Good morning, everyone. I'm Sonia Petering, Chair of Vitrafy. Thank you all for joining us today for the Vitrafy Life Sciences Full-Year Results Shareholder Webinar. I would like to acknowledge the traditional owners of the lands on which we're all dialing in from today and pay our respects to elders past, present, and emerging. As we gather today for shareholders to understand Vitrafy's progress during the year in more detail, now as a listed company, I want to begin by announcing a leadership transition that positions Vitrafy for its next phase of growth. Kate Munnings has announced her retirement from executive leadership and will continue as a Non-Executive Director of Vitrafy. And after a thorough process, the board has appointed Brent Owens as the Managing Director and Chief Executive Officer. This transition represents the culmination of a carefully planned succession process.
Since officially joining the company in February 2024, Kate has been instrumental in transitioning Vitrafy from a private business based out of regional Victoria to a global ASX-listed company. Kate, together with the team, has achieved the successful listing of the company on the ASX on the 26th of November 2024, with all of the shareholders on the call supporting that, secured the financial future of the company with a AUD 35 million primary capital raise as part of the ASX listing and securing of the Industry Growth Program grant of AUD 4.8 million to support the development of our go-to-market device, VCU2, set the foundations to support the future growth of the business by investing in device development with the VCU2 project, go-to-market preparation in our target application areas, and commencing the build-out of the U.S. operations.
Also overseeing the growth of talent within the organization, Kate's development of talent, including fostering the next phase of executive leadership within the organization, ensuring continuity of vision and leadership. And that includes, of course, working with Brent closely over the last 20 months. So, Kate will continue to serve as a Non-Executive Director, ensuring continuity of her valuable insights and relationships. And this change will take effect on the 1st of September 2025. So, to Brent, the Board has determined that Brent is the right leader to guide the next phase of growth of Vitrafy. He represents the right mix between vision, innovation, market knowledge, and continuity to ensure that we as a company continue to build upon the strong foundations that have been developed to date. Brent is a great leader of teams and the organization more broadly.
He lives and breathes Vitrafy 24/7 and is widely respected internationally, particularly among partners and our potential customers. The board has confidence in Brent's ability to execute on the strategic plan and deliver value to shareholders and move quickly on our strategic priorities and, importantly, commercial opportunities. As Chair, I want to assure all investors that this leadership transition represents continuity, not change. From the plan outlined in our IPO last year, the strategic plan we have been executing remains clear and will be executed under Brent's leadership with the support of the team. As I look at Vitrafy, I see a company with tremendous momentum. We have a passionate and capable leadership team, a growing pipeline, strong financial position, and thank you to you, our shareholders, and importantly, and most importantly, a clear vision for creating value through our cryopreservation solutions.
We know the value drivers are quality and consistency of results, commercial contracts in our priority applications, product in market, and driving growth in annual recurring revenue. Quality, contracts, product in market, and driving growth in annual recurring revenue. The leadership transition that we announced today demonstrates the maturity of the organization and the depth of talent and shows that Vitrafy is built to last and built to grow. So, in closing, I want to thank shareholders sincerely for your confidence and support and express on behalf of the board and shareholders our gratitude to you, Kate, for your service and leadership as CEO. Australia has long punched above its weight in life sciences, but leadership and not just research is what's going to define our future edge. I assure you that the board remains committed on overseeing execution and focused on creating long-term shareholder value.
We understand the importance of developing and supporting our leaders who not only navigate complexity and scale and innovation, but who deeply understand the mechanics of building commercially viable, revenue-generating businesses, and we're excited about the opportunities ahead, so I'd like to now invite you, Kate, then Brent, and then Simon to present our full-year results for 2025 and share the vision for Vitrafy's immediate future. Thanks, Tim. Over to you, Kate.
Thank you, Sonia, and good morning, everyone. I just want to echo Sonia's comments about Brent's leadership capabilities. Having worked closely with him for close on two years, I'm very confident in his ability to lead the company through the next phase of growth. Brent's strategic vision and his deep knowledge of the science of cryopreservation is widely respected. He has held leadership roles at Vitrafy since the founding days, and he has the confidence of our team and collaborators. Brent will continue to be supported by the board and Simon, as well as the strong and growing Vitrafy team, both here and in the U.S. It has been an absolute privilege to work closely with Brent and the Vitrafy team, and I'm really, really pleased to be able to continue to support the company as a Non-Executive Director.
I have seen firsthand the significant market opportunity for Vitrafy, and I am extremely confident of the company's success. So, I will now hand over to Brent to take you through our update.
Thanks, Kate. Thanks, Sonia. Thank you, everyone, for joining. As we share our first full-year results as a listed company, I and the whole team believe we've made great progress in all areas with a clear focus, as Sonia mentioned, on commercialization in our priority markets and applications. As you all know, Vitrafy addresses a vital global need for enhanced cryopreservation solutions, which can materially impact the economics of cryopreservation. Our aim is to improve the quality of life-saving treatments by preserving life. We're very excited about that too. Overall, I would say we're in a really strong position. This year has seen us deliver on the IPO commitments that we made. What we did, I guess, as part of the use of funds through the capital raise was break down that into market development and technology development. We've made great progress in both.
And that's where a large portion of the use of funds was allocated. On the market development side of things, there has been an expansion of commercial activity in animal reproduction, and we have significant interest from global players that could rapidly scale our market share in all areas and species, not limited to one. We've built out and grown the pipeline in all areas of human health applications, and we're focusing on the wave of opportunities and securing and completing those. We've also established our U.S. presence, and we're actively building that out further to support the sales and marketing function, but also then to execute with clients as the U.S. is our primary target market. And we've completed very high-value proposition studies such as the phase I military results on blood platelets with game-changing results, as quoted by the military themselves.
On technology development, our focus is to get products to market at scale that meet the market need. Both products, both VCU2, our cryopreservation device, and LifeChain, our software platform, are both on track and on budget. We're expecting to have the first release of those in market in the first half of this financial year, which is very exciting for the organization. Their technology and the innovation around it was also recognized by the federal government through the Industry Growth Program, awarding us a AUD 4.8 million non-dilutive innovation grant, which is really focused on commercialization in global markets, which is exactly what we're doing: novel Australian innovation, to Sonia's point. We're in a very strong financial position, close to AUD 30 million in cash and plenty of runway ahead too. Strong position. As we all know, our addressable market is large and it's growing.
We're focusing on a very targeted area of that market for various reasons, being animal because of the immediate revenue opportunities that we have and the scale of that, and also blood components, particularly blood platelets, because there's a need and they're always in high demand, high value, and currently isn't done, and then cell and gene therapies. It's innovative, it's new, it's growing rapidly, and it needs cryopreservation. I guess over the term, we've really assessed and analyzed the market, those different priority areas that I mentioned. We've identified who the buyers are and who the users are and who the key participants within each sector are, and in animal, as I mentioned, it's a global opportunity immediately. And all the results that we've generated to date and historically have direct economic benefit because cryopreservation is already used in this industry quite widely, actually.
If you think about some of the users that we already have, such as Huon Aquaculture and Select Sires, we're focusing on growing the user base, but there's also bigger and faster ways that we believe that we can get market share across the entire sector. That comes through equipment providers and global suppliers of this equipment. This entire application may be larger than we first thought, and we're very proactive and progressed in this space as well. In the blood space, as I mentioned, it's not currently done. We're unlocking an entire new revenue opportunity and giving, I guess, defense and military the ability to stockpile these products that are in high demand and they currently don't have a solution. This is new market opportunities.
The users within this would be blood points of collection and production centers, obviously biobanks and where they store a lot of these products. That's around, focusing with defense in particular, which we're very well progressed on, as we mentioned. In cell and gene therapy, I mean, this industry is rapidly growing, but it needs quality. It needs consistency to work at scale, and it needs cryopreservation to actually work at all. That is our value proposition. There are several users within that sector, such as biopharmaceutical and biotechnology companies, particularly those in early stage clinical trials, the organizations that collect the raw materials to enable these therapies to be available. To make some of these drugs, you need to collect the raw materials to be able to do that.
Contract Development and Manufacturing Organizations, which we call CDMOs, they're really important potential customers to us because they're the ones that make the final product that is of extreme value in the hundreds of thousands of dollars per dose, and then research and academia, so we've been actively engaging with all of those parties, particularly in human health in North America, which is our focus, and we'll continue to do that moving forward with urgency. We have many, many in various stages of the pipeline at the moment as we stand today, and multiple of those are quite deep. And importantly, through this phase of market in the U.S., no one's saying no. There's no indications that our technology won't be accepted, which is very powerful when you think about a new market entrant and the risks around that too.
We're feeling really confident with where we're at in that space. And when we reflect that on the full-year results and operational highlights that I'll go into in a moment, that we've completed, all of the results directly correlate to addressing these global markets. Our results all have economic benefit to our markets in various ways beyond just being great validation studies, starting with blood platelets. As we know, the potential of cracking the blood platelet market is huge, with millions of units collected per annum and only a five- to seven-day shelf life with up to 20% wastage per annum. That's over AUD 200 million wasted per annum on its own. With the U.S. blood supply, 7% of that is allocated to defense, so a very large volume of blood.
During the period, as you know, we have a CRADA agreement with the U.S. Army Institute of Surgical Research as part of the Department of Defense. We completed the phase I study with them in San Antonio, Texas, which was a gating item to move forward into the next phase. We received outstanding results on three different protocols in commercial volumes. We've now signed phase II, which is the next phase of the study, which is starting in the first quarter of this financial year, and we are expecting that to be completed before the end of the first half of year as well, so end of calendar year, with commercial activity progressing in parallel with that too. Further to that, and which we found really exciting and interesting, is the U.S. military themselves have publicly shared this outcome that we received with them during phase I.
They're presenting these results at military conferences literally this week. There's one, and there's another one in October where they're spruiking what we've been able to achieve with them, as well as publishing that in a very high-profile military magazine a couple of months ago. Further to that, I also have interviews later this year with federal government agencies around some of these results too, and I just want to reference a quote that Dr. Cardenas made in her interview that she completed more recently. She did the study. She used our technology, and she generated these results. Her quote is, "Our results suggest that cryopreserved platelets have the potential to be a game changer for warfighters, especially in large-scale combat operations and resource-constrained events." That in itself provides the validation for us that this opportunity is large, and we're very excited by that to continue moving forward.
Expanding on that and in the area of cell and gene therapy, as I mentioned in the user's slide a few slides earlier, the raw material points of collection is really important for us. And there's a lot of those locations around the world, and particularly in North America. So, to expand on our value proposition in cell and gene therapy, we completed very high-value validation studies on PBMCs, which are essentially the raw materials that you need to make these cell and gene therapy products or some of. We completed studies that our results were comparable to fresh, proving the value proposition in a market segment that far exceeds the existing standards. It's really important data that these quite sophisticated organizations need to see to have an opportunity to commercialize with them and to become customers. And this will continue.
This type of validation data we will continue to generate, as it is quite important. But we've now set the foundations for entering into revenue-generating collaborations in this space by doing this study and completing this data set. We've also been continuing to expand on our multi-year agreement with Huon Aquaculture in the salmon reproductive market. We've been increasing throughputs now that we've exceeded industry competitive standards year- on- year. And when we think about the core value proposition that Sonia mentioned and that I opened with around quality and consistency being value drivers, we're now seeing fertilization rates comparable to fresh essentially every time we complete work in the animal reproductive space, particularly with Huon. So, they are our value drivers that have been validated, and we are growing that.
We also expanded that commercial activity domestically here in Australia with other aquaculture providers, and we'll look to scale that out further, as I mentioned earlier, in bovine, which we know is 40% of the global animal market, so a big opportunity. Our data suggests that there's over 170 million units cryopreserved and sold per annum of bull semen. We're currently working with Select Sires in Columbus, Ohio, as you all know, which collect around 26 million units themselves per annum. We did complete during the period our own internal studies and generated some IP in that space that we own and is non-exclusive. We have a collaboration with SSI, which we've commenced the next phase of that study on site with them, and we are expecting the results to come out in the first half of this financial year.
But we're also deep in the exploration of global market opportunities in animal as a whole, which does include bovine, which again could open up that global market opportunity more rapidly, which just on that on its own, that market could be bigger than we first thought, and it could be as much as 400 million units per annum across the sector itself. And I wanted to share, I guess, how we've been approaching commercialization as a new product in market. This slide here describes what we're doing and how we're going about it. Naturally, this will evolve over time, and the cycle that's presented here should condense and shorten as we get some more progress through this phase of early stage. So, from the first part of business development activities, primarily in the U.S., what we've found is that this is more a business-to-enterprise type sales cycle.
Some want exclusivity straight away. Others want proof and validation for their processes depending on the sector that they're in and where we're attacking, and what we're doing is breaking down a collaboration program with our clients, which is what we've previously indicated with the collaboration to commercialization strategy, and this is resonating quite well, and due to demand, you now have to pay for that collaboration step, which historically we've always done in kind as a first starting gate. From there, we'll look to formalize an agreement. That's the start of a commercial relationship from how we're looking at this process. We'll then integrate with the customer, optimize some of their processes to ensure that we're getting those quality outcomes and we're getting them consistently, rather.
This is where I think that the revenue model that Simon spoke to through the IPO of the managed service is actually really important so that we can stay close to customer. We can collect their data. We can get better quality outcomes, and we can get them more consistently. So, this phase is actually quite important. During that period of optimization, we will complete the business case for a broader and bigger rollout and scaling of the technology with them and others as well. This will vary customer to customer, application to application. Some of these discussions are with global partners. Some of them are multi-site. Some of them are single-site. So, they will vary a little bit. We have several groups in this process at the moment and a wave of opportunities coming through across the different verticals that we're targeting as well.
If you think about an announcement to the market, it will be during this formalized commercial relationship phase where we will sort of announce that to the broader market. That will vary case by case depending on the size and the scale of that opportunity, naturally. I guess, as you know, scaling revenues and capturing market share is only possible with products in market at scale. A core part of our use of funds through the IPO was to get our scalable products to market. I'm excited to announce that both of those projects, VCU2, our freezing device, and LifeChain, our software, are both on track, both on budget, and both expected to be released in the first half of this financial year. What you can see here is a schematic of VCU2, so an image of what that product is.
We've been working with Planet Innovation, who are our partner in this space, who have been excellent to work with, have developed a product that is really fit for the market, learning from all of the customer feedback that we have with strong value proposition points with a lot of LifeChain connectivity to deliver quality and consistency, again, which is our core value proposition point and the market problem that we're trying to address. So, just a few other points on VCU2. Part of it around scale is having a product that's scaled for the market, but also something we're trying to build that can have a higher margin product with better quality outcomes and more functionality for the different applications that we're working in.
We also wanted to improve the connectivity and integration with LifeChain so that we have the ability in certain environments to really push down a lot of the intelligence and collect a lot of the data as well, which we're seeing being really critical long term, and I guess this product itself is what was acknowledged by the federal government, which received the AUD 4.8 million commercialization grant. I would say importantly, with the progress since the IPO, the first phase of the development of VCU2 was the highest risk phase where a lot of the innovation was undertaken. The longest process, the highest risk, we have completed that phase working with a Planet Innovation team as well as the team at Vitrafy here in Victoria, Australia.
We now have capability to do domestic and U.S. manufacturing moving forward and capability, and also with some of the more recent events that could span to other jurisdictions as well. As mentioned, this is on time. It's on budget, and we're planning for our first release in the first half of this financial year, which unlocks bigger market opportunities moving forward. Similarly, with LifeChain, our software platform, which controls the intelligence of VCU2 and collects a lot of the data that we will be collecting. As you may recall, through the IPO process, we wanted to rebuild LifeChain so that we had a scalable platform that could absorb large amounts of data, which is really important to execute on that revenue model at scale and continuously improve on our customer outcomes. Again, this is on time.
It's on budget, and we're preparing for the release in the first half of this financial year as we committed to in November last year, so I will put a pause there on the operational updates and hand it over to Simon to give the financial update.
Thanks, Brent, and welcome, everyone, so just a few points I wanted to make on this one. Obviously, we've improved our revenue. That's largely driven by the work we've been doing with Huon and one of the other players in this market. We expect that to continue to expand, and I know there's a few questions on Aqua, which we'll come to shortly. The second major source of income, obviously, was the grant that we secured this last half. Obviously, we were paid in cash.
You will have seen in the quarterlies AUD 2.4 million in cash, but we earned that on an expense basis, expense matching basis. So, we earned AUD 1 million in the first half. We were paid ahead of expenditure, and so we'll earn the rest of that out. There will be some more revenue flowing from more cash flowing from that, and obviously revenue in FY 2026. As we also flagged along the way, our R&D Tax Incentive is declining as we shift to commercialization. Most of the efforts now are on commercialization. So, we had AUD 1 million that we will receive in R&D claims, but that will continue to decline. We will continue to do R&D. It'll just be a lower proportion of effort in the more immediate term. Having said that, our R&D spend, which is largely product development related, will grow about 50% year- on- year this year.
We did about AUD 6.6 million in what we call research and development, which is mostly development. We expect that to be up about 50% in FY 2026. A lot of that will be front-end loaded. In the first half, as Brent was pointing out, we're peaking this half in terms of completing VCU2 and LifeChain development. That's where that peaking in spend will be. If we move on to a normalized view of the income statement, because there have been questions in the past about this, what we've tried to extrapolate here is to give you a view of the half-on-half loss when you exclude effectively non-cash items. You can see there we've got a significant growth in share-based payments. Obviously, we closed out the convertible notes at the IPO, and that was a hit to the P&L in the first half.
Clearly, that's now gone. And obviously, there were some capital raise costs. So, you can see first half, second half was not nearly a steep climb in normalized losses. And that's reflective in our cash flow, which I'll come to shortly. If we move on to the balance sheet, there's AUD 29.6 million worth of cash that we hold. We believe our cash runway through to calendar year is pushing through at least into calendar, well into calendar year 2027, despite the elevated expenditure based on our current forecasts. And obviously, we've got more income coming in from the next slide, coming in from the grant. You can see here our cash flow, our operating cash flow for the year was an outflow of 8.8 net cash burn. As I said, we expect that will grow in this next half before settling back down as we peak.
You can see some movements. We've been moving a bit of money into term deposits. And of course, you can see the cash rise there. I'll pass that now to Brent. Thank you.
Thanks, Simon. I guess the outlook for us is very clearly solid and focused on accelerating commercialization, securing new revenue-generating contracts, and capturing market share. As I mentioned earlier, we have several deep in the pipeline in all applications that we are focusing on, animal being the most immediate and the more global initially, as we mentioned. We also have the existing collaborations that we want to complete and convert, that being SSI and the military. Again, military starting in the first quarter and completed by the end of the year. Similarly, SSI completing in the first half as well.
Further to that, and to be able to execute once we secure the contracts with customers, we need products in market. We are focused on the release and the completion and the release of those products to be put into the market in the first half of this financial year, and also building out the supply chain and manufacturing capability and capacity to be able to service that. So, as an organization, we remain very diligent. We remain very disciplined and focused on our objectives. I do look forward to providing more updates as we execute and highly confident on the opportunity that is larger than we first thought. So, thank you everyone for joining, and we will now take questions. Tim.
Thank you all.
Just a reminder, if you do have questions relating to the FY25 annual results, please submit them via the Q&A function at the bottom of the app. Just starting off, there is a couple of questions for the CGT relating to the CGT vertical from Tom Godfrey. So, Brent, for you, any color on the potential partners in the CGT vertical? Does the PBMC data translate to a collaboration program in FY 2026?
Thanks, Tom. Yeah, good question. Sorry, can you just mute him? Just a good question. With the CGT vertical, I guess it's probably broken into two. One is the raw material collection points, and there's several within those. So, where they collect products such as the PBMCs. And then there's the sort of people that use those products to create the drugs. That's a good way to think about it.
They often cryopreserve at both of those points. So, we've been focusing on building and the pipeline in both areas in particular. And I would say that we're well progressed, particularly on the parts that manufacture those into drugs, which we call the CDMOs, quite progressed in that space. And we do anticipate further progress in that in the near term. The PBMC data itself was really critical because you have to be able to prove that you can retain the quality at a minimum at market standards to even get the door open. So, being able to generate data that is so comprehensive and comparable to fresh has opened those doors, which is why it's a really important data set to get.
And also to Simon's point, while we will continue to do further work on proving up the value proposition in different products and different applications, because this is what's driving the interest, because that's the core problem in the market as it stands today. Tim.
Thanks, Brent. There's a follow-up question from two individuals, Tom and Ed Deville , relating to aquaculture. What are the next steps regarding the paid pilot with the second aquaculture provider from Australia? And then subsequent to that, are Canada and Norway potential partners for the aquaculture products that you currently have?
Yeah, I would say that Australia has been, like Huon as an example, has been excellent to us. They're a great partner, really strong collaborator, and we've learned a lot over the past previous few years of working with them.
Now that we're so confident with the results, the consistency, the quality, we are expanding that, as we mentioned. So, the next steps would be to secure those domestic contracts to progress that moving forward, similar to how we've done that with Huon. But also, once we've got that, it's how do we approach the larger organizations, as you mentioned, in Norway and Canada, where most of the production is done. There's a couple of ways that we're approaching that. One is direct to, which is similar to, say, Huon and the likes.
The other is looking at how we can have the right partners as a global market opportunity that expands all animals reproductive, which includes aquaculture and some of the equipment suppliers to these organizations in Norway and Canada and the likes, would be a great partner for us to work with to unlock that opportunity at scale as well. Approaching it from multiple angles.
Thank you, Brent. A combination of a couple of questions we've got through the chat regarding manufacturing of VCU2 and the economic policy situation in the U.S. Any updates? I might get Simon to answer this question. Any updates on the scale of manufacturing for VCU2 in the context of the shifting global tariff regimes and how we will navigate that?
Thanks, Tim. Thanks for the questions. Look, there are two things to note on this.
I think the first is we selected Planet Innovation as our partner because of their capacity and capability of manufacturing in the U.S. We thought that was important at the very get-go before the tariff situation emerged. There's definitely an impact from the tariffs on cost of imports. So, we are looking very carefully in this next phase, this next build phase, to make sure our bill of materials is well costed. But as you would all know, not only have the tariffs caused issues in terms of cost because of the tariffs, but also supply chain issues, which have impacted costs for componentry. We will attempt to manufacture as much as we can in North America for the North American market and be as close to customer in terms of delivery.
But there's no doubt there will be some componentry that will come from outside of America just because of the nature of what we're building. We think we have that in hand, and we are now set up as a local entity in the U.S. and will appear and represent as a local entity. It's really important to be local in terms of presentation. So, that's our approach today.
Thank you, Simon. If there are any more questions for our panelists, please drop them in now while we are giving the investors that opportunity. Brent, any final remarks?
No, I just wanted to echo the opening remarks from Sonia and thanking everyone at Vitrafy, the entire team. Without the team, we don't have a business, and everyone's critical to it. That spans board and all the staff, but also and equally the investors.
Thank you for your ongoing support and endorsement. We are being very disciplined and diligent. And as I said in my closing remarks earlier, we remain extremely excited about the opportunity for Vitrafy to deliver at scale. And we look forward to being measured on the outcomes that we deliver this financial year.