Paul Kinnon - President, Chief Executive Officer, Interim Chief Financial Officer, Secretary, Director Leon Richards - Chief Accounting Officer.

Bill Bonello - Craig-Hallum.

Good day, and welcome to the Transgenomic First Quarter 2015 Financial and Business Review Conference Call. All sites are currently in a listen-only mode. Please note, there will be a question and answer session later on in the call. Also note, today’s conference call will be recorded and will be accessible both, by phone and on the Internet.

For information, please refer to the conference call press release on the company’s website transgenomic.com for further details. The company has asked that I read the following statement. Management will make comments today that contain forward-looking statements.

Forward-looking statements are any statements that are made that are not historical facts. These forward-looking statements are based on current expectations of the management team and there could be no assurance that such expectations will come to fruition.

Because forward-looking statements involve risks and uncertainties, Transgenomic's actual result could differ materially from management’s current expectations. Please refer to the press release, the company’s 10-Q, 10-K and other periodic SEC filings for information about factors that could cause different outcomes.

The information presented today is time-sensitive and is accurate only at this time. If any portion of this call is rebroadcast, retransmitted or redistributed at a later date Transgenomic will not be reviewing nor updating this material. I will now turn the call over to Transgenomic's President and Chief Executive Officer Paul Kinnon.

Please go ahead, sir..

Good evening, everybody and thank for joining us in today's first quarter 2015 conference call. I am joined by today by our Chief Accounting Officer, Leon Richards. I will provide an overview and update on our progress during this quarter. Leon will then briefly review the quarter's financial results in greater detail.

It has only been a month since our last conference call, but I am pleased to be able to report good progress on several fronts since that time, including continued improvements in the results from our existing businesses and significant acceleration of our commercialization activities for our breakthrough technology Multiplexed ICE-COLD PCR.

First, I am pleased to report that we successfully closed and reported our first quarter earnings without any issues. Additionally, we achieved a double-digit percentage increase in net sales year-over-year in the first quarter, excluding sales of our divested Surveyor product line.

Importantly, the company achieved a robust 32% increase in revenues in the critical Laboratory Services segment, largely driven by increases in the volume of patients tests, Patient Testing and Laboratory Services were key area, which we had targeted for growth going forward.

We also reported decreases in bioconsumables sales in the first quarter, but these were expected as a result of Surveyor product line divestiture in 2014.

This shift in revenues from our instrument business to high potential segments such as Patient Testing and Biomarker Identification, reflects the growing success of our strategy to transform Transgenomic into a high technology biotechnology company, employing advanced genomic technologies for targeting and enabling precision medicine.

This shift in strategy is intended to support both, revenue growth and increased profitability.

I am therefore pleased to note that we also reported substantially improved gross margins in the first quarter, a trend we hope to sustain as we continue to grow volumes, sales of our targeted products and services and continue to bring new higher margin product offerings online.

Also, consistent with our commitment, we have made progress in reducing expenses this quarter and we will seek to continue to do so for those expenses not directly associated with increasing sales and Multiplexed ICE-COLD PCR.

As most of you know, our current focus is on maximizing the commercial rollout of our Multiplexed ICE-COLD PCR, which has unique properties giving it breakthrough potential as an enabling technology for widespread adoption of personalized medicine and precession medicine in cancer and other diseases.

To recap, Multiplexed ICE-COLD PCR enhances current technology to make it possible to detect and monitor genetic mutations simply non-invasively.

Its ability to reduce or eliminate the need for costly and painful tissue biopsies to enable the rapid developing liquid blood testing sector for oncology, its ultra high sensitivity and simplicity, its unparalleled flexibility to work with all types of patient samples and with all sequencing platforms, make an ideal enabling products in the rapidly managing genetic revolution in cancer diagnostics monitoring and treatment.

We believe we are on track and even ahead of schedule in realizing key elements of our commercial plan. Since the start of the year, we have been working to augment our internal resources and complete agreements with collaborators that further strengthen customers' confidence in the unmatched performance of Multiplexed ICE-COLD PCR.

We expanded our existing license agreement with Exiqon to ensure broad worldwide access to their technology that enhances Multiplexed ICE-COLD PCR ultra-sensitive detection of cancer mutations.

We have also revised our agreement with Horizon Discovery to incorporate their advanced human genomic reference standards into our Multiplexed ICE-COLD PCR kits to further assure customers of high quality and exceptional performance of Multiplexed ICE-COLD PCR.

As most of the [ph] in place, I am happy to report that the commercialized campaign is well underway. Notably, in April, we marked the first commercial launch of Multiplexed ICE-COLD PCR when we announced its availability to pharmaceutical and biotechnology companies of our biomarker identification business.

Multiplexed ICE-COLD PCR, provides unique advantages to biomarker discovery and development as well as for screening of clinical patients and stratification of patients.

With its unparalleled detection limits down to at least 01%, its high accuracy in both tissues and liquid samples, its ability to detect most types of mutations and its new qualification capabilities Multiplexed ICE-COLD PCR provides our customers a competitive edge by streamlining process for discovery through clinical validation and it is superior to historical types of PCR.

The fact that Multiplexed ICE-COLD PCR can be easily run on any next-gen sequencing or digital PCR platform will facilitate transition to daily clinical use. I am pleased to report that we are already receiving many expressions of interest in this new technology from our bio identification services customers, pharma and bio technology firms.

This launch represents an important milestone for Transgenomic, but it also just a first stage of our commercialization roadmap. Today, I am excited to announce that we will be launching our Multiplexed ICE-COLD PCR as a CLIA testing service at the ASCO meeting in Chicago at the end of May, which is actually 12 months ahead of our stated plan.

Providing access to Multiplexed ICE-COLD PCR, CLIA testing in the CLIA laboratory that is certified to conduct clinical diagnostic tests made available for the first times to oncologists and other physicians, hospitals, institutions and patients who want to realize the benefits in their therapeutic decision-making, monitoring and treatment of patients, and overall using liquid blood samples enable broader implementation of precision medicine in cancer.

I am also excited to announce that we will be launching Multiplexed ICE-COLD PCR kits worldwide in mid-June for use on all sequencing platforms. The kits will initially be labeled research use in the U.S. will be available worldwide and available in the U.S.

Additionally, we will be offering CE-marked kits in Europe for the use in clinical assays in Europe. As discussed previously, we are also pursuing a major initiative to establish large number and a variety of strategic partnering and licensing relationships with sequencing platform companies and other life science companies worldwide.

The combination of the tremendous flexibility of Multiplexed ICE-COLD PCR and the rapid growing interest in use of liquid biopsies reinforce our conviction as this strategy is ideal for realizing the large commercial potential of the technology both, in the near and long-term generating revenue for the company.

I noted in last month's call that we have recruited a leading industry business development consultant to assist with discount pay.

While these deals take some time to complete, the initial feedback from his outreach efforts are being very encouraging and we remain confident that we will have at least one agreement in place year generating material revenues for the company from Multiplexed ICE-COLD PCR.

These are major milestone for Transgenomic and we believe they mark the fundamental shift in the company's focus and direction that is our promise and our goal. Before turning over to Leon, I want to note that strengthening of our cash positions has been a priority in recent months.

We are therefore pleased to complete a $6.4 million private placement in March that included both, existing and new investors. In all, we raised $7.3 million in new funds during this quarter.

Going forward, we anticipate our cash needs will increasingly be addressed with growing revenues generated from the ongoing revitalization of all businesses as well as the increasing flow of upfront licensing and royalty fees from partnering our Multiplexed ICE-COLD PCR technology. With that, I will now hand the call over to Leon.

Leon?.

Thank you, Paul, and good afternoon. We will start with an analysis of the first quarter results. Net sales for the first quarter of 2015 were $6.5 million when compared with $6.3 million for the same period in 2014. First quarter 2015 Laboratory Services segment sales increased by $1.2 million or 32% as compared to the first quarter of 2014.

The increase was due to both, Patient Testing and the contract laboratory services pieces of that segment. In Genetic Assays and Platform segment, first quarter 2015 net sales declined by $900,000 when compared to the same period last year.

However, recall the Genetic Assays and Platform segment was impacted by the divestiture of our Surveyor product line during the third quarter of 2014 and that accounts for approximately $400,000 of that $900,000 decrease.

Gross profit as reported of $3 million or 46% of net sales compared with gross profit of $2.5 million or 40% of net sales for the same period in 2014.

Increasing gross profit, again, is a result of the higher Laboratory Services segment sales partially offset by some gross profit reductions in Genetic Assays and Platforms, due to the impact of that Surveyor product line divestiture. Operating expenses were $5.6 million during the first quarter of 2015 compared with $6 million in the prior year.

The decrease was primarily due to lower personnel costs and stock compensation cost in the current year quarter, partially offset by a higher bad debt provision in Q1 2015. In summary, the loss for the first quarter of 2015 was $3 million or $0.36 per share compared with the net loss of $4.2 million or $0.60 per share in the first quarter of 2014.

Modified EBITDA, showed a loss of $2 million for the first quarter of 2015 compared to a loss of $2.7 million for the same period in 2014. You can find a reconciliation of EBITDA and net loss in the earnings release.

Cash and cash equivalents were $5.4 million as of March 31, 2015, compared with $1.6 million as of December 31, 2014, and as Paul talked about earlier and as previously announced during the first quarter, we completed financing that raised $7.3 million in net proceeds and those net proceeds will be used for working capital and other general purposes.

At this point, I am going to turn the call back to Paul..

Thank you, Leon. At this point, operate, we are ready to open the call for questions..

[Operator Instructions] We will go first to Bill Bonello of Craig-Hallum..

Hey, good afternoon, guys.

A few follow-up questions here, so first of all in terms of the announcement in making ICP available to your pharma and biotech customers' announcement you had back in April, have you actually had any sales to customers yet?.

No. We have been working with the clients. Obviously, it takes time for them to move forward.

What we are looking at is expression of interest, customers starting to provide us with some samples and do some pilot work and such like, but there is no actual revenue as yet, but we are very excited by the levels of the response and also the level of the interest..

Okay.

What exactly are you selling to those customers, a license? Are you selling some time of reagent, are you selling a kit, are you performing testing for them in your lab? What exactly is the product that you are selling?.

The biomarkers, which is business is a lapse [ph] say was that carries out clear work for the pharma.

That is part of a study that they use for their basic research, their clinical research on the clinical trials work that goes to the FDA, so basically we are carrying out the ICE-COLD PCR study work inside a our labs in Omaha, either identifying new biomarkers that they have never seen before, identifying significantly low level mutations they can't find or mutations that are appearing the region they can't find and then and then running a panel very similar to what the work we did with Amgen in 2008 and onwards where we identified 68 unknown mutations for Amgen, so they can try and get approval for Vectibix in the U.S., which actually got them to move Vectibix from first line to front line in Europe, because the study that we did and the work, we did allowed them to identify which mutations were present at low-level, at 5% which then meant that the patient could be treated and not treated with that drug in Europe..

Okay. That is helpful.

Then in terms of your CLIA offering that you talked about today, that I assume you are talking about doing testing for clinical customers then?.

It is doing post-testing for patients, physicians, oncologists and the current business that we call patient testing the business unit there that those Long QT, how [ph] testing for patients or neurology testing, cardiology testing.

That is the area of sales, yes, so it will be directly to those people who are using it in the diagnosis, the monitoring of the treatment to patients..

As distinct from being used in a clinical trial or for basic research purposes?.

Right..

Okay.

On that front, when will you actually be able to be begin performing tests for those clinical customers?.

We will be launching the test at ASCO..

Okay.

What is the test that you are going to launch at ASCO? What specific test will you be launching?.

We are not going to disclose that at this moment in time. We will disclose that ASCO. Obviously, ASCO is the largest oncology meeting that occurs in the U.S. We will be press releasing and exhibiting there and we will be bring out that test, but it is a Multiplexed ICE-COLD PCR test that will be available there that will be unique.

We believe it will be compelling in the marketplace just because of the sensitivity, the fact that we will be able to use blood, we use less blood than any other provider.

We provide the ability to identify the unknown mutations there in the region and it will be a compelling offering that we will be bringing out there, but we are going to press release that and use that as a meeting as a launch pad for it..

Okay. That makes sense. Are there any limitations - just so I understand, sorry, you launch at ASCO basically that means you announce the availability of that test.

Does that mean that sort of from that point forward, you would be prepared to start if customers wanted, they will order the test to start taking orders or is there sort of a ramp up period between ASCO and when you actually would be able to receive orders?.

If a customer came up to us with a blood sample at ASCO, we would not probably be able to run there and then, but the goal will be that we will be able to take samples and start processing them immediately after ASCO..

Yes. I was not actually thinking you were going to take blood at ASCO, but just trying to figure out how quickly after that.

Then are there any limitations to which customers you can service? In other words, are there certain restrictions in certain states that physicians could not send test to be performed in your laboratory et cetera? How do we think about that?.

No limitations. I mean, Bill, in some aspects, we can take FNAs, which is a type of sample used for lung cancer. We can take FFPE tissue samples, we can take a plasma sample, and we can take urine sample.

In reality, we can take any of those samples, because the technology is flexible and then we will be rolling on the platform to getting - have in-house and giving the customers the feedback on the genes that we are looking at and the regions we are looking at for the low-level mutations at present.

Obviously, the big goal is to drive towards liquid biopsies, the people use our liquid samples and drive there, because our sensitivity outperforms all the technologies in our opinion and enables us to use significantly less DNA to start with than anybody else's platform and that is really where the real USP of the technology is a unique standpoint [ph]..

It sounds like what you are saying is in terms of why you are not giving specifics exactly on the assay.

What is it your launching it at ASCO will be something that is essentially immediately can be performed from a blood sample?.

Correct..

Okay. Then what I was getting at sorry - with the restrictions was not the format in which the test was coming. I was wondering if there were regulatory restrictions. In other words, I guess, though for instance physician in New York, send specimens to be performed in your lab and get results back and use those.

I do not know what the rules are on the lab-developed testing there..

There is no restriction from that perspective however. You do need a New York license to run samples from New York.

Our New Haven facility is clearly, CLIA-approved and also New York approved and our Omaha lab is CLIA-approved, but not New York approved, so there are some clinical restrictions from New York, but in reality that is the more of a CLIA-type approval process and we are between the two sites in terms of what we have got available..

Okay, so you could do the testing in Connecticut if necessary?.

Correct..

Okay. Thanks. That is helpful.

Then any licensing agreements thus far?.

No. I think we are halfway through the presentation discussion. I mentioned that we are getting a lot of positive feedback, there is a growing interest. We do think we have a deal signed before the end of the year. That is as much as we will say at this moment on time..

Okay. That is very helpful. Then just two last things if I can. Any update on the regulatory front? Coming into the year, you were very optimistic about the situation with the FDA and that you might be able to pursue some novel sort of approval process.

Where the things stand there?.

We are still in discussion with the FDA. There has been no real change in the status, but that as much as we can say on that issue. We are trying to walk a very thin line-type rope in terms of what we can say and cannot say. We are still in discussions with them and we will keep everyone posted on how that is proceeding..

Okay.

Then just the final thing any thoughts on additional monetization of assets?.

We are working aggressively on that, and as soon as we have anything to announce, it will be publicly available, but at the moment there is nothing we can update anyone on either..

Okay. Thanks so much for bearing with all those questions. That is all..

No problem. I appreciate it..

Thank you, Bill..

Since there are no other questions in the queue, I will turn the call back over to Mr. Kinnon..

Thank you very much. I hope we have conveyed to you a sense of both, progress that we are making in restoring the health of our call business and our excitement about the accelerating pace of commercialization activities around Multiplexed ICE-COLD PCR.

It has potential to transform both, our company and phase of personalized medicine precision medicine. We look forward to keeping you apprised of our progress and we thank you for joining the call today..

We appreciate your participation and you may now disconnect..