Precipio Stock

Precipio, Inc. and its subsidiaries (Precipio) operate as a healthcare biotechnology company focused on cancer diagnostics.

The company focuses on blood related cancers, which represent some of the most complex cancers to diagnose, and are prone to some of the highest rates of misdiagnosis; industry studies estimate 1 in 5 blood-cancer patients are misdiagnosed.

The company develops and sells diagnostic products, reagents and services that improve the accuracy and efficiency of diagnostics, and lead to fewer misdiagnoses. The company’s products and services impact patient outcomes by providing more accurate diagnostic results than current industry accepted practices that better inform the selection of appropriate therapeutic options. The company’s platform delivers better diagnostic accuracy than industry peers because of the technologies, workflow processes and experience the company have developed. The company markets its technologies to other laboratories; additionally, the company operates its own laboratory, focused on delivering specialized diagnostic services to physicians and their patients to better ensure they receive accurate results leading to fewer misdiagnoses and promoting cost savings.

To deliver the company’s strategy, the company has structured its organization in order to drive development of diagnostic products. In the company’s laboratory and R&D facilities located in New Haven, Connecticut and Omaha, Nebraska, the company’s development teams work to develop, test, and ultimately run new products and services in a clinical setting. The company operates CLIA (Clinical Laboratory Improvement Amendments), laboratories in both the New Haven, Connecticut and Omaha, Nebraska locations providing essential blood cancer diagnostics to office-based oncologists in many states nationwide.

Market

The company’s market is the United States domestic oncology market where the company participates as a commercial diagnostic laboratory and market the company’s products. The company also provides new technologies to the oncology diagnostic laboratory market in the form of HemeScreen and IV-Cell product offerings.

From the company’s New Haven, Connecticut commercial lab, the company provides diagnostic blood cancer testing services to oncology practices in over 20 states.

Technologies

The company’s strategy is to develop, manufacture and sell multiple technologies that the company expects to be adopted by laboratories. Since the company operates a clinical laboratory, the company has access to patient samples that can, in parallel to the clinical work the company conducts, be utilized to develop these new technologies. The following is a description of the two products on the market:

HemeScreen

The ongoing introduction of new, genetic-based targeted therapies have made molecular testing a mainstream and essential component of the diagnostic process. WHO (World Health Organization) and NCCN (The National Comprehensive Cancer Network) guidelines have delineated the testing requirements of several specific genetic markers that are required during the diagnostic workup based on the patient's disease state.

The products on the market offer two solutions for genetic testing. One of those solutions is single-gene testing products via various testing modalities; the other solution is broad, NGS (Next Generation Sequencing) panels that typically range from 50 to >500 genes in one panel. There are benefits and drawbacks to both current product options. While the single-gene products are focused, a lab requires multiple different products to address the clinical testing needs; using multiple products requires the purchase of multiple products and multiple testing machines, requiring the lab to spend substantial capital expenditures; a complex lab workflow; the splitting of a sample; all resulting in poor economics. Poor economics of an assay require the laboratory to batch samples, resulting in lengthy turnaround time to provide results to patients, and impacting patient care. Conversely, NGS, although providing broad gene coverage, is cumbersome and expensive to operate, thus resulting in lengthy TAT; and is costly to the payors who are reluctant to pay for the testing of 50 genes, when only 5 are defined as medically necessary.

A small panel targeted approach that operates on a single, low-cost, and easy-to-operate platform should be considered an attractive solution that provides the clinician with the answers they need while maintaining a simple workflow and economic model within the laboratory. HemeScreen utilizes an inexpensive RT-PCR (reverse transcription polymerase chain reaction). HemeScreen is a set of disease-specific reagents that provide a simple workflow, is easy to use, and create attractive economics to the lab, resulting in their ability to reduce batches and provide faster TAT. The company’s customers that utilize HemeScreen have demonstrated a reduction in TAT of 2 weeks to 2 days, and have also improved their financial outcome through this cost-effective technology.

The first panel developed using HemeScreen technology was the company’s Myeloproliferative Neoplasms (MPN) panel. The company has since added Acute Myeloid Leukemia (AML), Chronic Lymphocytic Leukemia (CLL), Cytopenia, and BCR-ABL panels, evolving HemeScreen into a ‘suite’ of robust genetic diagnostic panels, and the company expects the release of additional diagnostic panels during 2023.

The company owns a provisional patent application on its proprietary panels. The company’s technology enables testing to be completed in one rapid scanning process. The HemeScreen panels test for the presence of various mutations. In developing HemeScreen, the company focused on improving the economics of providing blood cancer diagnostic tests and reducing laboratory technician time consumed in the testing process. By using the company’s HemeScreen media, laboratories can avoid the cost of multiple platforms and test all the genes on one single platform; reduce the threshold of expertise required to perform these tests; reduce the batch requirements for the test and to subsequently significantly reduce the turnaround time for patient results; provide improved clinical service to physicians; and yield significant revenue to the laboratory.

IV-Cell

The cytogenetics laboratory workflow of bone marrow and peripheral blood samples suffers from an inherent flaw. The flaw stems from the requirement of the oncologist to provide their clinical suspicion, which determines the pathway of diagnosis, and guides the laboratory in the testing to be conducted, intended to confirm/rule out the oncologist’s clinical suspicion.

When a laboratory receives a sample, the cytogenetics laboratory must immediately set up the sample for cell culturing. Faced with four different options of cell lineages for culturing – myeloid, B-cell, T-cell, and Plasma, current products limit the laboratory to select only one cell lineage to culture. This selection is typically based solely on the clinical suspicion provided; hence, if the clinical suspicion is incorrect, the laboratory will have cultured the wrong cell lineage, potentially arriving at a false negative result. The company’s data shows this occurs in approximately 40% of patient cases, creating a substantial driver of misdiagnoses.

IV-Cell is a proprietary cell culture media that addresses the problem of diagnostic mistakes through the process of selective culturing. IV-Cell is a universal media that enables simultaneous culturing of all four hematopoietic cell lineages. Developed by Precipio, the culturing technology ensures that the laboratory is able to obtain sufficient information through other test modalities, thereby not relying solely on clinical suspicion, in order to ultimately select the correct cell lineage for culturing and evaluation.

IV-Cell was validated in the company’s laboratory in parallel with existing commercially available reagents and has successfully demonstrated superior results compared to MarrowMax. Subsequently, IV-Cell has been used at the company’s laboratory for the past few years on more than 1,000 clinical specimens, producing superior diagnostic results.

The company is marketing this technology by providing major laboratories with access to the media. The IV-Cell technology and media can be purchased via a direct supply contract, whereby the company is contracted with a manufacturer (under license and non-disclosure) to produce the media.

Competition

The company’s principal competition in clinical pathology services comes largely from two groups. The first group consists of companies that specialize in oncology and offer directly competing services to the company’s diagnostic services. These companies provide a high level of service focused on oncology and offer their services to oncologists and pathology departments within hospitals. Competitors in this group include NeoGenomics Laboratories, Inc., also known as NeoGenomics or Neo, GenPath Diagnostics and Inform Diagnostics. The second group consists of large commercial companies that offer a wide variety of laboratory tests ranging from simple chemistry tests to complex genetic testing. Competitors in this group include LabCorp and Quest Diagnostics. Within the liquid biopsy market, the company’s competitors include Foundation Medicine and Guardant Health.

Government Regulation

Approximately 40% of the company’s revenue for the year ended December 31, 2022 was derived directly from Medicare, Medicaid or other government-sponsored healthcare programs. Also, the company indirectly provides services to beneficiaries of Medicare, Medicaid and other government-sponsored healthcare programs through managed care entities.

The company offers its products as research use only (RUO) products. Additionally, the company’s CLIA laboratories offer testing utilizing the company’s laboratory developed tests (LDTs).

Intellectual Property

The company has filed provisional patent applications for its proprietary HemeScreen technology.

Research and Development Expenses

For the year ended December 31, 2022, the company recorded $1.7 million of research and development expenses.