Bio-Gene Technology Limited (BGT) Earnings Call Transcript & Summary

Thanks for standing by, and welcome to the Bio-Gene Technology Market Update Webinar and Q&A. [Operator Instructions] Please note the session is being recorded. On behalf of Bio-Gene today, we have the CEO and Managing Director, Tim Grogan. I'll hand it over to Tim. Please go ahead.

Thanks very much, Matt, and welcome, everybody, to this update webinar on the back of the news that we released last week. It's an opportunity for us to update current and new shareholders on recent developments and also dig into the background of the interesting U.S. Department of Defense announcement. Last week, we picked up over 70 new shareholders as a result of that announcement. So I'd also like to welcome any of the new shareholders joining us for the first time today. As Matt said, just a brief presentation today. And for those of you new to the company, I guess the key point is that we're developing 2 new active compounds as insecticides derived from a particular type of eucalyptus cloeziana that's grown in Northern Australia. And the exciting aspect for us is it's not only derived from nature, but we have demonstrated new modes of action, which is particularly important in the world of insecticides, where there's a lot of resistance built up to current compounds. We have large target markets around agriculture, public health and consumer. And now on the back of the defense announcement, we are able to open a new potential segment around the defense industry, which I'll talk more about in a moment. So we are developing Flavocide and undertaking the regulatory enabling studies at the moment. And we enter into broad-based partnerships with companies that have distribution and product development and franchise arrangements across the world in each of those vehicles. So I'd like to briefly just talk a little bit about the announcement relating to the 2 grants that were awarded totaling AUD 3 million from the U.S. Department of Defense. This announcement generated a lot of excitement last week, and some of you may have watched ABC News with Alan Kohler, and we also rated a mention there in a number of other publications, which was great. This was a culmination of a hell of a lot of background work and the exciting and relevant aspects for us, not only is the grant funding, but the ability for us to tap into the defense sector as a new category of opportunity for Flavocide and Qcide, respectively. Conventionally, we've talked about agriculture, public health and consumer. But in fact, it turns out that the defense industry globally has major unmet needs around pest management and particularly mosquitoes and bed bugs in our case. So first of all, the first of the 2 grants relates to Flavocide. And if you like, imagine a soldier in the field wearing a device on their body, a small device that is passively emanating Flavocide into the immediate environment around the soldier, a wearable device that once activated, continues to emanate Flavocide for quite a long period of time. And perhaps worth noting that the U.S. Department of Defense has around about 1.4 million uniformed personnel. So within the Department of Defense alone in the U.S., this represents a very significant opportunity for us in addition to other countries. So this particular program involves the combination of Flavocide with an emanated device that a U.S. company, GearJump Technologies is an expert in. And we also bring in the expertise of a number of the collaborators in the U.S. and Thailand interesting, particularly where it comes to testing against mosquitoes and other vector-borne diseases. So that particular program, as is the Qcide one is slated for a 3-year period. And obviously, it's an opportunity to accelerate the development of those products, we'll seek to do that. The current grant funding for this first emanated device is AUD 1.6 million, and that -- those proceeds are then spread across Bio-Gene and our collaborators. So the second grant obviously relates to Qcide. And many years ago, I had the very unfortunate experience of jumping into a bed in Sydney that hadn't been used for many months and experiencing the terror of being bidden by a very large number of bed bugs. And for those of you that haven't experienced that, it's an awful experience, so much so that the U.S. Department of Defense recognized this as a major psychological source of trauma for deployed salters on occasion. So a little wonder that this particular grant application has been successful. It involves the development of Qcide, as a residual formulation that can remain active within cracks and premises over a long period of time and to control not only actually bed bugs, but flies and a range of other crawling insects. This particular category has traditionally been served by the pyrethroid class of compounds, and a number of those use patents are now no longer available to those listed products, as a result of safety concerns. And in addition, resistance is a major challenge. It's been estimated that around about 11% of French homes being infected by bed bugs. There's been over 60% increase in bed bug reporting in the U.K. in recent years. And in the upper East side of New York, there are bed bug infestation reports that accompany the changing of houses and flats. So it's becoming actually a really major issue, and the unmet need is very rapidly growing. In fact, from 2023 to '33, the total global market is going to more than double. So this grant involves the formulation and testing of Qcide once again, with the Walter Reed and the Center for Medical and Agriculture Research within the Department of Defense and totaling AUD 1.4 million. So in an overall sense, the excitement from Bio-Gene's perspective is certainly the ability to access this new sector of defense. These are certainly very exciting product concepts and Bio-Gene's Flavocide and Qcide are being recognized because they have new modes of action and are derived from nature, and there's a very strong push as many of you will be aware, to move in that direction and away from synthetic chemistry and the new modes of action presented by Flavocide and Qcide also represent new control opportunities against these tests. And so, these grants is great validation for us and really pleased to see the coverage last week from that news. On this slide, I'd just like to summarize and briefly touch on the other aspects covered in our 4C released last week for Q2 FY '25. In terms of the development of and regulatory development of Flavocide, obviously, our estimated timing for completion of our regulatory dossier and its submission is at the end of 2025 at this point in time. And so, one of the key steps has been formally setting the specification for Flavocide from a chemistry perspective, characterization of any batch-to-batch impurities, for example, and then defining that in a formal sense in the regulatory program, but also in the subsequent safety studies. And that's been a key step on the back of the success in the pilot scale program that we've previously announced with Rallis in India. So the scale-up and chemistry and specification and analysis of our batches of Flavocide been going particularly well, and that's really the foundation for the development of Flavocide, as a successful commercial product. And unfortunately, there are many, many of these products that don't see the light of day because they can't be characterized and they can't be scaled up consistently, reproducibly and to cost of goods that makes them competitive. The second aspect there is that we've initiated the GLP safety studies. There are a range of studies that the APVMA and the Australian regulator confirmed that we need to undertake to support the registration of Flavocide in Australia. And we've been undertaking the dietary and metabolism studies initially. And throughout the remainder of 2025, we have a very, very detailed program. We'll be having a very, very busy year of work leading up to finalization of our dossier and its lodgment with the Australian regulator. And on the back of that filing, moving obviously into other territories such as the U.S., Brazil, et cetera, utilizing the same data that's been generated to OECD standards. So you'll hear a lot more from us, as a company over this coming 12-month period in terms of regulatory development, and this -- we have commercial development arrangements. But at the end of the day, we need to have an approved product to sell and to supply to generate revenue, and this is a very core activity for us. The next aspect there on the right is really just a brief update. We've previously announced we're working with this Envu, which was previously Bayer's professional pest management group, and they were spun out in a private equity transaction a couple of years ago, and we're continuing to work with them and developing a range of formulations, specifically targeting mosquitoes in this case and working with their mosquito and professional pest management groups to fully explore the potential of Flavocide in territories outside the U.S. and Cayman Islands. And we continue to work with Clarke Mosquito Control is our current licensee in U.S. and Cayman Islands. So if you like, Envu and Clarke are different sides of the same coin. So our other existing commercial collaborations are obviously continuing. We're continuing to work really hard with Evergreen Garden Care both in the U.K. and here in Australia, and that's looking at both Flavocide, the potential for use of Flavocide and Qcide in various applications. And no doubt we'll have more to say about that in due course. And obviously, as many of you will be aware, STK has previously signed on to undertake the regulatory development of Qcide. So we've just recently completed our 13th harvest just prior to Christmas for the Qcide biomass and the oil extraction. We're very focused on 2 really key aspects. One is the efficient and cost-effective production of Qcide and also preparation for the scale-up of the area based on the quality material that we've developed over the last 13 growing seasons. So it's important to remember that optimizing yield and biomass production and harvestability and tolerance to various fungal diseases is a very important aspect, as a precursor to the scale-up of Qcide and obviously results in a competitive cost of goods as well at the same time. So on the background there, the Qcide seed and seedling production program has been scaled up significantly. We've recently had a lot of success around grafting methodology that's been developed, which enables us essentially to move from a relatively small number of plants in the field into a very large scale quite rapidly. And we have the ability to expand the area under cultivation at the current site in addition to engagement with additional growers, who've traditionally been involved with tea tree oil production, which is a similar production system. So that's the summary of the 4C. I think for those of you new to Bio-Gene, this slide really shows the continuum of where we are as a company in the development of Flavocide and the development path. As I said, at the end of 2025, we have that first green star being the filing of our dossier. And at the moment, between 15 and 17 months is the average Australian regulatory approval time. It may be that we can be shorter than that. But at the moment, that for planning purposes is the estimated timing. And what we do as a company is develop the active compound Flavocide and the development of that regulatory dossier and our partners are involved in formulation of those into a format that is fit for purpose, whether it being grain storage or mosquito control or consumer use. And so, you have these parallel paths of development that happen at the same time. So in terms of looking forward, we have in the first category there, the news flow that will come around the further development and regulatory development of both Flavocide and Qcide, the enabling studies and the progress that we're making with that. We have some very experienced international regulatory development advisers assisting us with those tasks, and there's a lot of attention to that and the timely delivery of that within our control. Secondly, current partners and expanded partnerships and new partnerships is a major focus for us. So perhaps in one sense, the U.S. Department of Defense is a nascent new commercial partner for us on the back of we achieved success in these 2 growing programs. We have a ready-made market there, and we certainly seek to optimize that in other territories that obviously have the same needs around vector control and bed bugs. But what we expect to do as a company is expand out those commercial partnerships, and we continue to seek to engage in companies, particularly with an interest in the grain storage area. We have a -- what we believe is a very competitive offering there and resistance is becoming a major challenge. What's very interesting in the partnering and the commercial space at the moment is a very rapid change impacting our major partners and their difficulty in terms of achieving registration and regulatory registration and approval for additional synthetic products, and that's creating a real indigestion within the industry and many of those are now one way or another commercially and being effectively forced to look at the natural and biological category as a product category for their portfolio. So we are experiencing increasing interest from partners. And as we raise our profile with announcements such as last week, that will continue. And finally, our focus obviously on funding and additional support grants and other opportunities to leverage shareholder equity is obviously a core objective for us. And obviously, we'll, in due course, raise further capital to support the program. So I guess they're the 3 broad bundles of announcements that you'd expect to see over the coming months and for the remainder of 2025. Thanks very much, Matt. That's the summary, and happy to take any questions.

Thanks, Tim. As you mentioned, we'll move on to the Q&A now. [Operator Instructions] Tim, the first question I have is, what is the schedule of payment of the DoD grant? Are there milestones required? Is it paid monthly or upfront? And is it paid on progress/milestones?

So broadly, the recipe for the grant is quarterly reimbursement against agreed program activities. Those program activities can be adjusted either forward or backwards in conjunction with the DoD. But yes, it's a reimbursement arrangement. And the funds that flow to DoD agencies, some of whom were listed there is paid directly by the DoD to those institutions and doesn't come through our books. So that simplifies the grant arrangements.

Thank you. Can you provide an update on STK regarding progress on registration of Qcide? And when is the registration expected for this?

Sure. So we previously announced STK has taken on the regulatory enabling development and studies associated with the development of a data pack for Australia, the U.S. and other countries. We haven't announced a timetable. And in due course, we'll provide an update to the market on that. We would obviously need to do that in conjunction with STK. So perhaps a broader comment on that aspect, particularly for new shareholders. We have obviously, this partnering model. And obviously, there are a number of reasons why we can update the market on various aspects of those commercial and confidence and the prior agreement. So we take the opportunity to do that whenever possible. But as you'll appreciate, there are a number of things that need to remain under the confidentiality banner for the moment.

And following on from that question, what is the latest regarding the retail opportunity provided in the agreement with STK?

The retail opportunity I'm not sure I understand the question. But if I extrapolate the supply of retail products emanating from involving Qcide, certainly, it's a category of opportunity, as it would be for effectively consumer, agriculture, grain storage, et cetera. So yes, that just sits alongside the other categories of opportunity. There's nothing particularly related to consumer and retail.

And one that might assist, as you say, some of the newer shareholders, but can you just talk to the pathway to first revenues from the sale of pesticides? That's another question that's come through.

Sure. This is a question that comes up frequently and perhaps the development path for Flavocide and Qcide is somewhat unusual, somewhat similar to a biotech company. What we have with Bio-Gene is the ability to generate upfront payments from -- sign-on payments effectively from our commercial partners when we announce those deals. Secondly, milestone payments upon achievement of pre-agreed development programs or annual or timed payments. And thirdly, royalties on the sale of those products. And the largest category of revenue then would obviously apply upon sales being achieved. But the fourth category that's quite unusual that applies to Bio-Gene is that we own the scale-up synthesis methodology for the production of Flavocide. So for our Flavocide agreements, we have the ability to also generate a modest margin on the supply of Flavocide from that centralized source to each of our commercial partners. So perhaps in simple terms, there are 4 different potential revenue streams and the largest being royalties and obviously, the margin on the supply of active, but don't discount the upfront and milestone payments being significant in the scheme of our expenditure levels.

Thanks, Tim. There are no further questions in the queue. So I'll just throw it back to you to provide a closing comment.

Thanks very much, Matt. And really, the purpose of today was to emphasize the, I guess, the relevance of the recent news, particularly the DoD, but also to provide an update on where we are with the development of Flavocide and the regulatory enabling program and our relevant partnerships. So we'll see a lot more news flow over the remainder of 2025 relating to each of those areas and really appreciate the support of our shareholders and obviously, our new shareholders that have recently joined us. So thanks very much.

Thanks, Tim, and thanks, everyone, for joining.