Operator: Good afternoon, everyone, and thank you for joining us for the Interpace Diagnostics conference call to review the company’s financial results and operations for the third quarter and year-to-date of 2018 as well as recent developments. The earnings release detailing third quarter results was issued after the close of the market today and should be available on Interpace’s website at www.interpacediagnostics.com. Before we get started, during the course of this conference call, the company will make forward-looking statements. We caution you that any statement that is not a statement of historical fact is a forward-looking statement. This includes remarks about the company’s financial projections, expectations, plans, beliefs and prospects.

These statements are based on judgment and analysis as of the date of the conference call and are subject to numerous important risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. These risks and uncertainties associated with the forward-looking statements made in this conference call are described in the Safe Harbor statement in today’s news release, as well as Interpace’s public periodic filings, which include the Form 10-K filed with the SEC on March 23, 2018 and Form 10-Qs for the quarters ending March 31, 2018 and June 30, 2018 previously filed, as well the 10-Q for the third quarter expected to be filed shortly, which include discussions in the section on forward-looking statements. Investors or potential investors should carefully read and consider these risks. Interpace assumes no obligation to update these forward-looking statements to reflect future events or actual outcomes and does not intend to do so. In addition, to supplement the Generally Accepted Accounting Principle, or GAAP, numbers, we have provided non-GAAP information.

We believe that this non-GAAP information provides meaningful supplemental information and may be helpful in assessing the company’s historical and future performance. A table reconciling the GAAP information to non-GAAP information is included in the company’s earnings release, which is available on its website. Now, I would like to turn the call over to Jack Stover, President and Chief Executive Officer of Interpace Diagnostics.

Jack Stover: Thank you, Rob. Good afternoon and thank you for joining us today.

With me is Jim Early, our Chief Financial Officer. I will begin the call with an update on our progress both for the third quarter and to date and we’ll then review our financial performance in more detail. Following that, we will open the call for your questions. Let me remind you of our mission as I do on all calls. We are a fully-integrated commercial and bioinformatics company that provides molecular and related first-line diagnostic test and pathology services by leveraging the latest technology and personalized medicine for better informed clinical decision and improved patient management.

As you may know, we currently have four diagnostic tests commercialized on the market. ThyGeNEXT is our next generation sequencing test for cancer risk assessment of thyroid nodules that focus on ruling out cancer for indeterminate thyroid nodules. ThyraMIR is the first microRNA gene expression classifier for thyroid nodule identification, focused on ruling in cancer. PancraGEN is the first and only US commercially available molecular and bioinformatics test for sophisticated evaluation of pancreatic cysts and now solid masses as well as biliary structures. Our fourth and newest commercial product, RespriDX, is our foray into the lung cancer diagnostic.

The third quarter of 2018 was another strong quarter for Interface, representing the seventh straight quarter of improved revenue, with third-quarter revenues growing to $5.8 million or 37% over the third quarter of 2017 and year-to-date revenues of $16.1 million, which grew by over 39% compared to the same year-to-date period of 2017. Our test volumes grew and our pricing or NRV, net realizable value, improved resulting in record quarterly and year-to-date revenues once again. Further, we continued to aggressively grow our business, while rationally managing our costs. I'm especially pleased with our continuous improvement in monthly cash collections, the lifeblood of any growth company like ours. Our net loss for the quarter was more than a 10% improvement over the comparable quarter of 2017.

Our cash used in operating activities for the nine months ended September 30, 2018 was $6.8 million as compared to $12.9 million for the same period of 2017. Included in the $6.8 million was $2.7 million related to our growth in accounts receivable, mostly related to our growing revenues, as well as a change in accounting to a full accrual basis in 2018. Most importantly, we remain in a good cash position with over $8 million of cash and cash equivalents on hand at the end of September and we have no long-term debt. Today, we entered into up to a $4 million line of credit agreement, principally to support our growing working capital needs as our revenues increase as well as to support lab expansions. Our most important progress for the quarter and to date include the following – expanding our PancraGEN assay beyond just pancreatic cyst to include both biliary structures and solid pancreatic lesions.

Adding year-to-date 30 Blue Cross and Blue Shield plans to cover our thyroid assays as well as Cigna now covering ThyraMIR in addition to its previously approved policy to cover ThyGeNEXT. Most recently announcing new insurance coverage for our thyroid assays by the Blue Cross and Blue Shield Federal Employee Health Benefit Program of 5.3 million additional covered lives. And announcing, at the American Thyroid Association, release of interim results of our registry data supporting the use of ThyGeNEXT and ThyraMIR. Receiving approval from Piedmont General Hospital, Georgia's largest healthcare system, to cover PancraGEN and completing the transition of the Rosetta business to our commercial team, utilizing slides to assess the potential progression of indeterminate thyroid biopsies. And in conjunction, also acquiring most of the equipment of Rosetta's Philadelphia lab to assist us in the expansion of our own clinical labs.

And lastly, as previously disclosed, successfully launching ThyGeNEXT, our proprietary new expanded, mutational panel for indeterminate thyroid nodules at the ACE Annual Meeting. Our pipeline progress is principally focused in the following areas. Expanding our new product extensions from existing products, like we did with ThyGeNEXT; acquiring or developing new products similar to what we did by seeking approval to evaluate slide biopsies related to our thyroid assays and expanding this opportunity as we did with the assumption of the now former Rosetta Genomics business; and developing new products on an existing platform, like we are doing with BarreGEN for Barrett's esophagus. We are also focused on offering and potentially partnering our data and capabilities in bioinformatics and continuing to expand our product offerings by utilizing and leveraging our commercial team who have access to high-level physicians in GI and endocrine practices, and therefore, acquiring or licensing in products, while also seeking to expand our product offerings outside of the United States. To provide you more insight into our major pipeline product, BarreGEN, our CEP, or clinical evaluation program, continues to build as we gather more data and results of sophisticated users.

BarreGEN, as a reminder, is a risk classifier, and thus we are looking to assess at an early stage a patient's risk of developing esophageal cancer, a cancer as deadly as pancreatic cancer at an early stage. Today, in the US, approximately 3.6 million adults have Barrett's esophagus. We have over 10 years of data, and BarreGEN has been developed on our own Pathfinder platform, the same platform that we previously obtained approval for PancraGEN. As previously reported to you, our second clinical validity study is underway, looking to further support the ability of BarreGEN to identify patients at risk of progression to esophageal cancer years prior to any visible signs. We are now performing clinical assessment evaluations of BarreGEN in use with devices commonly used in Barrett's esophagus procedures and have begun to start discussions with the Center for Medicare and Medicaid Services, CMS, regarding their requirements of our data for coverage.

We are also seeking key opinion leader, or KOL, support for BarreGEN under our GI team activities, including planning and organizing face-to-face meetings in the near future. In summary, we are focused on developing and accelerating our BarreGEN product to the market and we are continuing to assess the use of BarreGEN and with other companion technologies, as well as targeting applications on our own. We continue to believe that we have the opportunity to be a leader in this important disease state and provide critical information to potentially improve the standard of care. With that, I'd like to turn the call over to Jim Early, our CFO, to specifically discuss the financial highlights for the quarter and year-to-date.

Jim Early: Thank you, Jack.

And good afternoon, everyone. Today, I would like to focus on some key elements of our financial performance and position. As previously mentioned, net revenue for the first quarter of 2018 was $5.8 million, a 37% increase over the comparable period of the prior year. Year-to-date revenue was $16.1 million, an increase of 39% from the comparable year-to-date period of 2017. The principal reason for our revenue growth was expansion of units and improved reimbursement in both our GI and endocrine franchises.

The majority of our growth continues to be our thyroid business. However, both our thyroid and GI businesses are growing. Our gross profit percentage for the third quarter of 2018 was 52% as compared to 51% for the third quarter of the prior year. And year-to-date gross profit was 53% as compared to 50% for the period comparable period, principally due the stronger gross profit margin experienced in the second quarter of 2018. Our gross profit percentage for the third quarter grew primarily due to efficiencies in production relative to the increase in case volumes and related revenues as many of the costs charged to production are fixed versus variable.

Sales and marketing costs for the third quarter of 2018 were $2 million as compared to $1.8 million for the comparable period of the prior year as we continue to expand the commercial activity supporting our growth. Year-to-date, our sales and marketing costs were $6.1 million, an increase of 36% over the same period of 2017. Importantly, as a percentage of revenues, sales and marketing costs were 38% year-to-date as compared to 39% for the year-to-date third quarter of 2017, demonstrating the continued leverage of our sales and marketing activities relative to sales growth. Research and development, or R&D, costs were $0.5 million for both the third quarter of 2018 and 2017. Year-to-date R&D costs were $1.5 million as compared to $1.2 million for the same year-to-date period of 2017.

General and administrative, G&A, expense for the third quarter of 2018 and the third quarter of 2017 was $2.1 million in each period. G&A year-to-date 2018 was $6 million as compared to $6.4 million year-to-date in 2017. The decrease in 2018 due mostly to reduced transaction fees and consulting costs compared to 2017. Our G&A costs as a percentage of revenues to date were 37% as compared to 56% year-to-date for 2017 as revenues rose and G&A costs declined. As a result of the information previously noted about, the loss from continuing operations for the third quarter of 2018 was $3 million as compared to $3.4 million for the comparable period of 2017 and the net loss for the quarter was $3 million as compared to $3.3 million for the third quarter of 2017.

Year-to-date loss from continued operations for 2018 and 2017 was $8 million and $7.8 million respectively, while net loss year-to-date for 2018 was $8.2 million as compared to $7.2 million for the comparable year-to-date period in 2017. 2017 year-to-date net loss includes an offset to expenses related to a $5.8 million non-cash change in fair value of contingent consideration. As we noted in our earnings release, we often referred to adjusted earnings before interest, taxes, depreciation and amortization, or EBITDA, a non-GAAP financial measure when evaluating our cash usage. We define adjusted EBITDA for our purposes as income/loss from continued operations excluding interest, taxes, depreciation and amortization expenses, as well as costs related to revaluing of contingent consideration, stock-based compensation, asset impairment, fair value loss on extinguishment of debt, mark-to-market adjustments to our warrant liability, and other non-cash charges. Importantly, our adjusted EBITDA for the three-month periods ended September 30, 2018 and 2017 was negative $1 million and negative $1.9 million respectively.

Adjusted EBITDA year-to-date 2018 versus 2017 was negative $3.4 million and negative $5.5 million, confirming our ongoing operating trend of revenue gains and cost-containment. As previously mentioned, our cash position at the end of the third quarter was $8 million. Our monthly operating cash burn year-to-date has consistently averaged $0.6 million in both 2018 and 2017. Total cash burn in 2018 and, to a greater extent, in 2017 included restructuring costs, transaction costs and greater expenditures from discontinued operations. These amounted to approximately $0.2 million monthly in 2018 and $0.9 million monthly in 2017.

Capital expenditures increased to almost $0.4 million year-to-date through September of 2018 from almost nothing for the same period in 2017, primarily due to the purchase of Rosetta lab equipment during the third quarter for 2018. Our accounts receivable net increased to $8.6 million from $3.4 million at the end of 2017, principally due to our growing revenues and partially due to recognizing all of our revenue on an accrual basis effective January 1, 2018 under the adoption of ASC 606 as compared to the prior year when revenue from certain peer groups was recognized on a cash basis. I'm also pleased to announce that today we entered into a three-year, up to $4 million credit facility with Silicon Valley Bank, including a revolving line of credit for working capital purposes and an $850,000 term component. We believe that this facility will assist us in managing our working capital and lab expansion needs for the foreseeable future. Total assets were $50 million and total liabilities were $14 million, resulting in stockholders’ equity of $36 million at September 30, 2018.

Importantly, we have no long-term debt. Our headcount is currently 78 as compared to 77 at the end of the last quarter. With that, let me turn the call back to Jack and the operator.

Operator: Jack, would you like to provide your closing commentary before we initiate Q&A?

Jack Stover: Yes, Rob. I would.

Thank you. In 2018, we continue to demonstrate and deliver improvement and growth. Our plans for the remainder of the year are to continue to build on that performance. While we, obviously, cannot guarantee any or all of these factors, we do believe we have multiple opportunities that could be additional inflection points and near-term value drivers. First and foremost, organically delivering over $20 million in annual sales would be a major milestone for us.

Based on our performance through Q3, I am increasing our net revenue guidance to between $21 million and $22 million. Our confidence in attaining this target is growing based upon our performance to date and our success in gaining and retaining reimbursement such as the 30 new Blue Cross Blue Shield agreements and the federal benefits program that we recently picked up; the experience of performance to date of our commercial team; expansion of processing thyroid slide biopsies as accelerated with the Rosetta business; the successful launch of ThyGeNEXT, our expanded thyroid assay; the growth of PancraGEN due to, among various things, the new applications for biliary and solid lesions; and clinical results anticipated that, if successful, should assist us in growing our business and gaining even more improved reimbursement. But beyond the end of the year, as we look out, we are also excited about our future in several key strategic areas such as utilizing our unique microRNA capabilities; our ability to leverage our high-performing commercial team with even more new products; personalized medicine becoming more of a reality and our capabilities being well-positioned to be a leader in this sector; the evolution of prognostic medicine and the role that we can play based on our proven expertise and not simply assessing a disease state today, but successfully anticipating the impact of disease stage progression years ahead; data and artificial intelligence driven opportunities, such as leveraging over 10 years of experience and data; and, of course, our pipeline opportunities including especially BarreGEN. We believe these opportunities and more set us apart from our competition and other less robust molecular diagnostic companies, and we believe we’ve created a unique opportunity in the future of personalized medicine. Rob?

Operator: Thank you, Jack.

[Operator Instructions]. Our first question comes from François Brisebois with LaidLaw. Please proceed with your question.

François Brisebois: Hey, thanks for taking the questions. Just a couple here.

In terms of the revenue, $21 million and $22 million now, it seems it doesn't take too much to start hitting that. It’s nice to see you moving it upwards. But would you say that the impact of Rosetta coming in is in line with expectations? Or how much do you think that Rosetta impact should have on the top line?

Jack Stover: Yeah. Thanks, Frank. Good question.

What’s interesting about the Rosetta business that we've effectively brought on board, focused on our slide businesses, it’s really expanded our slide offering because, in fact, we already had approval for slide processing. So, the impact of Rosetta has been extremely beneficial. No doubt about it. But it has also kind of expanded a whole sector that we weren't as focused on as we are now. So, to answer your question, we’re very pleased with it.

And in fact, we've absorbed it as well as you can imagine. I’d say, in less than 30 days, we were really up and running with the expanded slide business.

François Brisebois: Okay, great. And then, in terms of the sales team and its potential expansion or the speed to profitability of each rep, are you seeing any changes there? What are you thinking in terms of number of reps to have here?

Jack Stover: So, it's interesting. We’re at that stage now that we’re focused on not only the expansion of the sales reps in the field, but also client service reps that can help those existing reps become more productive.

So, it's really kind of a general expansion. What we are seeing, though, is consistently the accretiveness of our sales reps relatively quickly. In less than three months, our sales reps are accretive. And to date, that's been a very positive sign. And by the way, it's especially the case on the thyroid side, but it's also the case on our PancraGEN side as well.

So, just adding reps is certainly an important component, but increasing the capabilities of that entire, I’d call it, client service team is even more important and leveraging that team is critical to us.

François Brisebois: Got you. And then, just two more here. So, in terms of M&A, can you just remind us of what would consist of kind of a sweet spot for you guys, what you look at that would make sense through? You guys, at your size – you have quite the commercial expertise for the size company you are. So, what kind of makes sense on that side? And then, can you break out now like – usually, it's been 50-50 thyroid/pancreas in terms of the business.

Can you kind of – is it similar? Is there more growth on the thyroid side and how is that going?

Jack Stover: Yeah. Let me answer your last question first, and that is, you're right, at the end of last year, our business was roughly 50% GI and 50% endocrine – 50% PancraGEN and the other half thyroid. And as both parts of the business continue to grow, clearly, our thyroid business is growing at a faster rate. So, the thyroid expansion is above 55% today. And meanwhile both sides of the business are really expanding.

On the M&A side, it's hard to look at a better opportunity than the acquisition of the Rosetta assets that we did. That was really a very strong sweet spot for us because we were already approved in the sector that they were developing. Alternatively, if you look at some of the growth opportunities that we have with our commercial team, we certainly see lots of opportunities. The key is identifying opportunities that have the potential for reimbursement in the relative near-term, the potential for gaining guideline support and key opinion leaders. And so, it's really a balance not just with technology, but also balancing, with technology, commercial potential.

And that certainly reduces the number of opportunities that we see. I’d add to that that if you look at the areas that we are clearly focusing on in the future, such as the bioinformatics area, expanding in the bioinformatics area with a partner, we believe, is a good opportunity for us and a way to really accelerate our growth even greater than what we’ve had in the past.

François Brisebois: Great. All right. That's it for me.

Thank you.

Jack Stover: Thanks, Frank.

Operator: Our next question comes from Yi Chen with H.C. Wainwright. Please proceed with your question.

Julian Harrison: Hi. This is Julian on for Yi. Thanks for taking my question. Just in light of the strong year-over-year and sequential growth, just curious if you have any early thoughts on what revenue in 2019 might look like.

Jack Stover: It's a little early.

We are pulling that together, as we speak. All I can tell you is that we are seeing the continuation of the success we've had year-to-date. So, we’re optimistic about that. But, obviously, we also are concerned about managing our costs and keeping our burn rate under control all at the same time. So, my suggestion or advice is stay tuned.

We’ll be talking more about that shortly.

Julian Harrison: Okay. Thanks very much.

Operator: [Operator Instructions]. Our next question comes from Ben Haynor with Alliance Capital Partners.

Please proceed with your question.

Ben Haynor: Good afternoon, gentlemen. Thanks for taking the questions. I get, first for me, you mentioned bringing some of your offerings to geographies outside the US. I guess, what's the most likely commercialization strategy there? It’s something where you’d partner with someone or would you potentially open a lab outside the US or how should we think about that?

Jack Stover: Ben, good to hear from you.

Let me tell you what we've been doing so far. So far, effectively, what we've been able to do is focus principally on the Canadian market. And, today, I believe – or year-to-date, roughly 4% of our revenue comes from outside of the United States. So, that's a nice growth from the beginning of the year where I think our revenue outside of the United States was probably more like 1% as we were kicking that off. What we have done so far is not set up labs, but because of the nature and the flexibility that we have with transporting samples, effectively, those samples get shipped to us in the United States, we process them in the United States and then report back electronically.

And so far, that's worked out pretty well. And it's not just Canada where we've been doing that. We’ve been doing it in Western Europe as well, but Canada is certainly close enough and a significant enough opportunity. What’s really interesting about that is the economics for us in Canada, which is more of a socialized medicine environment, is not a bad market for us in the specialized area that we operate in terms of basically high-end molecular diagnostics.

Ben Haynor: Okay.

That's very helpful. Thanks for the color there. And then, you mentioned CMS discussion ongoing with Barrett's. Can you provide some color on how that’s going? Is there any sort of timeline in which you'd expect the decision? And then, also, I guess, what proportion of Barrett's patients would be of Medicare age?

Jack Stover: Yeah. All good questions.

Let me try and segment those. First of all, yeah, we are having discussions. And what we’re working on right now is making sure that the studies that we have underway will meet the expectations that CMS has in terms of being able to support us in terms of reimbursement. Obviously, it's a result of the outcome of those studies. Barrett's is a unique area.

It's, obviously, a growing area. But in terms of the number of progressers that progress to esophageal cancer, it's a relatively small number of patients. So, getting our arms around and identifying progressers takes a lot of time and a lot of effort, but, obviously, we've been doing this for quite a while. We've said this in the past and we’ve reiterated that we would like to identify a partner to work with us and we certainly are working in that direction. But in addition to a partner, if we ended up not getting a partner, or even if we do get a partner, there's roles and opportunities for us around focusing on the success or failure of radiofrequency ablation that can be important.

So, in 2018, the kickoff or the ramp up, if you will, this clinical process in Barrett's was very important for us. In 2019, I think that will only get more important. I think it's a little early for us now to really anticipate timing of results and timing of reimbursement coverage, but the reference point that we make is that the platform we use for BarreGEN is the same platform that we have had approval for PancraGEN and it's the same platform that we have had approval for RespriDX. So, they know us very well and they understand the core of what we’re doing. We just need more data.

So, we’re moving forward as quickly as we can and as economically feasible as we can to accomplish that.

Ben Haynor: Okay, great. And then, lastly from me, is there for you guys to quantify potentially how much of the business during the quarter came over from former Rosetta accounts or does it kind of all get mixed together and there's not a good way to keep that out?

Jack Stover: You read between the lines, Ben. It’s hard to say because it all gets kind of categorized in this summation, if you will, of the slide business that we've had. And so, as an example, we have already existing clients that were also former Rosetta clients that are now 100% our clients.

And so, part of their business was in slides. Part of it was really in FNAs with us, and now they're together. So, it's hard to say – or it’s hard to segment that and say here's what the true impact of Rosetta has been to us. All I can say is that, as we’ve looked at the potential for the Rosetta business, we believe it's consistent with what the Rosetta folks had originally thought that they could deliver with their product as they looked at the sector a year or so ago. But it’s, in fact, growing, I think, more than we had really anticipated.

Ben Haynor: Okay. That’s understandable. Thanks a lot, guys, for taking the questions.

Jack Stover: Thanks, Ben.

Operator: Our next question comes from Caroline Palomeque with Maxim Group.

Please proceed with your question.

Caroline Palomeque: Hi. Thanks for taking the question. So, two quick questions. The first one would be just on traction and market adoption.

Are you seeing any certain trends? Like, I know you mentioned payers and doctors. Is there a certain trend that you’re seeing maybe more payer adoption happening first? And then, my second question is just on your pipeline expansion. Just wondering what would be some of the other therapeutic areas that you're looking into expanding into?

Jack Stover: Maybe I can answer the second one first. In terms of pipeline expansion, we obviously spoke about – we spoke about Barrett's esophagus. Obviously, with RespriDX, we’re very much focused with our first product in the lung area.

We’re very much focused on the bioinformatics space and we’re very much focused on developing products outside of the US. Those are kind of the key areas. If I add to that our microRNA capabilities, what that helps us with is being able to – in a relatively small sample, be able to derive a great deal of information. And not that we’re focused totally in the area yet or even have a foothold there yet, but areas like CNS, or central nervous system, diseases where it's difficult to get biopsies, we believe that our microRNA capabilities would be very strong. In terms of market adoption, it's a good question.

So, as you know, Caroline, in this space, as products are recognized and they gain awareness, the awareness issues largely happen by physicians, key opinion leaders and guideline issues, et cetera. We’re not a therapeutic; we’re a CLIA-based diagnostic. So, it's easier – or it has been easier for pathologists, physicians to embrace what we do if it's beneficial to what they do. I would say, on the payer side, what's really happened is that, in the early stages, the payers would have more of a personal relationship, if you will, with the pathologists and have a high degree of confidence in their medical capabilities. Today, it’s gotten to be much more quantitative.

So, you're seeing more and more invested in – we call them – clinical studies, but the clinical utility studies that are really the base, if you will, of gaining reimbursement are really fundamental. And the other thing I would say is that, in the sector, in general, in terms of the diagnostics sector, with the FDA pushing back, if you will, on the potential concern that they were going to – I’ll use the word – take control of the diagnostic area and effectively leaving it to the CAP certification in the states, there is less, what I would call, regulatory pressure at a high level and more kind of a local regulatory pressure in terms of managing labs, et cetera. And, obviously, we’re constantly in an audit process. But I'd say, it's overall much more quantitative. And I’d say the rules are a lot clearer.

And I’d say also that it's a function of the reduction, if you will, and regulation in the space we’re in in the last couple of years and it's been really beneficial to a lot of us.

Caroline Palomeque: That’s helpful. Thanks.

Operator: Ladies and gentlemen, we’ve reached the end of the question-and-answer session. Jack, would like to make any closing comments?

Jack Stover: Rob, yeah, thank you.

Just briefly, what I'd like to say is thank you all for joining us this afternoon and following us, and then thank you for your thoughtful questions as always. I’d like to specifically thank the growing number of sell side analysts now – six! – that follow us. We look forward to continuing to update you on our progress. And if you have any further or unanswered questions, please feel free to reach out to us or our IR friends at Edison. And thank you again for your interest and support.

Operator: This concludes today's conference. You may disconnect your lines at this time. And we thank you for your participation.