Earnings Call: Q2 2021

Aug 9, 2021

Good day, and welcome to the Fulgent Genetics 2Q 'twenty one Earnings Conference Call. At this time, I would like to turn conference over to Nicole Borsha with Investor Relations. Please go ahead. Great. Thanks. Good afternoon, and welcome to the Fulgent Genetics call over to the Q2 2021 Financial Results Conference Call. On the call today are Ming Hsieh, Chief Executive Officer Paul Kim, Chief Financial Officer Doctor. Larry Weiss, call over to Mr. President and Brandon Perfews, the Company's Chief Commercial Officer. The Company's press release discussing its financial results is available in the Investor Relations call over to the operator's website, fulgentgenetics, ir. Fulgentgenetics.com. An audio replay of this call will be available shortly after the call concludes. Call over to Mr. President. Please visit the Investor Relations section of the company's website to access the audio replay. Management's prepared remarks and answers to your questions on today's call will contain forward looking statements. Call over to Mr. President. Thank you, Mr. Chairman. Thank you, Mr. Chairman. Thank you, Mr. Chairman. Thank you, Mr. Chairman. Thank you, Mr. Chairman. Thank you, Mr. Chairman. Good morning, everyone. The call over to the operator to discuss any forward looking statements are subject to risks, uncertainties and changes in circumstances that may cause actual results call over to the operator to discuss the financial results and the financial results. Call over to management's remarks today with the understanding that actual events, including the company's actual future results, may be materially different than what is described in or implied by these forward looking statements. Please review the more detailed discussions related to these forward looking statements, including the discussions of some risk the call over to the operator to discuss the financial results of the company's filings with the Securities and Exchange Commission, call over to Mr. Chairman, including the previously filed 10 ks for the year ended December 31, 2020, which is available in the company's Investor Relations website. Call over to management's prepared remarks, including discussions of earnings and earnings per share, contains financial measures not prepared in accordance with accounting principles generally accepted in the United States call over to GAAP. Management has presented these non GAAP financial measures because it believes they may be useful to investors for various reasons, conference over to the company's financial measures prepared in accordance with GAAP. Please see the company's press release call back to the operator for the Q2 of 2021 for more information, including the description of how the company calculates non GAAP income call over to our financial results and a reconciliation of these financial metrics to income and income per share to mostly most directly comparable GAAP financial metrics. Call over to Ming. Thank you very much, Nicole. Call over to Mr. President. Good afternoon, and thank you for joining our call today to discuss our Q2 2020. The call over to Mr. President. We have a number of exciting items to highlight on our call. I'm pleased call to be joined by our recently appointed Chief Medical Officer, Doctor. Larry Weiss, who will present in call over to Steve. Thank you, Steve. Thank you, Steve. Thank you, Steve. Thank you, Steve. Thank you, Steve. Thank you, Steve. Thank you, Steve. Thank you, Steve. Thank you, Steve. Thank you, Steve. Thank you, Steve. Thank you, Steve. Thank you, Steve. Thank you, Steve. Thank you, Steve. The call over to that end. We had 2 very exciting strategic announcements today the call over to the CXI Laboratories and the commercial partnership with Helio Health, the call over to you, which we will cover more in detail in a few minutes. I'm also joined again by our Chief Commercial Officer, call over to Brandon Perkins, who will cover updates to our go to market strategy call over to Mr. Chairman, and our CFO, Paul Kin, who will discuss our financial results and outlook in detail. The call over to you. Taking a look at our 2nd quarter results, revenue totaled at 154,000,000 call over 7 90% compared to the Q2 of 2020 the call back to the call back to the the call over to the Q2, almost 9 times the volume call over to the Q2 last year. The sole driver of revenue and the volume shortfall in the quarter call back to the Q1 of 2019. The call over to you. This Dynexx was a broad based process testing market and not specific to Forgent, the call back to the operator. Given the accelerated pace of vaccination and the decreasing need for testing across the country, the call over to you. We fully expect to see the slowdown in the test demand, but the drop was somehow faster than anticipated. The call over to Tom. That being said, our NGS revenue, which we now call core revenue, exceeded our expectation call over to the operator. In the Q2, we grew 296% year over year to $25,700,000 the call over in detail the call over to the vast majority of our core revenue was not related to COVID-nineteen the call over to Tasty. We also remain very profitable in the quarter, generating 2.59 the dollars per share in the GAAP EPS and $76,100,000 in operating cash flow. The call over to Mr. While we are disappointed that our top line results fall short of our the call over to our expectations in this quarter. We are looking at our opportunities beyond the COVID call over to our Q1 and NGS testing. The call over to Mr. President. We remain well positioned to capture demand for the COVID testing as the market dictates. The call over to David. That being said, we are focused on expanding our capabilities and commercialization on the other area of genomic call over to Tessie. We believe our response to the COVID-nineteen pandemic has demonstrated our call over to the operator to scale and execute with a high level of precision and excellence, the call over to you. And we hope to translate these capabilities into other areas of genomic testing with our core business. The call over to the CSLA Laboratory. The acquisition of CSI Laboratory is a prime example of how we call over to our strategic plan to strategically expand our business for long term sustainable growth. With the acquisition of CSI Laboratory, the call over to our financial results. We are excited to add a diverse menu of oncology testing and analytical diagnostic solutions call over to our menu. CSI has operation in Georgia and Florida and will add approximately 400 unique tests to our already expensive NGS test menu. The call over to you. In addition, NGS CSI has very strong relationship on the reimbursement front, call over to our menu to cover 160,000,000 incremental covered lives across United States. The call over to Doctor. Weisz on board to manage and oversee these operations, call over to leverage his expertise in conjunction with our next generation sequencing platform call over to the operator and the best in class execution capability to scale our presence in this market. The call over to Doctor. Weisz will discuss this opportunity in more detail shortly. Another exciting announcement the conference over to the operator. Thank you, call over to Mr. An emerging liquid biopsy company focuses on early detection of cancer. With this partnership, call over to Mr. President. We are gaining a foothold in the early detection liquid biopsy space in both in the U. S. And China call over to the operator. We will maintain exclusive commercial rights to Hill's test distribution in North America, the call over to Mr. President, which could translate into a very large opportunity for us going forward. And finally, call over to Mr. Chairman. We announced today that we have been completing the acquisition of our JV in China, the call over to Mr. Chen. Taking majority ownership of the entity as discussed in the past, this JV gave us direct access the call over to the operator. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Our next question comes from the line of the call over to the operator. And same operation excellence of our labs in the U. S, call over to Mr. President. We are excited about this opportunity to expand our presence in China in the years ahead. The call over to Mr. President. I'm very excited about this investment and opportunities we they are creating for Fulgent call over to Mr. President. In the post pandemic world, our value have remained unchanged. We continue to be disciplined in our call over to our customers and partners. We look forward to what the future the call back to Mr. Weisz call to further discuss our initiative on the molecular diagnostics and oncology front conference over to Mr. President. Otherwise? Thank you, Ming. I am very pleased to be here today and excited to be a part of the expanding Fulgent team. The call over to you. I joined Folgiant because I saw what they were doing in MGS and COVID testing and was very impressed with their operational strength call over to our Chief Financial Officer and Chief Executive Officer. With no fluke that Fulgent was able to pivot from a germline NGS company to rapidly become the call over to the operator. Among the leaders in COVID testing. And when you combine Folgen's operational strengths with its leadership in NGS, it makes for a very powerful combination. The call over to you. I believe that this combination will allow Fulgent to quickly transition to become a leader in somatic oncologic testing. The Somatic mutation testing is different from germline testing in several aspects, but the processes are essentially the same call over to you. I'm excited to be taking ownership of the operations and integration of CSI Labs into the Fulgent call back to you. CSI gives Fulgent an anchor into cancer testing as it combines a strong platform of traditional cancer testing with superb call over to customer service. With this acquisition, we plan to leverage CSI's base of cancer testing and access to specimens to rapidly develop a West Coast state of the art cancer testing laboratory. This new lab will complement CSI's South call over to the East location and quickly establish a national presence for Fulgent's oncologic testing platform. The call over to Steve. I'm also very excited about the strategic partnership we announced with Healio Health. Our relationship with Healio gives us the call over to the operator. Thank you, Steve. Thank you, Steve. Thank you, Steve. Thank you, Steve. Thank you, Steve. Thank you, Steve. Thank you, Steve. Thank you, Steve. Thank you, Steve. Thank you, Steve. Thank you, Steve. Thank you, Steve. Thank you, Steve. Thank you, Steve. Good morning, Steve. Good morning, everyone. The call over to you. My past experience at NeoGenomics taught me the value of providing a full range of testing options for oncologists call back to the line of Brian. Thank you, Brian. Thank you, Brian. Thank you, Brian. Thank you, Brian. Thank you, Brian. Thank you, Brian. Thank you, Brian. Thank you, Brian. Thank you, Brian. Thank you, Brian. Thank you, Brian. Thank you, Brian. Thank you, Brian. Thank you, Brian. Thank you, Brian. Thank you, Brian. Good morning, everyone. Good morning, everyone. The call over to the operator. We hope to differentiate ourselves relative to companies who provide primarily NGS testing without expertise in other areas the call over to the operator for providing optimal NGS services. With the acquisition of CSI, Fulgent is well positioned queue on our goal of developing a complete package of cancer testing solutions on a national level with particular expertise in NGS the call over to the operator. Thank you, Steve. I am very excited about this opportunity and look forward to developing Fulgent's oncologic testing program in the years ahead. I'll now turn the call over to Brandon Perfuse, our Chief Commercial Officer. Brandon? The call over to Larry. While the dramatic improvement in the pandemic led to lower than expected COVID-nineteen, especially in June, the call over to our operator for our country to see progress in fighting the pandemic. At the same time, much of this progress is being threatened by the spread of the highly contagious Delta variant. Call over to you. While COVID-nineteen testing came in under expectations in the Q2, our core business shattered records in terms of cases, accessions and total revenue. Call over to the operator for the call. For us to be able to handle the incredible amount of COVID-nineteen testing volume that we have with no turnaround time or quality issues, the call over to the operator or off the shelf. This level of execution gives us tremendous confidence in our ability to continue to the call over to the operator. New opportunities created by more competitive pricing, continued expansion of our commercial partnerships for both sequencing as a service and our core testing menu the call over to the operator. In the quarter, we had core business orders from over 400 unique institutions call back to the call. And many of these clients are not using Fulgent for our full services rather some of our unique tests. Therefore, we see this as a significant call over to the operator for further client penetration and will be a focus as we expand the sales team. As Ming mentioned, call over to you. We made our first ever acquisition with the purchase of CSI Laboratories. CSI offers 400 unique tests in molecular oncology, flow cytometry, FISH, call over to Cytogenetics and Histology. We believe the combination of Fulgent and CSI creates an industry first by being able to offer traditional cancer tests, the NGS cancer test such as liquid biopsy and MRD, hereditary cancer test and comprehensive test menus for rare disease and adult genetics. The call over to Paul. By combining Fulgent's NGS cancer test with CSI's testing platform, we become a true one stop shop for oncologists and pathologists. The call over to Steve. From a commercial perspective, our focus will be on expanding CSI's reach beyond the Southeast of the United States the call over to our call sales team. We plan to dramatically expand the sales team and build out a specialized oncology testing lab on the West Coast call over to our Chief Financial Officer to establish a national footprint for CSI. We believe CSI's menu, turnaround time, quality and medical professionals Combined with Fulgent's technology platform, operational excellence and presence in Houston and Los Angeles is poised to make a disruptive impact in this market, Which historically has been dominated by only a few companies. One other area that the acquisition of CSI really benefits Fulgent is with managed care contracts. The call over to our shareholders. We have only recently begun putting more emphasis on securing these contracts to be successful with institutions and other cash pay clients. The call over to our managed care team has been successful in expanding our coverage network and the acquisition of CSI brings our reach to over 180,000,000 call over to Covered Lives in Network. This essentially opens a new market for Fulgent as we now have we now can more effectively sell into those accounts that require insurance billing, be it hospitals, private clinics, OBGYN, maternal fetal medicine, neurologists and many other subspecialties. The call on. And as we onboard new sales team members, they will be able to sell without the limitation of minimal insurance call over to the Q1 of 2019. In addition to the acquisition of CSI, Fulgent has made a $20,000,000 investment in HelioHealth, the call over to an emerging liquid biopsy company for early cancer detection. This investment gives Fulgent an exclusive license to Healo Yield's commercial LDT products, call over to you, which are currently in clinical development. The first product we plan to bring to market will be a liquid biopsy test for liver cancer. The This is a large market considering liver cancer is projected to be the 3rd leading cause of cancer death by 2,030. The It is the 6th most commonly diagnosed cancer in the world and the 4th leading cause of cancer death in the world. In addition, there has been a 1.5 fold increase in liver the call over to the operator for questions. While the existing guidelines for surveillance of liver cancer recommend an ultrasound every 6 months, the Ultrasounds lack the sensitivity and is dependent on the size and location of the lesion, skill and training of the operator, call back to the call to the call to the operator. We believe Healio's new approach will be a paradigm shift in the way liver cancer is diagnosed and monitored. Multiple studies have confirmed the survival benefit of liver cancer screening in cirrhotic population and surveillance exciting news test to market with an initial launch goal of later this year. In addition to our launch effort, Helio has an ongoing clinical study in the United States the call over to the operator for questions. Thank you, Steve. Thank you, Steve. Thank you, Steve. Good morning, everyone. The call over to the operator. In addition to liver cancer, Fulgent and Helio will develop early cancer screening for other cancers, including using Helio's methylation based technologies call over to further expand our capabilities in liquid biopsy and oncology testing. Switching to COVID-nineteen, the Testing decreased from the highs we saw in the Q1. However, it is still a very meaningful revenue contributor to Fulgent call over to the operator for the call. This decision came after New York City put the fall semester out for competitive bid. Call over to our call to keep New York City Schools safe. In addition to New York City Schools, we are securing meaningful wins on the West Coast call back to school testing. We have also seen some states mandate testing for health care and government workers, call back to the call back to the call. While we saw a significant improvement in COVID-nineteen during the Q2, the call over to Steve. There is still much uncertainty, especially around the rapid emergence of the Delta variant. As of August 6, the 7 day average of new cases in the United States was call over to 106,000 compared to 55,000 1 year ago and the daily new cases recently have been as high as 168,000, call over to the November time period. In the recent weeks, we have seen a significant increase in our testing volume and positivity rate call over to our operator. During the Q2, we saw positivity rates dip as low as 0.5%. The However, in the recent days, we have seen that as high as 8%. We are monitoring the situation as closely as we can and we call over to the operator for the remainder of 2021. We look forward to helping local and state agencies, call over to colleges, K-twelve schools and companies with testing where we can as well as contributing meaningfully to the CDC's efforts the call over to our Q2 2019 guidance. It continues to be a dynamic time at Fulgent and we are very excited about the trajectory of our business. The With CSI and Helio transactions complete, we have dramatically broadened the footprint and addressable market of Fulgent And we look forward to continuing to invest resources to expand our capabilities and fuel long term growth and success. The call over to Paul Kim, our Chief Financial Officer. Paul? Thanks, Brandon. Call over to you. Revenue in the Q2 totaled $154,000,000 an increase of 7 90% compared to the Q2 of 2020. Call over to Billable test in the quarter totaled almost $1,600,000 growing almost 9 times the volume of Q2 last year. While the majority of this revenue was released to COVID-nineteen the call over to our core business. Our core revenue, which we previously called NGS revenue, call over to the operator. It was up 2 96% year over year and 54% decline. As Ming and Brandon mentioned, We were disappointed that our overall revenues came in below our expectations and this was due to rapid vaccinations and drop off in demand at drive thru call over to the operator for the Q1 of 2019. Demand for COVID testing has been volatile and as a result, we have generally taken a conservative stance on future revenue the call over to questions from pivot testing, but the drop in Q2 was more drastic than we anticipated. That being said, we have invested significant call over to Time and Resources laying out the foundation for a successful post COVID-nineteen growth opportunity through bringing on senior talent, investment and M and A call over to Steve. And we're well on our way of achieving this goal. Our ASP in the 2nd quarter was $99 slightly higher than the $95 we saw in the Q1. The call over to our Q2. While our ASP has largely remained stable over the last few quarters, the modest increase is due to the increasing mix of the call over to the core tests that we saw in the quarter. Cost per test in the quarter was $23 slightly higher call back to the Q1 due to the increased mix of NGS testing. Gross margins ticked down slightly in the quarter to 76.7% call back to Q1 as expected given the lighter volume we saw. Moving over to operating expenses, total GAAP operating expenses were 18 call over to the operator for the Q2, up from $18,400,000 in the Q1. Non GAAP operating expenses totaled $16,000,000 call back to the line of John. Thank you, John. Thank you, John. Thank you, John. Thank you, John. Our operating expenses increased primarily due to investments in strategic headcount call over to our organization as well as an increase in legal and accounting costs associated with our M and A activity. Non GAAP operating margin declined 8 percentage points call back to the Q1 to 66.7%. Adjusted EBITDA for the Q2 was $105,000,000 compared to 4,300,000 call over to the Q2 of 2020. On a non GAAP basis and excluding equity based compensation expense, income for the quarter was $78,700,000 call over to $2.55 per share based on 30,800,000 weighted average diluted shares outstanding. Call over to the balance sheet. We ended the quarter with 777 call over to the operator for the Q1 of 2019. We generated $76,100,000 of cash from operations during the quarter, the call back to our Q2. Fueling our cash balance. This cash balance includes the impact from our investment in Healio, which was $20,000,000 in Q2 and our investment in the China call over to JV, which was $19,000,000 This does not yet include the impact of a CSI acquisition, which could be up to $60,000,000 in cash call over to the moving parts we're taking into consideration, including the dynamic COVID testing landscape, our acquisition and CSI the call over to the operator. And the consolidation of our China JV, we will be breaking out our guidance by COVID and core revenues the call over to the operator for Q4 reflecting what we previously called NGS revenue with the addition of CSI's contribution. The Our COVID revenue includes all revenue from RT PCR testing, including picture at home COVID tests. Our core revenues call back to the call. Our traditional NGS business contribution from our China JV, contribution from CSI and our revenues from our NGS COVID test. Call over to you. While these revenue segments haven't really changed, we just have raised more reflects better reflects our non COVID business given the addition of CSI and Helio. The call over to Kevin. Starting with COVID revenues, as we discussed, we saw a sharper than expected decline in testing volume in Q2 due to rapid vaccinations and lower demand call back over to our Q and A session for guidance. We have seen test volumes trend higher with new cases, while the governmental agencies and schools are seeking more regular testing amid a more uncertain environment. And we also believe that ongoing assessment the call back to the call. Vaccine effectiveness could drive incremental testing. With that, we expect COVID revenues for the year will be at $690,000,000 call over to Steve. And we believe testing volumes in Q3 and Q4 are still on track to meet the expectations we set last quarter. Moving on to our core revenue guidance, Which is broken into core NGS, COVID NGS and the impact from CSI. We expect our core NGS business will be call back to the call to questions. Thank you, Steve. Thank you, Steve. Thank you, Steve. Thank you, Steve. Thank you, Steve. Good morning, everyone. Call over to the operator. We expect core NGS revenues will total $80,000,000 up from approximately $70,000,000 in our previous guidance. The call over to David. For COVID NGS revenues from the CDC, we are lowering our guidance from $15,000,000 to 30,000,000 the call over to Steve. Though we're optimistic about this contract, it appears volume is largely predicated on positivity rates, which fell to a record low during the quarter. The call over to the operator. This situation with COVID and the Delta variant is obviously very fluid. As such, we're taking a very conservative view as it relates to revenue from the call over to the SEC contract. And finally, we anticipate CSI will contribute approximately $15,000,000 of revenues for the remaining part of 2021. Call over to you. All together, we expect our total core revenues will be $110,000,000 for the year. With the $690,000,000 in COVID revenues call back to the call. Combined with $110,000,000 of core revenues, we expect revenues will be approximately $800,000,000 for the year, down slightly from our previous guidance of 830,000,000 the call over to David. From a profitability standpoint, we continue to expect to show ongoing leverage in our business, which drops to the bottom line and drives cash flow generation. The call over to Steve. We continue to rely on our foundational technologies for operating our business, which has produced superior growth in operating margins. Call over to the operator. We still anticipate that to be the case, though those percentages will likely be slightly lower as we get more active in M and A, hiring and internal investments. The call over to you. As such for the full year 2021, utilizing a 27% tax rate and a share count of 31,000,000, call over to Mr. President. We expect net income to be approximately $387,000,000 or $12.50 per share for our shareholders excluding stock based compensation. The call over to Steve. This EPS estimate is unchanged from our previous guidance from Q1, even with us lowering our revenue estimate by $30,000,000 to 800,000,000 the call over to the operator. For the Q3 specifically, we expect total revenues to be in the range of $125,000,000 to 150,000,000 call over to our shareholders. With core revenues growing to approximately $32,000,000 and COVID revenues to be in the range of $93,000,000 to $118,000,000 the call over to Steve. We hope the detail we're providing today is helpful and reflects the confidence we have in our outlook for the year. And we have posted slides on our Investor Relations website call over to Kevin. This quarter has once again proven the viability of our business model and the power of our technology platform given the ability call over to Steve to drive nearly $100,000,000 of cash flow in a single quarter. In addition, we have demonstrated our ability to execute on strategic initiatives through M and A call over to our Investor Relations segment. With our investments in China, Helio and CSI, all which should bear immediate fruit from a strategic perspective, call back over to Steve. We intend to get bolder and more active in M and A in the future and are evaluating a range of different companies and technologies. Call back to the operator. We feel very good about our positioning as we expand our platform to drive sustainable growth in the post COVID world. Operator, you may now open it up for questions. The call over to the call over to Kevin DeGeeter with Oppenheimer. The call over to Steve. Hey, guys. Thanks for taking my questions. Maybe just 3 for me. On CSI, I mean, interesting transaction, maybe you can just talk a little bit about the buy versus build for those assets. It would seem that that's a capability that might have been able to be built out in house, but the call back to Tom more quickly for M and A. Paul, I think you highlighted the continued high interest in M and A. The Maybe you can frame for us a little bit in terms of how we should think about focus being, is it primarily oncology? Are you call back to kind of broadly outside of oncology. Any perspective there? And then just with regard to reimbursement, which I think to us is maybe one of the more Thanks for today. How do you sort of leverage CSI's infrastructure for reimbursement to gain the call back to the operator. Yes. The Yes. Thank you, Kevin, for the questions. I think we'll probably cover in the more like a the call over to a broad level, strategic level. We do believe the cancer diagnostics, it is a big market. The call over to the operator. Fulgent Genetics has been in this market the call over to the operator. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Our next question comes from the line of the call over to Mr. Liarita Diagnostics. So by adding the CSI the call over to the call over to Heather. Avogent Genetics is pretty broad. The call over to the operator. Call over to the operator. So this is a $80,000,000,000 market call back to the call. This is much, much larger than the Fulgent Genetics initially thought IPO focused on the rare disease market. Call over to Mr. President. We're not missing the dismiss the rare disease market, but we are call over to the operator. We want to be a major player in the cancer diagnostic market. With that, I ask Doctor. Weiss to add a little bit more floor to CIs. So as you heard, our intention is to get involved in the cancer market. The And we have intention of developing our own laboratory on the West Coast, but the acquisition of CSI really the jump starts our entry into the cancer market. First of all, they have a base of clients and they already have an extensive test menu in areas such as immunohistochemistry, flow, dish and cytogenetics. And we're going to emulate the call back to the West Coast. Even more importantly for the West Coast lab, they have specimen the access to specimens that is very hard to find when you're just starting out in a laboratory. They already have a base of the sales team that we are going Dramatically expand in the future. So, although I think we could have done these things without CSI, CSI the call back to you. Clearly gives us a huge jump start into being a major player in the cancer business. Yes. Kevin, Brandon, I'll just add a little bit there, so which is really goes to your third question. You asked why do we buy versus build. The In addition to what Larry detailed, building would have been much more difficult, especially as it relates to the managed care contracts and reimbursement. So I think Larry is spot on. It is a quick way for us to enter the market. We address the insurance in network issue by buying versus building. In addition, we're highly confident, we can expand that business. They have a wonderful business. The it's been very successful. They have an amazing customer base, but it's a little bit geographically call focused with a small sales team. And we think with a national presence and a much larger sales team, we think that we're going to be in a big way. So I think for those reasons, the justify sort of our buy versus build thought process. I think Kevin, adding to call over to Doctor. Weisz and Brandon's comments. In addition, we do believe with the 4geneutics, the call over to the technology. We could significantly improve CSI's operation efficiency. CSI, it is a profitable have a profitable business, but with our technology insertion the And the technology combination, we will significantly improve the bottom line. The call over to Kevin, if you want to work through the rest of your question. So your second question was on M and A. We specifically focused on oncology call over to a more broad area. I mean, obviously, oncology is of particular interest to us. You can see by the moves we've made. The That said, no, our M and A strategy is going to be broad. It's going to be broad. It's going to be bold. It's going to be aggressive and fast. We are looking forward to deploying this capital the And continuing to leverage the technology platform to bolt on tuck in these acquisitions in a meaningful way. Call back to you. But Ming, if you want to add any comments there. Great. Thank you, Kevin. The call over to Stephen Ma with Piper Sandler. Call. Hi, guys. Thanks for taking the questions. I got a question on Healio. The The commercial exclusivity, is that going to cover all of their LVTs, not just liver? Because my understanding is they're also developing the test for colorectal cancer, breast and lung. Yes. Stephen, I call. I think it is a very good question. I think we're taking by the steps. We are going to help Healio call over to commercialize its liver cancer test. So we already started taking the action, the call over to the operator. Well, definitely it's the methylation technology and that there are biomarkers for certain the Liver, colon and the lung, so they are slightly different. The But we do have the opportunity to adding more tests in the coming quarters. The Okay. Got it. And does your partnership with Healio and your investment, Can you talk about the potential of launching these tests through your China JV? I know liver cancer call back to the line of John. And lung cancer, a big problem in China. Is there some way to leverage your China JV with Healio? Call over to you. Yes. Stephen, it is a very good question. Actually, KILIO was independent study, liver cancer test in China is slightly ahead of the U. S. We do expect the China launch will be sooner than the U. S. Launch. The Okay. But your exclusivity is just for U. S. Testing or is it also for China testing the For commercialization. Excluding activities covers in the North American, which is both the U. S. The call back to Canada. But in China, we'll be jointly working together. Forging Genetics will provide our laboratory services the call over to Helio. Helio is already in the process to finalize its the call over to the FDA approval process for its liver cancer test. It's a slightly different cancer test using DPCR the Inside of using the methylation in the U. S, both technology will be available for both China and the U. S. The Okay. So in China, it's more of a collaboration then. Okay. Yes. Okay, got it. The call over to Larry. And Larry, yes, welcome to the team. The call over to you. Could you let us know what percent the of CSI revenue is molecular that can be migrated over to Fulgent's NGS the platform because my understanding of CSI and I might be a little outdated is, yes, they were mostly the More traditional non molecular tests like immunohistochemistry, FISH, cytogenetics and flow. So maybe just give me a sense of the potential synergies with Folgen. Yes. Stephen, I will cover a little bit. CSI currently do offer some genetic testing, but is outsourced to a third party. So with this transaction, CSI will be the Ken directed all his genetic tests to Fulgent side. But really when the CSI as a standalone unit, they They have been not much promoting too much of the liquid biopsy and genetic testing. The But with this combination, we do plan to accelerate the process and also make a digital transition from the for the pathology transition there becomes more modern the And more than digital pathology. Yes. Ming stated, the CSI is basically a traditional pathology provider. Its assets are in immunohistochemistry, flow, the Cytogenetics and FISH. They do a fair amount of single gene testing, but their NGS is outsourced at present. That's why we think this is such a complementary acquisition because we at Folgent can provide the NGS and the molecular testing and really supplement CSI's strengths. The call back over to you. So we see as a win win, a win for CSI and a win for Fulgent. Historically, the CSI's client base has been with pathologists, but when we provide the molecular background, I think We can see a large expansion into an oncology customer base as well. Yes, this is Paul. The call over to you. We intend to put our full resources behind this acquisition of CSI and we also would not be surprised if that business call through in a considerable way. We took a look at a lot of different companies. This is the one that we like very, very much call back to the line of John. From a philosophical standpoint, they have been in operations for even a longer timeframe that we have. We took a look at the quality of the customers, the flow of the samples, their offering, even just kind of the way the business was structure. I mean unlike other smaller businesses, they don't lose money. So a lot of things line up with us. I think the piece that they were lacking, because they have they were private and a smaller company is being able to tap into the resources to get the capital so they can really move that business in a meaningful way. So Ming and Larry and Brandon talked about, right, the reasons why and the synergies and it's our intention to fully capitalize on this asset and to grow that business. The call over to Eric. Okay, great. Yes, thanks for all that color. And maybe if I just squeeze in one last one. Call over to you. Do you have any sense for the back half of the year, upcoming flu season? There's been we've been hearing some RSV call popping up in the Southern Hemisphere. And in addition to that, could you give us a sense of if you're going to be developing a combination test the Our broader respiratory panel that includes, I know you guys have flu A and B plus COVID, but are you developing a panel that includes RSV as well? The call over to you. Hi, Stephen. It's Brandon. Yes. Thanks for the question, Stephen. It's Brandon. We are going to be developing what we call a full respiratory pathogen panel. I think it has somewhere around 20 to 30 or so respiratory pathogens. So yes, it would cover COVID-nineteen, it would cover flu AB, RSV the call over to you. And many other respiratory pathogens. This will be delivered on the same automation, the same equipment, the same robotic liquid handling as our COVID test. So it's something that we can scale tremendously and continue to take advantage of the what we believe to be best in the best in class cost structure of our PCR based assay. So for an answer, we are. Okay, great. Thank you. The call over to Katie Troian with Credit Suisse. The call back over to you. Hi, thanks for taking my questions. Just on some of the return to work and return to school testing, can you just call over to outside of the New York school system, how you can participate call over to you. And to what extent are those conversations actually progressing? We've heard that, they're maybe progressing a little bit slower than previously anticipated, but just the In recent weeks with the Delta variant, is that starting to pick up? And how should we think about the implications for you, for the back half of the year there? The call back over to you. Yes. Hey, Katie. Thank you. It's Brandon. We're not revising the back half of the year COVID guidance, right? Q3 and Q4, we're maintaining our guidance. So I think that says something to the strength of the opportunities we see. Outside of New York, call over to you. We're seeing very meaningful progress opportunities in the Southeast, specifically, the Texas, Louisiana area, Florida, the as well as some schools coming online in the Midwest. And then on the West Coast, we're seeing many back to school opportunities. The So we think our experience in New York is incredible. We've done a lot of testing in New York. We've done a very good job. And that's the largest school district in the United States. So these other school districts, they lean on that. They look to that experience we've had. The call over to you. We can show how what an incredibly successful program we've run up there. So I fully believe we're going to be continuing with back to school testing the call back to the call back to the call. And I think COVID testing is going to be very meaningful in the back half of the year. The Okay, great. And then you mentioned we've talked quite a bit about some of your other investments in Healio and CSI, but just curious on the FSG and Biotech JV. I know you mentioned your intention to invest there further last quarter, but just curious If you could provide maybe a little bit more insight on how that JV has performed since you initially invested, call back to the call, which I know was quite some time ago as well as how it's performed more recently like in the Q2. Thanks. The call over to you. Katie, this is Paul. That's an excellent question. So I'm going to take a piece of that and I'm going to be turning it over to Ming, We can give you the strategic and the market reasons on why we took controlling interest of that. The So during this quarter in Q2, we already booked $2,000,000 of top line genetic testing revenues from China the call over to you. As a result of that consolidation and we believe in the second half of the year, call back to the line of David. We'll be able to record anywhere from $5,000,000 to $10,000,000 of additional business from that China market. But I'll turn it over to Meng the You can comment on the thought process on why we took the controlling interest, the potential market size in China call back to as well as the products and service offerings that we intend to put out in the marketplace. The Yes, Katie. As you may recall, we used to own around 30% the call over to JV, the structure, which is back to 4 years ago. The Really, our function was providing our technologies and the products the call over to our operator manage the sales and marketing and running the operations. The call over to you. As we see the more and more demands coming from China in terms of oncology, women's health, the call back to the operator. I think it would be better for Fulgent to put more of our the focus in the China market. So we have discussed with our partner call back to you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Our next question comes from the line of the And the growth requirement to the current management team and then we're also adding more of the the call over to our newly recorded executives for the operation. The This is including the handling the our relationships in the Helios operation in China. Call. We do see is a very competitive market and it is a growing market and it's also a challenging market. But we do see the demand is there and a lot of opportunity for us to expand and grow the market. The call over to you. Thank you.