You ready to get going, John? Yes, thank you. We're just seeing people coming through on the attendee list. Welcome everyone to the Atomo Diagnostics end of year results presentation, and we'll be looking in this presentation to go through the results for FY23, talk a little bit about where we find ourselves now in the 1st quarter of FY24, and review some of the priorities for the rest of this financial year. For those new to the business, just a quick summary of what we do. We're obviously headquartered in Sydney, with operations internationally and commercial networks extending globally, and most of our revenue is derived from, from export sales. We deliver best-in-class diagnostic test solutions, and we're very proud of the technology that we've commercialized. We now have customers across the globe.
We're looking to grow the customer base that utilizes our technology, as well as growing over the coming years, the amount of clinical test applications that use our product, whether we're the manufacturer or whether it's through an OEM partnership, we see a lot of opportunity in point-of-care testing, particularly at-home consumer testing. That really delivers for us two business units. One is the sale of finished products, where we are the listed manufacturer, like HIV and soon others in the market. Then beyond those finished products, we have an OEM services business, where we sell our devices to other diagnostics companies like, for example, Lumos Diagnostics, who have the FebriDx test commercialized on our platform. This slide really talks, I think, to where we're at in our, in our journey.
We are significantly de-risked as a business from a, from a product perspective and from an investment perspective. I just wanted to touch briefly on some of the key areas of risk that, that businesses generate when they, when they try to come to market, and talk a little bit about where we are with the management or mitigation of that risk. In terms of the product itself, we've developed a, a very new and novel solution to rapid testing, but it's now commercialized in more than 40 countries and successfully delivered to market for a range of different clinical applications. That risk is really being managed now.
In terms of revenue, our HIV once we strip out the one-off COVID business, we're seeing in our HIV business, increasing demand for self-testing, not just through OTC retail channels, but also, for the first time now, post-pandemic, a real willingness and acceptance from governments that, that self-testing is a way to reach untested populations. We're also seeing, through our OEM engagements, a willingness to utilize our devices for a range of applications. That revenue risk has been increasingly de-risked by us post the pandemic. In terms of market risk, we are seeing increased levels of adoption. I think this is probably the one risk that's changed the most post-pandemic. We're now seeing increased willingness for people to test at home for applications, and that really drives a market opportunity for us that didn't exist in outside of pregnancy before the pandemic.
I think that that market risk is, is not only diminishing, but is one of our main strengths, not just this emerging growth opportunity in consumer testing. Regulatory risk, we obviously wanted to address from the onset, and we went to market with a Class four HIV test, which is the highest regulatory approval the device can get. And we now have that across a number of markets. That de-risks the business significantly, and we're very pleased that our partner, Lumos, received a 510(k) approval for their device, their test on Pascal. That was the one remaining market that we didn't have a regulatory approval in, and I think that now completes a global regulatory network that we can point to for our own products and our OEM customers. That's very encouraging.
In terms of user acceptance, obviously for a new technology, user acceptance is key, particularly in consumer-focused products. We have an over 90% user preference rate across both professional and self-test users, and that's driven primarily by a very sizable reduction in errors when our device is used compared to a standard kit. That user acceptance, I think, is critically important for us to be able to demonstrate, particularly to larger companies who, who typically have an inertia to move to new technologies. I think that user acceptance is increasingly compelling. Obviously, businesses are always at risk of disruption. I think in many ways we are the disruption in this market. We've come into a market that had very little usability focus.
We've delivered a very well-engineered solution that addresses the human factor challenges with blood testing, we have a pretty robust IP portfolio granted across all key international markets that allows us to not only enter the market with disruption, but protect that market position with IP, know-how, and proprietary expertise. Then in terms of technology risk, we've partnered initially in the rapid test market using lateral flow, a very well-established technology, and we've now got over five million devices scaled up and supplied into market. We think that technology risk is manageable. That gives us a business that we think is significantly de-risked and ready for leverage on the upside.
In terms of the key achievements for 2023, we were able to re-engineer a number of supply agreements that allowed us to really take advantage of the opportunities we were seeing in HIV. We have nearly AUD 2 million take-or-pay contract that we entered into for the South African private sector market, and the first batch of that product is being dispatched in the very near future. We also significantly restructured our arrangements for Europe and entered into a partnership with Newfoundland Diagnostics, an emerging retail-focused go-to-market partner. They put in an order, initial purchase order, for nearly AUD 1 million worth of product.
Pleased to announce that the, the 1st batch of that product was delivered this month. They'll be using that to launch into a very large supermarket channel chain, and there'll be some upcoming announcements around that in the, in the next two weeks. We're very excited about that partnership. We expect to see further orders from them as they roll out into Europe. Very shortly, the 1st non-English language batch for them to support their launch in German-speaking markets in Europe. That really gives us a lot of comfort on the prospects for HIV over the medium term. We're expecting to see, you know, sizable sort of half on half growth in that channel. Our partners in OEM space are coming back to market after a bit of a hiatus when they focused on COVID.
We're now seeing NG Biotech back in the market. They're buying our cassettes for their blood-based pregnancy test markets. They're launched in the UK and France. They recently launched into Brazil. They're looking to close out deals for Southern Europe, so we're expecting to see some growth there. Obviously, the pregnancy test rights that we secured for Australia, New Zealand, and the US, Canada, will give us long-term upside in that market. The Australian submission, we'll talk a little bit later in the presentation, but that's now progressing with TGA, and we're very hopeful of approval in the coming months. The US Pre-Sub activities continue, and we'll be looking to meet with the FDA this year. In terms of point-of-care business, both NG and Lumos are reordering our Pascal devices, and we're seeing good demand there.
We're very obviously pleased with Lumos' 510(k) announcement on FebriDx . That not only gives us a larger addressable market, but it then capitalizes us and now promotes the platform in the US as a 510(k) route platform, and that significantly de-risks the opportunity for partners looking to seek access to our technology. In terms of the corporate activities over the year, Will's gonna talk us through those and, and then go into some of the results in a bit more detail.
Sure. Yeah, so thanks, John. Look, I think in the current environment, everyone's had quite a significant focus on their operating expenses. I think just to reiterate the business model here at Atomo, it's a platform business. Now that we have these platforms out in the market, we've installed the production and manufacturing capacity that we need to support growth. Our operating expenses should remain consistent, and indeed, over the course of 2023, have actually come down as we've been able to take some of those costs out once we reached that sort of steady state in terms of capital investment and in terms of those capital programs.
We took out nearly AUD 1.5 million in OpEx from our, our overall OpEx base during 2023, and we're continuing to, to focus on that and look at costs, further cost savings into FY24. I think that's been a significant achievement over the course of the year, whilst continuing to focus on key revenue generating activities and key growth activities. With that, we ended the year, roughly on our, on our target budget in terms of cash, around AUD 6.5 million. In addition to that, as most people are aware, we did do a capital raising post that, post that year-end cash balance, so we raised another AUD 2.25 million. That funding is now in, and so that's obviously not reflected in the year-end cash balance.
We decided to do that, as, as most people know, Lumos Diagnostics received the 510(k) approval. There was strong response in the market to that for Lumos and for Atomo. It flowed through to Atomo, it gave us an opportunity to raise some capital at, you know, at a reasonable price compared to some of our earlier trading, and top up that funding to really get after some of these growth initiatives that we're talking about for FY24. Just coming down to the results, here's a comparison between 2022 and 2023 in terms of the P&L. Obviously, the FY23 number is significantly lower when compared with FY22. I guess just to remind everyone, we did a significant amount of COVID business during FY22.
You know, we pivoted into that because that's where the market was. But we were reselling someone else's test, and it wasn't really leveraging the core Atomo IP, IP in the platform. What we're seeing now is obviously lower revenues, but much more higher quality revenue and sustainable revenue from customers that are using the Atomo platform and from our own tests on the Atomo platform. I think that's the key difference, and that sets us up for a nice platform as we move into FY 2024. I, I guess the other thing to remind people is that we actually did no OEM revenue in 2022 because of that everyone being focused on COVID, as John said. We're starting to see that come back with some consistent ordering from NG, some new ordering from, from Lumos.
That's really encouraging in terms of a platform for growth, and the ability to leverage, as I said, that installed capacity. Just looking at margins, obviously, there was some, some impact from, from getting rid of some COVID stock at the end of the year, but the overall normalized gross margin of around 37% is at the lower end of where we'd like to be. Again, that's part of diversifying that revenue, those revenue channels into different markets, particularly into U.K., Europe, and U.S., and Australia, as opposed to global health. Once we continue to expand that overall portfolio, then we should see margins start to move up into 40s, with a target of getting into the high 40s and, and close, close to 50.
Again, to reiterate, it took around AUD 130,000 a month out of our OpEx. We, we do run pretty lean by comparison with others, others in the sector, particularly for a global business in a highly regulated industry. We continue to focus on bringing those costs down, as I said, but doing that in a way that doesn't impact on our ability to grow. Just coming to the balance sheet and the cash flow. You know, investment activity was very much, you know, laser-like focused on market-facing and revenue-generating activities. And, you know, minimal CapEx was required throughout the period, and we're expecting similar for FY 2024. Very much a focus on, on, sales, marketing, business development, new distribution agreements, and, and growth. There's a bridge there that shows our opening cash flow through to our closing cash flow.
You can see receipts from customers of around $3.4 million. We received some funding by way of R&D rebate, around $1.2 million. OpEx and payments for stock account for the most of the outflows, leaving us with that balance of $6.5 million. I guess just reiterating that we then subsequently raised funds, so that $6.5 million balance doesn't include the new funds that came in post the close of the year-end.
Just for anyone new to the stock and that opportunity and excitement for FY24 and beyond, it's really this ability for us to deliver next-generations solution. Users recognize that intuitive use and are much happier and confident running tests on our platform and standard kits and delivers very high level user preference, but also delivers very high levels of performance in terms of reliability and error rate, and that's what's keeping regulators happy as we see the market transition from provided healthcare team to consumer and at-home testing. The performance we've delivered is best in class by any, by any measure, over % reduction errors, % reduction in time to test, and over 9% user preference. That's a compelling set of validated results that we can bring to partners, bring to regulators, and bring to customers.
That's increasingly important because the market's transitioning away from doctor office and lab testing to consumer decentralized and at-home testing, whether it's through pharmacy chain purchasing, e-commerce, or at-home telehealth, by way of healthcare delivery. This is where the market's going, for that to be successful, tests need to be reliable, easy to use, and convenient, and we're the only company with regard to blood testing, that's delivering that level of performance across a range of tests. For us now, the challenge is to expand the portfolio, get products to market. We've already established now some very good channel partners like Newfoundland, who have access to the pharmacy and supermarket shelves of leading retailers across Europe.
We expect to see similar agreements in the US over time as we get closer to regulatory approval there, and we've got the ability to go to market directly in Australia, where we've just already established HIV as a channel product in pharmacies. And once we expand the range to include pregnancy and others, then we can push into more mainstream supermarket channels as well, and we've got the evidence of the success of that through Newfoundland's UK operations to point to in that story. HIV is our flagship product. We're seeing increased demand for retail partners for HIV. We expect to be able to announce some big market entry deals through Newfoundland in the coming weeks, once we've now got that product to them, which was delivered this month.
We're expecting to also see that expansion beyond the UK and Europe over the rest of this. This meeting is being recorded. Markets and really brought to them at home and other. We continue to obviously support our business in global health. As Will mentioned, it generate the same kind of margins that business in Australia and other developed markets do, but it does, I think, meet a very important need in terms of global health, and we're very proud of that. It does, from a business perspective, also give us economies of scale, and by setting up manufacturing in South Africa, we've been able to continue to deliver a low cost of goods, which keeps us competitive in global health, but more importantly, gives us very significant margins when we sell the product in markets like Australia at a much higher price point.
We're expecting to see continued expansion into markets where Atomo haven't yet registered. We've got ongoing discussions well progressed in South America and Asia. That'll be, again, some announcements we have to bring to market later this calendar year. Overall, pregnancy is the next cab off the rank for us in terms of opportunity. We are starting in the markets they've entered. They're starting to take market share off urine tests. We're expecting to see sizable market penetration here in Australia when we get to market. We know the market here is 5 million rapid tests per annum. We completed a survey in Australia just recently, quite a sizable piece of work, over 300 women who had purchased a pregnancy test in the last 12 months.
This is the market for pregnancy in Australia, and we're very pleased with the results. More than about a half of the women said they were very quite interested in using the product, and one in five were willing to pay a sizable premium for that product because of the improvement in performance, because of the improved accuracy, because of the earlier detection window, and because they could use it as soon as they the following morning. Penetration. We have a very credible go-to-market channel partner line up to go to market once the product, and after a few months in a queue with TGA, we've been advised they're actively reviewing the dossier, and we're very hopeful for approval in the coming month. They're a very sizable market with product out of the market.
Differentiation as well as overseas validation, we're excited in terms of revenue growth for the business in Australia, as well as providing a case study that would then attract to go to market for a similar type. product through options. pregnancy test opportunities in the world, we now have the opportunity with a test that's unique in the Australian context, and we believe in the US context as well, if we can get to market in the next 18 months. Beyond, we're well progressed with amount of production to be able to expand the validation to include the ferritin test. That work will be done in October. We'll be then using that to complete the IVDR Europe at the end of Q4.
Beyond that, we'd really like to get behind our now actively test the work portfolio of products come to market in the next two to five years. Atomo as the listed manufacturer. Some of them may be hybrid, developed dossier of the device, and somebody else pays, we believe, to deliver a very comprehensive portfolio into in a consumer setting. That's where we want to be. In terms of our strategy to get there for FY24, we're gonna continue to establish the platform as best in class, and the 510(k) for Lumos really helps us move in the U.S. market. Now, we're seeing some sizable opportunities from across our presentations at AACC, which was very timely because it was a big conference that happened, like, three weeks after we got the 510(k).
We're expecting to be able to validate the performance of the platform through the launch of pregnancy later this year in Australia and through a Pre-Sub with FDA, start to finalize the US go-to-market plan and get a commercial partner lined up. We're also excited to see that our OEM business is back, post-COVID. We're seeing increased demand from NG. We're expecting to see increased demand from Lumos now they've got their US 510(k). We're also seeing a number of partners that we've contracted with, starting to promote our platforms to their customers, and their customers are companies developing new assays.
One of the things we, we decided to do was partner with companies that have the ear and the development contract new products, because it's easier to get our platform in at the start of a development than try and have it brought in post-regulatory approval and revalidate. So getting into those networks early is, is fundamental to that, and we've had success in securing agreements with 3 companies that are prepared to resell and promote our platforms into those, into those channels. Obviously, 2 of them are in the US, and the 510(k) helps enormously with that. Our success in Europe and Australia helps again with that. And it's a particularly compelling proposition to anyone that's looking to get a CLIA waiver or an OTC approval for self-test market applications for blood.
That's where we see the OEM business opportunity growing over the coming, over the coming years.
That concludes the presentation. If anyone has any questions, they can submit them via the Q&A function, at the top or bottom of your Zoom screen. We haven't had any questions come in in advance of today's presentation, so we'll just wait a second or two to see it come into the, into the Q&A box.
Yeah. Just while we're waiting for those questions, I think in the last few months as the, the demand for COVID tests have disappeared quite rapidly, Atomo is not the only diagnostic company that's shown a significant drop in revenues. I think the problem for a lot of diagnostics companies has been what comes after COVID, I think the difference between some of those companies and Atomo is that Atomo has been well-positioned even before the pandemic for consumer health market growth. That was a market that was constrained by customer awareness of the ability to test at home, clinical and regulatory barriers to testing at home, and an expectation that testing was, was a, was a medical clinical event and not a consumer initiated activity.
I think the, the real opportunity for us post-COVID is that that's now changed and everybody's done a, a self-test at home. Regulators are comfortable with it. Governments are starting to realize it's a much more cost-effective way to test, and consumers are increasingly asking for other, other solutions in, in, in those channels. We've got a, a ready-made platform that's, that's ideally there to support that opportunity. We're starting to see the types of interest and meetings with companies like Newfoundland that just didn't exist before the pandemic. That's allowed us to reestablish Atomo as a leader.
There's been a time lag to getting that turned into revenue post-pandemic. We're now starting to see the start of that growth and the start of that opportunity as we roll into across the developed world. I think that's a great position for us to be in.
I'm gonna quick about cash, and our cash. We're not going to give 2024, but just to reiterate the point that we're taking around AUD 1.5 million out of the OpEx, over the course of the year, and we continue to focus on that, whilst making sure we're investing in the areas that are leading new revenue growth. They're the two key swing factors there, where we're focused on being revenue 2024, with a low overall cost, should see cash burn, improve, but I guess- ... way through into, into-
Yeah.
Yeah.
We think is, is robust, and approved in, in Europe. We think the dossier is a house for that approval to come through and where it finally comes from that. We do have a partner lined up to go through pharmacy channels almost immediately. We are hopeful maybe getting into the channels pre-Christmas. If not, then we expect shortly after the start of the new year. Do expect to see pregnancy revenue impacting the second half of FY 2024 and growing significantly into 2025.
... We've had another question about the outlook for revenue and cash, which again, I can't be specific about, but what I can say is that we do have these orders in the pipeline that were disclosed already. Because of timing and getting regulatory clearances and so on, we haven't been able to deliver those at the tail end of the financial year, so they're all now in Q1 for 2024. From that, you can figure out that, you know, compared to FY23's total year revenue, we should be well ahead of that sort of run rate as we move into the end of Q1 and into Q2. We're encouraged by that, and the contractual arrangements we've got in place with some of these players will show revenue growth.
Yeah.
Um, and I-
I was just gonna say, I think beyond that then, in the second half of the FY, we expect to see on top of that HIV growth, the initial revenues coming out of the pregnancy test, and then as we move into 2025, that pregnancy revenue growing and then ferritin coming in behind that through that FY2025 period. I think in terms of revenue from iron deficiency, we're looking to submit at the end of the year to the regulators. We don't know what the approval time is for IVDR in Europe. We think it's probably about 9 months. We're hoping the TGA is a bit shorter than that, so we're looking at, we think, registration and launch for that product in the first half of the FY2025 period.
I guess, just to add to that and remind people of the plan for the iron deficiency test. We have our facility in South Africa that's set up to produce the lowest possible cost HIV, the best possible quality HIV test out of that facility. We're going to use that same facility to do the same thing, but put an iron deficiency, a ferritin test in the device instead of an HIV test. We've already got that production facility there. It should enable us to produce something out of that facility at very low cost and also increase utilization of that facility, and that's a really great place to be, where we can control that, that whole supply chain.
Yeah. There's a question in on OEM contracts, and will these consume cash or do OEMs pay for development? There's not a lot of cost involved to bring new customers onto the platform. We've done it 5 or 6 times now with different customers and applications, so that's quite well defined as a process. It takes a couple of months. It's less than AUD 50,000 to do that work. We typically do a bit of that work to get customers on board. It's always good to be able to show them working samples of their test on our device to get them interested.
Beyond that, in terms of regulatory and clinical revalidation, the OEM partners normally pay, but one of the things we're trying to do, as I mentioned, is get in at the ground floor so that they can do the development work on our platform and just essentially do the development work. That makes it a much more there's no additional cost.
The other thing to add to that is where customers might want something more, it becomes service to support that development. We can, we can go from there. There's been a renewed interest in that. You know, as recently as this week, there's been some discussions with one of the bigger players in technology. In those circumstances, we would charge the customer for that development work with a view to then, you know, becoming a critical supplier of something that's tailored for them using our IP and our patents.
Yeah, that's an interesting opportunity, I think, for us. We've sort of specialized in standalone devices that allow people to test themselves at home, but most of the bigger companies have, over the past 10 years, really invested in doctor office, point-of-care, reader-type markets, 'cause that's where the regulators were more comfortable. But those devices that they use don't deliver the usability on the front end that our device does. Now the opportunity for us, and I think some of the big guys are starting to recognize that, is to deliver level of front-end usability on a cassette format that's compatible with their validated installed readers, because they've got, you know, tens of thousands of these readers in the US healthcare system.
If we can deliver a device that takes their solution from a 510(k) point-of-care approval to a CLIA waiver approval, then they can expand the addressable market for those readers by, by a magnitude of four or five, and I think there's a lot of interest in that. What we think that looks like is us delivering a cassette that is the front end of a valve at the back end of a standard cassette that fits into a reader, pre-installed in a clinical guise. Consumer health usability we have can be that sits in a doctor's. I think that's an exciting opportunity. Although one that, you know, will take two years in terms of sizable revenue.
Look, I think we're out of time. It's busy, it's a busy reporting season. I appreciate, you know, a large number of people joining the call today, and we appreciate the ongoing support of all our shareholders and, and people interested in the company. Thank you very much for your time.
Thank you.