Letter to the Shareholders from the CEO
NEW HAVEN, CT, (March 20th, 2020) – Specialty diagnostics company Precipio, Inc. (NASDAQ: PRPO), released today the following letter to shareholders from its CEO, Ilan Danieli.
I’m writing this letter to you from my home office where, like many of you, I have been “holed” up for the past week. Like many companies, our first priority is to protect our employees and families, so we have instituted a policy that allows only essential employees to come to our offices. We all respect the precautionary measures that the CDC is requesting all companies to adhere to.
This has been a trying time for everyone, but we are fortunate to be in a healthcare business that continues to operate under relatively similar conditions, and we have not seen any substantial downturn in our business. For better or worse, I suppose cancer patients have more to worry about than COVID-19, and we are here to make sure we have their backs.
I would like to address some of the many questions that have been pouring in from our shareholders, and provide an update on the company’s situation. There are six key points I’d like to address today.
1. Employee safety and business continuation
Fortunately, as members of the healthcare community and as a certified laboratory, we already follow strict sanitary precautions. To date none of our employees have tested positive for COVID-19; however, we plan on continuously monitoring this and once kits are available our employees will be tested as necessary. We have realigned all lab testing and personnel and instated precautions to limit employee interactions while maintaining the services we provide to our customers.
Furthermore, we are reducing shift interaction and alternating staff attendance in the laboratory to minimize contact between employees. We are balancing the safety of our employees with the need to ensure that we continue to provide consistent quality of service to our customers. As described below, we have not seen a slowdown in our business volume, and continue to operate our laboratory in the normal course of business.
2. Pathology business
We serve oncologists and hospitals who continue to take care of cancer patients, and as such, require our testing services. Our customers have continued to operate in their capacity, and we continue to see a steady flow of biopsies coming to our laboratory for testing. We do not know if this will remain the same as the crisis develops. Although in-person access to clients has, in some situations, been limited, for the most part our sales team continues to stay in contact with our customers and provide them with the necessary support.
As announced earlier this week, the transition of the Oncometrix business has begun and we are seeing cases arrive to our laboratory from those new customers. We continue to onboard these customers as part of our normal procedure and welcome them to our company; we are of the view that even under these circumstances we will continue to see the increase in the number of customers as we grow our business.
3. Products business
Our clinical laboratory segment for our products business includes laboratories, and many of those laboratories, both domestic and internationally, are entirely consumed with their response to COVID-19, are dealing with similar issues of reduced staff attendance and focusing on incoming work volume. The integration projects of our technologies such as IV-Cell and HemeScreen have been placed in a temporary lower priority, although none of these projects have been cancelled.
The target customers that have explored and tested our technologies are to our understanding still committed to bringing these technologies to their laboratories once the current circumstances change.
Despite the slowdown in the introduction of our current technologies, we continue to explore other avenues to promote our technologies. We are currently advancing several initiatives that could potentially lead to quick and substantial market penetration, working with an additional segment of the healthcare community that is less “burdened” by the current situation. We will have more on this upon the launch of the program.
4. COVID-19 testing
Many of you have written to ask if we are getting set up to test for COVID-19. We have explored the option of setting up testing for COVID-19 and decided not to proceed down that path. We are not a virology lab, so getting set up would require complete construction and segregation of that testing area from the rest of our cancer lab which will require considerable cost. Additional credentialing and undergoing an inspection in the laboratory create further hurdles to this process. Furthermore, there is no clarity on the ability to obtain ongoing supplies of testing kits, and there are many issues surrounding reimbursement for the tests.
Therefore, we have decided that the right course of action is to remain focused on our business and direct our resources to executing on our business plan.
5. Finance & reporting
It is our intention to file our 10-K annual report for 2019 within the expected requirements and do not, at this time, anticipate any necessary extensions or delays in our filing. We will also ensure that the company can raise capital as necessary to carry us through this challenging period to ensure that we remain in business.
Fortunately as a revenue-generating company with several business lines, we have a better risk-profile than other companies in our industry. We are reducing expenses in all areas including a 25% salary reduction for the company’s management team, to manage through this crisis. Inventory management, work hours and administrative expenses are individually scrutinized.
6. Share price and future outlook
It is not lost on any of us where the share price is, and indeed we are again below the $1 mark. I don’t think anyone could have foreseen the market situation we’ve experienced in the past 30-60 days, and the impact from COVID-19 will have on the economy. We recently announced a doubling in our revenue due to the Oncometrix transaction. Our stock was up 10%, and down the following day, and continues to fall. In any other business, and in any other market, one could expect that the doubling of revenue (assuming the share price reflects some sort of revenue multiple) would have a positive and sustainable impact on the share price.
Many of you have expressed concern around another reverse split (RS), so I’d like to refresh everyone on the current process (which may be subject to changes due to the market conditions). Assuming the share price remains below $1 for 30 business days, we anticipate receiving a notice from Nasdaq providing us with 180 days to enable us to cure the minimum price requirement either by share price appreciation to above $1, or through a RS. We may even have the opportunity to file for another 180 day extension (subject to certain rules and naturally with NASDAQ’s approval), which potentially will provide us with a total of a year to comply with the requirements. Therefore, there is no imminent need to conduct a RS, and management will do everything within its power to avoid that outcome.
As someone who is a big fan of and frequently quotes Winston Churchill, I’ll end with one of my favorite quotes which these days, I find somewhat appropriate:
“If you’re going through hell, keep going”.
– Winston Churchill
Leadership is tested in challenging times, not when it’s easy going. We will do what it takes to get through this crisis, and I am confident we will come out stronger. My team and I have been through tough times before, and we are determined to prevail. This will not come without pain, but I want you, our shareholder to know that we will never give up. These times call for a combination of ingenuity, creativity, and a survivalist approach – and we possess all those elements.
I appreciate you taking the time to read this letter. As always, please keep emailing us at [email protected] . We will continue to work hard to deliver on our vision.
CEO, Precipio, Inc.
Precipio has built a platform designed to eradicate the problem of misdiagnosis by harnessing the intellect, expertise and technology developed within academic institutions and delivering quality diagnostic information to physicians and their patients worldwide. Through its collaborations with world-class academic institutions specializing in cancer research, diagnostics and treatment such as the Yale School of Medicine, Harvard’s Dana-Farber Cancer Institute and the University of Pennsylvania, Precipio offers a new standard of diagnostic accuracy enabling the highest level of patient care. For more information, please visit www.precipiodx.com.
Certain statements in this press release constitute “forward-looking statements,” within the meaning of federal securities laws, including statements related to ICP technology, including financial projections related thereto and potential market opportunity, plans and prospects and other statements containing the words “anticipate,” “intend,” “may,” “plan,” “predict,” “will,” “would,” “could,” “should,” and similar expressions, constitute forward-looking statements within the meaning of The Private Securities Litigation Reform Act of 1995. The Company’s actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors. Factors that could cause future results to materially differ from the recent results or those projected in forward-looking statements include the known risks, uncertainties and other factors described in the Company’s definitive proxy statement filed on May 29, 2018, the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2019 and on the Annual Report on Form 10-K for the year ended December 31, 2018 as well as the Company’s prior filings and from time to time in the Company’s subsequent filings with the Securities and Exchange Commission. Any change in such factors, risks and uncertainties may cause the actual results, events and performance to differ materially from those referred to in such statements. All information in this press release is as of the date of the release and the Company does not undertake any duty to update this information, including any forward-looking statements, unless required by law.