Predictive Technology Group Reports First Quarter Fiscal 2020 Financial Results and Provides Corporate Update

SALT LAKE CITY (November 14, 2019) Predictive Technology Group, Inc. (OTCQX: PRED) (“Predictive” or “The Company”), a leader in the development of genetic and molecular diagnostics and companion therapeutics, today announced financial results for the fiscal first quarter ended September 30, 2019 and provided a corporate update.

Management Commentary

“During our first fiscal quarter, we were able to sustain the momentum that carried us through fiscal 2019,” said Bradley C. Robinson, chief executive officer of Predictive Technology Group. “Total revenues for the quarter increased 2.5% year-over-year to $8.3 million, despite the difficult comparison driven by strong sales of human cell and tissue products (HCT/Ps) in the year-ago period.

“Since our last quarterly update, we successfully launched three new DNA-based test panels, including the full market launch of ARTguide™ following the successful Key Opinion Leader (KOL) beta launch, the KOL launch of FertilityDX™ and expanded distribution of PGxPLUS+™. ARTguide™, which helps detect genomic concerns associated with endometriosis and other infertility issues in women, has now been fully commercially launched and we expect material revenues to be generated beginning in calendar 2020.  FertilityDX™, which is a comprehensive service that identifies infertility causes, optimizes infertility treatments and reduces risk of complications, is currently in a beta KOL development period. We are on track with the development and distribution of these fertility diagnostic tests that address an unmet need in the complex area of fertility and women’s health.

“In parallel, we achieved a significant milestone in our Predictive Biotech business, having now delivered over 100,000 allografts resulting in over 60,000 patient experiences with no serious adverse events attributable to our products, including  AmnioCyte™, AmnioCyte Plus™, PolyCyte™ and CoreCyte™. Moving forward, in our Predictive Therapeutics business, we intend to pursue the FDA’s 351 regulatory pathway as we advance new cellular therapeutic candidates into clinical trials. Securing FDA approval via this pathway requires a rigorous demonstration of a product’s efficacy and safety at a time when the agency has increased its focus on companies offering potentially unsafe human cell and tissue-based products as therapeutic agents. We are in a unique position with our HCT/P platform as the significant safety experience of over 100,000 allografts used in patients in the U.S. market provides the ability to accelerate and de-risk the clinical trial pathway for FDA approved indications. We will announce the specific indications for which we are pursuing FDA approval.

“We are in the early stages of unlocking significant synergies among our business subsidiaries and are working to further advance our broad pipeline of data analytics, therapeutics and diagnostics to benefit both patients and our stakeholders. We are fortunate to have highly experienced members of our advisory teams, management teams and board of directors to bring these products to market and truly improve the quality of life of individuals.”     

Fiscal First Quarter and Recent Highlights

Predictive Laboratories

  • Announced in October the successful U.S. launch of ARTguide™, the Company’s first integrated, DNA-based test to evaluate the risk for endometriosis and other genetic causes of infertility in women, and FertilityDX™, a comprehensive genetic testing service that identifies barriers to healthy pregnancy and birth, allowing doctors to guide personalized fertility treatments
  • Presented new genetic findings in endometriosis at the 75th American Society of Reproductive Medicine (ASRM) Scientific Congress & Expo
    • The new findings were presented by Predictive Laboratories’ scientific team. Predictive Technology Group is a leader in the use of data analytics for disease identification and subsequent precision therapeutic intervention
    • The presentations focused on several features of endometriosis, including genetic mechanisms underlying the disorder, potential disease gene interactions, and the mechanisms through which some benign endometriosis lesions might become cancerous
    • Patent applications have been filed around these new discoveries adding to the Company’s robust endometriosis patent portfolio
  • Announced that Predictive Laboratories has collected over 2,500 DNA samples along with comprehensive medical records since acquiring its CLIA operations in March 2019. The subsidiary is broadening its research initiatives by acquiring new sample collections in chronic pain, pregnancy complications, autism, and both female and male infertility to support the development of personalized molecular diagnostics and therapies
  • In August, commercially launched PGxPLUS+™, a pharmacogenomic test panel being marketed to pain clinics for patients living with chronic pain
    • PGxPLUS+™ evaluates genetic factors that play a major role in an individual’s response to medications 
    • Predictive Laboratories reached a milestone by enrolling 350 patients with chronic pain into an Investigational Review Board-approved clinical study aimed at providing additional insight into the mechanisms of chronic pain and responses to pain therapies

Predictive Biotech

  • Delivered over 100,000 allografts resulting in over 60,000 patient experiences with no adverse events from AmnioCyte™, AmnioCyte Plus™, PolyCyte™ and CoreCyte™ products

Corporate Developments

  • Announced that Kenneth Ward, M.D., laboratory director and chief executive officer of Juneau Biosciences, Rakesh Chettier M.S., director of biostatistics and Hans Albertsen, Ph.D., chief scientific officer of Juneau Biosciences, received the 2019 Endometriosis Special Interest Group (EndoSIG) Prize Paper in the “Best in Clinical/Population Science” category
  • Appointed biologic industry leader Jeff Acuff to the newly created position of chief commercial officer of Predictive Biotech to drive the commercial strategy of its existing HCT/P business, including the development of new product candidates, and the expansion and use of the HCT/P into new vertical markets
  • Appointed E. Robert Wassman, M.D. as co-laboratory director of Predictive Laboratories
  • Engaged CLSA Capital Markets Limited to provide introductions to potential strategic partners and regulatory guidance to support the launch of Predictive’s proprietary genetic-based products into China’s rapidly growing women’s health and fertility markets
  • Engaged LifeSci Partners as communications partner to develop and implement comprehensive investor relations and public relations programs

Fiscal First Quarter 2020 Results

Revenue from operations (net) for the three months ended September 30, 2019 totaled $8.3 million, compared with $8.1 million for the three months ended September 30, 2018. The increase of $0.2 million was the result of an expansion of the company’s sales force and distribution networks leading to increased sales of HCT/Ps and regenerative medicine products.

Cost of goods sold (“COGS”) includes expenses associated with acquisition and processing, manufacturing (including materials and direct labor), shipping, and other direct expenses relating to the company’s HCT/Ps and regenerative medicine products. Cost of goods sold for the three months ended September 30, 2019 was $7.2 million compared with $3.0 million for the three months ended September 30, 2018. The increase is primarily due to $1.8 million in scrap expense and $1.2 million in increased inventory reserves related to HCT/P product that did not pass quality control, or that is not expected to pass quality control. The increase in quality control failure rates above normal levels was primarily due to a component supplied by a specific vendor. The remaining increase is due to increased share-based compensation cost of $0.4 million, increased personnel costs of $0.5 million, and increased facility costs of $0.2 million. 

Sales and marketing expenses for the three months ended September 30, 2019 were $3.2 million, compared with $2.4 million for the three months ended September 30, 2018. The increased sales and marketing expenses resulted from increasing the headcount in the company’s sales force.

Research and development (R&D) expenses for the three months ended September 30, 2019 were $1.8 million, compared with $0.6 million for the three months ended September 30, 2018. The increased research and development expenses resulted from increased focus on product development and additional proprietary research and development work relating to the company’s HCT/Ps and regenerative medicine products. Additionally, we have invested significant amounts in laboratory support in anticipation of the sale of diagnostic products.

General and Administrative (G&A) expenses for the three months ended September 30, 2019 were $6.4 million compared with $2.7 million for the three months ended September 30, 2018. The changes in general and administrative expenses resulted from increased management headcount and share based compensation expense in fiscal 2020.

Amortization and depreciation expense for the three months ended September 30, 2019 was $2.6 million, compared with $1.7 million for the three months ended September 30, 2018. The reason for the increase in amortization and depreciation expense relates primarily to the amortization of intangible assets acquired from acquisitions.

The net loss attributable to common shareholders for the three months ended September 30, 2019 was $7.9 million, or $0.03 per share, versus a net loss attributable to common shareholders for the three months ended September 30, 2018 of $2.0 million, or $0.01 per share.

About Predictive Laboratories, Inc.

Predictive Laboratories’ discoveries in molecular and genetic diagnostics focus on unmet needs in women’s health, infertility and other diseases. Predictive Laboratories offers earlier detection of disease through genetic assessment to guide personalized precision medicine. Leveraging its vast genetic database, Predictive Laboratories enables the discovery of genes and gene mutations that identify hard-to-diagnose and detect diseases and their prognosis.

The Company’s proprietary tests include ARTguideTM and FertilityDXTM. ARTguideTM is a blood test that assesses a woman’s endometriosis risk and other genetic causes of infertility in order to optimally navigate the path towards conception. FertilityDXTM is a comprehensive test and service, using the parental genetic assessment as the map to guide the journey to successful pregnancy and a healthy newborn. Predictive Laboratories’ tests are processed at the Company’s state-of-the-art CAP-accredited, CLIA-certified laboratory, equipping physicians with the robust diagnostic tools to provide personalized treatment for their patients. For more information, visit www.predictivelabs.com.

About Predictive Biotech, Inc.

Predictive Biotech, Inc., a Salt Lake City-based life sciences company formed in 2015, is a leader in human cell and tissue products for use in cellular therapies and regenerative medicine. A growing national network of clinics, health systems, researchers and physicians leverage Predictive’s four main placental-derived and Wharton’s Jelly umbilical cord-derived products. Predictive Biotech’s current products are regulated by the FDA under 21 CFR part 1271 section 361 as minimally manipulated allografts intended for homologous use.

About Predictive Technology Group, Inc.

Predictive Technology Group aims to revolutionize and personalize precision patient care.  The Company’s entities harness predictive gene-based analytics to develop genetic and molecular diagnostic tests, as well as companion therapeutics, in order to support a patient from diagnosis through treatment. The Companies’ tests and products empower clinicians to provide their patients with the highest level of care.  Predictive’s subsidiaries include Predictive Laboratories, Predictive Biotech and Predictive Therapeutics.  For more information, visit www.predtechgroup.com.

Forward-Looking Statements:

To the extent any statements made in this release contain information that is not historical, these statements are essentially forward-looking and are subject to risks and uncertainties, including the difficulty of predicting FDA approvals, acceptance and demand for human cell and tissue products and other pharmaceutical products, the impact of competitive products and pricing, new product development and launch, reliance on key strategic alliances, availability of raw materials, availability of additional intellectual property rights, availability of future financing sources, the regulatory environment, and other risks the Company may identify from time to time in the future.

Contacts: For more information, visit www.predtechgroup.com