Release Date: July 31, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Revenue for the second quarter reached $14.3 million, a robust increase of nearly 30% compared to the second quarter of 2023.
- Adjusted EBITDA increased 96% to $2.24 million, translating to $0.04 per fully diluted share.
- Patient affordability business revenue increased by 267% year-over-year, contributing significantly to overall growth.
- Gross profit margin improved by 200 basis points to 52.9% compared to the same period last year.
- Strong performance in the plasma donor compensation business with a 13% increase in plasma revenues year-over-year.
Negative Points
- SG&A expenses increased by 13.5% to $6 million, reflecting higher costs associated with growth.
- Total operating expenses increased by 19.1% to $7.5 million, driven by investments in IT and personnel.
- Net income for the quarter was $697,000, which, while positive, is relatively modest compared to revenue growth.
- The company experienced a $1.7 million decline in unrestricted cash from the end of 2023.
- The need for continuous investment in personnel and technology to support growth may pressure margins in the short term.
Q & A Highlights
Q: How many pharmaceutical companies are you currently working with now within all of your programs that you have?
A: We are currently working with in excess of 40% of pharmaceutical companies. Some of these are direct, while others are through hubs representing multiple pharmaceutical companies.
Q: As you look at the pipeline building, is a lot of that pipeline coming from pharmas that you have not done anything for? Or is most of the pipeline build just with your existing clients?
A: A majority of the pipeline is new clientele. While we do have existing clients adding programs, the lion's share of the pipeline between now and the end of next year will be new clients, many of whom will be launching multiple programs at once.
Q: How are these programs structured? Do you have an actual contract that runs for a duration of time? Or can the pharmaceutical company walk away if they're unhappy with the performance?
A: We have master service agreements that vary in length from two to five years, with statements of work guiding each program. Some MSAs do contain outs for our clients, allowing them to leave if they are unhappy with the services.
Q: Could you possibly size up the total TAM (Total Addressable Market) on a worldwide basis for this business?
A: The TAM for patient affordability is primarily a US phenomenon and does not exist in the same form internationally. We believe the TAM is north of $500 million, based on industry trends and consultations.
Q: As you add programs, can you scale this to where you don't have to keep increasing SG&A expenses?
A: While we are seeing operating leverage, as indicated by our adjusted EBITDA margin improvement, we do need to invest in personnel ahead of new program launches. This is reflected in our guidance, which includes expected hirings to support growth.
Q: What is the diversification of your customer base in the patient affordability business?
A: We are working with a diverse range of pharmaceutical companies, both directly and through hubs. This diversification helps mitigate risks associated with reliance on a few clients.
Q: What is the impact of new client acquisitions on your revenue growth?
A: New client acquisitions are a significant driver of our revenue growth. For example, our partnership with AstraZeneca has expanded from 4 to 12 programs, contributing substantially to our revenue.
Q: How do you ensure the quality of service to retain clients?
A: We invest heavily in IT and personnel to ensure high-quality service. This includes hiring account managers, claims analysts, and call center staff to support new and existing programs.
Q: What are the key factors contributing to your gross margin improvement?
A: The key factors include the exceptional performance of our patient affordability business, which has driven a 200 basis point increase in gross margin. This segment alone contributed to 59% of our total revenue growth year over year.
Q: What are your expectations for future growth in the plasma donor compensation business?
A: We anticipate moderate and stable growth in our plasma donor compensation business, supported by the addition of new plasma centers and an increase in revenue per center.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
