Cyclopharm Limited (CYC) Earnings Call Transcript & Summary

Thanks for standing by, and welcome to the Cyclopharm investor webinar and Q&A following announcement of the company's H1 2026 results. [Operator Instructions] Note this session is being recorded. On behalf of Cyclopharm today, we have the CEO and Managing Director, James McBrayer, and I'll hand it over to him now.

Thanks, Matt. I'll just bring up my presentation now. Let's see here. Great. Well, thank you, everyone, for joining us this morning. As I take you through the results of the first half of 2026, there are 3 things I want to leave you with. First, we delivered a fifth consecutive record revenue half; secondly, the United States has moved from promise to performance; and third, a few weeks after the close of the half, United States Society of Nuclear Medicine published an international clinical guideline that named Cyclopharm's proprietary product, Technegas, as a preferred ventilation imaging agent of choice. This is our standard disclaimer. Also, this presentation was released on the ASX last week. I'll move on to the next, the headlines at a glance. The top row are the financial headlines. For the half of the revenue, $17.5 million, up 14%, our fifth consecutive record half. The U.S. Technegas revenue, up 74%. Gross margins up 53.5% to 56.3%. Margin improvement is driven by the shift towards higher-margin Technegas, in particular, U.S. Technegas and $12.2 million of cash after a $13.5 million net raise. The bottom row is driving the top, 83 revenue-generating U.S. locations at mid-August, 70 at 30 June, 35 a year ago. 1,684 locations actively engaged in the pipeline, about 1/3 of the addressable U.S. market. And on 29 July, new guidelines naming Technegas generally preferred when available were released. Every number on that top row was achieved before those guidelines existed. On the loss, $8.8 million against $7.7 million last year. That result is deliberate as a result of our U.S. investment, our R&D nearly doubling to $600,000 as we advance beyond PE indications and the absence of last year's $1.1 million joint venture profit after we sold the noncore Cyclotek interest. I'll come back to cash at the end. A quick snapshot of what we do. This orients you to anyone new to our story, Technegas is an Australian invention, a ventilation imaging agent that shows how lungs actually work, how they function not just what they look like. Technegas is available in 67 countries, direct distribution in 17 of those. More than 5 million patient procedures have been performed. The number that really matters, in our established market, Technegas holds a market share of 85% or more of nuclear medicine ventilation imaging. This is the adoption curve we're now replaying in the United States, the largest health care market in the world. We report our revenue in 3 streams. For the first half, U.S. Technegas grew 74% from $1.2 million to $2.1 million. Rest of the World, Technegas increased 13% from $6.4 million to $7.3 million. Third-party distribution was up 4%, delivering $8.1 million in revenue. This was a good result given the capital projects are intermittent by nature. Again, overall, we posted a total revenue of $17.5 million, up 14%, our fifth consecutive record revenue half. The point of this slide is not the total, it's the shape. The fastest-growing stream is also the highest margin one. In the U.S., consumables run at greater than 90% gross margin. That's why the group margin moved from 53.5% to 56.3%. This is a slide to remember. U.S. Technegas revenue up 74%, the revenue generating primary sites 35 at June last year, 70 at June this year doubled and 83 as at mid-August. Look at the pace, 20 new net primary sites in the 8 weeks between our AGM on the 8th of May and 30 June. The U.S. is now ranked #1 globally for Technegas consumable revenue in absolute terms and per installation. And the 83 sites at 12 August are linked to a further 429 contracted affiliated locations. That's a significant expansion runway driven by customers who have already signed, already trained, already decided. For those, no new enterprise network relationship is required. 54%, this is a number to remember. 54% of our revenue generating U.S. locations are expansion units, a second or subsequent installation inside a customer that already has Technegas. We're no longer publishing our overall customer list for competitive reasons. However, the statistic speaks volumes roughly half of the U.S. News Honor Roll, the 20 most acclaimed hospitals in America, use Technegas, all 20 are engaged in our pipeline, 18 of the 100 largest U.S. hospitals, 27 of the 200 largest 13.5%. About 85% of our customer organizations are academic medical centers or major teaching affiliates. That last one compounds. These are the institutions that publish the research, write the protocols and train the specialist. Every resident trained on Technegas carries that preference to their next hospital. We're already seeing this benefit. Then look at what those institutions do once Technegas is implemented. 82% of our revenue-generating locations sit inside multi-location customer groups and 23 of our 38 U.S. customer organizations now run Technegas across multiple facilities. There is no stronger evidence of clinical utilization than a customer expanding the service within their own network. The expansions we did recently announce tell that story University Hospitals, all 11 sites now revenue-generating, Penn Medicine, 2 installations with an 11 site potential, Northwestern Medicine in Chicago with a 7 site potential; and an expansion within Massachusetts General at Brigham and Women's. Some of the most discerning health systems in the country, each choosing to go wider. Even since publishing this presentation last week, we've already added 2 more Lighthouse facilities. The federal sector is the other major part of the Technegas story. 9 federal locations are now live. Under the October 2024 National contract, we now service 6 VA hospitals with the seventh now contracted 2 military hospitals, Walter Reed and the Brooke Army Medical Center and the National Institutes of Health. Federal procurement is reputationally slow and undergoes a different approval process to the academic centers. We've successfully proven given the clinical importance of Technegas, we can navigate the supply chain and compliance across a government network with 23 distinct procurement groups. Our overall site numbers today is a modest base, but very high in caliber. We are reaching clinical inflection point, a growing federal network, institutions that are set clinical practice, the institutions that scale it internally and that standardize the use of Technegas. That is the foundation our rollout is built on. The international guidelines that have just been released are the undeniable proof of the clinical importance of Technegas in the U.S. This is our U.S. pipeline as at 12 August, it's the detailed driving the numbers I've already provided. I'll make a few comments. First, mid-last month, we were at 83 primary sites. That number has already increased. Second, we are proving that primary installations expand into their affiliate locations. Third, and pleasingly, since the guideline release, we're reengaging and making great progress with those sites that were on hold. Fourth, once the site moves to committee review, it has clinical backing. Once it's in contract review, implementation is sure to follow. We're only getting started. This is a snapshot of our addressable market. We're data-driven. This is CMS numbers or actual Medicare claims. The data we mine allows us to see referring and nuclear medicine physicians. It also distinguishes pulmonary embolism from other indications. There are 5,139 U.S. locations performing nuclear medicine lung imaging. We regard approximately 2,000 of those as our primary market. We expect both the total addressable and targeted market numbers to grow as we expand beyond diagnosing PE. However, PE alone represents a USD 180 million annual revenue opportunity for Cyclopharm. We've built a strong runway and we expect to deliver greater than that 85% market share in the U.S., the same market share that has already played out in every established market we operate. Let's talk about the recently released guidelines and why they are so important. In fact, this is arguably the most significant development in the company's history, and it happened officially only a few weeks ago. On 29 July, 4 societies, the U.S. Society of Nuclear Medicine and Molecular Imaging, the European Association of Nuclear Medicine, the American College of Nuclear Medicine and the Australian and New Zealand Society of Nuclear Medicine jointly published online in the U.S. Journal of Nuclear Medicine, a new procedure standard for pulmonary scintigraphy or lung imaging. This was the first update to the U.S. guidance in 14 years. It replaces the previous 2012 standard. And it's the first single lung imaging standard that aligns the U.S., Europe and Australia, New Zealand. Guidelines are the rule book. They set how a scan is performed and interpreted. And they are what hospital committees and health insurers point to when deciding what to implement. In other words, they define the standard of care. Guidelines of this kind are normally brand neutral. This one is not. Technegas as mentioned in the introduction, it's defined in the glossary. It's been given its own dedicated section and importantly, Technegas is recognized as preferred when available. Our subsidiary, Cyclomedica is named as the manufacturer, even the equipment section specifies our system and our single patient use consumables. In contrast, competing agents appear under generic headings. You can take 3 commercial consequences from this guideline. First, it calls from a move to 3-dimensional imaging in the U.S. where the competing agents are weakest. The second key point, dose and safety. A nuclear medicine scan with Technegas delivers a breast radiation dose up to 70x lower than a CT pulmonary angiography and about 10x lower even with a low dose CT. The standard names 5 patient groups where our scan should generally be preferred. They are premenopausal women, pregnant patients, impaired kidney function, contrast intolerance and suspected chronic PE-related lung disease. And the third point. The new guidelines identifies AI as a fast emerging tool and states that Technegas' base data requires no correction, exactly what our AI collaborators need. Until 29 July, our U.S. team was asking hospitals to adopt Technegas, a product that was previously listed in the 2012 U.S. guidelines as unapproved for use and unproven in the U.S. That barrier has been removed. This is not our marketing claim. It's the profession's own clinical position, a global consensus that is freely accessible to every clinician committee and administrator in the U.S. and around the world for that matter. And furthermore, it's the defined standard of care for at least a decade to come. Everything we've built in the U.S., our existing and imminent installations, our 1,684 location pipeline, we've built without this clinical [indiscernible]. With it in hand, we're only getting started. So why did the profession update their clinical practice guidelines? How do we get to this enviable position? The answer is twofold: Technology and Technegas. Regarding Technegas, more than 5 million patient procedures worldwide, over 230 published papers, more than 2,400 scholarly citations. Guidelines sit at the very top of this pyramid. You don't get there on marketing. You get there when the accumulated evidence becomes strong enough that the profession changes its own rules, which is exactly what happened on 29 July for Technegas in the U.S. Technology is the other driver. Ventilation imaging has moved from flat planar images to 3-dimensional SPECT and now to hybrid SPECT/CT that delivers three-dimensional region-by-region measurement of how each part of the lung is working. The new guidelines pushes the U.S. down exactly that path and identifies 3-dimensional scanning as the preferred technique. That matters commercially. The more advanced the imaging, the wider the gap between Technegas and the alternatives. And the evolution hasn't stopped. The next step is already underway. AI and quantification software layered on top of SPECT/CT combination, taking analysis down to segmental and subsegmental levels. We are seeing a rapidly growing software layer and all of them need to draw upon that base data, which brings us to the next slide where that functional data comes from and who is already building on it. At the heart of that AI evolution is function, function comes from nuclear medicine. CT shows you what a lung looks like, anatomically. Nuclear medicine shows you how it actually is working region by region. Every tool on this slide is built on the division of labor. Our functional data layered on CT anatomy. I want to highlight that CT contributes when paired with nuclear medicine. These platforms are using a low-dose noncontrast CT purely for anatomical registration, a fraction of the radiation of a stand-alone diagnostic CT, let alone a CT pulmonary angiogram. Patient gets anatomy and function together and still at a far lower dose. The software space around this is growing very quickly, multiple platforms here. The major imaging vendors, the radiotherapy planning vendors and the open source community, doing lobar quantification, ventilation perfusion mismatch, functional avoidance, planning, functional dose volume histograms, why it all matters to us, none of this works without a clean functional data input and the new guidelines state that Technegas' base data requires no correction, no algorithm. Every one of these platforms raises the clinical value of Technegas scan without us spending $1 on development. This whole software layer depends on the quality of the functional input, which is where the unique Technegas particle itself comes in. I've had to give you at least 1 slide. This is the magic behind Technegas. Technegas' particles are a few nanometers in size, far smaller than a red blood cell, only slightly wider than a strand of DNA. They behave like a gas going in, spread evenly throughout the smallest airways and then stay there. That's what gives you an accurate region-by-region picture of what oxygen is actually being delivered. A CT scan shows you what a lung looks like. Technegas shows you how it's working. No other approved agent does that with the same fidelity or anything like the same low radiation dose. This slide illustrates the Technegas barrier to entry. Technegas is not a drug on its own. It's a drug plus a device plus a service and consumable model. It's regulated as a combination product in the U.S. A competitor has to replicate all 3 and clear the regulatory path for all 3. That's why we have had no equal in this field and why the new U.S. guidelines specify our system and our consumable by name. Where to from here? Pulmonary embolism is the beachhead for our indication for use, not the destination. Technegas measures lung function, lung function matters in every respiratory condition, not just clots. Beyond PE is an additional addressable market estimated at over USD 900 million globally, taking the total long-term opportunity for Technegas to over $1.1 billion. Critically, the new guidelines validate this strategy for us. The guidelines reference chronic PE-related pulmonary hypertension, follow-up scanning 3 to 6 months after a clot where residual blockage carries a 2 to threefold higher recurrence. Lung function before and after lung surgery or radiotherapy lung transplant assessment and grading of small airways disease, which includes COPD and asthma. Here is the commercial point that matters most. Every one of those indications already falls inside our existing broad U.S. FDA approval for the visualization of pulmonary ventilation. That's the quote, "visualization of pulmonary ventilation." No further regulatory approval, no delay, no cost. It extends the value of every system already in the field, but clinicians still need the evidence. And we're building that case with the latest and the best complementary technology to include AI. Trials continued through the period, the Woolcock Institute study in mild to moderate COPD and the multicenter PROSPECT trial in France in recurrent venous PE. Again, the guidelines note that Technegas base data requires no correction, an ideal input for our AI collaborations. Turning back to our results for the half. The established business supports our U.S. expansion. Rest of the World, Technegas revenue is $7.3 million, up 13% across our 66 established markets. Third-party distribution contributing $8.1 million, up 4% built from our standing start in 2020 off our own sales, service and regulatory presence in our direct 17 markets. During the period, we achieved an operational milestone worthy of note. We secured the final wholesale pharmaceutical licenses to distribute in our own right across all 50 U.S. states. That gives us independence from outsourced distributors, more control over margin and customer relationships and opens third-party distribution opportunities of our own. On capital, during the half, we raised $13.5 million net with institutional placement and plus a share purchase plan. At the half, we closed cash at $12.2 million. And the statement that matters. We believe we passed peak cash burn. The logic is simple, though. Consumable revenue carries a gross margin in the U.S. greater than 90%. Importantly, our commercial infrastructure is already built and largely fixed. We have an inventory on the ground in the U.S. already there. Each incremental sale needs almost no additional cost. So as the installed base grows, monthly net cash consumption falls. Bullets on the left carry our derisk proposition. Reimbursement secured, federal and private network contracts signed, new guidelines published. For any product launching in the U.S., we are in a very unique even unprecedented position at this stage of a launch. Now the map. We're now present in 22 states, collectively holding 239 million people. We have only just started serving that population from our 83 sites. Look at how we grow along the arrows. We land a leading institution. It expands internally. That number again, 54% of our sites are expansion units inside existing customers. Then it pulls in its affiliated networks. 82% of our installs now sit within the multisite groups. From there it radiates. A leading academic center gives us the reference, the clinicians, the reputation and the published data to win the region around it. We're not buying growth market by market. We're compounding off institutions we've already earned. Of the 5,139 addressable sites, we target 2,000 and we're only in 83, 4%, the derisking is done, and we're only getting started. Bringing this all together, there are 5 key reasons to back Cyclopharm. One, a profitable, growing med tech. The business outside the U.S. is cash positive. We are past peak cash burn and group gross margins improved 53.5% to 56.3%. Two, we're first-in-class. 67 countries, over 5 million patient procedures, 85% plus share of the ventilation imaging in our established markets and now written into the profession's own clinical standard. Three, U.S. growth is accelerating, 83 revenue-generating sites as of mid-August or 1,684 location engaged pipeline, marquee federal and academic reference sites, a fully deployed commercial team and now the guidelines. Four, recurring revenue. Roughly, we're generating around USD 70,000 a year per larger sites. Consumables are greater than a 90% gross margin. And five, our real growth is ahead of us. Product expansion beyond PE that is accelerated by AI, all of these opportunities sit within our existing FDA approval. As I told shareholders at the AGM in May, the U.S. is not a hope, it's happening. In closing, Technegas is a proprietary, clinically proven technology with no equal in its field, scaling into the world's largest health care market, leveraging off this very moment, the greatest clinical and commercial validation in its history. We'll report quarterly pipeline updates through the remainder of the year. And I want to thank you, and I'm happy to take questions now.

Thanks, James. As you've mentioned, we'll move on to Q&A. [Operator Instructions] I'll jump into those now. First one I have that came through via email, James, there's a feeling in the market, the company will need to have a further capital raise in the next 6 to 12 months to help alleviate this concern. Can you please speak to the cash position, burn rate and how this will reduce as projected installations occur?

Yes, thank you for that question. At the end of the half, we've reached $12.2 million, as I mentioned in the presentation, we have reached cash burn peak. Every installation in the U.S. generates high margin with every installation. The Board has no immediate plans for any type of capital raise, but we're always looking at opportunities that avail themselves.

Thank you. The next question is, will the company look at paying a dividend any time soon?

We know that, that's very important for our shareholders. Historically, we paid dividends. Once the U.S. is firing, it's going to be very cash generative, and we will be reintroducing a dividend at that time.

And there's been a couple of questions come through just with regards to breakeven points. So can you just maybe speak to what needs to happen for the company to reach that point?

Well, I think we talked about the benefit of the U.S. and the margins that we're driving. There's a couple of different drivers in that. We're dealing with large contracts, those tend to fall into place with large institutions generating over 70,000 U.S. per annum. The speed at which that we generate, of course, is going to bring us to profitability that much sooner. So we're delivering on that and the speed in which we're driving that. On the back of these guidelines, we're expecting great things.

Thank you. The next question I have is, how does your third-party distribution business work? Can you speak to key partners' profitability of this and the scope for growth?