Precipio Inc (PRPO) 2006 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Transgenomic Reports First Quarter 2006 Results Conference Call. Today’s events will be recorded and all participants will be in listen-only mode. Later on you’ll have the opportunity for questions-and-answers.

At this time, I’d like to turn the program over to Mr. Mike Summers. Mr. Summers, please go ahead.

Thank you Adam. Good afternoon. I’d like to welcome all participants to our first quarter 2006 conference call and also to any who may be listening on the webcast. Hopefully, everyone has had the chance to look over the press release that we issued earlier today.

For those of you who don’t know, I am Mike Summers, Interim CEO and Chief Financial Officer. Also participating on this call from Transgenomic is our Chairman Collin D’Silva.

This conference will be archived and accessible via telephone and Internet. Please refer to our press release from earlier today or go to our website at www.transgenomic.com for details.

I’ll take a few moments here to take care of some necessary legal issues regarding forward-looking information that may be given during this phone call. Certain forward-looking statements may be made during this phone call that reflect Management’s current views and estimates of future economic circumstances, industry conditions, Company performance, and financial results. Such statements are subject to certain factors, risks, and uncertainties described from time to time in Transgenomic’s report to the Securities and Exchange Commission. Any changes in such risk factors-- in such factors, risks, and uncertainties may cause the actual results, events, and performance to differ materially from those referred to in such statements. Accordingly, the Company claims protection of the Safe Harbor for forward-looking statements contained in the Private Securities and Litigation Reform Act of 1995 with respect to all such statements.

Today we reported first quarter 2006-- we reported a first quarter 2006 net loss of $318,000 or $0.01 per share. This compares to a first quarter 2005 net loss of $2.9 million or $0.10 per share. Our 2006 net loss consisted of a loss from continuing operations of $304,000 or $0.01 per share and a loss from discontinued operations of $14,000. Our 2005 net loss was comprised of a loss from continuing operations of $2.2 million or $0.07 per share and a loss from discontinued operations of $730,000 or $0.03 per share.

The following is a summary of results from our continuing Biosystems business. Net sales were $6.5 million during the first quarter of 2006 compared to $6.9 million during the comparable period of 2005. Our 2006 net sales consisted of instrument, consumable, and Discovery Services revenue of $4.1 million, $2.2 million, and $211,000 compared to instrument revenues of $3.8 million, consumable revenues of $2.3 million, and Discovery Service revenues of $790,000 respectively in 2005.

During the most recent quarter, we increased our worldwide installed base of WAVE Systems to more than 1,300. The average selling price of our WAVE Systems was slightly higher than historical averages. Consumables volume was greater in the first quarter of 2006 compared to the first and fourth quarters of 2005, however, foreign currency fluctuations adversely impacted resulting net sales. Net sales of Discovery Services to pharmaceutical companies and research institutions were less than expected, reflecting continuing challenges in establishing larger scale and longer-term contracts. In our newest area of activity, clinical samples processed each month by our CLIA-compliant diagnostics lab have grown each month since this service was launched in the fourth quarter of 2005.

U.S. WAVE sales showed improvement in the first quarter, due in part to interest in the detection of cancer-associated mutations and translational and clinical research studies. In February, a customer publication demonstrated that the combined use of our WAVE HS System and SURVEYOR Nuclease was superior to direct DNA sequencing for detection of mutations in the epidermal growth factor receptor, or EGFR gene, in patients with non-small cell lung cancer. We believe the superiority of our technology in this type of setting represents an opportunity that we can continue to pursue going forward. On a related note, we anticipate one or more customer presentations at the American Society of Clinical Oncology Annual Meeting in June.

Gross profit was $3 million or 46% during the first quarter of 2006 compared to $3.4 million or 49% during the comparable period of 2005. Gross profit from instruments was in line with expectations. Gross profit from consumables and Discovery Services were impaired by fixed costs associated with excess capacity.

Operating expenses were $3.3 million during the first quarter of 2006 compared to $3.9 million during the same period of 2005. Operating expenses in 2006 were positively impacted by foreign currency adjustments of $108,000. They were adversely impacted in 2005 by foreign currency changes of $182,000. Not considering the impact of foreign currency changes, we expect operating expenses in future 2006 quarters to be within a range of $3.5 to $3.7 million to account for incremental investments in sales and marketing particularly related to our Discovery Services product lines.

The following is a summary of results from our discontinued Nucleic Acids business. While production at our Glasgow facilities ceased during the first quarter of 2006, we were able to generate product sales of $554,000. Costs were in line with expectations and I remain optimistic the facility will either be sold or the environmental process completed and the facility closed by the end of the second quarter of 2006.

I want to reiterate previous guidance regarding the impact of this discontinued business on our future operation. Absent valuation adjustments, which we currently do not expect, we expect discontinued operation to generate a loss of approximately $250,000 in the second quarter of 2006.

From a combined or consolidated cash flow perspective, the first quarter of 2006 is one of the best in our history. Cash flow used in operating activities during the first quarter of ’06 were breakeven or nearly breakeven at $26,000 compared to $213,000 during the same period of 2005. Cash and cash equivalents totaled $6.6 million at March 31, 2006, roughly unchanged from the prior-quarter end.

As it relates to guidance, beyond my prior comments regarding anticipated operating expenses and our discontinued operations, it is not our practice to provide prospected financial guidance related specifically to revenues, costs, net income or loss, or cash flows. We deviated from this practice during the fourth quarter of 2005 conference call due only to the significant confusion we expected those results to create.

Lastly, our CEO search is progressing as planned. Our primary goal is to identify the candidate that meets the criteria established by our search committee. We have interviewed numerous excellent candidates and expect to be in a position to announce a new CEO by the third quarter.

At this time, I’ll be happy to respond to questions. Adam?

[OPERATOR INSTRUCTIONS]. Our first question comes from the set of [John Schiller] with [Naw Partners]. Your line is open.

Yes, thanks for taking my call. So you can’t give revenue guidance on a go-forward basis. You can give expense guidance. So we really have no idea if you’ll achieve profitability in 2006?

Hi John. It’s generally been our practice, John, we have never, ever provided revenue guidance. We did in the fourth quarter for our fourth quarter conference call. We did, essentially, because we were bright enough to understand that the confusion-- the fourth quarter was in a large regard an anomaly and we needed to give some-- we needed to give some guidance to you guys, especially we were so late in the quarter.

It’s a Board policy not to provide guidance on the revenue side. We’re providing expense guidance in this case to give you some sense that, again, $3.3 million for this quarter is somewhat of an anomaly, predominantly as it relates to the foreign currency fluctuation. There was a $100,000 positive impact during the quarter. We just want to point out that we can’t expect that necessarily going forward. Otherwise, it’s not our practice to provide you with a revenue forecast.

Okay, so we’re flying blind essentially, because we obviously can’t draw any trend lines or from the historicals we can’t gain any insight as to what the Company is doing. I mean revenue is down, margins are down, expenses were flat. Actually, expenses were down but are going to go back up because you had the benefit from FOREX and then you have to invest some more in the business. I was about to say the growth of the business, but I’ll just say the business. So, in effect, we have no idea if this will be a profitable company in the entire year in 2006 or beyond for that matter? Is that a safe statement?

In terms of whether I have an idea or not, John, I do, but we are not providing that type of guidance.

Okay, thank you.

[OPERATOR INSTRUCTIONS]. At this time there appears to be no questions. I’d like to turn it back to Mr. Summers for any closing remarks.

Thank you Adam. I’ll mention one more time that this call is being archived and it will be available for listening to either over the Internet or on a dial-in basis. Any information as to how to do that is contained in our press release from earlier today. You can refer to that or you can visit our website, which is www.transgenomic.com.

Also, for the benefit of those who may have joined us after this call was already in progress, I’ll reiterate that certain forward-looking statements may have been made during this call that reflect Management’s current views and estimates of future economic circumstances, industry conditions, Company performance, and financial results. These statements are subject to certain factors, risks, and uncertainties described from time to time in our reports to the SEC. Any changes in these factors, risks, and uncertainties may cause the actual results, events, and performance to differ materially from those referred to in such statements. Accordingly, the Company claims protection of the Safe Harbor for forward-looking statements with respect to all such statements.

I’d like to thank all for listening and participating today. This concludes Transgenomic’s first quarter 2006 conference call.