NantHealth Inc (NH) 2017 Q1 法說會逐字稿

Welcome to the NantHealth First Quarter 2017 Financial Results Conference Call.

At this time, all participants are in a listen-only mode. Later, we will conduct the question-and-answer session and instructions will be given at that time.

(Operator Instructions)

As a reminder, this conference call is being recorded.

I would now like to turn the conference to Robert Jaffe, Investor Relations for NantHealth. Sir, you may begin.

Welcome, everyone and thank you for joining us today to discuss NantHealth's 2017 First Quarter Financial Results. On the call today are Dr. Patrick Soon-Shiong, Chief Executive Officer and Paul Holt, Chief Financial Officer. This call is being broadcasted live at www.nanthealth.com. A playback will be available for three months from NantHealth's Web site.

I would like to make a cautionary statement and remind everyone that all of the information discussed on today's call is covered under the Safe Harbor Provisions of the Litigation Reform Act. The Company's discussion today will include information reflecting management's current forecast of certain aspects of the Company's future and actual results could differ materially from those stated or implied.

In addition, during the course of this call, we may refer to non-GAAP financial measures that are not prepared in accordance with the US generally accepted accounting principles and may be different from non-GAAP financial measures used by other companies.

Investors are encouraged to review NantHealth's press release announcing its full 2017 first quarter financial results for the Company's reasons for including those non-GAAP financial measures in its financial results announcement. The reconciliation of non-GAAP financial measures to the most directly comparable GAAP financial measures is also contained in the Company's earnings release issued earlier today.

Today, Patrick will provide a brief overview of the quarter and discuss the business funds followed by Paul who would discuss the financial results in more detail. We will then open the call for questions.

With that said, I will now turn the call over to Dr. Patrick Soon-Shiong. Patrick?

Thanks, Robert. Good afternoon, everyone and welcome to NantHealth 2017 First Quarter Financial Results Conference Call. As a reminder, in early June 2016, we completed our [high price] successful initial public offering raising the net proceeds of approximately $83 million. And then during the fourth quarter in 2016, we also completed a successful [condition traction] raising net proceeds of more than $102 million.

There are those who are familiar with NantHealth and those are new to NantHealth, so, I'd like to provide a brief overview of the Company and our mission. So, what is our mission? NantHealth is a leading next-generation, evidence-based, personalized health care company driving the right care at the right time, at the right place. Everything we do is patient-provider driven to achieve the best outcomes at the lowest cost.

Our unique systems-based approach to diagnosis and care planning is tailored to the specific molecular profiles for patient tissues and integrates this data with large-scale, real-time biometric signal and phenotypic data, to track patient outcomes and deliver true precision medicine.

So, let me describe the three pillars that we have built in order to achieve this goal. Firstly, our diagnostic profile GPS which enables improved patient outcomes and more effective treatment decisions for critical illnesses. I'll speak more to this in detail later in this -- in the discussions.

Secondly, we [wrote] an adaptive learning system and this has taken us 10 years to develop, which includes our unique software, our middleware and hardware systems infrastructure which we called NantOS. This operating system collects, indexes, analyzes, and interprets billions of molecular, clinical, and operational and financial data all derived from novel and traditional data sources.

We are not aware of any system that has the capacity and has been built to integrate such complex and diverse data sources. This system will continuously improve decision-making and further optimize our clinical pathways and decision algorithms over time.

The third element of our platform is our pioneering efforts in the area of Big Data and what we call augmented intelligence. We believe we are uniquely positioned to benefit from multiple significant market opportunities as health care providers and payers transition from a fee-for-service to value-based reimbursement models and accelerate the pursuit of evidence-based clinical practice, driving better outcomes at lower cost.

I am committed to this goal that the work we have undertaken over the last 10 years and continues today will be transformative by health care system and for the millions of lives impacted by cancer. So, before I go into the details about our business, I would take this opportunity to get something off my chest.

While it's not [fitting] for us to dignify false reporting or to be further distracted by any of these false claims, I feel it's important for me to address at a truly egregious false statement. Recently reports stated that NantWorks purchased the Jefferson property from which I'm calling now from our foundation for $6 million.

That statement is false and worse, the reporter knew that NantWorks actually paid $15.5 million before he published the article. Yet he published a false statement of [para sell table] by NantWorks by stating a fabricated amount, about $6 million. We demanded a retraction and correction but not surprisingly to date the editors have failed to respond.

We will no longer be distracted or even to react to all these false reportings and the details of this particular egregious statement will be put in our website, for all to review. But now let's go on to really what is important is the business of actually transforming health care for all of the nation and our focus on a cancer vaccine.

So, let's turn to the GPS business. I'd like to start with adoption. During the first quarter a total of 365 commercial tests were ordered. This is up from 326 in the fourth quarter of 2016 and a total of 266 commercial tests were delivered up from 253 in Q4. As of March 2017, the number of patients with the cancer covered by our payer with GPS testing was approximately 327,000. This [number] includes lives anticipated upon completion of the pilot project with Horizon Blue Cross Blue Shield and it's up from 322,000 at the end of Q4.

Let's address the coverage which I think is the all important statement of how adoption will ultimately occur. We added two new payers for a total of 10 payer contracts with self-employed and health plan payers that now cover GPS cancer. Subsequent to the quarter, [in April, we] assigned an international reseller that this brings to forward the total number of international payers or resellers. Importantly, we are ramping our efforts to educate the oncology community about the benefits and value of GPS by investing an experience sales and account management staff.

Thus far, in 2017, we have doubled our sales team members that core oncologist and expect [a more step] during the coming year. Today, we made our first [resale about the] -- Dr. Bobby Reddy who joined us as Chief Medical Officer and as you could read from today's press release is a [clearly] accomplished physician and oncologist who will certainly play a major role in educating the clinical and scientific community about not only the clinical utility but the validity and the opportunity for this diagnostic test to transform their practices.

We've also increased our clinical support for oncologists engaged with our GPS Cancer team and our plan is for sales team to focus on recording, also on payer both the commercial and self-insured and for our field teams to educate physicians. As we've discussed briefly on our last call, we've recently just what we called pilot programs to further accelerate adoption.

The data that comes out of the GPS Cancer is not only complex but what's exciting is very actionable and this is now being demonstrated routinely by the users who are now -- some centers have now known 100 to 200 consecutive tests and finding hugely [actual] information.

Under these pilot programs, commercial insurance agree to pay for a certain number of GPS profile which is part of the pilot project. In addition, we have developed a GPS Cancer benefit option that can be purchased as a supplement to existing benefits through aggregators. Our first group is expected to come on board late in our Q3.

Let me discuss yesterday's exciting announcement regarding the FDA's authorization of the NANT Cancer Vaccine trials. Somebody asked me what is the NANT Cancer Vaccine actually stands for, N stand for Nab or nanoparticle albumin bound or new antigen. The A stands for antigen in which we will activate the antigen which is using adenovirus or yeast vaccines. The N stands for natural killer cells. It's an endogenous and exogenously and T stands for T-cells in which we will activate using IL-15 [super actives].

So, that's the Nant vaccine in which NantCell and NantKwest [through] the companies of NantHealth are focusing on harnessing the unique part of our immune system using natural killer cells to treat cancer. Yesterday, the Company has jointly announced that the FDA has authorized an IND for the NANT Cancer Vaccine for clinical trial enrollment for pancreatic cancer patients. Excitingly, NantHealth GPS Cancer tests will be the complementary diagnostic for these clinical trials.

As I said before, GPS Cancer test is one of the few tests in the country that measures not only the genome and the transcriptome and the quantitative proteome so that we can recognize [a priority] where the patient would be sensitive or resistant to chemotherapy, to targeted therapy, to monoclonal antibody therapy and even to checkpoint inhibitors.

The NANT Cancer Vaccine is the first combination immunotherapy protocol to orchestrate the delivery of metronomic low-dose radiation chemotherapy with this GPS molecularly informed tumor-associated vaccine, as well as natural killer cells in which it will activate both the innate and the adaptive immune system and induce what we call immunogenic cell death.

By inducing this immunogenic cell death and protecting, as well as enhancing the innate and adaptive immune system, the NANT Cancer Vaccine seeks to obtain long-term sustainable remission of multiple tumor types with lower toxicity and higher efficacy than the current standards of care.

So, we recall in January 2016 when we announced our Cancer MoonShot 2020 which we now have renamed Cancer Breakthroughs 2020. We started announced through journey to develop effective personalized cancer treatments to further enhance and harness the human body's innate immune system as a complete paradigm change to treating patients with cancer.

We brought together pharmaceutical companies, biotechnology companies, insurance companies, committee oncologists, pediatrics -- and the fruit of this labor has now been born by the FDA clearance,which is a further step in our 25-year quest to develop this cancer vaccine that seeks to induce immunogenic cell death and to orchestrate this innate and adaptive immune system through this delivery of these molecularly informed, biological platforms.

As I said, the acronym NANT stands for N Nab, A antigen, N natural killer cells, T IL for [inducing] proteins, and to our knowledge this is the first clinical study whereby protein anti particles, Nab, which is the molecule I invented as now being sold as Abraxane could be delivered with low-dose metronomic chemotherapy and combined with molecularly informed tumor-associated antigens, which would be activated in both the dendritic and T cells and activated by adenoviral yeast vectors, and then orchestrated with both endogenous and exogenous activation of natural killer cells.

We plan to study this NANT Cancer Vaccine in patients suffering all types of cancers and all stages of disease in the next 12 months, a Cancer Breakthroughs 2020 goal.

Now, let me turn to our NantOS results. In Q1, we completed 28 go-live projects across NantOS, Device Connects, and NaviNet. This NantOS system forms the basis and pillar of creating personalized evidence-based decision support medicine. In Q1 contractual commitments for NantOS and NaviNet were 59. At the end of Q1 Eviti covered lives increased approximately 22.5 million from 19.2 million at the end of Q4.

I'm particularly proud about Eviti because it will provide a clinical decision support engine for millions of cancer patients in which the provider will now have through our machinery algorithms of GPS understand which patients could benefit from which chemotherapy, which drug and truly drive outcomes-driven in the space camp.

So, let me give you a brief note about [the efforts of ] going forward. We will refer to NantOS as the provider in patient engagement tool. Device Connects as connected care, NaviNet as payer engagement and Eviti as clinical decision support. Again, the orchestrations of these tools are both providing patient engagement, connected care, higher engagement and clinical decision support will generate and establish a nationally based clinical learning system.

In Q1, we expanded a licensing sales in international customers and enabling us to significant customer [wins], one in Europe and one in the United States, each representing more than $1 million in [profits].

So, with that I review our business lines, I will turn the call over to Paul to discuss our financial result for detail, Paul?

Thank you, Patrick and hello everyone. For the 2017 First Quarter, revenue was 22.5 million representing a 16% increase over the 19.5 million we reported at the same quarter of the prior year. The increase was driven primarily by a combination of growth across SaaS, other services, and GPS revenue. We completed the NaviNet acquisition on January 1 of last year making all of our growth organic.

GPS related revenue was approximately 0.5 million. GPS revenue recognized in the quarter primarily came from three sources -- our international distributors, cash received from payers who don't have agreements with us and profile delivered to patients who are ensured by payers with whom we have agreements. A substantial majority of the 266 commercial GPS profiles delivered in the quarter where with patients ensured by payers that we did not yet have agreements with resulting in cash-basis treatment.

We expect the proportion of revenue being recognized on a cash basis to come down overtime as we gain experience with the growing number of payers who are covering our GPS profile. Going forward, our focus is on expanding both our volume profile as well as proportion of GPS profiles that are reimbursed. We are very close to our first PMPM arrangement which allows the employers to provide GPS coverage for a PMPM fee. This model will help expanded option of GPS through a holding channel and represents a significant opportunity for NantHealth.

Turning toward the revenue lines, we continue to generate excellent growth and our recurring SaaS services revenue. SaaS revenue grew to 15.2 million versus 13.7 million a year ago. This represents 11% increase on a year-over-year basis and was driven primarily by growth in NaviNet revenue. Other services revenue grew to .3.0 versus 1.9 million a year ago, an increase of 53%. This increase is primarily due to the recognition of a large stuff [pre-services] arrangement with the strategic customer of our patent and provider engagement software.

Our software and hardware revenue declined slightly to 0.6 million from 0.7 million in last year's first quarter. Software and hardware revenue is linked to the completion of implementation of our connectivity solution software projects. While we made great progress on several large software connectivity projects this quarter which will deliver revenue in future quarters, our revenue recognition is tied with the full completion of those projects resulting in deferral of revenue to future periods.

Gross profit was 3.5 million or 15% of revenue compared to 6.4 million or 33% of revenue in the same quarter a year ago. The decrease is tied to several factors including GPS related cost, an increase in amortization of capitalized software development costs, and an increase in the recognition of previously [you just heard] customer implementation and software services cost. SGNA expense was 20.9 million compared to 27.4 million at last year's first quarter, a decline of 6.5 million. The decrease was primarily related to approximately 5.2 million of acquisition related compensation cost recorded in the year ago quarter.

R&D expense was 13.4 million compared with 10.7 million a year ago, an increase of 2.7 million. The increase was driven primarily by the recording of 0.8 million in stock compensation as well as reduction in amounts capitalized due to the timing of completion of certain R&D projects. R&D expenses and percentage of total revenue was 60% compared with 55% a year ago.

For the 2017 Fourth Quarter, we recorded an income tax expense of 0.3 million, with an income tax benefit of 4.4 million in the prior year First Quarter. We recorded [a loss] from our related party equity investment in NantOmics at 4.5 million.

On a GAAP basis, our net loss is 41.1 million or 34 cents per share compared with 33.1 million or 36 cents per share for the 2016 First Quarter. On a non-GAAP basis, our last per share was 24 cents compared with 18 cents in the First Quarter of last year. Turning to the balance sheet, at March 31, 2017, cash was 124.9 million. Cash flow used in operations was approximately 26 million in the First Quarter.

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

Thanks, Paul. Operator, we've completed our prepared remarks, we'd now like to open the call for questions.

(Operator Instructions)

Sean Dodge with Jefferies.

Patrick, on the two-payer deal that you signed during the quarter, can you give us a little more detail on who those were with and the potential size of those in terms of coverage cancer-wise?

Those are both some local health plans and you saw we -- that helped us bumped the number of lives up from 322 to 327. But they're decent sized plans but I think at this time we're not necessarily going into get the details of customer-by-customer.

Then, maybe a little bit of background on the wins? Were those NantHealth Technology clients before? Were they using NaviNet or Eviti perhaps, and maybe you can give us some idea of how long that sale cycle was for those two?

Yes one was in our connective care segment and it's a brand new customer and it's up in Europe as we just mentioned. And that was a fairly likely sale cycle, I would say at least six months. But it was a very big one for us, very important -- we had a lot of competition for that project. And I think it's a stepping stone for further deals up in that particular area, in the Nordic regions.

Sean, I think the question you are really getting to is the synergies between the interaction based on this commission of our software with the decision support et cetera and the sale connectivity to payers once it cover GPS.

And I think that will prepare its way out. I think it's exactly why as an organization, we begin to clarify to the market that what we are truly is one of the few integrated organizations that will drive personalized healthcare in every aspect. So when an institution needs to create connected care they want to connect care whether in the hospital on the outpatient.

When the institution wants to create a payer and provider patient engagement which we do to our operating system, they want to also have the provider know what treatment is the right treatment.

When the physician wants to look at every TNC what's the standard of care and how they will be reimbursed relative to the paye, we have an opportunity also to educate at the same time the GPS-driven trial or the GPS-driven treatment.

So, I think this completes the cross-sell but truly systems integration. We've gone to great lengths and [sticking] as I said 10 years and maybe more to bringing [this in full]. I think it will get even more amplified when the clinical trials come out which are this unique clinical trials in which GPS will be the basis of the information to which the patient will know which gene sequence is abnormal or which protein expression is abnormal.

And again GPS is the only test that can actually provide that kind of information. So, all of these cross connections in this desperate siloed approach of healthcare, we've taken on the challenge of trying to interconnect with both the information as well as the test. So I think what your question is getting to is does the one sale of software perhaps generate an interest in GPS? And I think we're beginning to see that.

Okay and so it sounds like one of the payers did [start] to prove out this [cost sell thesis] and the other one was just net new to GPS and NantHealth?

Correct.

[Charles Rye] with [Covenant Company].

Hi, it's James up for Charles. Could you provide some color as to why an order of (Inaudible - microphone inaccessible) hasn't appeared to be taking off as expected?

Sorry, what [subject] wasn't -- I couldn't hear the question, can you repeat that, sorry?

Could you provide some color as to why the ordering philosophy hasn't appeared to be taking off as expected?

The ordering philosophy. Well I think two things, right? One the complexity of the information, I think we underestimated the real complexity of how doctors will understand this deluge of information that they were receiving. The report is something too close to 17, sometimes 20 pages and we have figured out a way to reduce the important information to one page and have access to the details via the other pages. So, that was the first step was to establish an educational tool.

Most practicing physicians in the oncology community have very little knowledge of the word transcriptome, or RNA protein expression or even genome. What they're really interested in is what drug do I give to my patient. What this step does is [one of the few] - only -- test that can at the protein level provide guidance as to the sensitivity or resistance to what drug to give to the patient.

When we first came out, I think incorrectly and maybe naively, we thought the science would speak and we realized very soon that the practicality of the need, or what we call clinical utility, needed to speak louder. And even louder than speaking of clinical utility what needed to speak was who's going to pay for it.

And while we had all these payers, we had one payer as you know, Independence Blue Cross step up very, very, very early on. Unexpectedly, that did not translate into the entire Blue system, because each of the Blue system act independently state-by-state and required a huge amount of education even amongst the payers.

And then the third one is we took the time in the last three months to meet with the CMS, both at the national and regional levels. And I must say, I'm extremely encouraged by the reaction and response we received about number one the fact that gene panels by themselves are actually inaccurate.

Number two, gene panels by themselves without [tumor normal] could not differentiate whether it's actually a normal variation of what you or I called a [sniff] or whether it's actually a mutation. And gene panels when it doesn't measure the protein or RNA downstream cannot tell you that even if the gene is mutated, is there a receptor for the drug upon which to act.

And in fact, we showed in certain drugs, very expensive drugs a 69% false-positive rate. When they began to understand this and when clinicians began to understand this, I think the light's gone on.

Now you have to put all this into relative space. There is no test ever to my knowledge that has done whole genome sequencing of tumor normal added to RNA add sequentially [for genomics] and to relaunch it. And putting that into perspective, we launched this at ASCO about one year ago.

So if you look at the trajectory of foundation medicine and how long it's taken them over the course of time even to get reimbursement and you just saw the [Moldex] reimbursement approval of the panel just in the last maybe three months, you begin to see the slow process which that takes.

So not to provide these with any excuses, I think we underestimated the complexity of the data, number one. We underestimated the educational marketing, so to speak, of the true clinical utility of the test and we underestimated the time it would take to educate even the payers. All of that, we are working through now and what's exciting is those who are using it and that's probably the biggest indicator to me are now using the test consecutively for every patient.

So if you go to the places like University of Indiana or [Dr. McManus] in Sarasota, Florida, you begin to see now -- the doctors that used it, feel that they actually are completely [encumbered] in making the decision, if they don't use the test because it provides such valuable information.

I think the University of Indiana is now up to 200 consecutive tests and similarly at the Sarasota, maybe over 100 tests. So, I think that's what is encouraging is that once the education occurs, utilization and adoption will take place. So, I believe it's just a matter of time.

Great, also like how -- how have your expectations now changed given that you're more aware of the complexity?

Well I think we, internally, are doing an internal review of our projections and clearly we internally adjusting that. And I think the analysts, we shared some of these discussions at Analyst Day and we'll continue to share this as we move forward.

Joe Munda with First Analysis --

-- first question, Patrick, real quick on the 80-patient trial for the QUILT trial for -- sorry, for the pancreatic cancer vaccine, will you be able to book revenue on that or -- are you going to be able to recognize revenue on that, commercially?

I've been working through that with the auditors. Clearly, the test then will be covered by the pharmaceutical companies and so then we'll work through with the auditors where a relationship or contractual agreement will have to occur between either the pharmaceutical companies directly or through the organizations actually doing the test on behalf of the pharmaceutical company.

So, we're working through that with the auditors and I'm hopeful that we'll find that the auditors will agree to allow some level of revenue to be booked.

I guess from a modeling standpoint, would it be safe to assume all 80 patients would receive a GPS scan that -- that whatever --

-- absolutely -- no, the -- okay, let me describe the NANT vaccine. The GPS test is -- no patients will enter the trial without a GPS test. It's actually a requirement in order for us to do many things with the test. One, to get an insight into whether the patient is resistant or sensitive to Taxol or the paclitaxel or whether cisplatin, potential of the drug that you see in the trial.

It will give us an insight into the presence or absence of the type of what we called tumor-associated antigens for which we can administer the adenoviral vaccine. It will give us the insight into the presence or absence of the tumor-associated antigens to which we can then target the natural killer cell.

So you begin to see it is truly a universal complementary diagnostic and so therefore any patient that enters into these trials could not really enter the trial because we will be encumbered with absence of knowledge of what's going on or what should go on, on behalf of the patient. So, all the trials that we will be talking about as it relates to this NANT Cancer Vaccine in the future as you begin to see we've announced toward the other tumor types will require GPS cancer test.

Moving on, do you guys have a number as far as the number of ordering physicians? You guys have provided that in the past as well. I guess, the pipeline of payers or engaged payers, you had 27 at the end of fourth quarter I believe, any update there?

Yes, sorry [we didn't], we should have, you're right. I think the last time we -- in Q4 we said there were 264 or something like that, ordering physicians. We are now up to 358 ordering physicians and counting and as -- I don't know, 2,000 oncologists or 5,000 oncologists out there. But yes, so we have 358 as of Q1 2017.

Okay and pipeline and payers that you had actively engaged to 27, has that number change at all? I know you just added two more, so are we down to 25 or is that number off?

Paul, do you have that?

Yes, I have that. So, we closed two of those. We told you we had 27 and we closed two of them, so we're at 25 but it's only been five weeks since the last time we spoke to you all.

But Joe so -- and you know I think what's happened -- a word of mouth as these payers (Inaudible - microphone inaccessible) each other and there's already internal competition among payers not wanting to be left out. But, I think what's also exciting is the international resellers is also now taking -- taking on beyond the United States.

Patrick, you talked about sales team doubling, can you -- and as well the clinical support team addition, can you give us a number on both, where you are on the sales team and as far as clinical support?

Yes, so we had a very little, small sale team there, so we [either] probably get up to 10 to 12 people now on the GPS side. The clinical support is going to be very important now where it -- I always said this is something like selling a pharmaceutical drug. Because, the audience is the -- both the nursing staff as well as the treating oncologist to understand the real importance of this test as the doctor makes a decision about the drug to be given.

I think more and more as the doctors said, oh my goodness, you're talking about Taxol, the drug I give everyday, you're talking about cisplatin, the drug I give everyday. If I had known that this test can tell me whether the patient is going to be resistant or sensitive to that drug, I would have certainly order the test. And that's the kind of clinical support that [we] are going out there.

Separate from the very complex of, you know, what does this strange gene mean and this transcriptome mean and what clinical trial is available for that, et cetera. So, I think this is where we need to both -- both internally and externally. And that's what we're doing now.

Paul, do you have a bookings number as well as contribution from NaviNet in the quarter?

I don't think we can do that.

We -- I think we're not going to give that bookings number out --

-- I don't think we break it down to -- by product and I think --

-- but not necessary -- yes, down to the NaviNet level, I think -- what I did disclose is that the vast majority of our growth came out of the NaviNet platform. We did -- but we did see some growth on the (Inaudible - microphone inaccessible) side but I think we're going to leave it at that for now on the disclosure side.

Patrick, my last question, I saw a press release not too long ago, NantOmics acquired Genos.

Okay, yes, so?

I'm just wondering if any -- could NantHealth see any benefit from that because NantOmics essentially does the sequencing for NantHealth, any -- any benefit there for NantHealth eventually, potentially?

Well, maybe we'll look -- let me just tell you a little bit of Genos, even though this is NantHealth call, right. The part -- the reason Genos was formed is a very noble issue of allowing the consumer to own their own data. So Genos is in a unique situation where if consumers wanted to have the gene sequenced. We believe that the ownership and rights of that data should be with the consumer.

So that is why Genos was formed and it also would provide the consumer not only it's -- his or her own information for future use but if the consumer then wants to participate in the clinical trial, it's up to the consumer to work with pharma and identify themselves as the potential and then that data would be available.

What this will do also is create consumer awareness. You know, I think 23andMe and [BK] and ancestry.com done a great job in creating consumer awareness in this field. What we have is much more complicated than that. So I'm really excited to integrate this Genos technology into NantOmics.

But how or not, it would [out] with the help of NantHealth, I can't predict but look if a consumer knows that the way my mother or your father or you loved one is about to get some chemotherapy and that this test can tell the doctor before this treatment starts whether your loved one will be sensitive or resistant to the drug, I think it will be helpful to consumer to educate the doctor about the opportunity of such a test, so in that way it could help.

Richard Close with Canaccord Genuity.

This is Brian Hoffman, in for Richard. You said that you had 358 ordering physicians and that once you have a physician start ordering test they become a repeat customer or if you want to call it that, they order for all their patients. And there were 365 tests ordered in 1Q.

So just trying to reconcile that, how we should think about an ordering physician being a repeat customers -- about one test per physician per quarter, what we can expect going forward or do you expect that to ramp up?

It's almost impossible calculation for me to make, right. But, I understand you need some level of modeling. But the variability of physician education and physician need sadly is highly variable. The two examples I gave you were physicians that started working with us almost a year ago and now continue to repeat.

I think physicians need three, four, five, six patients or so to really say, oh my goodness I really need this, it really helps me. And the rate of ramp is hard for me to predict. I think will be unfair for me to give you any indication of that kind of ramping. I think we just have to watch and see in our job frankly that's exactly why we need to bring out this clinical support team.

And as I said, it will [probably] be ready and people like, [probably] will be critically helpful in educating these physicians.

I'm showing no further questions at this time.

I would like to turn the conference back over to Robert Jaffe for closing remarks.

We look forward to sharing our progress on our next scheduled conference call in August. Thank you again for joining us today everybody. Have a good day.

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the program and you may now disconnect. Everyone have a great day.