Precipio Inc (PRPO) 2007 Q4 法說會逐字稿

-- this conference call will be archived and accessible via both the telephone and the Internet. Please refer to our press release from earlier, or you may go to our Web site, www.transgenomic.com, for further details.

Certain forward-looking statements may be made during this call that reflect management's current views and estimates of future economic circumstances, industry condition, 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 Securities and Exchange Commission.

Any changes 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 such statements.

Thanks for your patience there.

I would now like to turn the call over to Craig Tuttle, our President and Chief Executive Officer.

Thanks, Deb.

Good afternoon, and thanks to everyone who has joined us for this call.

This is Transgenomic's fourth quarter 2007 conference call, and I'm Craig Tuttle, the company's President and CEO.

I'm excited to report solid fourth quarter results, including profitability, for the quarter.

As we noted in our Q3 conference call and in our investor presentations that followed, we forecasted a profit for the quarter. We achieved that with consistent revenue performance in our bioinformatics business, continued healthy revenues in our clinical reference laboratory, and very strong growth in our pharmacogenomics business. These revenues, coupled with our recently completed cost reduction efforts, enabled us to achieve a profit totaling over $200,000 in the quarter, and for that we are justifiably proud.

I'm particularly excited in the growth and revenue from our pharmacogenomics business, which increased $360,000 quarter over quarter. We believe this is due to our increased focus on pharmaceutical companies that we initiated back at the beginning of the year. It also reflects our customers' validation in our unique mutation discovery and detection service capabilities, along with the other genomic services provided by this lab. This has resulted in several new project commitments that will be completed over the next few quarters.

In the fourth quarter, our pharmacogenomics lab completed 13 projects for five pharma partners, representing $527,000 in contract revenue, as well as completing 12 academic projects that totaled $61,000.

Although our pharma partners and contracted projects are confidential, it is rewarding to note that we have completed several incremental projects with our current customers and recently signed contracts for new projects, which should allow us to maintain a solid level of revenue from these partners going forward.

Of great significance in the quarter, we completed one Phase II drug mutation trial discovery project and contracted for a second with the same leading biopharma partner. The second Phase II trial should be completed over the next two quarters.

And to further drive growth in this business, we have hired two new business development directors to aggressively carry on with selling activities to more potential pharma and clinical research organization customers.

Another significant event for us during the quarter was the initiation of system evaluations of our HANABI Cytogenetics harvesters with the two largest reference lab systems in the U.S. Both of these trials have progressed well and, when completed, should result in several system placements in both organizations. We've also completed a large evaluation of the system in a leading hospital in the United Kingdom, which should support several system sales into the U.K. during 2008, as well as sales to other European customers going forward.

I'm also very pleased with key additions we have made to our senior team. We are already benefiting from the contributions being made by Chad Richards, our new Senior V.P. of Sales and Marketing, and Dr. Eric Kaldjian, our new Chief Scientific Officer.

Dr. Kaldjian has worked closely with me to develop a significant number of exciting collaboration opportunities, where we believe our skills and expertise should enable us to develop strong future opportunities for the company.

For the year just ended, from an operational perspective, I am very pleased to note that we have been able to maintain our current cash level, avoid any new debt, and improve our gross margins. We have strengthened our board of directors and added key senior management and experienced sales staff to further drive our revenues and future growth.

We have completed essential cost-reduction efforts to better position the company's cost structure, and I believe we are now well positioned to complete our plan to achieve double-digit sales growth for the year, as well as maintaining profitability.

We are driving growth in all three areas of our business and are aggressively looking for future growth drivers based on our technology and expertise in cancer and mitochondria testing, our mutation discovery and detection for pharmacogenomics, and our bioinstruments business.

I look forward to speaking with you again in our next quarterly call to update you on our progress.

Thank you, Craig.

I will take a few minutes now to discuss our fourth quarter and full-year financial results in a bit further detail for the year ended December 31, 2007.

When I am done, Craig and I will then be happy to answer any questions any of you may have.

Today we reported net sales of $6.5 million for the fourth quarter ended December 31, 2007. This was an increase of $721,000, or 12%, as compared to the same quarter in 2006.

Bioinstrument sales were $3.2 million, bioconsumable sales were $2.3 million, and discovery services sales were $1 million.

The bioinstrument sales were down 4% as compared to the same period in 2006. There were 12 WAVE instruments sold in both the fourth quarter of 2007 and of 2006. The slight decrease of 4% here was driven by just a fewer upgrade sales to existing WAVE machines approximating $200,000.

Bioconsumables net sales for the fourth quarter were up slightly by $261,000 as compared to 2006. The majority of this increase was related to our chromatography column sales.

Discovery services net sales for the fourth quarter were up 142%, or $597,000, over the same period in 2006. This discovery services group includes both our molecular clinical reference laboratory and our pharmacogenomics research services business.

The molecular clinical reference laboratory was up 119% for the fourth quarter over the prior year, and the pharmacogenomics research services division was up 161%. Craig has already given you some comments on these areas and noted how excited we are about the opportunities here.

Gross profit was $3.9 million, or 60%, during the fourth quarter of 2007, as compared to $3 million, or 52%, during the comparable period in '06.

We have had five consecutive quarters now with gross margins above 50% and are happy with where those margins are sitting.

The discovery services division was a major contributor with gross profit of $440,000, or 43%. This is compared to the prior quarter in 2006, where we had negative gross margins of 4% from this group -- a significant increase. We are making tremendous progress here.

Bioinstrument and bioconsumable groups also both had gross margin improvement in the fourth quarter.

In the fourth quarter, we reported a net income of $212,000, as compared to a net loss of $1 million for the comparable quarter in 2006. The improvement in 2007 is primarily a result of gross margin improvement of $895,000 and a reduction in operating expenses of over $400,000. That reduction in operating expenses is before we consider the restructure impact, which I will talk to in a minute.

We did have a slight improvement in discontinued operations. We had a loss of $165,000 in 2006 there, and we no longer have the discontinued operations in the fourth quarter of '07.

As far as restructuring impact, we did record $211,000 of expense related to the restructure activity in the fourth quarter, which brings the total for the year up to $1.5 million, just slightly over the projections of $1.4 million that we discussed earlier in the year.

Both of the consolidations in England and France are substantially complete. The production has been moved and is now being done in Omaha, Nebraska, and the European administrative functions that were previously handled in France are being performed either in the U.S. or in our remaining international site in Glasgow, Scotland. The only remaining item related to these restructures and consolidations is some final work on the building in England, and we should have that complete in March, and then a sublease on the French facility.

At December 31, 2007, we had a cash balance of $5.7 million and working capital of $11.3 million.

Significant items affecting cash flow for the full year were the $2. 9 million that we received from the sale of the Glasgow facility in the first quarter of this year, the $937,000 we received from the sale of the Pinnacle stock in the second quarter, and a significant reduction in accounts receivable during the year. These were offset by the increased inventory balances and capital expenditures of approximately $700,000 for the full year.

Shifting gears, I will discuss the results for the full year ended December 31, 2007.

Net sales for the 12-month period ended December 31, 2007, were $23.2 million, as compared to $23.4 million in the comparable period of 2006.

Bioinstrument sales were $11.6 million, consumable sales were $8.9 million, and discovery services were $2.7 million.

Bioinstrument sales were down 15%, or $2.1 million. In 2006 we had 68 WAVE sales, as compared to only 56 in 2007. This accounted for a little over half of the $2.1 million decrease.

Our OEM instruments -- or other externally manufactured instruments -- that we do sell through our sales distribution channels accounted for the remainder of the year-over-year decrease.

Please remember in 2006 we were also selling the SpectraMedics instrument through our sales distribution network prior to that company going into receivership in the third quarter of 2006. That is what's accounting for that decrease.

Bioconsumable sales were up 2%, with slight increases coming from both the chromatography columns and WAVE consumables.

Discovery services net sales, which includes both the molecular clinical reference laboratory and the pharmacogenomics research services business, were up 150%, or $1.6 million, over 2006.

The molecular clinical reference laboratory net sales of $1.7 million were up over 300%, or $1.3 million, over the prior year.

The pharmacogenomics research services business net sales of $1 million were up 47%, or $331,000, over the prior year.

Tremendous growth in both of those.

Gross profit was $12.7 million, or 55%, during the full year ended December 31, 2007, as compared to $11.4 million, or 49%, in 2006.

The largest factor in the gross profit margin improvement similar to the quarter was the discovery services group and the leverage on that revenue. Discovery services group contributed $1.3 million of improvement in their gross profit margins. They went from a negative 62% in 2006 to a positive margin for the full year of 22% in 2007.

As we continue to add sales in this group, it will continue to help us drive those profit margins. To a large degree, we have grown through our fixed base there in the laboratories, and we will see incremental increases as we add business in this group but still should see margins healthy in this area.

The bioinstrument and bioconsumable business both also had improvements in their gross margin, but note that, because of the $2.1 million decrease in the instrument sales revenue, the true dollar gross profit went down even through the margin did improve.

For the full year ended December 31, 2007, we reported a net loss of $2.1 million, as compared to a net loss of $3.4 million in the comparable period in 2006.

The 2007 results do include income from discontinued ops of $67,000, where we had a $468,000 loss in the period of the same year.

Other unusual items to note in these results for 2007 include two items that we've discussed either today or in previous quarters.

The year-to-date 2007 results include the $937,000 gain of the Pinnacle stock sale in the second quarter, and then please remember we did have the year-to-date expenses associated with the restructuring activity of $1.5 million.

This is the end of my formal financial update.

We would now like to open it up for questions. Devon will help us manage the queue on those.

Of course. (OPERATOR INSTRUCTIONS)

We'll take our first question from Steven Becker.

Go ahead, please.

Hello? Can you hear me?

Yes, we can.

Hey, terrific quarter. Congratulations on reaching profitability.

I have two questions for you. Firstly, are there any lingering cost cuts, or is there anything that will still be in the numbers going forward?

And the second question is can you talk a little about what you've done in terms of hires on the sales side for both lab businesses and what a reasonable expectation is for those hires to kind of get up to speed and be in full production mode?

Hey, Steve. We'll let Deb take the first question, and I'd be happy to take the second.

Steve, I think on the first question, we are virtually -- except for finishing up those two facilities -- complete with the restructure activities that we announced and managed in 2007.

I guess what I would like to say, though, is we continue to look at our operations groups and push our management team to continue to look at opportunities for improvement. So we'll obviously take advantage of any of those as they come up, but there is nothing imminent or identified as of this moment.

On the second question, Steve, it's a great question. We ask ourselves that all the time.

We have hired three sales reps for the molecular diagnostics lab -- or the clinical reference lab, as we called it in our breakout -- and they were hired in September so they are definitely hitting stride now. It takes a while to really make an impact there and get hospitals motivated to switch over to us and then to begin getting samples and what have you.

So we're hoping for just short of maybe $100,000 per rep per quarter in new growth, and we hired some very experienced folks there, and I think they're doing a really good job of gaining traction there, and we'll report on that next quarter as to how that is growing.

And then in the pharmacogenomics area, with the rapid growth that we've had there, that's really been a long-term effort from just a handful of folks seeing these pharma companies at conferences, not really in direct selling activities. So we think with only five to ten pharmas being serviced in any one quarter that there's a tremendous opportunity for us, and, as such, that's why we hired two business development directors that are very experienced in the space.

Terrific.

So we hope that each one of those reps can turn at least a $1 million in new business. And then when you look at the current run rate of both businesses, which seem to be relatively stable, we're looking at a significant improvement in the overall revenue for the company and, therefore, the margins as well.

How do you size the diagnostic lab side? What do you think the market size is there?

That's, for us, an easier question to get our arms around.

The mitochondrial space, where right now 1 in 2,000 to 1 in 3,000 people and newborns, in particular, have these diseases that are very difficult to diagnose. Our scientific advisor from the Cleveland Clinic estimated, and since he's a pediatric neurologist and does grand rounds for the United Mitochondrial Disease Foundation in training pediatric neurologists on the condition, he thinks that the whole market with our -- including our two competitors, have reached maybe 10%. So there's a lot of mitochondrial disease that exists that isn't diagnosed at the moment, and I think that that's mostly an issue of physician awareness. So we're really going to concentrate on physician training.

And in dollars what do you think that market is?

We think it's $30 million at least for the U.S. in the next two to three years to create that market.

But we also do cancer assays, neurology assays, and we are looking at extending the menu, as well as our capabilities, in laboratory. So we expect to see growth both in terms of revenue expansion from technology platform additions, as well as selling -- and new assays, rather, and sales of those new assays.

Terrific. Thanks, folks. Appreciate it.

Absolutely.

Thanks, Steve.

Thank you.

And we will take our next question from Matt [Armph] with Top Investment Advisors.

Go ahead, please.

Hi. Can you hear me okay?

Yes, Matt.

I'd like to add my congratulations on the quarter as well.

First question I have for you is any additional color you can give us on the state of the instrument pipeline?

On two sides, yes, absolutely, and good question.

For one component of the pipeline, certainly our OEM instruments, the HANABI harvesters, that looks to be very rich in the year. As I noted in my comments, we've had two large trials ongoing with the two leading reference laboratories in the U.S., and each of those labs could purchase multiple units. I won't forecast for them, but it's certainly a number of systems. And so we anticipate significant contribution from the HANABI side. We also have a large number of sales that are ongoing in this quarter. We can't report on those yet. So we're very confident that we'll do well with the HANABI side in the current quarter.

And WAVE's, even though we were down slightly from '06, we continue to sell 10 to 15 per quarter. We're a little bit -- I think our forecast says the lower end of that for the year. But the instrument still has great utility in the market, and what we're seeing from our service business is that the awareness is increasing, at least with our current pharmaceutical customers, that you can't find these mutations by sequencing, even with the next generation sequencers, and as such, you really do need the WAVE to capture them.

So we expect an ongoing, continued sales volume or (inaudible) pipeline of that whole platform.

Great. Well, it's good to hear that's holding up and that newer, more exciting opportunities are taking holding, and obviously in the pharmacogenomics research services things are going very, very well.

On the clinical reference lab side, could you speak to what kind of seasonality factors you would expect to come in to play here in 2008? It sounds like you, as a lot of folks do, were impacted by the down days in the fourth quarter. Can you just kind of give us a general feel for whether you expect that to follow kind of the typical seasonal patterns for clinical lab business in 2008, or what other factors may come in to play there?

That's a great question. I actually expect it to follow the typical reference laboratory model, and we've got a lot more color on that now that Chad Richards is running sales and marketing for us, and, as well, Dave Pauluzzi's joined the board. They're both very experienced in that space.

So certainly we think we'll have improvement from Q4 into Q1, and there was seasonality there. I guess we had a little more impact in Q3 from summertime impacts and physicians, as well as patients, on vacation.

So, yes, that does occur, and we're leaning a little bit more about that as we get into that market deeper.

But Q1 looks good for the reference lab. It also looks good for the pharmacogenomics lab. So with both of those somewhat maintaining their current revenue level even, and we're talking about $4 million plus total business for the year. So that's very encouraging.

Yes. That's certainly encouraging to us investors as well. So thanks for the questions.

Oh, absolutely. Good to talk to you.

Thank you. (OPERATOR INSTRUCTIONS)

We'll take our next question from Al [Shams] with Midsouth Capital.

Go ahead, please.

Hi. Good afternoon.

I've got a few questions here, so let me just fire them all off, and we can probably get them more efficiently that way.

Number one, go over what -- if you have any, and you should -- what our three year goals are for the company in terms of gross revenues, return on equity, net on sales, things of that nature.

Number two, describe the option package for executives.

Number three, address the cost of being a public company.

Number four, what do we have at a tax loss carry forward?

And, number five, are we at a position where we should be considering a stock buyback?

So I know I threw a lot at you but -- are you there?

I'm trying to write them all down.

Okay. Well, number one, is three year goals. Or whatever goals you have.

I won't speak to it beyond that we are crafting a strategy with the board right now, but I can tell you that, clearly, we see growth in both laboratory businesses. We'd like to maintain the bioinstruments and consumables business at its current level, but at the same time, we are discussing some collaborations both in the U.S. and in Europe to try and find new opportunities for the instrument base, new applications for WAVE, in particular. We continue to look for new products that we can sell and service in our ongoing -- in our current network as well.

In terms of the laboratories, I'd love to say we're going to look at them to grow 150% per year, but that's certainly a hope. We are going to continue looking at adding sales resources for both laboratories as the business growth permits, and we are looking at at the moment a large number of potential collaborations with a variety of academic and corporate partners that we think will develop really exciting technology, where we can secure rights to biomarkers or new IP. So we haven't monetized that yet.

Okay. Well, okay. So netting it all out, is there realistically a chance that we can be looking at a revenue run double what it is today three years out? I mean, is that in the realm of possibility, of probability?

Certainly anything is possible.

Right. That's why I said probable.

But I think what we're doing right now is structuring the business for a solid run rate on continuous growth, and I really can't forecast where we'll end up. We are not going to be Quest overnight.

Okay. Number two, the cost of being a public company. Is that a real drag on us at this point? And that kind of gets back to the first issue -- do we have to have a lot of revenue growth in order to get that cost down?

Al, this is Deb. I'll try for that one.

Obviously, there is a significant cost associated with being a public company. I think that cost exists today so, as we grow, I don't think you see really that much incremental cost. I mean, it's, unfortunately, here today. It's the audit cost. It's some of the legal work we do. It's, honestly, me potentially.

So there certainly is, I think, somewhere between a half million and -- I'm not going to guess exactly, but we've tried to lower some of that cost by doing some things. We did change our auditors to what we consider still a very competent firm but doesn't necessarily carry some of the costs of what some of the big four do. So we did go with McGladrey, and we, honestly, saved a significant piece of money by doing that.

So we'll continue to look at those opportunities, but I think, as we grow, you won't see additional costs associated with being public, but it does exist and it's --

Okay. So you think an all-in that kind of that cost of being a public company $600, $700,000 is maybe a good guess?

Yes, I would say that.

Okay. That's fine. I think we've answered that.

What about potential dilution from option packages for executives? Can you describe that program and strike prices?

We, obviously, have hired -- between Craig and I and then the two others that he talked about for sales and the CSO -- we've hired four senior-level executives in the last, say, 18 to 20 months. Each one of those did come with an option package. They're not significant, in my mind. Obviously, Craig's and mine are public so that information, if you go look for it, would be out there. Craig has 600,000 options; I have 300,000. So Craig's is 1% of the company. None of the rest of us have more than 300,000 shares at this point. So it's not significant.

Okay. Can you -- strike prices for you and Craig?

They vary because they came in over the years -- over a year period. Mine range from $0.42 to $0.53. Craig's are higher than that. That's a bone of contention internally here. His are -- I don't know -- $0.50 to $0.67, Craig? Is that approximate?

Yes.

I hope he has an opportunity to profitably exercise those.

No question.

Tax loss carry forwards?

We are actually going to do a small project in the near future on that, but when I started, I sat down with DNT, and while we had an all carry forward-- tax loss carry forwards in the range of over $100 million, because of some of the decisions made over the last few years within the company and change of control, many of those are limited or eliminated. So we are -- now that we're going to be profitable, we're looking into that.

I think we do have some that will be utilized, but of that 120, I believe, when we discussed it with them over a year ago when I first started, I think the amount usable were somewhere between $10 and $15 million, and we're going to go through that again quickly here. But it's certainly a small piece of the total amount because of change of controls that happened, primarily in '05.

Okay. And what about thinking about a nominal stock buyback?

One could always do that. I'm trying to hoard my cash at the moment -- or our cash -- it's not mine -- really to drive growth, and I think we can drive growth much better by funding the development projects that we have in front of us, rather than the stock buyback.

Okay. And then, lastly, you feel comfortable with the balance sheet the way it's currently constituted, and you think you have adequate resources to carry forward and don't see a need to do financing?

To carry forward the existing business and drive growth through the areas we've talked about, yes, I think we're fine. Obviously, when and if an opportunity would come up, we'd look at different opportunities that could propel growth even faster, and if the right opportunity comes up, we certainly would consider additional funding in some manner. Today, day-to-day ops, though, we are fine, and we believe that we will cash flow going forward and we won't see that deterioration unless it's the right decision to drive growth.

Okay. I'll let somebody else have a turn.

Okay. Thanks, Al.

Thank you.

Our next question comes from Larry [Hoffinsberger], a private investor.

Go ahead, please.

Congratulations on your quarter, and as I've been listening to this for over a year, congratulations on the number of questions here. Usually it doesn't last this long but --

I want to comment that you've beefed up your advisory board, you've beefed up your board with Pauluzzi, you've beefed up your team with Kaldjian and the V.P. of international sales from Quest, you've strengthened your sales team by three. Do you see in the future strengthening any other area of your management board or advisory board?

Hi, Larry. It's Craig. That's a broad question, but, yes. I mean, on one hand, Dr. Kaldjian and I have been on the road for as long as he's been with the company. So we're going to look and see what extra resources we need for handling all the business development opportunities that we have in front of us or managing those collaborations. So that's an area where we'll need help.

Just noting that the biggest growth driver that we see for the molecular diagnostics lab will be physician education, we are going to have to look at marketing resources and marketing expenses.

We're going to probably look at R&D resources as well. I think the good news for us is that we have both laboratories, and they're really humming along now, and they're well staffed with really competent folks, but as we get a collaboration in, that's really going to be a spade of samples that we put through one of the laboratories. So we're going to have to do that at the expense of paying projects, and, as such, there will be some expense there, so on one side from the labor, and on the other for the regions that do that. But it should be much cheaper than going out and trying to develop a new instrument system, etc.

So, clearly, as we grow, there's going to be resource needs across the organization.

But we do plan to manage those very carefully with the revenue growth also.

Have you leveled out on the number of sales people you're going to need?

No, certainly not. In our budget we are growing the reference laboratory sales team in the year, and we're trying to match that with the opportunity, as well as our ability to manage all that we see from the growth that they create.

So, yes, we're going to -- we'll add more folks there, and if on the pharmacogenomics side we get really good traction in the CRO's, as well as the pharma companies, we'll continue to add there equally.

So, no, we're not done yet.

Are there any upside surprises that could happen?

As always, we have some really interesting collaborations coming up, and what we're pursuing is it's been a model that exists in the industry, but we are trying to do some work for samples with academic partners and that reduces the cost of these samples substantially. When you look at a cancer specimen, it could cost $1,000 per tissue sample. And that allows us the rights to do more studies with those. Or it's specific studies that we do, and we're in discussion with NIH or the NCI or some other organization worldwide.

Thank you.

Sure.

Thank you.

Thank you.

We have a follow-up from Matt Armph.

Go ahead, please.

Just one additional question if I could.

Within the pharmacogenomics research services business, can you give us a little bit of a flavor as to the type of projects that you're looking at? Are we really seeing just more projects but they look pretty similar to the type of work that you've done over the last several quarters, or are you seeing any sort of evolution in terms of people recognizing the capabilities of your group and seeing different type of project work being put in front of you there?

Well, the main work that we do in that laboratory -- although we have a variety of genomic services -- but the main work we do is still mutation detection or discovery for now pharmacogenomic data that the drug company partners need for their new application submissions. So it's nice to have two Phase II trials -- one under our belt and the other signed up and ongoing -- actually, we have two ongoing at the moment. So those are good volume projects, and we hope to have them transition into Phase III projects.

At the same time, we hope to have some important biomarker discovered during that process, and we are doing, I think, such good work with them that they're coming back, and we do a multiple number of projects with each of these partners. So for the small number -- say it's around ten -- pharms that we work with now, they're all doing multiple projects with us. So that's good, and we've created that with participation at meetings on the technical side, but we now need to take that story on the road and meet the pharma companies and the CRO's that we aren't seeing and haven't heard and understand our capabilities.

And the good news for me is that these are really, what I would call, the initial stabs at true personalized medicine because they are looking for drug response based on the mutation profile that we provide them. And some of those pharmas will actually share that data with us now so that we can begin to see where you really have an impact and where you might be able to test for them to both select for their clinical trials, as well as select drug for the appropriate patient.

And with the fact that you're working with multiple large pharma groups on these type of projects, does that help you gain a certain credibility so the size of the company is not viewed as negatively as maybe it was in the past, where that was kind of a barrier to even getting a seat at the table in these discussions?

Absolutely. And that was the case a year ago, and we certainly know one very large biopharma that really had strict criteria for your financial position before you could actually submit to them.

Another thing that's occurring now is that we have enough staff with broader experience, and we are submitting for several grants now, and some of these grants are in the several million dollars. So whether we obtain those grants or not remains to be seen yet, but we are going after that as well.

And some of these partners that we're looking with will be putting SPORE grants together or SBIR's, etc. So we think we'll have a variety of funding sources in the future for both laboratories, quite frankly.

Great. Okay. Thanks again.

Sure. Absolutely.

Thank you.

And we do have a follow-up from Steven Becker.

Go ahead, please.

You know, it seems as time goes on that your reagent stream has been pretty consistent. Is there any opportunity to at this point in time revitalize the WAVE or market the WAVE for additional indications? I mean, clearly there's a population out there that consistently uses it and finds it has real advantages in certain applications. Is there any way to kind of focus on that and perhaps grow reagents or even grow WAVE placements?

Yes, absolutely. In some cases we are trying to get clinical trials initiated for markers I can't discuss at the moment but that are important cancer pathway genes, particularly the growth factor genes, and trying to compare that performance of the WAVE against sequencing, where mutations are missed. And there is a new paper that came out in leukemia that shows exactly that.

So, Steve, we're going to start pushing that more definitively in the market and also do trials that are with leading organizations that prove that, and then we can actually come back sometimes to the patent holder who is only sequencing and show both them, as well as the patients, that you get better data and, as such, better treatment options.

Another example, XDR TB. So for tuberculosis we certainly have an epidemiological application, and we're looking at getting that in place both in Europe and in the States. So we're looking in collaborations in that area.

So there is, I think, half a dozen projects that we're looking at that would validate the WAVE more deeply in its capabilities.

And then from that, we're really going to go after pharmas to share that capability -- get projects for the pharmacogenomics lab but then try and, as I said earlier, capture a biomarker link that we can put some IP around or share IP around and have diagnostic rights.

So the answer is somewhat broad, but clearly we're going to go after more WAVE applications. I'm encouraged to see what we're doing with the WAVE in surveyor and the pharmacogenomics lab is really gaining traction.

Terrific. Appreciate it. Thanks, guys.

Sure.

Thank you. And we have no further questions at this time.

Okay. Well, great. Thanks for all the questions, and look forward to speaking to you next quarter.

This concludes today's teleconference. You may disconnect at anytime. Thank you, and have a great day.