Precipio Inc (PRPO) 2011 Q4 法說會逐字稿

Good morning, and welcome to Transgenomic's fourth quarter and year-end 2011 financial results conference call. All sites are currently on a listen-only mode, but please note that will be a Q&A session later on in the call. (Caller Instructions) Also note today's conference will be recorded. My name is Brett Frevert, and I am the CFO of Transgenomic. Thanks everyone for joining us today as we discuss the fourth quarter and 2011 year-end financial results. As a reminder, it will be recorded, archived, and accessible by both phone and Internet from our website. Please refer to the press release or our website, Transgenomic.com, for further details.

Our comments today will contain forward-looking statements. Forward-looking statements are any statements that are made that are not historical facts. These forward-looking statements are based on current expectations of our management team and there could be no assurance that such expectations will come to fruition. Because forward-looking statements involve risks and uncertainties, Transgenomic's actual results could differ materially from management's current expectations. Please refer to the press release, our 10-Q, our 10-K, and other periodic SEC filings for information about factors that could cause different outcomes.

The information we present today is time sensitive and is accurate at only at this time. If any portion of this presentation is rebroadcast, retransmitted, or redistributed at a later date, Transgenomic will not be reviewing nor updating this material. Joining me today are Craig Tuttle, our President and CEO; and Chad Richards, our Chief Commercial Officer. During today's call, Craig will provide an overview of our key business initiatives, and then I will review our fourth quarter and year-end results. We will then open the call up for Q&A.

Thank you, Brett. 2011 was a great year for the Company on all fronts and set the stage for what we expect to be a breakthrough year in 2012. As Brett will discuss later, we had a very strong fourth quarter, driven by top line growth and the continued benefit of our FAMILION acquisition. Revenues for the grew quarter-over-quarter for all of 2011. Year-over-year revenue grew significantly as well, increasing 59% to $32 million. In addition to our successful integration of the FAMILION laboratory business, we achieved organic growth in our Pharmacogenomics clinical trial business and our Clinical Reference Labs business.

Modified EBITDA, which is a non-GAAP measure that we view as an appropriate and sound measure of the Company's results, improved to a gain of $615,000 for the fourth quarter of 2011 from a pro forma loss of $1.4 million for the same period of 2010. We calculate that pro forma -- the FAMILION business had been included in 2010 for valid comparison. For the year ended December 31, 2011, Modified EBITDA was a gain of $195,000 as compared to a pro forma loss of $6.3 million for the same period in 2010. Equally important, we edged into profitability for the fourth quarter with a net profit of $300,000. These results speak to our solid integration of the reference laboratory business as well as other cost management actions during the year.

Our financial performance for the quarter clearly underscores our continued success in executing our business strategy, which is focused on our ability to launch key new products and realize cost savings from our integrated reference lab business, while investing what we believe are groundbreaking, new technologies for our industry. I want to take a brief moment today to highlight some of the key initiatives at the Company, which we believe will serve as a catalyst for additional value creation.

First, we've expanded our cardiology genetic test offerings, launching two innovative genetic tests at the American Heart Association annual scientific sessions last November. But, most important is our new Clopidogrel, or Plavix Response Panel, which analyzes the genes, CYP2C19 and ABCB1, to help predict the patient's ability to absorb and metabolize Plavix, the most widely prescribed antiplatelet drug used to reduce the risk of death, stroke, and heart attack in heart disease patients. Clopidogrel is taken as an inactive form, called a prodrug, and must be absorbed through the intestine and then metabolized by the liver to form the active drug. Variations in either of these genes from normal can produce proteins that have reduced function.

ABCB1 is the gene that codes for the protein that controls absorption of Plavix, and CYP2C19 is the gene that codes for the liver enzyme responsible for metabolizing Clopidogrel, or Plavix, into its active form. As a result of these potential genetic variations, patients with dysfunctional or lower functioning ABCB1 or CYP2C19, or both, are at heightened risk for heart cardiovascular events than patients with normal protein function. The seriousness of this problem for CYP2C19 prompted the FDA to add black box warning to Clopidogrel's label in 2010 to alert physicians and patients about this risk. The expanded clinical picture for effective Plavix treatment is emerging further from large academic studies.

Just last week we announced the publication of a new study by researchers at Vanderbilt University, further validating that both CYP2C19 and ABCB1 are critical for determining which patients would benefit from treatment with Plavix and those who would, or should, be on a different medication. The Vanderbilt study is now the third independent published study demonstrating the value of testing for both CYP2C19 and ABCB1 to identify these patients. These results were published in the February issue of Clinical Pharmacology & Therapeutics. This is a significant opportunity for Transgenomic. There are approximately 6 million new patients prescribed Plavix each year, of which about 47% will not fully benefit from the therapy because of genetic variations in either CYP2C19 or ABCB1, or both. Our test is the only panel to test for genetic variations in both of these genes.

As a reminder, ABCB1 is proprietary to Transgenomic, and comes to us from the Clinical Data acquisition with associated intellectual property that was held by Clinical Data. Our patent on ABCB1 has already been issued in Europe and is pending in the US. We believe this market represents a potential multi-billion dollar opportunity for our clinical laboratories division, as the full panel both genes is needed to determine which therapy would benefit patients most -- Plavix, which will become a generic in two months; or two newly approved medications that would be much more expensive for patients and insurance companies. In addition to our Plavix test, we also expanded our growing FAMILION franchise with a test rate familial atrial fibrillation. We now have a total of 11 tests on our FAMILION cardiac franchise.

We also saw a significant growth in our neurology business, driven by our second-generation, sequencing-based mitochondrial assay or Nuclear Mitome Test, which has been very well received by mitochondrial physicians. This assay provides very useful clinical information to physicians and benefits these affected patients and their families, and allows them to better diagnose this serious and difficult to discern set of disorders. We continue to see demand for this new test and expect this demand will continue.

In our Pharmacogenomics Service, or clinical trials business, interest in our genomic services business continues to be very high, driven in part by our breakthrough Ice COLD-PCR technology. We have demonstrated analytical sensitivity improvements as much as 1,000 fold greater than standard PCR and Sanger sequencing alone when we employ Ice COLD-PCR for DNA mutation detection. Equally important, we do not have to target specific mutations to analyze when we use Ice COLD-PCR, as this technology enriches for all the mutations in the gene being tested, as compared to other competing technologies. By enhancing the analytical sensitivity of PCR and sequencing, we can offer the most accurate and sensitive mutation detection technology available on equipment found in molecular diagnostic labs worldwide utilizing standard Sanger sequencing technology.

In our Pharmacogenomics Clinical Trial business, we continue to perform Cancer Pathway Gene Mutation analyses and other genomic service testing for a number of companies. We typically perform 25 projects a quarter in this division for many of the largest Pharmas in the world, and our prowess in this area is becoming increasingly recognized as we add new Pharma partners to our business. Our long-term goal for this business, in addition to performing higher numbers of projects and more late state clinical trials, is to develop companion diagnostic assays, which we can deploy through our clinical reference lab and as kit products that can be sold worldwide. We are also focused on driving growth in our diagnostic tools business.

As we have discussed in the past, instrument sales translate to incremental revenue from consumables and service contract sales, which provides compounded and repeating revenue growth. We announced a significant distribution agreement in November, what has positioned us to be able to expand our presence in key international markets for our cancer mutation detection kits. Our distribution agreement with A. Menarini Diagnostics, one of the leading diagnostic distribution companies in Europe, covers the sale and marketing of our newly licensed WAVE MCE instrument, consumables, and our SURVEYOR Scan Mutation Detection Kits To the European Union. This transaction has significant revenue potential, enough we believe to reach several million euros a year in sales over the next several years, based on the strength of A. Menarini's distribution power and selling to pathologists across Europe, coupled with our expanding menu of cancer pathway gene kits.

We also announced agreement with ScreenCell for the sale marketing of its ScreenCell filtration device portfolio worldwide. ScreenCell's technology is dedicated to the isolation of circulating rare cells such as circulating tumor cells, or CTCs, which may simplify and improve noninvasive access to tumor cells for analysis of a patient's cancer. And coupling our Ice COLD-PCR technology with CTCs isolated by the ScreenCell device allows us to interrogate cancers from these isolated circulating tumor cells. Of course, Ice COLD-PCR also allows us to analyze circulating DNA directly. In either case, we believe the long-term benefits to cancer patients will be a blood-based test that can be used to determine the best course of therapy, evaluate when a patient's therapy would have to be changed to address an emerging resistance capability in their disease, monitor the effectiveness of treatment from a blood draw rather than imaging or biopsy, and even screen for cancer early in its development.

We are also investing in new products and technologies to drive the expansion and evolution of the Pharmacogenomics and companion diagnostics fields. Clearly as the market for personalized medicine develops, there is a tremendous potential for more comprehensive genomic testing to support accurate drug selection. As I mentioned earlier, we will continue convert Ice COLD-PCR assays from our Pharmacogenomics lab into kit products for worldwide distribution, providing laboratories everywhere with the most sensitive mutation detection technology employing all the instrument tools that they already have in their labs. Our efforts on this front have already led to the development of multiple new assays that we are now offering to pharmaceutical partners.

In summary, we had a great 2011 with continued progress across each of the business units. We remain pleased with the continuing development of our three core businesses, and we are very excited by the prospect of our emerging technologies. Now, let me turn the call over to Brett for a review of our financials.

Thanks, Craig. Let me begin with a quick review of the fourth quarter results. Total revenue for the quarter was $8.6 million, an increase of 68% compared with $5.1 million for the same period of 2010. Revenues for the fourth quarter of 2011 included $4.6 million related to the clinical labs, $0.5 million related to the Pharmacogenomic Services Unit, which were obviously supports the clinical trials, and $3.5 million in revenue related to the diagnostic tools. For the year-end December 31, 2011 revenues were $32 million, an increase of 59% compared to the $20 million for 2010. This included $16 million in net sales for the clinical labs, $2.3 million in Pharma, and $13.7 million for the diagnostic tools.

Gross profit was $5.3 million, or 62% of net sales during the fourth quarter of 2011, compared with gross profit of $2.4 million, or 47% of net sales during the same period of 2010. Gross profit was $18.4 million, or 58% of net sales for 2011, compared with gross profit of $9.8 million, or 49% of sales for 2010. The improvement in gross margin for the fourth quarter and full year is attributable to improvement in our lab services and Pharma margins. The improvement in the lab services is due to revenue from the FAMILION acquisition, successful consolidation of operations and reduction of operating costs. Our Pharma margins have improved due to the revenue increase quarter-over-quarter and year-over-year, as costs in that segment are relatively fixed. We've talked about it several times, that the primary cost is people and expertise and as revenues go up, margin is increased quite are dramatically.

Operating expenses were $5.4 million during the fourth quarter of 2011, compared to $3.7 million during the same period of 2010. Operating expenses increased primarily due to the acquisition of the FAMILION business, including non-cash charges totaling $0.3 million related to the amortization of the acquired intangibles. Operating expenses for the year-ended December 31 were $21.4 million, compared with $13.4 million for 2010. The increase, again, was due primarily to the FAMILION business with non-cash charges for amortization of $1.2 million. We also had non-cash charges for the stock option expense of $1.1 million, and we had bad debt expense of $1.7 million.

Net income for fourth quarter was $0.3 million, compared to a net loss of $0.8 million or $0.02 a share for the fourth quarter 2010. The Company had reported a net loss for the year-end December 31, 2011 of $9.8 million or $0.22 a share, compared with the net loss of $3.1 million or $0.06 a share for 2010. The increase in the net loss for 2011 is attributable primarily to interest expense of $1 million, non-cash charges for preferred stock valuation of $6.1 million, and amortization, again related to the acquired intangibles. As Craig mentioned, Modified EBITDA, which is our non-GAAP measure that Transgenomic views as appropriate and sound measure of the Company's results, improved to a gain of $615,000 for the fourth quarter of 2011, compared to the pro forma loss of $1.4 million for the same period in 2010. For the year ended, Modified EBITDA was a gain of $195,000, compared to the pro forma loss of $6.3 million for the same period 2010. A reconciliation of Net Loss to Modified EBITDA is presented in the press release.

The Company remains well-capitalized with strong cash balance. We ended the year with $4.9 million in cash, cash equivalents, and marketable securities, a figure which was substantially strengthen following the $22 million private placement financing last month. From the period of September 30, our third quarter queue, to the close of the financing, shareholder equity has increased over $33 million, dramatically strengthening our balance sheet and increasing shareholder value.

Thanks, Brett. I am delighted to be able to share our strong fourth quarter results, and our progress throughout all of 2011 with you on today's call. On top of a very good year, we are also very excited about the trust and value many investors place in us in support of the financing that we just completed. We had a number of top-tier institutional life science investors join in this raise, and we expect to use these funds aggressively to drive our new Plavix Test Panel and Ice COLD-PCR technologies into the market.

Although we are not issuing guidance for 2012, we are confident that we will grow all of our business segments in the year, leading to significant growth in the year and in the future. We have new products and services that should contribute to growth in each division of the Company and, combined, will continue to produce excellent results, both within each division independently and as they relate to an integrated strategy. And to review, I believe this model of an integrated biotechnology company is critical to our success. As a key example, technology that we develop from our instrument and diagnostic tools division, such as Ice COLD-PCR, can be deployed into our clinical trials group for early research on cancer patients' response to new therapies. Once that link has been established, we can expand this testing for our Pharmas in deeper validating clinical trials. We can then offer this as a new assay through our CLIA-certified reference lab, and we can manufacture the assay as a kit product that we can sell worldwide.

For 2012, we will continue focusing on our strengths in launching new products, such as our clopidogrel response test; expanding into new markets with agreements like the Menarini distribution relationship; investing in ground breaking new technologies, such as our Ice COLD-PCR products combined with the ScreenCell device for analyzing circulating tumor cells; integrating key acquisitions and driving growth across each business segment of the Company by investing in key new staffing needed to accelerate these programs as aggressively as possible. This direction, we believe, holds substantial opportunity for growth and value creation.

Before we open the telephone line to questions, I wanted to remind you of the feature that we added to our website in the investor relations tab. We have a text box link there where you can submit questions for this earnings call which we will be happy to address. We will now open the call to questions.

(Operator Instructions)

Matt Hewitt, Craig-Hallum.

A few questions on some of the key initiatives. First off, on the Plavix Panel, I was wondering if you could provide a little bit of color on how that -- I know you launched it at the scientific meetings at AHA, what has been the response so far? And more importantly, how should we be looking for, or what type of efforts on the marketing front will you be making over the near term?

Obviously, that's one of our largest growth opportunities for the year, Matt. So, we're very focused on our Plavix panel. At that meeting at AHA, that is a heavily science-oriented meeting, and two of the publications weren't available at that meeting. So, I think the -- actually the launch of the test wasn't as powerful as it would have been had we been able to do it after the issue of those two publications.

In either case, the real goal for that marketing strategy is to work hard, number one, in educating the cardiologists, as you well know, that aren't aware of the black box warning on CYP2C19 already, who aren't aware that there are clinical genomics test that can evaluate ABCB1 and CYP2C19 to suggest which drug patients should be on. And along with that training, we also hope to reach out through media to patients, so they can become aware of this. Remembering that Plavix is the second most prescribed drug in the world, so there are large numbers of patients that should understand that information and be able to act on it.

The other thing that we are doing, that are critical we believe, are reaching out to the pharmacy benefit managers and to managed care payors, as well as the companies with the new branded drugs in that space, because the genetics suggest that 47% of the patients that would normally be prescribed Plavix should actually be on a different medication for more efficacious treatment.

Lastly, we are hiring additional sales resources to help us drive that assay into the marketplace.

As far as the Pharmacogenomics business, you were kind enough to provide -- it sounds like you're doing roughly 25 projects currently. Could you provide a little bit of a history maybe, on where that business was a year ago or two years ago? Not only from a standpoint of number projects you're working on, but where in the clinical process those projects fit?

That's a great question, Matt.

Number one, I think the best thing to do is to look back five years ago when that business was quite small and a nascent business from our integrated strategy. We had at some points one or two customers in the group. Since that time, we have been selling our ultra-sensitive DNA mutation detection capabilities, and it did take a while for that to gain traction.

It has gained traction for two reasons. One, simply because Pharmas are now much more aware that mutations confer resistance, and that that resistance pattern has to be discovered and analyzed during drug development and clinical validation. And simply, the other is that we have improved our financial picture such that we now qualify for becoming a CRO for a variety of the Pharmas, which we did not early on in the process.

The second answer to your question is what did the projects look like back then versus now? In almost every case, the early projects were discovery pursuits that were small, $10,000 to $20,000 maybe $50,000, projects with Pharmas just looking to see what the profile of mutations that we could find, and then to analyze that to see if there was utility in finding these mutations. And, did it impact treatment or treatment outcomes? And, the answer to that is certainly yes because many more Pharmas have been added into the mix and are ordering from us today.

As that has occurred, the projects that we do have transitioned from being small discovery projects or something run alongside of phase 2, for example, to now we have three phase 3 projects signed up and in recruitment. That each will be one to several million dollars per program, or per project. So, we do see a transition from phase 1 or 2 into phase 3s, which is ideal; and we also see some looming interest for companion diagnostics, both in the short and longer-term, based on our current technologies as well as Ice COLD-PCR.

Lastly, we are getting Ice COLD-PCR clinical trials, so that is a very welcome result. And one thing I would add that I think is important to clarify, that with all of our sensitive, or ultra-sensitive DNA mutation detection products, that we scan for mutations rather than running isolated reactions for known mutations. And, in one of the clinical trials we supported that ended up uncovering mutations that were very important for the patients' outcomes on the drug being studied and just shows the viability of our, and importance, of our ability to scan for mutations.

That sounds great. Lastly, and then I will jump back in the queue, as far as the Menarini partnership, could you update us on where you sit with the launch plans there?

Absolutely. We are actually right in the midst of training. Chad was in Europe just recently, I guess last week, when we were performing training that's continued through this week in our Glasgow facility for the Menarini sales and marketing team. And, that will translate into an actual strong commercial launch on their part by April 1.

All right, great. Thank you; I'll jump back in the queue.

Chrystyna Bedrij, Griffin Securities.

Just a couple questions; just following-up on some of Matt's questions. First of all, thank you for reviewing the key initiatives. Can you just provide a little more color or rank those initiatives in the short-term, meaning actual size of revenue potential in 2012 and 2013? You don't have to give the exact numbers. Just generally, what you see, and then the long-term value proposition?

I'm happy to do that. I looked at Brett with big eyes because the tornado alarms are going off behind us, but we're glad to hear that they're just testing them rather than an actual event here (multiple speakers) -- so, I apologize.

If you rank the opportunities for us, and the criteria across each, or the milestones and activities around each, are certainly different. Number one, for us, the Nuclear Mitome assay and growth in our neurology business has been substantive, that was $0.75 million in Q4, so we're certainly continuing to focus on that.

The largest opportunity for us, of course, remains the Plavix Panel. The number of new patients a year is 6 million on that drug, and if 47% of those patients should be on [afien] or Brilinta, or some of the newer treatments being researched today, our test is really the referee for that.

So, we are going to drive the education of that assay as strongly as we can, media programs to help educate patients, again as I mentioned, the reaching and trying to contact and work with the key Pharmas there as well as the benefit managers and the managed care group. That will take substantial business development effort, communication plan, additional sales resources, et cetera, to help drive that. And, that is our key in that market.

But, the same time I will point out there are millions of patients already on Plavix, and those genetics still hold that 47% of them could be better maintained on a different medication. That's a huge testing opportunity, much beyond the $4 billion of new patients being tested. That's why we are trying to focus so heavily on Plavix Panel and drive that into the market as successfully as we can.

The next initiative, of course, is Ice COLD-PCR. For a platform technology like Ice COLD-PCR, you really need, obviously, two things. One is, for us, just more genes that are developed into Ice COLD-PCR assays.

And then from that, the applications of those tests in the market, and what I mean by that is for example, if you take colon cancer, we need to isolate not only -- we need to support both the testing for discriminating which drug a patient should be on, as well as new application. So, that is a well-known companion diagnostic approach, and we do that in a variety of clinical trials now. And, we do have kits, SURVEYOR Scan kits, available for BRAF, PIK3CA, and K-RAS that are coming to the market, or are in the market already and will supplement that.

However, what you really need to do here is the appropriate clinical validations with academic centers and get publications to help educate oncologists. So, that's a very strong pursuit that we need, and to that light, we are close to getting a project with MD Anderson going, we've finished a small project with Stanford, we are working with the Dana-Farber, and we are certainly in contact with other parties to try and do expansive clinical trials.

So, Ice COLD-PCR remains the third thing that we are working on. We will be working with the Pharma. We anticipate yet this year for a companion set of kits; and then, of course, we are continuing to build kits -- new kits to support the Menarini launch in Europe.

Just -- same question, but can you just rank off of your base business?

Sure. For us strategically, the laboratory service business has given us the biggest increase in revenue and as such, and we've been able to do our best cost savings around that area. But quite frankly, as I said, being an integrated business, we look to all areas of this to contribute going forward. So, I haven't rank ordered them in that regard.

As I said earlier in the prepared remarks, we are pulling technology that we develop in R&D that could be attributed, if you will, to what we call historically our diagnostic tools business. And, bring that through the laboratories, and then bring it back to the diagnostic tools to build as kits and then sell with our current infrastructure and, of course, with our distribution partners.

Okay, that's good. Just a couple more. In terms of -- you mentioned three contracts with your Pharmacogenomics business that you are working on right now. Can you just give a little more color on those? And, walk us through how that is going to -- when something like that might hit, and what is the ultimate upside or home run there?

Well, I'd love to be able to announce the partners. And two of those, I will be able to do so in the near future.

I can't commit to a date because it is up to the Pharma partner, but we have been told we will be able to announce those studies; and that will, I think, at least help educate the market as to the level of companies we are working with and how large the projects are. And quite frankly, those projects could be $1 million to $4 million each.

But, the home run in every case is, the other product portfolio that I mentioned again under confidentiality, I can't disclose the partner and the products, but they are our SURVEYOR Scan kits in cancer.

For example, looking at the K-RAS market, I -- well I depict that as about $100 million to $150 million market because it has been required in Europe to test for K-RAS prior to treating with Vectibix and Erbitux, so we see any new companion that comes out of this -- any of these Pharma relationships, as a potential $10 million to $50 million plus opportunity by the target as well as the number of kits that you would commercialize around that target.

For example, if there is a colon cancer panel, and we have five products it would be five times that and you could easily see that reaching to $100 million opportunity. That's the real home run out of our Pharma effort, I believe. But equally, it is a strong business that we use to access these Pharmas and collaborate with them to find out what new assays are appropriate for us to develop and bring to market. So, that's a very collaborative effort.

Actually, that's a very helpful answer, appreciate that.

And then, and I don't know if you or Chad -- we haven't heard from a while, just a brief overview of what the sales group looks like currently? And, you said you're going to add additional sales forces, and I guess it would be really helpful to understand how many people there are now in sales, and how those efforts are allocated.

First internally, and then externally, what you see at Menarini and other areas, just so we can get a better fix on how these various things will be sold.

We're happy to do that. Chad, would you like to respond?

Sure. Currently, in our clinical labs division we have 20 people in the field, focused on our entire clinical laboratory business. In the Pharmacogenomics business, we have two business development sales reps that are focused on bringing new clinical trials business into that area of the Company. And in the instrument division, we have six sales and marketing people worldwide focused on selling our instrument products.

In addition then we have our customer support team. In the clinical labs business, that team represents 20 people. In our instrument business, that team represents 10 people in the US and Europe. As we look to add new selling headcount, we would look to put those folks in the clinical laboratory division in the US.

We are also looking to add additional business development support for our in-licensing and out-licensing activities, as well as opportunities to drive Ice COLD-PCR and some of our proprietary technologies at a different level in the organizations that we are interacting with in the Pharmacogenomics business.

And, Menarini?

That's very helpful.

Menarini, when I was together with the group last week, we didn't have their entire field team, the company itself is broken out into individual business units based by country. So, they had brought in one or two business leaders from each business unit to their corporate headquarters in Florence, where we did an initial molecular diagnostics training and WAVE MCE and SURVEYOR Scan training for that group of people.

Last week we had over 20 people together in Florence. I think the number on some days was actually closer to 30, and from there, those folks will go back to their local business units and be the trainers for the individual team members within the business units, and I've been told that the total field sales and support team is in excess of 75 people.

And, those folks will all be supported by our sales and support team in Europe as they begin their selling efforts starting in the second quarter.

That's very helpful, Chad. And just on the Menarini, I know it's early in the process, but what do you see as potentially a sales process and cycle there? Actual results from those people. It's a big group, so that should be great. But, I just want to understand--?

We actually did our first--.

Are they giving you forecast?

We did our first introduction of the product in November, and during that meeting we had over 200 pathologists from all over Europe in Paris for a pathology consortium that Menarini hosted. And from there, a number of pathologists were very interested in our presentation and the WAVE MCE and SURVEYOR Scan product.

Now, as we take the next step in training their field sales teams, a number of those customers are awaiting demonstrations of the new product. So, we have already started to see some activity around that, we have demonstrations starting here in November, and we expect to see a robust pipeline of further opportunities in the second quarter.

We look forward to that. That's great.

And then just on the Plavix, so you have 20 people -- or, I guess the FAMILION sales force is how big now? Is that will be the same detailing for the Plavix, or--?

We will primarily be selling our Plavix assay through the FAMILION sales team, that is correct. The total clinical laboratory sales group is 20 people.

Okay, and last question, I promise. Just general thoughts on how you think the launch will go with Plavix, and how you think you will differentiate in the marketplace?

I think that our Plavix assay, as with all new genetic tests, is going to take education, similar to what we saw when we announced the FAMILION test three or four years ago. So, as you initially go out and start to educate your physicians on a new genetic test and what it means to patients and patient care, you see the early adopters embrace the test.

As Craig mentioned, there are a number of things that we see in 2012 that we think will be growth multipliers. Primarily, Plavix going generic the summer. They are going to need some method to differentiate who should be put on the generic form of Plavix, versus who should be considered for the more expensive branded drugs.

We believe that our Plavix Panel is one of the only assays that offers both genes that are involved in absorption and in metabolism. So, that gives us a unique advantage in the marketplace, and one of those two genes is proprietary to Transgenomic. So, that further helps us to differentiate our product from other labs that are only offering the CYP2C19 gene by itself.

The way that that works in the actual patient population is the numbers we have seen, say CYP2C19 alone can identify roughly 25% of the patients that have mutations that would limit the effectiveness of Plavix for them. When you add ABCB1 to that, you get about another 25% of the population that would have further mutations that would limit the effectiveness of the drug. ABCB1 does carry as significant of a patient impact as the CYP2C19 alone. So, we think that by combining those we provide a further enhancement of this genetic profile in trying to determine which patients belong in which therapy.

Thank you so much, everybody, for the clarification there.

Brian Marckx, Zacks Investment Research.

Congratulations on the quarter. One quick one on the gross margin. Can you tell me what the clinical lab margin was in Q4?

You know what, Brian, can I get that back to you? Why don't you shoot me an email? I've got the draft of the 10-K in front of me, but rather than scramble through it and find it and double check my math, I would just as soon get it to you.

Absolutely. And, I just had one other one. On Ice COLD-PCR, the kits, do you think that that is a 2012 event where you will be rolling that out?

Yes, absolutely. We started that in 2011, our first kit, Ice COLD kit, for mutations in the K-RAS gene was developed and put into clinical evaluation in Europe. We've gotten feedback from that kit, how it works, and the evaluators were happy with it. We are digging into their activities right now.

Right behind that, we have Ice COLD kits for BRAF and PI3K developed and ready to go to evaluation. We just wanted to work with the evaluators to really understand how the kits worked in their hands, and what we could do to make that a reproducible process as we begin to sell the kits more broadly. We expect to add not only the PI3K and BRAF kits in the market, but a variety of others going forward throughout the year.

Is the expectation that it will be more of a broad commercial launch in the current year then?

Well, with Ice COLD we believe that we are going to have to, as Chad mentioned for Plavix, we are going to have to educate the market and gain more publication support as well as beta site support. But coincident with that will be the work that we do broadly with other academic institutions to validate Ice COLD-PCR for blood-based testing of DNA mutations or circulating tumor cells. And, that will require ongoing clinical trials that we anticipate supporting as strongly as we can in the year. So, you've got both of those activities going on simultaneously.

The way I would depict Ice COLD-PCR is certainly as a platform technology that is going to be supported by increasing levels of clinical validation. One important thing that we have found in looking at Ice COLD-PCR at other -- compared to other somewhat competing technologies, besides the fact that it scans for mutations; and therefore, finds all the mutations that could occur in some of these important cancer genes.

Also, that you don't need as much DNA; it's a much more sensitive technology and enriches quite successfully. So, what we see in some Pharma trials is that depending on the amount of DNA that is required to do the analysis, that Ice COLD-PCR would really be the only technology that would support that, looking at multiple genes out of a blood specimen.

Okay. Thanks guys, I appreciate it.

Bruce Galloway, Galloway Capital.

Congratulations on being cash flow positive. That's quite an accomplishment.

I was wondering about this recent raise that you did, the $22 million. Being that you are cash flow positive, and being that their securities had a $5 million warrant out there, why did you raise so much? Are you looking at acquisitions for tuck-in products and tuck-in services? Are you just ramping up your sales and marketing that you need the excess liquidity? What seems to be the logic behind raising so much money?

That's a good question. On one hand, we were delighted that Q4 ended up as it did. And, we would be delighted if each quarter going forward would reproduce that result.

Although we did believe, and still do believe, that throughout 2012, that we are going to have to invest in Ice COLD-PCR and R&D resources to drive more assay product, or more assays first of all, and then we are going to have to drive more clinical trials to support it. So, we think that that will cost, certainly at some level. We have always been very frugal, but it's still going to cost some level of funding that would probably keep us from being break-even.

The other is the marketing and sales resources that we want to deploy to really drive Plavix much more strongly. Our belief is that investments that we make now in Plavix training, education, and communication to physicians and patients will result in successful selling efforts later in the year and in subsequent years. So, we want to really move forward on that and enrich it as much is possible now. That's the reason for the raise.

Third, we had some great investors that will come out with S-1 that you'll see that came into the raise that we thought were great additions to our current investor base. So, we wanted to accept them as well. That's why the raise reached that level.

Bruce, I think you'll really see us use the funds in three main areas. One is, of course, accelerating the new opportunities with Plavix and Ice COLD-PCR. Two is -- one is the Plavix, two is the Ice COLD-PCR, and three is to bolster the balance sheet.

And, as Craig mentioned earlier, when he started with building the Pharma division, Big Pharma would not look at it because the Company was in a tough situation. And now, as I said, we have just added $33 million to the equity section, we are looked at quite differently.

One more question. The Plavix test, how much is that going to cost?

You will see margins reported on it that are going to be consistent with what we see in the clinical reference lab business. Certainly in the 60% range. The test -- we sell that test for $750.

Is that competitive with the other tests that are out there right now?

Yes, we think it's actually very competitive.

Quest sells the CYP2C19 test alone for $500 and sometimes $600. I believe it's $600 at their list price, and they're probably at $500 reimbursed. So, we think that our combined panel is very cost efficient in pricing. These are small SNP numbers to test for, so it's got a very good margin.

All right, great. Very exciting initiatives on the table, congratulations.

Michael Zimba, Private Investor.

Bruce hit kind of in the area I was looking at, dilution. I know it's a fact of life with small companies, but once again, like you said the size of it here. I come up with about 100 million shares with all the warrants and options and everything, which is a lot of shares, but if you can make good use of it, I guess.

My question on the cash, $4.9 million in cash, does that include the $3 million note?

It did, yes.

Without that you had been -- was it $1.6 million after three quarters? I'm traveling, so I don't have my notes with me.

At September, I think we were just under $2 million.

Okay, so you would have been just slightly cash positive with that. On the investors -- and I may have missed that, too, as I said, I'm traveling. What is the restriction on the shares of the new investors?

We are actually in the process of drafting and filing the registration rights S-1, shortly thereafter. I don't know if you pulled the docs off of SEC.gov, but we have until March 23 -- Friday the 23rd to get the S-1 filed. Then, obviously depending upon the SEC's interest in it, they will either -- it will go effective within the 90 days or upon our response to their comments.

Okay. Well, hopefully it would be a reasonable amount of time. I've, through the years, seen deals like this where they sell the stock and have nothing invested and a free ride on the options. But, you say the quality of the investors, that is not the intent?

There is a pretty good -- almost a Who's Who list of some very good biotech investors.

And the time on -- it'll be, you can't give out the restriction on it, but it will be a pretty decent restriction as far as timelines holding the shares?

They will be tradable -- if all goes well with the SEC, they will be tradable before the end of Q2.

Okay, thank you.

Matt Hewitt, Craig-Hallum.

Just a couple more, gentlemen.

You mentioned the Nuclear Mitome test and that you have seen continued strong demand there. When you initially launched that I think you talked about getting to a run rate of around 30 a month, if I remember that correctly. After that initial flurry the first month where you did around 30, where do you sit today? And, are you getting back or have you already gotten back to that 30 a month rate?

Chad, that's probably a question for you.

Yes, I think the target was probably closer to 30 a quarter, Matt.

Oh, I apologize.

We exceeded that in the fourth quarter, and we expect to be on track to hit that in the first quarter.

That's great. As far as the reimbursement, given that it was a new test, you weren't quite sure how that was going to shake out versus your list price. Have you had any more feedback on that?

Yes, the reimbursement has proven to be in line with what we had anticipated in the plan that we made when we rolled the test out.

And that was, remind me, 12.5 I think? Is that right?

We expected to be somewhere around 75% to 80%, yes.

Okay. Lastly, and this is a little bit more housekeeping, what share count should we be assuming in our models starting with Q1, given the raise?

Let me grab the -- well, at year-end our fully diluted was 49 million, and we just issued another 22 million. So, the basic will be right around that 72 million, 73 million, with another 11 million in the warrants.

Okay. All right, fair enough. That works. Great, thanks so much gentlemen.

There no more questions at this time.

All right. Thank you for participating in our fourth quarter and full 2011 year financial performance review. We are very excited about the opportunities in front of us for substantial growth for the Company, and I look forward to sharing our progress with you on future calls.

This concludes today's conference. You may now disconnect.