Precipio Provides Status Update on Current Business Matters
Precipio, a specialty cancer diagnostics company, provided a business update addressing several key areas. In Q3 2023, the pathology division surpassed its $15M annual revenue breakeven point but faced setbacks in the following quarter. The company has rectified operational issues and expects to breach the breakeven point again by Q3 2024. On the products side, delays due to technical and supply chain issues have been resolved, with significant customer onboarding anticipated to drive revenue growth. The company was impacted by the Change Healthcare hacking but expects normal operations to resume by Q3 2024. A recent FDA ruling on Laboratory Developed Tests (LDTs) will require Precipio to submit its products for FDA approval over the next four years, at an estimated cost of $250,000. Precipio's CEO expressed confidence in reaching breakeven this year and highlighted an upcoming shareholder meeting on June 13, 2024.
- Pathology division expected to exceed breakeven point by Q3 2024.
- Resolution of technical and supply chain issues leading to resumed product revenue growth.
- Two major new customers expected to drive significant revenue growth.
- Company taking proactive steps to comply with FDA ruling on LDTs, estimated cost $250,000 over 4 years.
- Expected reduction in cash burn and return to normal operations post-Change Healthcare hacking.
- Revenue decline below breakeven point in the quarter following Q3 2023.
- Impact from Change Healthcare hacking led to temporary cash inflow freeze and need for short-term loans.
- Previous delays in product releases due to technical and supply chain issues.
Insights
Precipio's financial update provides several key points of interest for investors. The most noteworthy is the projected return of the pathology division to its breakeven point by Q3-2024, following operational improvements. This is a positive indicator as it suggests that the company is on track to stabilize its revenue. In the previous quarter, the pathology division had fallen below its breakeven point, but with the issues now resolved, the return to breakeven could signal a healthier financial outlook.
The company has also managed cash flow issues resulting from the Change Healthcare hacking incident by securing short-term loans. It's worth noting that while this is a temporary measure, it has allowed Precipio to maintain operations without significant disruption. Looking forward, the anticipated revenue growth and the subsequent reduction in cash burn are pivotal for reaching breakeven later in the year.
The upcoming revenue from new, larger customers who have received state regulatory approval is another positive. If these customers contribute significantly to product revenues, it will enhance the company's financial stability and progress towards profitability. However, investors should monitor these developments closely to ensure these projections come to fruition.
The news about Precipio’s products division obtaining new customers and regulatory approval is an encouraging sign for future revenue growth. The onboarding of two major new customers, expected to go live early next quarter, is particularly promising. This should help the company move closer to its
That said, the previous delays in product releases due to technical and supply chain issues are a reminder of the challenges inherent in this sector. While these issues have been addressed, ongoing vigilance is required to ensure they do not recur.
Additionally, the FDA ruling on LDTs, which requires Precipio to submit its products for FDA approval, could initially seem burdensome. However, due to Precipio’s existing clinical lab operations and ample patient sample data, this process is expected to be manageable and not cost-prohibitive. This strategic move could offer a competitive advantage by reducing the regulatory burden on its laboratory customers, potentially attracting more business.
The FDA’s new ruling on Laboratory Developed Tests (LDTs) places new compliance requirements on companies like Precipio. However, the company’s proactive stance to comply with these regulations by utilizing its existing resources could be beneficial. Precipio’s decision to take on the burden of FDA approval for its products, rather than leaving it to its laboratory customers, may strengthen its market position by adding value to its offerings.
This regulatory compliance is phased over four years, giving Precipio ample time to adapt. Given that Precipio already has significant patient data and clinical lab operations, the anticipated cost of
NEW HAVEN, Conn., June 12, 2024 (GLOBE NEWSWIRE) -- Management of specialty cancer diagnostics company Precipio, Inc. (NASDAQ: PRPO) provides the following update to its shareholders on various business matters looking towards mid-year.
1. Business growth
In September of 2023, Precipio’s pathology division exceeded its breakeven point of
We are pleased to report that the company has addressed the operational issues and as a result, pathology revenue is heading back towards its breakeven point. We anticipate that in the next quarter, Q3-2024, the pathology division will return to exceeding its breakeven point.
On the products side, the company had several delays in product releases due to several technical and supply chain issues which often occur in this line of business. These hurdles have been addressed, and revenue growth is resuming. Recently, two major new customers received state regulatory approval for implementing our technology in their practice and we anticipate them going live early next quarter.
These two customers are much larger than our average customer and we expect that they, along with several other customers in various onboarding stages, will provide a significant boost to product revenues and significantly advance us toward the necessary
2. Change Healthcare hacking & cash impact
As we previously mentioned, like many healthcare companies, Precipio too was impacted by the Change Healthcare hacking and subsequent freeze on cash inflow from the pathology services division (this does not impact the products division). We appear to be at the tail-end of this situation, with Change Healthcare in the process of resuming normal operations. The company has taken measures to supplement its cash situation through short-term loans, both from Change Healthcare and independent sources, ensuring it has sufficient funds to continue operations.
We expect a return to normal operations in Q3-2024, and to a quick return of any Change Healthcare loans. Furthermore, with the expected revenue growth discussed in the previous point, we anticipate a gradual reduction in cash burn, heading towards anticipated breakeven later in the year.
3. FDA ruling on LDTs
The recent FDA ruling will ultimately transition Laboratory Developed Tests (LDT) that are currently under the regulation of other federal and private agencies such as CLIA and COLA, to fall under the FDA’s jurisdiction as FDA-approved tests. This will require filings by test manufacturers and/or laboratories to register LDTs with the FDA. Requirements will be phased in over the next 4 years.
This rule creates two options to comply:
- Laboratories submit their LDT assays for FDA approval – placing the burden on the laboratory.
- Manufacturers submit their product for FDA approval – placing the burden on the manufacturer.
This impacts both our pathology services division and our products division as follows:
Pathology services division:
- The FDA rule has stipulated that any tests that a lab was operating before the ruling on May 2023 are “grandfathered” into approval and do not require any additional work. This applies to all our current tests.
- Should Precipio’s laboratory decide to add a test in the future, it will most likely add FDA-approved tests which will not place any burden on our laboratory.
- Therefore, the company does not expect any substantial budgetary impact to its pathology services division due to this ruling.
Products division:
- Precipio has decided to adopt option B listed above, which is to submit its products for FDA approval, alleviating our laboratory customers from the need to submit their assays to the FDA for approval. This will reduce the burden on Precipio’s customers and place Precipio in a competitive advantage compared to companies that choose not to take this route.
- According to the ruling, Precipio has four years to complete this process (if the timelines are not extended further, which many anticipate due to the expected burden on the FDA to process all these requests).
- For most manufacturers, this is a heavy and complicated process that requires obtaining patient samples, testing them in a laboratory, collecting, analyzing, and submitting the data to the FDA. The advantage for Precipio is that since we operate a clinical lab, we already have hundreds, and in some cases thousands of patient samples with both test results and other data that has been collected and analyzed. Therefore, while this will be a substantial administrative task, we do not anticipate that the process will be cost prohibitive.
- Precipio estimates the cost to be in the range of
$250,000 over the course of these 4 years.
“We have endured quite a few challenges over the past six months, and I’m proud of our team for not only meeting and overcoming these challenges but working hard to come out better and stronger”, said Ilan Danieli, Precipio’s CEO. “I believe we are well positioned to execute on the first stage of the company’s goal which is to reach breakeven this year. From there, as a financially independent growth company with high-margin proprietary products in large markets, we can build significant shareholder value. I am excited for the second half of this year and to share more upcoming positive results”.
4. Upcoming Shareholders Meeting
Management would like to take this opportunity to remind its shareholders that the Company’s 2024 Annual Meeting of Stockholders is scheduled for Thursday, June 13th, 2024 at 10:00 a.m. Eastern Daylight Time to be held virtually via live webcast at www.virtualshareholdermeeting.com/PRPO2024. It is important that your shares are represented and voted on at the annual meeting regardless of the size of your holding so please take a moment to cast your vote. If you have already voted on your shares you do not need to vote again and we thank you for your support.
About Precipio
Precipio is a healthcare biotechnology company focused on cancer diagnostics. Our mission is to address the pervasive problem of cancer misdiagnoses by developing solutions in the form of diagnostic products and services. Our products and services deliver higher accuracy, improved laboratory workflow, and ultimately better patient outcomes, which reduce healthcare expenses. Precipio develops innovative technologies in our laboratory where we design, test, validate, and use these products clinically, improving diagnostic outcomes. Precipio then commercializes these technologies as proprietary products that serve the global laboratory community and further scales Precipio’s reach to eradicate misdiagnosis. For more information, please visit www.precipiodx.com.
Please follow us on LinkedIn, Twitter @PrecipioDx and on Facebook.
Forward-Looking Statements
This press release contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including, among others, including other financial projections and potential market opportunity, plans and prospects. Except for historical information, statements about future volumes, sales, growth, costs, cost savings, margins, earnings, earnings per share, diluted earnings per share, cash flows, plans, objectives, expectations, growth or profitability are forward-looking statements based on management’s estimates, beliefs, assumptions and projections. Words such as “could,” “may,” “expects,” “anticipates,” “will,” “targets,” “goals,” “projects,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “predicts,” and variations on such words, and similar expressions that reflect our current views with respect to future events and operational, economic and financial performance, are intended to identify such forward-looking statements. These forward-looking statements are only predictions, subject to risks and uncertainties, and actual results could differ materially from those discussed. We caution investors not to place undue reliance on the forward-looking statements contained in this press release. You are encouraged to read our filings with the SEC, available at www.sec.gov, for a discussion of these and other risks and uncertainties Important factors that could affect performance and cause results to differ materially from management’s expectations, or could affect the company’s ability to achieve its strategic goals, includes factors that are described in the sections entitled “Risk Factors” and “Management’s Discussion and Analysis” in the company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023, as updated from time to time in the company’s Securities and Exchange Commission filings. The company’s forward-looking statements in this press release are based on management’s current views, beliefs, assumptions and expectations regarding future events and speak only as of the date of this release. The company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by the federal securities laws.
FAQ
What is the current status of Precipio's pathology division revenue?
How was Precipio affected by the Change Healthcare hacking?
What are the expected financial impacts of the recent FDA ruling on LDTs for Precipio?
What measures has Precipio taken to address delays in product releases?
When is the next Precipio shareholder meeting scheduled?
