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

Hello. This is Craig 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 Maria will answer your questions. [Operator Instructions] Before we begin, please allow me to 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. Please go ahead.

Thank you very much, and good afternoon, everyone. I'm excited to speak with you today and discuss our plans for 2025 as well as review the success bioAffinity Technologies has enjoyed this year. bioAffinity Technologies addresses the critical need for early detection of cancer. And more specifically, its deadliest form, which is lung cancer. An estimated 18 million people in the U.S. are at high risk for lung cancer. The European Union and Asia, which are other areas in which bioAffinity holds patents, they have an even greater number of people who can benefit from our products. For example, there are an estimated 300 million smokers in China alone. Across the globe, early detection of lung cancer is vital, and it leads to longer, healthier lives. Let me give you for a minute an example. In the U.S., the overall 5-year survival rate for lung cancer is 28%. This is, in fact, up from 26% estimated for last year. But if lung cancer is caught in Stage 1 and treated, the 10-year survival rate jumps to greater than 90%, 90%. So our noninvasive reimbursed test to detect early-stage lung cancer, a test we call CyPath Lung has shown high accuracy in detecting lung cancer. Our initial product to detect lung cancer, the one I'll focus on today has a large market. In the U.S. alone, the lung cancer diagnostic market in 2024 was estimated at $4 billion, and it's expected to reach more than $7 billion by 2030. I also want to emphasize, however, that we have a platform technology, and we are developing tests for the diagnosis of other lung diseases, such as chronic obstructive pulmonary disease. It's more commonly called COPD. And that affects an estimated 14 million Americans and has a similarly large diagnostic market globally. We count many successes in 2024 in this past year, including obtaining reimbursement for CyPath Lung, expanding our sales team with experienced salespeople who know the pulmonary market, obtaining access to the federal health care system and streamlining operations. The acquisition of Precision Pathology Services in 2023 gave us control over lab operations and 100% of CyPath revenues. The work we have done in 2024 has given us the capacity, the capability and the experience to expand operations to meet the growing demand for CyPath Lung as we strategically grow our sales efforts into other targeted areas in 2025. This year's sales of CyPath Lung has shown that a growing number of physicians are recognizing the benefit. In 2024, we've had a record year in sales, and we look forward to continuing with record growth in 2025. This year, our wholly owned subsidiary, Precision Pathology Laboratory Services is on track to report revenue of $9.4 million in 2024, more than 20% growth in annualized revenue compared to 2023 after accounting for the acquisition of Precision in September of 2023. The increase in revenue reflects greater than 1,700% increase in sales of CyPath Lung through November 30 over the same period last year. Looking to 2025, we will take advantage of our success this year in getting listed on the federal supply schedule and making CyPath Lung now available to our veterans and active military across the country. We are focused on key VA medical centers that screen, diagnose and treat lung cancer. These 132 designated cancer centers across the U.S. have teams of pathologists, pulmonologists and oncologists who can see the benefit of CyPath Lung for their patients. And I have to add, there are many benefits to CyPath Lung. CyPath Lung is patient-friendly, and it is very physician focused. It's a test that provides for at-home collection, meaning there's no blood and no needles. Results are provided to physicians 2 to 3 days after a sample arrives at the lab. CyPath Lung is particularly good at detecting cancer or determining cancer is not present in people with small lung nodules, less than 2 centimeters or less than 20 millimeters. The result of our clinical trial, which was published in the peer-reviewed Journal of Respiratory Research reported that our test had a 92% sensitivity, which is the ability of a test to detect a true positive, and an 87% specificity, which is the ability of a test to detect a true negative. The results also showed a 99% negative predictive value for the test when used with individuals with pulmonary nodules, less than 2 centimeters. CyPath Lung differentiates patients with cancer from those who are cancer-free using a technology called flow cytometry, which looks at populations of whole cells in a sputum sample that comes from the lung and then analyzes the data with our proprietary algorithm we built using machine learning. Machine learning is a form of AI that resulted for us in standardizing results and in high performance. Simply put, CyPath Lung analyzes the cell populations in the lung microenvironment to determine if there is a malignancy present. Physicians tell us CyPath Lung is helpful with patients with small pulmonary nodules. These patients are often asked to just wait and see if the nodule that they find is going to grow or sometimes a physician may opt for a more invasive biopsy only to find that the nodule is benign. The uncertainty is stressful for both the physician and the patient, as you can imagine. CyPath Lung does not replace the tools a physician uses to find early cancer. It enhances and it adds to the toolbox and can bring more clarity on next steps for both physicians and their patients. Physicians are also very well aware of the cost to patients and the financial burden to health care of lung cancer. And in 2024, this year, we saw that CyPath Lung has the potential to make a significant positive difference. Earlier this year, 2 physicians published their findings after analyzing the impact that the use of CyPath Lung could have on the health care costs in this country. In their analysis, Dr. Michael Morris and Dr. Sheila Habib assumed that CyPath was part of the standard of care in 2022 for patients with small pulmonary nodules. They considered the cost of follow-up based on published data and the savings that would be found in adding CyPath Lung to the care pathway for patients with -- on Medicare and separately, they looked at the impact using CyPath Lung as part of the diagnostic pathway for patients with small pulmonary nodules with private insurance. The results showed considerable savings. For Medicare patients, using CyPath would have resulted in savings of more than $2,700 per medical patient -- I'm sorry, Medicare patient or nearly $370 million in total savings in 2022 to the U.S. health care system. And for those patients covered by private insurance, the study reported a savings of more than $6,400 per patient. That would have resulted in nearly $900 million in total savings to the health care system if our test had been used with patients in 2022 who had pulmonary nodules between 6 millimeters to less than 30 millimeters. Let me -- again, let me take one moment to tell you about the authors of this study. Dr. Michael J. Morris is with the Brooke Army Medical Center, the country's largest U.S. medical hospital -- military hospital. He is a pulmonology and critical care physician, and he is the Assistant Dean of Research at the San Antonio Uniform Services Health Education Consortium. Dr. Sheila A. Habib is Director of the Pulmonary Lung Nodule Clinic and the Lung Cancer Screening Program at the South Texas Veterans Health Care Systems Audie Murphy Memorial Veterans Hospital. This is one of our nation's largest VA hospital systems. These are physicians who recognize the importance of CyPath and there are a growing number of physicians who similarly see the benefit in using our noninvasive test. In 2025, we will work with these physicians who are advocating on our behalf, and we will take what we have learned and how we have improved the physician and patient journey, and we will strategically expand our market. Some of our investors on the call will remember that we made a decision to launch CyPath Lung in a limited market. In our case, we chose to launch in Texas, our own backyard. And as you know, I say this is a very big backyard. In fact, by our assessment, it is the fifth largest state in the U.S. for pulmonary practices. This approach has been a good one because it's provided us with the ability to evaluate the market to hone our messaging to build a sales team and to improve operations. 2025 will be an expansion year. We look not only to enter the VA and military market, but also to expand into key regions where we have existing practices who came to us largely by word of mouth from other physicians. There are ordering physicians in 15 states who learned about CyPath Lung from a colleague or from a patient. We believe those are the practice areas worth expanding. But of course, we won't forget Texas. It offers further opportunities for growth, both increased use of tests with our existing clients and increasing our customer base. And of course, we recognize that a larger market means a greater marketing effort. Marketing plays a critical role in sales. We established our brand with the help of Havas Health, and now we will be working with an equally well-respected, highly innovative marketing agency with an impressive pedigree in taking new products to market, particularly in the pulmonary space. In addition to increasing our sales team, in 2025, we look to hire a marketing director to add emphasis and to add the support needed to increase sales. In addition to expanding our sales efforts in 2025, we also expect to initiate our clinical study next year. We have reported that we intend to conduct a clinical trial that will be the basis for seeking clearance of CyPath Lung by the Food and Drug Administration, the FDA. We expect to begin this larger clinical trial in 2025. And towards that end, we met this month with the FDA to discuss our trial design and the test's intended use among other topics. We were encouraged by the meeting, and we will continue to work with the agency, and we will move forward. As part of the clinical trial effort, the National Association of Veterans Research Foundation, that's called NAVREF, sent out a call for interest in our study to the VA -- the entire VA research system. I'm proud to report that nearly 20 VA systems have responded so far, saying that they are interested in taking part in the study and are moving forward. These VA medical centers are in various stages of qualification, and it is important to understand that some may not be in the study for various reasons. But we are encouraged by the response of these physicians who treat our veterans and the veteran population, and they see the need to advance CyPath Lung. In addition to the VA, we also have a number of large private and academic medical centers that are in the process of being qualified as collection sites. Our national principal investigator for this trial is Dr. Michael Boris of Brooke Army Medical Hospital, the doctor who I mentioned earlier and the author of the study. We expect several active military hospitals will be part of the site collection network. And along with the VA and academic and private medical centers, it's just a very exciting time and a very busy time for the company and quite frankly, a very rewarding time to see the interest and the enthusiasm for CyPath Lung. It may be helpful if just for a moment, I step back to explain that CyPath Lung is, at this time, a laboratory developed test. That means that CyPath Lung is sold by a single laboratory. In this case, our subsidiary, Precision Pathology, and it is available only if ordered by a physician. The centers for Medicare and Medicaid oversee LDTs, laboratory developed tests, like CyPath Lung. And a newly promulgated rule by the FDA results in FDA having greater jurisdictions over LDTs. But I would note that our CyPath Lung test is grandfathered under the new rule. And I'm explaining this because the rules governing laboratory tests certainly can be confusing. And I also want to make clear that we will continue to market CyPath Lung as we move through the FDA process. I'm hoping that this explanation is helpful. As proud as we are of our advancement of CyPath Lung, we are well aware that the potential -- of the potential for our flow cytometry-based technology. Our research team is led by Dr. William Baa, who, during his time working for ILEX and Genzyme played a key role in successfully bringing new medical products to market. We have decided in the near term to focus our research efforts in developing our test for COPD that would help identify patients early enough to take advantage of the new very promising COPD therapies coming on to the market. In 2025, we also will build on our work with COPD and look at developing diagnostics for asthma. We view these tests, which are under development as possible companion offerings with CyPath Lung, our test for early lung cancer that is going to go to the pulmonary marketplace. bioAffinity Technologies was built on innovation. It was built on a dedication and a belief that we can make a difference, both individually and collectively. We have a strong management team and a highly experienced Board of Directors who play a key role in our success. Our Executive Chairman, Steve Girgenti, is a veteran health care executive. He founded Healthworld, which is a global health care marketing firm that when he was running it, was one of the largest in the world. The Chairman of our Audit Committee, Stuart Diamond, is the Global Chief Financial Officer of GroupM, a media investment management group with over $60 billion in billings. Our Director, Dr. Jamie Platt, has been guiding teams in developing, validating and commercializing more than 40 innovative high-complexity tests for the U.S. and the global firms. She served as Chief Operating Officer at PGDx, which was acquired by Labcorp and Inivata, which was acquired by NeoGenomics for a combined value of nearly $1 billion. Our management team is equally strong. Our CFO, Michael Edwards, guided us through the IPO and recently rejoined the company. He has 30-plus years in corporate finance, including serving as CFO for both public and private companies, and I'm very proud to have him at my side. Our Chief Operating Officer, Xavier Reveles, brings more than 25 years of experience as a clinical geneticist skilled in the creation and the management of CLIA clinical laboratories in coding and reimbursement. Our Chief Science Officer, who I mentioned, Bill Bauta, was responsible for the discovery, development and the FDA approval of multiple products during his tenure at Genzyme and at Ilex and has been the innovator and the inventor of several products for us. Our sales team is led by Dallas Coleman, who brings more than 15 years of experience in medical sales, where he succeeded in launching new products for Olympus America's therapeutic solutions division. He worked primarily with pulmonologists, thoracic surgeons and physicians treating patients with lung disease. And we see that he's brought his experience, his skill and certainly his goodwill to bioAffinity. For me, I've spent more than 30 years in the C-suite in the medical, environmental and energy fields. I've had the honor of leading bioAffinity from a small startup of about 3 people to a public company with talented and experienced employees at every level. They are all committed to advancing CyPath Lung and its platform. But CyPath Lung is also a personal calling. My father who is literally a rocket scientist, who is the one who pressed the button to launch America's first intercontinental ballistic missile, the Atlas, who is a dedicated World War II veteran, a father of 3 and yes, a smoker, died of lung cancer at the age of 38. I am dedicated as are the people who worked at bioAffinity Technologies to bringing value to our shareholders by bringing diagnostics to market that help people live longer, healthier lives. It is our profession, but it is also personal. And on a personal note, I want to thank you for listening today and for learning more about our strong management team, our strong research team, our strong sales team and all the others who are dedicated to bringing value to our shareholders. We are ready to execute on our plan in 2025 and beyond. We are ready to execute on a plan that can increase revenues, expand our market, advance new tests in our pipeline and conduct our pivotal trial. We remain focused on bringing shareholder value by helping physicians give their patients better diagnostics so they can take advantage of more targeted advanced care that can lead to longer, healthier lives. And with that, I thank you for attending today, and I'm happy to take questions.

Thank you very much, Maria. Yes, we are now opening the webinar to your questions. [Operator Instructions] Maria, how large was the study that was completed showing the 96% positive detection rate? And could you give again the name of the company that conducted the trial?

So the trial was conducted by -- I assume that they're talking about our trial that was in respiratory research, and that was conducted by bioAffinity Technologies. There was 150 patients in that trial. I believe that answers the question.

And I believe it does, too, Maria. Thank you very much.

Sure. I would reference, if you are interested in reading the paper, which I think it's very interesting, of course, I would suggest that people go to our website and you can look on publications and look for the Lemieux trial, and that will be there. It will be one of the top. There's quite a number of trials that we've done and research that we've published, but it is Lemieux. Madeleine Lemieux is the lead author.

Thank you very much, Maria. How much cash does bioAffinity have on hand? And would you need to do a raise?

So in our most recent quarterly filing, we reported $2 million as of November 12 in 2024. We really will be -- we will be looking for taking, I think, best advantage of the market as we move forward.

Thanks, Maria. What is the outlook for achieving positive cash flow?

So we're looking for the -- generating positive cash flow depends on a number of different factors. We're focused on driving sales for our first product, CyPath Lung and to deliver value for our shareholders. We are a research and development company. So we're also looking at how we can develop that value by increasing the products and the commercial products on the market.

What is your burn rate?

In our most recent quarterly filing, we reported operations of about $5.6 million for the 9 months that ended September 30, and this equates to a cash used of about $600,000 per month.

How many CyPath Lung tests could you potentially sell next year?

We have not as yet come out with our forecast, but we soon will.

How many CyPath tests have been sold in 2024?

We have about $600,000 in revenues that we expect from CyPath Lung. I have not reported the number yet. I'm hesitant to report something that is not already in the filing. So what I would suggest is that people look to our filings, our last quarterly filing.

What level of volume can you handle with your current infrastructure? If you, all of a sudden, had thousands of tests to conduct in a short window, could you handle?

Yes, absolutely. I think that's one of the most important parts of having acquired Precision Pathology and this last year in expanding our laboratory, our abilities. So we do have that capability to do thousands of tests. Yes.

What do you need to do to get FDA approval for CyPath?

So we will be conducting the pivotal trial that I had mentioned that I'm discussing, and I think someone had asked how long will that take? We expect the clinical trial to last 3 years and we will be following our participants for up to 2 years. And so after that, we will go back to FDA with a submission, and they will review and what -- and determine the label, the intended use for CyPath Lung. But it doesn't stop us, and we see continued growth in sales as a laboratory developed test as well. So we're very excited about that. I think that the opening of our VA market and the military market and the government market is very important. We were listed very quickly on that market. I mentioned in my talk how well we have been received when we talk about the larger trial and the use and the importance of CyPath Lung. We'll still -- we'll be selling into that market as well. So I do believe that there will be continued growth for CyPath as a laboratory developed test. Now of course, the FDA designation, the clearance for FDA allows us to offer the test in different laboratories. And I think it has the possibility of significantly increasing sales, not only in the U.S. but worldwide.

Maria, as you mentioned in your talk, beyond lung cancer, you're developing tests for COPD and asthma, market's expected to reach $8.2 billion by 2027. How could successfully entering these adjacent markets multiply your total addressable market?

They certainly will multiply, and I can't say to what degree. I have not done that calculation. But I can tell you that COPD in particular, is a growing market. There's -- for anyone following, there's a good number of new therapies coming on the market that I think will be very successful. And one of the advantages of a test like ours and a test for COPD is that it can identify more people who would be candidates for these therapies. Not that ours would be a precision medicine approach, but I think it would be more applicable for the therapies than -- it would just be applicable to the therapies. If we had a test when we have a test that can diagnose COPD such that people can get on these drugs early enough to really make a difference.

Maria, your high-margin CyPath Lung test contributed to improving gross margins to 38.7% in the third quarter of 2024. As test volume scale and you capture 100% of CyPath revenues, how high could margins expand?

I'm sorry, I really cannot comment on things that we have not yet filed with the SEC, that we haven't publicly disclosed.

CyPath, as you said, in the interview, concentrated on Texas in 2024. Talk about how you're expanding to the entire U.S.A.? Or are you just going to be targeting states, certain states?

We're cognizant of the interest in different areas that I think would be strategically correct to go into. And so we want to very much target our marketing dollars and our sales force in those areas. So we will be doing that. Saying that, we also have an opportunity with the entire country as it relates to the VA and to military, and that will be a broader reach. But we definitely will look in the more private or academic areas into very strategic areas.

With physician adoption growing 40% quarter-over-quarter from 100 to 140 offices, it seems that word of mouth is driving rapid expansion. Could this organic growth accelerate as more key opinion leaders experience the benefits firsthand?

Certainly, that's the case. But -- and we have seen the importance of peer-to-peer marketing, so to speak, or peer-to-peer discussion. But I do believe that the emphasis will place next year on marketing and sales, the support we'll be able to give and the additional work that we'll do in the marketing arena will help a lot. We have done a limited amount, I think, a very effective amount of marketing in the Texas area. But as we go national, we're cognizant of the importance of marketing and a good branding and of the many ways that we can get into the market and get CyPath Lung known on a much larger scale. Are we in here?

Sounds fabulous. The addition to the federal supply schedule opens access to about 8,000 annual veteran lung cancer patients. And as you mentioned, you mentioned the VA in your talk, with the VA promoting annual screening through programs like LPOP, could this become an even larger opportunity than initially projected?

So we have not issued our forecast. We will be doing so for next year. There always is the opportunity for an upside, and we're looking at how to really to capture that as we move forward.

How soon will the CyPath Lung test be available in Japan?

So I think that, that is probably 3, 4 or more years off. We look to getting FDA, I think, approval before -- or at least clearance before we move into Japan or into Asia. But it is a very large market as is most of Asia.

Having lived in China myself, I can attest to the fact that they're still stuck in 1975 when it comes to smoking. And yes, 300 million people are smoking.

Yes. Europe and particularly China. China is one of the world's largest cigarette producers. And so it's a very significant market. and it has a very high rate of lung cancer. So we're cognizant of the importance. We're looking at China and Asia as an important market. I think it's important to point out, too, that we have strong patent portfolio, and we're expanding that portfolio. And as we move forward with some patents that are very specific and I think very important for CyPath Lung in protecting CyPath Lung. Certainly, we have strong patents now, but we're not standing on our laurels. We're continuing to move forward to make sure that we have a good, strong patent portfolio.

What percentage of revenue do you expect to get from the in-house lab?

I would reference again, the most recent quarterly report and the third Q, and I think that would be helpful. I think -- go ahead. Are we -- I see some...

No, I'm just -- we have so many questions, Maria, and I'm just -- we're just looking through them and carefully choosing them. And this may be a good time to tell everyone that there's just no way we're going to get through all of your questions. However, if your question was unanswered today -- yes, go ahead, Maria.

Can I suggest something, please? So I would suggest if you might, just send me the questions or send RedChip the questions, and I'm happy to respond to all of them. I think that that might be a more -- a better use of our time in responding, and I can help by doing that. Or the other thing we can do is we can put the -- we can get the questions and we can answer them and you can look at RedChip. Either one would be fine. But I'm happy to answer all the questions.

Absolutely, Maria, and it's very simple. If you -- even if you have had your question answered or think it will be answered in the next 5 minutes because we're going to wrap up at 5:00 p.m. Eastern, you can copy your question right now, pace it into an e-mail and send it to [email protected]. Perfect. Have you found a degree of continued tests being submitted by existing clients?

Most certainly. We have several -- we have more than several. Our clients, our physicians are repeat in using the test. So I think I'm not sure -- if the questioner is asking, does one person use the test repeatedly, or does a physician order the test for a patient on multiple times? And the answer is yes, that can happen. This is a noninvasive test. And so physicians can use and order the test, for example, each time the person gets a low-dose CT. Sometimes with those smaller nodules, nodules that are 6 to 10, 6 to 15 millimeters, a physician will order CyPath Lung and then thereafter, he or she will order again in 6 months when they do another low-dose CT, when they do another imaging. So one thing I think that is important about CyPath Lung is that it allows a physician to order a noninvasive test to give direction as to what to do next, and they can do it every 3 months, every 6 months, whatever the doctor feels appropriate for the patient. I think that's one of the reasons that we get interest and one of the things that doctors like so much about it and patients is the noninvasive nature of it. They also understand, believe it or not, sputum, which is what we use. So sputum is something that is often people cough up when they're at high risk. Most of our patients are at high risk. We provide them with an Acapella also to assist in producing that sample. So for a physician and for the patient, it's fairly easy to give that sample, and it's also fairly easy to do this repeatedly if indeed the physician says or deems it appropriate. But we certainly have with our clients and our doctors where they're giving us multiple samples -- multiple is not even the answer, with many samples in a week or a month or so forth.

Thanks, Maria. There are 12,000 lung doctors in the United States. If each one of them sent in a test a week, would that produce profitability?

Yes. We don't need quite that much. But we are profitable in the sense that we are making profit. This is a -- we have revenues, I should say. But we -- certainly, the more revenues that we have, the quicker we will get to a cash positive situation.

Maria, we are approaching the 5:00 Eastern hour. As we said, we're not going to be able to get to everyone's questions, but we certainly value them all. Please copy and paste them into an e-mail and send it to [email protected]. As Maria said, she will be happy to give you a personal answer to each of your questions. Maria, I'm just going to give the attendees a little bit more information about how to get even more information about bioAffinity. They can call us at RedChip. 1-800-RedChip is our number here. They can visit RedChip's Investor Information page. For bioAffinity Technologies, it's biafinfo.com. There, you can sign up for news alerts on bioAffinity and view and download the investor presentation and fact sheet of bioAffinity. And a reminder that each one of you by virtue of having signed up for today's webinar also are opted in for our RedChip newsletter. You'll be receiving that once a week. I hope you enjoy that, everyone. It's free to you. Please watch Small Stocks, Big Money, RedChip's program featuring exciting small-cap companies over Saturday night at 7:00 p.m. Eastern on Bloomberg U.S.A. Join RedChip's next webinar with LOBO EV on Wednesday, January 8, at 4:15 p.m. U.S. Eastern. Register for all RedChip webinars at redchip.com/events where in a few hours, you'll also be able to view an archived version of today's BIAF webinar. Thanks once again to our many participants. And as always, thank you, Maria.

Thank you.