Earnings Call: Q1 2021

May 5, 2021

Quarterly report

Yes, thank you. Hello, everyone. My name is Thomas Warsaw. I'm the CEO of Q Life. First, I would like to say that I'm very happy here for the first time to be able to address you all with updates from Q Life and quarter 1 of this year. During this call, I'm going to talk a little bit about our activities last year, then what we reached in this quarter 1 and shortly thereafter and then what our strategy is and what objectives we have in the short to medium term. Starting out, I have included a picture of our device. We do hope that people like the looks of it. We have always been inspired by Scandinavian design And we want it to be something that people want to have at home, maybe on their night table. But inside, it is lead a very complex medical device. You can say that the founders of Q Life has spent the past 20, 25 years In accumulating knowledge that have made it possible for us to integrate all of these various modules into this small box Without compromising the clinical grade data quality, because that's what it's all about for Q Life, delivering clinical grade biomarker data from home and thereby, hopefully, contributing to making life better for many people. Please go to Slide 2. So what is it that Q Life wants to be? Well, as it says here, We want to be the market leader in consumer self testing diagnostics. Ultimately, we want to have the EcoHealth system implemented in households all over the world. I think maybe that everyone today can see that it would have been tremendously interesting If EGO Health System was placed into every household in Denmark or in Sweden or elsewhere, Then authorities would have had the ability to get clinical grade PCR virus data out of every home on a daily, weekly or monthly basis, which would have helped to provide much better oversight of population in crisis, pandemic situations, of course, with respect for GDPR rules. So this is for the future. It will definitely require much more of our production volumes at Q Life to service this mission. Please go to Slide 3. So significant events for last year. Well, we were listed on First North Nasdaq in Stockholm, something that has been quite a pleasure for us and Willy has helped to mature the company all through 2020. We did CE Mark our first capsule, a CRP hemoglobin capsule. We opened a COVID laboratory test center. And I would claim that we also did kind of a footprint in the professional sports world. We have been running coronavirus testing for the professional football leaker in Denmark, the professional handballs in badminton and in ice hockey. And we were running around 4000 to 5000 tests per week on average. Then we have grown from 15 to 40 employees and we have been finalizing the SARS CoV-two capsules. All of this made up a very hectic year And we ended up with revenues a little more than SEK25 million sorry, SEK21 million. Please go to Slide 4. So once we hit the start of 2021, just after the New Year, we were ready to see Mark Desauskaskopf's new capsule, which was indeed a big deal for the company because we now have not just an immuno test, but also a molecular test and may I say one of the most sensitive and precise PCR tests out there. We still have clinical studies ongoing and we are still working on finalizing some documentation related to software and how the data is sent further into databases and public systems. Under the new IVDR regulation, all of this must Please submit it to our notified body. Then we have focused on what I call operational upscale. This has actually been much about establishing a stable production output, both for capsules and for the devices. Steven, you have CE Marked your products. You, of course, have been through many key protocols and established pilot manufacture to sustain all of the regulatory. But from there on and on to reaching stable production output of fixed volumes, There is still some work to do. And Q Life sorry, Q1 was very much about that. On the operational side, Basically focused on getting quality procedures implemented so that when we output finished goods, we are also certain that the quality is good. Then we have been quite focused on getting the commercialization journey started and probably one of the realizations we did in this connection Whilst the Danish market is very centralized in regard to how purchasing is done, it is in fact all done from very few central Public Entities. And more importantly, they all require on top of the CE Mark additional national studies so that the clinicians Some sales feel comfortable with the product. And this is also part of the aim for the clinical studies that we are doing at this time. We did see that other countries are somewhat different in this regard, basically just purchasing the products. So this indeed has led us to adjust our sales strategy a little bit so that we now target a broader international read through distributor partnership instead of building our own sales force. So you can say that quarter 1 was the initial step in our strategy to reach the consumer mass market And first step entails going to the clinical market to get the key opinion leaders on board and to establish an installed base of devices that we can service with various capsules as they become available. And then likewise, It is the first step in the ramping of production to get an initial volume output, get stapled at Q Seat and get some customer feedback. And the feedback we are now starting to get from customers is that they really like the product. So that's indeed quite nice and encouraging for us. Please go to Slide 5. So the key figures for 2021 was that we actually we reached a revenue of SEK11 1,000,000, which we were very satisfied with, considering that we had SEK21 1,000,000 for the whole of last year. I think we are we can be a little bit proud of that. Our gross margin was 68% on products And we also did do a loss of €6,000,000 We are indeed expecting to continue to have an operational deficit Since we will be needing the resources to achieve the ambitious plan where we have put forward to. And likewise, investments in Production capacity will also continue to increase over the coming year. Please go to the next slide. I usually say that we are riding a trend that I call disruptive trend in the health world. We saw 10, 15 years ago that companies like Garmin, Fitbit, even Apple iWatch came to the market with Devices that we're providing what I call gadget data. People were willing to purchase these devices and it's all very nice. But For a doctor, this actually means this type of data actually means quite little. They are not clinical grade data. So this is indeed what we are trying to change with our products to bring clinical grade data from home to the consumer. Please go to the next slide, Steve. So yes, COVID has changed everything also for us. There's a funny story. We went public on 2nd March last year. And the same day, we held a Board meeting and we decided to change strategy. We decided to develop a SARS CoV-two capsules. And of course, we did that a little opportunistically To be able to service the immediate situation, the world needed a test, a quality PCR test towards the coronavirus. But we also did it to prove the versatility of our platform. So that before the IPO, we were only focused on the immunoassays. But with this, we took a step into the DNA, RNA field also focusing on molecular assays. So after Q1, what has happened of these significant events? Well, actually, we have had 2 quite big events. First of all, we have signed an agreement with Finnish Adient. We are very happy with this agreement. It is we have had a relationship with Adient since the early phases of the pandemics in April, March of last year, we have in licensed their CPaaS technology. And now we have taken a step further with ADN providing them with an inclusive agreement for a whole range of European countries, I think 10 to 15 countries. And Adient is seeing our products as sort of their prolonged arm from their own product into the GP offices into the hospitals. They're already sitting on the market for providing point of care diagnostics, especially for the CRP assay. With our product, they can take the step further into people's home and doctors and clinicians can prescribe that our system It's put into home and data can be sent directly from people's home into the clinicians department or into the GP office. This agreement entails that for the 1st 12 months, we have a minimum purchase of SEK 40,000,000 to SEK 50 Swedish million and this is only for the SARS CoV-two capsule. We are expecting to add more capsules To this agreement with Adient, producing the SARS CoV-two assay. Then Another big event here happening just last year sorry, last week is that we Q Life carried out a directed share issue of approximately SEK 90,000,000. This was the sort of accumulation of long Investor periods with many meetings and we ended up signing up with some very prestigious Investors and we are very happy with that. The proceeds of that will be used to invest into upscaling our production, both for the devices and for the automation of capsules. Please go to Slide 9. Then we are shortly here, we have started this week, we have started warrants issuance. This was already structured as many of you will know. We there will be an issuance of 2 shares 2 sorry, 2 warrants makes up 1 share. And the agent for this is Nordic Issuing. Please go to Slide 10. 1 for Q Life is, 1st of all, to build a strong product portfolio. We are I see that reaching a product portfolio of 3, 4, 5 capsules Would be sort of the inflection point that we are trying to reach all of these capsules for home use. And we are continuing our commercialization journey by rolling out into the professional market. We will strengthen our organization with adding key people and maybe additional partnerships in prioritized markets. We are working very hard on implementing freeze drying processes in our production, so that our products can be stored at room temperature. Currently, the SARS CoV-two product has to be stored cold at minus 20. And of course, that's not ideal for taking the product into home use surroundings. And then we are focused on This year, I'll be able to conduct usability studies to verify that layman users can actually figure out how to use the product. Furthermore, we will optimize and ramp our production. We are currently in the process of outsourcing the device production, and we are focused on ramping the in house capsule production as well, and we will build also we are focused on filing additional IP so that we have a strong patent portfolio. Now I'd like to say a few steps on how to reach the home use Market because I know some of you have been wondering how that is going. The process to actually get a CE mark for home use is A little bit long and it goes through the steps that we have illustrated here. First of all, we have to finalize an app, software app that works on smartphone and this app has to be documented according to certain ISO standard and fulfilling all the GDPR regulations. Then we have to upgrade our device also to an additional ISO standard so that there's no risk for the users. This has to be documented as well. And then we have to implement the freeze drying process, as I mentioned, in all our Production Processes and we have to repeat all of the protocols for the CE Marking procedure, which is quite substantial and we will start on this process hopefully later this year. Then we have to additionally conduct clinical studies at 3 sites with a minimum of 700 participants. And we will have to do a little bit of optimization on how the blood Saliva or swab sampling is done, so that the actual layman user can do it in a simple way. And then we will submit the technical dossier to the to our notified body and wait for the approval, which Typically, it takes 3 to 6 months. And in that process, the company is audited 2 times, which is a new requirement under the new IVDR. And then finally, we should have the approval for self testing home use. We are hoping that this is something that we can have either towards the end of this year or beginning of next year. Please go to Slide 13. So to be a little more precise in terms of quantitative targets for this year, You are next. Yes. Hello, everyone. Sorry about that. I don't know what happened with my phone there, but something did happen. Anyhow, I think we got to Slide number 15, the strategy. So please go to Slide 16. So I usually say that the red thread through Eco strategy is that we are focused on People with vulnerabilities, so people that have a chronic disease or people that have an underlying medical condition. And these people should definitely not be receiving an infection. They would obviously be severely affected by that. There are lots of people that have Different types of chronic diseases. So there are lots of capsules that can be developed towards many different things. And we think that in the long term, this strategy will pave the way into what I call the consumer segment for general health. If you go to Slide 16, the next one, I'm listing a little bit some of the areas where we could be focused. You can say our platform is very scalable because we would be able to target many of these categories of diseases here, Can mentioning inflammation and disease progression, diabetes and metabolism, cardiovascular diseases, so 3 are the big ones. And associated with that, you can mention categories of liver, kidney, blood clotting, vitamins, minerals, Allergies thyroid disease. So these are all areas where we see ourselves developing capsules in the future. Next slide, 18. So I usually say that our journey is sort of a stepwise journey, Going to market initially in the clinical market. Here we have defined 3 segments, especially where we initially are focused Being COVID and other viruses, we are focused in the rheumatoid arthritis segment where people are measuring CRP. And then also in the PKU, the genetic disease where Especially children and teenagers are not capable of digesting proteins when they eat. And so those are the three areas where we are going to market initially focused on together with Adient. And here, you could say the distribution Model is that we're selling into hospital and specialty institutions and doctors and clinicians are placing our device into the homes of people. Next slide, please. The next step for us is to go towards the broader consumer health market. And here we are working on defining different segments. It could be, for instance, urban people looking to track their health beyond fitness data For people that have a history of being pretty disposition for whatever genetic disease, it could be people that are a little bit Overweight and therefore motivated to live a healthier lifestyle or it could be people that are looking to monitor CRP or other biomarkers due to certain autoimmune diseases. One segment where we have been very Lucky to get into already is the sports segments where we are working with High performance athletes that are using our system, not only for the COVID monitoring, but also for other biomarkers. And here we are receiving some very positive feedbacks. So there we are already working in a segment which really relates to the broader Consumer Market. Next slide, please. So for Q Life, You could say that the journey for us forward is really what I call a ramping journey. We have during last year proven And we were capable of bringing products to the market. We have gotten a significant patent. We are Working with significant key opinion leaders, we have sold products to the Danish Infectious Disease Agency, which is probably the biggest key opinion leader here in Denmark. And we are started on rolling out the product into various segments. For this year, we are continuing to build customer base with especially the important KOLs. We are scaling The production so that we are least is capable of supporting the sales that we have. And then we are focused on certain of the operational task of outsourcing, especially the device and then getting the capsule production Volumes increased significantly. The coming years will really be to scale on all levels, both geographically together with our partners And then eventually move into the consumer segments as well. Next slide, please. I always include this slide here towards the end because I want to emphasize that our product is indeed not a gadget device. It is a very Heavily regulated product under the in vitro diagnostics regulator. It is regulated the exact same way As product in the hospitals, the data are exact same level because in fact our product is placed into the hospital, so they could be coming From our product when you have data from a hospital. And we have to follow all the new regulations, which are similar Yes, IBDI similar to the FDA in United States. Next Slide 22, please. So just to recap here at the end, currently going to market in the Professional segment. We are focused here with 2 capsules, SARS CoV-two and getting CLP into the market as well. We are selling through strategic partnership and focus is the EU. Of course, the prerequisite here is that we are approved for selling into the professional market and we are selling to hospital institutions, GPs, the key opinion leaders, health centers, schools and sports clubs and clients today, especially as mentioned, includes some of Two big KOLs and hospitals. We are typically selling contracts here, so not normally one device at a time, but several, including service, which includes connecting IT to various data portals. And status is that this is ongoing and rolling out. In the little longer term, focus on getting more biomarkers into the portfolios and Possibly sell through other sales channels, pharmacies, eventually also into electronic goods stores and WIP and Sony sales. We will be testing this and do controlled release rollout in the Nordics towards the end of 'twenty two, Reaching the consumer market. And here, of course, the prerequisite is that we have obtained the home use CE mark and that other Sort of on the issues are solved so that the product is easy to use. Target groups are both people that are diagnosed, but especially also people that are not diagnosed, but wants to monitor their health More actively. And the clients here could be people that are concerned about pathogens, virus, bacteria Or people that have chronic disease or simply just are conscious about the health. The crisis is that we are when we reach this level, we are expecting to We released the product at €995,000,000 for the device. Eventually, the target is actually to lower this all the way down to €295,000,000 We will see when that will happen, but we think our feedback is that $9.95 is pretty it's a fairly good price that people are willing to pay. And capsules will be released between €10,000,000 to €30,000,000 whereas the molecular ones are the more expensive one. And the status is that we are approaching this stage. Last slide is the EG1. Just thank you all for listening. Thank you. There will be a brief pause now whilst we register any questions. Okay. There seems to be no questions from the phone lines at this time. So I'll hand back to our speakers for the closing comments. Sorry, are you handing it to me? Yes. I'll hand back to you, sir, for the closing comments. Okay. Yeah. No, I think that's probably about it. I just want to thank all our shareholders for being so loyal to the company. Personally, I really enjoyed all the questions that we are receiving sometimes. And although we cannot always answer very specifically, it is indeed very nice To have this communication and we really appreciate that. So thank you for that.