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Edited Transcript of IDXG earnings conference call or presentation 15-May-18 12:30pm GMT

Q1 2018 Interpace Diagnostics Group Inc Earnings Call

PARSIPPANY May 23, 2018 (Thomson StreetEvents) -- Edited Transcript of Interpace Diagnostics Group Inc earnings conference call or presentation Tuesday, May 15, 2018 at 12:30:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Jack E. Stover

Interpace Diagnostics Group, Inc. - CEO, President and Director

* James E. Early

Interpace Diagnostics Group, Inc. - CFO, Secretary & Treasurer

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Conference Call Participants

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* François Daniel Brisebois

Laidlaw & Company (UK) Ltd., Research Division - Healthcare Equity Analyst

* Haeyong Chung

Maxim Group LLC, Research Division - Former Senior Equity Analyst

* Jason Wesly McCarthy

Maxim Group LLC, Research Division - Senior MD

* Yi Chen

H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research & Senior Healthcare Analyst

* Pierre Goovaerts

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Presentation

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Operator [1]

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Good morning, everyone, and thank you for joining us for the Interpace Diagnostics conference call to review the company's financial results and operations for the first quarter of 2018 as well as recent developments. The earnings release detailing first quarter results was issued this morning and should be available on Interpace's website at www.interpacediagnostics.com.

Before we get started, during the course of this conference 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 news release as well as Interpace's public periodic filings, which include the Form 10-K filed with the SEC on March 23, 2018, and Form 10-Q for the quarter ended March 31, 2018, to be filed shortly, which both include a discussion in the Risk Factors section and the section on forward-looking statements. Investors or potential investors should carefully read and consider these risks. Interpace 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 that this non-GAAP information provides meaningful supplemental information and may be helpful in assessing the company's historical and future 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.

Now I would like to turn the call over to Jack Stover, President and Chief Executive Officer of Interpace Diagnostics.

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Jack E. Stover, Interpace Diagnostics Group, Inc. - CEO, President and Director [2]

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Thank you, Rob. Good morning, and thank you for joining us today for a review of the quarter ended March 31, 2018. With me today is Jim Early, our Chief Financial Officer.

I will begin the call with an update on our progress, both for the first quarter and to date. We will then review our financial performance for the first quarter compared to the prior year first quarter. Following that, we will open the call for your questions.

Let me remind you of our mission as I will on all calls. We are a fully integrated commercial and bioinformatics company that provides molecular and diagnostic tests and pathology services by leveraging the latest technology in personalized medicine for better informed clinical decisions and improved patient management.

As you may know, we currently have 4 diagnostic tests commercialized on the market. First, ThyGenX, is our next-generation sequencing test for cancer risk management of thyroid nodules that improves preoperative diagnostic accuracy by providing physicians with greater confidence to rule in cancer or in determining thyroid nodules.

ThyGenX is typically combined with ThyraMIR, which is the first microRNA gene expression classifier for thyroid nodule identification. When ThyraMIR is used in combination with ThyGenX, the 2 tests have both high sensitivity and specificity that correspond to clinically actionable outcomes in a single testing service providing what we believe is a superior solution. Yesterday, we announced the expected introduction of ThyGeNEXT at the upcoming AACE meeting later this week, which I will discuss later.

Second, PancraGEN is the first and only U.S. commercially available molecular and bioinformatics test for evaluation of pancreatic cysts and assessment of risk of concomitant or subsequent cancer. Our fourth and newest commercial product, RespriDX, has been recently launched and is a molecular test that differentiates between new primary lung tumors and metastasis by identifying the unique molecular fingerprint of a tumor using a series of tumor markers and loss of heterozygosity. Discerning whether a lung tumor is newly formed or metastatic is useful in determining what course of action physicians should take, example, surgery versus chemotherapy.

I am pleased to announce that we had an excellent first quarter and start to fiscal 2018 as our test volumes grew and our pricing improved for both our GI and endocrine franchises, resulting in record revenues for the quarter of $4.8 million, an increase of 39% over the prior first quarter -- prior year first quarter and an increase of 10% over the prior quarter.

Our revenue growth in the first quarter represents the sixth sequential quarter of net revenue growth. Further, we continue to aggressively grow our business while rationally managing our costs. Importantly, March was our greatest cash collection month since the restructuring of Interpace. And we remain in a good cash position with $12.6 million of cash and cash equivalents on hand at the end of March and no long-term debt.

New commercial coverage recently announced included the following. In February, we announced that Horizon Blue Cross Blue Shield of New Jersey covering 3.8 million patients agreed to cover ThyGenX and ThyraMIR. In March of 2018, we announced coverage of ThyGenX and ThyraMIR by 4 new Blue Cross Blue Shield plans, Blue Cross Blue Shield plans of Arizona, South Carolina, Iowa and South Dakota representing over 5 million members.

In April, we announced that we entered into an agreement with BJC Healthcare of St. Louis to provide access to both ThyGenX and ThyraMIR. And in May, we announced that since the beginning of 2018, 14 Blue Cross Blue Shield plans across the country have published favorable coverage policies for ThyGenX and ThyraMIR resulting in over 75 million members being eligible to participate in these plans.

In addition to our reimbursement and plan progress, we also had several very important operational successes. As previously mentioned in March, we announced the execution of a new exclusive agreement with LabCorp, to further expand our national network of psychology providers in support of its thyroid business.

In March, we presented 5 abstracts as posters and podium presentations at the United States and Canadian Academy of Pathology meeting being held in Vancouver, British Columbia, reflecting a review of data from the company's extensive experience of molecular testing, including experience with over 5,000 analyses of indeterminate thyroid nodules using ThyGenX and our classifier, ThyraMIR; 30,000 tests of pancreatic cyst fluid and solid lesions using PancraGEN; as well as results from its recently launched product for lung cancer, RespriDX.

We expanded peer-reviewed evidence for PancraGEN publishing a manuscript describing the clinical validity and utility of using PancraGEN to help manage patients with solid pancreatic or biliary lesions. And we announced just yesterday, we are planning to launch ThyGeNEXT, our proprietary new mutational panel for indeterminate thyroid nodules at the American Association of Clinical Endocrinologists, or AACE, annual meeting in Boston being held May 16 to 19.

ThyGeNEXT now includes numerous additional molecular markers, gene mutations and RNA fusions than ThyGenX and interrogates a more comprehensive set of indicators to not only identify malignant or benign nodules but also ascertain aggressiveness of cancer and other characteristics while maintaining our strong PPV and NPV. Overall, ThyGeNEXT combined with ThyraMIR should enable physicians to make treatment decisions with a level of precision not previously available.

With that, I would like to hand the call off to Jim Early, our CFO, to discuss the financial highlights for the first quarter. Jim?

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James E. Early, Interpace Diagnostics Group, Inc. - CFO, Secretary & Treasurer [3]

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Thank you, Jack, and good morning, everyone. Today, I would like to focus on some key elements of our financial performance and position.

As previously mentioned, net revenue for the first quarter 2018 was $4.8 million, a 39% increase over the comparable period of the prior year and a 10% increase over the prior quarter. The principal reason for our revenue growth was our thyroid franchise, both in units and reimbursement improvement.

As you may know, a portion of our revenue in accordance with GAAP was accounted for on a cash basis during 2017 while we were establishing reimbursement among certain payer groups. As will be explained in more detail in our 10-Q as well as our previously filed 10-K, we adopted accounting revenue standard ASC 606 effective January 1, 2018. And effectively, all of our net revenues are now stated on the accrual basis, primarily by means of measurements of collection histories for all our payer groups. The adoption of the new standard now aligns our revenue recognition with the volume of tests sold in accession.

Our gross profit for the first quarter of 2018 was $2.2 million, a 31% improvement over the prior year principally due to the increased volumes. Our gross profit percentage decreased from 49% to 46.4% primarily as a result of increased materials acquired in the first quarter of 2018 in anticipation of supporting our increased volume and products for the remainder of the year.

Sales and marketing costs for the first quarter of 2018 were $2 million as compared to $1.1 million for the comparable period of the prior year. The increase reflects additional sales reps strategically placed in our thyroid franchise and other investment spending in sales and marketing to support additional reimbursement coverage and revenue growth.

Research and development costs for the first quarter of 2018 were $0.5 million as compared to $0.3 million for the comparable period 2017. General and administrative expense for the first quarter of 2018 was $2.2 million as compared to $1.5 million for the comparable period of the prior year. Prior year G&A costs were lower, primarily due to a reduction of $1.5 million in severance costs related to our restructuring during that period.

As a result of the information noted, net income or loss for the first quarter of 2018 was negative $3.2 million compared to a positive $2.4 million for the comparable period of 2017. 2017 included many restructuring charges offset by fair value adjustments in our debt restructuring, where we eliminated all our long-term debt.

As we noted in our earnings release and discussed above, we often refer to adjusted earnings before interest, taxes, depreciation and amortization, or EBITDA, a non-GAAP financial measure, when evaluating our cash usage. We define adjusted EBITDA for our purposes as income or loss from continuing operations excluding interest, taxes, depreciation and amortization expenses as well as costs relating to revaluing of contingent consideration, stock-based compensation, asset impairment, fair value loss on extinguishment of debt, mark-to-market adjustments to our warrant liability and other noncash charges.

Importantly, our adjusted EBITDA for the 3-month periods ended March 31, 2018, and 2017, was negative $1.8 million for 2018 and $1.1 million for the first quarter -- negative $1.1 million for the first quarter of 2017 due principally to our investment in sales and marketing and consulting and advisory costs in the first quarter of 2018. So the increase was due to some additional investment spending in sales and marketing and consulting and advisory costs.

Further, evaluating cash flow shows that the net cash used in operations included nonrecurring items such as discontinued operations, financing costs and vendor catch-up payment for the quarter ended March 31, 3018, was approximately $1 million as compared to $2.5 million for the first quarter of 2017. Our cash position at the end of the first quarter was $12.6 million.

Total assets were $53.1 million and total liabilities were $13.3 million resulting in stockholders' equity of $39.8 million at March 31, 2018. Importantly, just like at year-end, we had no long-term debt as of the end of this past quarter. Our headcount is currently 78 as compared to 71 at year-end, made up of 28 people in sales and marketing and 32 in laboratory operations.

With that, let me turn the call back to Jack and Rob. Rob or Jack?

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Operator [4]

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(Operator Instructions)

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Jack E. Stover, Interpace Diagnostics Group, Inc. - CEO, President and Director [5]

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Hey, Rob?

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Operator [6]

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Yes.

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Jack E. Stover, Interpace Diagnostics Group, Inc. - CEO, President and Director [7]

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I think the way this goes is that I need to provide some additional comments.

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Operator [8]

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My apologies, Jack, please continue.

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Jack E. Stover, Interpace Diagnostics Group, Inc. - CEO, President and Director [9]

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So yes, Rob, I would like to provide some additional color. As some of you will remember, in 2016, we initiated our restructuring and recapitalization. In 2017, we largely completed our reorganization, which demonstrated our ability as a team to scale our operations. And we validated, I believe, our commercial model. In 2018 to date, we have demonstrated our ability to deliver continuous improvement in growth. Our plans for the remainder of the year are to build on our performance. While we obviously cannot guarantee any or all of these factors, we do believe we have multiple

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foremost organically delivering $20 million in annual sales would be a major milestone for us. Our confidence in attaining this target is growing based upon our success in gaining and retaining reimbursement such as our success in adding the 14 new Blue Cross Blue Shield agreements, which by the way were previously mostly 0 pay accounts; our expanded LabCorp arrangement, which is adding volume; our choice to further expand our highly capable commercial team and take advantage of the opportunity of some highly qualified sales reps in the marketplace and our ability to make those sales reps accretive in a relatively short period of time; the launch of ThyGeNEXT; and the resurgence of PancraGEN now that the "14-day rule" has been eliminated effective January 1. And this was a bit of a cumbersome rule related mostly to hospital systems that would delay the billing process and effectively, as we're finding, created a scenario that made it difficult for hospital systems to order PancraGEN. We're certainly seeing as of the beginning of the year that that's going away and the opportunity is growing.

Beyond growing sales, utilizing our microRNA capabilities and experience to allow us to focus on uniquely delivering strong positive and negative predictive value for our assays and opportunities we may see and positioning us importantly in the less occupied niche of a prognostic assessor. For example, if you were a family member or identified as having cancer, wouldn't you want to know what your odds were of progressing to aggressive or metastatic cancer? Our capabilities will be a companion to therapeutics and potentially other diagnostics as well. It's an exciting space to be in.

Growing our already successful commercial operations, which we believe separates us from many of our competitors and we believe creates a unique opportunity for us to acquire or license in synergistic products, is a very strong differentiator. And we are constantly seeing opportunities. The key for us is finding the right accretive opportunities.

Leveraging our data. As recognized last year by CIO Applications magazine, this may potentially be our most valuable asset with the opportunity for us to monetize this data from over 40,000 patients served. And BarreGEN, we're convinced is a major important asset to risk classify at a molecular level the growing health care problem of Barrett's Esophagus and eventually esophageal cancer.

In liquid biopsies, I know this is a hot topic and gets a lot of investor attention, but liquid biopsies for us are a natural additive to our activities and we're evaluating that at many levels. We believe these opportunities and more set us apart from our competition and others of less robust molecular diagnostic companies, and we believe we have created a unique opportunity in the future of personalized medicine.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question today will be coming from the line of Jason McCarthy with Maxim Group.

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Jason Wesly McCarthy, Maxim Group LLC, Research Division - Senior MD [2]

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So for ThyraMIR and ThyGenX, when we think about uptake or early adopters, what percentage of sales are derived from doctors and centers converting from existing thyroid tests? And what percent are new to the market?

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Jack E. Stover, Interpace Diagnostics Group, Inc. - CEO, President and Director [3]

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Jason, yes, thank you. Yes, good question. I can't answer that specifically. I don't have that data for the first quarter in front of me. But I can tell you, in general, as we look at our Thyroid business and we talk about whether we're taking business away or whether we're adding new business, the majority of our business that we're adding is new business not business we're taking from other competitors.

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Jason Wesly McCarthy, Maxim Group LLC, Research Division - Senior MD [4]

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Okay. And then can you just discuss a bit in greater detail the continued progress in payer adoption? Like how many lives are covered in total for thyroid tests today?

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Jack E. Stover, Interpace Diagnostics Group, Inc. - CEO, President and Director [5]

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For the thyroid test? Yes, the...

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Jason Wesly McCarthy, Maxim Group LLC, Research Division - Senior MD [6]

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Yes.

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Jack E. Stover, Interpace Diagnostics Group, Inc. - CEO, President and Director [7]

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Yes. The thyroid test, it's a little difficult because of the kind of overlapping nature of some of the coverages. But in general, what we talk about is around 250 million to 285 million lives that are covered.

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Jason Wesly McCarthy, Maxim Group LLC, Research Division - Senior MD [8]

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Okay, and then one last question. In terms of reimbursement, there has recently been some legislation that has affected multiple companies in the therapeutics and device spaces as it relates to CMS reimbursement. Is there any impact on the diagnostic service space particularly as it relates to Interpace?

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Jack E. Stover, Interpace Diagnostics Group, Inc. - CEO, President and Director [9]

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Yes, good question. In fact, on -- in the CMS arena and to be honest with you, as we take a look at the space we occupy, remember we're really a pre-oncology company so much of the constraint has been brought in the oncology space. In the pre-oncology space, there certainly has been more flexibility. As a matter of fact, ThyGenX, which is obviously our biomarker component of our thyroid business, our pricing from CMS actually was raised about $400 effective January 1. So that's a very good outcome for us.

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Operator [10]

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Our next question is from the line of François Brisebois with Laidlaw.

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François Daniel Brisebois, Laidlaw & Company (UK) Ltd., Research Division - Healthcare Equity Analyst [11]

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A couple questions here. I was wondering what other disease areas do you guys think might work with the PathFinder platform.

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Jack E. Stover, Interpace Diagnostics Group, Inc. - CEO, President and Director [12]

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Yes, that's a -- Frank, thanks for joining us today. Yes, there's a broad opportunity in terms of PathFinder. And while we didn't mention it on the call, we have on other calls that basically BarreGEN is covered by our -- is a function of our PathFinder platform as is RespriDX, both part of that platform. I think other products or other applications, for instance in the kidney area, we're looking at other applications in terms of liquid applications as well. There's a number of opportunities that are really on the back burner for us as we aggressively move forward with the products that we currently do have.

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François Daniel Brisebois, Laidlaw & Company (UK) Ltd., Research Division - Healthcare Equity Analyst [13]

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Okay, great. And you touched on this quickly just now and in your closing remarks. So I was just wondering if you could give any more color as to why you think that the whole push in liquid biopsy can only be additive for Interpace.

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Jack E. Stover, Interpace Diagnostics Group, Inc. - CEO, President and Director [14]

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Yes. The way we look at liquid biopsy today is that as we evaluate the outcome of our assays, most of which are focused on a reduction in surgery. The alternative to not having surgery for pancreatic cancer or thyroid cancer or lung cancer is active surveillance. Active surveillance typically meaning that you're under a doctor's careful watch and care on a pretty aggressive basis, could be monthly, could be quarterly, could be semiannually, certainly more so than what a patient has been in the past. The opportunity for liquid biopsy in that area is really important. But even beyond that, as we take a look at pancreatic cancer and the PancraGEN assay and we look at some of the byproducts that are liquid byproducts of pancreatic cancer or the pancreas, typically, a pancreatic juice, if we can access and evaluate a pancreatic juice biopsy, we'll have a much more insightful evaluation into the prognostic assessment for a potential patient. So we see a lot of opportunities around that, and we're certainly aggressively evaluating that currently. It may be a little different definition of liquid biopsy than blood and urine. But remember, many of our assays that we currently do are really liquid biopsies to a certain extent already in that were accessing cysts, basically cyst fluid.

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François Daniel Brisebois, Laidlaw & Company (UK) Ltd., Research Division - Healthcare Equity Analyst [15]

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Okay. Okay, that's very helpful. And then can you give a little more detail on -- more details on ThyGeNEXT and its advantages? And is there any chance that this could potentially cannibalize ThyGenX that's right now? Or just to make that clear, that's ThyGenX. It's hard to differentiate, but...

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Jack E. Stover, Interpace Diagnostics Group, Inc. - CEO, President and Director [16]

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I know it is. Yes, it's a little bit of a tongue-tier. But no -- so basically what we're looking to do with ThyGeNEXT is simply to add additional biomarkers and focus on the aggressive nature of thyroid cancer. And maybe the way to explain that would be the most aggressive nature of thyroid cancer. So we don't see it cannibalizing, but what we do see is that it's not an option -- or won't be an option in the future for patients and physicians because ThyGeNEXT will provide more data. The combination of ThyGeNEXT and ThyraMIR will become the standard of care. And while we call it sort of our Version 2., it's a -- we believe it's a better solution. So ThyGenX, the original, will largely fall out as ThyGeNEXT, the Version 2, will take over and become dominant. And what we hope obviously is that with the additional biomarkers and the recognition of aggressiveness, we'll become even more competitive in that space.

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François Daniel Brisebois, Laidlaw & Company (UK) Ltd., Research Division - Healthcare Equity Analyst [17]

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Got you. And then I believe Jim mentioned the sales reps. Now you went from your headcount 71 to 78. And I believe he said it's about 28 sales reps now in the field. That seems like at this time last year, it's a little more; but over the year, probably a 20% growth. Is that something that we should expect this year as well to keep growing the sales force?

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Jack E. Stover, Interpace Diagnostics Group, Inc. - CEO, President and Director [18]

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Yes. We've had a lot of luck, Frank, with growing the sales force for 2 reasons. One is there have been some very good qualified reps available. And for us to make them accretive, what I mean by that is that their revenue supports their cost, has been a much shorter timeframe than what we've experienced in the past. So as long as we have that opportunity and as long as that sector is growing, we're very interested and anxious to continue to aggressively invest in our sales force. We just got back from our National Sales Meeting, which included both our thyroid and our pancreas reps. And I would tell you that the enthusiasm on both ends is more than I've seen ever in terms of Interpace. It was exciting, to say the least.

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François Daniel Brisebois, Laidlaw & Company (UK) Ltd., Research Division - Healthcare Equity Analyst [19]

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Okay, great. And then lastly here in terms of guidance, the changes in accounting that might make it a little easier for you guys from here on out to do. But did I hear you mention it'd be quite the accomplishment to hit $20 million top line for year-end '18, is that correct?

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Jack E. Stover, Interpace Diagnostics Group, Inc. - CEO, President and Director [20]

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Yes. So as you know, because of the revenue recognition issues, et cetera, we've been very careful about what we've done in terms of providing guidance mostly because the mechanics have been very difficult to do. And I think many companies in our sector have underestimated how difficult it was. As of January 1, being fully on an accrual basis, it certainly is a much easier thing to do. And so while we haven't given specific guidance, I think what we're saying is that the $20 million annual sales number for 2018, our confidence is very strong about attaining that. So we're excited about that opportunity. If you look at our first quarter, I think we're on track to accomplish that without a great deal of difficulty. So I don't want to mislead anybody. It's an accomplishment for the company and the organization. It's never easy to accomplish, but I think it's very accomplishable for us in 2018.

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Operator [21]

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The next question is coming from the line of Yi Chen with H.C. Wainwright.

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Yi Chen, H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research & Senior Healthcare Analyst [22]

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My first question is the gross margin in the first quarter is lower than previous quarters. How should we look at gross margin going forward?

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Jack E. Stover, Interpace Diagnostics Group, Inc. - CEO, President and Director [23]

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Yes, Yi, thanks for joining us today. Yes, so I think what happens when we look at the quarters overall is that the first quarter tends to absorb more costs than other quarters. The gross margin tends to flatten out or improve after the first quarter. Some of that is a function of how we acquire products and the expectation or the planning around the growth for the future. As we've talked about gross margin before, you've heard me say that I believe that our gross margin at 50% and above is very attainable for us. And obviously, I think it's also a function of scale. And as our scale improves and we're able to grow, which is what we're certainly predicting, I can't anticipate necessarily that for the year, we'll be above 50%. However, I do see that gross profit improving from where we were in the first quarter.

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Yi Chen, H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research & Senior Healthcare Analyst [24]

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And my next question is, is ThyGeNEXT priced the same as ThyGenX? And do you expect it to accelerate the acquisition of new businesses as well as grab market shares from competing tests?

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Jack E. Stover, Interpace Diagnostics Group, Inc. - CEO, President and Director [25]

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The answer is yes it is. Remember, it is just being introduced so we will be introducing it effectively this week at the upcoming conference. But we've already been informed that -- from the Medicare point of view, that ThyGeNEXT will be covered at the same level and the same rate as ThyGenX has been, so the answer is yes. As we look at sort of the opportunity, listen, we're in a business that we need to continually grow, we need to expand and we need to improve our competitive position. We have a strong competitive position already. We think this will improve, both the opportunity for new candidates in terms of patients and physicians that need a robust solution or a more robust solution as well as a competitive position as our sales reps go head to head against the competition.

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Yi Chen, H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research & Senior Healthcare Analyst [26]

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Do you expect ThyGeNEXT to accelerate the potential top line revenue growth from 2018 to 2019?

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Jack E. Stover, Interpace Diagnostics Group, Inc. - CEO, President and Director [27]

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We believe that it will help support our plans going from 2018 to 2019, and we certainly believe it will be part of that growth plan, yes.

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Operator [28]

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(Operator Instructions) The next question comes from the line of Lauren Chung with Westpark Capital.

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Haeyong Chung, Maxim Group LLC, Research Division - Former Senior Equity Analyst [29]

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One question I have is on the sales reps. Can you talk about sort of the integration of the new sales reps and how that process is going?

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Jack E. Stover, Interpace Diagnostics Group, Inc. - CEO, President and Director [30]

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Yes. Hi, Lauren, thanks for joining us as well. Yes, the integration process with the new sales reps is -- has been very interesting. As an example, several of our newest sales reps were actually sales reps that had previously worked for RedPath and were really some of our strongest sales reps previously. So it was very interesting in terms of bringing them back on. It was kind of a natural. So that's part of I think where the accretive nature is of getting these sales reps up and running. And if you look around, there's been several other molecular companies in the space that have started and terminated sales forces because they had -- were not able to get reimbursement or had other financial difficulties and so we've been able to attract them as well. And I think we have a great leader on the commercial side, Greg Richard, who's really stepped in and done a great job there. But he has a great network in the space, so he's very quickly able to identify for us the right sales reps and get them up and running very quickly.

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Haeyong Chung, Maxim Group LLC, Research Division - Former Senior Equity Analyst [31]

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Got you. And also on the strategic side, you mentioned liquid biopsy. What are you seeing out there? Can you give us a little more color on that?

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Jack E. Stover, Interpace Diagnostics Group, Inc. - CEO, President and Director [32]

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Yes. We're seeing a lot of different technologies in the liquid biopsy space. We were recently on a trip, I guess, 2 weeks ago to California. And in a 2 or 3-day period of time, we visited multiple liquid biopsy companies and technologies as well as contractors that are working in the space. Ours, as I said, is a better -- bit of a unique opportunity and we're not looking to expand specifically into a whole new product line in terms of liquid biopsies but to try and really work with utilizing our current capabilities in liquid biopsies and expanding those. Not to mention the fact that Dr. Syd Finkelstein has been very excited and enthusiastic about the opportunity for liquid biopsies with basically the pancreatic juice opportunity that we've talked about previously.

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Haeyong Chung, Maxim Group LLC, Research Division - Former Senior Equity Analyst [33]

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Got you. Are you looking beyond thyroid and pancreatic and esophageal cancers?

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Jack E. Stover, Interpace Diagnostics Group, Inc. - CEO, President and Director [34]

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Yes. As a matter of fact, we are, but not exclusively in those areas. If you really look at what we do and how we're positioned, while, to date we've really been in the cancer space, we are able because of the prognostic assessment that we do and the pre-cancer evaluation that we do, we're able to look at other opportunities as well for potentially expanding into non-cancer -- products for non-cancer therapies.

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Operator [35]

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The next question is from the line of Pierre Goovaerts with BioMedware.

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Pierre Goovaerts, [36]

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Okay. Good morning, again, Jack. I had just a couple of questions. I mean, it's a great quarter. I was expecting maybe a biggest increase over the last quarter given the increase in reimbursements. So I mean, it's a significant increase over the first quarter of last year. Over the last quarter, it's an increase of 10%. Is it due to the seasonal effect? Or how could we interpret that? Because, I mean, there is some increase in reimbursement by 40% for some of the products. Can you comment on that?

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Jack E. Stover, Interpace Diagnostics Group, Inc. - CEO, President and Director [37]

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Pierre, thanks for joining us again and I appreciate the call. Yes, as we evaluate the change and we look at sort of the change from last year to this year, first of all, quarters-to-quarters, Q1 post '17 versus Q1 '18, what we focus on there are units and -- versus price. And what we're seeing is that our growth is about 60% in terms of units, 40% in terms of price. And as we look at Q4, we recognize that there are some activities in Q4 in terms of acceleration at the end of the year. Our sales reps are certainly targeting their incentive programs, et cetera. So there can be a bump up in Q4 around some of those activities. But as we look at our plans from Q4 to Q1, we're pretty excited about a 10% growth from quarter-over-quarter. It bodes very well. And if you look at what we're suggesting in terms of where we expect to be for the year, I think what you might conclude is that's really the beginning, not the end, of what we're going to be able to demonstrate in 2018.

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Pierre Goovaerts, [38]

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I have another question regarding BarreGEN. Seems to be a big opportunity. We talked a lot about it for the last year. But there is no movement right now, no news. I mean, you are mentioning you keep trying to collect more data and trying to have it reimbursed. Is there anything, short term, that could happen with that test? Any partnership or?

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Jack E. Stover, Interpace Diagnostics Group, Inc. - CEO, President and Director [39]

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Yes, Pierre. As you know, BarreGEN, we believe, is a big opportunity for us in a large market component. And we do not have reimbursement for BarreGEN at this point in time. Our clinical evaluation program that's been underway for over a year is intended to gather data to be able to present to the reimbursement community. The good news about BarreGEN is it's on the same platform as our other products that have been approved for reimbursement. The difficulty with Barrett's Esophagus is identifying and evaluating progressors. It's not like pancreatic cancer, where a patient life cycle is relatively tight. The life cycle for a patient with Barrett's Esophagus can be dozens of years. So today, we're focused on gaining and gathering data. We have activities that we're working with, with other potential partners. It's a big focus on our part in terms of moving BarreGEN forward. However, from a sales point of view and expecting BarreGEN to have a big impact on sales in 2018, I don't believe that will happen. It's too soon. The process takes a lot longer. On the other hand, we think there are other opportunities to accelerate the value of that asset, and that's what we are working on. But it's too early to really talk about any specifics at this point in time.

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Pierre Goovaerts, [40]

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Okay. I have my last questions. I liked when you mentioned that one of the big assets you have maybe all the data you have been collecting. Will you have very concrete plan to valorize this wealth of information you have been collecting, partnering with other company or would you do analysis yourself? Or is it again long term being able to capitalize on all the data you've been collecting?

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Jack E. Stover, Interpace Diagnostics Group, Inc. - CEO, President and Director [41]

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So the process for that, Pierre, is underway. We're working with some third parties to help us understand the quality of the data. The good news is that we have repositories and we have active samples that we can and do utilize for this purpose. If you look at the nature of our assays, our assays are targeted assays for the most part as opposed to covering a long progression. And there's value in the nature of those targeted assays and we're working with third parties to help us uncover or determine what the value of that might be. But 40,000 patients and over 10 years of experience we believe is very, very important. If you look at a product like PancraGEN as an example, pancreatic cancer, and you look at the potential for therapies that are now coming into the market and the amount of interest in sort of pancreatic cancer, that is relatively recent only in the last couple of years. I don't think anybody has better or more data than we do in that space. Again, we think it's an opportunity.

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Pierre Goovaerts, [42]

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Okay, good. Actually, I have one more question as a retail investor. Your share price has been under $1 for some time now, and is it something you worry about? Or?

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Jack E. Stover, Interpace Diagnostics Group, Inc. - CEO, President and Director [43]

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So Pierre, we always worry about share price. It's our lifeblood as you know. And I think as we continue to make progress, we continue to demonstrate all the activities and the rationalization in terms of managing our costs that we have in the past that, that will take care of itself. There's not a lot we can do in terms of share price other than getting more and more institutional investors interested in our story. And if you look at our story as I do on a regular basis and you basically look at a combination of our current position and our valuation, et cetera, I think what we find with institutional investors is that they believe that we have a big opportunity in front of us and we just need to take advantage of that. So I think we're on the right track. It's good to see recently some uptick in the share price. But also the molecular diagnostic market has been hit pretty hard by a couple of other companies that have not done as well. And again, that's why I tried to point out in our discussion and presentation what makes us differ.

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Operator [44]

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We're nearing the end of our question-and-answer session for this morning. We have time for one final question.

That question comes from the line of [Trevor Housten], a private investor.

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Unidentified Participant, [45]

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So my question is, as far as your thyroid products, what kind of feedback are you getting from the physicians? And what kind of percentage of adoption, I might say, or multiple orders once the physician has been through the process with 1 or 2 tests?

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Jack E. Stover, Interpace Diagnostics Group, Inc. - CEO, President and Director [46]

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Yes. In terms of our thyroid products with our current product ThyGenX and ThyraMIR, the feedback that we've gotten is that the physicians especially are very pleased with the combination of a solid negative predictive value, in our case in the plus 90% range. But also, they're enthusiastic about the positive predictive value in the 70-plus percent range. And that certainly has gotten a lot of attention especially as it compares to many of our competitors and, of course, that's the utilization and the leverage of ThyraMIR in that the combination product. I can't tell you exactly today in the first quarter what the recurrence has been in terms of physicians and customers that continue to order. However, I can tell you that seldom are we losing customers. We don't lose many customers. If we do, they step out, try a competitor and often times, they come back. Certainly, as we've heard them talk and we hear their interest and desire to identify more aggressive forms or aggressive markers, that's really been the motivation for us to move forward with ThyGeNEXT, which we're effectively launching next week. So it's -- I think it's a very current franchise. In addition to that, I'd say 2 years ago, certainly, doctors and health care systems were concerned about our financial viability and that has largely gone away. And I think our different financial position has made it easier for physicians and health care systems not only to acquire our products but to basically get confidence that we're going to be here and that we're going to be aggressively updating it to state-of-the-art activities in the future.

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Unidentified Participant, [47]

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Great. One more question, if I may. It seems that reimbursement drives sales. Doctors want to order a test that their patients are going to be reimbursed by their insurance. With that in mind, what challenges or successes or progress have you found in getting reimbursement for things like PancraGEN, RespriDX? Or what do you anticipate for ThyGeNEXT in that arena?

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Jack E. Stover, Interpace Diagnostics Group, Inc. - CEO, President and Director [48]

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Right. Yes, and you're right. Two things drive sales, one is units, which is basically adoption and recognition that we have an acceptable product. But reimbursement, and you're right, physicians that recognize that a patient is not getting reimbursed will look at this opportunity differently. And certainly, patients will, if they recognize that they're out of pocket, might be several thousand dollars. If you look at our reimbursement across the board, except for BarreGEN where we really don't have reimbursement, we have Medicare reimbursement on our thyroid assays and we have reimbursement in PancraGEN on -- from Medicare as well as RespriDX as well, even though RespriDX is a relatively new launch. So Medicare is certainly a big part of that. On the PancraGEN side, where the patient tends to be older, the Medicare component is very, very important. And for us, it's probably over 60% of our patient population. On the thyroid side, it's almost the opposite. The patients tend to be younger. And while covered by Medicare, Medicare is a much smaller component of our patient grouping. But if you look in the last 24 months at our commercial reimbursement coverage, it really has been excellent on the thyroid side. Again, I applaud Greg Richard, our Head of Commercial, for all the work he's been able to do in that. And it seems like, I don't want to say weekly, but certainly monthly, we're coming out with new coverage, new reimbursements such as the Blue Cross and Blue Shield coverage we got just since the beginning of 2018. All that being said, we're always nervous, we're always concerned about reimbursement and where that may go. What we liked about where we are and the pressure points, if you will, from the reimbursement community, we like being not in the oncology space but really in the pre-oncology space and we like being prognostic. It's a function of our pricing as well. Our pricing is not inexpensive. But if we're able to tell a patient basically not a snapshot as to where you are, but a vision as to where you'll be in the next 5 years, we think the value proposition is really excellent. RespriDX, like I said, is covered by Medicare but it's also covered by many private insurers. But we always are moving into the next level in terms of moving from coverage to basically getting on contract. And so we've been picking up contracts on a regular basis, but we certainly have a lot more work to do in that area.

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Operator [49]

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Jack, would you like to make any closing comments?

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Jack E. Stover, Interpace Diagnostics Group, Inc. - CEO, President and Director [50]

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Yes. Thanks, Rob. Thank you all for joining us this morning and following us, and thank you for your thoughtful questions. I'd like to specifically thank the analysts that follow us and that are on the call. And we look forward to continuing to update you on our progress. And if you have any further or any unanswered questions, feel -- please feel free to reach out to us. And again, thank you.

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Operator [51]

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Thank you. Today's conference has concluded. Thank you for your participation.