PRPO Precipio Inc

Management of specialty cancer diagnostics company Precipio, Inc. (NASDAQ: PRPO) provides the following update to its shareholders on various business matters looking towards mid-year.

1.   Business growthIn September of 2023, Precipio’s pathology division exceeded its breakeven point of $15M annualized revenue run rate, resulting in a Q4 cash burn of less than $100K for the quarter. In the following quarter, as previously discussed, due to several operational issues, revenue declined below that point.

We are pleased to report that the company has addressed the operational issues and as a result, pathology revenue is heading back towards its breakeven point. We anticipate that in the next quarter, Q3-2024, the pathology division will return to exceeding its breakeven point.

On the products side, the company had several delays in product releases due to several technical and supply chain issues which often occur in this line of business. These hurdles have been addressed, and revenue growth is resuming. Recently, two major new customers received state regulatory approval for implementing our technology in their practice and we anticipate them going live early next quarter.

These two customers are much larger than our average customer and we expect that they, along with several other customers in various onboarding stages, will provide a significant boost to product revenues and significantly advance us toward the necessary $6M annualized product revenue run rate goal that is part of our overall plan to reach profitability.

2.   Change Healthcare hacking & cash impactAs we previously mentioned, like many healthcare companies, Precipio too was impacted by the Change Healthcare hacking and subsequent freeze on cash inflow from the pathology services division (this does not impact the products division). We appear to be at the tail-end of this situation, with Change Healthcare in the process of resuming normal operations. The company has taken measures to supplement its cash situation through short-term loans, both from Change Healthcare and independent sources, ensuring it has sufficient funds to continue operations.

We expect a return to normal operations in Q3-2024, and to a quick return of any Change Healthcare loans. Furthermore, with the expected revenue growth discussed in the previous point, we anticipate a gradual reduction in cash burn, heading towards anticipated breakeven later in the year.

3.   FDA ruling on LDTsThe recent FDA ruling will ultimately transition Laboratory Developed Tests (LDT) that are currently under the regulation of other federal and private agencies such as CLIA and COLA, to fall under the FDA’s jurisdiction as FDA-approved tests. This will require filings by test manufacturers and/or laboratories to register LDTs with the FDA. Requirements will be phased in over the next 4 years.

This rule creates two options to comply:

1. Laboratories submit their LDT assays for FDA approval – placing the burden on the laboratory.
2. Manufacturers submit their product for FDA approval – placing the burden on the manufacturer.

This impacts both our pathology services division and our products division as follows:

Pathology services division:

• The FDA rule has stipulated that any tests that a lab was operating before the ruling on May 2023 are “grandfathered” into approval and do not require any additional work. This applies to all our current tests.
• Should Precipio’s laboratory decide to add a test in the future, it will most likely add FDA-approved tests which will not place any burden on our laboratory.
• Therefore, the company does not expect any substantial budgetary impact to its pathology services division due to this ruling.

Products division:

• Precipio has decided to adopt option B listed above, which is to submit its products for FDA approval, alleviating our laboratory customers from the need to submit their assays to the FDA for approval. This will reduce the burden on Precipio’s customers and place Precipio in a competitive advantage compared to companies that choose not to take this route.
• According to the ruling, Precipio has four years to complete this process (if the timelines are not extended further, which many anticipate due to the expected burden on the FDA to process all these requests).
• For most manufacturers, this is a heavy and complicated process that requires obtaining patient samples, testing them in a laboratory, collecting, analyzing, and submitting the data to the FDA. The advantage for Precipio is that since we operate a clinical lab, we already have hundreds, and in some cases thousands of patient samples with both test results and other data that has been collected and analyzed. Therefore, while this will be a substantial administrative task, we do not anticipate that the process will be cost prohibitive.
• Precipio estimates the cost to be in the range of $250,000 over the course of these 4 years.

“We have endured quite a few challenges over the past six months, and I’m proud of our team for not only meeting and overcoming these challenges but working hard to come out better and stronger”, said Ilan Danieli, Precipio’s CEO. “I believe we are well positioned to execute on the first stage of the company’s goal which is to reach breakeven this year. From there, as a financially independent growth company with high-margin proprietary products in large markets, we can build significant shareholder value. I am excited for the second half of this year and to share more upcoming positive results”.

4. Upcoming Shareholders Meeting

Management would like to take this opportunity to remind its shareholders that the Company’s 2024 Annual Meeting of Stockholders is scheduled for Thursday, June 13th, 2024 at 10:00 a.m. Eastern Daylight Time to be held virtually via live webcast at www.virtualshareholdermeeting.com/PRPO2024. It is important that your shares are represented and voted on at the annual meeting regardless of the size of your holding so please take a moment to cast your vote. If you have already voted on your shares you do not need to vote again and we thank you for your support.

About Precipio

Precipio is a healthcare biotechnology company focused on cancer diagnostics. Our mission is to address the pervasive problem of cancer misdiagnoses by developing solutions in the form of diagnostic products and services. Our products and services deliver higher accuracy, improved laboratory workflow, and ultimately better patient outcomes, which reduce healthcare expenses. Precipio develops innovative technologies in our laboratory where we design, test, validate, and use these products clinically, improving diagnostic outcomes. Precipio then commercializes these technologies as proprietary products that serve the global laboratory community and further scales Precipio’s reach to eradicate misdiagnosis. For more information, please visit www.precipiodx.com.

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Forward-Looking Statements

This press release contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including, among others, including other financial projections and potential market opportunity, plans and prospects. Except for historical information, statements about future volumes, sales, growth, costs, cost savings, margins, earnings, earnings per share, diluted earnings per share, cash flows, plans, objectives, expectations, growth or profitability are forward-looking statements based on management’s estimates, beliefs, assumptions and projections. Words such as “could,” “may,” “expects,” “anticipates,” “will,” “targets,” “goals,” “projects,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “predicts,” and variations on such words, and similar expressions that reflect our current views with respect to future events and operational, economic and financial performance, are intended to identify such forward-looking statements. These forward-looking statements are only predictions, subject to risks and uncertainties, and actual results could differ materially from those discussed. We caution investors not to place undue reliance on the forward-looking statements contained in this press release. You are encouraged to read our filings with the SEC, available at www.sec.gov, for a discussion of these and other risks and uncertainties Important factors that could affect performance and cause results to differ materially from management’s expectations, or could affect the company’s ability to achieve its strategic goals, includes factors that are described in the sections entitled “Risk Factors” and “Management’s Discussion and Analysis” in the company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023, as updated from time to time in the company’s Securities and Exchange Commission filings. The company’s forward-looking statements in this press release are based on management’s current views, beliefs, assumptions and expectations regarding future events and speak only as of the date of this release. The company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by the federal securities laws.

Inquiries:

investors@precipiodx.com

+1-203-787-7888 Ext. 523