Earnings Call: H2 2021

May 25, 2022

Good afternoon, ladies and gentlemen, and welcome to the Verici Dx PLC final results investor presentation. Throughout this recorded presentation, investors will be in listen-only mode. Questions are encouraged and can be submitted at any time via the Q&A tab that is just situated in the right-hand corner of your screen. Please just simply type in your questions and press send. The company may not be in a position to answer every question it receives during the meeting itself. However, the company will review all of the questions submitted today and publish responses where it is appropriate to do so. These will be available via your Investor Meet Company dashboard, and we will notify you by email when these are ready for your review. Before we begin, I would like to submit the following poll, and if you could give that your kind attention, I am sure the company would be most grateful. I would now like to hand you over to CEO, Sara Barrington, and CFO, David Anderson. Good afternoon. Good afternoon, everybody, and thank you for your time. I just want to emphasize that the focus of this presentation are the financial results. We will touch upon the clinical trial results, but in brief. Just to let everybody know that details will follow on those, after we have presented to the clinical community in early June. Those conference rules do require that we do not publish details ahead of time. So obviously, we gave an RNS on general terms, and then post that conference, we will host another meeting to discuss those in detail. Okay. Financial results for the end of last year. Let's get cracking. Obviously, this is our disclaimer language. But I thought it would be helpful just to remind everybody about who we are, and where we are going with all of our technology. So here is our vision slide. I have presented this before. For those of you who have seen it before, I apologize for repetition. For those that have not, I hope you find this useful. When we went out back in 2020 to the markets, we talked about two products, a pre-transplant kidney diagnostic product called Clarava, and an early stage Tutivia. Fairly quickly, we were able to license in the technology from Mount Sinai to add to this end-to-end view on individual tests called Protega. That is for late-stage damage. Although we are launching as three individual tests covering the time continuum, pre-transplant, early stage, late stage, one of the things that we have highlighted in previous presentations is we feel that these are very informative to one another. Being able to use the same patient population, the same clinical trial, was very advantageous for future studies and publications linking the three. We'll commercially launch as three individual tests, but fairly quickly, where we see the power of this is in an end-to-end solution, where each test informs another and the integrator becomes part of what we call the clinician's platform. As we look at this going forward, we're very conscious that there will be other technologies that will be very beneficial to answer the kind of gnarly questions the clinicians have facing them in making their determinations and judgments in patient care, and those would probably be either in-house discoveries or in-licensing opportunities. Obviously, these days, we're very conscious that life science is not just about biomarkers, but in fact about the data as well. You can see in the background, we understand that as we Our techniques are based on sequencing. We sequence the entire transcriptome. We have an awful lot of information to mine in the future, both ourselves and in collaboration with others. We recognize that it was not just a biomarker company, but a data company, too. To that end, at the beginning of this year, we announced our work with Illumina, and that continues, but it enables us to provide a very structured environment. I liken it to, at the moment, a company can create an environment that's a bit like Dropbox, with a lot of very tidy files. Taking it to that level where you're creating a very productive space for collaborations with other companies, that's where we've moved to with the ICA environment with Illumina. As we go forward, that will build out. Then, obviously, as we look further down the line, although we're very focused on kidney transplants at the moment, the obvious question is, does this apply to other organs? Further still will be autoimmune diseases. The RNA signature is very much based on biological systems and the immune system being one of the largest. So that's just a reminder of kind of the vision of the company. I thought it would also be useful to just throw up, as you know, in our last presentation when we were fundraising, we put up these timescales, and to just give a quick update on where we are with them. We are to time. We have published the results of the Tutivia in general terms. That will be presented at ATC, so we're doing that, and Clarava is being processed right now. That will lead to the pricing discussions with CMS that's being submitted in June, with an answer back at the end of the year. So we're on track with that. We'll be pushing forward with our Tutivia launch, with the time on that. We'll be building out our commercial team, and looking forward to doing what we call the commercial proof of concept, effectively like a soft launch, trying to get it into real-life clinicians' hands and practices so that they can really see how it works for themselves. As we know, the healthcare community believes their peers more than the company. So, that's a very important strategy in terms of rolling out a product into that area, gaining the trust. So everything else on here is to time. Let's just talk very quickly about where we were with the clinical trials. We did put out an RNS saying we will take an extra month to increase the numbers. We had had some delays on the European side. I can tell you that it was worth the wait. We had hit our endpoints of a number of about 107. By waiting to be better represented from Europe, that enabled us to have an overall trial size of 156. That is actually one of the largest in the industry, and was well worth it. It did not slow us down. That is the point we made in the RNS, is we actually had the scope and the time because realistically, we will still be launching at that conference in early June just as planned. The good news for us is, I think one of the competitive advantages to the way that we did this trial is to be able to say to the clinician, "We have designed this in a way that it will reflect what you are going to see in your own clinic." It is all comers. It is very independent and multi-centered across all the protocols. It also covered all types of rejection. The antibody T-cell, borderline, subclinical. Everything that they are going to experience in their clinic was covered by our trial. Also it was performed in a COVID environment. Again, this is part of our new normal. To be able to reflect a clinical trial result within that time, I think is highly significant for the clinical community. So high-performing. We are very satisfied by those results. Looking forward to pushing that forward during the rest of this year. Next steps. Always important to know. We will be presenting that data, as I said, at ATC. We will be going to the pricing committee. We will be submitting the file for the local coverage determination criteria, and we will be expanding that commercial team. Now we are the other side of R&D. Now we are on our commercial track and we are on time. Clarava, we are still processing that. There should be an RNS coming out shortly once we have got the headline figures on that. Again, the same idea of present the data, go to the pricing committee. This one, obviously, because it is novel, then we have to do more studies in terms of utility. There is no local coverage determination for this. This is more the traditional path. We expect to be set up for that by the end of the year. David, over to you. Thank you, Sara. Good afternoon, everybody. The year to December 2021 ended with cash at $10.3 million. In March, you will all be aware that we raised gross proceeds of £10 million, approximately $30 million. That really takes us out to continue the development of Protega, build our expanded laboratory in Tennessee, the commercialization of Clarava and Tutivia. There are other opportunities which are out there which we will look at speculatively, build on the data assets that Sara referenced earlier, and also, obviously, to continue to fund working capital. That cash raise together with current resources takes us out to late 2023 currently. Just going through the primary statements themselves. The cash flow statement. Net cash used of $7.4 million. That is $6.3 million on operating activities. That is lower than the EBITDA loss mainly because of site accruals. We accrue for the cost being incurred by the sites in the clinical trials, which they then invoice us later. That accounts for that delta. In terms of investing activities, we have spent just over $600,000 on capital equipment in the period and another 350 odd thousand on patents and licenses in the period. In terms of the income statement, adjusted EBITDA, that is adjusted for the share-based payment charge, which is obviously non-cash, is a loss of $7.1 million, very much in line with expectations. Largest item expenditure, two areas, wages, $1.9 million and R&D cost of $2.8 million. In terms of wages, average headcount for the year was eight. We are now up to a team of 12. In terms of the balance sheet, that intangible asset, the initial license that we acquired back in May of 2020, was $1.5 million. That has been augmented by the spend to date on patents and other licenses. Receivables are mainly prepayments, and that payables number is largely inflated by accruals, the biggest item of that being the site accruals I referred to earlier. Thank you, Sarah. That concludes our presentation. Sarah, David, that is great, and thank you very much indeed for your presentation this afternoon. Ladies and gentlemen, please do continue to submit your questions just using the Q&A tab that is situated on the right-hand corner of your screen. Just while Sarah and David take a few moments to review those questions submitted already, I would like to remind you that a recording of this presentation, along with a copy of the slides and the published Q&A, can be accessed via your investor dashboard. David, Sarah, as you can see, we have received a number of questions throughout today's presentation, and thank you to all the investors for submitting their questions. If I could please just hand back to you to run through that Q&A tab and where appropriate to do so. If you could just please read out the questions and give your response, and then I'll pick up from you at the end. Thank you. Thank you. The first question is, "Did you approach Illumina, or did they approach you, and what is the potential of this collaboration?" The choice was made by us to select the ICA for our pipeline product. It was in development. This was back in early 2021. We did make the choice that this was a market leader. They were putting a lot of support by that, so we would take the chance and work with a product that was in development. Because we made that choice, we're actually one of the first clinical customers that they have. When they launched it, they asked if we could be a flagship product for us, which, of course, we were more than happy to do. We've had quite a lot of support from the Illumina marketing team, as well as the product team. They asked us to present with them at a key conference, which we did this year. They are interested in taking this further. We are in discussions with them on several fronts, none of which have reached a full conclusion apart from that we are committed to working within the ICA environment and building out from there. If you think about it, we have two types of products. One is the data, which is more of a research tool, and the other one is just being able to process our clinical work through that, and that's already up and running. They are interested in we working on the research area. So, what's the potential of this collaboration? I think we'll continue to build with them. As I said, we have a lot of interest from them. It serves their strategy as well as ours. I always find that very reassuring with a big company, that if you're in their area of focus, you do get the right amount of attention and development work. So far, that's been very productive. So, let me know if you wanted any more from that answer. "How is the launch of Tutivia structured with Illumina?" I'm not sure that I fully understand this question, but let me do my best to answer that. Tutivia will be launched by us as an LDT, and by so doing, uses, obviously, the Illumina tools, the ICA environment, et cetera. But it's very much our commercial launch and very much our efforts to do that. Will there be more from a collaboration in the future? Quite possibly. There is some interest in that, but I would say the launch of Tutivia is a Verici endeavor. Next question. "You have Clarava, Tutivia, and Protega. What is the primary further developments of new products for the pipeline?" Clarava and Tutivia have obviously come out of the initial clinical trials. Protega is still in it, so it is still in development. Then there is the development of the integration of 3 individual products as an integrated solution. That is one plan. Going forward, I am interested in looking at other transplant areas. But we would have to bring on additional members of the team to do that. At the moment, with the focus on revenues and cash management, we will have to take a view on that and see how the launch goes for the first flagship products and see how confident we are in that diversion of cash resources to R&D. But that would be the order that I would look at it. "Are you surprised that the share price is so far below the recent placing price?" Am I surprised? Unfortunately, no, looking at the general market conditions. I think that I read a stat somewhere that something like 200 life science companies are actually trading at a discount to cash. So, we are not in that situation. Was I disappointed that on the back of really good news, we did not have what you would expect? But these are not unusual times. Unfortunately, there are times when you cannot fight the market, and I am seeing trends that are more market-based rather than individual company-based. So I would say that I was disappointed. We will continue to just head down, execute, and when the market forces weaken and the company performance comes back into play into the share price, then I hope to see it being reflected there. So at the moment, my job is really head down and execute and keep hitting those milestones. "How important is the relationship with Mount Sinai?" So obviously that is where our original technology came from. But we are not actually doing any of our clinical work with them. So it is great to have them as the inventor, source, and as a major investor, apologies. But in terms of the clinical rollout, they are not front and center. I always find Mount Sinai to be helpful and certainly having Erik on our board has been very helpful. But clinically, the relationship is not that important at the moment. "Have you seen any developments in the competitive environment recently?" Yes, I have. So, obviously for Clarava, there are no competitors. For Tutivia, there are a number. We have seen quite a lot of movement on the urine-based side. Bio-Techne did a distribution agreement with Thermo Fisher, who have identified that they do need to do further studies, by all accounts, and so that one is still in development. Then we have heard that NephroSant is not pursuing the same commercial path that we anticipated. I am still waiting to verify that. So, that would be all the activity in the urine-based testing side. On the other side, we have heard that the major companies who are also struggling with focus and share price and markets areas may or may not be focusing so much on the transplant. I see movements, but nothing particularly significant in terms of our rollout. "Are any of the goings on at the FDA and general unsettlement likely to have any effect on your planned launches?" No, very simply. We have said right from the get-go. During COVID, I was involved with a COVID-based product that needed to work with the FDA and saw firsthand how under pressure they were and how much burnout there was, and that was likely to go on for a number of years. In fact, they actually published on that. We made the choice not to go to FDA. We have run the clinical trial up to FDA standards, so if we ever change our mind in the future, we have a trial that we can use. We do not need to go to the FDA, and we are launching as an LDT like everybody else in the industry. What that means is we do not distill down to a kit and send that out to hospitals. What we do is we ask for the blood to be sent to us, and we process it in our labs and send them back the result. That is the main difference. The FDA environment is just something I keep an eye on. I would love to go there sometime in the future, but if we get snarled up right now, it would slow down our commercial launch, so I have got no interest in that, and we have never tried to pursue that to date. Go back to my very simple answer of no. I think that was the last question. Are there any other questions? Absolutely. Sarah, David, thank you very much indeed for taking the time to address all of those questions that came in from investors. If there are any further questions submitted today, we will make these available to you immediately after the presentation has ended for your review. Ladies and gentlemen, we will publish all those responses where it is appropriate to do so on the Investor Meet Company platform. Sarah, perhaps while redirecting investors to provide you their feedback, which I know is particularly important to yourself and the company, if I could just ask you for a few closing comments to wrap up with, that would be great. Yes. Obviously, this is one of our probably quicker investor presentations, given its focus more on the audited results. One of the things we are very excited about is meeting again very shortly, to discuss in more detail our products and our commercial launches. At the moment, hopefully you can see by throwing up the timeline that we are very focused on that timeline and currently are to time for that. That is great. Sarah, David, thank you very much indeed for taking the time to update investors today. Could I please ask investors not to close this session as you will now be automatically redirected for the opportunity to provide your feedback in order that the management team can better understand your views and expectations. This will only take a few moments to complete, but I am sure will be greatly valued by the company. On behalf of the management team of Verici Dx PLC, we would like to thank you for attending today's presentation. That now concludes today's session, so good afternoon to you all. Thank you very much. Bye.