Clever Culture Systems Limited (CC5) Earnings Call Transcript & Summary

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Principally the medical device, biopharmaceutical and biotech industry. We're about 500 people globally, about 1,000 customers served, and we're operating in about 52 different countries. We do have a software division, and that software is enterprise SaaS software, and that SaaS software is used by 15 of the 20 largest life sciences companies by revenue. The U.S. is our largest footprint. Our headquarters is in the Los Angeles area, specifically in Pomona, California, but we've got offices scattered throughout the United States, including the Northwest, the Northeast, the Southeast and in Texas. We also have 2 metrology labs. One is in California, one is in Pennsylvania, which really makes the stocking of spares and the ability to service customers very, very easy. We also have regional hubs in Ireland, Singapore, Taiwan and China as well as Dubai. And we also have a presence in Australia. We're in Melbourne as well as Brisbane in the Monash University incubator as well as in the TRI office space in Brisbane, which matters because Singapore is now part of this agreement. So the key line here is, we're already on the floor in our clients' QC labs. We're a trusted partner in their compliance decisions, and that's why we're bringing APAS to our customers. Next slide. So why does this partnership make sense for our company, PSC Biotech? Well, I can give you 4 very compelling reasons. We have a growing U.S. sector. There's a massive effort right now to onshore domestic manufacturing of essential medicines, key starting materials, and the like. And the market is like $500 billion right now in terms of onshoring activity. So there's a significant amount of that capacity that's being onshored is sterile capacity and sterile capacity means more environmental monitoring, more plates to read. So it's very, very complementary. Our clients already come to us for validation services, engineering, regulatory and software and the APAS platform really fills a gap that we hear constantly; manual, environmental monitoring, plate reading is labor-intensive, it's subjective, and it's a reoccurring source of data integrity findings. And all our customers want to avoid all these issues wherever possible. So the third compelling reason is the validation pull-through. Adopting the APAS system isn't just a purchase. It needs a full life cycle of validation. It needs qualification, it needs change control and valuation. And that's exactly what we do as our core business under our own agreements with our own customers. And the fourth compelling reason is, we are a solutions provider. So we like to bring the best-in-breed of technologies to our clients. Our clients just don't want a box or an instrument. They want a validated solution, and they want to make sure that it can pass the rigor of an FDA audit or inspection or an EMA audit or inspection. So together with CCS, we deliver the technology and the expertise to run through it. So you'll see the flow chart, starting with #1. Clever Culture sells and installs the instrument. PSC Biotech executes the performance qualification and change control. The customer gets the GMP use. CCS keeps the pricing, the sale and all reoccurring software and revenue and service revenue. The APAS system is the only U.S. FDA-cleared AI technology for automated cell culture plate reading. And it's already deployed or in evaluation at 8 of the world's largest pharma companies. And that's the validation our mid-tier clients are looking for. Next slide. So what you're seeing on the left-hand side is our facility and our facility is located in York, Pennsylvania. It's a contract research, development, manufacturing organization in York, Pennsylvania. It's a wholly owned subsidiary of PSC Biotech Corporation. What we do here is sterile manufacturing. It's on 39 acres of land with room to expand. We have a total of 9 clean room suites, 5 of them are open for new projects. So we do fill/finish of liquid and lyophilized sterile injectables from clinical supply to commercial scale. We do a breadth of products. So we do highly potent products such as oncology products and live vaccines as well as therapeutic products. We also have a 110,000 square foot warehouse just around the corner. So BioTechnique is really in its early growth trajectory right now. We expect to create upwards to 250 jobs over the 3 years -- over the next 3 years. And why we strongly -- why we strongly considered APAS. APAS is really a compelling sale for not only us, but all customers because it takes the variability out of the microplate reading, and it frees up people in the microbiology department to do more value-added activities besides plate reading. So we believe that having a technology lab in York, Pennsylvania gives our prospective customers the opportunity to look at this technology and get hands-on with this technology before they actually place a purchase. And we believe that this is a very compelling way to sell this technology to let the customers get hands-on with it, and actually interact with a producing sterile manufacturing facility and allow them to interact with the microbiology staff that support this facility and ask them specific questions. So it's in contrast to the way things are normally sold, which is just having a demo unit at a trade show. We believe that this is a very compelling way that will differentiate Clever Culture Systems in a very important American market. So our timing to purchase a system is within 90 days of this agreement, and we're targeting to have an APAS system -- an APAS system in our center of excellence by the 31st of March 2027. So we're super excited. Our customers want faster, more reliable, more compliant microbiology testing. Together with Clever Culture Systems, we believe that we can deliver this. So Brent, back to you.

Thanks, John. So look, maybe this is kind of the final slide, then I'll hand it over for some Q&A. But what we've kind of outlined here is how the partnership works in practice. And as you heard from John, PSC Biotech have a portfolio of companies and software and products. And really, APAS slots nicely into that existing sales and marketing process that they've already got in place. So that's, if you like, that first box on the left. So PSC Biotech will generate leads through a marketing and promotional program. But I think, importantly, it fits already into an existing portfolio of products. The qualification parts are an important one, and it kind of links back to that segmentation slide that I shared at the start because the number of plates processed every day by our customers is an important data point to understand the value proposition that APAS either could or couldn't solve for these labs. And so PSC Biotech will work through a qualification process with the customer to assess the suitability of the technology with that customer. And then the third part there is that then there'll be a referral process. And so we'll work very closely with PSC Biotech. We'll obviously communicate with each other, most likely have a checklist, which outlines customer details and work through this referral and acceptance, where CCS will review the opportunities and ultimately, once accepted, they go into a categorization bucket, whereby once the sale is completed, then a commission is payable for -- to PSC for those efforts. And so you've got kind of this 1- to 5-step process where you've got the lead generation activities, the qualification activities, a referral process, Clever Culture Systems going through an acceptance process, but then ultimately, Clever Culture Systems is the ones responsible to go through the final contracting with the customer, obviously, set the pricing and provide servicing. So if you like, that's no different to what's happening today. So today, when Clever Culture Systems goes to customers, we're the one contracting, we're the ones going through that sales execution and that sales process and contracting providing service to our customers. So none of that changes. But what is absolutely changing here is that we're expanding our reach. And so the whole idea is that our qualified pipeline, the number of customers being educated, being made aware of APAS is expected to grow. That will enter into a sales process that Clever Culture Systems still is in control of on a go-forward basis. And so the value proposition, John explained some of what that meant for PSC. So I won't go through that again. But in terms of the Clever Culture Systems, this is really all about expanding reach and doing so in a way that really preserves the work that we've done in terms of getting APAS in the market already and finding a partner to work with in the long term. And the facility, the BioTechnique facility that John showed on that previous slide, is super impressive. I was there with some colleagues recently meeting with John and the team, and there is so much capacity there. As John said, it's a very large facility that's in the, I guess, early stages of ramp-up. But that is going to be an amazing facility in the region and a great center of excellence in the very near term for APAS Independence to support the sales process. So with that, I will end the formal presentations and hand over to Courtney to facilitate if anyone's got any questions.

[Operator Instructions] So we have some questions -- live questions.

Courtney, I'll open it up. We've got one here with James. I might let James -- maybe I can manage this one, Courtney. I'll hand it over to James and allow him to kick off with the first question. James, over to you. You're on mute.

Can you hear me?

Yes.

Congratulations on this partnership. Could you please talk about how this arrangement will improve your ability to access additional clients given, I suppose, the size of your sales team relative to the size of the market?

Yes. So look, we're resourced to focus on the largest pharmaceutical companies globally. Each of those have a center of excellence. So none of that changes. I think what's changing here is really with the PSC Biotech very much using their existing network. And so we don't expect to have a linear increase requirement in needing to add more resources from our sales perspective. Really, what we're looking at here is to use the breadth and the reach that PSC Biotech already have within the region, predominantly in the U.S., having that referral process to kind of channel into Clever Culture Systems.

Yes. And given that PSC Biotech is a private company, perhaps could you give a bit more color on the breadth and the client base that they have and sort of existing work around similar technologies? And how this -- the APAS will fit within that?

John, maybe you're best placed to answer that one.

Yes. Thank you, John.