We are pleased to welcome Brent Owens, Co-founder and CEO of Vitrafy Life Sciences, to present to us today. Vitrafy has developed breakthrough cryopreservation technology that dramatically improves cell survival rates across multiple applications, including blood platelets, cell and gene therapies, aquaculture, and bovine reproduction. The company provides complete cryopreservation solutions through its managed service revenue model, utilizing its FDA-registered smart freezing and smart thawing devices, integrated LifeChain software platform, and smart packaging systems. Vitrafy listed on the ASX via an IPO about a year ago, and Brent will speak for about 15 minutes, followed by 10 minutes for Q&A. Welcome, Brent. Over to you.
Thank you, Martin, and nice to be here. Thank you, everyone. As Martin said, I'm Brent Owens. I'm one of the co-founders and CEO of Vitrafy Life Sciences, which was founded in late 2017, an Australian-founded company with a U.S.A. focus, a cryopreservation technology company, so hardware and software, with a mission, a very strong, broad, and global mission to become the leader in cryopreservation processes and set new industry standards for cryopreserved materials, preserving life. Again, what we have created is disruptive technology, a combination of hardware and software that together retains the quality of biological materials that have been cryopreserved. In many cases, we're seeing superior sample quality outcomes when compared to existing standards, in some cases over 100% improvement to what the market expects.
Cryopreservation has underpinned the healthcare system for a long time, and it is a substantial market opportunity with very broad applications across human health and animal health. You can see the numbers there in the U.S.A. alone. For Vitrafy, the company has started to commercialize, and we are ready to scale that primarily in the animal reproductive markets, but with our really short-term milestones ahead, we are unlocking the human health commercial market as well, and we are well-positioned for growth. Well-funded, completing the IPO in November of 2024 that was a successful AUD 35 million raise, focused on the U.S.A. growth, with a very strong and robust IP portfolio, over 13 patents protected, and that's over 50 individual filings, so a very strong and robust IP portfolio.
In terms of cryopreservation, to take it back, again, it is a process that has underpinned the healthcare system for many decades, such as IVF. It would not exist without cryopreservation, blood banking, and cell banking. It has been around for a long time, the process of freezing materials to very low temperatures to be available for future use. Unfortunately, though, the problems that existed with cryopreservation over 50 years ago are still the problems that exist now, and that is primarily high levels of damage to the materials. In some cases, over 50% of what is frozen is killed, so you are left with a lower quality product, expensive processing, and some products are unavailable at all. It materially impacts not only the availability and quality of the materials and life-saving products, but also the economics of that as well. That is where Vitrafy created its solution.
It invented and created new cryopreservation freezing and thawing technology, as well as our own consumables that are all captured underneath our software platform, which we call LifeChain. It is end-to-end, vein-to-vein of the sample, which can set a new standard of quality for all cryopreserved materials globally, which we believe will materially impact the economics of healthcare in various applications. That comes to our core value proposition. Quality is number one. We believe that we can cryopreserve, store, and thaw biological materials at a greater quality outcome, better than anything else in the market globally. That spans from reproductive material used in animal health all the way to life-saving blood products and blood components used for critical response.
Further to that, it can extend the shelf life of some of these life-saving materials from days all the way to years, which can then eliminate waste, which there are high wastage amounts of these samples. We can also do that in a very fast and efficient way when compared to existing technologies in the market, from processing times of hours down to just a few minutes, which is what Vitrafy can do. That is the Vitrafy advantage. I guess with cryopreservation having very broad applications globally, as a new company, we needed to prioritize where we were going to market and why. That is broken down into three core areas. The first is animal reproduction. It is an unregulated market. It is global scale with very large high throughputs and volumes, and it is commercially ready for us. We can scale that right now.
Blood and blood components, particularly blood platelets. This is a critical and growing need around the whole world, a global opportunity, and Vitrafy has got some really robust and progressed data in this space, working with the U.S. Army Institute of Surgical Research, where we're seeing a lot of value being generated in that space. Then cell and gene therapy, which is our third priority vertical. This is an industry that's in its infancy, but it's growing quite rapidly. There are a lot of trials around the world, and the process is yet to be standardized, and it depends on cryopreservation to be available at scale. We want to get in early whilst that's still being established, which is why that's a priority vertical for the company as well. Blood platelets, as I mentioned, is one area that we are focusing on.
It's an area where platelets are currently used as fresh materials, so they only have a few days' shelf life, but they're required for critical response and trauma response. They enable blood bleeding to stop, essentially, as the clotting agent. There's over 2.5 million units of blood platelets collected per annum in the U.S.A. alone, and of that volume, there's an expected 20% that's wasted annually. That's costing the healthcare system approximately AUD 280 million every single year down the drain and wasted. That in itself is an opportunity for Vitrafy, and that's why we're working with the U.S. Army Institute of Surgical Research to bring this product to market itself. We have seen game-changing results achieved in this calendar year with the U.S. Army, the first phase of that work. We saw results comparable to fresh.
For every sample that we tested, the results were over 89% when compared to fresh. The existing standard barely gets 50%, so that's a step change in outcome. The processing times, we can have that product available to be used within two minutes, where the current processes take over 25 to be ready, and they also use toxic cryoprotectants in the market. The shelf life, we can take it from being available for up to five days, which is why there's high wastages and shortages, to storage over two years, so you can have products stockpiled and ready for use rapidly. Big opportunity for the company. Our roadmap. We've broken down our use of funds through the IPO into two areas. One is market development, and the second is the technology development.
In the market development piece, again, we're commercially ready to scale the animal reproductive market, and we're looking at a global opportunity in that space. We want to continue to unlock and grow our sales and marketing business development functions in North America, primarily in cell and gene therapy and blood platelets. We're looking to have a fully operational sales marketing customer-facing team in the very near term, and that is well-designed with active outbound business development and marketing opportunities currently in the pipeline as well. We do have a well-progressed customer pipeline that is well-developed primarily in North America, and we're about to commence the second phase of the U.S. blood platelet trial in San Antonio, Texas. That phase II study has started, and we're about to reengage now that the government has reopened, and we're expecting very near-term milestones in that space, which is a huge opportunity.
For that to be possible, we also need the technology in market. We have just achieved, in the last couple of weeks, our first milestone of having our next-generation freezing device available for the market. That first release is coming very, very soon. Following that release, we will have medical device certification and clearance. We are aiming for that to be in the middle of next calendar year, 2026, in North America. Our software, the first release of that software is also now ready, so we are ready to scale that in North America. That is also compliant with U.S. regulatory expectations, which is called 21 CFR Part 11, and we are going to continue to expand our product portfolio to strengthen our competitive advantage and competitive moat selling quality outcomes in this space.
With that, we do have cash in the bank of AUD 25 million available in the bank, and we did get awarded a AUD 4.8 million commercialization grant, which is non-dilutive by the Australian federal government due to the innovative technology that we have created and ready to scale out as well. All of that is very much in line with our plans, our progress on our mission to become the global leader in cryopreservation, founded here in Australia with a global opportunity itself. Thank you.
Right. Thanks for that overview, Brent. That was terrific. As you point out, the delivery of the first production unit of the second-generation device is a major achievement, and now you have to scale up that production. What is your current production capacity? What is the value of that, excluding the consumables? When do you anticipate reaching capacity?
Yeah. Yeah, it's a great question, Martin. I guess one thing that we have secured as well is both Australian and U.S. manufacturing. Given the U.S. is our primary market, we want to be able to manufacture equipment there to avoid supply chain bottlenecks, high tariff costs, and also customer expectations in North America. We are moving into building out a fleet at the moment. Over the next few months, we'll be building more capacity and volume and devices based on what we need for the medical device pathway, but also in anticipation for customer demand. What our capacity is, we can build out quite a fleet in itself in the tens over the next few months and then into the hundreds thereafter, and that depends on customer demand, but also relates to the revenue model as well.
We are looking to do a managed service model, so that does mean that capital is upfront for the company itself, but there are different ways to fund that as well.
Okay. Just on that revenue model, I mean, I understand you charge the hardware and software via managed service model and then the consumables separately. How quickly can the recurring revenue scale for a typical customer, and what kind of gross margins should we expect from that?
Yeah, it's a good question. I would say that it's more about proliferation in market for us in terms of how many devices and/or packages, let's say, can we get in market to have a stable recurring model moving forward. Some of these blood collection centers are not just individual centers. They may have 10, 20, 30, 50 different locations under the same banner, and they're the ones that we're targeting so we can proliferate and get that recurring model on board from day one. In terms of margin, based on our forecast at the moment, we believe that we can have a small margin in the first year and have the payback complete, and then into year two and beyond, then we're looking at software margins in sort of 80% plus that will be recurring from there on.
That doesn't include the consumables, as you mentioned, which we see those being charged on top once they're commercially ready. They are in animal, but there's a longer timeline there for the human health side of it.
Right. Excellent. Okay. The U.S. military relationship seems to be progressing well. Can you provide more color on the conference presentation you did jointly recently and the next steps towards a commercial contract?
Yes. We did complete earlier this calendar year, we completed phase I. The results were game-changing, and I don't just say that myself. The military were quoted saying that as well. They submitted an abstract to the annual American Blood and Biotherapies Conference, which is one of the national bodies, and that was approved and presented last week in San Diego. That was a presentation of the phase I results that we had that were very positive, very well received. I would say at that conference, generally, the wastage component of blood platelets was one of the highest and most important topics of the conference. It was well-timed, and that was the platelet study that we did. That was a really positive step forward. In parallel with that, we did commence the start of phase II of that study in San Antonio, Texas.
Now that the government is back operating, we're about to recommence that. We're expecting that study to be completed in the end of Q3 for Vitrafy, and we'll be working towards the commercials in that term as well so that we can move through that commercial agreement very soon thereafter.
Right. Do you anticipate a commercial agreement of that nature to have a slow ramp up, or do you think there's a capacity, given that you are manufacturing in the U.S., to cover the entire scope of what that might look like relatively quickly?
I think it will ramp, but I think there can be a very large step forward as well. Again, blood platelets are collected in over 800 facilities in North America alone. A ramp can be still quite significant, and the starting block can also be quite large too. I do not foresee it starting at sort of one or two sites. I do see it being about a much higher number than that and then ramping from there.
Okay. Since you set up operations in the U.S., where are you receiving the most inbound interest from?
As an organization, until we had sort of website and inbound capabilities for the business, most of what we're doing from a business development perspective has been outbound. With that and the conferences that we've attended throughout this calendar year, I would say that's been focused on cell and gene therapy as being number one. That's something that we needed to put a lot of effort into to generate the education and to show people what value we can bring to this market. That's a very positive feedback, notwithstanding that the progress in blood platelets was already there. That value for blood platelets was already identified, and that's where the military interest came. This year, we've been putting effort into cell and gene therapy, and that's where a lot of the new interest has.
I could foresee that growing over the next calendar year as well.
That cell and gene therapy is in the unregulated space. Is that correct? What does that look like?
It's both. It's both. As part of this first release that we have for the new device, there's a whole category of the cell and gene therapy market that we do unlock. That's in process development, raw material collection, and anything that's before it's in the clinic and clinical application. When we get the medical device certification in 2026, that's when we unlock the clinical application side as well. There's probably half of the market that we unlock now, and then the other half we unlock middle of next year as well.
In terms of blood platelets, so there's U.S. Army, but there are things like Red Cross equivalents. Where are you situated with those types of organizations at the moment?
I would say there's two uses or primary uses for blood platelets that we're focusing on. One is the military and defense aspect. The second is the civilian market. Our strategy is to focus on defense first, then go to civilian. That being said, the U.S. blood system is broken up into a few different areas, and we want to put effort into groups such as the Red Cross and the different collection centers across North America in both the defense and civilian market as well. There's active conversations across the board in North America in those areas.
Right. What are the key impediments from here to converting interest into commercial deals?
The core for us is having products in North America available for people to see and touch. One thing to show the data, which is really strong, which is really clear and really well understood, it's another thing for people to want the technology without touching it and feeling it and seeing it. Over this calendar year, whilst we've been developing the new generation of the technology, we've been focusing on the education and preparing customers for the technology as it gets released. That is now available. The devices that we're building at the moment, a couple of those will go over to North America to be used for that in-person marketing collateral. I think that's going to turn the dial up because that's been unavailable to date.
If there was any, let's say, hesitation, it's because people are yet to see this product in market because it hasn't been available to do so.
Right. Okay. If we take a step back a bit or zoom out, where do you see the company in three years? Can you provide some kind of aspirational target for investors?
I would say in three years, coming back to our core mission of being a global leader in cryopreservation, every sample at every collection center will be protected by Vitrafy. That equals high market share, which equals high revenues. There are hundreds of collection centers around North America preserving these critical materials, and Vitrafy will be the number one reason that people cryopreserve in the future. I believe that we will be in every collection center in North America within three years.
Do you think you've got the capability logistically to achieve that?
Absolutely. We're preparing for that now. We're making sure that we're set up, established foundationally to be able to scale rapidly, but sustainably as well.
Right. Okay. That's all we've got time for. Thank you very much, Brent, for your time and your insights. Good luck for the near and long term. We'll take a short break, and John will be back with QBiotics.