Fulgent Genetics Inc (FLGT) 2022 Q3 法說會逐字稿

Hello, and welcome to the Fulgent Genetics Q3 2022 Earnings Conference Call. (Operator Instructions) As a reminder, this conference is being recorded.

It's now my pleasure to turn the call over to your host, Melanie Solomon, Investor Relations. Please go ahead.

Good afternoon, and welcome to the Fulgent Genetics third quarter 2022 financial results conference call. Today, we will also be discussing the acquisition of Fulgent Pharma announced after the markets closed in a separate press release. On the call are Ming Hsieh, Chief Executive Officer of Fulgent Genetics; Paul Kim, Chief Financial Officer of Fulgent Genetics; Brandon Perthuis, Chief Commercial Officer of Fulgent Genetics; Lawrence Weiss, Chief Medical Officer of Fulgent Genetics; and Dr. Ray Yin, President and Chief Scientific Officer of Fulgent Pharma.

The company's press release discussing these 2 announcements are available on the Investor Relations section of our website, fulgentgenetics.com. The webcast portion of this call contains a slide presentation that Bill will refer to during the call. Those following along on the phone who wish to access the slide portion of this presentation may do so on the Investor Relations section of our website. For those who have accessed the streaming portion of the webcast, please be aware that there may be a few seconds of delay and that you will not be able to post questions via the web. A replay of this call will be available shortly after the call concludes on the Investor Relations section of the company's website.

Management's prepared remarks and answers to your questions on today's call will contain forward-looking statements. These forward-looking statements represent management's estimates based on current views and assumptions, which may prove to be incorrect. As a result, matters discussed in any forward-looking statements are subject to risks, uncertainties and changes in circumstances that may cause actual results to differ from those described in the forward-looking statements. The company assumes no obligation to update any of the forward-looking statements it may make today to reflect actual results or changes in expectations.

Listeners should rely on any forward-looking statements as predictions of future events and to listen to management's remarks today with the understanding that actual results, including the company's actual future results, may be materially different than what is described in or implied by these forward-looking statements. Please review the more detailed discussions related to these forward-looking statements, including the discussions of some of the risk factors that may cause results to differ from those described in these forward-looking statements contained in the company's filings with the Securities and Exchange Commission, including the previously filed 10-K for the year ended December 31, 2021, and subsequently filed reports, which are available on the company's Investor Relations website.

Management's prepared remarks, including discussions of earnings and earnings per share, certain financial measures not prepared in accordance with accounting principles generally accepted in the United States or GAAP. Management has presented these non-GAAP financial measures because it believes they may be useful to investors for various reasons, but they should not be viewed as a substitute for or superior to the company's financial results prepared in accordance with GAAP. Please see the company's press release today discussing its financial results for the third quarter of 2022 for more information, including the description of how the company calculates non-GAAP income and earnings per share and a reconciliation of these financial measures to income and earnings per share, the most directly comparable GAAP financial measures.

With that, I'd now like to turn the call over to Ming.

Thank you very much, Melanie. Good afternoon, and thank you for joining our call today to discuss our third quarter 2022 results and the acquisition of Fulgent Pharma. I will start with some comments on the transaction and my vision for Fulgent before turning the call over to my co-founder, Dr. Ray Yin. Then Brandon will review our product and go-to-market updates from the third quarter and Paul will conclude with the financial and outlook before we take your questions.

I'm pleased to announce that we have acquired Fulgent Pharma, a company I have been running with my co-founder, Dr. Ray Yin as a private entity. We believe this acquisition has the potential to rapidly transform Fulgent Genetics from a genetic diagnostic service business into a fully integrated precision medicine company focusing on oncology. We are also joining our team of talent individuals integrating our companies to address the continuum of care that we believe begin with diagnosis and end with patient care. Let me take a step back and provide a brief history of these 2 companies. Showing on this time line slide, Fulgent Pharma and Fulgent Genetics were previously both owned by the Fulgent Therapeutics, until 2016, when the business were separated ahead of initial public offering of Fulgent Genetics. The company has operated as separate entities since 2016, enabling each business to focus on and scale its core business across genetic testing and therapeutics.

Over the last year, Fulgent Genetics has taken measured steps to accept the food cost in the large market of oncology testing, most notably with the acquisition of CSI Laboratories in August 2021 and opening state-of-the-art oncology testing facility in Southern California in May 2022. We believe the platform we have built with Inform Diagnostics and CSI make us uniquely positioned to deliver a full suite of genomic testing capabilities to our biopharma clients. We have been building this sequencing as a service business over the last few years and we're seeing a meaningful opportunity to continue expanding these operations in the years ahead. As we build up on our genomic testing capabilities to offer a more comprehensive suite of services to our customers, we also recognize that both therapeutics industry and our pharma business may benefit from the learnings and expertise in NGS and Genomics.

Fulgent Pharma has developed a novel nanoencapsulaton and targeted therapy platform technology designed to improve the therapeutic window and the pharmacokinetic profile of both new and existing cancer drugs. Based on the current study and our pre-designed criteria, we believe our lead drug candidate, FID-007 has achieved proof-of-concept of treatment of numerous cancers, including Head and Neck, Ampullary, Pancreatic, Lung and Breast, as presented at ASCO 2021. Both pharma and diagnosis have well-vetted technology platform and the talented science teams have already taken a new and existing challenges in precision medicine and patient care. We believe we bring these 2 entities back together will unlock a significant long-term upside for both pharma and diagnosis business, while efficiently most current and future risks.

Our vision of Fulgent has always been to build a vertically integrated solution to potentially help patients developing and overcome cancer. The novel nano drug delivery technology platform synergistically underpins the combined business and help create a more sustainable and product business model in precision medicine for years to come. With large database from diagnostics business and the deep drug-candidate pipeline from a pharma drug delivery platform, we can potentially bring more effective therapy or precision medicines while mitigating development risk. Our near-term opportunity, including using FDA's 505(b)(2) new drug submission pathway to potentially shorten development time lines.

In the long term, we believe we can leverage our insights from the diagnostics business to enable precision medicine through organic or partner development strategies. With this combination, Fulgent Pharma will fully integrate with genetics, adding 30 people along which are the PhD scientists, will bolster our already existing base of more than 100 pathologists, genetics and PhDs. With this combination, our head count is well over 1,000 people, spanning offices in California, Texas, Arizona, Georgia, Florida, Massachusetts and New York.

We believe with this capability along with the strong cash position of Fulgent Genetics will allow us to continue to invest in this combined business while managing potential risks. This business combination advances our mission to build a vertically integrated platform to provide comprehensive service and solutions across cancer care continuum, including early detection, diagnostics, monitoring as well as drug discovery and development. The progress of each business has made today enable each other with technology and insights toward a common goal of improving continuum of care for patients.

We believe we are well capitalized to capture pharma pipeline with no additional financing or dilution to shareholders. We have an efficient research program in place as well as manufacturing capabilities that may leverage for both sides of the business, overcoming potential future hurdles of drug development. We already have a team in place. The combination of these 2 businesses diversifies our access and will. Assuming regulatory pool provides significant future revenue opportunities and margin opportunities through a lucrative target market.

Before I turn over to Ray, I want to highlight the target market we have chosen for the pharma business is a large and well established. We believe we have opportunity to capture a portion of this market through indications that we have chosen to focus on data from completed ongoing studies of our current drug candidate developed with our novel drug delivery technology that will provide early evidence that some of these candidates may be able to achieve the targeted indication. We believe we have potential to bring some exciting drug candidates to the market through our platform.

Now, I would like to introduce my Co-Founder and President and CSO of Fulgent Pharma, Dr. Ray Yin to provide more details on platform and the pipeline candidates we have been working on. Ray and I have been working together since 2004, when I served as the CEO of Cogent Inc. We later found the Fulgent Therapeutics together in 2011. Ray?

Thank you, Ming. I'm pleased to be here today to discuss the Pharma business. As Ming mentioned, we have been working together for many years. In addition to Fulgent, I also founded ANP Technologies, Inc., a nano-biotechnology based company and has served as its CEO and CTO since its inception. Prior to that, I worked at the U.S. Army Research Laboratory and managed its nano-biotechnology for chemical and biological defense program. Our efforts at Pharma are based on a novel nano drug delivery platform technology capable of delivering various water insoluble or poorly soluble drugs.

Unlike some of the drug delivery materials such as human serum of human or HSA, which is only soluble in water, our nano drug delivery materials used for drug candidate development are soluble not only in water, but also in various organic solvents as well as capable of hot-melt mixing with active pharmaceutical ingredients or APIs. We believe these advantages will allow us to generate a much broader range of drug candidate formulations, particularly amorphous drug candidate formulation, which can be used for both IV and oral formulations with a goal to improve pharmacokinetics or PK profile as well as safety and efficacy.

With this platform, we believe we have the opportunity to use a 505(b)(2) approach to shorten development time lines for active pharmaceutical ingredients or API that the FDA has previously approved. This plug and play approach allows for multiple shots on goal during our development, therefore, giving us more chances to win. In addition, the simple manufacturing process also lowers the product cost significantly. Our lead drug candidate, FID-007, has a manageable safety profile with maximum tolerated dose not reached at 125 milligrams per square meter per week in a Phase I clinical trial.

Dosing at 160 milligrams per square meter per week is ongoing. The Phase I trial is being conducted by the University of Southern California in collaboration with the National Cancer Institute. We have observed the preliminary evidence of anti-cancer activity in heavily pre-treated patients across different tumor types, for example, in head and neck and ancillary cancers as well as checkpoint inhibitor resistant cancer patients. So far, in the Phase I trial, we have not observed any serious side effects related with peripheral neuropathy.

Using the same nano drug delivery platform, we have generated a deep pipeline of wholly-owned drug candidate, focused on head and neck, pancreatic, lung, breast and colon cancers. In addition to our lead candidate, FID-007, we have 2 other drug candidates, one for colon cancer and the other is an NCE or new chemical entity targeting STING pathway, which have also been tested extensively in preclinical studies. If we were able to continue developing FID-007 under the 505(b)(2) pathway, we expect to begin Phase II and III trials in 2 to 3 target indications in the next 1 to 2 years with data readouts over the next 3 to 4 years.

We also have a robust preclinical pipeline, which includes additional 505(b)(2) and novel NCE therapeutic candidates. For example, multi-kinase inhibitors and BMI-1 inhibitors, potentially for additional oncology-related indications. We believe our genomic database can further fuel the discovery and the development of additional new drug candidates, which can potentially address various unmet needs such as drug resistance through precision medicine to cancer patients as biomarkers play a key role in creating these targeted therapies.

I will now turn it back to Ming to wrap up on the transaction.

Thank you, Ray. This transaction reinforces my commitment to both business and I believe it will realize our vision, building a vertical integrated solutions to potentially combat cancer. Based on the current studies and the pre-designed criteria, we believe we have a proof-of-concept of FID-007 candidate in hand and the initial targeted indication for head-neck cancer provides an attractive entry point and possibly rapid commercial utilization trends and assuming a regulatory approval, a path of probability in therapeutic segment. In long term, we have opportunity to leverage data inside from diagnostic businesses to enable precision medicine through proprietary of partner development strategy as we continue to grow our diagnostic business through organic investments and strategic M&A.

I will now turn over the call to Brandon Perthuis, our Chief Commercial Officer, to talk about our diagnostics business results during the third quarter. Brandon?

Thanks, Ming. Turning to our core business, which we define as our sales minus all COVID-19-related testing, both PCR and NGS. Core business revenue was $56 million in the third quarter compared to $27 million in the same period the prior year and $45 million in the second quarter of 2022, representing 110% growth year-over-year and 24% growth sequentially. Our investments in Fulgent Oncology, Pharma Services, CSI and Inform Diagnostics are performing well as we begin to tap into the synergies across the business units.

With our diversification into oncology and pathology added to our robust test menus for pediatric genetics, reproductive health, hereditary cancer, neurological conditions and more, we have created one of the largest test menus in our industry. Not only do we offer one of the largest test menus, we also continue to excel as it relates to turnaround time, depth of coverage, reliability of CNV calls with proprietary algorithms, ease of use and access with custom portals and interfaces, along with the ability for our clients to customize their gene panels.

Historically, we have served as a reference lab for many hospitals, academic medical centers and commercial laboratories. However, now with direct access to the payers and over 300 million covered live, we'll be able to address the commercial pay market. This opens up an entirely new channel for Fulgent. That said, while we had hoped we would have these contracts rolled up with the ability to sell into for the fourth quarter, it is taking a bit longer than we predicted. We now anticipate the contract roll-up will be completed by the end of the year, allowing us to penetrate the direct pay market starting in 2023.

Paul will address our Q4 forecast in detail, but at a high level, we are projecting the core business at $52 million, down sequentially, however, up 86% year-over-year. The sequential decline is due in part to significant seasonality in our Inform Diagnostics business related to a drop in elective surgeries and procedures around the holiday season as well as the delay in managed care contract roll-up and the delayed adoption and reimbursement of HelioLiver. We view these as transitory and expect our business to gain momentum throughout 2023.

On the sales team front, we have recently completed comprehensive cross-training for the legacy Fulgent sales team and the new Inform Diagnostic sales team along with the restructuring to align with the corporate go-to-market strategy. This accomplished 2 things. It greatly increased the sales coverage for the Inform Diagnostic products and it brought together the subspecialty sales team to take full advantage of our product portfolio and synergies.

In terms of synergies, we are currently focused on penetrating the large IDX client base with Fulgent products. For example, selling our hereditary cancer test to gastroenterologists and urologists for hereditary colon cancer and hereditary prostate cancer panels, respectively. These are just 2 clear examples. In addition, with our specialty offering in nerve fiber testing, IDX has established a very large national adult neurology client base. As we get our contracts rolled up, these clients are the target audience for our adult neurogenetics test, which now has a menu of over 80 unique panels. As we mentioned on previous calls, there were several territories where IDX had not had a historical sales presence, but has the necessary contracts to sell. We see these as green territories and we have now placed reps in several. The total size of the sales team is now right at 50 people, including our Pharma Services and Oncology division.

A quick update on HelioLiver. We have now onboarded over 90 clients. We generally view these as the early adopters. Unfortunately, even as early adopters, they have not fully integrated HelioLiver into their patient care. We believe this is just a matter of time. However, there is still work to be done to get there. For example, many clinicians want to see practice guidelines before wide-scale adoption or local coverage determinations. We believe the CLiMB prospective study is a critical piece of evidence to drive to these endpoints. Recruitment for the study is complete and the team is aiming to publish the data in the second quarter of 2023. In addition, we expect HelioLiver to be submitted to the FDA in the third quarter of 2023.

Turning to COVID-19. The U.S. is now in a much better place with COVID, with cases steadily trending down since summer. In addition, many of the screening programs have been stopped, including employee screening and back-to-school programs. This has all happened much faster than we predicted. However, since the early days of COVID-19 has been very difficult to predict the state of the virus and testing. To adjust to the rapid decline and remain cost efficient, we have shut down our Houston operation and scaled back operations in Temple City. We have significantly reduced the operational cost to support COVID-19 testing by rightsizing the lab team to support the remaining test volume. We still maintain the laboratory infrastructure, but if needed, we can ramp back up support high-volume COVID-19 testing very quickly.

I will now turn the call over to our Chief Financial Officer, Paul Kim. Paul?

Thanks, Brandon. Revenue in the third quarter totaled $106 million compared to $228 million for the third quarter of 2021, in line with our overall guidance of approximately $105 million. Billable tests in the quarter totaled $952,000 compared to $2.2 million in Q3 of last year. The year-over-year decline was again due to COVID testing dynamics. Breaking down revenue a bit further, roughly $50 million came from COVID-19 testing in Q3 compared to our guidance of $51 million. Revenue from our core business totaled $56 million, which exceeded our guidance by $54 million and grew 110% year-over-year. And as a reminder, our core revenue includes our NGS business, contribution from our JV, CSI and Inform Diagnostics and excludes NGS COVID testing from the CDC.

As demand for COVID PCR testing remains volatile and generally trending lower, we continue to take a conservative stance on expected revenue from COVID testing. We remain focused on executing on our post-COVID growth opportunities, which include the integration of Inform Diagnostics, expanding the reach of CSI capabilities, executing on additional investment and partnership opportunities, ongoing work with Helio on joint commercialization and growing our footprint from (technical difficulty). Our ASP in the third quarter was $111, higher than the $94 we saw in the second quarter of 2022. Our ASP has fluctuated along with the mix of COVID testing. Cost per test for the quarter was $63 versus $45 in the second quarter of 2022, largely due to the shifting mix away from COVID testing to more of our core testing, including testing from Inform Diagnostics.

As a reminder, our cost per test on our core portfolio can be as high as $200. So, as COVID testing continues to decline, the average cost per test will increase to a more normalized level for our core genetic testing portfolio. Gross margin was 43.6%, down 37 percentage points year-over-year and down 8 percentage points sequentially. The reduction in gross margin was again due to testing mix, including higher costs associated with our core genetic testing portfolio, including testing from Inform Diagnostics. We anticipate gross margin to be under pressure in the fourth quarter as our anticipation for COVID revenues will be very low, combined with lower expected core revenues in our previous guidance, which I'll elaborate in the guidance section of the call.

Now turning over to operating expenses. Total GAAP operating expenses were $45.7 million in the third quarter, down from $52.5 million in the second quarter of 2022. Non-GAAP operating expenses totaled $37 million, consistent with last quarter. Non-GAAP operating margin decreased 13 percentage points sequentially to 11%. While the expense structure of our legacy Fulgent business remains lean, we have incurred a number of incremental expenses as part of our recent acquisitions as expected. We have made significant investments in people, infrastructure and operations to support our growth and these investments are putting pressure on our operating margins for the near term. We remain confident that these investments will translate into demonstrable ROI and drive outsized future growth of our core business. At the same time, we're pleased with our ability to still generate positive EBITDA and cash flow during this transformative time for our business.

Adjusted EBITDA in the third quarter was $19.7 million compared to $167.3 million in the third quarter of 2021. On a non-GAAP basis, and excluding equity-based compensation expense, intangible asset amortization and restructuring costs and acquisition costs related to Inform Diagnostics, income for the quarter was $9.8 million or $0.32 per diluted share on 30.9 million weighted average shares outstanding. Turning over to the balance sheet. We ended the third quarter with approximately $918 million in cash, cash equivalents and marketable securities. We generated $20.8 million of cash from operations during the quarter despite the significant investments we made in our business in the quarter.

I'd also like to highlight that we were active with our share repurchase program in the third quarter. We repurchased over 780,000 shares of our common stock with an average -- with an aggregate cost of $34.7 million at an average price of $44.49 under the stock repurchase program announced in March. As of September 30, 2022, a total of approximately $204 million remained available for future purchases of our common stock under the stock repurchase program. In addition, subsequent to September 30, 2022, we repurchased another 244,000 shares of our common stock for an average aggregate cost of $9.1 million at a price of $37.33.

Moving on to our outlook for 2022. We saw a sharp drop in demand for COVID testing orders in Q3. As such, our expectations for Q4 COVID has changed significantly. We now anticipate approximately $8 million of COVID revenues versus the previous expectation of $54 million. This translates into $433 million of COVID revenues for the full year, inclusive of the $425 million we did in the first 3 quarters of the year. As stated in the past, revenue from COVID testing has been a nice lift to the business, though very difficult to predict. Moving on to our core revenue guidance, which will include contribution from Informe Diagnostics.

We now expect core revenues to be approximately $178 million for 2022, representing a growth of 92% year-over-year, which takes into account the outperformance we achieved in Q3. This translates into guidance of $52 million in core revenues for the fourth quarter. The weakness in our core revenues is attributable to falling short on anticipated revenues from HelioLiver combined with the utilization and capitalizing of reimbursement contracts from the acquisition of Inform Diagnostics as well as seasonality. We see these issues as temporary and believe we'll be back on track to grow our business again in 2023.

With $433 million in COVID revenues and $178 million in core revenue, we expect total revenue to be approximately $611 million for the year. We expect there will be continued volatility with COVID testing and remain focused on executing our strategy to drive momentum in our core business. From a profitability standpoint, we remain focused on investing in our business to drive sustainable long-term growth. That being said, we expect to see meaningful pressure on operating margins in the quarters ahead as we integrate and further invest resources of our recent acquisition. In addition, our conservative assumption for COVID testing demand will result in lower growth in operating margins relative to the record high margins we experienced during the COVID crisis.

Long term, our foundational technology platform supports a strong margin profile and we'll continue to manage our spending with discretion to drive operating leverage. For our full year 2022, utilizing a 28% blended tax rate and a share count of 32 million, we expect net non-GAAP income of approximately $5.60 per share for our shareholders, excluding stock-based compensation, amortization of intangible assets, restructuring costs and acquisition costs to Inform Diagnostics as well as any other one-time charges. The third quarter marked a notable milestone for Fulgent with core revenue exceeding COVID revenue for the first time since the early days of pandemic. We have also set the bar for our core business at over $200 million annual revenue run rate going forward even with the anticipated weakness in our Q4 revenue guidance.

Shifting gears with the acquisition of Fulgent Pharma, we anticipate reporting on this business segment separately going forward, which will include capital and cash requirements to fund the robust pipeline. We'll also be reporting on progress of key milestones of this business on each of our earnings calls. Our updated guidance is posted on slides on our Investors Relations website, which show the detailed breakout I just discussed. The pharma slides we just presented today are also posted on our website, as Melanie mentioned.

Thank you for joining the call today. Operator, you may now open it up for questions.

(Operator Instructions) Our first question today is coming from David Westenberg from Piper Sandler.

This is John Peterson on for Dave Westenberg. Congrats on the acquisition of Fulgent Pharma. It's a really exciting funding opportunity. So first off, I'd just like to, to ask your implied like the organic growth rate seems to be like very high for your core business. Can you talk about how you're able to pick up so many hospitals and so much volume during the pandemic and how -- just how that's been going for you?

So David, thank you for the questions. I think we also known one of our major business for the -- during the past 2 years has been the COVID. And we are very proud to be part of the company, combating the pandemic. As the pandemic we've seen getting to the end, that is a very good sign for the country and for the entire economy. But we always have been trying to invest in the resources we have to see how do we build a long-term growth. As you see, we announced that we have -- that our core revenue has outperformed the COVID revenue for the Q3. Part of those -- the revenues we have is from our acquisitions from the CSI and the Inform Diagnosis. It will take us a little bit more time to build more efficiency from these acquisitions and integrate with our genetic testing business. But we see the strategy has been working for us. But definitely, we're adding our new acquisition we have announced today, we hope we'll build an individual solution not only focused on the diagnosis, but increases complete solution, which is the patient care.

And also next, if you could just -- just talk to me about given that the COVID revenue, the guidance has come down. How should we think about the underlying margins going forward given that COVID is tailing off?

Yes. So, I'll take that one. The biggest surprise for us during the quarter was the drastic drop-off in the COVID testing demand, which we incorporated into our conservative COVID guidance for Q4. And because of the sharp drop off, it's going to take us a little bit of time. Our guess is 1 to 2 quarters for us to realign our investments and our cost structure, particularly related to the COVID part of the business.

And then Brandon mentioned temporary weakness in our ambitions for the core revenue, we believe that, that will be back on track in 2023. So what we're doing and what we have been doing is realigning and restructuring our cost to make sure that even on an intermediate basis that our margin profile and our leverage is there and we believe that, that will take 1 to 2 quarters for us to adjust. And then once we're back on the growth path for our overall core business, without counting too much on COVID, we anticipate the weakness that we anticipate in the margin profile for Q4 to start grading up again.

And also about the Fulgent Pharma acquisition, you mentioned several different indications that you could potentially be going after within the next coming years. Is -- are there any of those in particular that you're most interested in because there were several that were mentioned.

Thank you, David. First of all, we are from the data we have so far, we have very good indications initially focused on head and neck cancer, that's the area, which is the area lacking of the -- some of the therapies. But also the indication we have with pancreatic, ampullary and the other disease. But in terms of the pipeline, we also see our strong cancer candidate, which is focused on the colon cancer. And that drug is we're trying to push accelerate the clinical research approaches as we push into as soon as possible to the clinical trials. So, we will provide an update once we get all 2 businesses integrated and when we meet with the FDA authorities.

(Operator Instructions) Our next question is coming from Dan Leonard from Credit Suisse.

Is there any way you could frame for us the cash and capital needs of the Pharma business over the next, call it, 1 to 2 years?

Sure. I'll take that on. And then after my comments, if Ming and Ray have any additional comments to add. The capital needs for the Pharma business for 2023 and 2024, we believe it won't be that significant. We anticipate that the totality (technical difficulty) in each of the years will be somewhere in the mid-teens million. So, anywhere from (technical difficulty) of cash needs. And we believe that the advantage that we have is, there's been a lot of work and investment that went into the pharma asset, as Ming indicated, from its assumption in 2011. So again, the capital needs for the next couple of years should be in the $15 million, $16 million, maybe $17 million per year. So, it's not going to disrupt the capital optionality that we have, the cash position for the company.

And if you see we starting to burn more than the cash, as Paul indicated, and that is a good sign. It doesn't mean that we will be providing some kind of acceleration in terms of development or the new drug candidates getting into the clinical trials.

And then for my follow-up question for Brandon, I wasn't sure I fully understood the contract roll-up feature you were talking about with your guidance. Could you circle back to that and maybe elaborate on what's evolved differently than planned?

Yes, certainly. Thanks for the question. It's just mechanics, Dan. So, those contracts need to be assigned to Fulgent. We have to work with the payers to do that. So, just mechanics, just contracting, just pushing paper work. And it's just taking longer than we predicted. I don't know if there's any reason behind it, staffing shortages, I don't know. But it's just mechanics taking longer than we thought. So, once they're all rolled up to the Fulgent corporate level, then we will have -- be able to deploy those contracts across our various entities.

And then final question, you mentioned the new $200 million baseline in revenue for core Fulgent. Do you have any framing thoughts for us on how rapidly you think that could grow in 2023?

I believe our intention for any kind of investment that we make is to grow faster than the marketplace. And because of our diversified portfolio and the overall market reach that we have, we wouldn't be surprised if the growth of our overall business is anywhere from, say, like 10% to maybe like 20%, 25% range. I mean that would be the goal that we have at the moment. I mean, again, we're going to be laying out guidance when we announce the next quarter call for 2023. So, we'll have more specified ranges and details that we can talk about at that point. But our intention has always been to grow faster than the marketplace.

Thank you. We reached the end of our question-and-answer session. And ladies and gentlemen, that does conclude today's teleconference and webcast. You may disconnect your lines at this time, and have a wonderful day. We thank you for your participation today.