Precipio Inc (PRPO) 2008 Q4 法說會逐字稿

Good day, welcome to the Transgenomic Incorporated fourth quarter 2008 results call. (Operator Instructions). Later, we'll conduct a Q&A session. This call is being recorded. And now, I'd like to turn the call over to Debra Schneider, the CFO of Transgenomic Incorporated. Please go ahead.

Thank you, Brock. Good afternoon, everybody. I am Deb Schneider, Chief Financial Officer for Transgenomic. I would like to welcome all participants to our fourth quarter 2008 conference call, where we plan to discuss our fourth quarter, as well as our full year results. I want to apologize to everyone for the delay of this call. We had some final accounting issues to work through with our outside auditors and I felt that it was important to take the extra time to ensure that our results would be complete and accurate. I would also like to extend a welcome to anyone who may be listening on the Webcast. I hope that you have had a chance to look over our press release that we did issue a short time ago.

Before we start to review the results, I'll just take a couple of minutes to get the administrative matters out of the way. This conference call will be archived and accessible via both the telephone and the Internet. Please refer to our press release from earlier today or you may go to our Website 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 conditions, Company performance and/or 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 performances 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 said 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 for joining today's call. For the fourth quarter, we achieved revenues of $6.1 million. These revenues were comprised of $4.8 million from our WAVE business segment, which includes cytogenetic systems sales that totaled $608,000 and genomics service revenues totaling $1.3 million. In comparison to the fourth quarter of 2007, Q4 2008 was slightly lower due to the impact of foreign currency rates on our consumables sales and the delayed start up of some planned pharmacogenomics clinical research projects.

A bright note continues to be our molecular diagnostic laboratory, which achieved revenue of over $900,000 for the quarter. This represents growth of 25% above the third quarter in 2008, 114% growth over fourth quarter 2007, and 70% growth overall in 2007. For the fiscal year, we achieved revenues of $24 million or growth of 4% from 2007. Our net loss of $495,000 for the year is a significant improvement from our reported loss of $2.1 million in 2007. And does include a goodwill impairment charge of over $638,000, which Deb will cover in more depth in just a moment. Without this impairment charge, we are finally near breakeven performance. With that brief introduction, I will now turn the call over to Deb Schneider.

Thank you, Craig. I will take a few minutes to discuss our fourth quarter and full year financial results for the year ended December 31. I may have some comments that Craig has already communicated, so I apologize for that duplication. Today, we did report our sales of $6.1 million for the fourth quarter ended December 31, 2008. This was a decrease of $405,000 or 6% as compared to the same quarter in 2007. Craig did discuss this a little bit. Our instrument business showed an increase of $673,000 or 12% decrease. However in our laboratory business, we did have an increase of $268,000 or 26%. Bioinstrument sales were $3.2 million. Bioconsumable sales were $1.6 million. And laboratory services were $1.3 million.

The bioinstrument sales were flat compared to the same period in 2007. There were 14 WAVE instruments sold in the fourth quarter of 2008, as compared to 12 in the same period 2007. We sold three OEM instruments in 2008, as compared to four in 2007. The two additional WAVE sales were offset by the one less OEM instrument sale. Bioconsumables net sales for the fourth quarter were down by $710,000, as compared to the same period in 2007. This decrease is primarily in the European market and there are two factors contributing here. First, the foreign currency fluctuations of the great British pound to the US dollar and the Euro to the great British pound during the fourth quarter of 2008 were the largest that we have seen. The great British pound to the dollar rate decreased just over the fourth quarter by approximately 37%. In addition, we did experience some small volume decreases in our bioconsumables in the international market.

Laboratory services net sales for the fourth quarter were up 26% or $268,000. The laboratory service business includes both Molecular Clinical Reference Laboratory and our Pharmacogenomics Research Services business. The Molecular Clinical Reference Laboratory was up $489,000 or 114% for the fourth quarter. Sales focus and increased customer base and expansion of our test offering has driven this growth. In the latter part of 2008, we have started to process Medicare claims and have submitted applications in a number of states for Medicaid approval. While we believe this opens additional opportunities for us, we also believe our reimbursements will likely be less on these tests to the Medicare and Medicaid offices. We hired an individual recently who has experience in the medical billing arena who can guide us through these requirements.

Pharmacogenomics Research Services was down 38% or $221,000 for the fourth quarter. The pharmacogenomics revenue is project-based, so the revenue is likely to have some spikes. In the fourth quarter of 2007, we also completed two large projects that totaled approximately $300,000. Gross profit was $3.3 million or 55% during the fourth quarter, as compared to $3.9 million or 59% during the same period in 2007. We have had nine consecutive quarters with our gross margins above 50%. The primary reason for the decrease in gross margins in the fourth quarter is due to the lower consumable revenue, which remains with a primarily fixed base of expense.

The laboratory services division had gross profit of $696,000 or 54%, as compared to the same quarter in '07 where we had gross margins of only 43% from this group. We continue to see improvement in the laboratory services gross margins, as net sales increase, due largely to the fixed expense base in this business. In the fourth quarter, we reported a net loss of $219,000, as compared to a net income of $212,000 for the comparable period in 2007. Operating expenses during this period included two significant items. $530 of foreign currency revaluation gain, in which we've reduced operating expenses. And then, a goodwill impairment charge of $638,000 related to our instrument business. Without these two items, operating expenses for 2008 were $3.3 million, as compared to $3.7 million in the same period of 2007, or a decrease of about $400,000.

Let me spend a minute on the goodwill impairment. Net sales for the instruments or our WAVE related business, for which the goodwill is attached, have declined more than 15% over the last four years. Our projections for 2009 show continued decline in this part of our business. Based on our analysis using a risk adjusted discount rate in the 14% to 18% range, which we believe is certainly reasonable, our goodwill was deemed to be impaired and written off in the fourth quarter of 2008. Our audit committee and our external auditors concurred with this decision.

At December 31, 2008, we had a cash balance of $4.8 million and working capital of $11.4 million. Working capital was consistent with the end of 2007. Cash decreased by $1 million from December 31 '07. With just over $400,000 being used for operations and $400,000 used for purchase of plant, property and equipment, primarily in the laboratory business.

I would now like to turn the discussion to our results for the full year-ended December 31, 2008. Net sales for the 12 months ended December 31 were $24 million, as compared to $23.2 million for the full year 2007. This was an increase of 4%. Our instrument related business showed a decrease of 3% or $708,000. We then showed an increase of $1.5 million or 56% in our laboratory services business. Bioinstrument sales were $11.2 million and they were down 3% or $356,000. We had 56 WAVE sales in 2007, as compared to only 30 in 2008.

Offsetting a majority of this shortfall due to the WAVE sales were our OEM sales. We sold eight instruments in 2007, as compared to 13 in 2008. These OEM instruments tend to have higher sales prices than our WAVE instruments. The other thing I would note here is, we do recognize ongoing sales related to service contracts on both our WAVE instruments and our OEM instruments.

Bioconsumable net sales were $8.6 million or down 4% due to a decrease in WAVE consumable usage in Europe and the foreign currency revaluation and translation in the European market. Please remember here that we have ongoing consumable revenue streams associated with our WAVE instruments but we do not sell consumables related to the OEM instruments we are selling. While the OEM sales are somewhat offset -- are offsetting the decline in the WAVE instrument sales, we do not enjoy that same relationship on the consumable side.

The Laboratory Services business net sales were $4.2 million. This includes both the Molecular Lab and the Pharmacogenomics Research Services business. The Molecular Lab, sales of $2.9 million were up 70%, as Craig Tuttle noted earlier, or $1.2 million over the prior year. We continue to see significant growth in this area. The Pharmacogenomics Research Services business, net sales were $1.4 million and that was a 33% increase over the prior year.

Remember, that in the fourth quarter, we had a slight shortfall and some of that can be timing. I want to remind everyone that trends between quarters can be difficult to predict, as this is primarily project-based sales. And the timing of samples coming in can move work from one quarter to another, even though we do have a contract in place. Many times this timing is not in our control. We were very pleased, however, that this product line showed strong growth for the full year over 2007 of 33%.

Gross profit was $13.7 million or 57% during the year-ended December 31, 2008, as compared to $12.7 million or 55% in 2007. Overall, the instrument business had a very small dollar change in gross margin, with their gross margin remaining at 59% for the year. The largest factor in the gross margin improvement, obviously, was the laboratory services group. This group contributed $1.3 million of additional gross margin in 2008. And their gross profit margin went from 23% in 2007 to 45% margin for the year-ended December 31, 2008, a significant increase.

The increased revenue here helps improve our margins on a largely fixed cost base. Obviously, there are some steps based on equipment and people but those costs are not super significant. We do expect that our average test price is likely to decrease, as we move to accepting insurance Medicare and Medicaid. In addition, as we move into additional markets and start offering new tests, those test prices may be lower than the mitochondrial tests that we started out with. And so therefore, on average, our test price may be lower in the future.

For the full year-ended December 31, 2008, we reported a net loss of $495,000, as compared to a net loss of $2.1 million for the full year 2007. y We are pleased that the Company is still trending in the right direction. And also, don't forget, that we did have the $638,000 goodwill impairment charge and we also had $1 million of foreign currency revaluation gains in 2008, net sales growth and close to breakeven performance. We were pleased with that.

We continually review our expense base to ensure that we are operating as effectively as possible. We encourage operation groups to look for new ways to be more effective in their day-to-day operations. Investment in the business remains focused on the higher growth opportunities. This is the end of my formal financial update. Craig would now like to come back and discuss some further comments before we open it up for questions. Craig?

Thanks, Deb. I'd like to further describe our progress to date and comment directly on the key initiatives that we are working on to drive growth in both the short and long term. In particular, I believe that reversing the last few years of sales declines is one of the most significant successes in the year. This has been accomplished with the addition of key sales staff and sales leadership; growth in Molecular Diagnostics Lab assay menu and staff; and continuing sales of WAVE services, products and consumables. And although sales of new WAVE systems has slowed of late in the marketplace, we are developing some key products and applications, which we expect will increase interest in use of the system in the near future. I will discuss those plans shortly.

In reviewing the progress in our Molecular Laboratory, where revenues reached nearly $1 million in the fourth quarter, we continue to demonstrate real leadership in mitochondrial assessment linked to severe neurological diseases. We have also added new CGH microarray testing to our menu, which is further enhancing our growth. Furthermore, gaining accreditation from the College of American Pathologists was a pivotal step in further recognizing the ongoing maturation of our high quality lab operations. And the recent lab certification from California allows us to begin our selling effort in one of the largest market segments in the US.

I'm also sure that you have seen our announcement for the key licensing efforts that we have been pursuing during the year. We have finalized two exclusive licenses from which we gain exclusive access to assay technology with very large market opportunities. The first license we announced is with the Clayton Foundation for Medical Research. And this license grants us access to a patent for the assessment of mitochondrial DNA damage, that is indicative of cardiac disease, diabetes, neurodegenerative diseases and cancer, as well as aging.

To explain these potential opportunities, just a little further, our focus on mitochondria is based on the expertise that we have gained from performing mutation assessment of mitochondria DNA for specific neurological diseases such as [Melous, Tiernsers and MERS]. Although these are somewhat rare diseases, they cause a variety of poor outcomes that range from blindness and seizures to deafness, chronic fatigue and even death. The defects in mitochondria may be linked to the development even of autism.

What is sometimes forgotten is that mitochondria are the small components of every cell in our bodies that generate energy and heat, as well as regulate many important cellular processes, including the [apoptosis] or mechanism our bodies use to kill cells that are defective, such as cancer cells. Mitochondria are only central -- they're also central to free radical generation. And mitochondria are the only organelles in our bodies that contain their own DNA. As such, measuring the damage or mutations that occur in mitochondrial DNA provides a wealth of disease related information that has long been overlooked in current medical research. And although that trend is changing rapidly, we are well placed to be at the forefront of this developing science.

Testing mitochondrial damage has been shown to be an early indicator of cardiac disease and disease risk, the risk or indication of diabetes or even pre-diabetes, certainly cancer and aging. Following our securing this license, we have had to develop a robust assay to determine mitochondrial DNA damage, which has recently been completed by our R&D team in Gaithersburg. And now, we are ready to begin deeper clinical validation studies across each of the diseases I just mentioned.

We are fortunate enough to have already established a relationship with several key researchers and clinicians across each of these disease indications to prove the utility and eventual clinical use of this assay in assessment of these diseases. And all of them are particularly significant market opportunities. Equally important, we can now offer this assay to our pharmaceutical partners through our Pharmacogenomics Lab and sales team to support clinical research and trials for both drug toxicity testing, as well as validating drug targeting of mitochondrial damage. We have also completed the exclusive license to Power 3 Medical's proteomic assay technology for Alzheimer's and Parkinson's disease diagnosis.

Currently, there are no definitive diagnostic tests for these two diseases. Unfortunately, there are currently no effective treatments reverse these diseases either. But there are treatments that will at least slow the development of the disease, particularly for Alzheimer's. Allowing clinicians to definitively diagnosis these diseases will allow better treatment opportunities and eventually, the option of earlier treatment. With 5 million sufferers of Alzheimer's and over 1 million cases of Parkinson's disease in the US, coupled with the ongoing increases in these diseases, driven by our aging population, we believe that each test represents a very significant market opportunity. Our plans include further clinical validation of both assays this year, coupled with commercialization of the assays through our CLIA-certified molecular diagnostic lab within the year. And once again, we have the ability to offer these biomarker based assays to pharmaceutical companies to support their clinical discovery in trials on current and new therapies under development for treating these diseases.

As I mentioned in my opening remarks, we remain committed to enhancing our WAVE system platform and maintaining its technical utility in disease testing. Our current efforts include an aggressive project to develop a kit based assay for K-RAS mutation testing. This K-RAS kit will run in combination with our WAVE system. We are pursuing this opportunity following several cancer treatment drug studies that we performed with key pharmaceutical partners, where we were able to demonstrate clear evidence of superior performance of our assay, compared to sequencing or QPCR method. As a result, we believe a strong market opportunity exists in both colon cancer screening for K-RAS, as well as an even more compelling market opportunity in lung and pancreatic cancer testing using our products. We are on target to complete our K-RAS assay development in second quarter and we will soon be initiating the essential clinical trials necessary to validate our kit's performance.

Equally important, we have developed a large portfolio of over 200 key cancer pathway gene mutation assays that we offer through our pharmacogenomics lab. And many of these assays can and will be converted into WAVE based kits. Furthermore, we have already initiated discussions with potential reference lab partners for commercializing these assays. Our expectation is that cancer therapy decisions, particular for epidermal growth factor receptor treatment strategies, will require a thorough and very sensitive mutation assessment of several of these key cancer pathway genes. And again, seeing the impact of our combined services offering, we are already seeing a pick up of oncology assay testing volume in our own Molecular Lab for K-RAS testing.

I hope that our strong efforts in expanding our sales for our laboratory services group, coupled with ongoing activities to develop and bring high value added and large market opportunities to the lab, demonstrate what we believe is a very sound and achievable strategic vision for the Company. Unfortunately, as a Company, we face many of the same challenges that many others face from the current economic turmoil. In particular, with a sizeable amount of our revenue coming from Europe, continuing fluctuations in foreign exchange rates could have a sizeable impact on both revenue and ongoing product sales, at least in the short-term.

We certainly hope the current economic stimulus package going to the NIMH will have a positive impact on us. And we are also planning to submit a broad number of grant applications to aid us in expediting the clinical validation activities with our key academic partners for validating our assay targets. But we cannot easily forecast what the total impact of this current economic volatility will have on our business in 2009. Well, that concludes my remarks for the fourth quarter and fiscal year 2008. Deb and I are now happy to answer any questions that you might have.

(Operator Instructions). It appears our first question comes from the site of Chrystyna Bedrij from Griffin Securities. Please go ahead.

Good afternoon, Craig and Deb. And congratulations on your just unbelievable achievements and I think unbelievable initiatives. Just a couple questions.

Of course, Chrystyna.

Okay. Can you just elaborate a little bit more on your press release on the Clayton Foundation? And maybe just zoom in on one of the opportunities, maybe the atherosclerosis opportunity and just maybe speak a little bit to timetables and maybe the importance of this test in the cardiac space?

That's a great question. Thank you.

Thanks.

Again, there are a variety of disease states that are covered in the Clayton patent, which we licensed. And cardiac, I think, is the first and most important one, at the current time, because the number one killer in the US remains cardiac disease. And so, any assay that can give a good indication of current or eventual risk to patients that are suffering cardiac events is in particular very useful and certainly economically interesting. For this assay, not only does the application opportunity extend to atherosclerosis and it does appear that atherosclerosis can and is driven by free radical generation, that mitochondria are intimately involved with. And the damage that occurs to the mitochondria, certainly aids, unfortunately, the development of these plaques and the eventual rupture of plaques, which can cause an MI. But the other application that is seen in the data on an early basis, which we will have to validate, is to really show a very near term risk or stress from the mitochondrial damage. Which we anticipate, with our clinician partners, to be truly indicative of highly dangerous near term stress events, including an MI. So the first half of your question is that, if we could show through this assay individuals that are highly at risk for an upcoming MI, that would be quite revolutionary in the cardiac space for selecting treatment options and observing patients.

And that's proprietary right?

Yes, it is.

Wow.

Thank you. It's exclusive. So the real challenge now is really validating that that condition does exist. And clearly, the cardiac space is somewhat slow moving. As you know, right now, the market still looks at LDL as a -- or clinicians still look at LDL as an important indicator of lipoprotein status. And quite frankly, apoB is a much better marker but that adoption has taken several years. At the same time, we can launch an assay through our CLIA lab, following validations and the generation of publications, so that we are gaining the benefit of being able to sell the test now. And continue to expand the clinical data that supports further sales of the test and greater adoption. As such, that leads to the second part of our strategy, which is obviously one where we sell the test through our lab here but then we extend that and produce this assay. And also, assay kits for the other indications. It's an actual kit, just like we're doing with K-RAS. In this case, the kit would not have to work with the WAVE system but we could sell it broadly. And that too would be covered within the patent confines of that license. So with -- on the back of the envelope, I look at what, 500,000 cardiac related deaths a year. And if you were testing a large percentage of those with a $500 test, it's a significant market.

Wow. And then, I'm sorry, maybe you said timetables, that's right now?

That's a great question. We're in conversation with a clinician now who is one of the inventors of the test and also the indication. And we are expecting to put a grant in under the current stimulus package for the challenge grants. They're due at the end of next month. But we'll also put an SBIR on. But in any case, we will look forward to moving forward as quickly as possible, certainly before summer, to get the clinical trial ongoing.

Well, that's very helpful.

In that regard, I would say that that's one of the longer term indications, to fully develop it, validate it. That could take a year or two to generate that data. But again, at any point during that time when the data is strong enough, we can launch the assay in our CLIA lab.

That's not that long in drug development.

Exactly. And the other side of that is, you can sell this assay to pharma partners for use in drug treatments that are based on understanding this high stress condition that mitochondrial damage has created. So that's further opportunity to sell it on the other side of our business and gain revenues there before all of the clinical validation is done to convince cardiologists.

That's very helpful, thank you.

My pleasure, of course.

Okay. We'll take our next question from [Larry Hoffinsberger], who is a Private Investor. Please go ahead.

Yes, hi, Craig, and congratulations, you're $23,000 more in cash than you were at the close of September, the third quarter. And I, for one, like that.

So do we.

Thanks, Larry.

You've got traction and your cash is growing, even though it's modest. But I've got a couple of questions here. On March 5. in a press release. you put out that you received notice from the State of California that you can begin offering the service in the state. What kind of economic benefits do you think may result from that?

That's a good question, Larry. First of all, to understand the scenario for a laboratory business. A variety of states have different certification requirements prior to performing tests in their state or performing tests on their residents. California and New York are two in particular where you have to actually gain accreditation for your laboratory practices from the state and a state authority. And then, you're permitted to actually engage in sales and marketing activities in the state. So prior to this, we were not able to actively market our lab services for mitochondrial assessment or any of the other tests that we do in California. We could accept samples that were sent in but we couldn't actively sell and market the services.

Following that California certification, we can now do so in California and we've already begun that. So, that was a key hurdle for us and an excellent milestone to have achieved. I forget how many people are in California these days, since I moved away. And I don't know how many have money now in the current economic condition, they're one of the harder hit states. But clearly, it's one of the largest state markets for our testing services. And so, we expect ongoing impact on our business that should lead into our internal forecast for the laboratory, which is certainly to have it continue growing, hopefully, at the same pace that it has been growing to date.

As far as last year, at this time and the present, how many salespeople do you have this year compared to last year at this time?

For the Molecular Laboratory, this year last time, we had five individuals or I'm sorry, we had three. I'm getting the three signal. And we have five now. And our plan is to, I hope that's your next question, Larry, but our plan is to almost double that through the remainder of the year. It will be event driven on sales growth but we see that need to continue growing the field team.

With respect to doubling that, you're sitting with about $4.8 million in cash at the end of December. What kind of a cash use do you think you're going to have over the next two quarters? For this quarter that we're in and the next quarter, are you going to be able to maintain your cash similar to where you are now?

Without going into forecasts, we're watching it closely. All I can tell you is that, as we undergo currency fluctuations, it's very hard to predict that. We'll maintain as tight a control on our cash as we can. We'll even look at potentially delaying some of our clinical trial activities until we get a good picture on whether they'll be given current challenge grant support or if they'll be given SBIR grant support. So, we'll manage our cash and our activities accordingly. We don't want to be one of the biotechs, of which there's a couple hundred out there today, that are burning cash and will need money yet this year to stay in business. So we certainly don't have any interest or intention to get in that position. So with that said, that's the real key for having achieved near breakeven performance.

Are you feeling the effects of the economy? You said you were feeling it with respect to WAVE sales. Are you still feeling it and is it lessening or is it tightening or what is your opinion of that?

Well, first of all, we announced a fairly significant gain from currency fluctuations last year. As you recall, perhaps, the British pound was at $2 last year and already, this quarter, it's dropped to $1.4. It's been as low as $1.38 or even less. But today, I looked at it yesterday, it was $1.4. And so, that fluctuation continues and so, we'll continue to suffer from that.

We certainly haven't seen the fluctuation we did towards the end of '08, though Larry. I think the great British pound to dollar was $1.45 at year-end and it's maybe $1.4. So we haven't seen as significant a deterioration but we continue to watch that closely. We also continue to do pretty in depth expense reviews with different management people and try to manage travel and expenses and CapEx. We really do try to watch that closely all the time.

One last question here, the last time, I think it was last quarter, I asked a question, if you liken yourself to Sequenom. And just as sort of a fun question, and I'd like to ask that question again. Is it possible that you could do anything in the future like Sequenom has done?

Again, I think that remains a great question. To clarify it to the rest of the audience, Sequenom has a genotyping business that they have also gained some exclusive, maybe not exclusive now, assay technology to do Downs Syndrome testing. And that resulted in a significant run up in their business and potentially or ostensibly $1 billion market cap increase. And some time ago, their stock reached all-time high of around $25 a share. It's now drifted back down to $14 to $15 a share. But in either case, I think the market recognized that Downs testing and high accuracy Downs testing in maternal blood, rather than having to do a chorionic villi scrape or amniocentesis, is an important and new novel technology. And I agree.

On the other hand, when I look at our business, Larry, and it always remains our strategic intent and that's a great question, I look at two things. One is. if you will, shots on goal, to bring up the hockey reference maybe, football if it's your preference. And the other is; How strong or large is the opportunity? And I think that for cardiac disease, cancer and neurodegenerative all combined, if something can impact your health, we have an opportunity to participate. So clearly, as many folks have voiced of late, we need one of these opportunities to hit. And that certifies our future as a successful molecular lab and ongoing genomics Company. But if more than one hits, I think the sky is the limit there. So our role and goal here has been to identify the best opportunities, based on our technical expertise and areas of focus. And then, find the appropriate clinical indications where we can have good market impact and do good science there, that really will expand our opportunities.

Which two would hit first?

All right, so we're playing hockey now, Larry. In reality, the proteomic assays for Alzheimer's and Parkinson's, I believe, are closest to market in terms of the current data set that validates their targeting. And we expect to commercialize both the Alzheimer's, as well as the Parkinson's test this year. Alzheimer's will be the first test we will try and commercialize. But as you know, there's a good amount of clinical validation that you have to do. Fortunately, those assays come with a good history of clinical activity and support. So, we're confident that those two will hit the market this year.

Thank you, Craig.

Sure, my pleasure. And by the way, I would mention that with 5,000 individuals suffering from Alzheimer's in the US, that kind of relates to about a 125,000 new cases of identified disease. And there are several -- or many cases where the disease is not identified, certainly, early enough. So, that's a significant market. And Parkinson's is about 1.5 million sufferers in the US and also growing, just like Alzheimer's. So both stated, those are potentially $75 million to $200 million opportunities, at the end of the day, when fully commercialized and selling on to all the potential venues.

All right, we'll take our next question from Mark Merrill from Griffin Securities.

Hi, good afternoon, Craig.

Hi, Mark.

Congratulations on your development in the fourth quarter and thank you for taking my question. I was wondering, you just finished speaking about so many different opportunities, shots on goal if you will. I was wondering if you could speak about one of them in particular a bit more? If you could elaborate a bit more on the connections between mitochondrial DNA damage and autism?

Well, you've been reading some of the most new literature out there, Mark. It's a great question. Obviously, there is a significant dilemma facing -- well, it's significant medical emergency, I think, facing parents in the US and that's currently about 1 in 150 to 200 newborns in the U.S. before the age of I believe seven are identified as having autistic syndrome. And it appears that there are a variety of types of autism, clearly, but the bottom line cause is unknown. And yet at the Vaccine Court, there was the [Anna Pauling] case. This is a case where a young child who had an underlying mitochondrial disorder, she had both a point mutation, as well as a known energy transfer or energy generation problem, was given several vaccinations. And then shortly thereafter, developed frank autism and has remained autistic. So clearly, the risk is apparent that an underlying mitochondrial frailty, if you will, could be a factor in the progression or development of autism. And therefore, maybe it should be understood before children are vaccinated.

We're talking about in, when we look at mitochondrial mutations in mitochondrial DNA in newborns and in children, we see a far lower amount of mutations, certainly, in the order of 1 to 2,000 to 1 in 4,000 individuals. However, there was a study done in the UK where they assessed, I think, 3,000 newborns and found pathogenic mitochondrial mutation in roughly 1 in 200. So, that data is very similar to the incidence level of autism. And I will tell you, we are working with some collaborators to put grant applications together just to find out if there is a link. If there is a link, it would be a good finding if you could somehow test individuals beforehand to understand their mitochondrial susceptibility and if that does cause autism following vaccination. But the Vaccine Court recently ruled that vaccinations are not involved in the development of autism. And I think this is a case where we just need more data. And we've appealed to the CDC and to NIMH to help us -- or help fund us in developing that data.

And other groups have had the same request. So in the short-term, I hope that they come to grips with the need to fund that and develop the data. So we know that it is or is not involved and have some impact on the high level of autism that we're seeing in the US.

Yes, that's very interesting. I appreciate the level of detail. Also, very quickly, the collaboration or license agreements between you and the Clayton Foundation and Power 3 are great steps in the right direction for your molecular business. I was wondering if you could be so kind as to briefly discuss any potential future collaboration or license agreements that you may be working on?

Well in addition to the cancer gene pathway kits that we are actively developing, we are -- and we haven't announced, so I have to say I would like to defer that question until the announcements come out. But we are looking at a technology that has very high increases in mutation detection. And the others, I'm just going to have to wait until announcements are made. But it's a great question and certainly, it indicates our active interest to continue looking in the market and in the literature for new opportunities. I will say that the one that we hope to get traction on fairly soon, is some studies to look at circulating DNA and try and understand if we can use our current technology with WAVE and SURVEYOR or a new technology that we're looking at, to see if we can find these DNA signatures that are indicative of an ongoing oncogenic state. And hopefully, to see that we can find an earlier means to uncovering cancer.

Okay. So, you are active in pursuing additional opportunities?

Absolutely.

Okay, great. Thank you very much.

Sure, my pleasure.

(Operator Instructions). We do have one now from [Michael Spindahl] from MJS Capital.

Hi, good afternoon.

Hi, Michael.

A couple of quick questions. I was wondering if you could give me a current number for your NOL's, at this point, in going forward?

We can rustle some paper and come up with it. I think it's under $10 million.

Well the NOL's are much greater but we actually are in the process of doing a study to determine if any of those have been limited due to changes of control provisions. And I'm flipping real quickly.

And I think because of the pipe that was done in 2005, before Deb and I got here, that there is going to be an impact against the total NOL.

Okay. So, you think it's right around $10 million?

We did an assessment with Deloitte & Touche a year or two years, maybe 2.5 years ago and I think the number was around $10.5 million at that time.

We did but we want to verify that.

Sure.

In the K, you'll actually see a bigger number, a full evaluation allowance that we're showing about $41 million.

Okay. Also what's the number of shares, fully diluted, at the end of the quarter?

It remains the 49,189,672.

Okay.

We have no options that are in the money.

Okay, great. And I think you touched on it earlier with one of your questions. It looks like you're planning on doubling the size of the sales force regarding the laboratory segment of the business? What type or how -- are you guys able to see how long it takes from bringing on a new sales rep to get him or her fully running? And in what type of numbers do you kind of expect from your sales reps?

Well, I will say that we've learned how long it takes for a typical new representative to come up to speed and it does take several months. They can start having an impact in a market territory, somewhat soon. But for them to achieve roughly $500,000 a year in new product sales through the laboratory services, that does take a good six plus months. So, we expect that when we bring in new staff.

And then on the pharmacogenomic side, we actually expect those numbers to be greater, as far as what an individual can bring in. But it does take probably the same amount of time on that side or a little longer to develop those relationships with the big pharma companies.

Okay, great. Thanks. That answers my questions. I'll go back to the queue.

Thank you.

(Operator Instructions). At this time, I don't believe we have any final questions.

All right, well, great. Thank you, everyone, for participating and I certainly appreciate your interest and questions. Thank you.