Precipio Inc (PRPO) 2007 Q1 法說會逐字稿

Welcome to today's teleconference. [Operator Instructions] I would now like to turn the call over to Debra Schneider. Please go ahead.

Thanks, Jimmy. Good afternoon, everyone. I'm Deb Schneider, Chief Financial Officer for Transgenomic. I'd like to welcome all of our participants to our first quarter 2007 conference call and to also extend a welcome to anyone who may be listening on the webcast.

I hope you have had a chance to review the press release that we just issued earlier. This conference call will be archived and accessible via both the telephone and Internet. Please refer to our press release from earlier or go to our website for further details.

I want to take just a few moments to take care of some of the necessary disclosures before we go further. Certain forward-looking statements may be made during this 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 factors, risks, and uncertainties described from time to time in Transgenomic Inc.'s report to the SEC. Any change 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 1955, with respect to all such statements.

First, I will cover the financial results. Then I will turn the call over to Craig Tuttle, our President and Chief Executive Officer and finally, at the end, we'll be happy to take questions from anyone who may have those.

Net sales for the first quarter ended March 31, 2007 were $5.2 million, down $1.3 million as compared to the same period in 2006. Bioinstrument sales were $2.6 million, Bioconsumable net sales were $2.2 million and Discovery Services net sales were $369,000.

Bioinstrument net sales were down 35% as compared to the same period in 2006. There were 23 WAVE instruments sold in the first quarter of 2006 and 14 sold in the current quarter. In addition, we sold 6 OEM instruments in the first quarter of 2006 and 2 in the current quarter.

Bioconsumable's net sales were relatively flat, with less than a 1.0% change from the prior year. Discovery Services net sales were up 75% or $158,000. $213,000 in the Discovery Services sales were related to the increase in our CLIA Laboratory net sales, offset slightly by a decrease in our research revenues.

We are extremely excited about this new growth area for Transgenomic and expect to continue to see growth in this area due to our unique capabilities around providing mitochondrial tests. In addition, we have recently signed a number of research projects, including two larger ones, which will regenerate Research net sales as we continue through 2007 and allow us to perform to our expectations in this area. We are excited about the opportunity to partner with these companies and hope to continue our relationship far after the initial project work is complete.

Gross profit from continuing operations for the first quarter ended March 31, 2007 was $2.7 million, down $274,000 from the same period in '06. The decrease was the result of the decrease in net sales, largely offset by a decrease in COGS related to the lower number of instruments built or purchased, product mix, and also includes a reduction in costs for some manufacturing personnel that were realigned to our research group during 2006.

Gross profit margins were 52%, up from 46% in the prior year. The 52% gross profit margin was consistent with our fourth quarter of 2006.

Our loss from continuing operations for the first quarter ended March 31, 2007 was $1.3 million, compared to a $304,000 loss in the same period of 2006. The increased loss this year is attributable to lower net sales and the gross profit margin change, coupled with increased SG&A costs and increased R&D costs.

The increase in R&D costs was attributable to a collaboration with a company in Italy who is developing assay kits for cancer detection and heart attack prediction, increased costs associated with patent filings surrounding our newly developed intellectual property and the realignment I spoke of earlier around personnel costs from manufacturing that are now in R&D.

SG&A costs have increased over the first quarter in 2006, primarily due to some realignment of some personnel costs in our international division that were in discontinued operations in first quarter of 2006 and are now part of our SG&A costs in the international division. SG&A costs, however, were down slightly from the third and fourth quarter of 2006, which we believe is a better comparison, as all three quarters are comparable with no realignment costs between areas.

At March 31, 2007 we had cash of $7.9 million and working capital of $12.1 million. This is up from $5.9 million and $10.3 million at December 31, 2006. An important item to note here was the sale of our Glasgow facility that we've talked about previously. We did receive $2.9 million in cash from this sale in the first quarter of 2007.

One final comment on cash flow I'll make and communicate is today we did close an agreement, a stock purchase agreement where we agreed to sell 250,000 common shares of Pinnacle Pharmaceutical stock to New River Management, LP, for a purchase price of $3.75 per share. That cash was received today and that cash total was $937,500. That just came in today and we'll be issuing an 8-K today.

While we do not publicly disclose future financial projections, our actual results were very close to our internal plan for the first quarter of 2007. This includes net sales and net loss projections that tracked with our internal plan. Cash flows were actually favorable before the acquisition of SpectruMedix assets that we have disclosed, as this was not contemplated in our internal plan. This was an independent business decision we made after the plan was complete.

We had no major surprises in the first quarter, so we're pleased that we're able to perform to our internal expectations. Our goals continue to be to make the existing business profitable and to be able to generate positive cash flow.

While we have some variable expenses associated with our Instrument net sales and our Consumable net sales, by far the majority of our costs are fixed in nature, so major fluctuations in the bottom line are really a direct result of net sales movement or expense management.

We have initiated, as previously disclosed, some cost reduction efforts primarily around consolidation of facilities. However, the impact of these actions will not be visible until later in the second half of 2007. Those cost reduction plans are proceeding as expected.

We still believe the actions will result in annualized savings of approximately $1.5 million after these efforts are complete. As stated before, day-to-day expense management continues to be a focus for me, as we continue to drive towards positive cash flow from the base operations.

That's the end of my prepared remarks. I would now like turn the call over to Craig Tuttle, our President and Chief Executive Officer.

Thanks for that update, Deb. I would now like to add my comments about our first quarter performance.

First of all, I want to reiterate that these revenues achieved our internal plan for the quarter. A noteworthy success is the continued growth of our CLIA-Certified Reference Laboratory business. As Deb described, this business continues to develop and grew by 48% over Q4 to reach a total of $290,000 for the quarter. However, we also had over $100,000 in sample testing business that came in at the end of the quarter, which we were not able to realize.

This result gives us confidence in the continuing quarter-over-quarter growth that this business has shown over last four quarters and we believe that this trend will continue for two significant reasons. One, we are seeing an expanding volume of mitochondrial disease tests coming in from our newest customers and partner labs. This includes a beginning stream of samples from our lab partner ARUP.

And second, we are beginning to see an expansion of tests being ordered, incremental to our mitochondrial disease test menu. These additional requests include test for both inherited diseases as well as cancer diagnostic analysis. Our CLIA Lab has a full menu of cancer assays that we offer and it is rewarding to see increasing market traction for these tests.

We completed the asset purchase of SpectruMedix in the quarter. We have since completed the integration of the SpectruMedix manufacturing assets into our Omaha manufacturing facility and we've begun servicing and selling reagents and consumables to the U.S. customer base in addition to continuing to provide sales and service to our European customers.

In the quarter we announced an important cancer link gene mutation analysis project with a new pharma partner. Since that announcement, we have established two additional projects with significant pharmaceutical companies that, in whole, represents close to $1.0 million in new discovery research and translational medication laboratory project business.

We are currently making strong progress in consolidating our manufacturing and R&D facilities and resources. Deb already discussed the cost savings that we will realize from these efforts. Coupled with a further headcount reduction that we completed across our Omaha facilities, we expect an annualized total cost saving of approximately $1.5 million. Equally important, we are better aligning our resources for higher productivity and focus.

Finally, we have reached at total, to date, of 24 new patent disclosures that have been submitted for patents. As I have announced previously, these patent submissions are based on novel mutations in key cancer regulating genes that we discovered using our very own sensitive mutation discovery technologies. We have novel mutation discoveries in key genes for many growth factor receptor tyrosine kinases, apoptosis pathway genes, angiogenesis-regulating genes, as well as key tumor growth promoter and tumor growth suppressor genes.

We have begun discussions on partnerships to further validate and study these patents and we are beginning the selection of a scientific review board to help guide our prioritization and clinical utility analysis of these mutation discoveries.

In summary, we remain focused on further development and growth of our laboratory services business, including our CLIA-Certified Reference Laboratory, our Discovery Research business, and our Translational Medicine Research business. And we remain committed to the financial management necessary to bring the business to breakeven performance as quickly as possible.

That concludes my prepared remarks. We are now happy to take any questions that you might have.

[Operator Instructions] [Joe Leafer], Private Investor.

Good afternoon.

Good afternoon.

I have been a stockholder for quite a while and when management turned over from the previous management to the current management, I had great hope that things would turn around quite quickly. And I do believe that, initially, your indications were that you could turn the business around and get it profitable, seemingly quicker than it is taking at this time.

Yes, I'm excited about the Discovery Services Business. But I think it's going to be a long, long, long time before that throws off enough cash to offset the losses in the instruments and that sector, which has always been or previously has been the sector that has thrown off the most revenues.

But what I see in quarter-by-quarter and year-by-year, is your revenues rather than going up are trending down. Your bottom line is trending to a higher net loss. Now, all well and good, you guys are going to cut back on expenses. It's taking a long, long time for you to cut back on expenses and to possibly realize that $1.5 million bottom line helped.

But how long is it going to take? When is your business going to turn around? Internal projections are great for you guys, but it's not really too satisfying for the shareholders who see revenues continue to go down and losses continue to go up. So how about giving some color and some insight as to when you can expect this and how you're going to achieve it and to what degree? Thank you.

Well, thanks for your question. First of all, I don't think that we're making slow progress in our expense management. I think we're moving expeditiously. You might know, and if you don't I'm happy to relate that, unfortunately, the facilities that we are acting on are in Europe. And as such, the transition times required by European law in the countries that we've announced these actions in are much slower than they are in the U.S.

So, as such, we are moving as quickly as we can in that area. One might ask why those actions weren't taken in the past, but new management is taking those actions as quickly as we can. So I hope that answers that question.

As regards the instrument business, it's always been fluctuating significantly, quarter-to-quarter and if I look at Q1 '07 versus Q1 '06, that happened to be a big spike in instrument placements that was somewhat unusual. I forecasted WAVE system sales at an ongoing rate, previously described. I'll describe it again. I believe we're in the 10 to 15 instruments-per-quarter sales and on top of that, we have a variety of OEM systems that we're selling.

Deb noticed or mentioned that we sold I believe six OEM systems in Q1 '06 versus just 2 in Q1 '07. That's principally due to the SpectruMedix confusion in the market place and the closure of that business, which resulted in us acquiring the asset and then now offering to service those customers. So we expect to be able to grow sales in that area.

And in addition, we're launching a new instrument for the cytogenetics market that's tripled the throughput of the previous offering. So there's been a little reticence in the market to move forward with the lower-volume system, at least that we experienced in Q1 and we hope to make up for that in Q2, but that instrument lists for $300,000 a copy. So we expect pretty significant uptick with just a few instrument placements.

So, clearly, our goal here is to continue growing the services business as quickly as we can and continue to seek out new products to add to out current business and also new applications for our current business. So Deb already noted the collaboration that we have in Italy with a company named [Fiatecnica], which is being funded by the Italian government to develop at the moment a heart attack predictor assay, which we will sell on WAVEs and we are in negotiation for some other assays. But I can't speak further about that at the moment.

So, in terms of the overall business, we believe - and we've said this before but I'll say it again - we expect to reach breakeven run rate by the end of year and that's our goal here.

And just as a follow-up, can we expect, sequentially, quarter-by-quarter this year until you get to that breakeven point, that we can see some progress?

Our internal forecast is certainly to grow quarter-over-quarter. Obviously the growth in the services business is going at a very strong rate. One could hope to see that even increase to where it is, but that's very positive growth and we're realigning sales resources to help drive that.

And we are trying to maintain and stabilize our ongoing systems business and add products to that portfolio, to keep growing that business as well. Clearly Q2 our forecast, our internal forecast, is to perform at a significantly higher revenue level and that grows throughout the year, so the answer to that question is yes.

And just one more with regard to instrument sales. Since when I got into the Company that was my great expectation, was to see your instrument sales grow, because I thought that they were really great in the field that they are. Can you foresee growth in the WAVE systems and those OEM systems, you know, significant growth?

Certainly the WAVE platform is almost a dozen years old and as such, I think there's decreasing opportunity to greatly expand WAVE sales. But please remember that there are over 1,600 WAVEs in the field and those provide a significant ongoing operating revenue for us on the consumable side, as well as the service side and we continue to sell instruments.

The impact of new technology in the sequencing area has been an issue for that business and we continue to look for new applications in the microbiology area and in cancer assay opportunities that will help and add new applications, which will drive further sales. But the peak periods of selling 100 WAVEs a quarter, which occurred five years ago, I don't think is going to be possible going forward.

Thank you very much.

[Bob Everhart], Private Investor.

Hi, Mr. Tuttle. Again, I'm a longtime investor and have been disappointed in Transgenomic's performance. Listening to you talk about the WAVE system and placing 1,500/1600 of them in the field and you're saying that that platform, because of its age, it's probably on the downward side. Do you guys have a good feel for what the market size is for that product and what are some of your competitors?

When I think of 1,600 WAVE systems worldwide, that seems very, very, very small and is there a lot of competition? If there is, is it our feature function, our pricing? What is it? Why can't there be more sales penetration or is the market that dang small? I mean, is it that -- did we pick a market that's so darn small here?

I don't think we saw sought the smallest market in the DNA tool space. But a dozen years ago when that system was launched it was always designed and oriented to do very sensitive DNA mutation discovery and detection for both inherited diseases as well as somatic diseases like cancer.

That market is not the same size as the sequencing market. If you look at Applied Biosystems, with $1.0 billion in genetic sequencing, that market requires I think 8,000 to 10,000 instruments. That is a different market. So, as such, I do believe that this system has saturated many of the opportunities in the U.S. as well as Europe.

Let me reflect a little bit more deeply in that. In Europe the system is used as a clinical testing platform for inherited diseases and for cancer assays. In particular, for the BRCA-1 and 2 testing that's done in Europe and in Asia, it's all performed on the WAVE system. So all of those centers that are reporting those results are using our instrumentation and consumables.

That market grows fairly slowly because it's a well-established test and well known. We do tend to add instruments on a lower demand as those customers require greater throughput, as their sample load increases. But is it not at the same initial level that we had.

In the U.S., the market is substantially different. It is a research-oriented market and for example, if I look at NIH, I think we have 60 to 65 systems placed within NIH and there are a variety of institutes within NIH, including the National Cancer Institute.

So whether one says that that's a big or small market, it is being utilized for, as it always has been, mutation discovery and I think mutation discovery will increase in volume as we get into the Cancer Atlas Project. But even with that, that's a very small project in comparison with all the mutation discovery that'll be required across all of the different cancer types.

But it isn't a technology that is commonly employed, because in the U.S. sequencing has always been the dominant technology that's been selected. So we have faced competition from improving costs and improving speed and sensitivity-based sequencing technologies.

We've countered that with an enzyme we call SURVEYOR, which cuts any DNA mismatch and we are forecasting growth up to about 70% over current run rate for that product, which greatly facilitates that discovery of mutations. But in terms of the overall market, no it is not a market of 50,000 instruments or 10,000 instruments.

Okay. On your Discovery Services, just if we decide or if we accept that the WAVE system and the consumables are not going to grow dramatically, so we kind of are looking at the Discovery Services, yet I look at from quarter-to-quarter -- I shouldn't say quarter-to-quarter. From first quarter last year to first quarter this year, Discovery Services didn't grow all that much and what other eggs are there in the basket here, basically?

Well, you don't have the detail of how that business performed and I'm happy to add a little color there. Number one, we actually only began the CLIA-Certified Reference Laboratory just before that time. So there was virtually no revenue for that business as a reference laboratory at that time. Deb points out to me that it was $76,000.

And that was the first quarter.

In the first quarter where we launched it and Discovery went through a spike. We call our Discovery business the laboratory in Gaithersburg that does a lot of work with academic centers and with the National Cancer Institute for a variety of specific gene-linked mutation discovery projects.

And we had a very large project with a pharma company that I think reached $5.0 million in billing, but when that ended that was gone and it was very difficult to add another customer immediately to that mix. So acceptable or not, I'm proud to say we've just lined up nearly $1.0 million worth of business for the Discovery Lab and as such, we see very strong growth in both the CLIA Lab and in the Discovery business for this year.

Okay. Thank you.

Matt Arens, Kopp Investment Advisors.

Thank you. Craig, a quick question for you on the Discovery side of the business. Have you commented over what timeframe that roughly $1.0 million of revenue, over what timeframe you expect to generate that?

Hi Matt. I didn't, but I can. We expect to complete as much of that as we can in second quarter, but we believe we'll finish before third quarter. And it's really dependent on getting samples in from these pharma partners and as you know, or if you don't know, they're flash-frozen carotin-embedded specimens. We've got to extract the DNA from them and then do complicated mutational analysis that we're very good at. So it isn't like you put them on an automated instruments and crank them out.

And Matt, this is Deb. We don't have any of those samples in-house yet. We continue to work weekly and daily with both of the large contract partners to try to get those samples in and we do have some commitments for some of those to come in for second quarter and really, it is hinging upon them sending them. But we have the capacity to turn those fairly quickly.

Okay and then looking beyond that, what is the opportunity to get a) repeat business from those customers, and then b) what is your pipeline of potentially adding new customers in this very important Discovery business look like?

Well, I do know that we have bids out of over $1.5 million that's incremental of the projects that we have right now and clearly, I've asked that same question of our team, Matt, for the current projects. And we believe that this is just a first pass with them and that we would go even more in-depth for follow-on studies, particularly if they have candidate drugs that show some promise and require that deeper analysis.

And these are three of the top firms. Unfortunately, they haven't given us approval to announce them yet, so I won't, but we're very excited by it because they're, as we see it, the pharma players that really understand the impact of these mutations on these disease states, in particular cancer.

And you may have heard that out of the Cancer Atlas Project and out of the Welcome Institute that there are driver mutations and passenger mutations and clearly mutations are an extremely important component of cancer development and cancer progress.

So we believe, coupled with our IP, that we used our own technologies to develop that it's going to become increasingly important to know the thorough mutation state of specific pathways when you're trying to both design the target therapy, but more importantly when you're trying to select the target therapy.

We already know, as an example, that with the couple of cancer types that we've looked at deeply, we know from the mutations -- we don't know -- I won't say we know why specifically. But we know based on a mutation that one drug is going to be effective and one drug isn't.

So our prediction is that, specifically, as we do more clinical validation of our intellectual property, that we will be able to really define what treatment paths are, based on the impact of the drug and so that if patients that will not respond to a drug won't be given a drug.

And let me just step back. I want to ask a few more questions about the evolution of the Discovery business, but a big picture question, if I might. A lot of the excitement that I've had around Transgenomic and I think, correct me if I'm wrong, but part of the excitement that brought you, Craig, to the opportunity at Transgenomic, is this developing personalized medication business.

And now that you've been with the Company for a while and you're seeing some success in some of these areas, although in its early stages, obviously, maybe you could update us on a kind of big picture basis, of how you feel that's developing. And not tied to revenues, because I know we're very early in this, but just in terms of the opportunity and the progress that you've been able to make in that are, because I think that is important to the longer-term value creation potential at Transgenomic.

Well, thanks, Matt. That's a great question. Number one, I'm actually more happy to be here than when I joined for a variety of factors. But the most important that we're really starting to mature this portfolio of intellectual property that really has detected what we believe are key novel mutations that are driving cancer. And maybe not at each, let's say the origin, of cancer but at different stages of the cancer.

So, as you know, cancer eventually or initially starts growing and stops responding stop signals, or tumor suppressor signals, and then it responds to growth factors or application of growth factors and it stops dying as a cell, so apoptotic processes are abrogated. And then it starts to, it gains motility. It evades the immune system and then, once it has motility and it can recruit blood supply, eventually it will metastasize, particularly epithelial cancers.

So I think that with our 24 patent disclosures that we've put together to date, with representing a significant amount of mutations, we still have about 36 that we think we can go to on our first pass.

So where I'm excited is when I look at the Cancer Atlas Project and what they're doing, which I think is the right thing to do. Unfortunately, they're very low-volume cancers. But they're looking at specifically for a cancer type and they're looking at late-stage disease, if I best define it. And they're looking for all the mutations they can find with their technology, which isn't as sensitive as ours and the methylation state and the gene expression state of the cancers.

Where I think it needs to go, unfortunately - and that's going to take three years. Where it needs to go beyond that and where we are already is you'll need to look with the most sensitive technologies at earlier-stage cancers and more importantly, you're going to have look at circulating DNA. Which we already have a collaboration going on to try and develop capability in identifying mutations in circulating DNA so that we can -- and based on our mutation portfolio, that we can identify cancer much earlier.

We can also look for, we believe, cancer through monitoring patients that have already survived some treatment to look for the reemergence of these mutation patterns. We think that that will be important and right now I believe we're the only ones that have the technology to do that and in particular, that's with WAVE.

Because with the WAVE system, you can actually separate the predominant DNA that you find in a specimen, either from one of these tumor tissue specimens, or from blood, and really eliminate that and then amplify an area that WAVE can isolate of the genes that are of interest and amplify them again and again. So you get significant amplification that I don't think you can do any other way. I mean, clearly there will be debate around that. So that's why I'm quite excited about it.

What I found even more intriguing is emerging data principally from studies that we've done in collaboration with our discovery group in gastrostomal tumors. That, based on the mutation, we know which therapy works, whether it's a Gleevec or a Tarceva or even another therapy that's needed and I think that same model will play out in a variety of cancers.

So -- and added to that, I will tell you, and I hate to wax too far on this, but cancer has just gotten -- the discovery of cancer and the analysis of cancer's development and progression has gotten increasingly complicated, back from when I did cancer research in graduate school. So we knew it grew then and it grew unregulated. Now we know of a tremendous number of pathways that allow cancer to evade one treatment regimen, for example.

So what I see occuring is eventually significant combination therapy treatments that you're going to have to know, I believe, which therapy is the right one to give at that time of the cancer, requiring a better and deeper understanding of the mutational load of the cancer. So all told, I think that personalized medication is really at the beginning of its capability. The very best example that I can give you is on the diagnostic and inherited side, BRCA-1 and 2.

So if BRCA-1 and 2 only represents 5.0% of the breast cancer that occurs in the U.S. and in the U.S. that's what, 210,000 new cases a year. But for those individuals it's lifesaving, because if they have that mutation, I believe that the data is that 85% of them will develop breast cancer and 50% of them will develop ovarian cancer. So you can take strong prophylactic measures in those patients.

On the other side, you've got Herceptin and Her2Nu and Her2Nu is just over-expression of one of the tyrosine kinases, and just one of them, and clearly that's a treatment modality that works very well. But that's just one of 500 tyrosine kinases that are operating and that's a minimum within cancer.

So, once again, I'm on one side I'm saying it's very complex as a disease, but secondly that you will have to have the data to understand the mutation load and presumably, the methylation load of these tumors and as early as possible to have more effective treatment.

So I think we'll get there. We will get there at the expense of other more rudimentary or classical diagnostic processes, because you can't fund everything. So that's where I see the biggest crux coming into the whole mix here. I think clearly WAVE is a very cost-effective platform and that's where a benefit of it comes.

Our SURVEYOR is an even more cost-effective platform, quite frankly, because it cuts any mutation it finds and allows you to quickly determine its location and then sequence to find out what it is. So we've had multiple publications around that. So, our charter is really to get that product in front of the leading cancer research groups, but we haven't been able to introduce them to it yet.

That's a fully-loaded question and I hope that answers and sheds some light on at least where we are and where we think we're going with this.

No, that is helpful from a bigger picture perspective and I appreciate you walking me through that. Two more questions, if I might. Back to Discovery here, so you've commented on these three contracts that you have and kind of project work, it sounds like, centered around one particular target or project.

As we move on and as your partners become more comfortable with your capabilities, what's the evolution of that business? Do you see multi project deals that may take place over a longer timeframe and involve more dollars and maybe raise to the level where you can speak to who the partners are and a sizable revenue component to that?

Or is the nature of this just that, as a project comes up, they'll do a onetime, short-term deal and then as their needs arise, they'll come back to you again and again? Is that the nature of that business or can you expect, as they get comfortable, to do longer-term deals?

Our experience has been both, so I wouldn't pick one over the other. With the current projects that we're doing, one of them starts out at a $10,000 project and when that's successful it goes to a $50,000 project, which we're in the midst of now. And from there, we believe it'll go to a $200,000 to $300,000 project and then eventually get to a very large-scale project.

Now I can tell you that we are bidding on a $1.0 million project at the moment, which is one of the first that I see, which is not only thought-provoking but satisfying in terms of looking at the mutation load across all these cancer pathways. And I think that we're going to be unique in providing that capability in the short-term, at least for the next three years and so I see that as very successful for us. And then once you have those relationships established and have produced very significant and productive data, I'm convinced these partners will continue to do business with us.

But our evolution is typically to do a pilot project that that then it goes to the next stage and then it gets increasingly larger.

Okay. Last question I have is, is there any update to be given on distribution around SURVEYOR?

I'm sorry to say no. We're still trying to both find distribution solution of that product and a key customer relationship that makes sense and we're going different avenues now, because we haven't been successful to date.

Yes, Matt, we've a little bit more success in the U.S. and not as much or seen as much activity in the European markets, so we've kind of approached those different. So we're taking a look at those distribution methods, like Craig said, to see if we can't get a little quicker uptick on that.

Okay. Thank you for taking my questions.

Thanks, Matt.

And it appears, at this time, we have no further questions.

Okay.

All right. Well, thank you very much. Those were excellent questions. I hope the answers that we gave shed some light on where we see the business going. I am remiss in reminding everyone that we believe that with the launch of the new cytogenetics platform, which does triple the volume of the current platform at an improved price tag, that we expect good success for that.

The SpectruMedix systems we're not selling and we can sell refurbished systems from that business and expect to continue doing that. So I see a return in the OEM business to a higher level, certainly and maybe a significant level.

And that concludes our remarks for the day. Thank you.