Exact Sciences Corp (EXAS) 2008 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the first quarter 2008 EXACT Sciences Corporation earnings conference call.

My name is Lauren and I'll be your operator for today.

At this time, all participants are in a listen-only mode.

We will conduct a question-and-answer session towards the end of this conference.

(OPERATOR INSTRUCTIONS) As a reminder this conference is being recorded for replay purposes.

I'd now like to turn the call over to your host, Mr.

Chuck Carelli, Chief Financial Officer.

Thank you, Lauren.

Good morning, everyone, and thank you for joining us today.

With me on the call today is Jeff Luber, our President and Chief Executive Officer.

Before we get started, let me remind you that certain matters we will discuss today, other than historic information, consists of forward-looking statements relating to, among other things, our expectations concerning our future results, cash preservation and commercial and regulatory strategies.

These forward-looking statements are not guarantees of future performance and are subject to a variety of risks and uncertainties that could cause actual results to differ materially from the results contemplated by the forward-looking statements.

These risks and uncertainties are described in our annual report on Form 10-K, for the year ended December 31st, 2007.

You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of today.

We undertake no obligation to update or revise the information provided in this call, whether as a result of new information, future events or circumstances or otherwise.

I'm now going to run through the financial update and then Jeff will provide a business update and then we'll open up the call for your questions.

For Q1 2008, the Company generated a net loss of $2.5 million, compared to a net loss of $1.9 million for Q1 2007.

This translates into a net loss of $0.09 per share for Q1 2008 and $0.07 per share for Q1 2007.

The increase in net loss for Q1 2008, when compared to Q1 2007, was primarily driven by lower noncash license fee amortization and royalty revenues in connection with the June 2007 amendment to our license agreement with LabCorp, which I'll explain in a minute.

The increase in net loss in Q1 2008 was partially offset by savings realized in our sales and marking operations as a result of the elimination in Q3 2007 of those functions, as well as lower overall R&D expenses.

Total revenues of approximately $50,000 for the quarter ended March 31st, 2008 were lower than total revenues of $1.2 million for the same quarter of 2007.

Total revenues are comprised primarily of two elements.

The first is noncash license fee revenue related to the amortization of up front license fee payments from LabCorp.

These revenues decreased by approximately $750,000 as a result of the June 2007 amendment to our LabCorp license agreement which extended LabCorp's exclusive license period to December 2010.

Since this amendment, we've been reporting lower noncash license fee revenues per quarter as compared to prior periods.

This is because of initial $30 million up-front payment made to us by LabCorp is now effectively being amortized into our revenue through 2010 as opposed to 2008, which was the end of our exclusive license period prior to our amendment.

The second source of our revenue is product royalty fees, based on LabCorp sales of PreGen-Plus.

The end of Q1, 2008 marked the close of the third quarter operating under our amendment license agreement with LabCorp.

Similar to its impact on Q3 and Q4 of 2007, under our amendment LabCorp agreement, we now report an estimated third-party royalty liability to LabCorp as an offset to the royalty revenue line item in our P&L.

We began to record this potential liability in our financial statements during Q3 2007 and recorded charges of $1.2 million during fiscal 2007.

We accrued an additional charge of $300,000 during Q1 2008, increasing the total reserve related to this obligation to $1.5 million at the end of Q1 2008.

This accrual reflects our current estimate of the obligation based on sales volumes that we anticipate in light of the FDA and CMS status of our technology.

This $1.5 million payment would be due to LabCorp in January 2009.

As you may recall, we may be obligated to pay up to a maximum of $3.5 million over the exclusive license period, if LabCorp sales of PreGen-Plus do not exceed certain specified thresholds.

The ultimate amount of this potential liability is based on LabCorp's sales volumes of PreGen-Plus during three measurement periods within our exclusive license period, which again ends in December 2010.

A significant increase in PreGen-Plus sales volumes during any of the measurement periods could reduce our obligation related to that period, but test volumes consistent with historical PreGen-Plus sales levels could result in payouts to LabCorp for the full $3.5 million.

The first measurement period, which ends in December 2008, includes a maximum potential obligation of $1.5 million which as I mentioned we have reserved for as of March 31st, 2008.

We'll continue to assess whether additional charges related this potential obligation are necessary and we'll accrue those charges accordingly.

Payments for the second and third measurement period to the extent necessary would be due in January of 2010 and January 2011.

Total operating expenses decreased to $2.7 million for Q1 2008, down from $3.3 million for first quarter of 2007.

As a result of the continued delays and the guidelines decision that we experienced, starting in Q4 2006 and through the end of 2007, we took steps to reduce our costs and structure the Company to better align our resources with strategic imperatives.

These actions include reducing our R&D group at the end of 2006, eliminating our sales and marketing functions in Q3 2007 and reducing the amount of space leased at our Corporate Headquarters to reflect our current level of operations.

R&D expenses decreased to $859,000 during Q1 2008, down from $1.3 million for the quarter ended March 31st, 2007.

This $400,000 decrease was the result of the continuing effect of our cost reduction efforts which included lower personnel-related and other operating costs as well as lower external licensing costs.

Our current expectation is that the R&D group will remain focused on supporting the FDA regulatory process, as well as limited technology improvement projects.

Due to the elimination of our sales and marketing functions in July 2007, we had no sales and marketing expenses in Q1 2008 which represents a savings of approximately $400,000 when compared to Q1 2007.

G&A expenses increased to $1.8 million for Q1 2008 from $1.6 million for the same quarter of 2007.

This increase was mainly driven by higher professional fees for the first quarter of 2008 in connection with our ongoing reimbursements in FDA regulatory efforts.

We finished Q1 2008 with approximately $9.5 million in unrestricted cash, cash equivalents and marketable securities.

Based on our current cost structure, and assumptions relating to the potential clinical and other studies that we may initiate in 2008 to support our efforts to obtain FDA clearance for our Version 2 technology, we expect that our existing cash will last through December 2008, which would be prior to the completion of the studies that we will likely need to conduct for purposes of a V2 clearance.

Obviously the FDA filing and approval process, including the timing, content and cost of the studies we will be required to conduct, as well as any other additional unexpected expenses, could negatively affect this projection.

As our press release mentioned last night, we're pursuing FDA clearance for only our Version 2 technology.

Jeff will provide additional color on our FDA path forward in his remarks.

But let me briefly outline the anticipated costs in light of our strategy.

Our current expectation is that the FDA study could be conducted in support of a de novo 510(k) submission for our Version 2 technology, would primarily include a clinical validation study and a reproducibility study.

Our Version 2 pre-IDE submission to the FDA in April included a proposal for a clinical study of samples to be collected from average risk, asymptomatic study participants.

Based on the size of our proposed clinical study, we believe that the cost of running the clinical and reproducibility studies would be in the range of $4 million to $6 million over the next 12 to 18 months.

The reason for the variable cost range is that because we're collecting samples from an average risk asymptomatic population, where the average prevalence of cancer is about six or seven per thousand people, it may simply take longer than we anticipate to collect cancer samples from our study population.

If, for example, the prevalence of cancer among our study participants turns out to be lower than six or seven per thousand this would require that we screen additional participants in order to collect our target number of cancer samples, resulting in study costs approaching the higher end of the cost range that I mentioned.

Conversely, if the prevalence of cancer among our study participants was higher than six or seven per thousand, we may be able to collect cancer samples by screening fewer participants which would result on study costs on the low end of the range I mentioned.

Our operating plan for 2008 includes approximately $1 million to $2 million to initiate any Version 2 studies.

Remember also that this cost range is based on a specific number of cancer samples that we proposed in our pre-IDE to the FDA but is obviously not yet been approved or agreed to by the FDA.

Of course, to the extent that the FDA requires additional cancer samples or additional studies not included in our pre-IDE submission, our costs would be higher than the range I discussed.

We continue to work with the FDA to define the regulatory requirements for our DNA technology and once we've done that correct we'll know more on the potential impact on our financials and business operations.

In the meantime, we'll continue to closely manage our expenses.

Now I'm going to turn the call over to Jeff.

Thanks, Chuck.

Good morning, everyone, and thanks for joining us on today's call.

The inclusion of stool DNA in the guidelines of the American Cancer Society and U.S.

Multi-Society Task Force for colorectal screening in Q1 represents a strong foundation for the long-term value of stool-based DNA screening and EXACT Sciences.

Stool DNA is now a guidelines recommended standard of care for tens of millions of people in the United States.

We are especially pleased that the U.S.

guidelines groups provided a broad category endorsement for stool DNA regardless of test version.

This is certainly good news from a product development standpoint as it allows to us bring newer versions of our stool DNA patent-protected technologies to market without having to revisit the guidelines process.

I will now review for you our work with FDA.

With the broad guidelines endorsement announced in March of Q1, one that was not specific to a version of our technology, this enabled us recently to have a wide ranging discussion with the FDA regarding our Version 1 and Version 2 technologies, the pass forward for each and alternate ways in which we might streamline the path toward a clear or approved test.

From these discussions, we reached agreement with the FDA that we could seek approval for Version 2 only and that a Version 1 regulatory path would not be necessary.

As a result, we are withdrawing our Version 1 pre-IDE protocol and will now focus our energies and resources exclusively on a Version 2 clearance.

Can the FDA always change its position and require a Version 1 submission?

Yes.

But we do not believe that this is likely based on our recent discussion with the agency.

In fact, we already submitted our pre-IDE for a de novo 510(k) filing for Version 2 and we are looking forward to our scheduled meeting with the FDA in the coming weeks to obtain their feedback.

You will recall that we have been pursuing Version 1 clearance for FDA compliance purposes but that our main commercial focus remain Version 2.

We had estimated that it could cost up to $2 million to complete the necessary reproducibility study for Version 1.

This amount can now be applied directly to the V2 clip validation and reproducibility studies instead, which we estimate based on our pre-IDE proposed protocol, will cost between $4 million and $6 million as Chuck mentioned.

The timing and cost are directly dependent upon the specifics of the required clinical validation study for Version 2, for example the number of average risk cancer samples required.

Let me take a minute to describe the difference between a clinical validation study and a reproducibility study in terms of effort and cost.

A clinical validation study is the more expensive and time consuming of the studies.

The purpose of which is to demonstrate that the clinical approach works and that it's safe and effective.

A reproducibility study is designed to show that a particular test is robust in the hands of different technologists running the tests repeatedly over the course of several weeks.

For Version 1, you will recall, we were relying on our published multi-center study from 2004 as the clinical validation study and we did not intend to invest further for this purpose.

For Version 2, as I've stated previously, we will need to do both, a clinical validation study and a reproducibility study.

We are fortunate in that a clinical validation study for Version 2 will have the benefit of our knowledge and experience from our historical Version 1 studies.

For example, we now know which collaborators offer the greatest likelihood of being higher volume collection sites for samples, and in knowing this, we believe that we will need fewer collection sites for accruing samples.

We also will have the benefit of a more efficient and lower cost assay to run in Version 2 as compared to Version 1 and we have the guidelines endorsement, which can offer greater awareness and acceptance of stool DNA and potentially easier recruitment efforts for the Version 2 study.

We also have the benefit now of our interactions with the FDA over the last several months from our Version 1 pre-IDE discussions which we use to inform our Version 2 pre-IDE study protocols that we submitted to the agency just recently.

For example, we were able to frame certain parameters for our pre-IDE Version 2 submission, based on the information we received from the FDA in our Version 1 discussions.

Especially as we thought about the numbers of cancer samples, advanced adenomas and normals for use in our Version 2 pre-IDE submission.

Now for competitive reasons, I'm not going to discuss the specific numbers that we propose in each category, except to say that from a statistical and clinical standpoint, we believe that the study that we proposed for Version 2 can yield important clinical information, while appropriately balancing issues of cost and time to clearance.

You should also know that we have already accrued a small number of cancer samples under the research protocol used to validate the Version 2 assay which may contribute toward the cancer sample goal that we have proposed to the FDA for our Version 2 clinical study.

We intend to confirm with the FDA that these samples can be used in the upcoming clinical validation study as well.

We have been accruing samples for sometime and we continue to do so.

We are also in the process of signing up additional sites for accrual with the goal of bringing in more samples in a timely fashion.

Again, sample acquisition is the primary driver of cost and time associated with studies of this kind.

Until we obtain final agreement from the FDA on the Version 2 study size and sample specifics, we do not intend to update our previous guidance of the second half of 2009, at the earliest, for our obtaining Version 2 clearance or our realizing material revenues.

In light of this new information from the FDA and based on my discussions with LabCorp, I believe that LabCorp wants to make the transition away from Version 1 to Version 2, and will likely stop offering Version 1 in the near term.

This is particularly good news, in my view, as you've heard me note in the past that LabCorp's inventory levels for the Version 1 product continue to run low.

In addition, the two marker Version 2 test is easier and more cost effective to run from an operational standpoint than the 23 marker Version 1 technology.

Version 2 has demonstrated greater sensitivity for colorectal cancer detection and can also offer more attractive margin opportunities than Version 1.

The logic behind taking Version 1 off of the market so that we can transition to Version 2 dove tails nicely with our more focused Version 2 regulatory strategy with the FDA.

By taking Version 1 off of the market in the near-term we can focus on the timing and specifics around a Version 2 launch that can meet business objectives and regulatory requirements.

The transition from Version 1 to Version 2 will likely not be immediate and I suspect there will be a delay before Version 2 is launched following the phaseout of Version 1.

When we spoke with the FDA just recently, we also explored the latitude that we may have to launch the Version 2 test ourselves at EXACT at the CLEA laboratory until the Version 2 clearance is obtained.

We believe this may be acceptable to the FDA, but given our current cash position, resource constraints and the operational planning necessary for such a shift in strategy, a Version 2 launch at EXACT is not something that can realistically happen in the near term.

We intend to continue our focus on the Version 2 FDA clearance while we consider the steps toward a Version 2 launch that can meet regulatory requirements and bring the better technology to market as soon as practical.

Finally, I'm very pleased to report that one of our European collaborators, NorDiag, issued a press release this morning announcing an expanded relationship with EXACT.

You will recall that NorDiag is based in Norway with core confidence in automated sample preparation of complex clinical samples and we previously licensed certain of our technologies on a nonexclusive basis to them for use in certain territories abroad.

NorDiag also currently has a relationship with Roche Diagnostic that they announced last year.

As an investor in EXACT, you likely know that one of the key elements required to operate clinically useful, noninvasive stool-based diagnostic for colon cancer screening is the ability to have superior sample preparation methods, an area in which EXACT Sciences Corporation has long maintained a strategic and intellectual property advantage.

This newest agreement with NorDiag provides us with an opportunity to share expertise in the area of sample preparation as well as provide EXACT with a right of first refusal for the U.S.

and Canada to NorDiag's advances in the area of sample preparation and automation for stool-based DNA screening for colon cancer.

I believe our expanded collaboration with NorDiag in securing this right of first refusal from NorDiag for the U.S.

and Canada further protects our advantage in this key technical area.

So let me summarize our key developments year-to-date.

Stool DNA technologies are now a recommended option for early colorectal cancer detection in the U.S.

through their inclusion in the guidelines of the American Cancer Society and U.S.

Multi-Society Task Force.

We have reached agreement with the FDA that our Version 1 submission is likely not necessary anymore and we have submitted our Version 2 pre-IDE protocol to the FDA and have a meeting scheduled with the agency in the coming weeks.

Now, I'd like to address a couple of questions that I suspect you have and then I'm going to open it up to your questions.

One, the Company announced that it hired an investment bank to evaluate strategic alternatives.

Where does that process stand?

We are continuing to work with Leerink Swann on exploring our strategic options.

As we mentioned in our press release announcing our engagement of Leerink, we do not expect to provide an update, unless and until we have a definitive transaction to announce.

No option is off the table as part of this ongoing strategic process.

Two, what will happen to your Version 1 test if you no longer pursue Version 1 clearance?

We believe that LabCorp may well take Version 1 off of the market as we move toward a launch plan for Version 2.

Version 2 is much easier and more cost effective test to run than Version 1.

With stool DNA now included in screening guidelines as a category, we believe it makes sense to replace Version 1 with Version 2 as soon as practical and in a manner that is in line with regulatory requirements.

That said, I do not believe Version 2 will be launched quickly and I also believe there will be a delay between taking Version 1 off the market and launching Version 2.

Decisions around the timing of our Version 2 launch will likely be driven in large part by the discussions we have with the FDA during our meeting in the coming weeks.

So now I'm going to turn the call over you for your questions.

(OPERATOR INSTRUCTIONS) And your first question comes from the line of Anthony Giallourakis with VSR Financial Services.

Hi, that's Giallourakis.

Good morning, Jeff.

Morning, Tony.

Question, have you touched base with the folks in Atlanta Amer Cancer Society and the Multi-study Task Force regarding the period of timing which you just mentioned, the V1 would be coming off the market and then there would be a delay and then V2 would hopefully be ramping back up?

And do they have any issues with that or do you think that the guidelines will be contiguous throughout the process?

Thank you.

I've not spoken with the American Cancer Society about it, Tony, but I appreciate the question.

I mean the inconclusion in guidelines was a medical-evidence based analysis.

And their understanding of our -- of the nuances with the FDA, I think is pretty well known by the FDA.

I believe it was noted in their write-up of the guidelines.

So I don't know that a further discussion with the American Cancer Society is merited at this point.

Thank you.

(OPERATOR INSTRUCTIONS) And your next question comes from the line of Leah Hartman with CR--.

Gentlemen, congratulations on the cost control and moving forward on Version 2.

That sounds like very favorable news from our standpoint.

Can you give us an update on the strategic review that you've engaged Leerink to conduct?

Well, I can tell you this, Leah, and thank you for the question.

Obviously, it's a thorough process that we're engaged in.

We're focused on our current cash resources.

We're moving forward deliberately and with purpose at the Board level and with Management involvement.

I can't get into specifics because we said when we announced the engagement is was something that we would not update folks on likely until we had a definitive agreement in place with someone.

But I also want to make clear no option is off the table.

I don't want to suggest that this is just limited to a strategic discussion with a partner.

We may raise money, we may not.

But all strategic options are being considered and we are moving forward with purpose.

Well can you give us an update that they've completed their due diligence and reported back to the Board or -- and the Board is reviewing the options suggested?

I appreciate the question, Leah.

I don't think that would be fair to the process and is not something that 'm really in a position to speak to.

Okay.

Thanks very much.

All right, thanks.

And your next question comes from the line of Michael [Mascoff] with MRM Capital.

Hey, Jeff.

Good morning, Mike.

Hey, in the press release you say you believe you've reached an agreement with the FDA and I heard what you said on the conference call today.

Can you just elaborate a little saying you believe versus -- or you guide?

Did you have-- do you have a concrete agreement regarding this Version 2?

Sure.

Well, its a good question, Mike.

And it's one of those issues and you've heard us talk about the FDA in the past.

When you've heard us talk about our beliefs that we're on a 510(k) path as opposed to saying we are on a confirmed 510(k) path because the interactions with the FDA are predominantly based on discussion.

They don't issue you certificates confirming that in fact this is what you are faced with at this stage of the process.

So what you're going on are discussions and matters of concurrence with FDA in verbal discussions.

It's a belief we have.

We believe it's well founded and reasonable belief.

But the FDA, as you know, always has freedom, latitude and authority to take whatever position they want.

But I think it's a reasonable path, based on what we've heard from them and we're very optimistic about the discussions we had.

And that's why we're announcing the path we're on.

So you guys are meeting in the next like one or two weeks, you say in the coming weeks, in the next few weeks?

Next several weeks.

And the feedback you're getting from them has been very positive as far as -- as far as the speed, the expeditiousness of this?

Yeah.

Look I mean the discussion we had with them around the Version 1 and Version 2, I think as we explained it to them following this guidelines announcement, now that we know the guidelines endorsement was a category endorsement and not limited for example to just Version 1.

I think the FDA understands that it can save them and us time and resources and energies to just focus on Version 2.

And that seems a reasoned outcome which is why we believe we have confidence in being able to proceed forward on just Version 2 alone.

That's what they told us.

And the, the relationship with LabCorp as a result of this announcement, what was their feedback?

Well, I talked to LabCorp.

I think as we both focus on the better technology and the Version 2 technology, I believe LabCorp wants to move away from Version 1 to Version 2.

So from a compliance standpoint if we had to do the Version 1 study, they were fine with that obviously.

But the fact that we can now focus on the study that's more congruent with our commercial strategy, I think everyone's satisfied with.

So basically in a nut shell, I mean the story for people who've especially followed you guys for a number of years like I have and been investors, what have you, with the former CEO of EXACT Science now with LabCorp and with you guys getting the blessing of ACS and obviously everyone's concern is the cash position.

And you guys have stated on this call that you're moving forward with purpose, et cetera, et cetera.

As each week or month goes by as we get closer to the end of '08, the stock dribbles down, blah, blah, blah.

I believe with colon cancer being the way it is, this could turn out to be a phenomenal story based on x, y and z.

But the real concern is that something gets done real soon as far as raising capital.

I know you guys have talked about this, but that's obviously the going concern issues.

Yes.

Well, you said it very well, Mike and I thank you for that.

I mean let's-- let me frame for you why I agree with you that the story remains phenomenal.

Guidelines inclusion brought category endorsement with an approach that we have the intellectual property in.

That now behind us, an FDA path that we were originally facing a Version 1 and Version 2 regulatory path, now where we believe we are now focused on the Version that we believe offers the most commercial advantage and opportunity.

That's a great story for us in our view, okay.

Into terms of the cash position, we're very much aware of it, have been aware of it.

And it's one of the reasons Chuck Carelli has done such a good job in managing our expenses as tightly as he has.

I guess if I were you, I would be more concerned if we had not announced sometime ago that we had engaged an investment banker to analyze our strategic options and if we were not engaged in that deliberate of strategic processes that we're engaged in.

We're all very much aware of it and are making decisions that we believe are in the best interest of the Company and the shareholders.

And your next question comes from the line of Anthony Giallourakis with VSR Financial Services.

Try that again, thank you.

Jeff, a follow-up question.

This currently homebrew status still exists, is that correct?

As a category?

In other words it wasn't wiped out last year by the FDA, correct?

Correct.

Okay.

Does LabCorp, but I know you can't speak for LabCorp, but based on your understanding of the FDA issues surrounding stool DNA and your conversations with LabCorp, does LabCorp have the option of quietly rolling out Version 2 under their homebrew status, again not making claims, not doing any of the things that would be uncomfortable for the FDA?

But do they have the option of doing that, as best you understand the regulatory environment around homebrew and stool DNA?

Well, look it, obviously for us, we can never speak for LabCorp in terms of what their strategic plans are going to be specifically.

That's LabCorp's role to do that and I have too much respect for those folks to stand in their shoes and say what they're going to do.

But I will say this, the reason we are a lot more confident in Version 2 than some issues we've had in the past, is Version 2 doesn't include some of the components that the FDA had issues with in their original letters to us.

For example, the Effipure component that the FDA focused on is not part of the Version 2 test.

Version 2 uses all off-the-shelf reagents.

It's a two marker test.

So if LabCorp decides based on a license of our patents to go ahead and develop their own test based on Version 2, that's a decision they're going to have to make and I just can't speak for them.

Okay.

But again the question-- I'm not asking whether you-- what you think they're going to do.

Do they have the option?

In other words, so certainly in your discussions with the FDA, you must have asked the question as to whether that option is available, regardless of whether you do it as a CLEA lab or whether LabCorp does.

Because you just brought it up early in the conversation that that's an option that you have.

And by the way, what would qualify EXACT Sciences as a CLEA lab?

I'm sorry, say that again.

What would you have to do to be able to offer Version 2 under homebrew as a CLEA lab?

You brought that up earlier in the conversation.

Yes and again, I don't want to overstate our ability to offer the test, except to say that we've had that discussion with FDA, I've talked about that in the past.

We at one point in time for several years had a CLEA license, and by the way are completing the paperwork now to submit that for this licensure again, to put ourselves in that position, if that's something we think we can execute on in the future.

So I mean -- so let me-- let's just put that piece aside.

In terms of the specifics of the how and the when for a launch of a Version 2, a lot of that, as I mentioned in my prepared remarks is going to be informed by the discussions we have with the FDA as part of our upcoming discussions.

You'll notice that we continue to narrow our discussions and strategy with the FDA along the lines of a particular regulatory filing and how best to align that filing with our commercial strategy.

And that's part of the discussion we're going to have with them, Tony.

I'm sorry I can't give you more specifics on LabCorp's strategy, but that's just not appropriate.

And your next question comes from the line of [Larry Litten] with [Second Line Capital].

Hi, good morning, Jeff.

Good morning, Larry.

In terms of a prior question, obviously we appreciate that you're running out of runway and yo're addressing that issue from a financing standpoint but obviously the stock is drifting down here in a void.

And you-- have you gotten enough feedback that you have some confidence that there is a reasonable option here, whether it is strategic or financial and that we can avoid something that's terribly toxic?

Do you have that degree of information, feedback and confidence?

I am highly confident in the process.

I'm highly confident in the advisory we've chose and I'm highly confident in the analysis of the Board and Management are undergoing.

I am reluctant to get into any discussion of mechanism specifics and approach for the same reasons I mentioned to Leah, not because I don't think they're good questions, just because I don't think it's fair to the process or consistent with what we said we were going to do publicly in our announcement with Leerink.

So you can't say whether you are at a point where you've got enough knowledge to have some confidence in the outcome?

No, well, Larry, I mean--I don't know how to say it.

I mean I'm not trying to-- I know it's-- I don't want to be dismissive of this because it's an important question and a helpful question.

But if we go out with a press release that says we've engaged an investment banker and the next point of update is going to be when and if we enter into a definitive agreement, I kind of have to stick to that.

Not that I want to dismiss your question, but I've got to stick to a process that I announced publicly in the market.

Okay.

But I appreciate the question.

And your next question comes from the line of Leah Hartman with CRT Capital.

Hi, thanks for taking this follow-up.

When you-- when Chuck and you, Jeff, mentioned the average risk population and the estimated time to accrue for a trial, is that accrual estimate based on what you went through previously when you were doing a clinical trial?

And if that's true, would you think that it might be a quicker accrual now that you're in the guidelines?

Or is this a new estimate based on your own guidelines with this type of task that's now been approved and you think it's a quicker accrual than you had experienced in the past?

I think there are opportunities for this accrual to be quicker.

Again, as Chuck mentioned in his remarks, some of this is luck of the draw.

I mean we're based-- it's based on the prevalence of the disease, which is in fact, informed by our experience from the Version 1 study.

But there are aspects of how we're approaching this that I think can lead to a quicker recruitment.

I think the guidelines piece of it is not insignificant.

Part of this is recruiting patients who've heard of the technology, know about what it is, and to be able to say that this is a guidelines approved technology can be exceedingly helpful.

We also had experience with collaborators and knowledge around how to collect samples and who the high volume sites are now that I think is a learning curve for folks and can be exceedingly helpful as we think about our recruitment for Version 2.

So your assessment of this 12 to 18 months is based back on the accrual rate that you experienced previously to be conservative?

It's informed by that, in part, but it's informed by other elements that we've learned--

Okay.

Since then as well.

All right.

Thank you.

Yes, thanks Leah.

(OPERATOR INSTRUCTIONS) And there are no further questions.

I'll now turn the call back over to Mr.

Luber for closing remarks.

Thank you all very much and we look forward to touching base with you in the future.

And thank you for your participation in today's conference.

This concludes the presentation.

And you may now disconnect, good day.