Abingdon Health Plc (ABDX) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen, and welcome to the Abingdon Health plc investor presentation. [Operator Instructions] I would now like to hand over to the executive management team from Abingdon Health plc, Chris. Good morning, sir.

Good morning, Jake. Thank you.

We'll just get the slide deck.

Okay. Good morning, everyone. Thanks for joining the results presentation for our financial year ending 30th of June. I'm Chris Hand, I'm the Executive Chairman of Abingdon, and I'm joined by Tom Hayes, the Chief Financial Officer. I'll hand over to Tom for the first few slides, which will give you a financial update on the company's progress.

Thank you, Chris. Okay. So the first slide in the presentation is just a summary of the results for financial year ended June '25, which were released this morning. So I think the key message on this slide is that, firstly, that these results were in line with brokers' forecast that were in the market, both at revenue and adjusted EBITDA level. I think the second point I'd draw out is that really the -- there was quite a difference between H1 and H2 trading. So in H1, we saw some delays in decision-making, which ultimately impacted on the revenue number. But then in H2, we announced several large contracts during that period and a couple more post period end, which supported significantly stronger trading in H2. And that was also reflected in a lower adjusted EBITDA loss. And then we mentioned later in the presentation that momentum has continued into the first half of the current financial year. Okay. So moving on to the second slide. This is again, really just summarizing some of the cash and fundraise that occurred during the year. We've recently completed further placing a retail offer, which raised GBP 3.2 million net of expenses by the end of October. And the rationale for that was 2 reasons. Firstly, that we wanted to accelerate the expansion of our new U.S. subsidiary to include the ability to manufacture products out there and also to provide us with the working capital to support execution of the new larger contracts that we're taking on. And then final point is the one I just mentioned around current year having started. Okay. So the third financial slide, we've just summarized how the revenue broke down in FY '25 between the different categories of revenue. So it's really showing that the 2 largest parts of what we do, the contract development work and also the regulatory work. The regulatory has increased significantly in FY '25 on the back of the 2 acquisitions that were made in calendar year '24. The first one being IVDeology in May '24, the second one being CS Life Sciences in August '24. And what both of those acquisitions have done is give us a significantly enhanced regulatory capacity, which is a key part of these end-to-end contracts that we're now winning with customers. Okay.

Thanks, Tom. The next couple of slides give an overview of what we do. I'm conscious many people will know that already. But I think it's important to illustrate how we expanded and enhanced our offering. We're still lateral flow technology experts. That's our specialty. But by the acquisitions and also by establishing our performance evaluation lab in Doncaster, we now are a truly one-stop shop for our customer base, and that's illustrated by some of the larger contracts we're now winning where pharmaceutical and biotech companies are basically saying to us when we're talking to them is that they've chosen to work with Abingdon because of our full service offering, including the regulatory performance and performance evaluation we can offer to them. So we've got 2 sites in the U.K., one in York, one in Doncaster, where Doncaster is where we do our analytical performance evaluation activities. York is the development and manufacturing site. And then as we'll come on to talk about, we've opened a site in Madison, Wisconsin, primarily initially for development and commercial activities, but laterally expanding into manufacturing. We've got significant expertise in the area. And as I've said, the key thing for moving forward is we now really do have this end-to-end service offering for our customer base. The next slide gives an overview of lateral flow. And again, many people are aware of lateral flow. What COVID did for lateral flow is broaden its -- the people who knew about it. There was a lot of innovation during COVID. And -- but I think mostly what has happened is the acceptability of lateral flow as a test method has gained a lot more following. So as we announced yesterday, the ability to measure multiple analytes semi-quantitatively is something that people may not have considered when thinking of lateral flow as a simple yes, no qualitative system. But I think this slide illustrates the breadth and strength of lateral flow, and we're applying this across many sectors. U.S.A., we opened -- or we began starting to look at U.S. operations towards the end of 2024. We established the facility at the University of Wisconsin's Research Park in Madison, and that was fully up and running in April '25. That's overseen by Abingdon's Co-Founder, Chris Yates, who founded the company with me. And Chris is now President of Abingdon Health USA Inc. and looks after our commercial operations globally. Chris is spending a lot of time in the U.S.A. He's there last week and he's there this week, in fact. And we're finding an increasing number of the clients working with in the U.S.A. are also asking for manufacturing to be done in the U.S.A., which has come through probably a lot quicker than we anticipated. So there's not only the demand for made in the U.S.A. and avoiding potential import tariffs, but there's also instances where U.S.-based clients of ours are grant funded and to use those grants, they have to be spending the dollars in the United States. So having that U.S. base is very important for us and particularly as it's the largest global market with about 40% of diagnostics being used in the United States. And we've got off to a good start. This slide illustrates 5 projects which we previously announced that we were up and running since April. We've added a sixth one there, which was the one we announced by [ RNS ] yesterday. But I think this illustrates the breadth of what lateral flow and the company can do from testing for a duplex device to measure a pharmaceutical product and its metabolite through to looking at veterinary products for dogs and in cattle. We've done some feasibility work with the U.S. West Coast University. That was a relatively short-term project, which is now completed, looking at feasibility of a new nanoparticle. I mentioned earlier that there's been technology enhancements since COVID, and this is another example of that type of work. And then infectious agents in animals and humans. So I think illustrating, a, that we've got off to a good start in the U.S., but also, as I've been saying, the breadth and use of lateral flow. The sixth contract we've listed on here is a new one. We announced this yesterday. It's a good example of both our full service offering and the use of lateral flow in this multiplex semi-quantitative format. And I think, again, bringing all that we've been saying together and that it's a U.S.-based project using the benefits of lateral flow and across everything from feasibility through to regulatory eventually. So what do I mean by full service offering? That's illustrated here on this slide. So in the darker green, you can see the laboratory work or biochemical work, if you like, from feasibility, optimization of that test through to scale up the manufacture, technical transfer, which is where we make multiple batches of a product to ensure it can be made reproducibly and then the manufacture, launch. But running in parallel with that, and all this is done now internally by our 45 strong team of regulatory experts of the 123 total personnel right from regulatory strategy at the beginning. Some people often think that regulatory comes at the end of a process. It doesn't need to start at the beginning. So we help the customer with their regulatory strategy, the quality management right through to risk management and the performance evaluation, which we can now offer from our Doncaster lab, where we're creating the data that's required for regulatory approval to create a technical file. So that Doncaster lab is bridging between product development and regulatory approval. And then there's the in-country registration, et cetera. So the whole process from start to finish, whether that's the laboratory biochemical work or the regulatory work that's now wrapped altogether in this full service offering. And I think that can be illustrated here by all these previously announced contract wins, 3 of them from the financial year '25, the bottom 2 post year-end. The European biotech company and the pharmaceutical company, the fourth one there, they are 2 of the examples where I said they've come to us because of the full service offering, and we're winning these larger, more complex contracts because of that. We've got the $2 million sexually transmitted disease program, which is ongoing and is now moving through with 4 of the 7 tests we're developing through to the performance evaluation stage. The GBP 0.8 million funding from UKRI, that's the malaria development program that we're doing with the Institut de Pasteur in Paris, FIND and some other prestigious entities such as the London School of Hygiene and Tropical Medicine. And that project is going well. It's to create a malaria test for use in the developing world. And then the final one on here is the one I've just mentioned in the U.S.A. where, again, illustrating the full service offering attracting these larger contracts from our client base. So malaria, I've just mentioned, this slide gives you a snapshot of new product developments that we're doing. I think it's important to note that these product developments are done for -- to add to our toolkit if you like. So it's to develop products alongside others such as the malaria, where it's paid for development or with the sexually transmitted infections, it's a hybrid [ of paid ] for development and some developments where we're using Abingdon's resources such as with gonorrhea and chlamydia to add to the portfolio of tests, which we would then flow back through the same route to market as the other paid for developments. There's a few other examples of our product developments on this slide, again, with the theme being products which we can immediately have a route to market for. The partnership we formed with Okos Diagnostics, a Dutch company, to jointly commercialize an avian flu test is going well. We're currently evaluating that product in the U.S.A., U.K. and Europe, primarily in cattle, in bovine milk and in poultry. There's a potential future use for use in humans, but our focus currently is cattle and poultry. And you can see an example of the test on the right there showing a positive avian flu result. So as I said, a lot of our development is to enhance what we can offer to our customer base. The AppDX is an example of that. AppDX is a lateral flow smartphone reader, which we've been developing for several years now, and it's ready for evaluation and use by clients. We're talking to customers about the use of this smartphone app with their products. It's patent protected. A new patent was granted in July in the U.S.A. And the system is based on machine learning and AI, allowing the smartphone to capture and interpret the result of a lateral flow test and to send that result wherever it needs to be sent to. As I say, it's another tool for our customer base to use. And then the eco-friendly lateral flow devices, the next slide gives further detail of that. We've been looking at eco-friendly devices for a while, as those of you that follow the company know. We settled on a bio-based housing as an alternative to plastic. The key benefit for this is that it's obviously over and above the bio-based nature of it is that it's injection moldable. So that means we can use classic production methods to produce the devices. We can use injection molding techniques as we use for our plastic devices. But we're using red seaweed-based material from a partnership with a company called SymbioTex based in Wolverhampton, and they're the material providers, and we're using that material to produce these devices and to offer the cassettes and technology to our customer base. So we've got examples on the slide here of actual devices in use. So these were injection molded using our standard partners in injection molding. On the left, you can see a test for a plant disease, a positive and a negative. And on the right, a pregnancy test, positive and negative. Using a midstream urine sample is how that one works. So the sort of device you use for pregnancy and fertility. So to summarize, we've raised GBP 3.4 million gross recently, GBP 3.2 million net. The key drivers for that fund raise were to support the full service offering, which is gaining momentum and gaining clients of a larger type, so requiring greater cash flow, the larger contracts with longer payment terms are something which does require better cash flow. But also the U.S. operation is driving growth. It's -- we've got an increased demand in the U.S. for manufacturing. And what the fund raise does is both aid that cash flow of the larger contracts, but also aids us to accelerate the growth of our U.S.-based manufacturing due to the demand of our customers for that activity. So in summary, we're very pleased with how things are going. We're both in the U.K. and in both our sites for our regulatory activity and the ability to win these larger CDMO contracts, including the regulatory. The U.S.A. has got off to a flying start. We expect that to grow, but also we expect growth in the U.K. operations. So yes, that's a summary of the results. Happy to take any questions. And I'll hand back to Jake at this point. And...

Perfect. Chris, if I may just jump back in there. Thank you very much indeed for your presentation this morning. I'll just bring back up your cameras for the Q&A. [Operator Instructions] Just like to remind you that a recording of this presentation along with a copy of the slides and the published Q&A can be accessed via your investor dashboard. We have received a number of questions throughout your presentation this morning. And thank you to all of those on the call for taking the time to submit their questions. But Paul, at this stage, sir, if I may hand over to you to chair the Q&A with the team. And if I pick up from you at the end, that would be great. Thank you.

Thank you. Yes, we have a few questions in. Straight away, if we could go into, as you've just been talking about the eco cassettes, alternatives plastics, one of the investors was asking what's the cost likely to be between the comparison of an eco cassette to a plastic one ultimately?

Very similar to plastic. It's slightly more expensive. But by that, I mean, of the order of 10%. So in round figures, if you are paying GBP 0.10 for a plastic device, you'd be paying GBP 0.11 for one made from seaweed. I mean don't [ be quick to ] hold me to GBP 0.10. I'm giving the example of the amounts of money. So it's in terms of a test for -- the plastic part of the test is relatively low element anyway. But yes, adding -- using seaweed adds a minimal amount of cost to the product.

Then the other question was about the U.S. shutdown. Has that created any headwinds for you?

It hasn't directly affected us. Although we are pleased to see things that seem to be changing this morning in the U.S. We've been talking to government agencies from our U.S. base. Those conversations have continued, which is potentially because we're talking to more -- those agencies which are regarded as more -- to pick the right word, which aren't closed down. So more...

Does it have an impact on the regulatory side sort of FDA...

We haven't found any impact at all. I'm not saying we wouldn't if it were to continue. But so far, no, we haven't found anything to our detriment.

We've had a couple of questions about eco flow, and I'm not sure whether from a confidentiality point of view, you'll be able to say much about a specific company. But the question was regarding that you've seen the written -- the investment has been written off. It is immaterial, I appreciate. But there are questions as to is that no longer a project, what's happened? I don't know whether you can say, but if you can.

I think the way to answer that question is to refer back to the previous slide. I mean what we've done is looked over the past year or more at eco-friendly alternatives to plastic. We've settled on red seaweed for a number of technical reasons. The prime practical reason is we can use injection molding to make the devices. So rather than other ways of making eco-friendly products, the fact that we can use injection molding means it's a much more manufacturable product, and we've decided to pursue that material rather than other materials that we've looked at previously.

We've got a question on the LTIP. Are you able to give shareholders more idea of the targets that need to be hit for these to be vested? And when would those be available? Are they going to be in the annual report?

We haven't previously disclosed those targets other than to say that they're challenging. I appreciate people would like to know what those are. We haven't announced them. We would consider doing that in the future. But I'd be happy to say that they're aligned with shareholder interests. So the sort of things you would expect in terms of encouraging growth and shareholder value. But we can't at this point disclose the actual targets.

There have been a few questions on this. As you say, if you're able to consider it, I know it's not you, but the Remuneration Committee, I think [indiscernible] would appreciate that. Questions now mainly on -- probably for you, Tom. They all sort of hit the same sort of questions and maybe you can talk about what the forecasts are in the market. But it's the question about what revenue levels do you need to be at to get to breakeven? And when will that be achieved? And the same question could be answered when people are asking about cash flow positivity, when do you expect to achieve that? Obviously, not your forecast, but what the market expectation [indiscernible].

Yes, sure. Well, so [indiscernible] have a note out there in the market, and I'll share a few headline numbers from that. So the forecast they have for the current financial year ended June '26 is revenue of GBP 12.2 million or GBP 12.6 million, including grant funded revenue that sits in other income. And that shows breakeven at adjusted EBITDA level. The following year, they've then got an increase to GBP 15.1 million and trading profitably. And I think publicly, we've consistently said we're working towards cash flow breakeven or cash flow positive in calendar year '26. So it's something that's on our minds as well. Obviously, we've been through an investment phase with the intention of growing the business and creating value. Challenge now is to then drive the revenue growth on the back of that.

One of the questions also about revenue was about wanting to know when you'd be profitable. And this particular investor was saying because we'd like to stop capital raises. We don't want to see dilution for existing shareholders. So I wonder whether that's an opportunity for you to talk about the recent fund raise and why you did it and why you feel, well, a, what it was driven by and I'm assuming also the shareholder support behind it. But the reasons why you did a fund raise because ultimately, I guess you have to balance between the dilutive effect and then the effect of being able to accelerate growth.

Yes, exactly that was to accelerate growth. So there were 2 prime reasons. One was to accelerate the growth of our manufacturing scale up in the United States where we're getting a lot of customer demand. And the other was to accelerate the execution of the larger contracts that we're winning. We could have ticked along without doing a fundraise. But I think the key for us as a Board and our employees and shareholders is to grow the company more quickly. Obviously, there's a dilution that occurs with the fundraise, but our primary objective is to grow the total value, grow total shareholder return. And so yes, it's about accelerating growth to get us where we want to be more quickly.

And there was a comment that I think we should address one of the shareholders is asking if he wants to know the company forecast rather than [indiscernible] forecast just to make it clear, you obviously provide guidance for analysts. But in terms of what the expectations are, the expectations of what the market suggests what the analyst research is, you're not going to provide and it would be very unusual for them to be a wildly different forecast from you as a company. So I just want to make that clear because it has been raised in the comments. Could you give some update on the pipeline for patent applications? Are there more applications pending in the U.S. other than the patents, what are the barriers to entry do you think you have in the U.S.?

Yes. Well, a lot of our IP is know-how. We patent things where we think it's sensible to do so. And most of those patents have been around the AppDx smartphone reader. The -- we just had one granted in the U.S. There's another one pending there. We've got 3 granted in the U.K. and others pending in Europe and U.S.A. based on those same families. So patents isn't a big elements of what we do. We patent things where, as I say, we think it's appropriate to do so. But our key barrier to entry is really the know-how and knowledge-based IP, coupled with the -- I've referred numerous times to the full-service offering. But why we're winning contracts with pharmaceutical companies and biotech companies is because we do have this large offering, which is pretty unique in our sector.

Thank you. And then the final question, an investor has asked, is there any background you can give on the involvement of Northern Powerhouse Investment Fund?

Yes. Northern Powerhouse Investment Fund, we were an investor before IPO. It's a fund managed by Enterprise Ventures, part of Mercia Group. So they're a long term -- yes, they're a long-term investor and have been supportive of us for many years before we floated and have maintained their shareholding in that.

Thank you. Thanks, Chris and Tom. I'll hand back to Jake.

Perfect, guys. That's great. And thank you very much indeed for being so generous of your time then addressing all of those questions that came in from investors this morning. And of course, if there are any further questions that do come through, we'll make these available to you after the presentation. But Chris, perhaps before really now just looking to redirect those on the call to provide you with their feedback, which I know is particularly important to yourself and the company. If I could please just ask you for a few closing comments just to wrap up with, that would be great.

Thanks, Jake. Well, first of all, thank you, everyone, for taking part in the presentation and asking the questions and for your support of the company. We're very excited about the next phase of the company's growth. We're well funded. We've got our activities internationally with a very strong and skilled employee base. And yes, the full service offering, which I'll continue to refer to, I think, stands us ahead of our competition. And yes, we're looking forward to this current financial year and continuing that growth.

Perfect. Chris, that's great. Thank you once again for updating investors this morning. Could I please ask investors not to close this session as you will now be automatically redirected for the opportunity to provide your feedback in order the management team can better understand your views and expectations. This will only take a few moments to complete, but I'm sure it will be greatly valued by the company. On behalf of management team of Abingdon Health plc, we would like to thank you for attending today's presentation. That now concludes today's session. So good afternoon to you all.