Ronnie Morris – Chief Executive Officer David Miller – Chief Financial Officer

Joshua Horowitz – Equity Group Anthony Marchese – TriPoint Global Equities

Ladies and gentlemen, greetings and welcome to the Champions Oncology Third Quarter Fiscal Year 2018 Earnings Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] It is now my pleasure to introduce your host, Ronnie Morris. Thank you, you may begin.

Good afternoon. Joining me today is David Miller, our Chief Financial Officer. Thank you for joining us for our quarterly earnings call. Before I begin, I will remind you that we will make forward-looking statements during today’s call and that actual results could differ materially from what is described in those statements. Additional information on factors that could cause results to differ is available in our Form 10-Q and Form 10-K. A reconciliation of non-GAAP financial measures that may be discussed during the call to GAAP financial measures is available in the earnings release. This was another strong quarter for Champions Oncology. We continue to demonstrate progress in several key areas, including growing our market presence, expanding our margin, and taking advantage of the leverage in our business model. This is the third consecutive quarter we’re reporting revenue with excess of $5 million. This represents an important stage in our development as we’re achieving the goals and projections we’ve laid out for the company. We’re fulfilling our commitment of consist growth giving some positive results, controlling costs, and most importantly reaching operational profitability. We remain confident in our greater than 20% year-over-year revenue growth for fiscal year 2018, along with optimism that catalyst on place for our continued growth into next year. This optimism is driven by several key factors. First of all, R&D – oncology R&D budgets are expanding and we are positioned well to take advantage of the market opportunity. Secondly, we have invested heavily and strategically with the unique and well characterized tumor bank supporting the opportunity for the cognizable companies and why selection of tumors is available for testing. We believe that unique tumor bank will continue to give us a competitive advantage in the marketplace. Thirdly, our reputation for operational excellence continues to drive business in all direction. Additionally, one of the things we take pride which is that we are not nearly muted service provider, but rather as a scientific leader which result in deep consultative and opportunistic relationships. There are several other opportunities which we have spoken about in the past that adds core excitement about our future revenue growth potential. As mentioned, oncology R&D budgets are expanding with many of those dollars being directed towards immuno-oncology therapies. While we signed and completed several millions of dollars in the immuno-oncology studies to-date, we’re continuing to invest and expanding and tailoring our IO effort to improve and expand the product offering and interest within the pharmaceutical companies. Also as discussed in our previous calls, co-clinical trials involved partnering with pharma – PDX models from patients enrolled in the clinical trial. These models provide value by enabling – we had multiple patient responses to the drug and not just single response available from the individual patient on the clinical trial. We have currently booked approximately $11 million year-to-date co-clinical works, while recognizing revenue of $2 million and our service discussion and additional opportunities. We continue to expand our model build program. As a reminder, this program evolves using our interceptive global network of medical and academic institution to find unique tumor types and specific interest to pharma companies and that builds PDX models before that. We signed our first deal with AstraZeneca several quarters ago and since then several more with other pharma companies. It’s these types of opportunities that validate our claim that we are indeed unique providers and leaders in the PDX industry. All in all we’re pleased with the direction of our top line and non-GAAP profitability and where they are headed. Our financial results for the first nine months of fiscal year 2018, we enforced our confidence in reiterating our outlook for strong annual revenue growth and operational profitability for fiscal year 2018. I will now turn the call over to David Miller for the financial results.

Thanks, Ronnie. Our full results on Form 10-Q will be filed with the SEC on or before March 19. Revenue for the third quarter was $5.1 million, an increase of 42.6% over the prior year, and our third consecutive quarter of revenue in excess of $5 million. This increase was driven primarily by a 50% increase in revenue in our TOS segment. Sustained growth in our business pipeline is enabling year-over-year growth in our quarterly revenue. By business segment, TOS revenue was $4.8 million for the three months ended January 31, 2018, a 50% increase compared to the $3.2 million in the third quarter of fiscal 2017. As mentioned on our second quarter call, we expected the year-over-year revenue growth rate in our TOS business segment to return to higher level than the 22% reported in the second quarter. TOS gross margin was 53.4% for the third quarter, compared to 35.2% in the year ago period. Our gross margins may fluctuate quarter-to-quarter, given the manner in which revenue and expenses are recognized in accordance with GAAP. However, we expect that over time as our business continues to grow, quarterly fluctuations and gross margin will become less fanatic. We also expect gross margins to trend higher as we leverage our growing revenue base against the fixed cost component of costs of sales. And we realize variable cost savings from operating in our new lab facility. Revenue in our POS business segment was $259,000 for the third quarter of fiscal 2018, compared to $347,000 in the same period last year. This continued decline was expected as we shift our efforts and resources to our TOS business. POS gross margin was 15.1% for the third quarter of fiscal 2018, compared to 8.4% in the same period last year. Research and development expense was 1,050,000 for the three months ended January 31, 2018 compared to $1 million for the same period last year, an increase of 4.7%. Sales and marketing expense was $627,000 for the three months ended January 31, 2018 compared to $726,000 in the same period of last year. The decrease in third quarter sales and marketing is mainly a result of the reduction of resources in POS division. General and administrative expense was $1 million for the three months ended January 31, 2018 compared to $836,000 for the same period of last year. The increase in G&A is primarily a result of some IT cost and recruiting fees as we expand our sales force to capture what we see as a growing market opportunity. Total operating expenses were $5.1 million in the third quarter of fiscal 2018 compared to $5 million in the same period last year, an increase of 3.7%. As you know, we focus on operating results excluding non-cash based stock compensation and depreciation expenses combined our cost of sales and operating expenses excluding stock-based comp and depreciation were $4.9 million for the third quarter fiscal 2018 compared to $4.7 million in the same period last year. Representing a modest 4.5% increase. The majority of this increase was generated by an increase in POS cost of sales resulting from an increase in workflow. As such our total cash-based expenses are increasing at a low single digit percentage growth rate. We continue to expect our total cash operating expenses for fiscal year 2018 to increase in the low single digit which we far outpace – our expectations for revenue growth. On a non-GAAP or cash basis we reported positive income from operations of $183,000 similar to our previous second quarter results when we reported approximately $200,000 this compares favorably to a loss from operations on a cash basis of $1.1 million in the third quarter of fiscal 2018 and 2017. Now let me turn to cash. Net cash used in operating activities was $1.2 million for the first nine months of fiscal 2018 compared to $3.2 million for the first nine months of fiscal 2017, an improvement of approximately $2 million. More importantly, at the end of our first quarter 2018 we had approximately $430,000 of cash on the balance sheet. Resulting from a cash burn rate for the quarter of $2.9 million due to our investment in fixed assets related to our new lab along with other balance sheet accounts negatively impacting cash flow in the normal course of business. However, as we guided our cash position has increased in two sequential quarters increasing $293,000 last quarter and $424,000 in this quarter, rising to a balance above $1 million. Although our cash position can fluctuate from quarter to quarter primarily as a result of a timing of working capital, we remain confident that our cash on hand is sufficient to fund our operating activities and to continuously increase overtime. As a reminder, we have put in place $1.5 million line of credit that we grow – that can be grown up on. We have not, and [indiscernible] utilize the line of credit for operating expenses that has put it in place to protect against any short-term fluctuations in our working capital that may arise in the normal course of business. In summary, the third quarter was marked by continued positive financial results and old momentum in the execution of our growth plan. We are reiterating our guidance of at least 20% revenue growth for the full fiscal year 2018 as we continue to move towards achieving sustained quarterly profitability. And next quarter is our fiscal 2018 year end, our next call will be at the end of July. We are looking forward to speaking with you then and providing some initial positive guidance for fiscal 2019. We now like to open the call for your questions.

Thank you. [Operator Instructions] Our first question comes from the line of Joshua Horowitz from Equity Group. Please go ahead.

Hi. Sorry, it’s actually from Palm Global Small Cap Fund. I have a question – good quarter, first of all congrats. I’m looking at the revenue cadence here. It’s look it’s your third $5 million quarter in a row. This would appear to be a lot smoother than last year. What accounts for that difference? How do I account for the lumpiness last year compared to this year?

Do you want to take that David? Go ahead.

Sure. So I think that just a few things, some of it is just in terms of the business that we’ve signed, externally signed, I want to say consistent level of business in prior quarters more so than previously. In addition to just operational efficiencies, as we grow and as we – even as much as we’re experts, we want activities that – we’re able to better I guess project and guide where the revenue will fall out and that plays a role. And I think in generally as grow I think we will see exact lumpiness moving forward even as the revenue continues.

Thank you. So if I look at this business, say, this last month you can do $5 million a quarter. What could the company earn at $20 million of revenue in earnings per share? And what does it earn at $25 million in revenue?

So if we were at that, if we were at $25 million in revenue [indiscernible] $1 million, I would say $1 million of cash flow for quarter. And certainly we can similar familiar results, but also we have expectation that would be a quick guided for what we can

Yes, I think it’s a general guide we’d like to give guidance that from this point forward which is the highly leveraged model, so that 70% of revenue from here forward will go to the bottom line stuff; to the bottom line. In the release, you reiterated that you don’t need capital to grow. And I think that’s – I appreciate that’s the common thought. What could you do with capital right now if you have it? I mean, are there companies you could acquire? Could you get growth faster?

Yes. So the answer to that is if we had capital there are some – there’s a lot of opportunities that have the Champions Oncology a lot of innovative approaches and programs that we want to do. And we would accelerate some of those if we had some extra capital as well there are some opportunities for acquisition that we currently can’t do both because we don’t have the cash and we don’t really have the equity value. So one of things holding us back as we mentioned before is the perception in our part at least that there is some mismatch in the value. And if you go out and do a raise in order to grow, we really don’t want to have – we don’t want to have an event which would give us that type of a dilution. So we feel we can still get a lot of those things just being a little more patient and continuing to grow and continuing to use potentially some of our operating cash flow positive proceeds to accelerate some of that growth. But there are certain programs – to answer your question, there are certain things that we would absolutely do if we had capital.

Okay, thank you.

Thank you. Our next question comes from the line of Anthony Marchese [TriPoint Global Equities]. Please go ahead.

Yes, hi, good afternoon. My understanding is that your largest competitor was bought out in the last three months. If so, what was the valuation and how does that compare to what you guys are trading at?

So Crown Bio was acquired approximately seven months ago. They are a little bit different than us that in a sense that they not just oncology base. Most of what they do is oncology based but they also have a division that also does endocrine and metabolic diseases. So, my understanding from the acquisition, I’m speaking to the people who involved was that the acquisition was primarily for the oncology assets and not for the metabolic assets. Having said that, my understanding as well with that the company was valued purely on a revenue basis and it was valued at a little over 5 times revenue.

Okay. So you are trading at about twice the revenue right now?

Correct.

All right. Great. Thank you.

Thank you. [Operator Instructions] Our next question comes from the line of Toni Kemen [ph]. Please go ahead.

All right. I wanted to ask a little bit about AstraZeneca and as that relationship is developing – how that relationship is developing. And then as the second part of that you mentioned that you are getting other companies to follow kind of in their footstep. So the second part of it is, are other companies sort of starting to understand the advantages that you can give them and if you can give some color around that.

Yes. So our relationship with AstraZeneca was built on – the idea that AstraZeneca has a lot of very innovative drug development pathways and ideas that really in order for them to understand and use PDX in the right way. They need a very specific patient population. Neither us nor any of our competitors have those type of patients. They are multiple resistant types of patients, patients who have been on multiple drugs and have developed a resistance to those drugs. So AstraZeneca in all of their drug development endeavors are really looking for very specific patients. The reason we – the reason AstraZeneca chose to work with us is primarily because we have a network and we work with a lot of academic groups around the world. So that was something that – it was hard for them to be able to do. But we were able to find those patients working with the oncologist, the academic medical centers around the world. Similarly there are other pharmaceutical companies that have special needs they want to study a special patient population. And they want to use PDX model to study that patient population. But they just can’t because they just don’t exist. So they too have come to us understanding our unique capabilities of having a network out there. And they have come to us to also help them find and build these types of models. So from our perspective this is a unique advantage that we have because we’ve spent many years developing the network, developing these relationships. And it seems to be an interesting – something that’s interesting also to the pharmaceutical companies.

Do you think in terms of being able to announce another contract with sort of a more key name like in Astra is that something that you believe might happen this year?

It’s tough to say, as I think the pharmaceutical companies don’t always want us to announce what they’re working on as a contract that we have. So it’s certainly possible. But more important to us is – obviously it’s important for us to be able to announce these things. But the most important thing for us to be able to continue to work with these pharma companies and get their business and develop models And have them sponsor the cost of the R&D.

So you’re getting the work that you want from the right type of companies regardless of advancement?

Correct.

Congratulations. It’s nice to see your company developing.

Thanks.

Thank you. Ladies and gentlemen, we have no further questions in queue at this time. I’d like to turn the floor back over to management for any closing comments.

I think we would just like to thank everybody for joining the call. We continue to be excited about our opportunity at Champions Oncology. And we look forward to the next quarterly call. Thanks and have a good evening.

Thank you, ladies and gentlemen. This does conclude the teleconference for today. You may now disconnect your lines at this time. Thank you for your participation and have a wonderful day.