Larry Heaton: Okay. What do we got online here? Okay, first one, what was the primary motivation to acquire Qorvo Biotechnology? That’s a great question. Primarily it was the ability to immediately realize improvements in margin and to do that with a very, very high probability of success from an execution standpoint. And secondly, to accelerate the ability to develop and launch new assays. So when you think about margin improvement, once we start manufacturing the products ourselves then you know we’re cutting out the middleman, Qorvo Biotech. Instead of staffing up down in Georgia and equipping Georgia to be able to manufacture the products. Instead of staffing up in Ann Arbor from an R&D standpoint to develop the new assays by acquiring Qorvo Biotech We just acquired the people in the team that have been doing it and so that gives puts us in a quicker position to realize those efficiencies and that reduced price.
Also by doing this we eliminated substantive payments going forward, right. So we had transition service payments. We had payments due for the finalization of the new assays and we also had a royalty that we were going to have to start paying once we started manufacturing them ourselves. All those go away. In fact, we think from an economic standpoint, it was a really good deal. The one thing I will say is that you know we’ve always been paying for the R&D expense and other associated expenses it’s just we’ve been paying those expenses in the form of a higher price to us for the assays. Now, we’ll pay those expenses directly as part of OpEx or wherever they fall, but our margins will be better. And when we look at the long-term and the long haul, it’s the desirability of high margins is really what’s going to sustain the company and propel it to profitable growth in the future.
Next, two questions. Do you still plan to release the GI assays this quarter and two, what has been the reaction by horse vets on the equine assay? So we’ll take this the first one first. Yes, we do still plan to release the GI assays this quarter. We talked about that a little bit in the text of the initial comments, and we’re very optimistic about those, as those are absolutely assays that are not currently available at the point-of-care that veterinarians would really like to have available at the point-of-care because you bring your dog in for diarrhea and vomiting, they’d like to know right then and there what’s the issue so that they can start treatment right away. Horse vets have been very receptive in our early rollout of the equine eACTH assay.
The ability to, you know, there’s a number of different ways that this assay is used. Today, when a vet sees signs of potential cushions in a horse, then they need to test right away. So that’s one, test those with signs. Second, once they come up positive, then there’s one drug on the market that’s manufactured by an animal health company and it’s sold and it works really well. But in order to figure out the dosage, you need to test eACTH frequently during that initial two or three week period. And so that’s multiple tests. And then that horse either twice a year or four times a year, some vets do it, quarterly some every other quarter, they test again eACTH to titrate that therapy for the rest of the horse’s life. And so all of that business is open to us now.
And then what we really expect to do is to leverage the convenience and ease of use of the TRUFORMA platform, the ability to do the stall side to move from testing only when you see signs, at which point the disease has already progressed significantly. And in some cases, the horses 30% of the time never show signs. We’d like to move to a screening opportunity because there’s 5 million horses over the age of 15 in the United States and of the — and their prevalence of this disease in that group of horses is 25%. So we see a screening opportunity which would be very significant in terms of potential revenue for the company. Why do we feel a reverse split would be more beneficial than a buyback? Why not buyback now while the price is low? If you look at the data that we’ve been looking at, the performance of a stock after a buyback 30, 60 days later it usually reverts right back to where it was and in a case of ours where we have such a huge float no buyback is going to substantially reduce that float and we’re going to have there’s still going to be plenty of opportunity for day trading and as a result there’s no assurance that we wouldn’t find ourselves in the same position except for we would not have that cash and so we would not be able to take advantage of opportunities to acquire companies or product lines in the marketplace or fund organic growth.
And so we believe that a reverse split, because it’s permanent, would be the better alternative for shareholders over the long haul. It’s not, listen, nothing gives me pleasure about this, especially the timing of it, because we respect the investors in our company, but we also have a responsibility to do what’s best for all the shareholders and for the company itself. Please discuss how the acquisition of Qorvo will affect the G&A line. Peter, you want to take that?
Peter Donato: Yeah, nominal, nominal on the G&A line.
Larry Heaton: Yeah, what is the Zomedica team looking forward to the most going into 2024, 2025? That’s a good question. I think growth and profitability, but I think really it should be a fun year, right? It’s a year of execution. As we begin the year, we have a full slate of products. The TRUVIEW and the VetGuardian, we launched during the year. There’s always a ramp up. Remember, we’re not going in and selling the same thing as someone else. We’re not trying to say this is a slightly better widget than that, we’re going in and saying, for the first time ever, you have a product that will give you the ability to monitor a pet without having any wires or harnesses on that pet. It’s a whole new category and certainly a new product.
Many of our assays are new products not previously available. And so we’ve had the year to sort of ramp up into that. Now as we look into 2024, we have a full year, we have a full team, and I really look forward to realizing a return on the investments that we’ve made, right? So for example during 2023 and you’ll see it in the OpEx. We built — we had to build and assemble a team to do remote pathology reads for our customers for TRUVIEW. NOW in 2024 we get to see the revenue from TRUVIEW to overtake that expense. Same thing with the R&D expense. It costs us like $1.5 million to create the GI assays. In 2024, we’re going to see revenue from those. So, I mean, most of all, it’s really driving for a cash flow positive and profitability.
Peter Donato: Yeah, I see it, Larry, you know, we’ve grew 31% in the quarter, 39% or so year-to-date, right? That’s essentially with our Assisi and PulseVet products, right? Those are predictable, right? We’re not going to comment whether that’s the right growth rate for next year, but if you assume, as we’ve disclosed, most of the $18 million year-to-date has been from those two products and those are growing quarter-over-quarter. And to your point, and to the question, what are we excited about, TRUFORMA, VetGuardian, and TRUVIEW, right. We have almost no revenues for those or very little nominal and those are three best. So it doesn’t take three for three, although that’s the goal, to have a very meaningful year next year, certainly well above where we finished last year, right, which is $19 million or just under 19.
So to answer the question directly, I’m excited about the possibility of those three new products while continuing to grow the other business. And that should, as we’ve said repeatedly, get closer to that $40 million annualized run rate. We’re approaching cash flow break even.
Larry Heaton: Yep. There’s a number of questions on the subject of international sales. And so let me just comment on that right now, about 20% of our revenue, depending on the quarter, about 20% of our revenue comes from the international sales of TRUVIEW. I’m sorry, I’ll take that back. PulseVet and Assisi products ,right. And of course we continue, we expect to continue growing those products in Europe, in South America, in Australia, in Japan, in the Middle East. In addition, we expect to begin in the first quarter of next year launching VetGuardian and TRUVIEW products, both of which right now are undergoing the sort of final testing that needs to occur to get the CE mark. So that they clear regulatory requirements in Europe primarily and generally every country wants the kind of certification that they’re you know safe and all that.
