Today will include a company overview, followed by our addressable market, a number of additional triggers in terms of the clinical work that we performed a couple of years ago, as well as the joint FDA study that is ongoing. Last but not least, our company's growth outlooks for year to come. How this all started, it was in the U.S. where our Founder and Chief Scientific Officer, Mr. Per Gerde, he was working in Lovelace Respiratory Research Institute in the U.S. and really was looking for a precise system in order to analyze how dust particles behave in the human lung. He couldn't find any precise system, so he decided to move back to Sweden and found the company in collaboration with Karolinska Institutet in 2005. The technology was validated with and through a number of industrial partners, between 2006 and 2013.
In 2014, the very first product was launched, PreciseInhale. We have a total mix of customers, anything from blue-chip pharma companies such as Chiesi in Italy, AstraZeneca. We have academic customers such as King's College London, Karolinska Institutet, as well as the environment research centers such as Fraunhofer and Swetox, which is now RISE. That list is growing. We introduced the company into stock exchange in 2017, with the ticker name ISOP, and that is where we are at the moment. Our vision is to become industrial gold standard for inhalation R&D. What do we do? Our platform technology addresses drug discovery and preclinical studies for inhalable drugs. We do that with our main system, which is called PreciseInhale. It is a plug-and-play instrument with both hardware and software. We have different add-on modules in terms of different kind of studies.
Is it in vitro studies for cell culture studies? We have animal studies, in vivo studies, as well as ex vivo studies with its isolated perfused lung, IPL. We perform all of those studies in our facilities in Huddinge, in Sweden. What is our core value proposition? That is something that is extremely important to explain and understand. What do we do? We are de-risking the failures of clinical trials by providing high-end data already in a preclinical phase. With our technology, you will know which substances, which formulations, which APIs will work well in a clinical setting and which ones doesn't work well. You continue with the ones that you know it work well in the clinical setting already at the preclinical stage. How do we do that?
We have a plug-and-play aerosol switchboard, as we call it, and it enables in vitro, in vivo correlation, which is a golden goal for any inhalation studies, enable to go through all the way from in vitro to in vivo. As well as, by using the same platform technology, we are minimizing translational errors because we are using PreciseInhale throughout the whole studies. If you compare to other studies or other competitors, they change the platforms, thus there is a risk that you lose data. That is one, and we are also enabling regional targeting. It's a definite goal to be able to target different part of the lungs. We have studies that we have shown that we are enabling that for both preclinical and clinical settings. Last but not least, it's not only about where, it's also how much.
It's about the control, it's about dosage. How much of the substance you want to target in different part of the lungs, and that is something we're also enabling what is called size-fractionated aerosols. All these three together, we know, and we have data that we can provide that data already in a preclinical setting to weed out the bad apples already in a preclinical stage and move on with the ones that are successful. That is by far our core value proposition. In terms of the whole drug and device development value chain, it's everything from discovery, preclinical, clinical, and commercial. We are focusing on preclinical. We are not in the clinical world. We are in preclinical stage. We are having lead optimization, we have in vitro studies, we have in vivo studies, and formulation developments. That is our core focus.
We have also done a phase I feasibility study that we performed a couple of years ago, I will touch base that in the coming slides. Again, our definitely main focus is the preclinical phase. In terms of commercial legs, we have two. We have either products that we are selling or leasing to the customers, and it's mainly to big pharma companies that they want to have their own products, and that historically been the main part of our sales. We have IRS services, inhalation research services. It's in-house CRO work. We receive substances and formulations from customers. We perform the data in-house, and maybe provide them data. Historically, we have been focusing on product sales, but in 2022, we decided to change the strategy to be more focusing on sales of services.
We could see that the split of the revenue changed pretty drastically from 18% of the revenue in 2021 to 58% in 2022. That is in line with our expectations, and that is something that we will continue to build on for years to come. Our addressable markets, we have done a number of market research about what is our market, and how much is it worth. In the preclinical world, there are different steps, anything from toxicology, safety, bioanalysis, DMPK, as well as characterization. We are not covering everything. If we were about to cover everything for both in vitro and in vivo, our estimation is that the market value is about EUR 1.2 billion. We are covering only bioanalysis, which is outsourced by a third party, DMPK, and characterization. That market itself is about 40% of total market value, which is EUR 480 million.
That is the existing market with our existing products. If we look what we have in terms of annual revenue, we published our 2022 numbers just a couple of weeks ago, and we had the revenue of SEK 12 million , and we had the sales of SEK 17 million . You can just imagine how much of the potential we have in a market with a total of EUR 480 million with our existing services and products in our existing market. There is a huge potential that we still can gain in terms of market share. We have also been talking with a number of customers, both existing and potential customers, about the unmet need to verify, to see if what we are doing is in line with what their expectation and their need is or not.
Luckily enough, we have received confirmation that four of the mentioned needs are something that we are already offering. Number one, the ability to calibrate optimal particle size. Again, dosage control. If you don't have it, then most likely your clinical study will fail. Something that we know, and we have data that we can deliver. Number two, the regional targeting, to be able to target different parts of the lung. Something that we have data, both preclinical and clinical, that we can deliver. Next step is the consistency, the minimizing translational errors. Using the same platform technology throughout both in vitro and in vivo enables to minimize the translational risk. Last but not least, the lack of correlation between in vitro and in vivo. Again, using the same PreciseInhale throughout the whole studies will enable you to increase the correlation between in vitro and in vivo.
That is, again, a golden goal for any inhalation researchers. In terms of market potential and its growth, we know that the service side on the drug preclinical services will be increasing in average around 8% year-over-year for years to come. We also have estimation that the outsourced portion of it is going even higher with 11% for each year. The reasons for outsourcing is simple. Number one, the biopharma companies, the rationale behind outsourcing is that they will have access to specialized capabilities and capacities, which is much more expensive to have in-house. The second one, it is very important to get it right from the beginning to be successful already at the preclinical stage, and then you have a lot of significant cost saving later on.
Last but not least, many CROs, many smaller companies such as Inhalation Sciences, they have advanced IT and lab management that will make and improve the preclinical studies. Thus, it makes it much more attractive to outsource the services to the companies instead of having them in-house. On top of the potential and the growth opportunities, we have also done a clinical study to just show the proof of concept. Even though we are focusing on preclinical studies, the technology could be also applicated to clinical studies and clinical work. We did that in late 2021 with 12 healthy volunteers here in Sweden. The end points of the studies were three. Number one, to show PreciseInhale being superior than commercial inhaler in the market, the ability to control the dosage with regional targeting, as well as having no major adverse effects.
All of these three endpoints were checked. We presented the data late last year, and the full study will be published before summer this year. If we apply in the clinical market, the market potential will be at least 4x higher. That is our estimation. There is a huge upside in the company as well in terms of clinical markets. Another very interesting aspect is our collaboration with FDA. In 2022, we started to work together with FDA because there is no standard dissolution method in the market. The FDA and other regular bodies, they are interested to have some kind of standardized dissolution methods. Thus, we have started this collaboration in order to show the differences before and after using DissolvIt to show the superiority about what we can do with DissolvIt.
It's a two-years study that we are performing with a big number of formulations, and we hope to be able to publish the data by end of 2024. It's supported and co-financed by FDA with a total of $480,000. If we have positive data, that could be definitely game changer for the company because we have then a FDA-validated study and hopefully a FDA-recommended solution basically. The company's growth outlook, as I mentioned in my previous slides, we had focused on product sales on annual basis, we made this change of strategy in 2022 where we shifted the focus to sell more of our services, inhalation research services. Reason being because there is a larger customer base. There are many more customers, CRO companies or pharma companies, they are interested in data. They are not necessarily interested to own the products and services and CapEx.
They want to have data. We know we can deliver good data. Number two is the shorter sales cycles. When we used to promote the product sales, it could take anything between one to two years. The sales of services is anything between three to six months. It's much shorter sales cycle. A third aspect is the relative ease of product portfolio expansion. If we see services that we could offer the customers even better, then we can easily add that, either have it in-house or outsource it to a third party, which we are doing with our bioanalysis. Last but not least, we have much better margins on services than product sales. To summarize where we come from, where we are, and where we about to go, historically we have been focusing on product sales and research services, and we have maintained the product sales.
Currently, as I mentioned, we have increased focus on our IRS, inhalation research services, because it will take us much faster to gain market share. Our future plan is to become a go-to partner and have a full shop of inhalation R&D to our customers that we can increase the market share much, much higher. That is pretty much the presentation I had. Thank you.
Thank you. Thank you, Manoush. Maybe we should start there with the service model that you're implementing. How far have you come? How much is service sales now?
During 2022 that we reviewed the total, it's 85% of our total sales is coming from IRS, from services. We see a big change of split between services and products, and that is where we want to be. We will continue to build on that momentum for 2023 and the coming years.
You've already done the shift?
Yes.
Okay. I was really interested in this FDA study. It's going to be finished in the end of 2024 with DissolvIt. What happens then? If the study is positive, is it like you just go or do you need a year more?
That's a good question that we ask ourselves and FDA. It all depends on obviously on the outcome, but given its positive outcome, again, that could be a game changer for a company because any companies that would like to do FDA studies for dissolution, they will need to go through us because we already have a study for two years instead of themself designing, having technology to do that. We have IP, we have all the aspects of it. That could be definitely game changer. In the best of the worlds, it could be FDA-recommended solution. That is we are really looking forward to have that finalized.
Looking at competition, is there any competition in this?
Well, the short answer is no. There is no direct competitor to us. The closest ones that are our competitors is for the animal studies where companies who offer inhalation towers where they put 20 or 30 different animals to the same tower and inhaling them at the same time. Those are our direct competitors for animal studies. We have a number of advantages compared to them. Number one, we are using much less of substance for each study, and there is a cost saving by far for the industry.
Number two, we are using much fewer animals. In average, we are using three animals per study per substance compared to, again, 20 or 30 different animals at the same time. That is in line with the 3Rs in our inhalation world, reduce, refine, and replace to use much less animals. We are in line with that too. Last but not least, the most important part, that we know that our data is much more precise than what the alternative is. That is our unique selling points.
I couldn't fully concentrate. I was thinking of this tower of chickens.
Well, mostly it's rats or mice. It's not chickens.
A tower of mice.
Yes.
Mice. Oh, yeah.
Yes.
What can you tell us now about your 2023, the backlog, the pipeline? How does it look?
Yes. We have increase on both sales, backlog, and backlog's definition is pretty much what we have signed in terms of orders, but not yet shipped. They have all been increasing, and we did see the shift when we focused more on sales of services. That is what we will definitely be continuing doing to gain market share. That is focus number one. Two, three, sell more of what we have, and expand the portfolio of services when needed. Again, we are having a revenue of SEK 12 million. Second, we have a potential of EUR 480 million. There is much more we could do in the existing market. When and if there are any collaborations with partners, we are having discussions with a number of them as well and to see how we can add value into our portfolio.
Today, how do you do that when you sell?
We either sell through distributors or direct. Mostly it's direct sales. When we talk to potential customers, we have different lead generation legs that qualify the customers to us, and we receive a number of 20, 30 different leads on a weekly basis that we work with. Then our work is to convert them to customers and users. The main is a number of service and studies that we sign. We have a number of recurring customers that, based on the value of the data that they receive and they see, they are signing a long-term contract with us. One of the comments that we received not a very long time ago, that's one of our biggest customers said, we didn't know that this data could be possible. That's, again, confirms that we are on the right path and to continue to build that.
Should we be worried that everyone really liked this new model, so you had a bump in sales just because you got them in on service?
Well, that's not a problem. If we see that momentum continuing, we will be definitely looking into how we can increase in terms of resources. We have already added a second DissolvIt in vitro module in our labs in order to be keeping up with the demand. That is where we want to, if any investment, that is going to be to invest in the IRS and either in staff or products. That's going to be a good problem that we will looking forward.
I was meaning, you had a push into because of the new model, now it's going to be slower.
Well-
You're not worried about that?
We are not worried about it.
No.
No.
Maybe I was a bit inattentive. On one of your slides, I think you mentioned a market share of 15% in your sectors. Is that correct?
Well-
If so, someone else has or have 85%. What is that?
It's the technology which is out there. I mentioned the inhalation towers that are out there. In lack of additional instruments and solutions, that has been the standard. We do know that in our world, what we call standard deviation, the facts, what the instruments can deliver versus the reference, which is human. The standard deviation from the existing technology is more than 50%. We know by fact with data that we have produced, our standard deviation between our data and human data is less than 10%. It's about creating the awareness. Many customers, they don't know of us. They think that's the standard to use what is available. That is, again, our challenge to gain more market share to come over the 15% market share that we have.
The 85%, are those mostly in-house? Are there other companies of your type, less successful in your eyes, that have those 85%?
No, it is mostly in-house. That's what we see in terms of competition. Again, our biggest challenge is we have been an R&D company for many, many years. Now we want to take this small R&D company into a commercial company. It has its opportunities and its challenges to sell what we have, build on that, and gain more market share. That is exactly what we are doing in terms of increasing focus on service.
Is it difficult to convince larger companies to get rid of their in-house capabilities for your services?
Well, I wouldn't say it's difficult. I would say it takes time because, again, they think this is standard. That is how it should be. We have a big number of pharma companies that they have started doing a number of studies with us when if they see the results and how that differs from the internal data, they have decided to, after two, three studies, purchase the instrument themselves because they are running these studies on a weekly basis. They need to send this data to FDA on a weekly, monthly basis. Now they have purchased those instruments.
Our challenge has been that when they have purchased the instrument, we lose that contact. We don't want to do that. We want to continue to build on that. We want to gain the market share by selling the services. That is why the shift of focus on services and on product sales. We are still having the products as maintaining them, but not necessarily promoting them as a first leg. We want to have them coming back to us in terms of purchasing the services.
How many systems have you sold? How many?
Throughout the years, we have sold and placed around 20 instruments. I would say during 2022, based on strategic focus that we have purposely not sold any instruments. We have increased double digits by selling the services. That is where we want to be and gain the market share and margins, basically.
Interesting. We wish you very good luck.
Thank you