CelLBxHealth plc (CLBX.L) Earnings Call Transcript & Summary

Good evening. Thank you very much for the introduction, and I'm delighted to be speaking to all of you. The new investors, particularly, we want to tell you about the story. We'll seek to explain that as clearly as we can to the existing shareholders, who maybe wanted to get an update. We're going to try and make sure that we've got a good amount of time for questions at the end of this presentation. And as Sarah mentioned, Ian Griffiths, the ANGLE CFO, will join me for the questions. So we're very pleased and excited to tell you about our business, which is focused on transforming cancer care. We've got a very innovative approach, which can change the way that cancer is diagnosed and treatment decisions are made. And this is all about something called liquid biopsy. And I'll try and explain what that means and why it's relevant. So every patient's cancer is different from other patients. In fact, you imagine if you have 3 people with breast cancer, they would have the same disease, but that's not, in fact, the case. They have the disease in the same part of their body, but it's not the same disease. And that's why some of them will respond well to a particular drug, but others will not respond well to the same drug. And it's that difference that's really important to understand to make sure that patients are given the appropriate treatment for their particular cancer. And it's made yet more complicated because the cancer changes over time, so that an individual's cancer on presentation may be very, very different later in their disease. And that's why regrettably, we hear that patients who have previously been responding to drugs, have failed to respond going forward and are relapsing. So the way that cancer is investigated is to do a tissue biopsy. That is the standard of care to cut out some of the cancer and look at cancer cells within the tissue biopsy in order to make decisions about treatment. The challenge, however, is repeating the tissue biopsy. There's nothing wrong with the tissue biopsy per se, but you'd like to repeat it. And if you think of the breast cancer example, but it's exactly the same with all solid tumor cancers. What you can't do is cut out the same lump twice. So once you've actually done your tissue biopsy and maybe the patient has had a lumpectomy or a mastectomy, it's not possible to go back and have another tissue biopsy. So that means that doctors end up flying blind in terms of treatment after the initial diagnosis. And what you see on this slide is a Parsortix cassette. So that's a microfluidic device which ANGLE has developed and owns worldwide, which is capable of separating cancer cells from the bloodstream. And the question is, why would a cancer cell be in the bloodstream if a patient had breast cancer or colorectal or lung or prostate or any other solid tumor cancer? And the answer is that's how the cancer spreads. Over 90% of patients who die of cancer actually die of the spread of their disease. So as I mentioned, the standard of care is a tissue biopsy, which is cutting out part of the cancer and taking it to a laboratory and examining the cancer cells. And indeed, it's so important that the national cancer guidelines in the United States mandate that when the cancer returns, if it does, which obviously you hope it doesn't, but if it does in a metastatic case where the breast cancer has spread to another organ, then the doctors should do an additional tissue biopsy of the new metastatic site, which might be the lung, the liver, the brain, for example, or the bones, which is common metastatic sites in breast cancer. This is a really difficult thing to do. And despite it being in the national cancer guidelines in the United States, which is leading cancer treatment worldwide, over half of all the metastatic breast cancer patients don't get that secondary cancer biopsy. They are either too ill for the surgery because it's highly invasive or the tumor is inaccessible. Maybe, for example, it's a brain metastasis and they can't cut into the bone or, for example, in the lungs, often there's insufficient tissue available to do the necessary analysis. So for those different reasons, half of all the patients don't get a secondary biopsy. So what we're doing in ANGLE is pioneering a completely new approach to biopsy. And we're taking advantage of the fact that the cancer is spreading via the blood circulation system in order to recover cancer cells from the blood sample. So what this means is a patient doesn't have to have invasive surgery. They don't have to wait until the cancer has spread to a secondary site, but instead, they could have a blood test. And in that blood sample, our system, Parsortix, can recover some of the cancer cells for analysis. And this is a tremendously viable way of repeat biopsies for the patient. And it has a lot of major advantages. Obviously, notably, it's repeatable as mentioned, it's noninvasive, so it doesn't cause the patient harm getting the cells out. It's real time and it's cost effective. So it's a new method, which could allow the cancer surgeons and oncologists to keep up to date with what's happening in the patient's cancer without causing the patient distress and, at the same time, saving money because it enables the appropriate selection of drugs, which can be very, very expensive and avoid the use of drugs which are ineffective for patients and nevertheless, very, very expensive. So this whole approach is good for patients and it's cost effective. And I'm going to explain to you how it works. But before I do that, I just wanted to emphasize a few points with regard to -- obviously, we're having this as a virtual session today because of the COVID-19 pandemic, and that's caused a lot of disruption for a lot of people. But many of those poor people are actually the cancer patients. And there's been some major collateral damage in relation to the treatment of cancer, which has to come from COVID-19. And it's pretty important to put in context that actually, I believe, around 2 million people are recorded to have died of COVID-19. And yet every single year, 10 million people die from cancer. So there's a 5x difference in the number of people affected. And the critical points which you might be interested in is that the statistics in April 2020 showed that the referrals for cancer investigations were down 70%. There was a 70% reduction. So that means that 70% of those patients were not getting the appropriate referrals that they should have had. And the statistics suggest that, just in the United Kingdom, 2,000 fewer cancers were diagnosed each week last year. So that's 100,000 undiagnosed cancers. Now why did this happen? Because of the shutting down of hospital facilities from cancer so that they could be used for COVID work and crucially, because patients were either advised not to go into the facilities for fear of catching COVID or for the same reason they chose not to go in, and that is actually a cancer ticking time bomb. Now we believe that the liquid biopsy approach that we are pioneering could, in a future pandemic, actually solve that problem in many cases. Because a nurse in full PPE or phlebotomist could visit the cancer patient's home. So it would remove all risk to the patient from the simple blood test and then the blood could be taken to a laboratory and analyzed. And in many cases, the same or even potentially better information could be obtained from that approach. So we are accelerating our efforts to bring this product and approach to market in order to pay our contribution to dealing with the COVID-19 situation. And the product that we've developed, the Parsortix system, which consists, as you'll see shortly over an instrument and a consumable, which is used each time a blood draw was taken, has a very wide application, addressing a market in excess of USD 100 billion per annum. So that is a huge market. And that's because this system works for all solid tumor cancer types. We're doing a lot of our work, particularly in breast cancer, but it equally well applies to numerous other cancer types. And in fact, the system has been shown to work with 24 different cancer types. And for those cancer types, you can do a whole range of different things if you can get the cancer cells out. You can use them to detect the presence of cancer in high-risk groups, and we're actually actively working in ovarian cancer in that space. You can use the cancer cells to make determinations as to which drug would be appropriate for the patients. You can look at particular proteins, for example, expressed on the cancer, such as PD-L1, which is a target for immunotherapy drugs and determine whether or not they're present and from that, make the decision as to whether the patient might respond to those drugs. So it's good for patient decision-making, and it saves money because it eliminates the use of drugs, which are very expensive and ineffective. You can also use the circulating tumor cells to assess whether the patient's treatment is being successful, what is happening in the course of their drug treatment. You can use it for measuring and assessing remission monitoring. One of the biggest worries if you're a cancer patient is when you go into remission, will you relapse? And at the moment, there is not a good test for identifying the possibility of relapse. All the current work is mainly CT scans. It's actually telling you that you have relapsed, and you've got a metastatic disease, whereas it would be far better if you could monitor the presence of cancer cells in the bloodstream and attack the cancer cells before they cause the secondary cancer. And long term, we believe that the circulating tumor cells in the bloodstream assessment could lead to very accurate assessment of aggressive cancer in screening asymptomatic people. But I'd stress that as a long-term area and not one that we are currently investing in as a business ourselves. So the circulating tumor cells offer living cancer cells, which are involved in spreading the cancer amongst the patient. And as I mentioned, over 90% of patients who died of metastatic disease die from the spread of their cancer. They do not die primarily from the primary. So these are highly relevant, clinically significant cancer cells. They're not just random cells, they are ones that are spreading the disease. And the tissue biopsy is used for a whole range of analytes. They look at DNA, they look at RNA and they look at protein expression. And you can do exactly the same thing with circulating tumor cells because they're intact living cells. Now interestingly, whilst the liquid biopsy market has had a tremendous impetus behind it, particularly in the U.S. investor market, some very large-scale businesses have been developed in the liquid biopsy space. These businesses actually don't focus on circulating tumor cells. They don't have a Parsortix system. They're unable to recover the cancer cells from blood. So they instead focus on something called circulating tumor DNA, ctDNA for short, which is fragments of dead cancer cells. And whilst you can get some pretty good information from ctDNA in terms of DNA, which is mutational status, you cannot measure RNA and you cannot measure protein expression. And certainly, you can't culture cells for future investigation. So we see the circulating tumor cells as a complementary addition to the ctDNA. And indeed, some of the large companies that are listed on that sheet, we're seeking to work with them to expand their offering from ctDNA by giving them access to the Parsortix system, so that they can expand into living cancer cells for circulating tumor cells. Now the way that this works, this is just an image there of the Parsortix cassette. It's a microfluidic cassette. It's manufactured to plus or minus 1 micron, so that's 1/1,000th of a millimeter. And what happens is the blood flows down a channel inside this cassette and it's forced to go left or right, which takes it up -- at the bottom left there, you can see the series of steps, which is the patented microfluidic structure that the Parsortix has. And the red and white blood cells are larger and less compressible than the cancer cells so they flow through. And I'm going to explain how that works with a couple of videos in a second, but we have developed in the Parsortix instrument and the instrument is a machine, which automates the process. So in the middle of that instrument, what you see is a standard tube of blood, which is just drawn from the patient's arm in a normal blood test, attached to our instrument by removing the top and twisting on the tube and then hit go and the machine will do all the work. It will just very gently flow the blood through the Parsortix cassette, which is shown here. And that will hold on to the cancer cells, let the red and white blood cells and plasma flow through. And then when the machine has finished, the sensor detects that the end of the process does a wash with the saline liquid and then can reverse flow and recover the cells. And this solves the technical challenge which others have failed to solve, which is how do you recover circulating tumor cells when they're so rare in number that there may only be 1 cancer cell in amongst 1,000 million blood cells. We solved that problem with a very simple and effective and affordable solution. So I'm now going to show a video with an animation of how this works. Could we please run the first video? So what we're now doing is we're looking at an animation of a Parsortix cassette. The hole on the bottom there is the inlet. The blood will flow inside this device. It will flow down the channel there. And it has to go left or right, in this case, going left. It's up a series of steps, and the red and white blood cells can stream up the staircase, and they flow through the critical gap in a way, whereas the cancer cells shown in green here are larger and less compressible, and they're held gently on the final step. And as I mentioned, the instrument is then capable of a reverse flow to take those cells out again. Now I'm going to show an actual video of real blood flowing in a Parsortix cassette of a metastatic breast cancer patient. Could we have the next video, please? And what we see here, the curve line is looking down on top of the staircase, so those are the stairs. And on the left-hand side, that's the inlet channel. So what you see is thousands of millions of blood cells, red and white blood cells, streaming up the staircase. The light colored area is where we have the critical gap. So that's 1 cell B. Now we're looking at the exit channel. Now again, the critical gaps are streaming up the staircase here. And here, we see a single captured cancer cell, held gently on the final step. The beautiful thing here is that the red and white blood cells continue to flow, and it does not clog up, and then you're left with these large cancer cells on the final step. So in terms of this technology, it's now being out in the research market for several years. And the good news about that is that we have got 38 peer-reviewed publications by 24 world-leading cancer centers showing how well this system works. And if you're interested, you can go on to the reference slide on the ANGLE website and have a look at these different publications. All of them identified very key advantages if you can get the tumor cells out with the Parsortix system. And it needs 7 of the papers do a comparison with the legacy system, which is antibody-based and identified key advantages of our system compared to these competing approaches.

There's 4 minutes left in the presentation in its entirety.

Thank you. So we've been going to hard yards over several years now, nearly 5 years towards an FDA clearance, and this is no mean feat. We've submitted over 400 technical reports and documents in support of this and around 15,000 samples. We've got the prospect of the first-ever FDA clearance for a product to harvest cancer cells for subsequent analysis. And having made our submission, we've been through administrative review. We're now in a substantive review with the prospect of an FDA clearance, the earliest Q2 CY '21, so this year. We're building up -- we've got 4 major activities in addition to this. The first one is we're setting up 2 clinical laboratories, which will be accredited clinical laboratories in order to enable us to build a pharma services business, which will be working with cancer drug trials and generating substantial revenues, we hope, for the business and to act as an accelerator and demonstrator for clinical tests. Secondly, we are developing a series of tests in-house, which are listed there. One of the most interesting ones is the PD-L1 immunotherapy checkpoint inhibitor test to determine which patients may respond to immunotherapy. That's really important because only 1 in 5 on our project patients will respond and yet such drugs can cost $170,000 per patient, which is why they're not generally offered in the U.K. at the moment. So it'd be much better to identify who might respond to those drugs. And the third thing is that we're developing something called sample-to-answer imaging, which will enable us to lock down the whole process all the way from the Parsortix separating the cancer cells through to the downstream analysis and the result, the answer that is needed for clinical use. In addition to all of that, we have a large-scale ovarian cancer study running, actually the third of its kind. The first 2 200 patient studies have already been completed and showed best-in-class results of an area under the curve accuracy in excess of 95% in detecting ovarian cancer, which is tremendously difficult to do. Key advantage of our test is a low false positive rate compared to alternative approaches. We have a clinical verification study running with University of Rochester right now, which is due to complete in Q2 this year, the enrollment. And then by the end of this year, hopefully, we'll have that converted into a laboratory-developed test in our laboratories. So just as a final summary here, ANGLE is in a very strong position. We're addressing an enormous emerging market, and we're driven not only by benefits to patients, which is obviously the key thing that we want to achieve, but also an overwhelming need from health care economic systems to reduce wasted expenditure on treatments that do not work. We're able to address those things. The logos of the organization is shown there, are all working very, very closely with us. We have a highly differentiated solution. We've got 5 key near-term drivers of value. The first one is the establishment of the clinical laboratories. The first one will be up this quarter. The second one is the establishment of a large-scale pharma services business, and we hope to be able to announce the early pharma contracts shortly. The third one is the establishment of a sample-to-answer solution, which will make it much easier for adoption. The fourth one is the development of the ovarian cancer application. All of these are near-term drivers. In addition to that, of course, major, major issue is the FDA clearance. We'll be the first in the field. It's very important to remember that the big U.S. liquid biopsy companies do not have an FDA product clearance. We will be way ahead of them, notwithstanding the fact that our valuations are obviously a lot lower. So on that note, I'd like to hand back to Sarah for the questions. And Ian, maybe join me as well, please. Thank you very much, everybody.

Thank you. So well done on accelerating your effort to do your bit for the pandemic. The science, well, this decades' worth of intelligence has gone into that. But [ Peter Callander ] asks, can Parsortix tell the location of cancerous tumors within the body? Yes, it can capture a cancerous cell, but can it tell the clinicians whereabouts that cells come from?

I'll start with that one, Ian. The answer is sometimes, not always because it depends on which kind of the type. But we anticipate this is primarily to be used with high-risk individuals, by which I mean, for example, a woman with an abnormal pelvic mass. That's a very common, 5% to 10% of all women will have that sometime during their lifetime. A man with a high PSA reading, that would give you an indication, a person with a tumor which they don't know whether it's cancerous or whether it's benign. So generally speaking, the location is already known before the test is done, and it's more about either is that benign or is it malignant or how do we treat a known cancer? So the biggest application for this is with people with known cancer. That said, there are markers and it is possible to do molecular analysis. So in some circumstances, it will be possible to do what's called cancer of unknown primary, where you detect the presence and location as well.

Yes. I'd probably add, there's been quite a bit of data coming out on some of the DNA analysis that can identify certain cancers, certain of the leading or sort of the larger cancers with reasonable accuracy, but it does vary by cancer.

Okay. Everyone is talking about the FDA approval. Of course, it will be a watershed moment if you do get the FDA approval. Of course, there is the 150 days, [ Tim Grasson ] is reminding us all that you submitted at the FDA on September 28 last year. The FDA states they have 150 days to review, so that would bring us to February 24. So when does the clock stop from the FDA in terms of the questions that they can ask you? Then how long do you have to respond to them?

So it's important to note that this is what's called a de novo FDA submission. De novo means new. It's the first time that FDA have ever looked at clearing something to do with the intended use that we are submitting. And consequently, the time scales are inherently uncertain. They have to identify whatever questions that they want answered, and we have to answer them. And we found over time that they often ask additional questions, but we -- I know Tim will know this, but we have followed a queue submission process to try to minimize the risk that we will get unexpected questions. But nevertheless, we would certainly stick to the time scales that we've said, which is the earliest is Q2, and it could well be longer. We don't know. It's a question of what actually comes through on the de novo process. So there's an inherent uncertainty there, but we are following a very clear process.

Okay. The FDA has got its hands full though, what with 400 tech reports and 15,000 samples as part of the data set that you have given. [indiscernible] is highly optimistic. He says on the basis that Parsortix gets the FDA approval, this one's for Ian, what are the best estimates for forecasted revenue in the next 3 to 5 years?

Yes. So in terms of the 3 to 5 years, there is a note out with finnCap as well that have done some forecast on this. And obviously, we have our internal forecast. Now there's different elements here on the revenue. So the existing research use only base to translational researchers, and that's building up, and we expect that to be turbocharged with some of the work that's going on, both the FDA clearance. We've seen that with CELLSEARCH. Despite its limitations, it's still the most widely adopted system. We've got sample-to-answer and various other product development improvements going on that will build that side of the revenues into sort of high single-digit millions, but that's -- the benefit of that is the -- what we call the leverage R&D model with all the other areas. The next sort of area that's being developed is the pharma services. Andrew has already touched on why we're developing our labs to be able to deliver that. That is money that's available now. And therefore, we'll be building that up quite strongly. We've been expanding the team. We've got pharma services sales recruits coming on. And that we'd expect to be able to build quite strongly. It will still take a while because CTCs have got to become established, but that will build quite strongly over the next few years. And indeed, that revenue line alone could cover all the costs of the business in circa 5 years' time. Now obviously, what we want to do is get the product being used with patients, and that means clinical use. And we're developing the Clear Labs so that we can offer lab-developed tests. Therefore, we're able to sell specifically to private payers, but also to start getting early adoption with the insurers and so forth. That will take a little bit longer because particularly in the U.S., which is our #1 launch market, you got to get reimbursement codes so that you can get paid for these. And there's a time line to get that reimbursed. And that's why we referred to it being an accelerator as well because we can do that ahead of the actual product clearance. So we need to get reimbursement codes. We'll probably need to run a few more studies. So that will take sort of 2 to 3 years before we start to get the revenues building up. But once we start that and the clinical revenues go, that starts to build much more strongly. And then that feeds into the actual product sales, which is the final component here. This is the FDA-cleared product. So there's different components, and they'll all build up, but some of them take different time lines to get to that revenue line.

And going back to the initiative Parsortix, clicking questions coming through. [ Alex Kupa ] asks, how stable are the cancer cells on the cassette? Can it to be stored for several hours before they die? He's thinking about the courier, courier in the cassette to the lab. Or do they need to be removed and analyzed immediately? Because you did mention, Andrew, that you can do this test, people can come to your home in full PPE and conduct it there.

So the issue of stability of the sample is very important, and we've been doing a lot of work over the last 6 months or so, in fact, probably longer than that on blood stability tubes. So the use of blood preservation tubes. And we've got now a solution that we're developing where we think that we'll be able to have a stable blood tube for 96 hours post blood draw. That's really important because for the pharmaceutical services where we're trying to get into the large global pharma clinical studies, what they do is they collect blood from all over the world. And the reason we're setting up 2 clinical labs, 1 in U.K. to cover Europe and 1 in near Philadelphia to cover the U.S. and North America, is to give us global reach because with 96 hours stability, there's enough time to ship blood like from the point of draw to where you want to process it. The next question, if you do that, however, those stabilization tubes are great for getting the cancer cells stable, but you won't have a living cancer cell coming out. If you want a living cancer cell coming out, you would need and you want to say culture it, you would need to process the blood within 5 hours probably of draw from the patient. But interestingly, post Parsortix, we've developed techniques for fixing the cells either on to slides, microscope slides for image analysis, at which point they become essentially 100% stable or lysing the cells for molecular analysis, in which case they can be frozen. So all intents and purposes, if you do the right things post Parsortix, you can actually store the sample indefinitely. And so sometime in the future, we would like to encourage government, charities and so forth to set up biobanks with these -- this information. Because if you had 5 years of cancer samples and then you know the outcome of the patients, you go back and investigate those samples and from that, you've learned a lot of information. So a very good question. Thank you.

And [ Andrew Ness ] was asking about the proliferating activated cells. He says they're much larger than normal lymphocytes and granulocytes. Do they get tracked as well?

Sorry, which -- what type of cells was it?

Proliferating activated cells are much larger than normal lymphocytes and granulocytes. Do they get tracked...

Yes. The short answer to that question is, yes, we do preferentially capture a number of other larger cells, some of which have got a very interesting immune response investigation capability. And indeed, there are other types of large cells that may be captured, for example, fetal cells if a woman is pregnant and endothelial cells if somebody is at risk of heart attack. So there's a whole range of different cells that can be captured preferentially with the system.

Now you have been actively courting U.S. investors, don't forget us here in blind tears. So therefore, there's quite a few questions about whether you're going to list in the U.S. And are you going to lobby the new President to perhaps create one of those biobanks?

Well, I have heard Joe Biden speak shortly after his son died actually, and he spoke quite passionately at the AACR Cancer Research Conference. I was in the audience when he spoke. So yes, it will be -- we don't have any particular contacts with the incoming President. But certainly, we hope that he will be continuing his interest, which he has had a very long interest in cancer research and development of these kind of techniques. Ian, would you like to answer the other questions about funding and so forth?

Yes. So obviously, there's a lot of liquid biopsy companies mainly being developed out in the U.S. There's a lot of health care specialist investors used to the space, used to how we differentiate ourselves against those companies and what we can bring to bear. And hence, why we were able to bring in the Morgan Stanley fund at the last investment raise and another large U.S. investor before we followed the money in terms of Conifer, which has sponsored the -- some well-known funds there. In terms of Nasdaq, what you have to remember here is we've got a platform technology. It works with every cancer. We've tried it so far and in multiple different areas. And that means the market opportunity for us is huge. And we will need capital if we want to fully exploit the opportunity in front of us, we will need a lot more capital than we currently have. Now obviously, the deep pools of capital are really added Nasdaq and -- or in the U.S., and that's why Nasdaq would be attractive. Obviously, we don't want to go too early. We need to make sure everything is lined up. It is expensive, and there's plenty of companies that have gone out there and not done so well. So it's a balancing act for us, but it's certainly on the radar. And certainly, we get a lot of very strong interest from the U.S. investors. And there's a lot of money gone into liquid biopsy space, over $5 billion invested in the last 2 or 3 years. And obviously, that's a lot more than you see in Europe. So it's on the radar.