Good day, everyone, and welcome to iSpecimen's First Quarter 2022 Conference Call. [Operator Instructions] This conference is being recorded. A replay of today's call will be available on the Investor Relations section of iSpecimen's website and will remain posted there for the next 30 days. I will now hand the call over to Allison Soss, Investor Relations for introductions and the reading of the safe harbor statement. Please go ahead.

Thank you, operator. Good morning, everyone, and welcome to iSpecimen's First Quarter 2022 Results Conference Call. With us on today's call are Christopher Ianelli, iSpecimen's Chief Executive Officer and President; Tracy Curley, Chief Financial Officer; and Jill Mullan, Chief Operating Officer. Before we begin, I would like to remind you that today's call contains certain forward-looking statements from our management made within the meaning of Section 27A of the Securities Act of 1933 as amended and Section 21E of the Securities and Exchange Act of 1934 as amended, concerning future events. Words such as may, should, projects, expects, intends, plans, believes, anticipates, hopes, estimates and variations of such words and similar expressions are intended to identify forward-looking statements. These statements are subject to numerous conditions, many of which are beyond the control of the company, including those set forth in the Risk Factors section of the company's Form 10-K for the year ended December 31, 2021, filed with the SEC. Copies of this document are available on the SEC's website at www.sec.gov. Actual results may differ materially from those expressed or implied by such forward-looking statements. The company undertakes no obligation to update these statements or revisions or changes after the date of this call, except as required by law. Now it is my pleasure to introduce Chris Ianelli, CEO and President of iSpecimen. Chris, please go ahead.

Thank you, Allison, and good morning, everyone. Thank you for joining us for today on our First Quarter 2022 Earnings Conference Call. I'm excited to provide you with an update on our progress following 3 completed quarters of operation as a public company. With me are Tracy Curley, our Chief Financial Officer; and Jill Mullan, our Chief Operating Officer. I'll begin by providing an overview of our operational performance, followed by a review by Tracy of our financial performance during the 3 months ended March 31, 2022. Following that, we will open the line to take your questions. Q1 was another exciting quarter for the company, marked by a tremendous amount of activity and a few challenges, the latter of which stemmed predominantly from the military conflict between Ukraine and Russia and the resulting geopolitical unrest. Starting with our operational highlights. As we have discussed on our prior calls, following our initial public offering last June, management has been intensely focused on expanding the capabilities of the iSpecimen marketplace platform, accelerating the growth and utilization of our global supply chain and invigorating revenue growth for long-term value. I'll cover each of these separately, starting with the work being done on our marketplace platform. I'm pleased to let you know that several weeks ago, we announced a new release of the iSpecimen marketplace. This was a culmination of planning and work that began in the second half of last year. It's important to stress that this update was the first of a series of updates we plan to release each aimed at delivering incremental yet foundational improvements to our software platform that align with our long-term strategy. As we have discussed on prior calls, our unique marketplace platform is a critical component of our business model and strategy to capture market…

Thank you, Chris, and good morning, everyone. Today, I'll be reviewing our financial results for the first quarter of 2022 compared to the same period in 2021. For the first quarter of 2022, we reported approximately $2.5 million in revenue compared to approximately $3 million during the same period last year. The decrease in revenue was primarily attributable to the Russia and Ukraine conflict, which shut down supply sites in those regions, along with the reduction in sales of COVID-19 specimens when compared to the prior year. The heterogeneity or diversity of our order as the heterogeneity of our order mix returns, we continue to experience declines in COVID-19 revenue. For the first quarter of 2022, COVID-19 revenue was approximately $479,000 compared to approximately $682,000 for the same quarter in the prior year, a $203,000 or 30% decrease in COVID-19 revenue. We anticipate that our COVID-19 revenue will continue to decline being a specific guidance on the decline due to the uncertainty of the continued impact of COVID-19. Specimens accessioned during the first quarter of 2022 were directly impacted by the Russia and Ukraine conflict, which resulted in a decrease of approximately 1,267 specimens or 20% to approximately 4,924 specimens compared to approximately 6,191 specimens accessioned during the same quarter in the prior year. On a positive note, there was a change in specimen mix that resulted in an increase in the average selling price per specimen of approximately $10 or 2% compared to the same period in the prior year. Cost of revenue decreased by approximately $458,000 or 28% from approximately $1.6 million for the first quarter of 2021 to approximately $1.2 million for the first quarter of 2022, which was attributable to an 11% decrease in the average cost per specimen as well as a decrease of 20%…

[Operator Instructions] Our first question is from the line of Matt Hewitt with Craig-Hallum Capital Group.

Maybe first up, regarding the roughly $1 million in orders that were impacted by the Russia and Ukraine situation. I'm wondering, is there any way to kind of help us with the cadence of those a little bit? I mean I think you said that it would be reflected or recognized over the remainder of the year, but will the bulk of that be hitting in any particular quarter?

No. So when we look at those orders and we reallocated them to new sites, collection rates varied from when we originally had them allocated to the Ukrainian sites. So it turns out we will be collecting the bulk of that over the next 3 quarters, and it's pretty evenly spread out.

And it's hard to project, Matt, this is Chris. That was Jill answering the first part. It's hard to project because as we scramble to move those orders, which we successfully did for the majority of them, we had to get into other queues. And it's not as though those other sites could immediately drop the other stuff that they were doing and move to these. So it's going to be really difficult to predict where the bolus of those orders come out in the next quarter. So it's safeness to say they're going to spread out over the year.

Okay. That makes sense. And obviously, it is highlighting your abilities and the breadth of your platform. So I guess, congratulations on that front. Maybe shifting gears a little bit regarding the data initiative. Some of the changes, obviously, congratulations on getting that first update out. As you look at the platform today and you think about the next update or the next couple of updates, what other areas of data do you believe could add the greatest value to your platform?

So it's going to continue to be deep clinical data sets for a period of time. And I say that because what's most valuable is to be able to gain as much visibility into the phenotype or the characteristics of patients from whom our customers want those samples. So for the foreseeable future, our intense focus is going to be on reaching more deeply into the electronic medical record, to gain access to not only the sorts of data sets that we've been getting historically that describe the samples that exist in the pathology lab, a clinical lab or a biobank. But now trying to get those deep phenotypes, meaning you want to have deeper diagnosis data, you want to have information on how these patients are treated, how they may have responded or not responded to those treatments, social history information like smoking status, drinking, family history. That information is becoming increasingly important in our customer base for 2 reasons. One, when they go to select a sample that we would source for them from a pathology lab, a clinical lab or a biobank, meaning an environment where the sample already exists. They want to qualify that sample for selection and shipment to them by understanding these deep attributes of the patients more so than they have in the past, but the second reason why it's important is because with precision medicine really picking up, we've been in a world of precision medicine for some time now. The request that we're getting are increasingly specific, not only in terms of the patients that collections need to be done from, but the way that those samples are collected. And we are seeing an increase -- and we've seen this for a while, a steady increase in the number of prospective collections that are being requested of us, meaning what is being asked for by the customer cannot be satisfied by a sample in a lab already exists. We have to have information about where the patient with those characteristics is and where they are likely to have an encounter with a health care system so that they can be approached, informed consent can be gathered and we can do that collection. So it's deep data sets to really help with both arms of collection that we currently run. I don't know if Jill has anything to add to that, but...

No, I think that was pretty complete.

That's very helpful. And maybe 1 more, and I'll hop back in the queue. But I think you mentioned, Tracy, that the ASP actually during the quarter increased roughly 2% year-on-year, how much of that is related to COVID as you're seeing this shift back to, I guess, a broader sample collection versus primarily COVID last year and the year before? And then how much of it is the newer samples that are coming with this greater data set just require or come with a higher ASP.

I'm going to let Jill answer that because she's closer to the mix of our specimens.

Yes. So when I looked at the mix of species, what we saw is a slight increase in the overall percentage of the POs that we received that were based upon research use only prospective collections. And typically, those custom collections were, as Chris mentioned, we have to go out, find the patient, approach them, can send them and get a sample from them, have a higher price point than, say, something like a clinical renin sample. So as our mix continues to shift more towards those higher value samples, you typically will see the price increase. The COVID effect or COVID part of it is a lot of the COVID requests that we had gotten certainly in the early days of COVID and throughout last year too were clinical remnant samples, so those lower-value samples. And so as the COVID mix shifts out of our overall mix, and these other samples increase as a percentage of the overall samples, I would expect you would continue to see increased overall ASPs. Yes, I was going to say, it may be lumpy on a quarter-by-quarter basis because it really depends upon the projects. But overall, if you look at our history, as that has happened, the ASPs have gone up.

Our next question is from the line of Constantine Davides with EF Hutton.

Chris, you highlighted how much cash you have on the balance sheet and obviously, industry valuations lately are under some pressure. And I'm just wondering does that change the rising cost of capital, does that change your mindset in terms of looking for assets on the acquisition front? And maybe you can just help us understand to the extent you are looking for assets to bring in-house, what are the criteria of some of the properties you would target?

Yes. So it certainly does the macro environment that we now find ourselves in, along with everybody else and the valuations that are being assigned by the market, certainly does change our attitude towards M&A. Cash is king right now, but we are continuing to look and be very selective on what we look at. We have not announced or made public what those criteria are, but I'll sum it up by saying we are going to be very opportunistic, I think a number of the competitors in our space are going to be feeling the sting from what may be a recessionary environment that we enter into, but certainly a pullback given what's happening in the market. So we'll be looking for very opportunistic opportunities for us to go in and bring in assets that can bolster our supply side and give us deeper and better access to that is our platform, but also it gives us access to the customer base that some of those competitors may be serving. In addition to looking at look-alike to specimen in the sense that we're looking at low-tech competitors where we can be opportunistic. We're also looking at opportunities where we can start to get into new offerings that are very related. I don't want to say tangential because they're very adjacent to what we do now in providing access to primary patient material, meaning primary tissue or biological samples. But there is an opportunity for us to add value to what we currently do. Not only would we be able -- one example of this would be not only getting access to the right patient and the right sample, whether it's a biofluid or a piece of tissue from that patient, but being able to separate different cell types and then sell isolated cell types from that tissue. And that's something that we're looking at because we have access to such a large network and access to so many different types of tissue, and we can start to create some inventory around very specialized cell types that we know are in demand in the market, hepatocytes being one of them. So that gives you a little clue as to some of the things that we're using to qualify these potential targets for M&A or partnership, things that we can be opportunistic and things that we can sensibly extend our offerings to our customer base, given that we have their attention on the platform and with our sales force. The economic parameters or financial parameters around which we would qualify these opportunities, we have not yet disclosed that. And I don't think I'm ready to do it on this call, but that will be coming out as we make more progress.

Do you feel like you're far enough along in some of these discussions that we potentially see a transaction this year? Or is it more of a 2023 event?

Yes. I would shutter constantly to tell you what's going to happen this year because there's so much uncertainty in the market, and we do want to hold on to cash and see the value of that. So I would say, unlikely this year and much more likely in next -- 2023 and subsequent years.

I show no further questions in the queue. At this time, I'll turn the call over to Mr. Christopher Ianelli, CEO and President, for closing remarks.

All right. Thank you, operator. I'd like to thank everybody again for joining us on today's call and for your continued interest in iSpecimen. We look forward to having follow-up conversations with many of you and seeing many of you at upcoming events. So with that, thank you, and everyone, have a great day. Bye.

That does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your lines.