Predictive Oncology (NASDAQ: POAI), a knowledge-driven company
focused on applying artificial intelligence (“AI”) to personalized
medicine and drug discovery, today issued a letter to shareholders
discussing the Company’s recent accomplishments and voting
recommendations from its Board of Directors for two proposals that
are scheduled for shareholder vote on September 3, 2020.
Dear Fellow Shareholders,
Predictive Oncology is committed to executing
our strategic vision to develop and commercialize an offering that
will enable us to support the improvement in healthcare outcomes
for oncology patients and increase value for our shareholders. Over
the last six months we have been diligently assembling a portfolio
of assets and aligning our capital and governance structures to
help us achieve this vision.
At our annual meeting on September 3, 2020, we
are asking you to approve two important compensation-related
proposals – repricing stock options for executives and key
employees (but excluding director options), and an increased share
reserve for the stock incentive plan. Management and the Board
considered these proposals carefully before recommending them for
your approval, and we need your vote FOR these proposals. Approval
is critical as we expand upon our considerable recent business
accomplishments and enhance shareholder value by attracting and
retaining talented management.
Recent Accomplishments
- Completed acquisition of Quantitative
Medicine. In July we completed our acquisition of QM, a
biomedical analytics and computational biology company. This
acquisition equips us to further leverage our unique database of
drug-response and genomics profiles that our subsidiary, Helomics,
has gathered from more than 150,000 cancer cases over more than 10
years of clinical testing. By integrating QM’s proven machine
learning platform, CoRE, with our proprietary database of drug
response and genomics profiles we believe we can revolutionize the
role of our AI-driven predictive models in the discovery and
development of new anti-cancers and will be able to more quickly
understand how specific types of tumors react to cancer drug
therapies. We expect to offer this new capability to our
pharmaceutical company customers in revenue generating projects
later this year.
- Completed acquisition of Soluble and BioDtech.
In June we completed our acquisition of Soluble Therapeutics and
BioDtech, thereby expanding our precision medicine revenue and
monetization prospects in a meaningful way. The Soluble
Therapeutics assets increase our capabilities to predict and
provide the best formulation with the highest concentration and the
most stable solution for protein and peptide-based drugs in
providing services to the pharmaceutical and biotech industries.
Our acquisition of BioDtech gives us ownership of BioDtech’s
successfully developed test used to ‘unmask’ endotoxins, which
allows a monitoring physician to perhaps change the strategy of
treatment or treat the patient with antibiotics. These acquisitions
expand our opportunities within precision medicine.
- First commercial sale of novel ovarian cancer
media. In the second quarter our TumorGenesis business
achieved a major milestone with the first order of our unique
ovarian cancer cell culture media for cancer cells collected from
patient derived samples (PDx) to a top-rated medical university in
New England. This new media allows researchers around the world to
isolate and then culture ovarian cancer cell types and culture them
reproducibly to find new targets for treatment, diagnostics or
other studies on the close interrelationship of ovarian cancer
tumor populations and how they are able to fool a patient’s immune
system.
- Helomics nearing commercialization of
revenue-generating services. Helomics, our flagship
precision medicine and AI division, continues its strong progress
on CancerQuest2020, its collaborative project with UPMC Magee
Women’s Hospital to build an AI-driven predictive model of ovarian
cancer. In addition, there is continued progress with Genomics
England in the UK to build an AI model or ovarian cancer to be used
for clinical decision support for patients. We expect completion of
the models in late Q3 and are pursuing in parallel commercial
discussions to use these ovarian cancer AI-models in revenue
generating projects with Pharmaceutical companies in Q4 and
Q1-2021. Furthermore, we expect the recent acquisition of and
integration of Quantitative Medicine’s CoRE platform to drive
additional revenue generating projects in the same period. Helomics
clinical testing for ovarian cancer has continued throughout the
COVID-19 pandemic and we are continuing outreach efforts to
clinicians to drive more testing revenue.
- Strengthened balance sheet with capital raise, cash
from warrants and restructuring of debt. During the second
quarter we raised $4.4 million in aggregate gross proceeds through
a registered direct offering and the exercise of existing warrants.
In addition, I personally reinforced my commitment to our mission
when I exchanged $2.1 million of Predictive Oncology notes that I
held for additional common stock in the company. Through these
actions, we significantly strengthened and simplified our balance
sheet and created additional runway to execute our vision.
- Restructured board of directors with appointment of
three new directors. In July, we reconstituted our board
of directors with the appointment of Dr. Nancy Chung-Welch, Ph.D.,
Mr. Charles L. Nuzum, CPA and Mr. Greg St. Clair. Each of these
members brings a wealth of knowledge, experience and thought
leadership that are highly valuable. Collectively, these
appointments significantly elevate our depth in the areas of new
business development, executive leadership and financial acumen and
demonstrate our commitment to aligning our board’s expertise with
our strategic objectives to drive increased value for our
shareholders.
Annual Meeting Proposals
At our Annual Meeting on September 3, 2020 you
are being asked to approve a number of proposals that are described
in our proxy statement that we filed with the Securities and
Exchange Commission on July 29, 2020 and have mailed to our
stockholders. Two of the proposals are vital to retaining and
attracting top talent aligned with executing our corporate strategy
such that we can scale and grow our business and achieve
profitability.
Proposal No. 3: Approval of Repricing
Stock Options Held By Officers and Employees.
The Board has determined that adverse changes in
the market price of the Company’s common stock since the Eligible
Options were granted could materially interfere with the Company’s
efforts to retain the service of its existing officers and
employees. In Proposal No. 3, Predictive is seeking approval of a
one-time repricing of all stock options outstanding under the
Company’s Amended and Restated 2012 Stock Incentive Plan held by
current officers or employees of the Company which have an exercise
price higher than $1.54 per share, but excluding stock options
granted for service on the Board of Directors. More specifically,
the proposal requests stockholder approval to change the exercise
price of eligible options to $1.54 per share, equal to the closing
sale price of the common stock on July 1, 2020, the day before the
Board approved the repricing.
The Board recommends the option repricing to
encourage an increasing alignment of their interests with those of
the Company’s stockholders and their stake in the long-term
performance and success of the Company. When the market price for
the Company’s common stock is significantly below the applicable
exercise price of an option (often referred to as “underwater” or
“out-of-the-money”), for example, the Board believes that the
option holder is not likely to exercise that option and will not
have the desired incentive that the option was intended to
provide.
Please note:
- When the Board approved the repricing, it
excluded the stock options that were granted to
the directors for their service.
- In considering the repricing of my stock options that I hold as
CEO, the Board noted that I received most of those option in lieu
of cash salary for nearly two years, which I was willing to accept
to accommodate the cash needs of the Company.
Proposal No. 4: Increase in Reserve in
Stock Incentive Plan. The Company does not possess enough
options in its stock incentive option plan to incentivize valued
employees currently working hard to bring success to Predictive and
align their incentives with our shareholders. It is also critical
to have a large enough share reserve under the plan to attract
prospective employees to our organization. In order to meet its
business and growth objectives, the company will need to hire
talented additional management and operating personnel.
In Proposal No. 4, Predictive is requesting
stockholder approval to increase the share reserve by 750,000
shares, to a total of 1,750,000 shares. Currently, options to
purchase 830,488 shares of common stock are subject to outstanding
stock options under the Restated Plan. In determining the amount of
the increase in the Restated Plan, the Predictive Board carefully
considered its intention to grant further equity awards to current
and future executive officers and key employees and directors. The
Restated Plan also eliminates certain limitations on individual
awards that are no longer required under applicable tax laws.
The Board believes that approval of Proposal No.
4 is in the best interests of Predictive and its stockholders
because the availability of an adequate number of shares reserved
for issuance is important in attracting, retaining and motivating
employees, consultants and directors in order to achieve the
company’s long-term growth and profitability objectives.
We believe that adopting these measures will
give Predictive the ability to attract and retain the high-quality
professionals we need to achieve our strategic vision and create
value for shareholders. Accordingly, management is asking
shareholders to approve the proposal to reprice options (Proposal
3) and approve the proposal to amend and restate the company’s 2012
stock incentive plan (Proposal 4).
We remain open and available to speak with any
of our fellow shareholders as you make your decisions and, again,
thank you for your support.
Dr. Carl SchwartzChief Executive Officer
About Predictive Oncology Inc.
Predictive Oncology (NASDAQ: POAI) operates
through three segments (Domestic, International and other), which
contain four subsidiaries; Helomics, TumorGenesis, Skyline Medical
and Skyline Europe. Helomics applies artificial intelligence to its
rich data gathered from patient tumors to both personalize cancer
therapies for patients and drive the development of new targeted
therapies in collaborations with pharmaceutical companies.
Helomics’ CLIA-certified lab provides clinical testing that assists
oncologists in individualizing patient treatment decisions, by
providing an evidence-based roadmap for therapy. In addition to its
proprietary precision oncology platform, Helomics offers boutique
CRO services that leverage its TruTumor™, patient-derived tumor
models coupled to a wide range of multi-omics assays (genomics,
proteomics and biochemical), and an AI-powered proprietary
bioinformatics platform to provide a tailored solution to its
clients’ specific needs. Predictive Oncology’s TumorGenesis
subsidiary is developing a new rapid approach to growing tumors in
the laboratory, which essentially “fools” cancer cells into
thinking they are still growing inside a patient. Its proprietary
Oncology Discovery Technology Platform kits will assist researchers
and clinicians to identify which cancer cells bind to specific
biomarkers. Once the biomarkers are identified they can be used in
TumorGenesis’ Oncology Capture Technology Platforms which isolate
and help categorize an individual patient’s heterogeneous tumor
samples to enable the development of patient specific treatment
options. Helomics and TumorGenesis are focused on ovarian cancer.
Predictive Oncology’s Skyline Medical division markets its patented
and FDA cleared STREAMWAY System, which automates the collection,
measurement and disposal of waste fluid, including blood,
irrigation fluid and others, within a medical facility, through
both domestic and international divisions. The company has achieved
sales in five of the seven continents through both direct sales and
distributor partners. For more information, please
visit www.Predictive-Oncology.com.
Forward-Looking Statements
Portions of the narrative set for this document that are not
statements of historical or current facts are forward-looking
statements, in particular, the commercial outlook provided above.
Our actual future performance may materially differ from that
contemplated by the forward-looking statements as a result of a
variety of factors.
These factors include, in addition to those mentioned elsewhere
herein:
- We may not be able to continue operating without additional
financing;
- Current negative operating cash flows;
- The terms of any further financing, which may be highly
dilutive and may include onerous terms;
- Risks related to the 2019 merger with Helomics including; 1)
significant goodwill could result in further impairment; 2)
possible failure to realize anticipated benefits of the merger; 3)
costs associated with the merger may be higher than expected; 4)
the merger may result in the disruption of our existing businesses;
and 5) distraction of management and diversion of resources;
- Risks related to our partnerships with other companies,
including the need to negotiate the definitive agreements; possible
failure to realize anticipated benefits of these partnerships; and
costs of providing funding to our partner companies, which may
never be repaid or provide anticipated returns;
- Risks related to the transaction with Quantitative Medicine
including: 1) possible failure to realize anticipated benefits of
the transaction; 2) costs associated with the acquisition may be
higher than expected; 3) the transaction may result in the
disruption of our existing businesses; and 4) distraction of
management and diversion of resources;
- Risk that we will be unable to protect our intellectual
property or claims that we are infringing on others’ intellectual
property;
- The impact of competition;
- Acquisition and maintenance of any necessary regulatory
clearances applicable to applications of our technology;
- Inability to attract or retain qualified senior management
personnel, including sales and marketing personnel;
- Risk that we never become profitable if our product is not
accepted by potential customers;
- Possible impact of government regulation and scrutiny;
- Unexpected costs and operating deficits, and lower than
expected sales and revenues, if any;
- Adverse results of any legal proceedings;
- The volatility of our operating results and financial
condition;
- Management of growth;
- Material and adverse effects of the COVD-19 pandemic, including
impact on a significant supplier; a reduction in on-site staff at
several of our facilities, resulting in delayed production and less
efficiency; impact on sales efforts; impact on accounts receivable
and terms demanded by suppliers; and possible impact on financing
transactions; and,
- Other specific risks that may be detailed from time to time in
the Company’s reports filed with the SEC, which are available for
review at www.sec.gov.
Investor Relations Contact:
Hayden IRJames
Carbonara(646)-755-7412james@haydenir.com
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