Atomo Diagnostics Limited (AT1) Earnings Call Transcript & Summary

To our Q4 FY '26 quarterly report. And I'd like to thank you for joining me here this morning. If we jump into the FY '24 -- '26 highlights for the quarter, we had $2.3 million of revenue for the quarter, bringing total revenue for the FY '26 period to $5.3 million. That, of course, is unaudited, but that represents a solid increase on the comparable revenue for FY '25, and we'll talk later in the presentation about what has driven that revenue growth. In addition to the revenue disclosed for the quarter, we did receive through the period, orders that will be booked as revenue in this FY '27 period. That was about another $1.5 million of orders. We are seeing a significant increase in business as we roll forward from FY '25 through '26 into '27. Cash receipts for the period totaled $3.8 million, and I will note that we received just after June 30, further cash receipts of $1 million through the first part of July. We finished June 30 with $3.7 million of cash on hand and no debt. With regard to business highlights for the quarter, we did bring on a commercial manager through the year, and we are now starting to see some increases in onboarding in ANZ. 33% increase this quarter since we started the onboarding program. We are also expecting to see that momentum continue into FY '27, and we have expectations of a multiple increase in onboarding of pharmacies active in selling the HIV test through this next period. We also successfully completed some new customer Pascal deliveries. We announced earlier in the year 2 new customers coming onto the platform. We have now supplied them with product in the quarter, and that will facilitate the completion of, we believe, long-term supply agreements with those customers in the coming months. We are also continuing to progress with go-to-market planning for both active syphilis and liver. We will talk a little bit later in the presentation about the opportunities and the activities related to those 2 products as we roll forward. We have also previously announced earlier in the year a plan to introduce Blister Machine-mk2 into operation to increase capacity and reduce cost of goods. There has been progress through this quarter in the setting up and qualification of a facility here in Australia, where Atomo is running that directly. That is well progressed, and we will talk a little bit at the end of the presentation around our plans to complete that activity and what that might mean for our operational footprint and capabilities moving forward. In terms of Appendix 4C that accompanies this report, we have put out a detailed 4C alongside the presentation. I would encourage shareholders to go through that in detail. I think the main point from this is that we had $4.5 million of receipts from customers through the FY '26 period. A further $1 million come in just shortly thereafter, bringing the total to about $5.5 million from the start of FY '26 through to today. We had a cash balance at 30 June of $3.7 million. Obviously, cash has come in since then, and we continue to monitor that, and we will be able to provide a further update on that when we put out our full annual results at the end of August. In terms of financial highlights, if we look at the cash flow activities for the quarter, cash receipts totaled $3.8 million. That was $1 million of customer receipts, further funding from the CRC-P grant and $2.7 million from a recent capital placement. Outflows for the quarter totaled $2.8 million. The focus remains on commercial scale-up, particularly for HIV and Pascal OEM, and the progression of new products to market being primarily syphilis and liver. With regard to revenues, you'll see from the graph that we've had a substantial uptick in revenue compared to the prior period, Q3, but also compared to the comparable Q4 period last year. We do expect to see that revenue momentum continue into FY '27. Revenue, as I mentioned, was $2.3 million for the quarter, $5.3 million for the year unaudited, and that represents a 40% increase on the FY '25 revenue. That growth has come primarily from an increase in HIV business as well as, in the back end of the year, an increase in OEM Pascal business, primarily to Lumos, off the back of progress that they've made in their markets with the CLIA waiver. We have received also, in addition to that revenue, further orders during the period for $1.5 million. So we do go into FY '27 with some momentum in terms of orders and production in the system, and that gets us off to a very good start. With regard to operating costs, we do continue to remain very focused on reducing operating costs in the business to get to breakeven. You'll see that the operating costs for the quarter have reduced compared to the prior period. Again, a significant increase compared to the comparable period FY '25. So that is an ongoing focus of the business as we look to streamline operations and divert more of our efforts to commercial activities. If we look at the financial summary of the business more holistically, we are seeing momentum in both HIV and Pascal OEM, we do expect both of those to continue into FY '27, and we are optimistic about having further growth in both those segments. As well as growth organically in the current channel, we are actively looking to expand the customer base for Pascal. Two new customers coming online, we believe, in the next couple of months with long-term supply agreements. That will build out our customer base for Pascal from 2 companies to 4. And we're also seeing the onboarding of new pharmacies in Australia and New Zealand, as well as the onboarding of new distributors overseas, and that will also continue to show growth in the HIV business longer term. We have seen revenues pick up, we do see historical EBIT losses contracting, and we're very focused on bringing that through to breakeven. The balance sheet remains debt-free, it's worth mentioning that the validation of our own operations system in Australia will not only increase capacities within the business but will materially improve margins as we bring in-house operations that were previously outsourced to third parties. With regard to medium-term growth beyond HIV and OEM Pascal, we're making good progress with active syphilis. We're very excited about the liver test opportunity, we'll talk a little bit later in the presentation around both of those opportunities. Atomo was very focused on expanding its own product portfolio so we can maximize not only the opportunity that our technology offers, but maximize margins through owning the vertical supply chain of the full product. We have been successful in launching HIV self-testing, and as you've seen from recent results, we are seeing momentum and growth in that channel. That's supporting a number of other opportunities. Active syphilis is a very exciting opportunity. We have completed development. We are going through tech transfer from the Burnet Institute lab into an industrial production process that can support go-to-market. That is a product that dovetails very nicely into the HIV business. It's got very similar customers, very similar users. Outside of syphilis, both blood pregnancy, which is the NG Biotech product, offers distribution opportunities for us in markets where NG do not have a commercial footprint, and we are in discussions with a number of countries around taking over the distribution for that product on behalf of NG. As well as opportunities to launch a liver test. Longer term, there's a number of other tests that are very suited to the Atomo Pascal platform, and we do see significant opportunities longer term with the building of a portfolio of Atomo products. The success that Lumos had getting CLIA waiver in the U.S. market on Pascal opens up a go-to-market channel for these products in the U.S. that we're very excited about. If we just talk firstly about HIV business activity. We started in early this year a growth opportunity program rollout in Australia and New Zealand. We've had a lot of success with that. Our pharmacies online actively selling the test has increased 33% this quarter. We've gone from about 150 up to 190 in the quarter. We do expect to see more onboarding through FY '27, and we are looking to get to a 6x market penetration level longer term over the next couple of years, and we're having good success in rolling that out. We've also been very successful entering into New Zealand. We launched there just over 12 months ago. We currently have 70 pharmacies in New Zealand activating the product. Most recently, the CDC wholesaler has taken it on and launching it through their pharmacy. We're seeing good growth in both those markets. It's worth noting that we do expect to see that growth continue through FY '27 and beyond. We're also very pleased to see that the Australian federal government has rolled over further funding for the next period on HIV self-testing through public health. We have seen our NAPWHA program grow fairly materially over the last 24 months, and we do expect to see that business continue over the medium term as the Australian government renews its commitment to self-testing as a way to access, at low cost and with good precision, the types of people that they want to see testing through targeted reach-out programs. It's worth reiterating that those programs are ideally placed to support the launch and distribution of our active syphilis test, which has been funded in part by a grant from the Australian federal government. If we move beyond Australia and New Zealand to the international HIV business landscape, the right-hand side of the slide, you'll see that in Europe with our partner, Newfoundland, we've seen a sizable increase in business through this FY '26 period. We've been working with them to expand beyond their foothold in the U.K., where they've been very successful getting into the market through Boots and Tesco, they're looking to replicate that pharmacy retail model in other markets, including the Netherlands, Germany, and Scandinavia, as well as a few markets in Eastern Europe. We do expect to see that trend continue with another sizable uptick in revenue for the FY '27 period as they start to build momentum in that European expansion. Outside of Europe, if we look at our LMIC, that's low and emerging and middle-income countries business, basically global health channels. We have seen that Viatris has stepped up in terms of volume for FY '26 compared to FY '25. We're very excited to see that, we'll be meeting them at a conference next week to talk about further expansion of their global health business, particularly outside of Africa. We're mindful that funding into the African channel has been constricted, particularly on the U.S. funding side, there are opportunities outside of Africa that we want to explore, primarily Asia and South America. We'll be looking to build on the momentum that they put into the market over the last year. I think, in short, our HIV business is growing materially, and we do anticipate that that growth will continue into FY '27 and beyond. Active syphilis dovetails into the HIV markets very nicely, in part because it's the same end user, and if you're at risk of a HIV incident, you're also recommended to screen for syphilis. Not only is it the same user, it's the same purchaser, be that pharmacy retail or public health programs, we've already seen emerging demand from those channels for the syphilis test. We've completed development and preliminary verification. We're able to deliver 85% sensitivity for the ability to detect between prior and active syphilis, we're the first rapid test really that can do that. That gives us an enormous competitive advantage clinically, as well as being able to be delivered in a self-test format as well. I think those 2 benefits are material. We are in the process of doing tech transfer from the lab at Burnet to the manufacturing facility in South Africa. We expect that to be complete in the next 2 months, we'll be then looking to build product for clinical trial and regulatory submissions. We'll keep the market informed on that, we are very excited about the opportunity that test will bring to public health, we are starting to see some pilot opportunities emerge from our engagement, primarily with ministries of health in Australia. The active liver test that we're looking to commercialize is very exciting. We mentioned to the market the exclusive global license through our partnership with Burnet. The 2 main pathways for this product to market are drug-induced liver injury monitoring, as well as screening and monitoring of people at risk of fatty liver disease. With regard to drug-induced liver injury, there are a range of drugs that are very important in their clinical utility, they do come with some risk to liver function because of their impact on the body. There are protocols in place for liver screening for patients going through clinical trials with those drugs, as well as liver testing for people going on to treatment with those drugs. In the case of some of those drugs, a requirement for ongoing periodic liver function monitoring as part of their ability to stay on that medication. There is a U.S. trial underway with a pharmaceutical company to look at the ability to use this test that we've developed with Burnet on Pascal as a way to improve compliance in home monitoring. We think there's a very big opportunity to take that one step further and move it beyond clinical trials into an actual treatment companion solution for people going on to treatment with those drugs. We're starting now to unpack those drugs, the companies that make those drugs, and the opportunities to partner with them as a companion for monitoring and risk reduction in those channels. That's a very big market. We're talking a lot of different categories of drugs and quite a large number of drug pharmacy companies that we can reach out to. There will be ongoing work over the next 12 months, and we'll certainly be bringing updates to market as they materialize. Over the medium term, about 1 in 4 people have exposure to or risk of fatty liver disease. It's an increasing problem that's related to lifestyle and not dissimilar in terms of cohort to people at risk of diabetes. Fatty liver disease does impact the liver, and ALT is a good early biomarker for detecting fatty liver disease. It's not to be used to diagnose it, but it does have a very high correlation with people who are suffering from fatty liver disease. Early intervention and lifestyle changes or early intervention and medications are extremely cost-effective at managing downstream healthcare costs. We think with an aging population increasingly at risk of fatty liver disease, a cheap, easy-to-use home monitoring test that can be doctor-prescribed and used to diagnose and then manage risk is extremely valuable. We're starting to engage with some key opinion leaders in the fatty liver disease area. We'll be looking to establish that as a second version of the test as we roll it out in the market over the next 2 to 3 years. That's something we'll continue to keep the market abreast of, but we are very excited about that opportunity, just given the size of the market and the amount of people that are suffering from that condition. Finally, I want to talk about the operational, not restructure, but expansion that we're undergoing, why and what it means for the business. We announced previously that we have a much improved Gen 2 blister machine that we've developed in Australia that's now installed in a facility in Sydney that Atomo is running directly. We will now be moving to update our quality management system so we can bring production from this machine into our supply chain for our own use with Pascal-based Atomo tests, as well as being able to offer it to our existing Pascal OEM customers. The benefits of this machine are There's several. One, it has a higher yield, which means that it is more efficient. It also adds incrementally to the amount of blister production that we can deliver to market, so our overall production capacity for Pascal increases. But by bringing it in-house, we have more control not only of the process but of the supply chain. And by bringing in-house a previously outsourced operation, we save on cost of goods, and that improves our margins on OEM supply, as well as reducing COGS for our own Pascal-based products. That has progressed well. We have made, I mentioned earlier in the presentation that we provided the first 2 batches to the 2 new customers that we secured in January. Both of those batches were made on this machine in Sydney, and we will be looking to qualify them in Sydney, as well as offering to NG Biotech and Lumos Diagnostics the ability to qualify their products on this machine as well. And that allows us to have dual-sourced redundancy in the system, as well as offering more capacity and improving margins. We are very excited about that. There is also some space there for us to look at some dedicated assembly operations if we decide that we want to move down that path. So our operational upgrade is well progressed. It is important to note that the CapEx for this already was spent in previous years. We are now just doing the implementation, setup, and qualification, and we expect to see this machine operational by the end of the year. As well as that, we are qualifying a multi-cavity production tool that will allow us to produce components for our Pascal cassette at lower cost, which again improves our margins as well as improving and increasing capacity. So all of that sets us up for being able to make more product at a lower cost and support customers like Lumos Diagnostics as they move into the U.S. flu season during the U.S. winter, and we will be ready to supply increased volumes into those contracts as they are needed. I would like to thank everyone for taking the time to join. If there is any further questions relating to this webinar or the business more generally, I would encourage people to reach out. We are always happy to hear from shareholders and to engage with our partners directly.

We do have a couple of questions that have been received that I am going to address now before we close up. One says, does Atomo Diagnostics offer multi-test kits in the Australian market for COVID and other viruses? If not, why not? We did work on COVID during the pandemic. The demand for COVID tests has fallen away. That market now has transferred to a multi-panel test, as the question alludes to, which is typically flu and other biomarkers on a single test. Swab-based antigen tests is not really Atomo Diagnostics' core business. We develop blood test solutions, and we focus on blood testing. So HIV, syphilis, other applications. We are not an expert in swab-based antigen assay production. It is not our core competency. There's a lot of large companies in Asia and the U.S. that specialize in that. The amount of cost it would take for us to build up that capability and try and compete with large multinationals, I don't believe is the best use of shareholder capital. I also feel that it's us starting to play in a market where we're not a market leader. We've proven that blood testing is where we can deliver best-in-class solutions. We want to focus on that area as that's really where we have our best advantage. There's another question saying, when are you planning to pay dividends? As I pointed out in the presentation, we are tracking towards breakeven. We're very focused on getting there. Once we're on the other side of that, the board obviously will consider its financial position. That would be a consideration at a later stage. We have no further questions for this session. I would encourage everyone to join me for our FY '26 results presentation, which will be out towards the end of August. In that, we will obviously reposition the numbers once they've been audited and released. More importantly, at that presentation, we'll be looking to spend some time setting out the core priorities and deliverables for FY '27 for the business, as well as starting to talk around some of the medium-term deliverables that we're looking to achieve and building off the building blocks that we're setting out now. Getting to breakeven through growth of HIV and OEM Pascal supply, the launch of syphilis, and dovetailing that into the existing HIV business. The opportunities to partner with pharmaceutical companies for the liver test. The ability to grow, we believe, substantially the OEM Pascal business now that we've proven we can deliver or help deliver CLIA waiver to partners in the U.S. market. There's a real big opportunity for other blood tests to become CLIA waiver and self-test approved. Our device is now, I think, the market leader or proven to be the market leader in making that happen. We'll talk a little bit about each of those in more detail at the presentation next month. Until then, I'd like to thank you for your time and wish you a very good weekend. Thank you.