Audio from The Elizabeth Holmes trial

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Episode Transcript

Speaker 1 (00:00):
Absolutely both wonderful to speak with you all and it's
wonderful to be in a place in which we can
begin to talk about this is. As you all know,
we have been working very hard for a long time
to build out this infrastructure, and when I started the company,
we knew that it would take us a long time

(00:23):
to be able to establish an infrastructure that could uh
do any lab tests that is run in a traditional
lab from a micro sample for these tiny droplets that
we take now from the finger. And we've thus built

(00:43):
the business around our partnerships with pharmaceutical companies and our
contracts with the military, wherein we could deploy our framework
in the one case for helping to accelerate clinical trials
and in the other for um extreme use case situations

(01:06):
in trauma and other areas where there was a very
compelling value proposition. In order to build out our test
menu and our infrastructure to be able to get to
this point. UH several years ago and we realized that
we had created an infrastructure that could in fact make

(01:29):
it possible to get rid of lobotomy or the big
tubes of blood that are drawn from the arm in
its entirety, and we began this work to be able
to create a framework wherein working with insurance companies, working
with medicare, working with medicaid, working with physician and hospital groups,

(01:54):
and now retail, we could establish what has the opportunity
to be ultimately the largest lab in the country and
the most important way to change the reality and lab
testing today, which is that it's very painful of the

(02:17):
population doesn't do it in terms of compliance with the
requisition from a physition to do a test because the
fear of needles is such a great phobia, and equally,
the fear of having to wait long periods of time
for the results deter as many people from getting tested

(02:40):
in the first place because they don't want to be
sitting around worrying whether they're positive with something or not,
for example. And so now in the framework that we've created,
we've built the opportunity for people to be able to
do their tests in a whole new way, become more

(03:02):
compliant with being able to get access to this laboratory data,
which is incredibly powerful information that drives so much of
clinical decision making, and in doing so, create a richer
data framework for the purpose of being able to better

(03:26):
characterize the progression of certain conditions. By virtue of the
fact that not only are we helping to get people
tested because it's a this small sample, we can get
people tested at the needed frequencies. And because the sample
is fresh and it's not you know, a big series

(03:48):
of tubes of blood that are sitting on a counter
and exposed temperature, we don't suffer the rates of decay
of key and lights that happened when you shift samples
off to a central lab. And then by virtue of
the fact that our analytical infrastructure is standardized, so we

(04:12):
don't have the variability that is associated with traditional laboratory testing.
Meaning today, if you go to a lab in San Francisco,
then you go to a lab in l A on
the same day for the same value. One could report
a result that is, for example, on a test like

(04:35):
HDL cholesterol plus or minus for from some standard and
be considered accurate in the eyes of regulators, which means
on the same day for a single test. Based on
the fact that each lab is centralized, has its own
lab director, has its own reference range, uses its own equipment,

(04:59):
which is different from what other last views, you could
see a sixty percent variants in data, and if you
start to think about how that compounds over time, it
makes it very difficult to look longitudinally at the progression
of a condition by virtue of the fact that there's
so much noise between time points and here. Because this

(05:22):
is a single framework and we have built this doubt
in such a way in which we have a less
than five percent variants on our test. If we begin
to see a change of in patient values over time,
it's because it's clinical and this is a richness of

(05:42):
data for the physician community that has not been accessible before,
and it allows the physician to begin looking at laboratory
data in the same way that people talk about looking
at a test for ps the cancer proctic cancer called essay,
which is they focus more on the rate of change

(06:03):
or its velocity then they do on its absolute concentration
at any given point in time. And we're going to
be able to start presenting this laboratory information in that
way so that it can be used more toward early detection.
We have launched our retail infrastructure. We are operating now

(06:27):
in California and in Arizona. We have opened our first
stores and have patients coming in live every day. We
are working to expand that as fast as possible. The
speed with which we expand is critical in the context

(06:49):
of capturing the market opportunity that we have created, and
we are putting a lot of resources into establishing a
UH and national footprint as fast as we can. Yeah,
but that starts with excellence in each local market and
capturing market share in each local market, which is where

(07:13):
we are focused now. And as we do that, we're
leveraging capital from our strategic partners and also from equity
opportunities that we have on the table to be able
to UH grow very fast. And as you all know,

(07:34):
we have recently issued shares at seventy five dollars to
share for reference the initial investment in Paraos that you
all made with at a two cents, and so we
are already U creating significant value. And of course we're

(07:58):
just getting started in the context of being able to
establish and roll out this infrastructure as we go forward
into in addition to the speed of scale, UH putting
the resources into the business to be able to build
the organizations that are required to handle this type of

(08:23):
consumer business is another core area of focus for us. Obviously,
a great contract in the context of a pharmaceutical deal
could be very great financially, but UH it was very
small relatively speaking in the context of volume next to

(08:45):
what we're facing now. There's you know, seven million people
in the Bay Area, thirty nine million in California, and
that scale is very different from the scale on which
we've operated in the past. So we're very focused on
being able to establish the operational framework to be able
to handle that type of volume, and it's a it's

(09:09):
a area that we're spending a lot of time on now. UH.
The retail infrastructure is the foundation for being able to
reactivate a lot of the pharmaceutical programs that we did
that allowed us to build the business from cash from

(09:30):
operations since we did our serious C round in two
thousands six. And there's a very strong synergy between the
ability to run clinical trials UM at retail and the
ability to UH speed enrollment and better demonstrates that it's

(09:52):
possible to deliver therapy in a new way. Five virtue
of the fact that this testing can be done and
practically inside a retail pharmacy where the drug is delivered
in and of itself. So the focus on the pharmaceutical
business is still uh significant focus for us and will

(10:15):
continue effectively as a business unit as we now grow,
and will be very synergistic with what we've established in retail.
So maybe Chris, let me pause there and just the
out of what I've said so far, if there's questions
and anything we've covered uh up to now, thank you,

(10:37):
thank you. Higher was what's the hell? I guess a
two part question. The first of all, if you could
just cover generally the current capitalization in terms of what
he had to SUBCUPI dollars, share what the capalisation will
be and what you're looking to raise and take a

(10:59):
pint to but maybe go into the cool use is
a heavily weighted towards the retail build out which to
do uh the national basis how long you expect time
wise to to the build out of the room tail side?
Absolutely so. Um So when you all came in in

(11:25):
the Series B U pre money was about twenty millions
evaluation of the company and and that was you know,
griefly assolciated with the Series A prices cents to share. Uh.
Now the evaluation of the company is seven uh just
over seven billion, and that's that the seventy five dollars

(11:49):
to share. Um, the retail is exactly where we're focusing
our investment and the it's really now a question of
health fath do we scale? You know what? The fact
that we will scale is given our our retail partners
have invested hundreds of millions of dollars and building out

(12:11):
this framework and uh, we too have been preparing for
this for many years now. UM. The goal is to
be able to be national very very quickly. So the
immediate focus is California and Arizona certainly, you know, as
we're going to one of our goals is to have

(12:34):
those markets that beach hads in terms of really owning
the marketplace and being able to expand from them. But
the ability to expand throughout retail. What's the operationalized the
given market is, uh, it's it's not very complicated. And

(12:55):
you know, companies like Well Grants have done this very
well in areas like the blue Shot or vaccination business
where they trained all their pharmacists and how it deployed
nationally within I think about an eighteen month period. And
there's there's a parallel to what can be done here
and we're working to do that. Thank you. Next question

(13:18):
comes from Larry Gerts Fleas. Go ahead, Larry there, Yes,
I am HIZ with this. Larry Gertis Hi, Larry, how
are you good? Good? Congratulations of all this progress? Well,
thank you, mad Now list with you Rich and the

(13:40):
You might have some additional equity rounds that are coming up,
All right, Can you give any indication of how much
money you want to raise and what market taps you'd
like to see yourself achieving those rounds? Sure? Absolutely so.
We you know this. This reason trans actually seventy five

(14:00):
dollars to share is actually part of contracts that we
have with strategic entities and partners who previously had an
equity relationship with Darren Olson had an option to exercise
UH to invest traditional capital before the end of twenty thirteen,
which they literally just exercise, and so we're working through

(14:27):
that now. Is as many of you all know, some
of the recent shareholder contents and and that valuation that
I previously mentioned is associated with those transactions. We do
have offers on the table right now from UH financial
institutions that are in the several hundred million dollar range

(14:49):
in terms of the amount of capital, and we're considering
that in the context of how we how we invest.
And also we're aware that certain shareholders have uh some
liquidity needs and so the ability to put a large
amount of capital into the company and then where and

(15:09):
as relevant and at the right time for the business
address that liquidity is is how we're looking at that,
and there's a very high likelihood that we will we
will do transactions that are in the several hundred million
dollar range. UH. Insofar as the evaluation, we know that
it is higher than seventy five dollars to share. We

(15:33):
are having negotiations right now a valid exactly what price
we pick and more importantly is what we pick as
you know the the investor based here and UM. Some
of this in terms of what the actual price for
share and therefore the associated equity capitalization of the company
will be is going to depend on how that plays out.

(15:55):
But that's something that that is going on as we
speak and UH and will likely be affected early in
Q one. I Elizabeth also congratulations from us. It's remarkable,
well you've accomplished, um UM. Just to follow on my view,

(16:16):
were just discussing, I assume it would all be private.
I'm wondering, UH, if you see a public m liquidity
event at some point where where you go out with
an I p o um uh wondering about that. And
as long as I'm speaking, I UM was was also

(16:38):
curious if there's a military aspect that you're going to
pursue um And again, since I had the floor with
regard to competition, Chris had had mentioned that there doesn't
appear to be any out there wondering if your patents,
So I was looking at any concerns that issue factors

(17:01):
are possibility for pattern infringement or or others doing something
similar competing with you. Absolutely, I will start with the
first one. So the immediate transactions when we're talking in
the December January early que one time frame, are all

(17:23):
private transactions. We have put a corporate in structure in
place that positions us to be able to proceed with
future equity related events and retain the control to realize
the long term vision that we have. And as you

(17:44):
all know, this company is about being able to change
the health care industry and that's something that we plan
on doing for the next ten fifty years. We had
the opportunity to create an industry here and that's what
this is about. So we have always been very long

(18:04):
term in our mindset. The potential for some type of
public transaction as publics opering transaction down the road is
there right now. We think there's a lot of advantages
to continuing to operate as a private company, especially in
the context of what we've just done where we made

(18:26):
some very difficult decisions when we signed our retail contracts
to effectively agree to contracts but said we couldn't talk
about this because these companies were putting hundreds of millions
of dollars into the infrastructure and they had announced it
to the street and it was material and non public
information and some of it still is and so um.

(18:51):
So what we got out of that is we got
to lead time and we were able to launch and
and really surprised the market in terms of the existence
of this capability. And there's a lot of power in
that from a market ownership standpoint. But UH, but we
are we are looking at liquidity options and uh, and

(19:14):
an idea would be one of them. Uh. In terms
of the military aspect of this, military is a big
deal for us, and I can tell you confidentially a
couple of the areas in which we've focus there one

(19:34):
in the context of work in the Middle East and
specifically in Afghanistan. The survival rates of our men and
women in field when they're hids UH is per cent
if they get through the doors of an emergency room
within sixty minutes from the point of injury. And if

(19:56):
we miss that window, that's where both of our totalities occur.
And so the ability to take a technology like this
and put it in flight, specifically on a METAVAC, has
the potential to change survival rates. And what it does
is it makes it possible to begin transfusion and stabilization

(20:21):
UH in place, and so we've we've been doing a
lot of work there. We've also been doing a lot
of work for Special Operations Command in the context of
missions and remote areas where not only is there no
capability to do testing for certain things that needs to
be measured, but if situations arise in which those tests

(20:44):
are warranted, the mission is a boarded and people are evacuated,
generally out of continent and so UM we have created
a distributed system that can be used in remote areas
and that is that is another dage areas focus for us,
and as we now reached this stage in our business,

(21:06):
and going back to the comment that I made earlier
on organization, that really is another business unit, and so
that the pharmaceutical business and retail are these three units
that we have. Obviously to be able to do what
we've just done, we had to pause a large number

(21:27):
of our ongoing pharmaceutical and military programs so that we
could focus like a waiser on this and executing on this.
And the scale of this retail infrastructure now is where
we will continue to focus like a waisers, but as
we get the resources and organizations to capture some of
these additional opportunities. In parallel, we will proceed with the

(21:52):
pharmaceutical and military business UH and leveraging some of this
infrastructure and the resources from it that that we're building
now so that for the long term will be will
be an important thing for us. And it's also very
symbolic because it's our way of being able to help
make a difference in whatever small way we can't there

(22:15):
and so far as competition is concerned, exactly the reason
that we we're so aggressive about being in self mode
was to preserve the window for capturing as much market
share as possible without direct competition. We have not seen
other companies UH doing this that like, for example, the

(22:40):
ability to use the clouds to control health device or
the ability to run any accommodation of lab tests on
you know, these distributed devices. And obviously we've complemented those
with a very broad portfolio of very narrow claims. Yeah.
But um, but we have been preparing for litigation in

(23:06):
the context of being able to protect them and intend
to protect them very aggressively. In our case, IP litigation
is not about licensing. R IP prosecution is not about licensing,
but it's about it's about being able to maintain our
ownership of this space. Um. We have a great lawyer,

(23:28):
David Boyds, who joined us at all of our board meetings,
who also does our IP litigation, and we get filed
a lawsuit about a year and a half ago, two
years ago against a patentroll who had gone some elaborate
means to attempt to steal some of our intellectual property

(23:52):
and and our main point there is we will not
settle on any intellectual property viola sans. In that case,
the specific patent question was it was not we have
that content covered by other of our patents. But but
setting the precedent that we have a zero tolerance approach

(24:13):
to intellectual property violation or people trying to threaten us,
they're trying to get us to settle and pay them money.
It's just not something that we're going to do. And
I think ultimately, as we go forward, obviously continuing to
build out the portfolio defending it aggressively are going to
be two very important things which we will do in
a big way. But ultimately our real strategy here is

(24:38):
the steed of execution, the way we price in the market,
which is a big deal. We haven't talked about this
directly on this call, but we are changing the cost
structure of laboratory testing and and that you know also
has a competitive aspect to it in terms of winning
in in owning this space and and then doing what

(25:01):
what we love and try to do best, which is
being on version twelve of this type of system by
the time anybody else can try to be on vision one.
And and that's a that's an ongoing focus for us.
In turning. I'll fire the questions at this time all

(25:29):
if there are anyone, please queue up with with God.
If there are any other questions, Elizabeth just as as
you know, as an observation, when you published your prices
on the website that are significantly clearly lower than what
typically labs charge, how does that strategy evolve, and as

(25:54):
it relates to Medicaid or Medicare and so forth. Absolutely right.
So so there's there's multiple aspects of this. One is
our belief that access to this laboratory information is biochemical
information which drives UH most of clinical decisions, is a

(26:18):
basic human right and it should cost the same no
matter who you are, if you're insured, you're uninsured, your
Medicare and your Medicaid, and that that is very different.
And then the way that other companies operate in this space,
so no good, thank you, Elizamath. Okay. We also believe

(26:44):
that the ability to UH create a technology driven business
model where we're going after volumes in a big way
and UH and make these tests available at really low
cost at the same time has a great potential. And

(27:04):
it's also different front ways people have operated in this
space because generally the conversation is, oh, we've invented this
new test and it's going to be really good, so
we're going to go try to convince Medicare to pay
five thousand dollars for the test. We're taking the same
tests and making them available for thirty dollars and will

(27:26):
continue to do that. Yeah, we are the first company
who has built Medicare and Medicaid at a fraction of
what they're willing to reimburse And that's very interesting because
what happened as a result is that they survey every
year what they're being built and reduce their reimbursement thresholds accordingly.

(27:49):
And so UH, in the context of UM this lower pricing,
their reimbursement thresholds will fall and will be reduced over time.
And the savings to Medicare and Medicaid are significant. Uh.
It's projected to be at least one and sixty billion

(28:11):
dollars in direct out of pocket savings over the course
of the next ten years. And there are additional savings
that come with the way that changes the care process.
Meaning what's happening right now, Alan Paulo Alto is that
unlike in the past, where I would go see my doc,

(28:32):
Doc with say Elizabeth, haven't seen you for a year,
go to a test. I'd go do my test, come back,
you know, Doc says no, you know your chemic wlobin
was seven. That means you're brilliant emic. I don't know
what kind of anemia it is. I'm gonna put you
on this anemia drug immediately and go to another test
so I can figure out what kind of anemia it is.

(28:55):
So I go get my prescription, the heavy duty drug UH.
In the meantime, go do my second lab test. Come
back from my third office visit, and the doc says,
though iron deficiency, get off that drug, take some iron pills.
And you have this six week process with three office visits,

(29:15):
two labs, one unnecessary prescription. And because we've made it
possible to run any combination of lab tests from these
tiny samples, the physician can now say on the lab form, if,
in my example, human globe and is low, automatically run
iron and BEA twelve and other tests on the same sample,

(29:38):
because big, dedicated tubs of blood are no longer required
to run each of those different as a methodologies which
require their own vague analyzers in a traditional lab. And
so we get these lab forms that say, okay, you know,
if this is out of range, then run this and

(29:59):
on the same sample in that same window when we're
processing the sample, we can do what we call this
automated reflex to those additional tests and then send the
data back to the dock. And because we generated the
data so fast, namely within hours, I as a patient

(30:20):
then could go see my dock that afternoon and the
dock already has this data. So we're starting to see
a shift in the workflow where for people who have positions,
they're sending the tests ahead of time and then they're
seeing the patient and that significantly changes some of the

(30:41):
redundancy in costs around visits that are associated with follow
on lab tests and we're not having the information that's
needed at the time of diagnosis is being the and
so from a savings perspective to Medicare and Medicaid, that
is a much bigger deal than direct out of pocket
savings that I previously referenced and ultimately will lead to

(31:06):
better care in the GOL