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Edited Transcript of IDXG earnings conference call or presentation 13-Nov-19 9:30pm GMT

Q3 2019 Interpace Diagnostics Group Inc Earnings Call PARSIPPANY Jan 8, 2020 (Thomson StreetEvents) -- Edited Transcript of Interpace Biosciences Inc earnings conference call or presentation Wednesday, November 13, 2019 at 9:30:00pm GMT TEXT version of Transcript ================================================================================ Corporate Participants ================================================================================ * Jack E. Stover Interpace Biosciences, Inc. - CEO, President & Director * James E. Early Interpace Biosciences, Inc. - CFO, Secretary & Treasurer ================================================================================ Conference Call Participants ================================================================================ * Benjamin Charles Haynor Alliance Global Partners, Research Division - Analyst * Jeffrey Scott Cohen Ladenburg Thalmann & Co. Inc., Research Division - MD of Equity Research * Kevin Michael DeGeeter Oppenheimer & Co. Inc., Research Division - MD & Senior Analyst * Yi Chen H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research & Senior Healthcare Analyst ================================================================================ Presentation -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- Greetings, and welcome to the Interpace Biosciences Third Quarter 2019 Conference Call. (Operator Instructions) As a reminder, this conference is being recorded. During this call, the company will make forward-looking statements. We caution you that any statement that is not a statement of historical fact is a forward-looking statement. This includes remarks about the company's financial projections, expectations, plans, beliefs and prospects. These statements are based on judgment and analysis as of the date of the conference call and are subject to numerous important risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. These risks and uncertainties associated with the forward-looking statements made in this conference call are described in the safe harbor statement in today's earnings release as well as Interpace Biosciences' public periodic filings, including the discussion of Risk Factors section in our Form 10-K filed with the SEC on March 21, 2019, the risk factors set forth on Form 8-K filed with the SEC on September 20, 2019, as well as the Form 10-Q for the third quarter expected to be filed shortly, which includes discussions in the section on forward-looking statements. Investors or potential investors should carefully read and consider these risks. Interpace Biosciences assumes no obligation to update these forward-looking statements to reflect future events or actual outcomes and does not intend to do so. In addition to supplement the generally accepted accounting principle, or GAAP numbers, we have provided non-GAAP information. We believe this non-GAAP information provides meaningful supplemental information that may be helpful in assessing the company's performance. A table reconciling the GAAP information to non-GAAP information is included in the company's earnings release, which is available on its website. I'd now like to turn the conference over to our President and CEO of Interpace Biosciences, Jack Stover. Please go ahead, sir. -------------------------------------------------------------------------------- Jack E. Stover, Interpace Biosciences, Inc. - CEO, President & Director [2] -------------------------------------------------------------------------------- Thank you, Kevin, and thank you all for joining us this afternoon for a review of Interpace Biosciences results and business highlights for the third quarter and year-to-date. I don't believe that the earnings release has hit the wire yet as this is a very busy time for filings, et cetera, but it should hit during the call. With me today on the call is Jim Early, our Chief Financial Officer. For today's call, I will focus on our achievements to date, and provide a general business update. Jim will review our financial performance in more detail. Following that, we will open the call for questions. I'm pleased to announce our name change from Interpace Diagnostics to Interpace Biosciences today. We are a leader in enabling personalized medicine, offering specialized services, along with the therapeutic value chain, from early diagnosis and prognostic planning by way of Interpace Diagnostics' historical business to now targeted therapeutic applications for pharmaceutical and biotech companies by way of our new Interpace pharma solutions business. We changed our name to better represent our broader-based combined business and to indicate that we are no longer a diagnostic company alone. Importantly, this is the first quarter where the biopharma business we acquired on July 15, 2019, is included in our results of operations. We acquired the net assets for approximately $23.5 million, subject to a net working capital adjustment, which were completed on October 16. Additionally, we raised $27 million in 2 tranches of convertible preferred stock with Ampersand Capital Partners, perhaps the preeminent investment group in the lab services business. While the transaction was complex and we are in the transition process, we couldn't be more pleased with the acquisition. As to date, it is performing even better than expected. As we have previously stated, the pharma solutions business is synergistic with Interpace Diagnostics business, which is also assay based, uses similar processing equipment and platforms and similarly qualified technical personnel. Most customers of our diagnostic business are physicians and health care institutions, while the primary customers of our pharma solutions business are pharmaceutical and biotech companies involved in using our capabilities for clinical research and drug development. We believe that our future will be based on leveraging the opportunity that is created by the breadth of our capabilities working together with physicians and biopharma companies to optimize cancer therapies. For instance, we have a very deep biorepositories of both solid tumor, pancreatic, thyroid, lung and Barrett's Esophagus samples. Precision medicine, typically known as personalized medicine, is the concept of combining a drug with a test that is modified to a person's genetic disposition. Precision medicine involves the selection of diagnostic tests, companion diagnostic, or CDx, that have the potential to identify changes in each patient's cells. Over 2/3 of all oncology therapeutics today are developed in parallel with diagnostic tests. Today, our pharma solutions business works with 9 out of the top 10 biopharma companies and is involved in over 225 trials, including over 45 immuno-oncology trials where a patient's immune system is used to treat cancer. With the acquisition being only 4 months old, we are confident that the growth of the Pharma Solutions business will be an important contributor to Interpace Biosciences' pharma-planned growth. Larger contracts in Pharma Solutions with, at times, unpredictable revenues due to the timing of customer clinical trials, we believe, are a good complement to the relatively predictable revenues of the Interpace Diagnostics business, which can be subject to third-party reimbursements risks. We think that the combination of Interpace Diagnostics and Interpace Pharma Solutions business, now under the name Interpace Biosciences, is a great platform to deliver consistent growth as well as a basis for additional acquisitions while accelerating our timetable to adjusted EBITDA breakeven. The addition of Ampersand Capital Partners, as we've mentioned before, is perhaps even more important than this exciting acquisition. Ampersand is a significant financial and strategic partner and investor in Interpace Biosciences and, in our opinion, not only helps to provide validation of our model and plans, but also provides the basis to aggressively seek future synergistic acquisitions that we believe will help differentiate us from many of our competitors. Interpace Biosciences has demonstrated its ability to acquire and cost effectively integrate meaningful assets. With the Biopharma acquisition, we continue to view our operations and manage our business in one operating segment for reporting purposes, which is the business of developing and selling diagnostic tests and providing biopharma services. We recognize $7.7 million in net revenue for the quarter and $20 million year-to-date. We had volume growth of 16% for the quarter and 22% year-to-date for our diagnostic assays. Medicare and contracted reimbursement remained strong and continued to grow across both products. Today, about 65% of the net revenues in our diagnostic business are generated by our thyroid business and 35% by our endocrine or PancraGEN business. Revenues from our pharma services business were included in our consolidated results from the closing on July 15, so not quite a full quarter. Net pharma solutions revenues for the quarter were less than $3 million and approximately as expected. Focusing on the pharma solutions business, contracts are growing, and bookings have been recorded through September 30, 2019, worth over $18 million that are expected to be recognized over the next year or more. Our near-term revenue growth plans are to add additional business development personnel in key unserved markets, expand our immuno-oncology franchise and accelerate growth expansion as recently indicated by our partnership with Genecast in Beijing, China. With consolidated gross revenues -- while consolidated gross revenues were in excess of plan for the quarter and year-to-date, we reduced our estimate of the amounts to be collected by approximately $1.8 million during the quarter, principally due to the transition to a new billing contractor. Our plan is to aggressively continue our collection efforts, and we have recently added new professional billing staff with set goals to increase our reimbursement rates. It should be noted that in accordance with ASC 606, such adjustments like this in our diagnostic business are, in fact, required to be reported as an adjustment-reducing revenues for the current quarter. For clarity, with the acquisition of the biopharma business in Q3, the overall cost of the Interpace Biosciences business have increased for both the onetime transaction cost as well as incremental operating costs and margin reductions while we are rightsizing operations and beginning to recognize synergy. We expect this process will continue in the fourth quarter and into early 2020, with 2020 being the primary beneficiary of these improvements. During the third quarter and year-to-date, we also continue to make progress with PancraGEN, our proprietary assay for Barrett's Esophagus that is in our clinical evaluation program. With the help of our key opinion leaders, we initiated a retrospective study, and as such, we are accumulating samples. We expect to announce results in 2020 to support further clinical acceptance and sufficient initial reimbursement to commercially launch BarreGEN. Additionally, we had our first independent study of the potential benefits of BarreGEN published. Now I'd like to turn the call over to Jim Early, our CFO, to discuss our financial highlights for the quarter and year-to-date. Jim? -------------------------------------------------------------------------------- James E. Early, Interpace Biosciences, Inc. - CFO, Secretary & Treasurer [3] -------------------------------------------------------------------------------- Thank you, Jack, and good afternoon, everyone. Today, I would like to focus on the key elements of our financial performance and position. As previously mentioned, net revenue for the third quarter of 2019 was $7.7 million, up 35% from Q3 of 2018. Our year-to-date net revenue was $20 million, up 25% from the same period in 2018. The principal reason for our net revenue growth was continued expansion in both our GI and thyroid businesses, led principally by unit growth and the acquisition of the biopharma business from Cancer Genetics. Gross profit percentage for the third quarter of 2019 was 37% compared to 52% in the second quarter of last year. Our gross profit percentage year-to-date through Q3 2019 was 48% as compared to 53% for the prior year-to-date. Gross profit percentage reduction was primarily due to the acquisition of the biopharma business and the reduction of our estimate of amounts to be collected. Sales and marketing costs for the quarter were $2.8 million, an increase of 36% over Q3 of 2018. Year-to-date sales and marketing costs were $8.1 million, an increase of 33% over the prior year period. This increase is due to the added biopharma commercial activities for the quarter as well as new investment in additional commercial headcount for sales representatives and account managers related to our diagnostics business. Research and development costs for the quarter increased to $0.9 million, up from $0.5 million in the prior year. General and administrative, or G&A, expense for the third quarter was $4.5 million, up from $2.1 million in the second quarter -- third quarter of 2018, related principally to the acquisition of the biopharma business. The transition services agreement between Interpace and Cancer Genetics principally terminates at the end of fiscal year. We also incurred $0.8 million of cost during Q3 of 2019 and over $2.5 million year-to-date, primarily in professional, consulting and banking advisory fees in connection with our acquisition of the biopharma business. As a result of the above, loss from continuing operations for Q3 of 2019 and Q3 of 2018 was minus $7.3 million and minus $3.0 million, respectively. And loss from continuing operations year-to-date 2019 versus 2018 was minus $16 million and minus $8 million. We believe that the increased costs associated with the acquisition of the biopharma business and operations will be an investment that is well worth the cost. As we noted in our earnings release and discussed above, we often refer to the adjusted earnings before interest, taxes, depreciation and amortization as EBITDA. Adjusted EBITDA is defined as income or loss from continuing operations, plus depreciation and amortization, acquisition-related expenses, transition expenses, noncash stock-based compensation, interest and taxes and other noncash expenses, including asset impairment costs, net debt expense, loss on extinguishment of debt, goodwill impairment and change in fair value of continued consideration and changes in warrant liability. Accordingly, our adjusted EBITDA for the 3-month period ended September 30, 2019 and 2018 was negative $4.2 million compared to negative $1.0 million in 2018, respectively, and for the 9-month period ended September 30, 2019 and 2018 was negative $7.7 million and negative $3.4 million, respectively. The reduction in adjusted EBITDA was due primarily to the acquisition of the biopharma business of Cancer Genetics. Our monthly operating cash burn averaged $1.5 million in the third quarter of 2019, principally as a result of our acquisition of the biopharma business as well as our planned increases in expenses and operating cost to support our planned end-of-year growth. Cash and cash equivalents totaled $2.4 million as of September 30, 2019. Subsequent to the end of the quarter, in October, we completed the second tranche of funding of $13 million with Ampersand Capital Partners. Our accounts receivable increased to $14.7 million, net of adjustments, from $9.5 million at the end of 2018, principally due to the acquisition of the biopharma business as well as our growing revenues in diagnostics. As a reminder, last year, we entered into a 3-year up to $4 million dollars credit facility with Silicon Valley Bank. In the third quarter, we borrowed approximately $3.75 million under this facility, principally to assist us with the acquisition of the biopharma business and transition. Subsequent to September 30, we have paid the line back in full. Total assets were $74.7 million. Total liabilities were $37.7 million, and stockholders' equity was $23.8 million as of September 30. With the acquisition of the biopharma business, our headcount is currently 184 as compared to 79 at the end of 2018. With that, let me turn the call back to Jack for his closing statements before we turn the call over to Kevin for the Q&A. Jack? -------------------------------------------------------------------------------- Jack E. Stover, Interpace Biosciences, Inc. - CEO, President & Director [4] -------------------------------------------------------------------------------- Thanks, Jim, and I understand that the earnings release wire has hit for those of you that are looking for it. Q3 2019 is certainly a transition period on many fronts for the new Interpace Bioscience business. Let me remind you that the transition process, as I previously said, is on schedule, and the pharma services business is, in fact, performing better than expected. The diagnostics business volume growth has been strong, not only with our thyroid assay, but also with our GI or PancraGEN assay. Interpace, though, is adjusting its 2019 annual net revenue guidance to between $28 million and $32 million in revenue as we continue to transition the biopharma business and prepare for a full -- first full year together. Interpace Biosciences is also announcing and confirming top line revenue guidance of $50 million for 2020. Now let me turn the call over to Kevin, the operator, for Q&A. ================================================================================ Questions and Answers -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- Our first question today is coming from Kevin DeGeeter from Oppenheimer & Co. -------------------------------------------------------------------------------- Kevin Michael DeGeeter, Oppenheimer & Co. Inc., Research Division - MD & Senior Analyst [2] -------------------------------------------------------------------------------- A couple, if I may. Jack, I appreciate the guidance you've provided at the end of your prepared comments, $28 million to $32 million for the year. If my "back of the envelope math" is right, that kind of lands you somewhere kind of $8 million to $12 million for the fourth quarter, a pretty wide range. Can you just kind of walk us through your thinking and some of the puts and takes that would drive you either towards potentially the upper end or the lower end of that range given we're sitting here in mid-November currently at the time the guidance was issued. -------------------------------------------------------------------------------- Jack E. Stover, Interpace Biosciences, Inc. - CEO, President & Director [3] -------------------------------------------------------------------------------- Yes. Thanks, Kevin. As you can imagine, we've been focused on wrapping up the September month end and quarter end activity. So that, obviously, has been a principal focus. But I think it's basically just recognition, and you probably know me by nature as being conservative and wanting to make sure that, while we are on track and things are really moving forward as planned and as we are reiterating guidance in 2020, I mean, that's an unusual kind of a structure to be basically saying, "Hey, listen, we're going to be on the lower end of guidance in the remainder of 2019, but we're really on track for 2020." And basically, that's the transition process overall in terms of that activity. But remember, too, we took a $1.8 million charge in the quarter and the methodology of how those effectively receivable reserves get accounted for, they really hit top line revenue under this ASC 606. So we just want to be cautious and careful. And of course, we want to meet and exceed people's expectations, but we don't want to mislead anybody either. -------------------------------------------------------------------------------- Kevin Michael DeGeeter, Oppenheimer & Co. Inc., Research Division - MD & Senior Analyst [4] -------------------------------------------------------------------------------- Fair enough. And then to that last point with regard to the reserves, can you just provide us some granularity as to how do we think about the 3 primary components of the business, biopharma, thyroid and GI in terms of where that kind of $1.8 million is sort of falling proportionally, just so we can kind of think through where mechanically those impacts are coming from? -------------------------------------------------------------------------------- Jack E. Stover, Interpace Biosciences, Inc. - CEO, President & Director [5] -------------------------------------------------------------------------------- Yes. It's really a good question. And obviously, it doesn't have anything to do with the biopharma business because those revenues just started coming onboard. So it's really a part of the diagnostic component of the business. And realistically what it is, it goes back as far as the beginning of 2018 where we effectively -- well, I guess we were transitioning, but the ASC 606 activity reached back to that point in terms of how we evaluated revenue recognition in the beginning of 2019. And to be honest with you, the process there is that as those receivables are not collected, the further we get away from them, the more difficult it is to collect. And when you are in a billing transition and collection process, you have 2 different contractors trying to solve that problem, and things can fall through the crack. So it was really the thyroid and pancreatic assay business. And I don't know this exactly, but I would generally say it's more on the thyroid side than it was on the PancraGEN side. But that's a guess, that's just kind of a rough estimate in terms of that number. And in fact, if you look at it for year-to-date, the reserves that we have or adjustments that we have are over $2 million. It just happen to be that it was $1.8 million in Q3 as we effectively looked to clean that all up. -------------------------------------------------------------------------------- Kevin Michael DeGeeter, Oppenheimer & Co. Inc., Research Division - MD & Senior Analyst [6] -------------------------------------------------------------------------------- Got it. And one last question for me then I'll get back in the queue. For those of us who are interested in tracking the relative growth file -- growth profile of the clinical business, thyroid and PancraGEN versus pharma, how are you thinking about sort of break out a segment revenue going forward? And what should we expect there? What we can monitor and what we can't monitor there? -------------------------------------------------------------------------------- Jack E. Stover, Interpace Biosciences, Inc. - CEO, President & Director [7] -------------------------------------------------------------------------------- Yes. It's an interesting question. So I said on the call and you may have missed it, but we're going to continue to report under one segment for the time being. But it doesn't mean that we won't identify and we won't talk about how we're doing in the biopharma side and how we're doing on the clinical side. If you go back and look at it, what we tried to do is identify or reference the volume growth and the volume activity that we had in the quarter and year-to-date. And so the volume activity on the diagnostics side was pretty attractive and really consistent with what we've talked about before. We saw on the unit side for the quarter, 16% growth and year-to-date, 22%. I would tell you that we typically haven't talked about this, but now with the biopharma business, the emphasis around it is that certainly the majority of that growth is in the thyroid business in terms of units, but the reimbursement on the PancraGEN side is very attractive and a single-digit growth on PancraGEN, if I did the math, it might be the equivalent of double-digit growth on the thyroid side as you sort of think about models. On the biopharma side, it's a little early to tell. All I can tell you, and I think I may have mentioned this originally that if you looked at the biopharma business inside of Cancer Genetics for the last couple of years, it ran about a $15 million revenue run rate. That's not what we're projecting, but give us a little bit more time in terms of what's happening. And what we did do was we basically gave some color as to the success they're having in terms of building backlog. Obviously, the question on that backlog is, not of all of it gets pulled through and the timing of that pull-through becomes important. So that's why we're adding the additional business development people, specifically in territories that really have been untouched like San Diego. And I would say or suggest that we have, based upon what we're seeing in the activity, we're very optimistic about the 2020 impact. And actually, I think we are very optimistic about Q4 as you referenced when you look at sort of the revenue growth in Q4 for us to be able to beat our range as to what we're hoping for on the biopharma side. -------------------------------------------------------------------------------- Operator [8] -------------------------------------------------------------------------------- Our next question today is coming from Jeffrey Cohen from Ladenburg Thalmann. -------------------------------------------------------------------------------- Jeffrey Scott Cohen, Ladenburg Thalmann & Co. Inc., Research Division - MD of Equity Research [9] -------------------------------------------------------------------------------- Just a few questions. So I will segue from Kevin's question on the biopharma, so I know you're not going to break that out independently, but as we think about particularly 2020 where you gave some top line around $50 million. Is it reasonable to expect the biopharma in the, call it, 34% to 36% range? Does that sound like about the right spot where it should be relative to the top line of $50 million? -------------------------------------------------------------------------------- Jack E. Stover, Interpace Biosciences, Inc. - CEO, President & Director [10] -------------------------------------------------------------------------------- I'm sorry. No in terms of the dollar amount of revenue or the percentage growth? -------------------------------------------------------------------------------- Jeffrey Scott Cohen, Ladenburg Thalmann & Co. Inc., Research Division - MD of Equity Research [11] -------------------------------------------------------------------------------- Yes. The aggregate dollar amounts. So -- for the top line of $50 million for 2020 on the guidelines, would $17 million or $18 million seem appropriate for biopharma? -------------------------------------------------------------------------------- Jack E. Stover, Interpace Biosciences, Inc. - CEO, President & Director [12] -------------------------------------------------------------------------------- Oh, I'm sorry, I thought I heard you say $30 million. I think that's well within the range. Yes. -------------------------------------------------------------------------------- Jeffrey Scott Cohen, Ladenburg Thalmann & Co. Inc., Research Division - MD of Equity Research [13] -------------------------------------------------------------------------------- Okay. Perfect. So if you break out the $1.8 million should be collected so it sounds like it's the wide range for fourth quarter. Some of that may be coming back in. It's a little early to kind of get a better handle on it at this point? -------------------------------------------------------------------------------- Jack E. Stover, Interpace Biosciences, Inc. - CEO, President & Director [14] -------------------------------------------------------------------------------- Yes. That's a really good question. And you're absolutely right. Just because we've basically made an adjustment for that doesn't mean that we don't, and we're not attempting to collect it. But at this point in time, with the addition of -- or the 2 businesses coming on board, we thought it was really an appropriate time to just make sure we had an especially clean balance sheet. It doesn't mean that we won't have other adjustments going forward in terms of reserve adjustments by the nature of this revenue recognition, but we feel really comfortable with it. And by the way, I hope we collected all. As Jim said, we're not in the business of reserving or writing off, we're in the business of collecting and that really is our primary focus. -------------------------------------------------------------------------------- Jeffrey Scott Cohen, Ladenburg Thalmann & Co. Inc., Research Division - MD of Equity Research [15] -------------------------------------------------------------------------------- Got it. And then lastly for me, Jack. Could you talk a little bit about BarreGEN? And as you do some of your further evaluation, talk to us about the size of the market, and where you anticipated it could be and where it is now? And how would that be reflected in your top line? -------------------------------------------------------------------------------- Jack E. Stover, Interpace Biosciences, Inc. - CEO, President & Director [16] -------------------------------------------------------------------------------- Yes. And obviously, BarreGEN, the beauty or the opportunity with BarreGEN is that we have interest, and we are talking to pathologists in the GI piece of our business and they've been asking us, interested in this product for quite a while. Last year -- it was last year, we really rebuilt out the KOL in Barrett's led by Dr. Nick Shaheen at the University of North Carolina. And Nick is not only a leader in this space, he's been probably our single biggest encourager in terms of progressing to the next level with BarreGEN. We really break it down into 2 products. We look at basically the initial product as an overall risk assessment, or you might even look at it as an initial evaluation of the potential progression, if you will, of Barrett's esophageal cancer. That's a really big market. We think it's $1.5 billion market, and we would need a partner to really help us in that. And obviously, that is what we're doing. We're talking with potential partners, but it's all about the data. So having our first independent data published this quarter is, I think, really important. Secondarily, if you look at a smaller piece of that, and that is evaluating the success or failure around the RFA, radio frequency ablation, that's a much smaller market and that's an opportunity that we can take on in an area that we're focused on. We just need more data. We need more confidence in the insurers in terms of what we are doing will be well received and will ultimately not only improve the standard of care, but also reduce cost as well. And these radio-frequency ablation processes run on average $30,000 to $40,000 a piece, and go on for sometimes multiple years. And we've also recognized that we have the ability to make a determination at a molecular level as to the success of those ablative processes. So we have a couple of different places that are potentially important for us. I think 2020 will be a big year for us. And Dr. Tina Narick from our leadership team has taken on the responsibility to guide us in this whole area, and she has been a big believer and driving us in that direction. So we're very excited about it. Obviously, with all the other activities on the biopharma side, we've been extremely focused on that, but I can promise you that members of our GI team are very, very excited about BarreGEN. -------------------------------------------------------------------------------- Operator [17] -------------------------------------------------------------------------------- Our next question today is coming from Jason McCarthy from Maxim Group. -------------------------------------------------------------------------------- Unidentified Analyst, [18] -------------------------------------------------------------------------------- It's Dave on the line for Jason. Thanks for taking my question. Can you provide some granularity with the respect to the kinds of synergies you typically look for when not evaluating whether a company or component of a company is suitable for acquisition? -------------------------------------------------------------------------------- Jack E. Stover, Interpace Biosciences, Inc. - CEO, President & Director [19] -------------------------------------------------------------------------------- Yes. It's an interesting question. Actually I thought you were going to ask another question about synergies. But as we look at sort of synergies, I can tell you that even before we actually closed on the biopharma business, we already were working with Ampersand in evaluating different opportunities. One opportunity or one area that we have looked at are companies that somewhere range between $10 million and maybe $29 million to $30 million in revenue. That are synergistic with what we do in the esoteric part of our diagnostic business. And what I mean by that is, we're not a reference lab, we're really product-driven. So we have a GI team, we have an endocrine team that are commercially driven and identifying products that can fit into that group or team because we already have the front-end and the back-end can be very synergistic and add, not only the top line, but to breakeven as well and cash flow positive. So that's one area. The other is, as we look at the biopharma side, we are looking very much internationally at expanding our international footprint. We think there's a lot of value in that. The Genecast deal we did in China is a partnership. There was no money exchanged in that deal. It's a relationship about sharing customers and how we serve customers. But we've had already several customers that have developed just by that relationship in the last month or so. So there's a couple of really good examples of the areas that we're focused on. -------------------------------------------------------------------------------- Operator [20] -------------------------------------------------------------------------------- Our next question today is coming from Ben Haynor from Alliance Global Partners. -------------------------------------------------------------------------------- Benjamin Charles Haynor, Alliance Global Partners, Research Division - Analyst [21] -------------------------------------------------------------------------------- But just kind of curious on the bookings, you mentioned $18 million that you recognized over the next year or more. I guess, my question is, how does that compare to the bookings level that CGI might have been at prior to the acquisition? Or any color on the expansion or is that running off, kind of what direction is that going? -------------------------------------------------------------------------------- Jack E. Stover, Interpace Biosciences, Inc. - CEO, President & Director [22] -------------------------------------------------------------------------------- Yes. So that's not just the bookings since July 15. And remember, we acquired assets including receivables so that's really been accumulative activity that was happening prior to July 15, et cetera. And looking back on that, you really have to kind of look -- go back to 2018, and I would tell you that it's growing compared to the results in 2018. I think you're seeing improvements in terms of the kinds of customers and also the average size of contracts although we typically don't disclose that. Our target for bookings or backlog, if you will, is well in excess of $18 million. We'd like to see it above $25 million, and I think we'll get there pretty quickly. -------------------------------------------------------------------------------- Benjamin Charles Haynor, Alliance Global Partners, Research Division - Analyst [23] -------------------------------------------------------------------------------- Okay. Great. That's helpful. And then just thinking about the commercial organization and expanding into areas that have been untouched like San Diego. How many people do you need to do that? How many kind of regions or areas might they be covering? Any color there would be helpful. -------------------------------------------------------------------------------- Jack E. Stover, Interpace Biosciences, Inc. - CEO, President & Director [24] -------------------------------------------------------------------------------- Sure. So when you look at the biopharma business and you look at the commercial team, and just for clarity, if you look at the team we have currently, we have about 18 sales and sales-related people in thyroid and roughly 12 in PancraGEN or GI. As we look at the biopharma side, and by the way, those are salespeople that are really calling on physicians and hospitals so they have big territories and a lot of geography to cover. When you convert that over and you look at sort of the biopharma business, you're focused on pharmaceutical companies and biotech companies. And today, that group is 3 or 4 people inside of the pharma business. And that's the piece we want to expand. So 2 territories that are missing that we expect to fill shortly. One we've already filled, that's San Diego, and you might imagine for this business that is where you want to be. And the other, Boston. And so that's the second one on our list. And once we get those 2 filled, I think we'll have a full plate. -------------------------------------------------------------------------------- Benjamin Charles Haynor, Alliance Global Partners, Research Division - Analyst [25] -------------------------------------------------------------------------------- Okay. Great. And then a couple of kind of more housekeeping questions. On the G&A, does that include the transition expenses that you break out in the EBITDA calculation? And then just wondering if there's anything else that was kind of one-timey in it during the quarter? -------------------------------------------------------------------------------- James E. Early, Interpace Biosciences, Inc. - CFO, Secretary & Treasurer [26] -------------------------------------------------------------------------------- Yes. If you look at sort of SG&A, what you're seeing is about $2 million in G&A in Q3. I'm not looking at the number right now. And $3 million in G&A year-to-date. A little over $1.5 million of that is related to the biopharma business. And so we've broken out, if you will, the nonrecurring costs and those are generally -- those are the costs that have kind of putting 2 companies together without having the time effectively to rationalize what that is. So what you're seeing is, as we move through this transition process, 2 companies and some overlap. I think that you'll see in the synergies as we get through the transition process at the end of the year and move into 2020 that we'll be able to rightsize that whole activity. -------------------------------------------------------------------------------- Benjamin Charles Haynor, Alliance Global Partners, Research Division - Analyst [27] -------------------------------------------------------------------------------- Okay. Great. And then lastly for me, you mentioned that company that you're looking at with the $29 million run rate. Can you get a little bit more specific on that one? -------------------------------------------------------------------------------- Jack E. Stover, Interpace Biosciences, Inc. - CEO, President & Director [28] -------------------------------------------------------------------------------- Yes. I would say, Ben, that was one of the -- it was one example of a company we were looking at in terms of activities. It was a reference lab business, and we chose not to move forward with it. It was a nice company. They had a lot of great people, and they had a nice level of revenue. The reference lab business, though, can be a tough business, and you compete with some really tough people like the NeoGenomics in that space. We like the area that we compete in on the product side or what we call the esoteric side. So we're looking for more product and more opportunities in that space as well as a broader-based opportunities in the biopharma arena, which, by the way, I mentioned a couple areas that we're looking at, but don't forget that we actually have an immuno-oncology franchise. And that is a big, big focus for us in terms of being able to continue to grow that. -------------------------------------------------------------------------------- Operator [29] -------------------------------------------------------------------------------- (Operator Instructions) Our next question today is coming from Yi Chen from H.C. Wainwright. -------------------------------------------------------------------------------- Yi Chen, H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research & Senior Healthcare Analyst [30] -------------------------------------------------------------------------------- Could you clarify that the $50 million revenue guidance for 2020, whether that includes potential revenue contribution from BarreGEN test? And whether that includes potential biopharma services from sources from China partnership? -------------------------------------------------------------------------------- Jack E. Stover, Interpace Biosciences, Inc. - CEO, President & Director [31] -------------------------------------------------------------------------------- Yes. It is -- nominally includes revenue from BarreGEN. And primarily because it's difficult for us to estimate that now until we get improvement, if you will, or recognition on reimbursement. So that does not include that. There's some revenue in there -- and by the way, we do see some revenue for BarreGEN currently, but it's not predictable. And in terms of the expectation of revenue coming from China, it's not specifically in that number. But we already are seeing the benefit of having a Chinese partner. And I think that's an upside to the potential. The other way to say is that we haven't seen enough of that activity to really bake it into a forecast for 2020. -------------------------------------------------------------------------------- Yi Chen, H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research & Senior Healthcare Analyst [32] -------------------------------------------------------------------------------- Got it. Second question is you previously announced the collaboration with Helomics regarding collaboration in thyroid cancer with artificial intelligence. So what's the update on that? And how is that collaboration going to drive the volume in thyroid testing in 2020? -------------------------------------------------------------------------------- Jack E. Stover, Interpace Biosciences, Inc. - CEO, President & Director [33] -------------------------------------------------------------------------------- Yes. So as we look at it in terms of driving thyroid volume in 2020, I don't have that answer, and it's not baked into our expectation and plan. What we're really looking to do with the AI component is; a, provide additional information data and a potential new revenue source for us in the samples that we have and basically we convert some of the data that we have to information. Remember, too, it's not just thyroid although that's where we started because we have a lot of that information. In PancraGEN, we have a lot of data. And importantly with the biopharma acquisition, we also picked up the solid tumor basically biorepository of one of the Cancer Genetics' subsidiaries, Response Genetics. And so we have a lot of data that we're looking for help in terms of kind of the artificial intelligence component. All that being said, and I've said this before and I firmly believe it, that as we move forward, and you look at us in 5 years, we may be more of an AI-driven or data-driven company than we are an assay-driven company. That part of the business is changing quickly. And in the pharma side of what we do, you can imagine how important that is. So we are at the very early stages with the precision or Helomics in terms of making those evaluations, but we're going to do more of it. -------------------------------------------------------------------------------- Yi Chen, H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research & Senior Healthcare Analyst [34] -------------------------------------------------------------------------------- Okay. And regarding the recent data reported supporting the high negative predictive value of PancraGEN, do you think that data would be sufficient to drive the volume of PancraGEN going forward? -------------------------------------------------------------------------------- Jack E. Stover, Interpace Biosciences, Inc. - CEO, President & Director [35] -------------------------------------------------------------------------------- So that's a good question. Listen, it's all about more data and more data, right? So it is a continuous process. I guess the good news is that we are seeing the growth of PancraGEN. Again, it's not growing at the same level. And remember that Medicare covers PancraGEN, and the incremental or additional reimbursement that we are working on with commercial payers is in process. So I would also say the piece of that, that is missing other than just sort of the expansion, if you will, on the negative predictive value is guidelines in pancreatic cancer, and we're seeing those come around. And I think a combination of things in terms of data improvement, in terms of guideline from GI physicians, the reduction of the 14-day rule and the fact that while there's a number of people in the pancreatic cancer space that were virtually alone in terms of what we do on the molecular side, and maybe the last piece of this, which also is part of that gray area and really potentially benefits what we do on the biopharma side is that there is now over 600 clinical trials going on in pancreatic cancer. That's pretty amazing, not to mention the fact that everybody is moving back to understand cancer at an earlier stage instead of kind of a terminal disease position. So I think it's a lot of those things that are, in fact, changing out there. But remember, we've been doing this really 10 years. -------------------------------------------------------------------------------- Yi Chen, H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research & Senior Healthcare Analyst [36] -------------------------------------------------------------------------------- Okay. Last question. Will there be a change in the stocks trading symbol now that the name has been changed? -------------------------------------------------------------------------------- Jack E. Stover, Interpace Biosciences, Inc. - CEO, President & Director [37] -------------------------------------------------------------------------------- No. We chose not to make a change in the stock trading symbol. And we may make a different decision on that in the future, but for the time being, we're going to continue to trade as IDXG. -------------------------------------------------------------------------------- Operator [38] -------------------------------------------------------------------------------- Ladies and gentlemen, we've reached the end of our question-and-answer session. And that does conclude today's teleconference. You may disconnect your lines at this time and have a wonderful day. We thank you for your participation today.