sense of the pharma partner? Is it like a top 20 pharma partner or --

Yes. I would say it's a top 20 pharma partner and it's the demand for confidentiality. It's a sensitive high-profile program and we're collaborating. And in the manner that we indicated in the script, it has a lot of potential and that point alone may lead to additional drugs being considered as we go forward. So look, interest is growing and you should watch this space. And we're quite excited, given how frankly, the technology is still proven itself and it's come a very long way. It's ready for use effectively. The interest we're getting and generating is I'll use the word exciting. Okay.

Okay. All right, great. Thanks for taking the questions.

Thank you, Steven.

Dan Leonard, Wells Fargo.

Hi, this is Lisa Phan. Thank you for taking my questions. So, can you just talk a little bit about like the July churn and then, do you see the volume getting improved. and then what's your view to Q3 and Q4?

Okay. So, we're seeing in July, we're seeing rising volumes over June, which was rising over the prior months. We expect that we are not giving guidance obviously, but I've used the term accelerating sequential quarter-over-quarter growth. And that's what we're anticipating, as we move forward. So, the trend is continuing.

Got you. That's very helpful. And then, can you also talk a little bit about the ASP churn. I think you mentioned that there's a little bit impact. So, it's like a little bit lower in Q1 and Q2. So, can you talk about more ability to intuit the ASP for the year end and then maybe, in 2021 as well?

Yes. I'll be happy to take that also. I know Eric is jumping at the bits. But effectively, we expect a rising ASP, and the drivers for that is primarily due to our in-network transition. And we're seeing a high percentage of tests getting paid. So, you should expect to see a rising ASP, especially between now and Q4 and then into 2021.

Got it. And then I think my last question, probably going back to that GI program. So, I think like, do you expect there were more contrast to come, like similar to the one that you just signed? And then maybe, just a little bit like a pipeline on that.

And then and then another question separate from the GI, it's on really the sales force's function. Like, any specific areas that you target to hire more people, like for example, on the preeclampsia side or just on the NIPT part of it? Thank you.

Great questions. I'll do the last one first and then finish on the GI. So, during the road show, we indicated that we're going to grow our sales organization from about 150 to around 200 in the next 18 months. The primary drivers are -- we've actually relatively got a smaller sales force than our larger competitors. So that's an opportunity for us.

But really, the principal catalyst for the investment in growth is the fact that we're now in network, and we have access to a broader customer base than we did before, and also we're positioning for preeclampsia in the second half of next year. So, expect to see those that hiring to continue and it will make a difference. And I think you'll begin to see the difference, the early part of the difference in Q4.

Okay. Now, hopefully that answers your question about sales force expansion. And it's national really. So, it's enabling us to go into areas that we've underserved, and the access customers that we were not able to access, and enables us to tie in our territories. So, to enable even [indiscernible] that's the strategy. So, we're excited about the opportunity that innatal presents and preeclampsia does.

Now, going beyond that to GI, yes, there is a pipeline of GI opportunities. Frankly, across the programs, there's a special interest in the OBDS and in the RSS. And these include -- so we tied the OBDS, where we're in advanced discussions, the clinical candidates are not some of which actually commercial candidates, others of which are in clinical development.

So, it's really across the spectrum of what I'll call the pharma value chain, and it ranges with different kinds of drugs. I'm not going to get into details, but you can imagine monoclonals are an example of one. And also challenging products, where pharma has run into challenges and getting what they need from their capabilities. And they're looking for assistance from our technology and capabilities. So expect to see deals over time, and expect to see an acceleration of those deals as we go into 2021, and as we generate further data on the technology.

Got it. Thank you so much, and congrats on the quarter.

Thank you very much for your interest.

Catherine Schulte, Baird.

Hey, guys. thanks for the questions. I guess, first, just going to the pharma collaboration that you signed. Can you just give us any incremental color on that partnership? What's the structure are there upfront milestones, et cetera, any exclusivity, any details on the timeline? And then do you expect it to be revenue generating this year?

The answer is yes, it should be revenue generating this year, one. Two, it's a high potential drug in the clinic. And it's a challenging chemical class, and we are basically, prevailing our capabilities on this one class and the deal is structured in phases.

Phase 1 is where we mutually demonstrate whether or not we can make a difference together. Okay. You could imagine they've explored many other approaches. Okay. And if that goes well, then there's an opportunity to then extend into a full agreement. Okay.

We have other opportunities, where basically I'll give you an example at a very high level commercially strange product, where we're in discussions to provide additional shots on goal for the partner, the prospective partner.

Now, I will - I'm giving you a couple of examples. There are others in the works too, that may be broader. And the other piece we're seeing is, as you engage these folks and establish credibility, they've got many - they've got other opportunities in their portfolios, where they believe that we could make a difference. So, it's quite encouraging. So Eric wants to pop in.

Yes. So Catherine, for your modelling purposes, the expected revenue profile from that first partnership would not deviate from our discussions we've had in terms of the expectations. So, it's right down the fairway of what we had discussed before.

And going to the other part of your question, we are anticipating upfront milestones and royalties for some of these arrangements. Okay.

All right, great. Thanks. Thank you for all the color. Then maybe, just going back to ASPs in the quarter, how much of that degradation was due to that mix shift away from carrier screening and towards NIPT? Is there a way to quantify the impact or magnitude of that mix shift?

`So, it was not that material, but it's definitely a contributor. Obviously, the accruals that we had in a quarter are the biggest impact on ASP. But if you look at the trend lines, the shift is noticeable, but not overly material, but weren't highlighted, because the shift is a very good representation to the dynamics of the market. And it's important to highlight, because the demand profile for NIPT and carrier screening are not exactly the same. And I think we have very effective marketing strategies to make sure that they're continuing to perform well. But for this quarter, we felt it was reasonable to mention it.

All right. Great. And you've made a lot of progress on going in network with payors so far this year. Can you just remind us the major plan still outstanding from a contracting perspective, and what kind of progress do you expect to make over the balance of the year?

There are two plans that are outstanding. And we anticipate one potentially, ask any network with them towards the end of this year or early next year. The other one may take into the end of 2021 or early 2022. And as a reminder, our affiliate, Avero Diagnostics is essentially in network with all commercial payors, wherever it practices business. So through our affiliate, we do have a separate business, but it is an affiliate and it's really run as a separate business.

All right. Thank you.

Thank you. I appreciate it.

Andrew Cooper, Raymond James.

Thanks for the time, guys. Maybe, just first, I would ask one more on the pharma partnership. But can you just tell us just to be kind of crystal clear? So, is this a new novel drug with a new novel indication, or is this something that maybe is already an existing product being put into a new delivery mechanism. just so we can make sure we have that kind of pin down or how to think about --

I can't comment, because without -- we are very respectful of any confidentiality, it's a new drug in clinical development.

Okay, great. And maybe, moving to preeclampsia, I think the timeline that you talked about here where maybe a quarter or so later on the validation, and moving launch from 2Q into the second half. So, just any color there on -- is this largely a COVID delay or was there anything else that maybe slowed down that timeline a little bit beyond the pandemic that we should be thinking about?

It's primarily the pandemic in Michigan, where we are focused in terms of this programs R&D had lockdowns. And although, our lab operations was essential, R&D was not deemed to be essential. So that definitely affected us quite a bit, maybe more than a quarter. But the credit to the team, they were able to like go into overdrive to move the program along.

And now, I'm really pleased to say that we've transitioned the program into operations, which is the part of the business that's viewed as essential, and it's taking samples as well as clinical samples, and that's where the verification and the validation is ultimately going to occur. So, whilst that doesn't guarantee it been insulated from COVID developments in the future 100%, it really gives an incredible protection relative to where we were before.

Okay, great. Maybe, just one more kind of thinking about the COVID and the core molecular business, but when you comment about accelerating sequential growth quarter-to-quarter, how much of that might be to step-up in COVID or how do we think about what you're maybe anticipating you might be generating from COVID testing, as opposed to your more traditional NIPT carrier screening business?

So, when I make reference to that, it's really related to the core business. But COVID is going to make its presence felt, because you read the news as well as I do, and there is a deficit of testing nationally. And we really do want to help pregnant women in particular, which is really our mandate.

And our affiliates, Avero has an existing molecular infectious disease business, where it provides our services to the OB/GYN. So, it seems to be like a very natural place for us to expand that testing. And I don't want to go into how much, but I will say this, we are investing in capacity, because we believe that demand is --

Great. I'll stop there. Thanks for your time.

Thank you for your questions. I really appreciate, Andrew. Thank you.

That concludes today's question-and-answer session. I'd like to turn the call back to Dr. Stylli for closing remarks.

Thank you, operator. Thank you all once again, for participating in our first financial results investor call as a public company. We will be participating in upcoming virtual investor conferences in September, and look forward to reconnecting with many of you at that time.

If you have any additional questions, please feel free to contact us. Have a good evening, everyone and thank you for your interest.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.