Aptamer Group PLC (P0J.SG) Earnings Call Transcript & Summary

Hello, and a warm welcome to the Aptamer Group webinar with Dr. Arron Tolley, the Chief Executive Officer and Andrew Rapson, the Chief Financial Officer. This website is hosted by Turner Pope Investments. And you're with me, Katie Pilbeam I'll be moderating the Q&A session with all of the questions that have been sent in to us from your investors, followers and those of you watching as well. But before we do that, it is over to Arron and Andrew for the webinar itself.

Thank you, Katie, for the introduction. So we'll kick off by introducing the presenting team. We'll give an overview of the business and our model. We'll give you a brief commercial update and look at the unaudited year-end position, will discuss our recent fundraise, use of funds and then take some questions. So first and foremost, I will just draw your attention to the obligatory disclaimer before moving on to introduce myself. So I'm Arron, I'm the Co-Founder and CEO of Aptamer Group, I have a degree in molecular medicine and a PhD in structural biology and biophysics. I have recently been appointed visiting professor at the University of Missouri for translational or commercialization of science. I founded the company in 2008 when I realized there was a scientific and commercial opportunity in this technology platform. My role broadly involves the day-to-day running of the company and the translation/commercialization of the science into market-ready products.

Hello, everyone. I'm Andrew Rapson. I'm CFO of Aptamer Group. I have over 20 years' experience now as a chartered accountant, and I joined Aptamer on August '22 and then took over the role as CFO from August '23. I've worked in the AIM environment now for over 10 years.

So due to the mail on Sunday tip. We thought we'd get a few extra views. So we're just going to do a recap on the business, the market and our model. So who are we? So we're Aptamer Group plc. We're a biotechnology company headquartered in York in the North of England. We're addressing a broad affinity ligand market worth $210 billion annually. To do this, we have a proprietary platform for the discovery of high-value molecules called Optimers. Optimers are innovative, cost-effective alternatives to traditional antibodies, and we deliver bespoke solutions to the life sciences sector. We are recognized as a key global player in our field. We have a global customer base, which includes 75% of the world's top 20 pharmaceutical companies, and 100% of the top 10 companies. So how does our technology fit into the current market space? So within the affinity ligand market, they're an array of technology platforms collectively known as affinity ligands that have grown out of the fact that antibodies fail to work around 50% of the time. There are a variety of different companies, Abcam all the way through to ourselves, Aptamer Group focusing on different scaffolds, such as nanobodies, affimers, Bicycles and Optimers, we're all addressing this enormous $210 billion market with the key difference being that we are an evolving service business and the other platform technologies have taken molecules derived from their partnerships. So we have structured our business model to emulate this proven pathway to value creation. This slide captures our business model and various different applications. Our business model also has platform technology at the center and is involved in a wide array of application areas across human health and cosmetics. At our core, we sold high-value complex problems for companies in a wide range of sectors on a fee-for-service basis. The model, however, is more nuanced than just fee for service. We get paid for the R&D work that we do, but we also get paid to support our partners, the integration of the molecules in downstream assays. However, the real value/upside comes from future exploitation of that solution through licensing. Like other platform companies, the objective here is to generate more revenue from passive income delivered through partnerships and offering proprietary solutions to customers. So as a business, we are currently focused on building a critical mass of licensable products, this is a key strategy that runs in parallel to generating fee-for-service revenues. Over the past 2 years, we have had a strategic focus on asset development and licensing as we feel shareholder returns are better protected with passive income streams. We've worked very hard to validate assets that have been identified from fee-for-service work and also our own internal research and development and move them into multiple active licensing discussions. Over the past 12 months, we've gone from 4 licensable assets to 11. And this is done in a focused and diversified way across a range of application areas adding near medium and deliberate strategy to balance short-term revenue with long-term value in a portfolio-based approach. Recently, we have added an exciting new opportunity in the detection of folic acid for using food fortification products for emerging countries. Here we are in talks with the global organization and licensing our solution. Of the 11 licensable opportunities, 3 have already been signed and 3 are currently undergoing contract review. We are also concurrently seeking partners for our liver delivery assets and are in late-stage discussions with key players in this area. I think the key take-home from this slide is that we are working on developing a range of drivers and valuable assets that have the potential to add significant value in the short, medium and long term for the company and the shareholders. So this slide really aims to get over 2 points. So it's to provide a quick update on technical progress. But also secondly, to aim to clarify questions around the timing of revenues and licensing. I mean, we could speak easy for 20 minutes on each subject. So this update will be brief. However, my co-founder, David Bunka, will be doing a detailed technical webinar explaining these technologies in light person terms for those interested in understanding how all of this adds value. And this will be in a week's time. So it's best to think of these contracts in terms of the length of development, the technical complexity and value are all often linked together. So what do I mean by that? So for example, simpler projects like enzyme inhibitors. These could be done very quickly. Here, the work was identified, done and commercialized within a 12-month period. These molecules are being developed, manufactured and tested across 2 sites, 2 separate companies showing exceptional functionality, and we are now in legal contracting with these 2 partners. A third MTA for evaluation is also currently underway with a different partner. The Optimers here will be solved by our partners and will be included in our asset kits. Revenues are expected to start this financial year. The second project for the prenatal testing, and this is very interesting. This came out of an EU-funded grant. This was a technically challenging project and took 2 years in order to develop the science. This technology essentially allows the purification of rare cells from pregnant women's blood to be screened for genetic abnormalities, avoiding risky prenatal testing procedures, such as amniocentesis. This is a high unmet need and as such, has already been evaluated with great success by a major player in the life sciences market. Here, there is still some work to do, but preliminary licensing discussions have already been had. This is a near to midterm opportunity in my view. Similarly, the Alzheimer's test is also a key area of unmet global need. Our solution has been proven to work in clinical samples. We have successfully converted that assay into what's referred to as an ELISA format, enhancing the compatibility for a range of different clinical analyzers. However, this work has still to be advanced. There are things like regulatory approvals, FDA approvals, more clinical references to be taken. So in our view, this is more of a medium- to longer-term opportunity. Licensing terms on this situation have been locked in early in order to secure a position through the product REIT market. And finally, the liver fibrosis work. This is a longer-term therapeutic opportunity and naturally therapeutics take longer to develop, but have massive enormous potential upside. We've been working on this technology since around 2021 -- late 2021 as part of an initial development project with a global pharma company. We own all the IP and have developed internally this asset. We have demonstrated the delivery of gene therapies and shown preliminary data on the reversal of fibrosis. The molecules also target various fibrotic tissues, making it applicable for the delivery to a range of fibrosis associated cancers. As part of this work, we have also validated a novel approach to biomarker discovery, which will be explained in detail in next week's webinar with Dr. Bunka. This is a transformational value opportunity for us. It's a longer-term opportunity and one which we are actually currently in active discussions for licensing and technical evaluation with a top 20 pharma company. So I'll now pass over to Andrew to go through some financials and some numbers.

FY '25 has been a significant year in terms of asset progression. As Arron has mentioned, we've significantly advanced the asset portfolio, starting the year with 4 assets in the licensing pipeline and concluding the year with 11. This is a significant step forward and demonstrates that the technology has a value to customers. The breadth of the portfolio is pleasing, which shows broad applicability of the technology. We're particularly pleased that 2 of these assets have resigned licensing terms one to Neuro-Bio in the development of early Alzheimer's diagnosis, and a second to Glasgow University as a vaccine adjuvant. We now look forward to seeing how these customers progress the development of these assets into end-use applications. We're particularly excited about the potential of the 3 late-stage legal review licensing deals for enzyme modulating Optimers. We have 2 customers approaches separately early in the financial year with a view to carrying out fee-for-service work with their enzymes very successfully. The technology has performed very well in this setting. And now we have 2 customers with whom we've agreed heads of terms and we're progressing through it with a view to licensing the technology. We have continued to build on the fee-for-service offering in the current period, resulting in revenue of GBP 1.2 million for the year versus GBP 0.85 million for FY '24. We've seen a strong mix of repeat business and new contracts and we closed a series of new contracts in the final quarter, an element of which will roll over into the new financial year. We're very pleased to agree a second fee-for-service contract with Unilever, which demonstrates the potential they've seen in the technology from the first project. As ever, we try as much as possible to retain the IP when conducting these fee-for-service projects so that we have the potential to generate an asset that can be licensed to the customer downstream. This is where the real value in this technology is. In the case of the repeat business, with a top 20 pharma partner, we managed to retain the IP in a contract worth GBP 126,000 in fee-for-service revenue. Target material was delivered quickly to us, which meant we recognized some revenue in FY '25, and the remainder will roll over to FY '26. We've recently signed a development contract with a major multinational conglomerate to deliver Optimer-Fc for inclusion in immunohistochemistry kits, and this deal includes a 2% royalty on net sales from the assay kit. Another repeat customer project has come in the form of a second development program with a global enzyme supplier with a fee-for-service work valued at GBP 105,000. This follows a successful development of a binder on the first project, again where we retain the IP, and this asset has reached heads of terms with a view to entering a licensing agreement. We have successfully developed an Aptamer based test for Alzheimer's in conjunction with Neuro-Bio, which has been converted into a hospital ready format. This has been passed over to the customer and has resulted in the execution of a double-digit royalty-bearing license with Neuro-Bio. Revenue for the year was GBP 1.2 million, up 41% on the GBP 0.85 million reported in the prior period. We took forward much improved sales and production pipelines into this latest financial year resulting in the increased revenue. We've continued to convert deals steadily throughout the year, continuing to focus on retaining IP to make the business more financially secure in the future. Cash position at the end of the year was GBP 1.1 million, and we raised a further GBP 1.8 million net of expenses shortly after the year-end. We have strong support for the fund raise this time around, which was oversubscribed and puts us in a much stronger position to execute our plans over the near term. In terms of use of the funds that we've raised post year-end, there are 5 key areas that we'd like to deploy the funds over the near term many of which are a continuation of the successful work that has taken place over the last 12 months. Firstly, asset licensing discussions, as we referred to earlier in the presentation, we have a number of assets that are going through legal contracting, including supply, due diligence and testing. We're finding that these processes are quite lengthy. And so ensuring we have the financial stability to complete these negotiations and onboarding processes is key to us getting a good outcome. Secondly, the manufacturing investment. This aligns nicely with the asset licensing negotiations use. As a company, we've only provided Optimers to customers to date at scale required for research and development. Signing supply contracts will require us to be able to upscale our production capacity from where we are now, depending on the success of the products that incorporate our Optimer. Thirdly, advancing the liver fibrosis program requires investment in animal models as a next step. If successful, this will open doors to other partner programs to assess the value of this technology as a delivery system. And as part of the work that we've done on liver fibrosis, we've identified the biomarker. Been able to identify biomarkers as gaining strong interest at industry conferences recently and has the potential to become a revenue-generating service for us in its own right. And lastly, we also want to look at leveraging the huge amount of data that we have with machine learning models that can help us to more efficiently select or predict Optimers that will be successful for certain targets. Speed of development in this area is significant and being able to leverage a database like ours could differentiate our service offering. So they are the key areas in which we're looking to deploy these fundraised proceeds. I'll now hand over to Arron to go through them in a little more detail.

Thanks, Andrew for that overview. As Andrew said, we recently raised net GBP 1.82 million to help us accelerate the commercialization of our technology. And this will be deployed broadly across 5 key areas. So here is the first one. So asset licensing negotiations. We've strengthened our balance sheet to support ongoing negotiations. And there's 3 broad reasons for this. Firstly, to stop larger companies attempting to run the clock down during negotiations; secondly, to develop necessary data to support higher-value licensing opportunities; and thirdly, to get legal support on contractual terms. It's really important when protecting passive income streams to have solid legal contracts. So due to the requirement to manufacture the molecules for commercial licenses and for our internal preclinical drug delivery, it's really appropriate and prudent to be able to protect our IP and increase margins by producing the products, the real licensing in-house. So some funds will therefore be used for capital equipment for production scale up and the implementation of GLP-level manufacturing as and when required by our customers. This gives us total control of the margins, the IP and the delivery of our products to our customers. So on the liver fibrosis program, internal work suggests that we've identified a molecule that can open up opportunities in fibrosis and liver fibrosis, fibrosis associated cancers. In order to be able to negotiate strong licensing deals with big pharma companies to give them access to our platform, we need to have animal-based validatory data. So some funds will be used to support the generation of data packs in animal models for our liver fibrosis and fibrosis associated cancer delivery technology. This will give us a stronger negotiating position for access to our platform. As part of our liver delivery project, we've also validated a novel biomarker discovery approach. Again, this will be gone through with Dr. Bunker in a bit more detail in next week's presentation. We will now be able to offer this as a service alongside our existing fee-for-service work. This will open up additional revenue streams. These are yet to be determined. Some funds will therefore be used to service in-house equipment to develop additional case studies and generate additional data to increase commercial traction. Some funds will also be used to launch and market the new service. And finally, AI and machine learning. This is a slightly more complicated slide to explain. But briefly, machine learning is a branch of artificial intelligence that enables computers to learn and improve from existing data. They're doing this instead of following predefined instructions and machine learning essentially allows the data that we have to be analyzed rapidly, patterns to be recognized and then predictions or decisions to be made based on what the system has learned. So for us, this really translates through to things like RNA binding proteins. These have traditionally been considered undruggable targets. They're increasingly being recognized as important therapeutic targets as time goes on. The problem of RNA binding proteins is they often lack well-defined binding pockets, unlike enzymes, which have very well-defined binding pockets. And they are generally challenging for targets, including small molecules and antibodies. These RNA binding proteins take part in complex interactions, biologically with other proteins and RNAs through extended services rather than having defined pockets very often with large disordered regions, it makes them quite difficult to generate binders to. Now the natural binding partner for an RNA binding protein is a therapeutically viable RNA. Now our Optimer platform happened an RNA-based system, and we have extensive data sets, probing essentially the interactions between RNA molecules and various different proteins. So obviously, we are going to use this data to our internal knowledge of targeting these proteins therapeutically. This will open up a new application area for us beyond targeted delivery. We will obviously then use this model to enhance our fee-for-service offering and extend it as a service. So finally, we'll come to the summary. So essentially we've enhanced our financial position, and we're using that to achieve robust revenue growth. We've expanded our Optimer portfolio over the course of the year from 4 to 11 assets. 3 of which are currently licensed, 3 of which are under evaluation and contracted. Initial license in regard with 3 other partners demonstrate great commercialization and progress towards non-dilutive revenue streams. We've increased the number of repeat contracts, highlighting commercial demand for the technology. We've made excellent technical progress across multiple Optimer assets from reagents through to diagnostics and potential therapeutic delivery molecule supporting the advancement of discussions with multiple partners, including recent discussions with a top 20 pharma company for evaluation of our liver-based technology. We've also raised $1.8 million in funds in July to support the strategic plans for the commercial progression of the Optimer assets and our platform. So I would like to thank you all for listening, and thank Katie for introducing the presentation, and we'll hand over now for questions.

Okay. Thank you very much indeed. Let's get stuck in. So the first question today is, can you name the global health organization you referred to in your trading update. If not, are there reasons you haven't named them. And for that matter, several other organizations, you are negotiating contracted with?

We haven't named the global health care organization simply because we don't name all of the companies that we work with for various different reasons, not least confidentiality and there is no particular reason other than that.

Okay. So this next question is asking about the financials. So this ones for Andrew. How has the news of the latest fund raise being received by those potential customers who needed to see Aptamer with improved financial substance before entering into long-term contracts?

So improved financial position is only a positive for us in these negotiations. We deliberately acted early on the fund raise to avoid negotiations with customers becoming more protracted and eroding any confidence there. We previously had customers question our financial position, but this latest fundraise has helped to mitigate the same concerns in these latest negotiations.

This one is another financial question. So this person is saying that they were hoping for a higher turnover figure in the results. So can you explain why there seems to be a lag between the revenue you announced and the apparent value of contracts you sign?

Yes, sure. Well, projects typically take 3 to 6 months to complete and the revenue is recognized as the work is done over that period. The work commences once the customer sends us material or targets as we refer to it to select our Optimers against. Mostly customers are ready to start straightaway. And so we start recognizing revenue straightaway. So in examples recently where we signed deals with Unilever, a top 20 pharma, an enzyme supply that all announced in May and June, they all sent us material straight away, and we started recognizing revenue straightaway. We've had other instances where customers have taken much longer to send material. And these reasons are why we get lag sometimes between a contract being announced and the revenue then ultimately been recognized.

Okay. This next person is asking about AI. So we're all talking about AI aren't we? So are you using AI with your internal work processes? And is this resulting in an increased speed of delivery to the customer or reduce costs? Also, will be offering AI-driven solutions as part of your commercial services?

Yes. So it's really a good question. So AI is a great tool, but it's not so great that it can work within 2 weeks of funding, unfortunately. We still need to hire a machine learning expert and there will be job adverts help for that relatively soon. And this is a long-term investment for us as a company, which we hope will eventually increase speed of delivery and reduce costs for the development of the Optimers. We currently do have internal bioinformatics capability as a business. We offer that already as part of our solution. So yes, when the machine learning tools are operational, we will be included in them as part of the service.

Okay. The next one is more about your clinical processes. So although your liver fibrosis news is promising. There are several companies looking at targeted drug delivery and some already in the clinic. So what sets your platform apart? And how can you be confident in it at this stage of development?

I'll take this one. That's another good question. I mean, if you look at the companies that we referenced in the first few slides of the presentation, Bicycle Therapeutics and Avacta to name 2, there are multiple benefits of our platform by comparison, such as things like mass scale up of the therapeutics to kilogram quantities because they're nucleic acid-based. And these things are still challenged with things like macrocyclic peptides where Avacta concerns, their molecule is probably more of a prodrug that is active at a particular site as opposed to being a traditional targeted therapy which is delivered to a particular site of interest. So that's where we would differentiate. But to be fair, the results that we've seen to date are very, very good in vitro set currently in negotiations with a top 20 pharma company to evaluate even at this early stage. So that's why we're fairly confident.

This next question is asking about Neuro-Bio. So, I see Neuro-Bio is looking to raise funds. How will it affect you, if they can't raise what they need? Do you think they're likely to IPO?

Very difficult question to answer for us because obviously, we don't represent Neuro-Bio, so we can't comment on their funding position or their aspirations for IPO. But what we are involved with them in numerous conversations with potential global partners with regards to that technology.

Okay. You signed a licensing deal with the University of Glasgow. But normally, we see this work the other way around. Please can you explain why this is a better route to commercialization?

Yes. Well, there isn't really a traditional route in my opinion. I mean, we're working with the team at Glasgow. They were after a programmable vaccine adjuvant and now we're looking for a cutting-edge technology, which we could provide. And we provided that solution for them as we do with numerous other partners. They were already working with a partner. So for us, it's really the same route to commercialization as other assets. It's just through an academic partner.

Okay. Got it. Going back to the financials with this question. What is the current cash burn and approximately which quarter in 2027, does your runway take you to? What are your main assumptions about revenues for you to meet that target?

Okay. So the annualized cost base is just over GBP 3 million per annum, and we're forecasting revenues from fee-for-service to grow steadily. The 2 variables that are harder to predict are the commencement of licensing revenues, which we hope will be near term, but the level of revenue generation from royalties and supply will depend on the success of the product with each customer. At this stage, that's quite difficult to predict. Now, the other variable is the cost of development work, particularly the animal model work that we've referred to. The cost of this will depend on the success delivered from the initial studies. At this stage, we're confident that we have sufficient funds to see us through to 2027 and during that period, we'll look to make progress on the items outlined in the use of funds.

You seem to have a number of shots on goal. So how do you choose which to support financially and which to leave on the back burner? Have any new ventures change your cost base?

Yes, we pick our opportunities based on potential short-term revenue and long-term value to try and create a balanced portfolio of opportunities within the company. In terms of new ventures changing the cost base, anything really that's therapeutic related, which will add long-term value to the company does come at some significant cost at some point in the development. So we've taken the liver technology, for example, as far as humanly possible without animal verification data and hence, the fundraising that we've just done to get some funds in order to develop that animal data that's required. I mean, this opportunity represents massive potential upside for us and hence justifies fundraising to externally validate the platform.

All right. This next one is a nice one. Is there a specific part of the business you're most excited about?

Yes. I think for me, personally, scientifically speaking, I think the liver technology platform is exciting on multiple different fronts. Firstly, it represents an opportunity to deliver a solution to an unmet need at the moment. Secondly, it appears that the data is allowing us to operate in different areas, moving into potentially the area of fibrosis associated cancers. And from a commercial point of view, if you look at other platform companies, their value inflection points, almost always center around demonstration of clinical utility. So that's kind of the approach that we're taking now. So I'm really excited to see how that unfolds over the next 12 to 18 months.

Good stuff. This person here says, I noticed that the Board has an option scheme in place with some high hurdles. So what do you think you need to do from now on to get the shares to the level you require?

Okay. So as a recap, the current option package as vesting hurdles at 1.4p, 2p and 2.5p in equal thirds. And although these are somewhat higher than the current share price, we have confidence that over time, we will get there given the progress we've seen over the last 12 to 18 months. A combination of further licensing of assets starting to generate positive income and then therapeutic and diagnostic development has the potential to increase the value of the business. As you'll have seen in the presentation, there are a number of assets that we've developed for example, the malodor Optimer with Unilever, the [ folate ] Optimer, the fetal diagnostic that each individually have the potential to add significant value to the business. So we have a number of shots on goal, which could lead to these options ultimately vesting.

Okay. And you mentioned it there, the Unilever deodorant deal. This person is asking, is there a time line on when the on-human trials will commerce? And once started, how long all these take to complete? They've added here, one would assume that given there is no medicinal concern, product ingestion and the nature of the product being so -- being a short-term use. The on-human trials should be fairly straightforward and quick to complete? They're saying perhaps a month or so, they're asking. And further, is there a time line on expected route to market post on-human trials, what are the stages thereafter? So sort of 3 parts of that question.

I can take some of that. I mean we've already started the on-human trials as previously explained. It comes in 2 parts. Firstly, it's testing the Optimers on skin scrapings or samples from the skin. The second part is putting the Optimers on to actual human armpits to check whether or not they're functional in a live setting. The holdup as far as I'm aware, and is in the safety evaluation at Unilever side. So it's going through an internal process of approval with the safety team before it can be put on to human skin for obvious reasons. Thereafter, it will go through a variety of different tests for manufacturability. But we believe that we will be able to start having discussions around commercialization and time lines for commercialization as soon as the on skin testing phase of that and prior to manufacturability.

Okay. And this last one, what keeps you up at night?

So aside from having 2 children, who are both under 2, which is a whole other level of discussion, I think making sure that we get enough value out of the deals, that takes a lot of thinking and strategy very often. What's happening, Andrew, very late at night, asking him for his opinion on things. And we work quite closely together on that, finding the time to work through the growing pipeline and the proposals generated by the sales team is also quite a stressful component to the job. Keeping an agile strategy positioning of the assets, market volatility had a few sleepless nights around tariffs a while back until we understood we had limited exposure. More recently, AI adoption and integration. Although I'm pretty IT literate, got my eye on the space by attending a few training, of course, it was back time to make sure it was prime for when the timing was right.

Nice, Okay, well, Trump's keeping us all on our toes. So that brings us to an end. Thank you so very much indeed for everyone that sent these in. Terrific questions, and people again, have really spent some time on this constructing them all. And hopefully, you all got the answers that you wanted. And thank you to Arron and Andrew as well for going through those all with us for the webinar itself, for the Aptamer webinar. Thank you for watching.