bioAffinity Technologies, Inc. (BIAF) Earnings Call Transcript & Summary

Hello. This is Craig Brelsford with RedChip Companies. Thank you for joining today's event with bioAffinity Technologies, which trades on the NASDAQ under the ticker BIAF. With us today, we have Maria Zannes, President and Chief Executive Officer of bioAffinity. We will begin with a brief presentation in a moment, and then we'll open this event to your questions. [Operator Instructions] Before we begin, please allow me to briefly read the safe harbor statement. This call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements pertaining to future financial and/or operating results, along with other statements about the future expectations, beliefs, goals, plans or prospects expressed by management constitute forward-looking statements. Any statements that are not historical facts should also be considered forward-looking statements. Of course, forward-looking statements involve risks and uncertainties. I now turn this webinar over to Maria. Thank you very much.

Well, thank you very much, and good afternoon. My name, as he said, is Maria Zannes, and I'm President and Chief Executive Officer of bioAffinity Technologies. I want to thank you for joining us today to learn more about bioAffinity. BioAffinity develops noninvasive diagnostics to detect cancer and lung diseases at early stage, and we're researching targeted therapies to treat cancer at the cellular level. Our first product, a test we call CyPath Lung, has shown to be highly accurate in detecting early-stage lung cancer. And as Craig said, I must caution you that this presentation contains forward-looking statements, and I encourage you to read our security filings that can be found on our website. In a clinical trial, the results of which were published last year in Respiratory Research, CyPath Lung showed 92% sensitivity and 87% specificity with a 99% negative predictive value in detecting lung cancer in individuals who had pulmonary nodules less than 20 millimeters, small pulmonary nodules. Half of the trial participants in this study had cancer in Stages 1 and Stage 2. We take a very novel approach to diagnosing lung cancer, using flow cytometry and automated analysis developed by machine learning. I'll talk to you today about that. But most important, CyPath Lung is patient-focused. It is a noninvasive test. Patients collect their sample in the privacy of their home, and they send the sample overnight to the lab in a pre-addressed prepaid envelope. The ordering physician receives the patient results within 3 days of the lab receiving the sample. We look to use this flow cytometry platform to diagnose multiple diseases, and our research discoveries include therapeutic applications. But today, I'm going to focus on CyPath Lung. Lung cancer is the leading cancer killer with more than 2 million people diagnosed each year with this deadly disease. It holds this dubious title largely because lung cancer is most often caught in late stage, and that is when the cancer has metastasized and there often is less treatment options available. But lung cancer screening is essential. The problem with lung cancer screening is not that it doesn't find cancer, but it often calls [ things ] and nodules -- cancer that are not. It has a low positive predictive value, which means that out of 100 people who receive a positive screening result, only 4 actually have lung cancer. But an accurate diagnosis at early stage is really imperative. If caught in Stage 1 and treated, studies show that lung cancer's current overall 5-year survival rate of about 25% can jump to a 10-year survival rate of greater than 90%. Lung cancer claims nearly 18 million lives each year. And in the U.S., people who are at high risk are recommended and should be getting annual screening using low-dose computed tomography or low-dose CT. The American Cancer Society recently released new guidelines that they called for screening for people who are 50 years of age or older and who are smoking now or who have smoked in the past at any time. It is estimated that about 19 or actually more than 19 million people should be screened annually. The market itself is quite large. As you can see by this slide, we have an estimated $2.6 billion market in 2022 that's estimated to more -- nearly double by 2030. Unfortunately, lung cancer is a disease that will stay with us for some time. But it's not an easy task detecting lung cancer at early stage. But it is one that bioAffinity has accomplished. Detecting cancer at early stage is difficult because the tissues of an early-stage cancer are often very similar to tissue without cancer, especially among those who are at high risk. But the benefit of early detection, as I've stressed, is profound because it leads to better treatment, it can lead to longer lives and even cures lung cancer. Because of this, we believe CyPath Lung can change the paradigm of how lung cancer is detected, diagnosed and treated. The process for our test itself is quite simple. Doctors order the test for patients who they suspect may have lung cancer. Often, this is after a positive low-dose CT screening. A patient takes home the collection kit. It's a small kit that contains a cup for collecting the sample. Patients receive instructions on how to collect their sample. And sputum is collected. Now sputum is the phlegm in your lungs. And people who have smoked or former smokers or present smokers often spontaneously can bring up or collect this. But patients also have access to a patient coach who can help walk them through the process of collection, and they also can use something called an acapella, which is used to break up the mucus in the lungs and can help better collect a sample. After 3 days of collection in the privacy of their home, they use that pre-addressed FedEx envelope to ship their sample to the laboratory. And at the lab, the sample itself is processed into a single cell suspension, so the mucus is disassociated, and that allows the sample to be run through a flow cytometry -- excuse me, flow cytometer cell by cell. The sample itself is labeled with a cocktail of antibodies, and the fluorescent porphyrin, TCPP, for which we have strong patent protection, securing its use for the diagnosis, the monitoring and treatment of all cancers, including lung. TCPP labels cancer and cancer-related cells for detection. The flow cytometer itself reads these various label combinations on the cells, including those cells that have taken up TCPP. And through that process, we can identify different cell populations that indicate there's cancer present in the lung. We found distinct differences between cancer and noncancer samples. And we created -- we developed automated analysis using machine learning, using AI, that can read a patient sample in minutes and produce a report for physicians. We know as we bring this test to market that we only get one chance at a good impression. And we're determined to get it right. That's why we've conducted some in-depth marketing research to develop CyPath Lung and its brand. Physicians tell us over and over again that they need diagnosis of lung cancer when they see small pulmonary nodules. And when they're found, doctors need assurance. They need confidence to perform those invasive biopsies for patients who test positive for CyPath Lung -- with CyPath Lung. Or they also appreciate that they can continue with imaging and following over time as recommended, if the patient tests cancer-free. Our new branding highlights these strengths that it is a noninvasive test, that it is an accurate test, as you can see by the prominence of both the sensitivity and the specificity, and that it is targeted, this CyPath Lung, at solving a very defined and understandable problem. In the past year, we've addressed the key drivers that were brought up in our market research. This month, the new CPT code specific for CyPath Lung became effective for Medicare -- with Medicare. And our fee schedule calls for a $1,900 reimbursement price. Last year, our clinical trial, showing both high sensitivity and high specificity, was published in the peer review journal Respiratory Research, and it built upon 2 similarly important peer review articles published in 2022 that set the foundation for our advanced flow cytometry test, one that we'll use with additional lung cancer tests -- in developing additional lung -- I'm sorry, in developing additional lung tests for other diseases. So CyPath Lung really builds on the excitement that physicians have shown for the test as being noninvasive and for it being actionable. And our -- we have learned that the combination of a strong sales force, coupled with multimedia and other support, can really make a difference. CyPath Lung enters the market as a laboratory-developed test, as an LDT, and it compares very favorably to the current standard of care. Our competitors often show high sensitivity, but that's at the -- unfortunately, comes along with low specificity or vice versa. And that is often a confusion. It adds additional confusion. Ours is not that case. We have a balanced -- sensitivity and specificity that, as you can see, compares very favorable with the tests that are now out there. We provide physicians with actionable results. We provide physicians with results that they can use to save their patients from unnecessary, costly or invasive procedures or to find that cancer at this very early stage. Our advanced flow cytometry platform interrogates millions of cells in minutes. It reveals, as I said, cell populations residing in the lung microenvironment, including cancer and cancer-related cells that are labeled by TCPP. CyPath Lung's proprietary automated software ensures that only cells of interest are interrogated. It eliminates debris, dead cells and cell aggregates. And the algorithm's quality control assures that the sample itself comes from deep within the lung by identifying specific cell populations, lung macrophages. The results are generated in minutes shortly after the data is acquired. We've taken an innovative approach with an established technology, flow cytometry, and used it in a novel way to find lung cancer. We do not use a molecular marker. We investigate, and by use of fluorescent markers, we illuminate the lung microenvironment. Our recent acquisitions -- acquisition of Precision Pathology Laboratory brings in revenues, it brings in resources, and it expands our market reach nationwide as we move from our more limited Texas test marketing work to the national stage later next year. We have an -- we have accomplished a lot, most certainly, but we understand that there's much more to be done. We anticipate reaching significant milestones in the relatively near future. We're, of course, very pleased to welcome Mike Dougherty, our CFO, who recently joined us from Amazon, as well as Dallas Coleman, our National Sales Director, who joined us from Olympus. We also have opened 2 clinical trials with the Department of Defense that has expressed interest in using CyPath Lung prior to screening as a front-end diagnostic. This month, as I said, Medicare began accepting our CPT code approved specifically for use with CyPath Lung. And this year, we'll begin the process of seeking FDA clearance for our diagnostic in opening a pivotal trial as well as expanding our sales of CyPath Lung as an LDT. We see our flow cytometric platform as a platform to be used, as I said, with other lung diseases, and we have begun research with COPD, which we are conducting at our laboratories here in San Antonio. This year -- later this year, we expect to begin a proof-of-concept trial for our new COPD diagnostic as well as expand studies with the military. I'm very proud to work with the people at bioAffinity Technologies. It has an experienced, dedicated and highly innovative team of professionals who can grow the company into the leader it can be in the cancer diagnostic field. Dr. Vivienne Rebel, our Chief Science and Medical Officer, is an MD, PhD who spent 11 years at Dana-Farber before joining bioAffinity. Mike Dougherty, who joins me here, was the CFO for Amazon's Alexa commercial domain and also for Amazon Pay. Our scientific and medical advisory Board includes leaders in the field of pulmonary medicine, including: Dr. David Hill, who sits on the Board of Directors for the American Lung Association; and Dr. Sheila Habib, who directs the lung nodule and screening programs here at the VA. Our Board of Directors also is quite impressive. They're actively involved, and they bring exceptional experience to their -- to our company. Our Audit Committee Chairman is Stuart Diamond, who is the global CFO for GroupM, the world's leading entertainment company, with -- who's responsible for $50 billion in investment. Peter Knight founded Generation Investment that he grew with his partner, Al Gore, to an $18 billion fund. And recently -- most recently, we're pleased to welcome both Dr. Roby Joyce, the founder of Precision Pathology and our partner in commercial development of CyPath Lung, as well as Dr. Jamie Platt, who led 2 successful M&A exits for diagnostics -- diagnostic companies in 2021 at a combined estimated value of $1 billion. And Steve Girgenti, who's our Executive Chairman and also a founder, also founded and built multiple global health care companies that he's taken to very successful exits. In conclusion, CyPath Lung itself, by itself, meets the need for greater diagnostic certainty for both patients at risk for cancer and for their physicians. But we will be doing more. We will have more tests. From the -- but for CyPath Lung, from the patient's point of view, the test itself is noninvasive. There's no needles, there's no blood. Our patients tell us that, that's a big plus. And it's easy to do from the comfort of their own homes. Our studies to date have shown an accurate test with high sensitivity and high specificity. In market testing, the SNS numbers resonate highly with our doctors in the targeted market. And we rely on tested technology on flow cytometry, enhanced by our own automated data analysis built by machine learning. And lastly, as I said, we're expanding our technology platform to bring new diagnostic tests to market for COPD and other diseases of the lung. I want to thank you for taking this time to listen. I have on my -- we will publish or we will put this presentation on the website, and it does have the publication link should you be interested in following up. Obviously, for more information, you can talk to our -- who is on the phone now, our Director of Communications, Julie Anne Overton, or to RedChip. I'm happy to take questions now, as is Mike, if you have them for us.

Yes. Thank you very much, Maria and Mike. As Maria said, we want your questions. [Operator Instructions] We already have a couple of questions in the box. How does your test compare to conventional sputum cytology?

Our test compares very -- it is a different test and compares very, very well to sputum cytology. Sputum cytology has long been used, I think, back in the '40s. The difficulty with sputum cytology has been that, one, it's very time consuming. But two, it's dependent upon the abilities and the expertise of the pathologist who looks at the slide. For those of you who don't know what sputum cytology is, is that basically, you put a smear of a slide, a sputum on a slide and look under the microscope to look for cancer cells or cancer-related cells. We do something completely different. We use sputum, and I must say sputum is an excellent -- it's a very, very good sample. And the reason is that it bathes the lung. So it's very concentrated. But we look for cell populations using flow cytometry, whereas sputum cytology may look at maybe 10,000, 20,000 cells or perhaps as many, if you read multiple slides, as 30,000 cells. Our average sample is about 16 million cells, and flow cytometry allows you to not only look at the cells in a sputum sample, but also to sort them into different populations. That's why we have a difference in, I would say, specificity. For example, sputum cytology in specificity and sensitivity may be in the low 40%, whereas we have 92% sensitivity and 87% specificity, meaning we can very accurately detect whether you have cancer, but also whether or not you do not have cancer, both of which are important. So whereas we build upon use of sputum, this technology itself is quite different, and its approach is different. One last thing. Cytology, as I said, looks -- or relies upon, I should say, the expertise of specific pathologists. Our technology uses an automated system that standardizes results, such that the results are not dependent on an individual's perception, but rather on what the flow cytometer is actually seeing. And the results are very, very quick, like I said, in a matter of minutes.

[ Michael Samuels ], you are on with bioAffinity.

Two questions. Number one, how big is the market for the lung?

So the lung -- we're estimating a significant market share, probably a $2 billion market for the lung at our price.

$2 billion, okay. And you're saying -- okay. And then the other question I have is, at what point will you need to raise cash? Or won't you?

So we'll take -- we'll look at the markets and take advantage when we can with what is best -- and looking at what's best as well, obviously, most important for our shareholders.

Okay. So how much -- so let me go back. How much cash do you have to operate -- I mean, how far do you -- how much cash do you have to operate now going forward?

What was our last -- Michael?

In our last report, we had $4.5 million in cash, and we're burning about $1.5 million a quarter.

You're burning $1.5 million a quarter, and you have $4.5 million, so 3 quarters?

Yes.

Does the sputum require refrigeration? What is the shelf life? What is the margin on a $1,900 test?

Well, I can tell you first that sputum is surprisingly robust. I'm often saying nice things about sputum and people laugh. But the mucus around the cells tends to, for whatever reason, buffer and keep it well. We get samples in -- and we have about 70% or 80% of the cells themselves are viable, meaning alive when we get them in. And we do ask that the sample be refrigerated. The sample comes into the lab and is immediately processed. So it is transported without any reagent or anything else. People just simply collect in the small cup and send it. We do have, in the little kit and box in which people send the sputum back, a small ice pack, and we ask people to put that into the freezer, but it's quite simple. It travels very well is what I'm saying. Yes, please? I'm sorry.

And do you want me to be jumping on the margin question? So like the $1,900 test is -- price is just what we have now started billing with our new CPT code. And so right now, the cost of the test full out with reagents and everything fully loaded is about $300. But also I do want to point out that as we start to get reimbursement from this code, we will have contractual discounts and stuff from insurance companies and what we can get from Medicare. So of the $1,900, we will likely receive net about $1,200, and there's about $300 of cost of sales, so $900 margin out of the $1,900 is what I'm forecasting.

Can individuals buy the test directly? And if so, how?

The test must be ordered by a physician. And so if they can go to their physician, they can talk to their physician about the test. The patients, I'm trying to say -- so patients who are at high risk, patients who have smoked or who are smoking now, most often those who have had a low-dose CT or screening and who have a nodule are those where physicians most often order the test. But it is not -- it is -- a patient cannot directly order. They must order through their physician.

What has the response been from the health care professionals you are currently in talks with? Do you expect significant sales this year?

So we have taken the -- so the answer is -- first answer is that the response has been very good. And there's a good deal of interest. We've just begun to get out to the market. We've been doing more in the last year of market research, market development, branding development and the rest. We've taken an approach of doing more of a beta testing approach. You only, as I said, have one impression on the market, one first impression. And so we're looking at building out from our hometown of San Antonio, Houston, Dallas, the Valley here, the Rio Grande Valley, and that's where we're looking at first, particularly looking at the larger systems as well. So we do expect to have for -- we do expect to expand into a national market this year. But I think you'll see over the next 6 or 7 months more of a focus on this area of Texas. Now Texas is a large market. It has some big hospitals and caregivers. So we're excited to do that. We also, I have to say, have interest outside of Texas that has come to us. And obviously, we're not saying no to that.

Will the acquired lab be used for any tests outside of CyPath Lung?

The acquired lab actually is a well-established laboratory for the past 17 years that we expect to show a profit and continue to grow. It offers a wide variety of tests. It's largely histology lab, although it has molecular tests and also has test -- it has an interesting test for the detection of skin cancers as well. So that -- in addition to CyPath Lung, we'll have an additional test for COPD. We'll be expanding the test menu for Precision Pathology. If you're interested in what Precision Pathology offers, I just direct you to their site, precisionpath.us, and you can see their menu.

And just -- if I add, the audited annual financials for 2022, Precision had a $6.9 million net revenue last year. So yes, already existing sales.

You may have covered this before, but it may be worth repeating. How much does it cost bioAffinity to produce the test?

We had said about $300 all in for the test itself. We expect economies of scale, though, as we build out the test.

Yes. And to be clear, that -- it's fully burn, includes labor and machinery and everything. So economies of scale definitely look to improve that.

[Operator Instructions] Again, if you wish to recover some ground you've already covered here, we've got what are your current sales programs and what is the sales cycle process?

As I said, the current sales programs are focused as almost a beta testing in Texas. And we have begun to move into Houston. We will be going into Dallas, Texas as well as we're down looking at Austin, San Antonio and the Valley, the Rio Grande Valley. We'll develop and continue to develop and expand. We do have interest and we have customers who are outside of the Texas market. They've come to us, physicians have come to us. And so we can and do service those individuals.

When will full 1,800-person FDA studies start? And what will de novo classification achieve for CyPath Lung?

So we expect to begin the FDA study this year, later this year, probably midyear. We have interest and focusing in the military and in the VA systems as well as private systems for sites. We do have numerous sites that have expressed interest, and we're completing the -- and we'll be going to FDA with a presub with -- although we don't need to have FDA approval, we will get their -- if it makes sense, right, we will get their comments and see if they have other questions on the design. So that we're working on right now. The -- so we are going into looking at CE marking this in the EU. The FDA trial and its approval, FDA clearance, provides us, I think, with greater credibility. It will expand and make sale of this test easier. It will allow us to go into Europe, I think, more quickly. Although we can do so now -- I'm sorry, we can't do so now, we have to get CE marked, but we don't need FDA approval in order to be CE marked. Asia, I think, is after the EU. Our intent in the EU is really to go first into the Netherlands and to expand from there, in that same kind of process that we did here where we start smaller and then expand.

Maria was answering one of our written-in questions, which was, are there any plans to expand into Europe or Asia, for the benefit of the attendees who can't see the questions until we read them out. Okay. We did have one more question here. We sort of have covered this earlier, but maybe it bears repeating. Are you planning to raise capital in the near future?

We will take advantage of the market as we can. We have currently -- if you go to our filings [ as shelf ] available, but that is really -- that's all I can say at this point.

I'm not seeing any questions in the queue right now nor am I seeing anyone's raised hand. [Operator Instructions]

Well, I want to thank everyone for attending. I very much appreciate it.

When will the Q4 report come out?

I think our date is April 1, April 2?

Yes, April 1 is the...

I hesitate to say April 1 because of -- it's April Fools' Day. But I think that we'll do on or before April 1 and as required by the SEC.

Now before I give everyone ways to reach bioAffinity to get more information about the company, perhaps you, Maria and Michael, would like to give the essential value proposition. Tell our attendees today, why should they be interested in bioAffinity Technologies right now?

BioAffinity Technologies addresses a global need and a critical need to find early-stage lung cancer. Lung cancer is the leading cancer killer. We have, I believe, a stellar team of professionals who are very well skilled, very experienced in their respective fields, with Michael Dougherty, with Dr. Rebel, with Dallas Coleman, who is our sales, and others with a strong Board of Directors, who are advancing a technology that can fill a significant need, and that is lung cancer detection at early stage. As I said, the difference between finding lung cancer now at an overall stage is about 25 -- there's a 25% of a 5-year survival. And that reflects the fact that lung cancer is found in later stage. But if we can find it in Stage 1, which CyPath Lung has been shown to find, in Stage 1 and treated, you have a greater than 90% 10-year survival rate for lung cancer. What does that mean from an investor standpoint? It means that you have a very strong test using established technology and including AI that can meet a very critical need in the market. And most -- and equally important, you have a platform technology using flow cytometry to detect different lung diseases. COPD is equally a $2 billion market, and that's our next test. But this is a test that may also be used for other cancers, like prostate cancer or bladder cancer. So it's not just -- even though I hate to say just, lung cancer. And I think we've proven ourselves. I want to point out that CyPath Lung received a CPT code with CMS, with Medicare, a clearance approval in about 8 months. And I think that's somewhat reflective of the fact that CMS and others see the need for a test like ours.

Thank you very much for that, Maria. Now before we sign off, for more information about bioAffinity Technologies, you can reach us at 1 (800) RedChip, that's 1 (800) 733-2447. You may also write us at [email protected]. Please make sure you visit RedChip's investor information page for bioAffinity Technologies. It's redchip.com/stocks/biafredchip.com/stocks/biaf. There, you can sign up for news alerts on bioAffinity and view and download the investor presentation and fact sheet. Please also visit the bioAffinity Technologies website, it's bioaffinitytech.com. Thanks again to our many participants today. And thank you very much, Maria and Michael.

Thank you very much.