Daxor - Q4 2023

Transcript

Operator (participant)

Ladies and gentlemen, thank you for standing by. Good afternoon and welcome to the Daxor Corporation conference call for the corporate update and financial results for the year 2023. At this time, all participants are in a listen-only mode. After today's presentation, there will be an opportunity to ask questions. To ask a question, select the Q&A button within the Zoom call. During this call, management will be making forward-looking statements, including statements that address Daxor's expectations for future performance or operational results. Forward-looking statements involve risks and other factors that may cause actual results to differ materially from those statements. For more information about these risks, please refer to the risk factors described in Daxor's most recently filed annual report on Form N-CSR and subsequent periodic reports filed with the SEC and Daxor's press release that accompanies this call, particularly the cautionary statements in it.

These reports are available on daxor.com. The content of this call contains time-sensitive information that is accurate only as of today, March 25, 2024. Except as required by law, Daxor disclaims any obligation to publicly update or revise any information to reflect events or circumstances that occur after this call. It is now my pleasure to turn this call over to CEO and President Michael Feldschuh.

Michael Feldschuh (CEO and President)

Thank you, Natalie. Good afternoon, everyone, and welcome to the Daxor Annual Shareholder Call. I would like to turn the floor over to our Chief Financial Officer, Robert Michel, for some highlights from our financial performance. Bob?

Robert Michel (CFO)

Thank you, Michael. And good afternoon, everybody. Here's a summary of our fiscal 2023 financial results. For the year ended December 31, 2023, Daxor's net assets increased 17.4% to $34,103,384, or $7.08 per share, as compared to $28,969,469, or $6.75 per share at December 31, 2022. Valuation of the operating division increased $6 million-$32 million at December 31, 2023, from $26 million at December 31, 2022. The increase during 2023 is based on an annual independent valuation performed for the year ended December 31, 2023, utilizing a hybrid of methods of the income approach using the discounted cash flow method and the market approach utilizing recent arm's length transactions. In 2023, 464,599 Daxor treasury shares were sold at a price of $9.75. The discounted cash flow utilized 35% of this weighting on the income approach and utilized 65% weighting on the market approach.

For year-end December 31, 2023, Daxor had net dividend income of $157,378, net realized gains on investment activity of $603,774. There was a net decrease in the unrealized appreciation on investments of $885,199 as we sold long-held positions during the year 2023, from which prior year's significant unrealized gains unwound into realized gains for the period. Included in the net increase in net assets resulting from operations of $280,640 is a non-cash stock-based compensation expense of $631,701. In an effort to provide incentive to employees, officers, agents, and consultants to the company, we utilize stock-based incentive awards. Daxor invested $4,552,380 in the operating division relating to our continued investments in research, development, sales, overhead as the company continues to invest judiciously in research and development for our anticipated 2024 product launch, ramping the commercial sales teams as well as production facilities for our next generation of blood volume analyzers.

That concludes my summary of the financial results, and I'd like to turn the call back to Michael. Thank you.

Michael Feldschuh (CEO and President)

Thank you, Bob. Appreciate it. So I'm going to give a general update on the company. A number of investors and other interested parties have thoughtfully submitted a series of questions for me to address after that. In addition, it's possible to type in questions that you wish to the moderator, who can then pass them on to me. Unfortunately, due to the very large volume of questions that we've received and the time allotted for this, I can't get to every single person's question. But I will try to cover a lot of ground, and hopefully that will satisfy people's need for more details. So let's just start at the top. You know, this is an incredibly exciting time for Daxor right now. A number of different things are all converging.

Things that we've been working on for years, things that are critical to our development as a company, as an ongoing concern, as a company that's committed to changing the arc of healthcare, and specifically to solving one of the largest challenges in medicine, which is specifically that of effective blood volume measurement to enable optimal care. So I'll just start by saying that we, as a company, have never been more focused on our mission and our goals than we are right now. Every team member at Daxor sees both the remarkable strides that we're making in these different areas. I'm going to go into those details in a moment.

We really feel that we are solidifying our position not only as the global leader in terms of blood volume measurement technology, but we're rapidly seeing just how vast this market is and the promise of what our rapid expansion means, both for the company and for the potential for serving the tens of millions of patients that exist in the market globally that would all benefit from having care optimized through better blood volume measurement. For 2023, we've seen a very strong start, continued growth of our revenues from 2022-2023, and into the start of 2024. And I'm going to go into more details on that as well.

We've been able to hit a number of key milestones and objectives from last year, including submitting our next-generation blood volume analyzer for consideration under the 510(k) approval process with the FDA, which is something that we did at the end of Q4. We've received a number of new patents. Those are very important as we have a growing family of patents around our technology, which will protect our lead in the marketplace for years. We have a number of patents pending as well. We've been the recipient of awards from both the National Institutes of Health and further contract awards from the U.S. Department of Defense, which are not only wonderful for their non-dilutive funding, but also because they are such a strong validation of the value of our technology and the importance of the problem that we're solving and the effectiveness of the solution that we present.

So, with that being said, why don't I dive into, you know, a little bit more about what we're doing? Briefly, I'll say that blood volume measurement is a key indicator that is essential for improving and optimizing patient care. While not all investors are familiar with why that is such a vital sign, I'll briefly just explain that while the pressure and the temperature of a patient's blood can be easily determined, even the ratio of red cells to plasma can be easily ascertained, knowing and quantitating the actual total amount of blood that a patient has, has been one of the major challenges in modern medicine. Daxor has a 98% accurate gold standard method of solving this problem. The reason why that matters is because blood volume is vital for improving patient outcomes.

Every single intervention in medicine that involves a transfusion, that involves the use of a diuretic, that involves some kind of supportive fluid management decision is really a blood volume management question. And the problem has been that while we've had a wide variety of interventions to guide blood volume, and that's necessary, obviously, in areas like things that come to mind like critical care. But it's also the cornerstone, for example, of management of things like heart failure. And then also things like syncope and POTS and hyponatremia and chronic fatigue syndrome. You know, the list just goes on and on where volume is actually a central question of the management of the patient. There's been a lot of management of patient care, but without effective measurement of the patient's actual volume.

So, management without effective measurement has meant that there have been a lot of really suboptimal outcomes for patients. And that has a profound implication for patients, both with chronic conditions and acute conditions that require them to be hospitalized. It involves patients on the inpatient side, meaning hospitalized patients. And it also involves the management of patients on an outpatient setting as well. So, when you look at the vast number of patients that are having some kind of volume management intervention in their care, and that includes not only the 6 million people with heart failure, 1 million of whom will be hospitalized this year, 1 in 5 patients will die from heart failure. That's how pervasive that problem is. It's one of the leading causes of death in the United States.

It also can really be expanded to include the very large number of patients, for example, who are undergoing volume-effective therapy for hypertension, just to name another population. That involves 120 million patients a year. So, if Daxor has such a massive market, what has been our strategy to try to make an effective inroad into that? And I'm going to go into that more. But first, I just wanted to set the stage of what's at stake. And one of the things that's been very important for the arc of the development of the company over the last several years has been it's not just enough to show that you have a more accurate diagnostic. You also have to actually then show does care guided by that more accurate diagnostic lead to better outcomes? And what specific better outcomes are they? Are they better clinical outcomes?

Are they better health economic outcomes? Are they better quality of life outcomes? And the good news is that, in Daxor's case, more effective care, which starts with having a very accurate diagnosis to guide the interventions that follow, leads to an improvement in every single one of those areas. And that's really what you want to see in an effective product offering for a company. Something that improves the clinical outcomes for patients. That means reducing the length of stay in the hospital, reducing their chances of readmission, reducing their mortality rate. But also something that then leads to a more effective and efficient result for the providers. That means that the hospitals will spend less money treating these patients. And ultimately, the insurance companies, the payers, will be on the hook for less as well.

That's something that we at Daxor have been proud to be developing extensively. We've been gaining traction on that. Let's talk briefly about the financial numbers. Bob obviously just hit upon the highlights of what's there. In our letter, we covered the fact that we've been seeing strong revenue growth for the company. Obviously, one of the challenges with Daxor is that we have been mandated to report as a 1940 Act company, which means that we present a consolidated balance sheet across all of our investments, which includes the listed securities that we have, as well as our fully owned operating company that we have. But I do want to give investors a sense of what our cadence of operations has been and how things have been improving.

So, quite specifically, between the second half of 2022 and the second half of 2023, we've seen our kit sales rise, just to give a sense of that, by a full 37.4%. Obviously, that number, that's the number of tests that have been sold. Our tests, our test kits, which are single-use test kits, are sold either in the form of kits which are shipped to a hospital for use with their analyzer, or they're in the form of reference lab where the blood samples are sent back to Daxor's CLIA-certified lab for reporting results. Those types of tests are actually priced differently. The price for our tests in 2023 was $385 per kit when the hospital performed the test. That price has since been increased to $460 per test.

So, that's for both new customers and for existing customers who don't have price protection built in, which is the vast majority of them. So, we've been able to effectively have a 20% price increase starting March 1. So, none of the numbers reflect that. We also introduced a so-called ezBVA Lab in 2023. That's a reference lab where the tracer that is injected into the patient is shipped to the hospital. The blood samples are sent back to us. That has been priced at $965 per test. And we've been seeing increasing uptake of that product as well. That really started to help, particularly in the Q4 of 2023. What we've seen for the start of the first two months of 2024 has been a continued rise in the number of kits sold.

So, the first two months of 2024, we saw over a 95% increase in the number of kits sold versus the number of kits that were sold in 2023. So, we're seeing a very strong rise. In the past, we've put out that over 65,000 kits have been sold to date. That number certainly needs to be updated. It's several years old. That number is at least 10,000 kits more now than it was in the past. And we should be updating that number as a reference. But we are seeing a really strong increase in that number of kits being sold. We'll dive more into that later. Let's talk about the number of accounts. So, our sales have been rising through a combination of an increase in sales at existing accounts, meaning we're penetrating deeper into these accounts. But we've also been adding new accounts.

So, we added 12 new hospital accounts. One of the questions that I received was, do we count a hospital system as one account? Or do we count the individual hospitals in a hospital system as an account? The answer is the latter, not the former. So, for example, if we sell it into a 3-hospital system, we would count each one of those hospitals individually as a so-called new site for the use of BVA, because functionally, they really are. So, just to give a sense of the increase in the business, we added 12 new accounts in 2023. Those accounts were a combination of sales, rentals, and then services for the ezBVA Lab. In the first two months of 2024, we added 6 accounts, again, with a similar kind of combination.

So, just to give people an understanding of what's going on, we've seen a very sharp increase in the number of accounts open, the sales. There's really been a pivot point in the business, I would say, from the Q3 of last year. And the cadence of sales and the cadence of customer engagement has been much, much higher, which in some ways was potentially surprising. I think that I've received a number of questions from investors who were concerned that because we have a next-generation system that we're planning on launching, they were concerned that there would be a slowdown in adoption of our technology as customers waited to upgrade to the new system. We've actually seen the exact opposite, with a 95.7% year-on-year increase in the first two months of the year. We just actually had our best week of kit sales last week.

So, we're continuing to see stronger growth. We're also seeing a forecast now where we anticipate being able to break even within 12 months from now. We are thinking that that will be driven by a combination of the continued growth that we've been seeing in the adoption of our systems, anticipated revenue from various different contracts that we are aiming to receive, and of course, the launch of our new system, the new BVA-200 system, which contains a number of very important potential upgrades and will be adopted by customers, we anticipate, at a much higher rate, more quickly, and with a higher rate of utilization. So, I'll go into that system now.

So, Daxor completed a clinical trial last year at several sites where we did a comparison between lab results from our existing FDA-cleared BVA-100 system and what we have used as an internal designation, the so-called next-generation blood volume analyzer. That clinical trial involved several hundred samples that were drawn from patients in a variety of conditions in real-world hospital situations. And then that was packaged into a 550-page submission to the FDA. That was under the so-called 510(k)/CLIA dual waiver application system. And that's a system of approval, which involves the submission to show the equivalence between an existing approved system and a proposed system. We were quite pleased with the data that we collected. We had validated this next-generation device with the Department of Defense under contract with them. And we were then happy to do the civilian-side validation for our submission.

So, just to review to everyone, why is this next-generation system so important? What is it? Our existing system is a carousel-based system that sits in the lab, typically, of a hospital. So, the workflow involves the injection of our tracer into the patient, usually at the point of care, a collection of blood samples, which are then sent to a lab for processing. And then the results are entered into, usually, the electronic medical record system of the hospital. And then results are reviewed by the clinical care team. The new system, which was developed under contract by the U.S. Department of Defense, is a portable, battery-operated point-of-care system. It's about the size of a shoebox. It was designed initially, or under the specifications of the U.S. Army, to be ruggedized so that it could be used for forward deployment in combat casualty care.

But it's also been made with the civilian market very much in mind. So, the new system involves a completely different workflow. It involves that the patient has the tracer injected into them. But as the blood samples are collected, they're processed immediately at the bedside. And then a result is available to the clinical care team. So, why is that so important? Well, under the current system, the workflow can involve waiting for 60-90 minutes to receive the results of a test. If the hospital is using our send-out service, it's actually a 24-hour delay. The new system was shown in our trials to be able to give an initial blood volume result in as quickly as 15 minutes at the bedside, with considerably less effort by the technicians because they don't have to bring the samples back to the lab, etc.

This is really something that opens up a very broad array of potential users, for example, where timely blood volume measurement is really important. Think about, you know, patients in a critical care unit where they want to make a fluid intervention, but they need to make that intervention in a rapid way. It's something that makes the system more attractive for potential hospitals to take on because of the resources required. The workflow is just much more friendly towards adoption in the hospital system. So, we're really excited about this. The other thing is that we're looking for this device to be so-called CLIA-waived. A CLIA waiver certification would make adoption of the system and its utilization much more friendly to the hospital systems.

We anticipate that, with the approval of this system, that there would be potentially significant adoption of that new system, not only at existing customer accounts, who would be very attracted to the new workflow and footprint of the system. It would also open up a large number of accounts at hospitals that have expressed interest in our technology but would like to see this new workflow that's available based upon the speed, the convenience, and of course, its ability to provide timely information that will guide interventions. Touching on a related area, our R&D, we continue to do further next-generation tracer development into our fluorescent marker, also with support by the U.S. military. We have also been filing and receiving patents related to the utilization of blood volume technology.

So, specifically, Daxor has been receiving method patents that are related to the application of blood volume measurement and the guidance of care. We feel that these patents are quite important and will help to protect the valuable IP that the company has been developing for years. We've been seeing that there's also been an important amount of clinical outcomes that have been occurring. We've seen over 25 papers and peer-reviewed presentations on blood volume analysis in the past 18 months alone. And so, we're seeing a very large upsurge of interest in blood volume measuring technology. When I go to the type of society meetings, the Heart Failure Society of America, for example, featured a whole session on blood volume measurement last fall. That's 2 years in a row that they've been doing it.

When I go to conferences like the THT Conference, which is one of the leading heart failure technology conferences in the world, again, blood volume keeps coming up again and again with important presentations and acceptance. So, we're seeing that, as we've had a much higher profile on the podium at these events, key opinion leaders have been bringing the system into their hospitals. There's just been a much higher profile and recognition for what blood volume analysis can do. And I think that that's also what's underpinning and helping to drive increased utilization in our system. So, this is something that is really quite important. We're seeing outcomes that have shown the substantial need for our technology. You know, two different randomized control trials presented pilot results last year.

The amazing thing about these two different RCTs, one was from Duke, one was from the VA Center, is that in both pilots, they asked clinicians what they thought the blood volume was of the patients using the existing technology and then measured it with BVA system, which is 98% accurate, and then compared the two. What they found was really astonishing. It turns out that, according to the VA study, 70% of the time, clinicians are getting either the total volume or the red cell volume wrong of these patients, categorically, 70% of the time. The Duke study also had a similar finding that 50% of the time, they were getting the volume wrong. They didn't actually look at what percentage of the time they were getting the red cells wrong.

But that would probably be of a similar order of magnitude if it matches the VA study. What does that mean? It means that there's really a lot of suboptimal care going on out there. That if the clinicians knew the volume accurately, they would be getting much better results. And that's becoming increasingly clear in study after study. So, I'll sort of wrap up there and start to go into more of the very specific questions that I've received. And I think that that's going to be able to lead to a good segue to talk about the acquisition that Daxor announced this morning, which is really quite important. So, just wrapping up in terms of the 2023 results, we're continuing to see a strong increase in the utilization of our product. We've made important strides in terms of the next-generation analyzer.

Just to give people a sense of it, we submitted for the 510(k), as I said, at the end of Q4. That is a traditionally, it's a 90-day review process for the 510(k) and a 90-day review process for the CLIA waiver. So, we are about 85 days into the review for the 510(k) piece of it. We don't really know exactly when, in this 180-day window, the FDA will give us any feedback. As soon as we do know and we are able to move forward, then, of course, we're going to keep all of our investors surprised of that. We've been making preparations, though, to build and manufacture units in anticipation of a clearance. And we've been doing work behind the scenes in order to drive the adoption and the messaging that's necessary for the marketplace once we are allowed to actually market the products.

So, with that, I would like to just sort of briefly pivot and talk about the announcement that we made this morning. Iso-Tex Pharmaceuticals, a firm based in Texas, is a private radiopharmaceutical manufacturer. They have been providing us with inputs into our test kits for the last period of time. And they are what we would consider a key supplier. In addition, they also manufacture and sell a product called Glofil. So, let me first explain Megatope and Volumex. Megatope and Volumex are the two drugs that they manufacture on our behalf. We combine those with other elements and then sell them in test kits. We have entered into an agreement that calls for us to acquire the exclusive worldwide rights to manufacture Volumex and Megatope from them. In addition, a third FDA-approved drug called Glofil will also be acquired by Daxor.

So, Daxor owns and operates a 20,000-square-foot state-of-the-art facility in Oak Ridge, Tennessee. We have clean rooms there. We have the ability to manufacture FDA-approved products there. So, we will be taking those products in-house. This agreement does not require Daxor to make any sort of substantial additional capital investment. We're going to merely leverage the existing footprint that we have in order to operationalize these drugs for our own purposes. Megatope is an input into the manufacture of Volumex. Volumex itself is the drug that we are packaging into our test kit. So, the impact of us taking Volumex in-house for our margins, we anticipate could be quite substantial. It's going to really affect our margins depending upon how our business scales, which obviously will not surprise people.

But I would say that it would probably lead to a minimum of a 15% increase in our margins for our Volumex products, which would increase over time as our business continues to scale up. We do have the ability, we estimate, at our facility in Oak Ridge, Tennessee, with what's there, to make approximately between 2,000 and 300,000 test kits a year. So, there's ample room for expansion and for growth within our facility. So, we have a lot of room to scale up in our existing footprint without having to make further investments to bring the product to the next level. As far as Glofil goes, Glofil is a product which is used for the measurement of glomerular filtration rate. And this is an exciting product for us for a number of reasons. Glomerular filtration rate is a different metric than blood volume.

But it is often a metric that is considered by nephrologists in relation to blood volume. In other words, people like to look at the kidney function of a patient along with the circulating volume and the red cell volume to understand a complete picture of what's going on, typically in a cardiorenal scenario or in the question of hyponatremia and cerebral salt wasting syndrome. So, this drug fits in very, very well for us at Daxor. It has an existing footprint of customers. And while its sales right now are really focused in the nephrology area, it's something that is very ripe for development. That they have an existing customer base of approximately 20 customers that are regularly ordering this product. We think that with a small amount of additional focus, marketing, etc., we'll be able to substantially increase their sales that they've been experiencing in this.

We have the ability to cross-sell between Glofil and blood volume. And so, in other words, the existing Glofil customers will be great for us to sell our blood volume systems. Our existing blood volume systems are customers that would also be natural targets for Glofil. So, we think that there's going to be really a substantial synergy between the new product that we're bringing in and the existing products that we have. The terms of the deal are also quite favorable for Daxor. We will be working towards establishing the manufacturing of these products in our facility in tandem with Iso-Tex. Once we take over the production of these products from Iso-Tex, Iso-Tex intends to cease producing them. They will not have the right to produce them further. That will become Daxor's sole and exclusive product.

Daxor has entered into a seller financing agreement with Iso-Tex Pharmaceuticals that allows Daxor to pay off in monthly installments over a two-year time period for the products in question. We have the option to pay for the acquisition in a mixture of stock and cash at our option. We believe that the terms of the agreement are such that we will be cash flow accretive on the deal from the first month of its inception. This is going to be incrementally positive for our earnings from the beginning. It's really sort of almost like a form of a buyout based upon revenues. In our case, it's not based upon the revenues, gross revenues. It's just based upon a minimum amount that we need in order to generate that number.

We've looked at the run rate of our existing business, plus the run rate of the existing customers that Iso-Tex has. We feel that this is going to be a net positive, as I said, from the first month. So, that's some of the details there. This is a really important thing that's going on for Daxor right now. What we're really seeing is the convergence of a number of different efforts here. Taking the manufacturer of our test kits in-house entirely, along with the manufacturer of our devices, means that the company has synergies from being vertically integrated. We have the ability to scale the business and to benefit from the economics of growing that business at scale. It means that we are strategically really well placed as an integrated platform around the technology.

In other words, we're controlling both these important drugs used for fluid management, now GFR, in addition to blood volume. And we have the leading technology around the most accurate and effective way to measure this. So, we're very excited about how this folds in. And the timing, we feel, is quite auspicious in relation to the launch of our next-generation analyzers, which, as I've said, we anticipate will have substantially more rapid and more comprehensive uptake. So, with that having been covered, I would like to turn to the questions. I would just like to say one final note. As I noted in our shareholder letter, we were sad to note the passing of Mr. Jim Lombard. He was a director of the company for many years. He served on the board for two decades. And he passed away last October.

He was a smart, dedicated, and very loyal director. We extend our condolences to his family and appreciate the service that he gave over many years to the company. So, with that being said, again, you can type questions you might have into the Q&A on the button that's at the bottom of the screen that you have. And I'll start to now read some of the questions. I received some from some investors who submitted them before the meeting. The first question was received was, "How do we anticipate the revenue being generated from the purchased assets related to Iso-Tex, the pricing of it, cash or equity, etc.?" The revenue that we anticipate from the Glofil product should serve in and of itself to pay almost entirely for the acquisition of the two products themselves.

In addition, the margin improvement from the bottom line will help us to fund the acquisition as well. So, we're going to be seeing probably a build-out of the Glofil product that will ramp up once we take on production of it, etc. I think that it's a product that probably has the potential to be substantially larger than it is right now. Because Iso-Tex currently has no salespeople and no marketing effort behind the product. And it is capable of generating about seven figures of revenue a year with its current build-out, which means it's not much of a platform. So, I think that this could be something that would be quite accretive to us. Another question around that was, "Will we be marketing this through third parties? And will we be able to sell this through distributors?" That's an excellent question. We're going to have to explore that.

Certainly, Glofil is a product that has a lot of uses, including apparently in the pediatric market. And we're going to explore more about that to see how we can improve the footprint of this. Let's see. Skipping to the next question. Let's see. "Will Daxor be the sole source provider for all of these products that are being acquired? And can we discuss the competitive landscape?" So, Daxor has the only FDA-cleared product that measures blood volume directly, along with the associated patient norms. And so, we've been continuing to increase our lead there for measuring glomerular filtration rate. I believe that there are one or two other products that exist in that space. But we, from our due diligence, have ascertained that Glofil is not only the most accurate of them, but it also might be the most convenient for people to obtain.

So, we'll update the shareholders more as we become more familiar with all of the opportunity around this. But we think that it's well positioned within the competitive landscape, especially for cross-selling, as we discussed earlier. The question was also given, "What costs will be incurred over the next 6-9 months to bring this capability in-house and additional SG&A?" So, again, we'll be able to manufacture both Glofil, Megatope, and Volumex in-house with our existing facility. The company judiciously built out a world-class facility about 10 years ago. We've been really improving it ever since. So, we've already made the capital investments that are required in order to bring these products up to speed. We will be adding a few headcount in order to make the manufacturing possible. But that cost will be more than offset from the savings of not buying it from a third party.

So, we think that it's going to be really quite helpful. Another question that I received is, "Does this product contain a radioactive component? How does that fit into our strategy around having a so-called non-isotopic tracer?" Glofil is a very mild radioisotope. There are advantages to that in the sense that Glofil is a product that also has reimbursement in place, which is quite important, just as our blood volume product does. So, it is a well-understood and reimbursed product. So, that's a positive. Daxor continues to move forward with our non-isotopic strategy. We've received last year funding from the National Institutes of Health Catalyze Program, which has funded for a lot of the testing and the development of our tracer system. And we've been working hard on this so-called fluorescent marker in our labs as proprietary. So, we're excited about the progress that we're making there.

And we're committed to developing and bringing to market a number of different technologies to solve this crucial problem in medicine. Let's see. Other questions. "Will we become a reporting company?" This is a question that I get a lot. And it's something that I talk about a lot. So, we've been lowering the portfolio value through judicious sales over the last year. We continue to. You can see the N-CSR to see some of the details of that. The company has been a 1934 Act reporting company up until 2011. It was not our choice to become a 1940 Act company. We have been in touch with the SEC around this issue. It is something that our attorneys have regularly been talking to the SEC about. We continue to hope to make the transition back to a so-called 1934 Act reporting company. We have been increasing our revenue.

And we do feel that we should qualify for that designation. Again, this is something that's up to the regulator, not up to us. But we're going to continue to be engaging with them on this. Next question from this investor was, "If we get FDA approval on our next-generation device, will the revenue exceed $10 million a year, etc.?" Well, let's talk about those numbers. We have not released pricing yet for the next-generation analyzer. We do intend to switch over towards a so-called per-use model for the test. Our ezBVA Lab right now is priced at $965 per test. So, in order to understand, you know, simple math around there, you know, 10,000 tests a year would obviously translate to about, you know, $9.65 million worth of revenue. And that's just obviously from our test kits.

I think that the growing confidence around management, around our breaking even and turning a profit within 12 months, is really driven by this substantial uptake that we're seeing. What makes it difficult for the company around a specific revenue forecast or number is that we just don't know yet what the approval date or timeline will be with our next-generation system. I do feel that once we have visibility that way, we're going to be able to make a better presentation of both the cadence of the business and the forecast for when that happens. We are, though, feeling extremely excited about the Q4 of last year and the start of this year. As I mentioned earlier, you know, we saw a rise of 32.9% in our test kits between the first half of 2023 and the second half of 2023.

That's accelerated to over 95% in the first two months of this year. Our business is really rapidly growing. The revenue associated with it is growing as well. We're very, very careful as a company to invest and grow. We're not interested in just growing top-line revenue and at the expense of increasing losses. Actually, just the opposite. We're growing revenue substantially and narrowing the losses so as to get to break-even and profitability. Okay. Let's see. Getting in here. Sorry. I received a question. "Why did the seller want to sell the company that?" Okay. Iso-Tex Pharmaceuticals is not selling their company to us. They are selling the products that they manufacture to us. It's an important distinction. This was an opportunistic moment for us to acquire it. Iso-Tex Pharmaceuticals has been in business since 1975.

There was a generational transfer associated with the company. And so, Daxor was a natural acquirer. So, we really took advantage of the timing of their own strategy, their own desire in terms of their arc of developing their business. This was a very good time for us to make this offer to them. And after some negotiation around the terms, we were able to come to something that works for everybody. Next question. And again, I apologize. We have received a really huge number of questions, which is great. I'm just trying to sort through them and get to them and get to them all. Let's see. Next question. There's a question. "How much cash does the company have on hand? What does this mean for the future?" Again, I refer you to the NCSR to see a listing of our audited financial statements.

That's what is accurate and updated as of the 31st of last year. Let's see. "What is the cash burn rate of the company? What do we anticipate?" So, again, this is something that's very interesting. We're seeing that the revenues have been climbing substantially. We anticipate that they're going to continue to climb now at an even greater rate. So, the cash burn of the company is something that has been shrinking quite a bit. And we anticipate, as I said earlier, getting to a place of break-even and profitability within 12 months. Depending upon the timing of what the FDA has to offer us and looking at the pipeline of customers and systems that we have, that number could be sooner. I don't want to speculate on exactly when. It's very, very hard to forecast these things. You know, we've been seeing an increasing number of sales.

Of course, the revenue associated with every one of those sales is going up. As I said, we just increased our prices by 20%. And the absolute number of sales is going up a lot too. So, these are all the kind of things that I want to see happening. Let's see. Okay. Very detailed set of questions. Let's see. "Has the kit revenue rate increased because of new accounts or because of increased utilization from existing customers?" We've seen an increase in the utilization rates from increasing customers. So, for example, we've seen, you know, certain physicians increase their utilization due to our outreach because of initiatives around customer education, grand rounds, those sorts of things. But we've also been spreading more within a hospital system. In other words, getting other clinicians to utilize the test and make it part of their centered on their care.

And we've also been adding customers and new accounts as well too. So, it's really a combination of both of those things. Another question was, "I'm interested to learn what milestones Daxor has to do to complete to land an additional $2.5 million of DoD funding?" The answer is, we don't have to do any more additional work on that. We're anticipating receiving some news around those contracts in the next 4-8 weeks. And we've done a substantial number of these contracts in the past with the DoD. It's been an honor to work with them. And we'll update shareholders as soon as we know more around that. Let's see. "How much more does the quarterly revenue run rate have to increase for you to reach break-even?" So, and how much of this is assumed based upon the FDA approval of the new device?

So, again, our forecast of breaking even within that timeframe, our anticipation around that, is based upon the increased utilization rate that we're seeing with the existing systems. That's a BVA-100, along with the ezBVA Lab and anticipation around being the recipient of certain contracts and grants as well. But it's not predicated upon a specific approval date of the new FDA system that's under review right now, which is a so-called next-generation BVA system. Were we to receive that approval sooner rather than later, then I would think that that would help us to accelerate that timeline of break-even and profitability. So, I think it's going to be quite important for us. Let's see. A question from an. "What is the reason that Daxor is involved in investing in stocks and financial vehicles?

“Wouldn't it be better to focus on the BVA business?” We are focused actually almost entirely on our operating business. The background for investors who aren't aware is that the company has a long history of being in the lab services business. We were also a very profitable company. Over those years, we had invested our retained earnings into a series of interest rate-bearing securities. The SEC determined that they wanted investors to have more visibility into those investments. That's why the company was then asked to file under 1940 Act status. One of the things that's interesting for people who follow the company, we've been a publicly traded company since, I believe, 1971. We went public with 5 million shares. We actually have a lower share count now than when we went public over 50 years ago.

That's because the company over the years was not only profitable, we engaged in a lot of share buybacks over that time period. We've been very, very selective about raising capital in those intervening years. 1986 was one of the last time that we raised money between going public. 1986 was the next time that we raised money. Then, after 1986, the next time that we raised money was in 2020. So, management is really intensely focused on creating shareholder value. We have raised money in order to fund the development of our next-generation systems, all of the IP work, all of the different things that you've been hearing about on this call. But we still have a very, very clean cap table. We don't have any warrants or derivatives outstanding. Management is really focused on building the company in a very shareholder-friendly way. Let's see.

What is the U.S. Army waiting for to purchase the newest BVA?" So, the United States Army generally will only purchase FDA-approved products for its use, either with the military or within the VA system. We have blood volume analyzers in use in the Veterans Administration system right now. They're our current BVA-100 unit. As soon as the next-generation system is available with a proper FDA clearance, then that would be something that they could consider to use. But I want to be clear with people that the largest opportunity, and it is a really substantial opportunity, just look at critical care, things like sepsis with several million patients a year alone. And fluid management is at the center of that care. The largest opportunity for us is not necessarily in military medicine per se, although that is an opportunity. Really in civilian care.

That's really a very substantial market for us to address. Somebody also asked, "Are there any research coverage prospects? Will be that dependent on reclassified listing?" No, actually, Daxor is covered by analysts. They do issue independent research reports right now. I suppose you should be in touch with our investor relations people. They can point you in the right way. But there is coverage by, I believe, the investment bank Maxim Group, as well as Ascendiant Capital Markets, among others. So, there are companies that are covering our stock. Let's see. Here. "Oh, are you surprised at seeing this increase in revenue in the first two months of 2024? Considering the next-gen BVA commercialization, what do you attribute this to?" Really, again, we attribute the growth that we've been seeing to the fact that there has been this convergence of awareness of the product among key opinion leaders.

There's been really exciting clinical outcomes showing the intense need and the benefit of utilizing blood volume analysis and the need of customers to solve this problem. So, just to review for a second, studies have come out showing that you can cut the length of stay for a heart failure patient, for example, by 2.5 days when they receive our test at the beginning of their hospital stay. That translates into a savings of thousands and thousands of dollars around the cost of care of that kind of patient. Now, why does that work? Well, if you start by diagnosing what's wrong with the patient from the beginning, the treatment is optimized, the care is more effective, they get out of the hospital sooner, they're much less likely to die, and they're much less likely to readmit. This is a huge problem across the entire healthcare system.

In other words, value-based care is really at the centerpiece of everything that's going on in American medicine. It's something that wasn't true 10 years ago as much, but now it really is. So, when we go to hospital administrators, we talk to service line directors. We say, "What are you focused on? What do you care about?" They all say, "We're really interested in understanding how to improve the health economics of treating these patients more effectively." Daxor has an inexpensive solution to a very costly problem that they're all really focused on. And our messaging has become very clean and very clear. We have a really strong sales and marketing team of over a dozen people that are focused on that. And I think that the word is getting out. And the customers are now telling other customers about how they've been getting really good results with it.

I think that that's just, you know, adding to the groundswell that is increasing the awareness and desire for the product. Let's see. Questions that we have else? Moment. All right. So, the last question, you know, that I'll seek to address a little bit is around, you know, the cadence of the business and giving people a sense of, you know, how to think about it. I want to emphasize that all the numbers that I've given around changes in revenue and changes in sales, etc., are unaudited numbers. Because, again, the audited numbers that we have are from the filings that you can find in the N-CSR. Numbers around our operating company, because we file consolidated statements, are unaudited. So, I just want to make sure that investors are aware of that.

In terms of understanding where we're at, you know, this is something where I think that the company is clearly focused on wanting to penetrate the market in a substantial way. When we think about hospital sales and what hospitals are capable of doing, typical hospital, you know, might start out at doing, you know, 100, 200, 300 tests a year. 500-1,000 starts to look like really ample penetration. If you're talking about one indication like heart failure you had in critical care and cardiorenal concepts, etc., you start to realize that a typical hospital could have as much as 1,500-2,000 tests a year total addressable market. That's why our next-generation systems are really important, because of the speed and utility that they have. At Daxor, what we're really aiming to do is to really scale up into this business in a really profound way.

At this point, you know, the numbers start to look very compelling. As I said earlier, you start to look at what our revenue numbers look like as we achieve, you know, a marker of 10,000 tests. You look at the ability of our facility to produce 20x that number of doses. And you start to get a feeling for what the total revenues with our existing footprint that we could scale into. We'll be looking to step up into that and giving more clarity around that as we achieve our milestones. With that, I'm going to thank you for your time and attention and all of your thoughtful questions. And I'll turn it back over to Bob if there's anything else that we need to say before closing. Bob, you're on mute.

Robert Michel (CFO)

Yep. So, I would just like to thank everybody for joining the call.

As Michael said, as we reach these milestones, we will be making announcements for the path forward. It's this very exciting time to be at Daxor and to be an investor at Daxor. Thank you very much for your support.