INVO BioScience, Inc.

And welcome to the INFO Biosciences Report's fourth quarter and fiscal year 2021 financial results conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star, then two. Please note this event is being recorded. I would now like to turn the conference over to Robert Bloom with Liz and Partners. Please go ahead.

All right. Thank you very much, Sarah. And good afternoon, everyone. Thank you all for joining us today for InvoBioScience's fourth quarter and fiscal year 2021 financial results conference call. Joining us on today's call from the company is InvoBioScience's chief executive officer, Mr. Steve Shum. the company's Chief Operating Officer and Vice President of Business Development, Mike Campbell, and Andrea Gorin, the company's Chief Financial Officer. At the conclusion of today's prepared remarks, we will open the call for a question and answer session. Before we begin with the event, we submit for the record the following statement. Certain matters discussed on this conference call may, by the management of InvoBioscience, may be forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 as amended, Section 21E of the Securities Exchange Act of 1934 as amended, and such forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. All statements regarding the company's expected future financial position, results of operations, cash flows, financing plans, business strategies, products and services, Competitive positions, growth opportunities, plans and objectives of management for future operations, as well as statements that include words such as anticipate, if, believe, plan, estimate, expect, intend, may, could, should, will, and other similar expressions are forward-looking statements. All forward-looking statements involve risks and uncertainties and contingencies, many of which are beyond the company's control, which may cause actual results, performance, or achievements that to differ materially from anticipated results, performance, or achievements. Factors that may cause extra results to differ materially from those in the forward-looking statements include those set forth in the company's filings, www.sec.gov. The company is under no obligation and expressly disclaims any such obligation to update or alter forward-looking statements, whether the result of the receipt of information, future events, or otherwise. With that said, let me turn the call over to Steve Shum, Chief Executive Officer of InvoBioscience. Steve, please proceed.

Thank you, Robert, and welcome, everyone. We filed the annual 10-K just prior to this call starting, but I also want to note that we filed an 8-K just now as well to both publish the news release but also publish a presentation focused specifically on our InvoCenter efforts in order to provide added details around how we are approaching this area of commercialization and some of our high-level goals and objectives. We prepared this targeted review because the InvoCenters represent such a critical part of our go-forward strategy now. That short summary presentation is also now posted on our website under the investor section and we will cover aspects of it here on this call. We also believe it will answer some of the questions that many of you often ask regarding this effort. So we encourage everyone to take a look at that additional presentation when you have a chance. And of course we will periodically update it as developments occur. Moving to our annual review and outlook. Let me first state just how important and exciting 2021 was for the company, particularly the resulting progress and developments toward the end of the year. As a reminder, and I know we stress this frequently from a market strategy perspective, our commercialization efforts continue to focus on the substantial underserved patient population and on expanding access to advanced fertility treatment for those people. We believe InvoCell and IVC can help address the key challenges of affordability and capacity in order to help provide care to the vast number of patients that go untreated every year. As one of our key objectives, we set out to develop an entirely new commercial pathway for our solution by opening jointly owned fertility centers focused on offering InvoCell and the IVC procedure to patients. We successfully accomplished this with the opening of three new centers in the latter part of the year, with the first starting in Birmingham, Alabama, followed by Atlanta, Georgia, and finally Monterey, Mexico. All three centers are now operational and treating patients. So our commercial strategy remains very focused on continuing to establish new InvoCenter clinics, selling the InvoCell technology to other existing fertility clinics, what we refer to as our distribution business, and longer term, as we work through the necessary details, leveraging existing established clinics in the OBGYN arena and bring the InvoCell treatment solution to those practices in a collaborative manner. The opening of the first three InvoCenters was without question a major milestone for the company. A tremendous amount of work went into this effort, something many of you know started well before the actual opening of the clinics. We expect the InvoCenters will be extremely impactful to the overall commercial progress moving forward and help expand awareness and further credibility overall. I would also note that we most certainly learned a lot through the process with these first clinics, and we'll look to apply that improved wisdom as we expand on the InvoCenter concept moving forward. That experience gained really helps with our forward planning and analysis. For example, there are several key steps involved in opening an InvoCenter. As such, we are making a conscious decision to move to more of a parallel strategy on those necessary steps rather than doing them sequentially. The goal here is to improve timelines as well as help offset supply chain logistic challenges, which are a real issue and often reported in the news. This also implies we are taking the lead or more control over the entire process of preparing a new center compared to the initial centers. On the startup costs, we believe the upfront costs will average closer to $700,000 to bring an InvoCenter operational. We also now expect the capital needed to support the clinic operations before reaching a break-even point will range between $300,000 to $500,000, depending on the specific structure with the physician operators at each clinic. We expect it to take approximately six to eight months to build and be ready to open the doors for each new center. We are taking a data centric approach towards selecting new markets. This involves both quantitative and a qualitative data review toward determining suitable areas. From a high level perspective, we are setting a goal of 20 INBO centers over the next three years. We can see ways to expand that as well as we recognize challenges that could impede that progress. But this is our current objective and we will update along the way. Equally important, when looking at an individual new center and how we expect it to ramp. We are setting a three year goal for each Invo center to reach an approximate 600 annualized treatment cycle run rate. Doing so should equate to a single center annual revenue of approximately four and a half million by that point and around a million and a half in operating profit. So at 20 centers, when they all reach that initial target level would imply close to 90 million in revenue and 30 million in operating profit. Please note that since we expect most of these to be JVs or shared profit interest, there will be a sharing of a portion of this operating profit with the physician operators. Of course, we will look to further grow each center beyond those initial target levels, and we don't intend to stop at 20 centers long term. Also, as this plan evolves, and if we can successfully collaborate with the existing infrastructure out there, We could also accelerate this plan, develop additional ways in which to expand, as well as potentially drive down the startup costs. We will work toward that as a goal as well. I realize we are giving a multi-year big picture perspective, but we want our shareholders to understand how we are thinking and what we want to try to achieve over time. Near term, we have the Northern California Center working through the build process. That is taking longer than initially expected, but we do expect it to complete this year. And the Tampa planning is well underway and a specific site having been located. We also expect to announce additional cities we intend to start the process on very soon. Again, as this strategy continues to evolve, we may find ways to further expand our efforts. Of course, this is not the only part of our commercial approach. We are working to expand our distribution activities, selling to existing established clinics. We believe there is encouraging developments on this front, and we still see the existing IVF clinic market as an important channel and intend to fully support that part of the market. We also have potential international partners interested in teaming up with us to develop an InvoCenter in their market. We are primarily focused on our North American InvoCenter efforts with the bulk of our resources, but we will support additional interest in other areas as it comes to us and where we can heavily rely on the partner for much of the work necessary to bring a center operational. As we've noted over the past year, the team we have assembled collectively has many years of experience in the device commercialization business and within the fertility space. Their ongoing efforts position us well to execute on our strategy. Another very important part of our story is patient outcomes data, including the further expansion of real market usage data around InvoCell, along with peer reviewed papers and abstract posters, which were presented late last year at ASRM, continues to demonstrate excellent patient outcomes and adds to the clinical validation around the technology, which builds confidence for practitioners and patients alike. We are also excited to see our own new Invo centers experiencing quality outcomes in these early days as well. On the initial Invo centers, they are progressing well. We recognize that it does take time to establish and build local awareness around a brand new medical practice, especially one that is also providing a newer treatment solution. Our Birmingham partners had some advantages in their specific market, given their prior experience and reputation around InvoCell from their previous clinic. that was located in the same area. Atlanta and Mexico have taken longer to build initial patient activity, but key metrics, which are important precursors to larger revenue and actual IVC cycles, such as initial patient inquiries to first consultations to then doing initial diagnostic testing, are trending well. We are also learning and gaining valuable insight with initial marketing programs, something we will look to deploy earlier and in a more concerted manner to accelerate these early trends in future clinics. Let me transition for a moment. On our five-day clinical efforts, we completed collecting all the necessary data, which we reported on our last call. However, what we did not recognize at that point was that some of the data showed inconsistencies that required us to circle back to the clinics for clarification. Most of that turned out to be input errors that we needed to clean up. We are through that back and forth process. This was a much longer and more tedious process than we originally envisioned. We don't believe we will find any additional items to scrub as we finalize all the statistics around the data and prepare for submission, something we now hope to have ready in the coming weeks. With that, let me turn this over to Mike for some additional details around the commercialization efforts.

Mike? Thank you, Steve, and good afternoon, everyone, and thanks for joining us today. As Steve mentioned, our initial commercial strategy is focused on the InvoCenter concept as well as selling our technology direct to the U.S.-based IVF clinics and through a distribution network to the rest of world markets. So I'm going to break my discussion into these two key areas and starting off on building what Steve mentioned on the InvoCenter model. So as he mentioned, our key objective here is to open clinics in high-growth potential areas where we can capture market share in short order. For this, as Steve touched on, we are taking a data-centric as well as a qualitative review of each potential market. Some of those specific criteria include avoiding areas with comprehensive insurance or a fertility insurance mandate. Currently, 19 U.S. states have some fertility coverage, but only nine states have really comprehensive mandates in place right now. We also tend to avoid markets where our health system owns both the OBGYN network in the fertility clinics, which could result in a potentially reduced referral base for us. We will focus on areas that have sustained patient demographics, areas that have significant capacity issues, have large OBGYN groups that we can partner with, and then areas that are primarily cash pay. So as an example, in Tampa, St. Pete, Clearwater area, we have just announced plans to open an EMBO center they have the following key metrics. The general population is about three million people in the area, so half of those being women, and an estimated 30% of those women being childbearing age. That brings us to about 480,000 women in that demographic, and typically infertility averages around 10%, so that's about 48,000 potential people in need of fertility treatment. Now, of course, not all are necessarily seeking treatment, But when we look at the SOC data, currently there are about 2,000 IVF procedures being performed in the Tampa Bay area through about 15 reproductive endocrinologists that serve the entire local population. So we have 2,000 IVF procedures and 48,000 potential people in need. We believe these types of metrics highlight Tampa as an excellent example of a large gap in need relative to the availability of treatment and, of course, why we chose this city. and we can observe this similar dynamic in many of the U.S. markets. As far as potential locations, we've expanded our initial target list to 27 cities, and we plan to prioritize these to optimize the demographics and the potential growth trajectory of an Invercenter concept. Steve noted earlier on the financial metrics related to our longer-range goals, but another metric to consider is that our geographic approach also involves maximizing the gap between potential patient metrics, and the availability of fertility treatment. Plus, with our marketing efforts, we will be able to help drive medical tourism to optimize the volumes of our entire center locations. Speaking of marketing, we recognize that building sustained InvoCenter demand is a key driver for the success of our InvoCenter model. With this in mind, we carefully constructed brand marketing and educational initiatives for both consumers and referring physicians to help support our growth. We're going to first look at the physician education and referral marketing program. As previously noted, we initiated this approach for our Atlanta EMBO Center, which we will use as a template for other markets. In Atlanta, we targeted 300 high-potential OBGYNs across 110 practices in proximity to the Bloom location over the past several months. The dual objective with this program involved introducing the InvoCell as a unique and affordable alternative for patients seeking infertility treatment, as most OBGYNs currently refer these patients out to IVF centers after evaluation, and to set up meetings with these practices that expressed interest in learning more about InvoCell to help build a supportive and sustained OBGYN referral network for our practice. This initial program resulted in a few key observations. First, there was a clear lack of referring physician awareness for InvoCell. However, there was also a strong enthusiasm for learning more about the InvoCell option, in which case we set up educational sessions with our physician partner in Atlanta for these groups, and that was Dr. Sue Ellen Carpenter. So far, we have had 24 practice meetings, which resulted in patient referrals from the vast majority. The 24 meetings featured many of the highest-profile practices in the community, and we anticipate continued OB-GYN support as we strengthen these relationships over time. In January, Inbro Center in Atlanta received 12 physician referral consults and another 15 in February, so again, we are pleased with the trend and the participation level from this program. We plan to continue to deploy this program in Atlanta and expand to additional surrounding areas in the region. Again, we are using this position referral marketing program as a template that can be replicated for future InvoCenters around the country. In order to promote InvoCell to the public and medical community, we have launched a three-part strategy to highlight the accessibility, affordability, and personal connection of InvoCell. First is a sustained consumer engagement via our Facebook, Twitter, Instagram, and LinkedIn platform activities. This would leverage content from our InvoCenters, detail corporate brand initiatives, and highlight success stories from existing RVR practices that promote InvoCell. Second is InvoCell targeted advertising with a focus on InvoCell brand recognition via an AdWords campaign. to generate patient leads in areas surrounding our EMBO centers. This commenced on March 21st, and these leads have been funneled to our EMBO centers for direct patient engagement. And finally, outreach to media organization and influence to detail the merits, patient experience, and availability of EMBO Cell. We now see more interview requests as a result, and that will help drive demand as our brand story is disseminated into more markets around the country. As we are now principally responsible for marketing InvoCell post-ferring, we anticipate that these initiatives will generate meaningful results in the form of consumer demand and physician referrals in support of our growth objectives. Our early results are encouraging as the quality of our website traffic has begun to steadily improve along with the ramp in the volume of requests for InvoCell information from potential patients as well as practitioners seeking to collaborate with us going forward. I would note that some of these marketing initiatives did take longer than originally anticipated to finalize and begin to implement, which did not allow us to kick off a more aggressive early and even pre-opening awareness and support program for the initial InvoCenters in their respective markets. That was probably more of an impact to Atlanta and Mexico in the first couple of months of opening versus Birmingham, where Steve mentioned Dr. Hammond and her team already had a level of pre-existing local awareness due to their previous clinic where they were active Imbrosol champions. All that said, we are, as of now, in the past two or three weeks, beginning to deploy these expanded initiatives across all three markets, and we'll most certainly fine tune them for what has the greatest results in, then look to deploy these efforts much earlier as the new centers come online, all with the goal of accelerating the initial ramp-up phase for these future clinics. With respect to the clinics themselves, in Birmingham, The clinic has now run five separate clinical series or batches to date with 70 cycle starts and 53 transfers. Overall, results are in line with our outcome expectation, and the most recent series performed earlier this month resulted in a 67% post-procedure positive pregnancy test, which was exceptional. Atlanta has conducted two separate series to date. But we think that the more relevant metric here is the positional referral program I just mentioned and how that's trending. We can now firmly say that we have an active and growing network of physicians referring patients in Atlanta. Equally important, traffic, both patient inquiries and consultations, is also growing separate from the referral network. So word of mouth appears to be spreading, and we have just kicked off our online marketing efforts. In January, February this year, they had 97 patient consultations with 80 in November and December timeframe, and just 37 back when they opened the clinic in the September and October timeframe. So as that volume continues to ramp, we expect to see more rapid increase in treatment cycles in the coming months. Mexico performed their first treatment cycle in January of this year, and similar to Atlanta, they are in the early phases of building their local awareness and pipeline of patients. They, too, have just recently initiated some local social media and market awareness programs to help drive volume. Our partners in Mexico absolutely know how to do this, as they have implemented a very successful in-boat program in a prior U.S.-based practice. So I'm going to provide some insight down into the distribution side of the business. This is where we are selling, as I mentioned, direct in the U.S. and through a distribution network and partners internationally. The distribution side encompasses methods of selling the InvoSol product with the associated requisite training to administer the IVC procedure into established IVF clinics. This segment is especially important since we resumed direct control of the U.S. market from February of this year. As we made the important decision to manage the U.S. market directly ourselves, the transition has been seamless. We alleviated some of the pain points that were part of the previous support process, and offered an improved price point and refined ordering process for our practicing clinicians. And the feedback so far has been very positive. We hired a dedicated resource to manage this key part of our U.S. business. He is Bojan Mitrovic. He came to INVO with a strong background and network of relationships in the fertility business and was able to begin building rapport with the U.S. clinics in short order. There were approximately 100 clinics that have gone through initial training with MSL. And this consisted of some of the legacy clinics that Invo trained before Faring and those that were trained during Faring's tenure. So as we ramp up the discussion with these clinics, we've been very encouraged with the feedback that reflects a strong interest in utilizing InvoCell, and we plan to support these clinics to help create awareness and build a strong patient base. Regarding rest of world markets, we continue to make progress here as well. In Spain, the newly formed relationship we announced with the OVO Group is helping to establish our presence and spearhead our initiatives in Europe. OVO is a group of clinics specializing in assisted reproductive treatments with four locations throughout Spain, and they possess collaborative centers around Europe through their OVO bank business platform. The goal here is to accelerate adoption of InvoCell within their markets through the expanded adoption of InvoCell within the OVO clinic locations. as well as establishing an EMBO center of excellence for future standardized training for the European market. As a quick reminder, we initially began commercialization in Spain through direct efforts in 2021, primarily to support Oval Clinic's desire to begin working with the EMBA cell technology. Throughout the several successful trials, Oval Clinic is now introducing this as an effective alternative in Spain, and we work closely We look forward to work with them to help expand adoption and achieve our goals of assisted reproductive treatment in the many individuals that need care. In Malaysia, as mentioned previously, we have a product trial evaluation ongoing in the government sector, and we are actively engaged in joint venture discussions with two physician groups to establish in both centers for the private medical sector here as well. So we'll keep you updated on our progress on those initiatives. In Pakistan, our partner Galaxy Medical continues to experience success with their mobile EMBO Center concept. This is where they transport the EMBO fertility lab equipment to regional medical practices to perform EMBO procedures. They currently have nine mobile labs and plan to have a total of 30 mobile labs operational by the end of 2022. Lastly, in Africa, Ingeborg Carlsen, our VP of Medical Affairs, recently conducted an on-site training session sponsored by our distribution partner, G-Systems. The hands-on training seminar was attended by over 30 practitioners, including embryologists, REIs, OBGYNs, and fertility nurses. They represented 15 separate fertility clinics throughout the country, as well as Ethiopia. Within Africa, infertility is on the rise, with an average infertility rate of 10.1% and has been reported as high as 32% in some regions. This was an extremely successful event for EMBO, where attendees were able to become educated about the device and see firsthand how the device can benefit their existing practice and help increase patient capacity. The session helped key embryologists understand the process, and that influence can be an important driver for adoption. A distribution partner, G-Systems, also understands unique opportunity EMBO cell can play helping combat the rising infertility challenges in Nigeria and the surrounding countries. A number of participants, along with the G-Systems team, recognized the unique advantages of InvoCell from a lab perspective, including the elimination of needing lab incubators, which can be extremely beneficial in areas that suffer from fuel shortages and periodic power outages. We believe this event will be a major springboard for which InvoCell is more readily adopted in this region. We have a number of other international discussions progressing, and we'll provide updates on specific developments as they occur. So our pipeline remains strong and growing. We see that our work is creating meaningful market traction. And each day, more people learn about Invasol. Our team is committed to making Invasol available globally for those wishing an affordable option to become a parent. And with every new Invasol baby, we are taking a step closer to realizing this vision. I want to thank you all for joining the call today and for your continued support. And with that, I'll send it back to you, Steve.

Great. Thanks, Mike. I'll just turn it straight to Andrea for a quick review of financials, and then we'll open up for questions. Andrea?

Thank you, Steve. Revenue for the year totaled $4.2 million compared to $1 million in the prior year period. We recorded a net loss of $6.7 million compared to a net loss of $8.3 million in the prior year. Excluding non-cash charges, mainly related to equity-based compensation, our adjusted EBITDA loss was $2.8 million compared to an adjusted EBITDA loss of $3.7 million last year. The $2.8 million adjusted EBITDA loss for the quarter included approximately $0.7 million attributable to our joint ventures. An apples to apples comparison of our adjusted EBITDA loss would be 2.1 million in the current year compared to 3.7 million last year. This was consistent with our internal operational goals. Revenue consisted primarily of fairing license revenue. As a result of the termination of our distribution agreement with fairing, the approximate 3.6 million in 2021 license revenue included approximately 2.9 million that was scheduled for future recognition. Our product revenue increased from 323,000 in 2020 to 545,000 in 2021, and we recognized an initial 44,000 in consolidated revenue from our InvoCenter in Atlanta, Georgia. As of December 31st, 2021, we had three operating InvoCenter joint ventures, With the support of subject matter experts, we further evaluated the proper accounting treatment for these operations and determined that the Georgia JV should be consolidated in our financial statements, while the Alabama and Mexico JVs should be accounted for using the equity method. The Georgia JV generated 44,000 in revenue from September through December of last year, and its operating expenses were approximately $0.6 million for the year. The expenses include certain one-time startup costs of approximately $75,000, as well as non-cash equity expenses of $300,000. In the near term, we expect ongoing cash expenses to approximate $200,000 per quarter before any offset from revenue and gross profits. Our note receivable from the Georgia JV, which as of year end had $450,000 outstanding, was eliminated as an intercompany transaction in consolidation and is not reflected on our balance sheet. In addition to this note, we also made a $472,000 equity contribution to the Georgia JV, bringing our total investment to $922,000 as of year end. To date, we have invested $1.7 million and $0.1 million in the Obama and Mexico JVs, respectively. These joint ventures generated revenue of $152,000 in 2021 and a net loss of $670,000, which included $424,000 of free revenue, startup, labor, and other one-time expenses. We expect to reduce startup and one-time expenses for new INVO centers as we apply our experience to future clinic launches. Since the Mexico JV had minimal operations last year, the $328,000 loss from equity method investment reflected in our 2021 consolidated statement of operations can be ascribed almost entirely to the Alabama JV. We ended the year with approximately $5.7 million in cash and no outstanding debt as all our notes were either converted, forgiven, or repaid in 2021. This amount of liquidity is sufficient to meet our near-term business development needs. We will need to source additional capital to support our InvoCenter expansion plans. We believe we have sufficient access to capital and are evaluating several alternatives including less or even non-dilutive options. With recent stock prices well below the level that we believe would more accurately reflect the progress made by INVO over the past year, we are focused on funding sources that would minimize equity dilution. As of today, we have approximately 12.1 million shares of common stock and approximately 260,000 warrants outstanding. In summary, Our InvoCenter and distribution activities are starting to bear fruit, and we can look forward to expanded growth from our efforts to deliver affordable and effective fertility treatment to those in need. Thank you very much. Back to you, Steve.

Great. Thanks, Andrea. I know we went a little long here on today's prepared remarks, so let's just go ahead and open up for questions. Operator?

Thank you. We will now begin the question and answer session. To ask a question, you may press star then one on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the key. To withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. Our first question comes from John with Vista Partners. Please go ahead.

Good afternoon, gentlemen. Thanks for the updates. As you know, I'm excited about what you guys are doing, as I express myself quite often in a number of ways. A question I have for you, when I look at this market, is that although I'm excited about the three and soon to be five and soon to be hopefully 20, oh, as you plan, can you address the bigger picture here and correct my understanding if it needs to be corrected? As I understand it, we are going after a market that is approximately 90% underserved. The patient population cannot get care through the current system of IVF. And so many go away from being served and don't get to enjoy the process of having a baby and children. In this case, right now we have about 450 or so clinics that are in operation in the U.S. alone, again, only serving about 10% and leaving 90% of the viable population without care. If we are moving forward, is the opportunity quite greater than what sort of we're looking at today? And I know we got to walk and then jog and then run before building out a bunch of clinics, but is it crazy to think that we could actually put one of these clinics near, right next door to one of these IBF clinics that are again, not serving this for a number of reasons, costs, et cetera, and even access. Is that opportunity there in the U.S. alone to be able to fill, again, 90% of the country's population not being served today?

There's quite a few questions in there, John. I'll first say that we certainly think the potential is beyond the initial target. cities that we've referred to. And we certainly think the market could support a higher number of centers to help properly treat the patient population. You know, they often talked about 90% going without care. Remember, Mike kind of made this point. It's not that necessarily every patient is seeking care. So there's probably some appropriate discount to apply to that. But regardless, We can see even with our own activities, our own initial centers, feedback from the market, that there's certainly a large number of patients that go without care. A lot of that often has to do with affordability factors. We see markets where there are clinics that have four to six month wait lists to get into the clinic. Even if there's an ability to afford, there's challenges getting scheduled in to seek treatment. And of course, as we all know, age is one of the biggest negative factors affecting fertility. So if you're on a wait list to get into a clinic, that's potentially further lowering your chances of success. So again, the broad statement that I would say is absolutely, we think that the market could support well beyond the initial 20 target. The other key point I would highlight here is that the idea of bringing additional, more affordable care through an InvoCenter to a specific market is not about trying to take market share from the existing clinics in that market. Our goal, as you pointed out, is to open up access and treat the underserved patient population. So if you look at Tampa, And Mike already called this out, the potential gap that exists between those that are potentially in need of care and those actually receiving care. And again, even if you apply a discount is pretty supportive of additional capacity. And that's our focus is fulfilling patients that need care and not disrupting the current market. And there's actually several successful examples of this. Our own partner in Birmingham, with their previous clinic validated this distinction and it's something we've previously highlighted, but there's other examples even within the IVF landscape where a new IVF practice entered an existing market with a lower price point and achieved substantial success with virtually zero impact to the existing higher price practices in the area, which just further demonstrates the potential additional demand that exists at different price levels. We speak to this all the time. Uh, but in our opinion, there's really clear proof of it. Um, so, and in fact, in some of these markets where there are lengthy wait to get into a clinic, our, our, our targets of ours. So Mike, you know, feel free to add to that, but I think Mike would concur here that there's definitely the potential to expand beyond our initial target over, over the long haul.

Yeah, no, Steve, I agree with all the points. And again, it's not just us saying it. There's a lot of information out there from folks both within the industry and from the investment communities that recognize the need for an additional channel potentially to treat this unmet need. So it's pretty well known.

Yeah. Let me ask you, the market in the U.S. that the IVF clinics serve, what does that represent from a dollar or revenue standpoint? Do we have an approximate number of what it did in any recent year?

Yeah, I think if you assume what is often considered the average cycle cost for IVF treatment, look at the number of cycles, Uh, per the CDC, uh, statistics, you'd probably easily get close to a five, $5 billion range for existing care in the market. Um, and then again, that's the other point that we often make is. If we can bring additional access, additional capacity, do it at an affordable price. We're not trying to carve out a piece of that 5 billion existing market. We're simply trying to expand the market. And we think that expansion opportunity, even at a lower price point, is still in the multiple billions of dollars potential expansion of the market.

Yeah, so if I'm hearing you right, if we would grab just another 10% and we're approximately half the price, that would mean that that's about a $2.5 billion opportunity just at grabbing 10%, adding 10% to that 90% that's not being served. Is that correct?

Yes, that's correct. That's certainly an opportunity for sure.

Yeah, it seems quite significant. So again, I think, you know, It'll be interesting to see how this plays out, but it just seems like a very significant opportunity as we go out and open the stores, the patients should be, or the clinics should show up. If it's so, as it is right now, you're starting to see great traction at these first three. So it's exciting to see that. And as far as financing, a rollout or possibly speeding out the rollout. Is it rational to think that being, if you were just targeting the same markets, typically you have real estate firms that are out there in the marketplace that are seeking to partner with companies and rollouts. And I've had conversations with different, you know, co-investors here that have had success with the Village MDs, the One Medicals, et cetera, that have successfully rolled out similarly sized clinics, obviously in different areas of primary care, et cetera. But there seems to be a footprint out there where partnerships are being created, et cetera. Is that a possibility here too for it to help potentially efficiently roll out across the U.S. and possibly even look at maybe partnering in some way and financing with them so that dilution could be minimized?

Yes, we think there are those kinds of tools out there for sure. As Andrea mentioned, we're evaluating what we think makes the most sense, including that's something that would most likely be less or even non-dilutive as a potential option for some of the upfront costs. Yeah, I think those are tools that are potentially available that we're exploring.

Okay. And then one last thing for a jump in the queue. Just help me understand, and other investors, since InvoCenters are fertility clinics that are offering the specialized technology InvoCell that you guys control, or InvoBioSense control, what... But you have a number of patients that come through, and I think IBF, they have clinics also. They have maybe, say, 100 or whatever might come through the office, and some might immediately in the next month go through in the sort of 15% range to a cycle. In your case, what is the experience in the first three clinics regarding this? Are you seeing about the same? And then also, can you speak to Are you seeing revenues drive well beyond the cycles for other services just like an IVF clinic or a fertility clinic would?

Yeah, there's a couple questions there, but on other revenues, you're correct. Patients, when they come through a consultation, If they progress to testing, there's various diagnostics that are often performed to assess what some of the issues are. And those are typically, those are services provided by the clinic. Those are charged services. So that's certainly a revenue source. Our clinics, if it's appropriate, and there are certainly cases that are, they may perform IUI cycles. So that's a revenue source. So there are definitely revenue components to the clinics, just like any fertility clinic that are beyond just simply an IVC or a treatment. So yes, I think that as far as conversion rates, it's a little early to draw conclusions, but I would say, I think we feel our practitioners feel it's consistent with what you would normally see. And remember not every patient that comes in for a consultation necessarily immediately moves to diagnostic testing. And even those that do, you know, they may not be a candidate for treatment. They may be a candidate for treatment, but many decide to wait a little bit before they proceed. So I think all of those dynamics are, are similar in our clinics. And I often say that a patient that may go through initial consultation and testing and is a candidate for treatment, if they don't proceed right away, it's not really a patient loss. They may just be making a decision on what to do and when to do it. And so we would see that still as potential patients in our pipeline for the specific centers. And Mike, again, I'll call on Mike to see if he wants to add anything further to that.

No, I think that's very accurate, Steve. But I will say that, you know, Karen Hammond down in Birmingham does have a very, very high closure. I don't have the metrics in front of me, but she does convert a lot of the consults to actual cases. So there is some magic to that process as well.

Well, thank you. Thank you, Jim. Again, congratulations on the progress announced and the plans forward and look forward to seeing how to all of our success as you guys move forward.

Thanks, John.

Again, if you'd like to ask a question, please press star then one. Our next question comes from Lawrence Udell with Udell Investments. Please go ahead.

Hi, guys.

Hey, Larry.

You had, you have, I don't know what, could you review the status of the clinics that you have out of the country?

Well, we don't, the only official info center we have up and running outside the country is our Mexico clinic with our Mexico partner. Is that what you mean, Larry? Are you talking more of our distribution business where we're just selling the device to other fertility clinics.

I thought you had potential clinics in India.

Our India partner, as we've noted over the past year, really was impacted pretty severely by COVID, and they were experiencing significant delays. And we just recently agreed that we would put a stop to that. They hadn't made forward progress at moving it along to our satisfaction. And I think, again, with what happened with COVID, they adjusted some of their focus. And so it made sense for us to terminate the India, which we just did just the other day as part of filing our 10-K. We made that decision with them. And we've had a few other inquiries in India market. But you're right, that was one of the first JV agreements we signed. But like I said, the partner, right after we had signed that agreement, really struggled and COVID hit. And so we thought it was best to free ourselves to be able to engage and have conversations with a few other potential parties.

Okay.

Okay.

And you did announce that you have a deal in the Middle East. Am I right?

We have a partner in Malaysia, and Mike referred. They're in the mix still. Is that a deal? What's that?

Is that a firm deal?

Yeah, we have an agreement with them, but... It's really, this is one of the points that we made earlier in our prepared remarks, that for us, the Internet, you know, we're a lot more focused right now on our North American operations, and we're willing to engage with partners internationally that are interested in those centers, but we're putting more of the onus on them to, you know, do the necessary work to bring a center operational, and we don't have as much control and control. It's hard for us to really manage that from here, so it's really got to be the right partner.

Larry, it's Mike, just on the Malaysia deal. Yeah, the trial is important as well. As I mentioned, we initiated a trial through the government sector. We have some cases ongoing in Malaysia, and as most of the rest of the world markets, they want data within their countries as well. And we did that in Europe. We had to go to Spain. We did some procedures and some trials in Spain before we can engage with the Oval Clinic group, too. So it's pretty much a standard operating procedure to build a beachhead, if you will, get local data, and then these guys make decisions based on how this thing works in their hands. So in Malaysia, yes, we do have two interested parties. Yes, one of these parties is our official distributor, if you will. In order to register a product in an international market, you have to have a local distribution company as part of this arrangement. So they ask it as its distributor, and they also do have plans to build an InvoCenter. So that all is ongoing.

Okay. And getting back to –

You know, Turkey and Jordan, we've mentioned those long ago. Um, Africa, of course, which Mike highlighted because they've, they really started ramping up their efforts to get trained and placed a first order, uh, here recently. Um, so sometimes these have long, especially with COVID that impacted the whole world, but some of the, some of these activities taken have taken quite a while, but what we see is, you know, in, in certain areas they're progressing.

Okay. Let me just ask a theoretical type of question. Suppose somebody pays $1,000 to a clinic that you own or have an interest in. How do you record that money? How do you show the money?

I can answer it, but I'm going to let Andrea take a turn here for us and address the accounting for the current centers and then what we contemplate maybe in the future centers. So anyway, Andrea.

Yeah, so there are two methods that we are using for the existing clinics. One is if we're deemed to control sort of the key activities that most significantly impact the economic performance of the clinics, which is kind of the standard under US GAAP, we get to consolidate it. So if they have $1,000 in revenue, that would become our revenue, and their expenses would become our operating expenses. And then we would have typically a non-controlling interest, which is backed out below the line. Um, that is the case for the Atlanta joint venture with, um, um, Alabama as Birmingham and Monterey, Mexico, we don't meet that standard. So we're using the equity method. Um, so it becomes more of a, uh, uh, you know, balance sheet activity. The income statement only gets impacted by our share of their profit, uh, or loss below the line. And we did provide some, in the press release, you'll see that there's a table with some information on the joint ventures performance as a whole. And we did provide a little bit of a breakdown, some information on sort of our investment in and how we recognize the performance in our own accounting. Does that answer what you were asking?

And I think one other last point, Larry, for you on this topic, I think as we look forward in the new centers and particularly how we're approaching those, I don't want to say always the case, depends on sometimes the specific arrangement with the physician partner, but most likely the forward centers will more likely be consolidated. rather than treat it as an equity method. But again, not necessarily in every instance, but most likely the majority of the future ones will likely be consolidated. Okay.

All right. Just another question. What's going on with the five-day trial?

Well, as I noted on my prepared remarks, it's been a lengthy process to not just collect the data, but then have to go back and do some back and forth with individual clinics. In terms of when we got the volume of data, I won't bore you with the details, but it was a lot, and we had to do a lot of scrubbing and make sure everything was standardized. Because we're trying to create statistics to support what the FDA is looking for around that data. So you have to make sure every data point from every clinic is conformed in the same way so that you can roll it up into averages and so forth. And we had some inconsistencies across some of the clinics. And so we had to do a lot of back and forth and that took quite a bit of time. And I believe we are As I said in my prepared remarks, we're largely through that. We have it in it. We're now doing the statistical calculations. I'm hopeful that there won't be any last-minute inconsistencies, but even if there are, it should be a quick turnaround. And we're looking to get that data submitted over to the FDA here very, very soon. And that's all based on the retrospective. We're using the retrospective data to try to support the 510 effort. This is the real market usage data.

Okay. Thank you.

Thanks, Larry.

Our next question comes from Scott Fruchter with Private Investor. Please go ahead.

Hey, Steve. Congrats on the progress. Really exciting to see the effort here in the North American centers. I guess as I'm thinking about how you guys move forward, I'm looking at projected 12,000 cycles when these are fully operational, which is actually a pretty big percentage of the overall IVF cycle market in the U.S., which is exciting on its own merit. But I was wondering if you could speak a little bit about just the revenue opportunity on the uptick in devices you anticipate selling to those clinics, or is there some kind of special rate? I don't know if that's disclosed. But I'm just thinking about how to model that in when looking at the investment opportunity.

Are you talking about the transfer price rate we use to the invo centers? Yeah, correct, correct. Yeah, we haven't. That varies a little bit center by center. Specifically, I guess, if it's between Mexico versus the U.S. centers. but um we haven't we haven't really disclosed that scott so um it's a it's i would tell you it's a little bit better price point than or transfer rate price than what we sell to non-invo centers um but uh i think until we're i would probably just leave it at that for now It's slightly better pricing than... Fair enough.

Appreciate the color. And I guess just a quick follow-up to that. Just looking at the timeline of how you're projecting these invo centers to go into the future to get to $2.3 million revenue year in year two and $425 grand in profitability, that's super exciting. And I'm sure... you know, what you're seeing in the existing clinics is giving you a lot of confidence. So just in that vein, I know that INBO doesn't provide guidance historically, especially around, you know, stuff like clinics, but with Atlanta and with Alabama, are you seeing the performance there in line with kind of what these slides are showing? You know, is there any big variance there, you know, as you work through the plan in these early centers?

Birmingham, yes. As we tried to note, I would probably, I think we would assess that Atlanta and Mexico are maybe a couple of months behind, because obviously we have a lot more detailed sort of month-by-month plan in how we see the centers. And I think if you were to slide the month-by-month over, maybe two to three months, then it would kind of line up. And we attribute that to, you know, when those clinics open, we were still. Obviously learning. Um, and we also really hadn't brought to, to support, you know, some of the marketing activities to help drive awareness, uh, things like that. So as Mike noted, we were, we, we were admittedly probably a little slower implementing some of the programs on the marketing efforts and the physician referral activities and so forth. So if you contemplate that we've, that's why we, we feel comfortable. Um, and again, this is why we're going to take, uh, you know, and as, as here in these early days of the marketing activities, we'll, we'll refine, we'll take what's working best. And that's going to be a big advantage in our mind for the new centers, because we will initiate those activities, uh, even before they necessarily on some of those activities before they even open their doors. And so with the idea of allowing them to hit the ground, running at a little faster pace out of the gate. So, um, again, from our vantage point, we're comfortable. Um, and again, Birmingham is, is pacing quite well. And the others, again, if you just sort of slide it a little bit and I, and we, we look at that as, uh, really. you know, how we initiated some of the marketing programs, and like I said, us being a little bit late, doing so after they had already opened, basically.

Got it. That all makes sense. Well, hey, it's a really bold and ambitious undertaking, and I think it's really exciting for all the existing shareholders and anyone who's kind of considering an initial investment in Google Bioscience. The company and the presentation certainly looks very different from how it looked even one or two quarters ago in terms of the commercial strategy with this new focus. So really exciting. Congrats again on the progress, and I'll look forward to tracking the story. Hey, Scott, it's Mike.

A lot of that has to do with the recent announcement of the ferry agreement. We really didn't have the ability to accelerate our marketing plan, which we do now. So that's really been the major driver.

Excellent. Yeah, that makes sense. And thanks for that additional color. Yeah, I mean, when Faring kind of got out of the way, I think everyone who understands the story and has been following along understands that that was actually a huge positive for Enville going forward. So, yeah, excited to see what you guys could do with it in your own hands.

Thank you.

This concludes our question and answer session. I would like to turn the conference back over to management for any closing remarks.

Well, thank you, everyone. Again, we appreciate your time for joining us today. Please do not hesitate to reach out to us directly or to our IR firm should you have any follow-up questions. And we look forward to, we'll probably be back with you here in about 45 days for the first quarter. where we will look to further add additional data points. As our existing centers mature, our goal is to provide more and more information around how they're doing as we move forward from here. So we'll look forward to doing that on our first quarter call here in the near term. Thank you.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.