Good afternoon, and welcome to the bioAffinity Technologies Business Update Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your telephone keypad. To withdraw your question, please press star, then two. Please note, this event is being recorded. I would now like to turn the conference over to Julie Anne Overton, Director of Communications. Please go ahead.
Thank you. Good afternoon, everyone, and welcome to today's Conference C all to discuss bioAffinity Technologies' acquisition of the laboratory assets of Village Oaks Pathology Services. These assets are being acquired by a new wholly-owned subsidiary of bioAffinity Technologies, named Precision Pathology Laboratory Services, LLC. Please note that during today's call, bioAffinity Technologies management will be making forward-looking statements and that actual results may differ materially from those stated or implied by these forward-looking statements due to risks and uncertainties associated with the company's business. These risks and uncertainties are detailed in and are qualified by the cautionary statements contained in bioAffinity Technologies' press releases and SEC filings. Furthermore, this conference call contains time-sensitive information that is accurate only as of the date of the live broadcast, today, September 19th, 2023 .
bioAffinity Technologies undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances after the date of this conference call, except as required by law. Joining me on today's call are Maria Zannes , President and Chief Executive Officer of bioAffinity Technologies, and Dr. Roby Joyce, Founder of Village Oaks Pathology Services and the Medical Director of the newly formed Precision Pathology Laboratory Services. Joining us for the Q&A portion of the call will be Michael Dougherty, bioAffinity's CFO. With that, I'd now like to turn the call over to Maria Zannes . Maria?
Thank you, Julie Anne , and thank you to our listeners who are joining us today. Today, I have some exciting and very important news to share with you regarding how we are strengthening the strategic direction of our company. As you read in the morning's press release, the main topic of today's business update call is our acquisition of the laboratory assets of Village Oaks Pathology Services. This is a CAP/CLIA-accredited clinical laboratory that for 16 years has provided exceptional pathology services in Texas and has the ability to expand its services nationwide. Village Oaks has been conducting business under the name Precision Pathology Services, and it's no coincidence that our newly established subsidiary shares a similar name to take advantage of Precision's reputation for excellence.
Many of you on the call today will recognize that it is Precision Pathology that developed CyPath Lung into a laboratory-developed test for sale to physicians. In fact, we've been working side by side with Dr. Joyce and his highly skilled team for the past 5 years. These are the professionals who, with Dr. Joyce, will join our team have joined our team at bioAffinity Technologies. CyPath Lung, of course, is our non-invasive and accurate test, a test built on flow cytometric platform and enhanced by automated analysis, a test to detect early-stage lung cancer. Dr. Roby Joyce, who joins me today on this call, founded Village Oaks in 2007, and will continue his work as the Medical Director of the newly formed Precision Pathology Laboratory Services. He also will join us as a member of bioAffinity Technologies' Board of Directors.
Together, we'll discuss the transaction, why bioAffinity made this decision, and what this means for our future. We will then conclude with a Q&A session. bioAffinity Technologies is dedicated to researching and commercializing diagnostic technologies. We are keenly focused on CyPath Lung, a non-invasive test that allows patients to collect their samples at home and physicians to receive actionable results that assist with the clinical decision-making for patients they suspect have lung cancer. Lung cancer is the leading cancer killer, largely due to its diagnosis in late stage. But as Dr. Joyce can confirm, detecting and treating lung cancer at early stage changes the prognosis, offering patients longer, healthier lives. CyPath Lung has shown a high 92% sensitivity in detecting lung cancer in people with small pulmonary nodules.
Our test is equally impressive for those suspected of lung cancer who do not have the disease, showing 87% specificity in confirming that someone does not have lung cancer when indeed they are cancer-free. With our test, we have the ability to save many people from unnecessary and expensive invasive procedures. In all, CyPath Lung can have a significant positive impact in the early detection of lung cancer. Today's announcement not only strengthens that position by integrating all operational aspects of CyPath Lung under one corporate roof, but it also internalizes the resources needed to more quickly bring to market additional innovative and non-invasive tests that bioAffinity Technologies is developing. We continue test marketing CyPath Lung. Our efforts will inform our nationwide rollout, and our work to date has generated valuable commercial insights. Perhaps most important, physicians appreciate the confidence we bring to the diagnostic process.
Our more limited beta marketing approach allows us to ensure that all aspects of the product are efficient, effective, and scalable. From marketing to physician onboarding and sales, to patient sample collection and sample, and sample return, to logistics and processing, and finally, to accurate data analysis and timely patient results to physicians. We are also finalizing new product branding and market positioning to accelerate both awareness and adoption. This acquisition equips us with the resources required to scale up and to optimize our business. By owning the pathology laboratory, bioAffinity Technologies can better focus resources on CyPath Lung as orders increase. The acquisition also supports our upcoming FDA pivotal trial by internalizing, accessioning, processing, analysis, and coordination with our CRO that will help us run the 1,800-patient study we anticipate will begin Q1 of 2024.
This tighter integration also fosters more effective R&D advancements, given that the diagnostic development, the validation process, and commercialization can occur under one unified operational structure. This transaction is grounded in our commitment to de-risk our operations, to drive recurring revenues, and to take the reins of our future. A primary motivation of this acquisition is to command and control our growth. Vertical integration enhances our commercial strategy by consolidating and integrating various, various stages of the diagnostic process, from sample collection to testing services, to analysis and reporting the results. From a financial perspective, by bringing the pathology laboratory in-house, bioAffinity benefits from financial leverage, as revenues that were previously split between the two entities will be consolidated as they are now entirely retained by bioAffinity.
This means we will have better control over pricing, which can have positive implications for both competitiveness in the market and for profit margins. Precision Pathology had net revenue of $6.9 million in 2022, and we see continued growth in 2023. During the six-month period ending June 30th, 2023, net revenues increased 12.5% versus the same period in the prior year. Furthermore, Precision Pathology enhances bioAffinity's value proposition to our clients. By offering a comprehensive suite of services, we can serve as a one-stop solution with the intent of drawing more customers and further differentiating ourselves in the marketplace. bioAffinity Technologies and Precision Pathology, as I said, have worked together for a while, in fact, for five years. We've had tremendous respect for the work that Dr.
Joyce and his team accomplish day in and day out by ensuring that patients and their physicians receive the highest quality of healthcare. Dr. Joyce likes to say that every sample received by his laboratory is treated as if it came from a loved one. I can attest to that, and I can attest to the fact that the men and women who work at bioAffinity care just as deeply about the work they do. We have had the advantage of working side by side for some time, and we've structured the acquisition to ensure a seamless transition and integration with a focus on long-term, sustainable, and profitable growth. From an operations perspective, we expect that integration will be very straightforward as this is a bolt-on complementary business with minimal overlap in staff and functions, and existing facilities that serve the needs of the combined company very well.
Detailed financials will be shared in our upcoming investor relations materials and future quarterly earnings reports. But in summary, we acquired Precision Pathology for $3.5 million, including $2.5 million in cash that was paid upon signing and 1 million in bioAffinity common stock. Our primary focus now is a smooth integration and ensuring that both teams come together with purpose. We're implementing a comprehensive integration plan, which will take place over the next year. Major milestones and updates will be shared with our stakeholders as we move forward. Before I turn the call over to Dr. Joyce, let me provide a bit of background on him.
I've worked with him and his skilled team for a while as we developed CyPath Lung into a commercial test, and I'm proud to say I believe I know him well, and I can attest to his dedication to his patients, to his employees, and to his family. Dr. Joyce is board-certified in anatomic and clinical pathology by the American Board of Pathology, and he is a fellow in the College of American Pathologists. He is also board-certified in neurology by the American Board of Psychiatry and Neurology, and he is a fellow in the American Academy of Neurology. In addition to his work at Precision, he has served at Northeast Methodist Hospital in San Antonio, including being chairman of the board of trustees and chief of staff of the Methodist Healthcare System. Dr.
Joyce received his medical degree from Louisiana State University School of Medicine in New Orleans. He completed an internal medicine internship at Fitzsimons Army Medical Center in Denver, his residency in neurology at the Letterman Army Medical Center in San Francisco, and his residency in pathology at Brooke Army Medical Center in San Antonio. Dr. Joyce is also a retired Army colonel, and his relationships will be important assets with our Department of Defense customers, where we have two ongoing studies. We welcome Dr. Joyce to the bioAffinity board of directors as part of this acquisition. In addition, he will serve as Medical Director for Precision Pathology Laboratory Services.
His background is an ideal fit for his new responsibilities because they are multifaceted, blending clinical expertise with executive leadership to ensure that our tools and services maintain the highest standard of clinical excellence, safety, and efficacy. Throughout a career in pathology that spans more than 40 years, he has been a highly regarded speaker in medical and scientific conferences, has held leadership roles on dozens of professional organizations and committees, and he has served as a lead author or co-author on numerous scientific articles. I hold Dr. Joyce in the highest regard for his technical skills, for his scientific knowledge, and for his integrity. Plus, I can tell you he's a heck of a nice guy. The entire team at bioAffinity has enjoyed an extremely productive and collaborative relationship with our new colleagues at Precision Pathology.
We share the broad mission of advancing the practice of medicine to help patients in need, and we are committed to the highest level of customer service and product quality. With that, I'll turn the call over to Dr. Joyce.
Thank you, Maria, for those kind words. I'm very excited about the future of bioAffinity, and I'm delighted to join the board of directors and offer my expertise as Medical Director. We have worked side by side with Maria and her team for five years, as she alluded to, to bring CyPath Lung to market, and I'm delighted by the reactions and comments we're receiving from the medical community. I also have been consistently impressed by bioAffinity's scientific team and management as their ability to utilize tools such as artificial intelligence, automated analysis of sputum samples, which brings a higher level of innovation to the diagnostics industry. I'm particularly excited about CyPath Lung for two reasons. First, my father died of metastatic lung cancer, so this is personal to me.
Secondly, I know that lung cancer is curable when detected early and before it has spread, and CyPath Lung offers early detection of lung cancer. I also know that by combining our expertise and industry relationships, we are now better positioned to expand the CyPath Lung test launch into additional markets, increase utilization, and apply our knowledge to develop new tests. In addition to CyPath Lung, our lab offers a wide range of services to physicians practicing in outpatient clinics and inpatient hospital settings. We also provide COVID-19 and influenza testing, anatomical pathology, including a very large menu of morphological stains, particularly for research organizations. We perform DNA extractions, sexually transmitted disease testing, and testing for women's and men's health, as well as literally thousands of skin biopsies for dermatologists.
We currently serve approximately 155 different customer sites, including seven central Texas hospitals and nearly 600 independently practicing physicians. We have grown steadily since I founded the company 16 years ago, reaching revenue last year of about $6.9 million, as Maria mentioned. As part of bioAffinity, we are better positioned to broaden our service offering and expand our client base. With our enhanced resources, our customers can anticipate access to an even wider range of diagnostic offerings. Let me add to what Maria said about the collaborative working relationship and the strategic fit of our two businesses. From a competitive perspective, our combined scientific, medical, and business expertise positions us to advance additional diagnostic platforms that can improve healthcare across a wide spectrum of medical practices.
From the perspective of corporate culture, our two organizations are extremely well-matched. We are passionate about what we do and are committed to making a difference while rising to the challenges each day presents. Finally, but importantly, I want to publicly thank the fine men and women who work at Precision Pathology Laboratory Services, who have made our lab a success and who will help take us in this coalition to an even greater height. I thank you for your attention, and now I'll turn the call back over to my friend, Maria.
Thank you, Dr. Joyce. In conclusion, I want to just sum up the acquisition that we're announcing today and what it represents. It really is a commitment to excellence and to leadership in the diagnostic sector. For bioAffinity, the acquisition has four primary benefits. First, we now have greater control over CyPath Lung and of our future. The acquisition allows us to consolidate revenues from our tests and gives us greater support for our FDA pivotal trials and additional development. Our R&D activities can be accelerated, and this will expand our product portfolio and further de-risk our company. We now have a broader market presence and the opportunity to build upon a reputation for excellence that's shared by both companies. Also, we immediately strengthen our portfolio of services and gain 54 talented colleagues, including, of course, Dr. Joyce.
With that overview, I'd like to open the floor up for a few questions. Operator?
We will now begin the question and answer session. To ask a question, you may press star, then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star, then two. At this time, we will pause momentarily to assemble our roster. Our first question is from Steve Silver with Argus Research. Please go ahead.
Thanks, operator, and congratulations on the strategic acquisition. I was hoping you could provide a little color on the operating expenses assumptions we should be thinking about over the next few quarters, as you begin to plan for the expanded CyPath Lung launch. As well as your current thinking on the capital runway, given the $2 million payment as part of the acquisition, and then just the shift that it brings to from the royalty-based structure to full ownership of the staff in the lab, as well as some of the initiatives that you mentioned in terms of the pivotal trial starting in next year, as well as the expanded R&D opportunities that come with the acquisition. So, just your current thoughts in thinking about the capital environment.
Yeah. So this is Mike Dougherty, the CFO for bioAffinity. In short, we don't believe that this acquisition of Precision will affect the cash burn rate of bioAffinity consolidation. So we will be taking advantage of the capital market in the near future as we go national on commercialization and start the pivotal FDA trial. Our cash burn continues to be, and will continue to be, at the present time, $1.5 million a quarter. So we will need, we will be looking to take advantage of the capital market in the near term.
Great. And, the prepared remarks made it sound like there'd be the opportunity to streamline the pivotal trial once it begins next year. Obviously, it's going to be a multi-year trial, but, is there any material benefit to the timeline that we could start thinking about in terms of the execution of this, of the pivotal trial?
We will be going to FDA shortly with a pre-submission with our design. We have the protocol and the design of the trial done, and we look to open sites first quarter of next year. We're also working, not surprisingly, with the active military and the VA, two partners that we've had in previous trials. One, in particular, with the military, the active military, now the DoD, has two smaller trials that we've undertaken with them, and I think that will help us a good deal with the pivotal trial. One, in getting the volunteers, the participants, and two, in getting a diverse group of individuals that's needed for that larger trial.
Great. Thank you for the additional color, and congratulations again.
Thank you very much, Steve.
The next question is from Aaron Thomason, a private investor. Please go ahead.
Thank you. First of all, I just want to say congratulations to Dr. Joyce. I am personally thrilled that you're joining the company. I've seen you participate on the introduction to CyPath videos and some other materials, and your expertise that you bring to the company, I think, is an asset, a huge asset. My question is, obviously you had a choice, you know, to keep your company private or to join bioAffinity. And you gave some background about the advantages of combining talents, but this really seems like a rave endorsement of bioAffinity for you to join. And I'm curious about why you think your combined efforts will be successful.
First of all, thank you for your kind comments, Aaron. It's the people. The people make any organization and the culture of the company. There was such a perfect match between the culture of the company, bioAffinity, and our company. I am a very much loyal individual, particularly to my employees. I had numerous other offers to purchase my laboratory, but none of the other companies, although some of them were really great companies, none of them had the culture or nor did I have the familiarity of working with any of them. To me, this was just a no-brainer, if you pardon the expression, from a neurologist. Yeah, this made perfect sense to me, particularly after we'd worked together for five years.
I mean, I know this company, they know me, and it's just been so collegial, even during difficult times. It's really hard to bring a test, a new procedure as a laboratory-developed test, and even through those rough, growing pains, everyone pulled together, and we got it done, so. But that's a great question. Thank you.
Thank you.
This is Maria, and I just have to say, we're very pleased that Dr. Joyce was willing to work with us from the very beginning. And we just can't be happier that he is now our partner, and now more than a partner, as part of bioAffinity. I very much look forward to working with him internally. He is, he's here. He couldn't be more integrated into the company. He's a board member. He's the medical director of Precision. He certainly will help us also with bioAffinity on grander things. So thank you.
I have a follow-up question. So I'm curious, so you all mentioned earlier that it should allow you to expand more rapidly, to be able to do the national rollout. How will this acquisition really do that? Like, how does it allow you to, I'm guessing you're gonna have to have at least several regional labs, right, to in order to do a national rollout?
So Precision Pathology has the ability to scale, and the beauty of CyPath Lung is that it can accept samples from all over the country into one centralized laboratory. And as you can understand, there's economies of scale with that. One of the work that we've done with Dr. Joyce and his team over the last year, as we've been commercial, is to really hone in on and make sure that we have a sessioning and onboarding and work with the physicians done just to a T.
I think that that is an important part of working with Precision, is its scalability, and its workforce that has already been trained, and the fact that we have the processes in place, from the very, you know, the very first discussion with a physician to the fact, to the end result, where he gets the results for his patient. I'm, we don't have plans for acquisition of any additional clinical laboratories at this time. We do have plans to grow.
Okay. If I can, one more question. Dr. Joyce mentioned the $6.9 in revenue that Precision Pathology brings in. I'm guessing that gets added to the books of bioAffinity, right?
That is correct.
Okay.
In future, as we mentioned earlier, too, as CyPath Lung grows and commercializes nationally, we'll now be able to consolidate 100% of that revenue, whereas before, we split that evenly with Precision.
Right. And I believe the Centers for Medicare and Medicaid Services, any day now, should publish what your reimbursement rate is starting October first, so.
Yes. So I'm glad you brought that up. So we do have, and we did receive from the American Medical Association, the AMA, a code that was specific for CyPath Lung. Very shortly thereafter, the advisory board of the CMS, of the Centers for Medicare and Medicaid Services, reviewed and proposed a fee, which at this point, I don't. I'm not able to give, but very shortly, we're hoping in the next even week that CMS will come out with that fee, and move forward. But we do have and we're pleased with what was advised. We do have, as of October first, the ability to use that code specific for CyPath Lung, which we'll do.
Awesome. Thank you.
Thank you.
Again, if you have a question, please press star, then one. The next question is from Steven Cantor with SAC Consulting. Please go ahead.
Thank you. Congratulations, and I've had the pleasure of doing a quick walk through the pathology labs a couple of years back, and definitely I felt the passion and dedication and expertise of the people. So this is a wonderful acquisition. So my question is: considering the amount of cash that was paid, $2.5 million, and the $1.5 million quarterly burn, and the anticipated consolidated financials, which quarter does the company project it will need additional capital to move forward?
Yeah, I would project third quarter of 2024.
Got it. So the FDA clinical trial is projected to start in the first quarter, so the company will gather data prior to needing to raise additional capital. Is that the case also, Michael?
We intend, we intend to begin the, this is Maria, obviously not Michael. We, we intend-
Yep.
to open our trial in first quarter of next year and take advantage of the markets as we can. We can't give a specific date, obviously.
Right. But you anticipate having some data before you go into the markets, right?
No, the trial itself will be a 2-year-
There won't be data released until the end of that trial, it's a prospective trial.
Right. No, I just meant that the company will have collected some data prior to going into the. The clinical trial part of collecting data will start prior to raising capital. That's what I wanted to understand.
Yeah, I appreciate that. I think I'm getting a little confused by the idea of collecting data. We will enroll patients, perhaps that's the way-
Yep, got it. Okay.
Open enroll patients.
Yep, that's what I was looking for.
Yeah.
Thank you, and congrats-
Okay.
Congratulations again on the acquisition.
Thank you very much.
Thank you.
Ms. Overton, I understand you have a pre-submitted question.
Yes. Thank you, operator. We did get a question earlier. Could you provide more commentary on where you expect to focus the R&D efforts, including specific tests and perhaps development timetables to go with that?
Surely. I'll take that, and I'm going to turn to Dr. Joyce as well, as we get into what we're looking at. You know, we have a very robust diagnostic platform with CyPath Lung, particularly looking at tests for lung diseases, and we're looking to expand the diagnostic platform, probably first with COPD, which we are now conducting research. We look to developing a test for COPD, similar in design to what we do with CyPath Lung, in the sense that it will be flow cytometric, that we will have automated analysis, and that we will be using sputum and collection in a similar way. That's very exciting to us, and we look, we intend, late quarter of next year to be doing some smaller clinical trials or proof of concept trials with the test as designed.
We're also looking at, and working towards a test that would be a complement to bronchoscopy. Again, taking advantage of our expertise and our platform that we use with CyPath Lung, and that's also looking at, of course, asthma would be the third test there that we would be interested in pursuing. I want to say that our research to develop these tests right now has begun with the active military, with two small trials with the Brooke Army Medical Center here that is helping us both with bronchoscopy and with COPD. They're also looking at and working with us to advance CyPath Lung with the military, with the active military and the Department of Defense. And so that's a very important market for us. But Dr.
Joyce, you can talk a little bit about COPD and asthma and respiratory. That's something you
Thank you, Maria. One of the first things that popped in my head when I first started talking to Maria and her team in their research lab at UT Health Science Center, it's, or UTSA, was, gosh, this would be great to use for COPD and asthma differentiation, because when I used to practice general medicine, you would think in medical school, you're told that COPD is one disease, asthma is an entirely different disease, and they're easy to differentiate. Well, that's not the case in clinical practice. It's very difficult because some of the symptoms overlap. It's really interesting. Just recently, there was what was called the CHAIN Study. It stands for something that's irrelevant, of 8,831 patients, and of those, 15%, and they were both mixed asthma or COPD patients.
15% of the patients had what was called the asthma-COPD, excuse me, asthma chronic obstructive pulmonary disease, overlap syndrome. So what we've been seeing clinically was very accurate. There are patients that have symptoms of both, but they're two entirely different diseases. Allergies trigger asthma. COPD is due to damage to lung tissue by smoking or inhaling pollutants. So, this will be very useful for a clinician trying to decide, well, which arm of the treatment algorithm shall I take? Is this COPD or is this asthma, or is this, is this the overlap? So I think, this will be another dilemma for pulmonologists, that this test will, will, really help them decide on treatment.
Thank you.
This concludes our question and answer session. I would like to turn the conference back over to Maria Zannes for any closing remarks.
Thank you. I want to thank everyone for joining the call today, and thank you, especially those who asked questions. We very much appreciate it. We are, as you can tell, all very excited about the new chapter, and we're very confident in the bright future that lies ahead for bioAffinity Technologies and its subsidiary, Precision Pathology Laboratory Services. We'll be hosting another update in a few months, to discuss our process and our advancements, so stay tuned. And once again, I want to thank you for your time and your support.
The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.