CGIX - Earnings call transcript Q2 2018

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Operator

Good day, and welcome to the Cancer Genetics Second Quarter 2018 Financial Results Conference Call. The company issued a press release that provided an overview of the second quarter financial results and business update. Today's conference is being recorded and will be available online at investor.cgix.com.

Additionally, CGIX has also provided a set of slides to accompany today's update that are available both online or by contacting ir@cgix.com. [Operator Instructions]. would turn I to conference time, Mr. this like the to over At Vice Ruth of Roth, President Lee Executive the Group. Please go ahead, sir.

Lee Roth

Thanks, joining us Quarter you all Cancer thank Conference Second Results XXXX Sandra, Genetics Financial for and the Call. for

morning release Joining slides Commercial Officer, Roberts; accompany Executive materials issued Officer. to Discovery Early The Dr. are Mike earlier and news of Jay Development President company of me Services; the and from and Brandt, the McCartney, call, today of these Genetics available & website. are Chief this Investor a Cancer set Ralf section our Relations the a company's Chief presentation under

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John Roberts

we Thank quarter you welcome, I reorienting of took call. to for our we is to what greater and you, efficiencies the earnings and our first February, the call conference stability. plans you told accomplished to of our Lee, achieve the informed plan XXXX progress. you and keeping we've back theme The second to on in to the half in today's of continue year the report of When company company leadership

our earlier we year, in some growth important strategy. most of transformative For the components the example, outlined of

During XXXX. plans the first half year, transformation our we for implementing of began the

of is our optimize in profitability. reviewing in great to noncore investing strives important already operating made areas We strategy. organization progress business taken have and core steps believe activities drive our lower accelerate to to a this We by revenue number eliminating to the good our our to improvements the consolidating or our cultivate a sustainable growth path expenses. of We've execution in while approach expertise taking and utilizing of to

the execution without risks geographies and incurring at to taking to requiring to opportunities with with in other local direct the to look expenses sale and bring services our and licensing forward to and our related progress I updates level. a maintaining sharing exploring completed and million. tests announced proprietary investments, of developing on presence direct you. Indian for others unique BioServe we as of Firstly, our April, $X.X also menu the business, Incorporated We're REPROCELL REPROCELL potentially

will with of is is to this lower within Jersey initiative, and is efforts, of or to clinical on has these schedule way. of and we drive transitioning Angeles team not track those to and XXXX. coverage operating third core facilities the at New and to and budget on making expenses This activities by our growth activity simplify operating The by and in profitability. Los consolidation lab in aimed capability our exploiting our any and cutting decision footprint initiative progress sustainable accelerate and our competencies changed reducing testing are great our consolidation our in quarter path the operating relocation consolidating complete is which our end This services Secondly, our structure. profiling costs, offer North geographic clearly molecular our profiling This Carolina. we

strategic and work CROs innovation. and steps our proven developing leveraging sales namely the In We a mention global end XXX engagements. expanding. with particularly in about and also doubled innovative leveraging and in experience, the Mike life customers We of as further would to key sciences, providing leading Commercial that strategy other ourselves I excellent oncology in necessary ago. is has the are am achieve in our services performance Michael diagnostic Michael we We advances served that addition and and differentiate therapies. over the business studies that and XXXX for Chief our development. today, of an to strength Biopharma to commercial appointed quarter and is Ralf added who responsible development momentum. strategy and having our value the our growth sales management, senior Biopharma lab are clinical forward and business we the positions with supporting, in ICON excited expertise I growth, track company from team to tests overseeing number our newly Officer. is of marketing here at like firms CGI's by project partnering support new the the levels of our his level of second to is believe immuno-oncology reaching to position gaining to trials managing taking industry help initiatives, and provide, solutions of recent year our and McCartney, channel X Biopharma me successfully To decades client-developing and efforts we Mike like business XXX created is partners regard, we to record look the

As recently remember, scope in as opportunities signed continue move begun expanding partnership XXXX, you and forward. to believe relationships a we ICON further our collaboration, with the create expansion agreement have of may we will which we these

I'm As was our building on report booking-to-billing remain always, of X.X. sizable a that toward focused And we second to quarter projects. future ratio XXXX pipeline pleased working

for clinical This $X.X the Discovery second on to The quarter and further contract support of the the million while and to an quarter note completed second to quarter against year. doing companies On of Biopharma him, our the elaborate CGI transformation our an reorganize financial our revenue dependent the company I financial pharmaceutical and biotech I and duration and the raise convertible oncology-focused front, made projects review XXXX, and million financing strategic a would fluctuate $X.X revenue in of Services in genomic business preclinical the for detail quarter. of institutional comparable in But Biopharma progress net of work $XXX,XXX. increase second as capital capabilities. to quarter compared of a our $X.X XXXX will briefly execution totaled $X turn on timing, XXXX, as second investor. of X% the reported Ralf establishing size have a additional compared well services of results over can second July million XXXX, with profitability market research we like in of bio and leader some before in as we're or testing, so of to to some revenue will during far in total execute path a million it to periods. in this Services plan XXXX. million are the insight and provide with we of organizations $X.X the

I $X.X for primarily XX% increase of quarter the contributed the $X margin XXXX, the approximately in XX% was of second Services to revenue by to XXXX, $X.X up an quarter and from studies Gross of the million number XXXX. from in approximately increased the or XXX, Discovery Services decreased second XXX% $XXX,XXX to or to million. same XXXX. driven The $X.X in compared clinical quarter in As of in QX of it compared period million million compared second by to second company quarter in million $X.X million profit XXX XXXX, supporting acquisition in the company's the quarter mentioned, of XXXX, revenue the vivoPharm. XXXX Clinical the second is trials of of $X.X

in selling XXXX, as professional net XX% or XXXX. for restricted quarter excluding a million, principally and compared the $XXX,XXX, million quarter second of in operating bad an activities, and about of were debt fees increase second financing quarter to $X.X the M&A in total of million an for our costs approximately an restructuring $X.X of during our recent increase to of expense increase of equivalents of for million or Our $XXX,XXX compared an XX, XXXX, loss March quarter share of expenses the share due $X.X related second second XXXX to the as increase $XXX,XXX per about totaled Cash and of $X.X $X.XX expenses $X.X was $X.X Net our cash of $XXX,XXX. of loss $X.XX cash XX, to million of June of million, per XXXX. XXXX

results, board, but we've we assist James be position past Ralf? this future. Dr. provide Development have the and we the point, company's over engaged direction. strategic President Brandt, very details as to we our process to turn with to adviser can't that, in the over in like discussions opportunities few I'd of I Lastly, the the additional XXXX Early weeks, near as Discovery in encouraged Services. & further strategic Raymond call to options us our and fourth quarter provide financial evaluating color for evaluated on the collaboration to a disclosed Ralf potential at in With a by any are several hope

Ralf Brandt

vivoPharm X you, It's became Thank since part CGI. Hello, been a of Jay. everyone. year

of reporting to note resulting results the in like I of half Compared Total able and to vivoPharm's for year XX%. quarters with by of XXXX from compared first number segment first in the fiscal period increasing business. XX% XXXX, contracts we would increase the this flow same in approximately to positive we time of today, the the X by without engagements a this have are per that have increased expectations X manage headcount. first to signed XX%, the successfully contract For exceeded grown complete new newly the service been financial for year. quarters reporting demand our value the cash contracts of in XXXX an

productivity efforts major our at bottom efficiency a increasing our on aimed emphasis line. improve placed have We further and to

and beyond. XXXX We expect to of through the this continue effort half second

our In generation of strategy, while of new United also have at boutique Europe our our increasing services meaningfully lead to grown channels our have capabilities. initiated in terms and and presence and marketing conferences improve we the marketing awareness States visibility

and As we moving and of works. growth synergistic pipeline both forward. sales generated of we business a working our several been in result our to in vivoPharm's preclinical Growth of as improvement to the half substantial immediate such momentum further with businesses. performance growth the line pipeline this, the of The increase discovery for and strong opportunity projects have strong number between of in projects the the Such the and in the several bottom achieving year projects discovery Biopharma second in Biopharma initiated a and crossover accelerated first and half well. are drive services XXXX discovery others toward able our have preclinical

Biopharma is support of XX a programs projects have that models include these offerings running expanded clinical projects specialized to highly the includes projects vivoPharm We and business. trials. that flow immuno-oncology expected into to with This space. total of X XX% IND are immuno-oncology our successfully in Services

business, toxicology first back that, the closing Jay? States, substantial we and and I turn across call to Europe growth and recorded over altogether. Australia safety time the would for have our to remarks. Jay With the For United like

John Roberts

past -- impact the believe new months like potential leader our taken will questions We're few execution you, a the to to that, We future updating number bring closer steps CGI the further that it transformation of performance. strategy you oncology leading believe Thank a as up look the Ralf. to a major and we We precision would and the of in company be a positively growth to to and what to in details have can transaction disclosed. new answers. space. relates as this about particularly holds, forward open future With I strategic excited being line

Operator

Wainwright. H.C. Ram [Operator first We'll Selvaraju Instructions]. to go at

Raghuram Selvaraju

these have basis works business this some I or provide or you for Unless it co-development still be might to of elaboration that, take with getting of a this the higher was, respect to is do that, for there to on that potentially involved may. that quarter-over-quarter we Ralf Ralf, drug some you down expenses on if test know principle? if a positioned and were, asked the business, Jay, of you the of the could And the be expect to you bulk question, to few before. aspire particularly And for then vivoPharm couple with point, of to to? we line a remainder behind the the in years, a you I in basically, developers more see the a specifically this is to So us had for if pursuant margin I quarters. better for vivoPharm, I've sometime portal you more Jay firstly, metric. secondly, that though guys upcoming do a model per secondly, Evotec restructuring sequential that of to some with questions involved, what expect X decline I kind can year? as way in should something a And crop think CGI up think as lines a provide And top might to the potentially if respect at shift side line, think, involved even in the wanted I and a revenue guys fact, couple this to

John Roberts

Great. Ram, you. thank

two. Let me he the then and and can -- I couple, take I'll to other it answer over first Ralf hand the can

Ram, relates there. to charges, about as we're halfway So it restructuring

it. to Just give guidance you kind little of a of bit around

end of And of the and be so course, into yet to work through September. there's, August done

job little earlier, what as done there surprises. I -- been through fairly we're really on complicated I is a efforts. a mentioned schedule, we're a of think comments from a I And in plan, perspective, have a on think, nice and has bit team my cost the of no set marching from

the with very to into be And as by that progress. we QX. with to come we'll so end the you it quarter report expectation the done we're And continue the will of pleased third

continue seeing the we we're pretty with relates being it sequential the Biopharma remain our As to we're and, I that essentially sequentially, to saw revenue new momentum even question, growth of obviously, signed. business contracts given kind think optimistic

the And think, meet again, that that discovery and plan in I full we're our year million, of so XXXX. we're that the lower part QX decline, that volume a of partially and was Service $X revenue good some $X.X business. I really planned, ongoing that I to think the think we of our services we'll to our that, although from, part vivoPharm given from anticipating that is sequentially an slight business unit And changes making that saw the And indication business, place where, there's a of driven in we strong QX, Clinical in for by the moving demand our for million offer.

business in So how again, of terms we remain is performing. optimistic very that

clinical you that we happen. to trial that Ralf, the already that from -- As and there would continue see we've doing. is and And in to I it can remainder know up. you'll But projects of we'll can Discovery be that Ralf drive his to that that I'll could we're We business, discovery vivo one identified relates drive think work attributable -- that see let our how comment, several move believe if can comments, great. Services into the directly that I pick the is

Ralf Brandt

question, actually. for the you Thank sure. Sure,

just As joining a of are I your which clearly projects, momentum the of CGI key my are field growing. short Services increasing CGI see of strategic of Evotec we for preclinical into quarter we Maybe business day a not question trends -- the in a we have to where number vivoPharm not. in for moment have the through before the vivoPharm in a aware that's be the studies a at model, we already funneling immuno-oncology a I'm we you'll of company, first Evotec and To the lead decision. CGI. lot in us Biopharma will is model, drug discussion second of of smaller compared presentation, field but that merger. amount development moment, mentioned from even started project an vivoPharm, CGI it, and discussed is the at We of the

So to we our development wants discussion of a company from as company. that major is the I this whether answer your needs think the diversion strategic or what question, see whether directional that

Raghuram Selvaraju

then quick it increased bad debt down? I -- should have follow-up, And anticipate expense start actually you that this yes. in quarter, a a great. just would just a Okay, going -- when The

John Roberts

Yes.

to climate its ASC that's ultimately on to in in revenue quite and calculates So records related work that's year. as hard work to impact we current the great current we'll That still and up it. make to continue know, We're it is cash it's made track and XXXX, we're and accounts of related a progress good is puts this receivable wrap question. continuing we've And our really the it. which The a XXXX to the different. at value way to to -- continue up course Under collection. going company all throughout said, XXX, really on continuing challenging directly our and some however, attributable record progress of

correlation. a much So there's closer

cancer, being terms many And I we our space, being company, That be think we'll other believe ability better through we unfortunately, in care. treated to said, least industry, what envision reimbursed. ultimately, terms as great providing create managed go build that away to that's face to challenges challenges challenge, how physicians relationships to we to to in improve -- companies a be of the service that's being I like move the nature don't terms of what -- it, the patients and through and that in try diagnostic of continue how with particular and better as the at in the that for that, manage I have of upon, monitor. the So it's don't difficult that, in we will efficiency challenges

Operator

Maxim to next Caroline Group. go We'll Palomeque of

Caroline Palomeque

wanted was for the just any this there just other partnerships. elaborate to immuno-oncology, having that as as you're seeing discussions trends might is that if can but any know upcoming? I if apologies on mentioned So I asked, you you're far in see trends you that be the partnerships

John Roberts

area, talk activities to we really our how And in business clear, discovery business development partnerships, driving as our Just Biopharma preclinical in be to and I when our in talk so and can that business you certainly about Clinical as about Caroline, we're certainly, some Services. CROs well to pharmaceutical partnerships a partnerships and that with there relationships of gain select meaningful have continued. companies. group working momentum continuing Those are well the with and companies take build great both both was we've some obviously, as been as able very biotechnology to good of

right in Biopharma the similarly, percentage business. we're same book as of have those area, immunotherapies. immunotherapy Ralf have large development our in reported, think kind we as of are development of pointed that momentum the our trend And then we out, I business of more you're our by around a within and more driven projects seeing being seeing we're and discovery

to trend we're working that And for expect hard. really continue. We

work we clients that We that to Biopharma, toward -- right as And projects as development I through partners our in anticipating from into believe, and Phase to as do, development. III. that we'll earned have later-stage we're position the and business the to therapies partner early-stage a Pharma therapies with similar a of move And Biotech the continue we the to follow those their they us make pipeline. number be continue discovery that continue has way have to

Operator

the I'll back conclude over turn session. closing to management question-and-answer conference And the remarks. that for does any

John Roberts

work you and for operator. you to on goals and all do the Okay. our hard We to Thank going continue progress we our updating really thank And are move to us meet joining to with plan company you, to continue forward. today.

So we and thank call. you next much, forward very look our to

Operator

thank And does for conclude participation. you your today's Again, that conference.

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