VivoSim Labs, Inc. (VIVS) Q2 2018 Earnings Report, Transcript and Summary

Good afternoon, and welcome to the Organovo Holdings Fiscal Second Quarter 2018 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Steve Kunszabo, Head of Investor Relations. Please go ahead.

Good afternoon, and thanks for joining us. I'd like to welcome you to our fiscal second quarter 2018 earnings call. Joining me on the call this afternoon are CEO, Taylor Crouch; our CFO, Craig Kussman; and our General Manager, Paul Gallant. Today's call will begin with the discussion of the 2018 fiscal second quarter results, followed by Q&A. Before I turn things over to Taylor, I'd like to caution all participants that our call this afternoon may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are statements that are not historical fact, and include statements about our future expectations, plans, and prospects. Such forward-looking statements are based upon our current beliefs and expectations, and are subject to risks, which could cause actual results to differ from these forward-looking statements. Such risks are more fully discussed in our filings with the Securities and Exchange Commission. Our remarks today should be considered in light of such risks. Any forward-looking statements represent our views only as of today, and while we may elect to update forward-looking statements at some point in the future, we specifically disclaim any obligation to do so, even if our expectations or views change. During the call, we'll also be referring to certain non-GAAP financial measures. These non-GAAP financial measures are not prepared in accordance with generally accepted accounting principles. Please refer to today's earnings release for a definition of these non-GAAP financial measures. With that, let me turn things over to Taylor.

Thanks, Steve, and good afternoon, everyone. I'll get us started by highlighting that our top line results of $1.4 million for the quarter represented our second highest quarterly revenue to-date and our third consecutive quarter of sequential revenue growth, this is good progress as we streamline the business around maximizing the uptake of our liver and kidney tissue systems, but we still have more work to do. We updated our full year revenue and negative adjusted EBITDA guidance today which reflects the latest assets of our growth trajectory. We're prioritizing disease modeling capabilities as we head into the second half of our fiscal year and deemphasizing our work in the routine toxicology research area. Our guidance also shows the benefit of cash burn from our organizational restructuring. Craig will provide more detail on our financials and the revised elements of our outlook in his remarks. As I consider the steps we've taken in the last few months to recalibrate our direction and evaluate the best path forward, our strategic identity has come into clearer focus. Our highly customizable 3D tissue platform affords us the ability to monetize our capabilities in many ways. We provision and curate primary human cells for use in research applications through our Samsara business. We've created dynamic disease models that can facilitate drug discovery and profiling in ways never thought possible. We struck licensing agreements that capitalize on our proprietary technology and intellectual property and we continue develop our own novel therapeutic tissue products to address critical unmet disease areas. We were working across a broad value chain that spans the drug discovery and development ecosystem with what we believe are the industry's leading liver and kidney tissue systems. Moving now to our commercial tissue business where our bioprinted liver remains the main engine of growth. I'd like to share a few leading indicators underscoring the strength of new business the health of our revenue mix, the growing value of our services and our significantly reduced cycle times. First, we added eight customer accounts in the first half of fiscal 2018 including three client projects with products already in clinical trials and we continue to see momentum in bringing new business to board. Second we continue to see a healthy revenue mix during the first six months of our fiscal year with a 50% to 40% split between repeat business and new orders. This is consistent with our breakdown in fiscal 2017 and supports the ongoing move by our clients up the adoption curve. Third, we've driven our average revenue per order higher over the last two quarters largely as a result of shifting our work to compound screening and disease models. In the first half of fiscal 2018, approximately 65% of our orders represented disease modeling projects this is good news because our competitive differentiation is particularly strong in these applications including target identification, market validation and lead optimization. Lastly, our cycle time from sending out a customer proposal to closing an order has declined sharply. In late 2016, we were averaging over seven months for this important business development metric. In the first half of fiscal 2018, we brought the spend down to under two months. In part owing to the master services agreements and repeat business we have with our existing customers as well as better understating our clients' needs relating to projects, outlines and study design. In addition, as result of our business development marketing and scientific outreach many new and existing clients are seeking out our services with the sense of urgency to interrogate their drugs on our platform. Our progress in study in liver disease has also been bolstered by the $1.7 million grant award we received from the NIH to collaborate with UC San Diego to evaluate NASH in our 3D bioprinted liver model. I also note our collaborate with Viscient Biosciences to develop a customer research platform that targets early discovery work for liver disease. We're also pleased with the distinction and reception our posters received at the recent American Association for the Study of Liver Disease Annual Meeting which is one of the most influential conferences in the liver disease space. Overall, our shift to disease modeling services recognizes the important role that liver disease plays in pharmaceutical, R&D, while also representing the highest value opportunity for our commercial business. We're seeing deeper engagements from our clients in this space as we discuss annual budget allocations and framework agreements for our services. Ultimately these are important steps as our customers move from single project commitment to dedicated research plans and meaningful annual revenue commitments. Let's turn now a quick progress update on our therapeutic tissue business. As many of you saw in our recent announcement we achieved major scientific milestones for the extended survival and functionality of our liver therapeutic tissue and we remain on track to submit our first investigation on new drug application to the FDA during calendar year 2020. Our bioprinted liver tissues showed significant engraftment, retention and functionality through 125 days post implementation in well-established animal models for one of the inborn errors of metabolism namely Alpha-1 antitrypsin deficiency. Importantly thorough evaluation of the treated animals suggest an approximately 75% reduction in the pathologic hallmarks of disease in treated areas. In short, our liver patch meaningful cleared the disease in the immediate area of the implant. The data show that the approach of delivering a 3D bioprinted tissue patch directly to the liver offers great promise in solving the retention and integration issues that has held let [ph] back, many cell and gene therapy attempt are treating these debilitating pediatric liver diseases. These are also major achievements because we believe they align with the historical expectations of regulators for these types of preclinical studies and allow us to confidently move on to the next phases of our development work now that these elements have been completed. Regarding next steps we'll continue to move forward with our application to seek orphan drug designation in the next several months. And we've now begun new animal model studies in a second therapeutic indication within the category of inborn errors of metabolism. In closing, we've taken concrete steps in the first half of the fiscal year to sharpen our focus on liver and kidney tissue systems. We shifted our commercial priorities to be centered on higher demand higher value disease modeling projects and we've restructured the organization to support these objectives. In doing so, we've improved our future revenue growth trajectory while also reducing our operating costs and materially lowering our cash burn rate. My emphasis will continue to be on meeting with customers, driving adoption of our platform commercialization, finalizing key proof of concept work for our liver therapeutic tissue program and translating all of this progress into value inflection points. And we will continue to be good stewards of our balance sheet. I look forward to communicating with you again soon as we execute against these important commercial and research milestones. With that I'll turn it over to Craig for a more complete financial review.

Thanks Taylor and good afternoon everyone. I'll begin by recapping our key financial metrics for the fiscal second quarter and then summarize the fiscal 2018 guidance we updated today. I'll wrap up my thoughts by briefly reviewing our balance sheet and liquidity profile. Organovo generated fiscal second quarter total revenue of $1.4 million, which was down 2% from the prior year period and up 37% sequentially. Total revenue results were driven by lower collaborations revenue as key collaboration agreements were completed in the prior fiscal year partially offset by grant payments related to our recently awarded NIH grant. Product and service revenue was $0.9 million down 8% from the prior year period. As Taylor noted, we're recalibrating our business development effort to focus on higher demand and higher value disease modeling services. Although we saw significant increase in disease modeling orders which were approximately 65% of total orders in the second quarter these gains were not enough to offset the toxicology research services revenue we recorded in the year ago quarter. Despite the short-term impact as we now deploy our resources against this new market opportunity, we see robust uptake of compound screening and disease models and expect it to be a major revenue growth component going forward. I'll focus next on operating expenses. We reported $0.3 million in cost of revenues for the fiscal second quarter, a 35% decline from the prior year period. The dropping cost of revenues was largely due to a greater contribution from higher margin, primary human cell and tissue products. Research and development expenses were $4.9 million, 9% year-over-year increase primarily resulting from higher facilities and employee related costs. We recorded $5.7 million in selling general and administrative expenses during the fiscal second quarter, a 3% year-over-year decrease largely due to lower external professional services fees and facilities cost. SG&A also included approximately $0.4 million of one-time CEO transition and employee severance cost. As we look ahead to the fiscal third quarter, it's worth emphasizing that we'll record an approximately $0.9 million non-recurring charge related to our recently announced organizational restructuring. And finally a brief review of the full year fiscal 2018 outlook, we updated today. And a few quick notes on our balance sheet and liquidity profile. We now forecast total revenue between $4.5 million and $6.5 million for fiscal year 2018 with the primary contributions coming from a few key components. Continued strong growth of our disease modeling services, recording the balance of our deferred revenues from the previous fiscal year, accelerating growth from our primary human cell and tissue products and accelerating progress on our NIH grant. Off which $200,000 to $600,000 is reflected in our fiscal 2018 guidance range. While we revised our fiscal 2018 outlook and now expect a delay in ramping to a double-digit annual revenue rate we remain confident that one or more of our customers will move from single project commitments to annual revenue commitments over the course of the next few quarters. Achieving this goal with our customers should position us to meet this important revenue metric in fiscal 2019. On the same basis for the full year fiscal 2018, we now expect negative adjusted EBITDA between $26 million and $28 million. This is an improvement in our cash burn from our previous estimate and is largely driven by the reduced operating cost will benefit from as the result of our organizational restructuring and a streamline focus on our existing commercial opportunities and therapeutic tissue program. By comparison, we recorded $29.8 million of negative adjusted EBITDA for fiscal 2017. Before I move on to our balance sheet, a few quick words on the evolution of our Samsara subsidiary and it's growing contribution to our business. First, it provides us with great expertise in the sophisticated isolation and curation of our target liver cells. Second, we're able to further explore how disease origin cells perform in our tissue models across various disease states. Finally, it benefits us from a business development perspective as many clients who worked with Samsara first moved to also engage in more complex liver and kidney [technical difficulty] services. All in all great synergies between the two operations as Samsara becomes a more meaningful portion of our total revenue. Now for our balance sheet, at the end of the fiscal second quarter we had a cash and cash equivalents balance of $50.7 million and we have approximately $17 million of funds available under our ATM facility. In combination this gives us approximately $68 million and available liquidity to carry out our business plan and invest in our key growth initiatives. As circumstances and market dynamics permit, we'll continue to use our ATM facility opportunistically to extend the cash runway for the business allowing us to scale our liver and kidney tissue research services and moving our promising liver therapeutic tissue closer to human clinical trials. The ATM facility is a flexible tool that lets us strengthen our balance sheet in a disciplined way while moving us forward to key value inflection points as we consider our long-term capital plan. If we're able to successfully execute against our planned ATM strategy, we do not currently envision a traditional equity raise such as a follow-on equity offering for the remainder of fiscal 2018. I'll wrap up by noting that we believe there is a growing value for Organovo as we continue to advance our liver therapeutic tissue and achieve major scientific milestones. As for our commercial business we continue to streamline our operations and re-deploy our efforts against the best opportunities to grow our revenue in the liver and kidney space. Disease modeling represents a big part of this future path. We look forward to updating you on our progress in February. With that I'll turn things back over to the operator for the Q&A portion of this afternoon's call.

[Operator Instructions] and our first question comes from Brandon Couillard with Jefferies. Please go ahead.

This is Christian on for Brandon, thank you for taking the questions. First off, I understand you're undertaking a broader shift into disease modeling, but will be helpful if you could provide additional commentary in terms of the key variables that drove the materially lower full year revenue outlook. I'm just trying to understand given the magnitude of downward revision why you didn't ultimately decide to pre-release the development or update the full year view concurrent with the restructuring plan announced in early October.

Christian, this is Taylor. One of the challenges that we face and that's why we've given a broad revenue guidance even for this remaining several months of our fiscal year. Is that we have a number of binary events that we hope and plan and working toward breaking our way which could result in significantly more revenue. But as each month closes we have to recognize the risk that some of these binary events don't go our way in this fiscal year but move into the final - into the next fiscal year. as an example we've mentioned that our deferred revenues for clients that we have hoped and certainly still plan to try and achieve this year may or may not fall into this fiscal year and similarly you see with our NIH grant revenues significant range tied to certain operational risk variables and NIH grant approval processes, that effect this range. So it's more an issue of being more cautious about the outcomes as we evaluate these binary events. As well as reflecting that we truly had hoped to see some more traditional routine tox business from our earliest clients, but now we realize that the investments we would have to make to convince them to move over their thresholds to incorporating us into what ultimately is a lower margin, but higher volume business, those thresholds don't provide us the same return on investments as we're seeing by investing now heavily in our disease modeling platforms which are begin driven by significant enthusiastic demand from those clients. So it's a number of forces that are coming together and our visibility on these forces clarifies as we approach the end of the year and we just thought it was more prudent to wait until this call to clarify that situation.

Okay understood that's very helpful. And then I guess also probably for Taylor. Maybe a two part question, would be very interested to hear an update on how the conversations are progressing in terms of moving the target one or more clients for a larger multi-year routine news engagement. To be clear, do you still expect that to occur within the fiscal year 2018? And maybe help us quantify how many customers might be in that Phase II bucket currently that could overtime move to steady state use over maybe the next 12 to 18 months. And then secondly, do you think you have enough current capacity to perhaps onboard those customers overtime and if so, maybe give us rough percentage of what capacity do you think you would need to commit to those, to such customers to fulfil a larger engagement.

Okay, thanks. Both great questions. With regard to our clients moving along the adoption curve and so the Phase II that you referred to for the others on the call represents the final validation of our custom research platforms, a process that we're undergoing for each of our clients and in some cases by the way we're validating more than one platform. And the final step of that phase, is to begin running standard reference compounds through our platforms to show how they modulate the very diseases that we've created in our tissues in these unique platforms. And I'm pleased to say that we now have a handful of clients that are in this final step of testing the modulation strategies with either reference or in some cases with proprietary compounds. As soon as that's completed, we believe the very next step is to move to more routine use for proprietary screening and profiling larger numbers of compounds and we do indeed have conversations underway more than one client along those lines and that continues to give us confidence that we will exit this fiscal year tracking toward that routine use more annual perspective kind of collaboration agreement. You second question as regards to capacity we actually have a significant capacity here to expand certainly to meet the needs both for our commercial tissue business as well as our therapeutic tissue research programs to handle various growth scenarios over the next couple of years. So we don't worry about capacity and we have scalable modular capacity built around our printing platforms that can easily be scale up when and if necessary.

Great and then maybe if I can sneak one more in. recently we noticed another 3D tissue player in the landscape signed the deal with the CRO, Charles River now I understand this player has somewhat different focus and value proposition, but would be curious to know what a high level, if you see an opportunity overtime to potentially work more closely with other CROs out there and if so, possibly over what timeframe that could occur. Thank you.

Sure. Actually I'll grab that question as well. As you know may know my background a big part of my career has been spent in the CRO industry and the biotech positions I've held, in those positions I've also been instrumental in putting a strategic CRO collaborations in place with all of the leading CROs. And certainly we see an opportunity as we scale and as we establish more repetitive use applications on our platforms to work with CROs. Certainly if we approach a capacity constraint and so I think it would very reasonable to expect us to be working collaborating and announcing appropriate agreements in the fiscal year to come along those lines.

Great. Thanks.

Our next question is from George Zavoico - B. Riley FBR. Please go ahead.

I have a question about your therapeutic tissues, liver tissues. I mean your shifting focus if part of it is perhaps disappointing potential revenue stream from the toxicology research services, but it much abounds by some sort of marketing surveys that you may have done with the therapeutic tissues despite the fact that you're waiting for an IND till 2020. So the question is, what kind of supportive marketing information do you have that really speaks to the potential demand and the potential revenue stream from this. And are you looking for partnership opportunities as well in this regard, in this sector.

So first in terms of demand, we mentioned some of our cycle time statistics and a year ago the process of getting a meeting with a classic toxicology decision maker to discuss how our experimental but promising platform might be useful. There was interest but I wouldn't call it overly enthusiastic and often it took months and months to close the first revenue opportunity with those decision markers. On the disease modeling side, our partners are therapeutic teams, clinicians that actually have real problems they need to solve with high degree of urgency and/or people in discovery who so far have had no other in vitro solutions to explore how their drug will perform in humanlike settings in these disease models. So we actually have a significant amount of clients reaching out to us, we have clients that we've talked to in the past about toxicology coming much more enthusiastically to discuss our disease models and I'd say we have a veritable who's who of people working in the NAFLD, NAS and fibrosis space across US, Europe and Japan beginning to move forward with us along with adoption phase. So it's really a demand driven opportunity, we see the market opportunity is quite significant because the later you get in discovery as you know with research services, the more the value of the drugs you're touching has and so as you move toward to lead optimization, pre-clinical candidates and certainly drugs that are already in the clinic. We're creating and enabling a much higher value outcome for our clients and their decision making and we're seeing an uptick in the revenues and the sense of urgency that they have to work with us and all of these things have built towards the decision to move in this space. As well as recognizing that we as liver experts already are developing our own therapeutic solutions with our tissues in and around the liver space and that gives us tremendous credibility with sophisticated clients focusing liver disease or better understanding their drugs in the liver and kidney environment.

And so the disease modeling aspect which is a services part of your therapeutic tissue sector, that's the part you see say perhaps revenue per unit or revenue client is substantially greater than the toxicology services and that you could drive your own research into developing, your own therapeutic tissue for which you're expecting IND in 2020, so that's sort of the balance, is that. Am I understanding it correctly?

I think that's a good way to look at it and clearly we're still in an early revenue generation mode. I see a logical and attractive opportunity to build our revenues along the lines that you just described we also have mentioned in our comments many of the other ways that complement our platform in terms of how we can monetize capability starting with our very sophisticated ability to isolate and curate cells which we do for ourselves, but is also a growing demand out in the marketplace, all the way through to licensing of our technologies for people who would like to bring some of these capabilities in health. but certainly in the field of NASH, fibrosis and other liver disease areas that we're being asked to being looking at, we see an overlapping layer-by-layer model platform development clients revenues associated with that and then the product screening and profiling revenues that come with each of those overlapping platforms that we develop, so it's a nice healthy business model.

And you also mentioned kidney disease modeling when do you see your kidney products getting to the same level of interest where you can provide the services like you're now with the liver disease modeling.

We already have some early traction in the early of kidney fibrosis with a handful of clients and clearly we prioritize most of our internal platform development to flushing out our NASH and NAFLD disease model capabilities. Often with our clients side-by-side funding these developments because they're so enthusiastic but see a similar kind of demand from folks in the kidney space and so we would expect on a staggered basis to be layering in more and more kidney disease model revenues certainly as we go into the next fiscal year.

So that would be in the 2019, fiscal year. Okay.

Correct.

Great. Thank you very much.

And our next question comes from Reni Benjamin with Raymond James. Please go ahead.

This is [indiscernible] on behalf of Reni. Can you hear me okay?

Yes, thanks.

Thank you for taking my questions and I appreciated the color you provided for quarter. I apologize if my questions have already been announced. As I have some technical issues here. On [indiscernible] as the toxicology business represented 35% of orders in the second quarter, so how should we think about this [indiscernible] business going forward, is it fair to assume that it's getting close to zero in the next couple of quarters.

No I think as a percent of total revenues it might decline, as an absolute value. I suspect it will fluctuate. But we will continue to provide services in toxicology. A number of our clients have specific issues based tox problems they need to solve. Others are trying to understand their targets with respect to classes of drugs that they want to explore, mechanism of action and we also have products in the clinics that are hitting tox issues, where those clients are coming to us. And so as the combination of those more custom solutions, approaches that generate our - the tox line of our business and we would expect to continue to see some revenues from there, but really a key part of our guidance change was recognizing that those revenues may not growing significantly, while our disease modeling revenues are really just now taking off.

Got it, that's very helpful. My second question is your future outlook on the disease modeling business. So maybe can you quantify like the size of this opportunity for a [indiscernible] execution for example like how many number of pre-clinical studies right now by those pharma company that could be potentially replaced by us, is this modeling facetious ?

Well the short answer is, that this is an emerging market and so, we're basically a path breaker in this field. What I believe and what we're seeing indications of is that our clients are engaging us at multiple high value point in the discovery and development process. So we have clients that want to use our platform as a brand new way, novel way to establish new drug target classes and or markers that go with them and that's a pretty high value platform generation opportunity that you can model looking at other platform collaboration approaches, take antibodies for example. The second area that required activing [ph] is in profiling drugs as you approach your cancel of optimized leads, which of these leads should be in what rank orders progressed into animal studies and again our ability to give answers to that question with hints, if not strong indications of how a drug may fair in actual human setting has significant value and so we're seeing engagement on each of those market segment and you can go to those classic markets to look at how those are sized. We also have a number of - the entire regenerative medicine space. So clients who are looking to re-engineer cells and deliver therapies through reengineered cells or through DNA, RNA therapeutics, vectors etc. are all paying close attention to our platform technology as a delivery capability for getting their therapeutic strategies into the body and accepted and to the target organ that gives us opportunities in the future for significant collaboration. And then as I mentioned for each of the disease models that we develop and just to take NASH. NASH is comprised of several components that as steatosis [ph] or fatty liver inflammation in fibrosis. We can model various combination of those or all of them at various stages of disease. So it's not like we're setting on one NASH model, we're sitting on a factorial combination of models and clients maybe interested in having a developed three, four, five custom models to address various target classes of drugs and so all of these layer on and the same will be the case for the liver, we hope the same will be the case for the kidney, we hope the same will be the case for other liver other areas such as Hepatitis B. and these are ways that we see are revenues per clients building up nicely overtime.

Great. That's very helpful. If I can, can I? I have one final question here. If I remember correctly [technical difficulty] $200 million in the toxicology market, so given the change being the focus, so how you think about this long-term guidance and with this modeling business, do you think you can achieve a similar level of peak sales from your 3D tissues? Thank you.

I think the opportunity to generate significant revenues in growth is clearly there. We're dealing with experimental disruptive technologies. The good news is disruptive technologies can replace screening platform, discovery platform entire R&D approaches and so you can take as a potential market, the size of drug discovery and what percent of that we might participate in, as creating very significant market opportunities for us. But disruptive technologies are also experimental and I don't want to overpromise the ability of anyone of our solutions to be expanded up to massive market sizes. What I do know is that the, the closer you get to touching and adding value around drug in the clinic the more value you can capture and the fact that we have clients with drugs in the clinics and classes of drugs coming to us to help them sort out real term decisions, we're now effecting orders of magnitude of value larger than a platform that's working to provide high throughput screening of tens and thousands of compounds early in discovery. So our challenge and our opportunity and our opportunity is to capture value all along this chain while also creating some of these drug delivery solutions in the mid-term and ultimately to fund and continue the quite exciting progress we're seeing on our own therapeutics program, which clearly we believe has a very attractive NPV [ph] for one or more indications, almost custom fit to our therapeutic approach.

Great, that's fair. Thank you so much for all the color here and good look going forward.

[Operator Instructions] our next question comes from Matthew Cross with Jones Trading. Please go ahead.

I was looking at your poster from AASLD and it appears as though for both albumin and T [ph] levels there's kind of rapid uptick and peaking at week three and then taping off closing to SHAM [ph] and I was wondering what you thought might explain that physiologically, is it simply a post-surgical response or could it have any positive or negative implications for engraftment?

I think we're first of all highly encouraged that we're seeing albumin and other enzyme production in over significant times. These are still early proof of concept studies and so the quantification of those levels overtime at the moment has to be viewed as just individual animal effects. And we're still teasing out the effects. I'm certainly heartened by the fact that our advisors such as David Brenner at UCST [ph]. I don't want to over speak but using terms like blown away by the unexpected acceptance engraftment and clinical impact that these tissues are having in this first disease model and as a result, we've been very encouraged to move to initiating our second disease model this year as we mentioned in our comments. So generally we're very enthusiastic about what we're seeing in the model.

Okay great. That's good to hear. And then I just have one more quick one. In your release you mentioned that you began to evaluate drug [ph] that's already in the clinic, I was curious what feedback you might have received from customers regarding regulatory perception of this approach at the clinical stage and then inclusion of those results in then subsequent filings.

I think at the moment our clients in the clinic are viewing this as a confirmatory but non-regulatory indication that a drug they have prioritized either maybe facing an issue or if they have two or three candidates perhaps they can rank them and decide which back up compounds might be accelerated. The FDA have told us that, when we asked them how will you view dossiers showing up with our data and they said, first of all we'll be quite excited to see the uptick of these complex tissue modeling systems because we do believe that they're very important. But until we start to see submissions it's really too early to say where they will start to set standards, start to demand it then all clients began profiling their drugs using these capabilities or continue to use it as a case-by-case approach. The other thing I should mention is that, many of our clients who have drugs in the clinic or even on the market are looking not just for a tox question being answered, but they're actually looking for mechanistic evidence that their drug performed in our model which would be a great repurposing strategy in a humanlike setting before they start to gamble on teeing up additional clinical development programs on those drugs.

Okay, sure. Yes it sounds like definitely something to watch. I appreciate the detail. Taylor. Thanks.

This concludes our question-and-answer session as well as today's conference. We thank you for attending today's presentation and you may now disconnect your lines.