Predictive Oncology (Ticker: POAI), a leader in the application of artificial intelligence to personalized medicine and drug discovery, has reported its financial results for the second quarter ended June 30, 2024. The company highlighted the successful completion of an ovarian cancer study with UPMC Magee-Womens Hospital and the launch of a 3D cell culture technology. Despite a decrease in revenue to $279,000 from $490,000 in the same quarter of the previous year, the company has managed to reduce its net loss per share to $0.68 from $0.98. Predictive Oncology also emphasized its focus on biomarker discovery and the development of next-generation therapies.
Key Takeaways
- Successful completion of a multi-year ovarian cancer study with UPMC Magee-Womens Hospital.
- Expansion of artificial intelligence and machine learning capabilities for biomarker discovery in oncology.
- Launch of a 3D cell culture technology for accurate drug testing and optimization.
- Implementation of a cost reduction initiative, including consolidating operations in Pittsburgh.
- Raised $5 million in capital through various means.
- Net loss per share decreased to $0.68 in Q2 2024 from $0.98 in Q2 2023.
- Decrease in revenues to $279,000 in Q2 2024 from $490,000 in Q2 2023.
- Reduction in general and administrative expenses, operations expenses, and sales and marketing expenses.
- Net cash usage of $6.6 million for the six months ended June 30, 2024.
- Accumulated deficit reached $175 million as of June 30, 2024.
Company Outlook
- Predictive Oncology is committed to advancing biomarker discovery.
- The company is developing next-generation therapies to personalize medicine in oncology.
Bearish Highlights
- Revenue declined in Q2 2024 compared to Q2 2023.
- The company continues to operate at a loss with an accumulated deficit of $175 million.
Bullish Highlights
- Reduction in net loss per share, indicating improved financial performance.
- Successful fundraising efforts, enhancing the company's capital position.
Misses
- The company missed its revenue targets, with a significant drop from the previous year's same quarter.
Q&A Highlights
- The company addressed questions about its cost reduction strategies and the potential for its new 3D cell culture technology.
- Discussions included the impact of the ovarian cancer study on the company's AI and machine learning capabilities for future drug discovery.
Predictive Oncology's Q2 2024 earnings call revealed a mixed financial performance, with notable advancements in technology and strategic initiatives to reduce costs and optimize operations. The company's efforts in biomarker discovery and the development of next-generation therapies remain central to its mission. Despite a decrease in revenue and an ongoing deficit, the reduction in net loss per share and controlled expenses reflect a company striving for efficiency and innovation in the challenging field of oncology.
InvestingPro Insights
Predictive Oncology (Ticker: POAI) has been navigating a complex financial landscape, as evidenced by the latest metrics from InvestingPro. The company's market capitalization stands at a modest $3.5 million, which is indicative of its small-cap status in the biotechnology sector. Notably, POAI's revenue growth over the last twelve months as of Q1 2024 was 36.98%, showcasing a significant uptick that may align with its strategic initiatives in drug discovery and development.
InvestingPro Tips highlight two contrasting aspects of POAI's financial health. On one hand, the company holds more cash than debt on its balance sheet, which is a positive sign for liquidity and financial stability. On the other hand, analysts are concerned about POAI's cash burn rate, as the company is quickly depleting its cash reserves. This could be a point of caution for investors considering the company's ability to fund ongoing research and operations without additional capital infusions.
Moreover, POAI's stock has been subject to high price volatility, which could be attributed to market reactions to its financial performance and the inherently uncertain nature of drug development outcomes. The stock is trading near its 52-week low, which might be reflective of investor sentiment and the broader challenges faced by the company.
For a more comprehensive analysis and additional InvestingPro Tips on POAI, interested readers can explore further at https://www.investing.com/pro/POAI, where 14 more tips are available to provide deeper insights into the company's financial and operational prospects.
Full transcript - Predictive Oncology Inc (NASDAQ:POAI) Q2 2024:
Operator: Good day, and thank you for standing by. Welcome to the Predictive Oncology Second Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ prepared presentation, there will be an opportunity to ask questions. Please be advised that today’s conference is being recorded. I would now like to hand the call over to your speaker, Mr. Glenn Garmont, Investor Relations. Thank you. You may begin.
Glenn Garmont: Welcome, and thank you, everyone, for dialing into the Predictive Oncology second quarter 2024 financial results call. First, you’ll hear from our Chief Executive Officer and Chairman of the Board, Raymond Vennare; and our Chief Financial Officer, Josh Blacher, who will review our financials. Certain matters discussed on this call contain forward-looking statements. These forward-looking statements reflect our current expectations and projections about future events and are subject to substantial risks, uncertainties and assumptions about our operations and the investments we make. All statements other than statements of historical facts included in the call regarding our strategy, future operations, future financial position, future revenue and financial performance, projected costs, prospects, plans and objectives of management are forward-looking statements. The words anticipate, believe, estimate, expect, intend, may, plan, would, target and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. Our actual performance may materially differ from that contemplated by the forward-looking statements as a result of a variety of factors, including, among other things, factors discussed under the heading Risk Factors in our filings with the SEC. Except as expressly required by law, the company disclaims any intent or obligation to update these forward-looking statements. Now I’d like to turn the call over to Raymond Vennare, Chief Executive Officer. Raymond?
Raymond Vennare: Thank you, Glenn, and good morning, everyone. I would like to begin this morning with a recap of a significant announcement that we made just a few weeks ago regarding the successful retrospective multiyear ovarian cancer study that we completed with UPMC Magee-Womens Hospital conducted over the past five years. As a result of this study, the findings of which were presented at the American Society of Clinical Oncology Annual Meeting in June, we have expanded our artificial intelligence and machine learning offering to independently pursue the discovery of novel biomarkers that can predict patient outcomes and drug responses in oncology. With these capabilities, we are very well positioned to play a significant role, not only in validating biomarkers that have already been discovered by potential partners, but also in discovering our own unique biomarkers and playing a more active and direct role in drug discovery and development. Please recall that the Magee study was designed to identify key features that drive overall survival endpoints in ovarian cancer, a very serious cancer type with a very high rate of recurrence. This study included data from 235 ovarian cancer patients from 2010 through 2016, a broad array of inputs, including patient data, whole exome sequencing, whole transcriptome sequencing, drug response profile and digital pathology profiles were used to train the 160 models that were included in the study. As we previewed during our first quarter conference call, we were able to obtain an end-of-life data that supports novel ovarian cancer biomarker discovery and development. We are very pleased to report that we were able to deliver strong predictive models with high levels of accuracy, and our machine learning capabilities demonstrated the ability to identify prognostic subgroups within ovarian cancer patient population. This progress represents a natural extension of our core artificial intelligence capabilities, where we employ our active machine learning and diverse patient tumor samples preserved in our extensive biobank to predict responses to drugs with a very high degree of accuracy. We are now taking this one step further by applying state-of-the-art deep learning approaches for biomarker discovery for both overall survival and drug responses. This includes our ability to extract differentiating features from our digitized pathology slides, which, in and of themselves, are potential biomarkers. Our platform now enables us to pursue deep learning as a methodology to accelerate the initial stages of biomarker discovery and stratify patient cohorts and further extend our capabilities, either independently or in partnership with our biopharma companies. Ovarian cancer represents a significant unmet need in oncology, with epithelial ovarian cancer being the deadliest of all gynecologic malignancies. While these cancers are sensitive to front-line chemotherapy in approximately 75% of cases, these women will ultimately experience disease relapse in an equal percentage, which is incurable. Outside of primary chemotherapy, there is no universal treatment decision path to determine the agent, sequence and timing of the standard of care for chemotherapeutic agents. These capabilities extend well beyond ovarian cancer and can be used in the discovery of biomarkers for other cancer types as well as diseases outside of oncology. External sources have valued the biomarker discovery market at more than $51 billion in 2024. So this is a very significant opportunity for us to leverage our unique set of assets and capabilities to play a role in the discovery of next-generation therapeutics, while creating enduring value for our shareholders. We look forward to further validating these capabilities through development collaborations with leading biopharmaceutical partners and health care networks. Also during the second quarter, in addition to our biomarker discovery initiative, we launched a novel organ-specific 3D cell culture technology that more closely mimics human tissue architecture than 2D assays. It does this by preserving critical interactions between a tumor and its cellular and extracellular surroundings and creates a more representative method for in vivo clinical testing for drug candidates. This allows for more robust predictions of clinical outcomes and can be used to optimize candidate selection for subsequent clinical development. The potential benefits to drug developers are numerous. They decrease the cost of new drug development and the time to market, but also reducing the need for animal testing and time-consuming iterations during clinical trials. The 3D cell market is estimated by third parties to grow 14% annually from $1.4 billion in 2022 to $5.3 billion in 2032. Also worth mentioning is the progress that we have made with our Accelerating Compound Exploration program, otherwise known as the ACE initiative. This program, as you may remember, is geared toward novel discovery through partnerships with universities and academic institutions and was created to provide early-stage academic development groups access to Predictive Oncology’s artificial intelligence platform, which, as you also know, leverages our extensive and diverse biobank of heterogenous tumor samples. The ACE program is designed to enable academic investigators to evaluate their drug compounds and facilitate more informed selections of drug tumor type combinations to increase the probability of future clinical success by efficiently addressing tumor heterogeneity earlier in development. This program, which we have been nurturing for more than a year, has resulted in our first collaboration with the University of Michigan. The library created by University of Michigan’s Natural Products Discovery (NASDAQ:WBD) Core is one of the largest collections of pharmaceutically viable extracts in the United States. This library which has been meticulously constructed over the past decade, in the laboratory of Dr. David H. Sherman at the University of Michigan’s Life Sciences Institute, is comprised of strains from Asia Pacific, Middle East, South America, North America and the Antarctic. Most importantly, this collaboration represents Predictive Oncology’s foray into true drug discovery. With the addition of University of Michigan’s natural products and drug candidates, we are very well positioned to expand our small molecule capabilities to include development of large molecule models using our proprietary AI and ML platform. Several publications will definitely come out of this drug discovery initiative. To ensure that we remain nimble and able to capitalize on this and other new opportunities that continue to emerge, we announced more recently that we implemented a comprehensive and strategic cost reduction initiative aimed at streamlining our operations and extending our cash runway. As a key part of this initiative, we made the challenging decision to consolidate our Birmingham operations, which houses our Biologics business into Pittsburgh, which as you know, also serves as our corporate headquarters. From a strategic perspective, it is important to understand the context of this action. First and foremost, it is incumbent on the company to remain laser focused on its core capabilities with respect to the application of artificial intelligence to drive drug discovery. Second, the very thing that enables our ability to model and predict drug tumor responses identify biomarkers and predict outcomes with such accuracy is the quality of the tumor samples in our biobank and the significance of the pristine longitudinal data that has been generated from those samples. This has now been externally validated and was presented at the Association of Surgical Oncology. The ability to deliver on the accuracy of our predictions and relevance of our models requires constant sequencing, characterizing, curating and digitization of tissue samples, drug response data and pathology slides. This is an ongoing effort and one which drives the precision with which our AI-generated models are perfected. In the absence of these silent endeavors, we cannot possibly distinguish ourselves in the marketplace. All of this requires dedicated resources and in this case, the reallocation of those resources from Birmingham to Pittsburgh. Lastly, innovation perpetuates value creation, and adding value to the company impacts valuation of the company. By adding value, we are signaling our relevance to the market with respect to the significance of our core assets. This initiative, once fully implemented in Q4 of this year, is expected to reduce our run rate for cash used in operating activities by approximately $2.5 million annually, which equates to roughly 20% of our cash burn based on our stated 2023 cash used in operating activities of $13.2 million. As a point of preference, the Birmingham segment generated a net loss of $2.0 million in 2023 and $1.8 million in 2022, with de-minimis-supporting revenue. Moreover, since Birmingham has become essential to our core focus in Pittsburgh over time, and in light of its lack of profitability, this simply became the right decision for the company and the shareholders moving forward. We would be remiss not to extend our gratitude to our partners in Birmingham, especially Dr. Larry DeLucas, Senior Vice President of Biologics, for his years of leadership and dedication. Thank you, Larry. To further strengthen our financial position, we've announced over the last few months a couple of significant capital raises, $5.0 million in total that also helped to bolster our cash balance sheet and extend our runway. In May, the company raised $3.7 million, net of $0.6 million of issuance costs or $3.1 million in net proceeds through its at-the-market facility through the issuance of 1.6 million shares. And in July, the company raised an additional $1.3 million in gross proceeds through the exercise of 958,000 warrants through our warrant inducement transaction. And now I would like to turn this call over to Josh Blacher, our Chief Financial Officer to review our second quarter financials in detail. Josh?
Josh Blacher: Thank you, Raymond. We concluded the second quarter of 2024 with $5.3 million in cash and cash equivalents compared to $8.7 million as of December 31, 2023, and $4.1 million in stockholders' equity compared to $8.3 million as of December 31, 2023. Note that our cash balance as of June 30, 2024 includes net proceeds of $3.1 million that we raised from our ATM facility in May, but excludes amounts raised subsequent to the end of the second quarter from the warrant inducement transaction that Raymond described earlier. Our net loss per share for the second quarter of 2024 was $0.68 per basic and diluted share as compared to $0.98 per basic and diluted share for the second quarter of 2023. The company recorded revenues of $279,000 for the second quarter of 2024 compared to $490,000 for the comparable period in 2023. Revenues for the quarter ended June 30, 2024, and June 30, 2023, were primarily derived from the company's EGAN operating segment. General and administrative expenses primarily consist of management salaries, professional fees, consulting fees, administrative fees and general office expenses. G&A expenses decreased by $567,000 to $2.1 million in the three months ended June 30, 2024, compared to $2.7 million in the comparable period 2023. The decrease was primarily due to lower employee compensation and decreased investor relation costs, offset by increased consulting fees. Operation expenses primarily consist of expenses related to product development and prototyping and testing. Operations expenses decreased by $100,000 to $893,000 for the three months ended June 30, 2024, compared to $993,000 in the comparable period in 2023. The decrease was primarily due to decreased cloud computing expenses related to our Pittsburgh operating segment. We expect these types of savings to continue going forward. Sales and marketing expenses consist of expenses required to market and sell our products, including staff-related expenses, for individuals performing such work. Sales and marketing expenses decreased by $145,000 to $284,000 for the three months ended June 30, 2024, compared to $429,000 in the comparable period in 2023. The decrease was primarily due to lower employee compensation, including sales commissions. As a part of the cost savings initiative, we've taken a hard look at marketing, spending in general as it relates to ROI hurdles, so you can expect that such reductions will continue going forward. Net cash used in operating activities was $6.6 million for the six months ended June 30, 2024, down from $7.0 million for the comparable period in 2023. The company incurred net losses of $3.2 million and $3.9 million for the quarters ended June 30, 2024, and June 30, 2023, respectively. As of June 30, 2024, the company had an accumulated deficit of $175 million as compared to $168 million as of December 31, 2023. That concludes the financial overview. We will now open the call up for questions. Operator?
Q -:
Operator: Thank you. [Operator Instructions] Mr. Vennare, I'd like to turn the floor back to you and close the question-and-answer session.
Raymond Vennare: Thank you very much, and thanks, everyone, for being on the call. So that concludes our call for today. We hope that you take away from this call that we are extremely excited to actively pursue novel biomarker discovery and play a more direct role in the discovery and development of next-generation therapies, either independently or with a partner. This represents a tremendous opportunity for us to bring new hope to millions of patients worldwide in cancer and other high-need indications, while creating long-lasting value for our shareholders. Thank you again for your support and your patience, and I look forward to the next quarterly update in November. Have a great day.
Operator: Thank you. This concludes today's conference call. You may disconnect your lines at this time. Thank you for your participation.
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