Genetic Signatures Limited ($GSS)

Good morning. My name is Caroline Waldron. I'm the Chair of Genetic Signatures. Welcome to our investor webinar. I'm joined on the call by my Board colleague, Mike Aicher and CEO, Maria Halasz. We had previously indicated to the market during the half year results announcement that we would be conducting a strategic review of our business. That work has been completed and to present the findings of that review is our CEO, Maria Halasz. Over to you, Maria.

Thank you very much, Caroline, and welcome to all on this call. Please take note of our disclaimer. And I would like to get straight into the presentation. And I'll be talking about 3 distinct areas. One is what we found and what we have done and where we're going. In terms of what we found within the organization, I started on the 2nd of March, so this is about 98 days into my tenure as CEO. And I had the privilege of support of the staff and Board in my review. So it's been really exciting to be part of the team. And especially as we found established customer relationships with meaningful revenue for the company in the last few months. We've had -- we also have a differentiated 3base technology, solid product and instrument pool, which we can use for existing and future customers. And most excitedly, we've got a trained and talented workforce in molecular diagnostics. Perhaps the organization wasn't ideally structured, so we did not see the productivity otherwise would have expected. We did see underperformance in the U.S. market and perhaps the reason for that was a scalable business model that was lacking. In terms of our product portfolio, we have very strong and well-performing products in our portfolio. However, in terms of product development, historically, there wasn't the right geographical and regulatory focus. And finally, we looked at the cost structure of the organization, which was misaligned in terms of the revenue that was generated. So what we've done in the last 3 months in response to that is, we've restructured the organization and implemented a $5 million cost reduction. It's an annualized figure, and it will transpire fully in the FY '2027 year. In terms of restructuring the organization, we've also reset leadership accountabilities and we set the organization up for higher productivity. We looked at that product and instrumentation strategy, and I'll talk to you a little bit further downstream about that, secured our long-term strategically significant contracts and also implemented product upgrades, which addressed supply chain issues and also some of the workflow issues that we've experienced. Where we're going from here is we really want to implement a profitability first commercial model in our future contracts. And not to say that our current contracts aren't profitable. it's more around really figuring out and setting into stone a margin discipline that will actually deliver long-term profitability. We're looking to grow Australia and EMEA, which is showing really good promise. And we will be pursuing APAC as the next growth opportunity for the company. We will be pausing the U.S. until further development of a scalable business model, and we will be also evaluating strategic partnerships to scale the company efficiently. We have already started with an AI program. We've got the beginnings of implementing AI tools for productivity. And of course, we are currently working on, and we expect to come back later on this year to the market with a Board endorse comprehensive product IP and corporate strategy. Thank you, Michael. I'll spend a little bit of time on each of these, and I'll start with what we found and particularly around the 3base technology, which has been the cornerstone of the business for the last 15-plus years. It is quite -- it was quite clear early on when I looked at the technology that 3base chemistry is a genuinely defensible scientific differentiator. It does perform superior to others in terms of sensitivity in infectious diseases, and it does have application potential in other areas. Our current EasyScreen assays produced really good results. And I think it's really important to note, and it's quite remarkable that they also perform the regulatory standards in multiple jurisdictions, both in Europe U.S. and also in Australia. I guess when you look at how they perform in the commercial environment, we already know that we've got long-term sustainable contracts, and they perform very well and create great value proposition in hospital environment. The one thing that we also noted was the 3base technology does have all these advantages, it probably has not been fully exploited in all its applications or potential applications. And there is an opportunity for us, the review of where we've been and develop a comprehensive IP and product strategy for the next-generation EasyScreen assays. The other area I wanted to spend a couple of minutes on is our revenue and existing supply agreements. And I think it's not trivial and it's quite remarkable that the company currently supplies test, about 500,000 tests a year to the market. Now we're in the infectious disease diagnostic area, and this is truly remarkable for a company of our size. However, our revenue diversity is limited, we really are focused on a few key customers, and that does represent an organizational risk. And we also noted that amongst the smaller supply agreements, we had agreements that were legacy agreements that may have uplift their economic value. However, the opportunity arose out of this, and that is really focused on our existing customers and enrich the relationship, but also really apply strict margin discipline with new subsequent supply agreements. Another area that we looked at is organizational and cost structure and it was previously announced, we have addressed the misalignment in the cost and revenue base. But I think what's really important and in every business, the key asset is our human resources and Genetic Signatures has a very deep talent pool in molecular diagnostics, not only that, but we've got long-term loyal committed employees, and that has become apparent during the restructure. Any restructure that attacks or addresses 30% of the employee base would be quite traumatic for any organization. We have been able to implement a restructure and retain key employees. And our talent pool has actually remained very strong. In terms of the opportunity to reduce cost, we've already implemented an annualized $5 million cost reduction, but we do believe that there are other opportunities for operational cost reduction. Part of it will come from productivity. In part, it will come from a deeper rollout of our AI productivity tools. In terms of our product portfolio, and as I mentioned before, we've got a very strong existing product portfolio, which performed very well in infectious disease pathogen detection. What we do feel is that we can actually build on this existing portfolio and all our new products in the coming medium-term, certainly. And I'll talk a little bit about that in the product strategy section. In terms of our U.S. market, and I'm sure that many of you are very interested in what we found. I have to state first and most of all is that getting a 510(k) clearance from the FDA is not easy. And our EasyScreen, parasitic detection kit was cleared by the FDA and it's a genuine milestone for the company. The fact that the U.S. market hasn't taken up quite so fast and had limited success so far, had a multiple and complex reasoning and we've identified at least 4 areas where we think we can actually -- what we can actually address. One is reimbursement challenges for the full pathogen portfolio. We know that at this stage, only 5 of the 8 pathogens in our EasyScreen assay are covered by reimbursement, and we really need to address that. We need to look at differentiate clinical value proposition, whilst we have a very solid and well-performing and competitive Parasite Detection Kit. When patients present with enteric symptoms, they also will have to be tested for bacteria and viral infections. At this stage, our test does not provide that. So in a clinical environment, they still have to use other assays. The other thing that we noted is that our workflow is probably not fully automated and certainly not enough to fit in with large throughput labs. And the final area where we look at is the competitive landscape, which has evolved significantly since the product was launched in '24. We see all of these as opportunities to pause the U.S. market entry at this stage, maintain our existing relationships with the 3 reference labs that we already have set up. However, make sure that when we actually start spending money on the market, we will have a very strong value proposition, and we will have addressed the root causes why the market entry to the U.S. was slower. In terms of our instrumentation strategy in part flows from our U.S. -- pausing the U.S. market, the Optimus Prime project was announced largely to address the high throughput environment that we were hoping our EasyScreen pathogen detection assay will go into. And the Optimus Prime project was to resolve the workflow related issues and make our test truly high throughput, as we pause the U.S. market entry, we are pausing the Optimus Prime project to ensure that we have appropriate time to reassess what would be the right strategy in both in terms of reentering the U.S. market, but also instrumentation in the long term. The pausing of the Optimus Prime project is also supported by the fact that our current instrumentation pool is sufficient to service our current customers and certainly entering into new markets and even in Europe and EMEA, with the current instrumentation pool. So we won't have to invest in new instrument development to pursue those markets. So now I go into a little bit of detail about what they've done. And -- in terms of resetting the organization and cost structure, I've already mentioned, the savings we've already seen and implemented and which we expect to fully materialize in next financial year. Part of that, we also established purchasing processes and controls, which we expect will result in further operational savings. A major part of the cost savings was restructuring the organizational structure. And that was important because we did have overlapping functions and that ultimately resulted in accountabilities being mixed up. So now that we've simplified the organization, really focused on core capabilities and looked at an outsourced business model where noncore capabilities can be conducted by contract research organization. We expect that we will be much more efficient in delivering current programs, but as well as new products into the market. We have also established our AI policy and began the AI enablement of the organization. We started with administrative and certain product development functions, and we're already seeing the benefits of these, but we expect that this will flow through further as our current software agreement continue to expire and we can replace them with much more cost effective and more tailor-made AI developed tools. Overall, what -- all this resulted in a fact that we've extended the runway for the company that will allow us for delivery of the key strategic objectives we set out. When we looked at our long-term supply agreements, what we've been able to achieve in the last 90 days, and you've seen this in our announcement with signed a supply agreement with the Hvidovre Hospital in Denmark, and that is not only relevant because it's a material amount of revenue, but it's also significant strategically as it demonstrates the clear value proposition we provide to hospital labs and that is the improved patient flow, and we reduce hospital ward closures. And this really opens up new opportunities in the EMEA market for us, both direct but also through our distribution relationships. We have also secured long-term supply agreement in relation to our gastrointestinal and respiratory detection kits in Australia. And we've completed those critical product upgrades that removed our supply chain risk going forward in addition to improving labs workflow. In terms of our product and instrumentation strategy, we completed the review of our existing instrument pool, and it's become apparent that we've got sufficient instrumentation to service our growth objectives in EMEA and also we can potentially pursue the APAC market with the current instrument pool. In terms of new product development, we're really focused on upgrading our existing products so that they comply with updated regulatory requirements. In addition, we want to broaden our pathogen detection so that we actually can provide better value proposition to our customers. We've mentioned the upgraded product flow and improving supply chains or addressing supply chain risks. In terms of instrumentation pool, again, I want to emphasize that our current instrument pool is sufficient to serve our growth objectives in EMEA, APAC and in Australia. And also, we have reserves in our instrumentation pool. So certainly, we don't anticipate major capital expenditure as we expand into this market in the near term. So where are we going? And we've developed a strategic framework on 3 horizons. The first horizon is stabilized. Second is optimized. And the third one is to scale for the next 24 months. By and large, our horizon 1 activities have been completed, and we've planned that for the first 6 months, we're a little bit ahead of that. We also have already commence some of the optimization horizon activities. I don't want to run through what we've already done. But the one thing that I wanted to emphasize that we already started to review our market access strategy outside of EMEA and U.S. and EU in addition to reviewing what we're currently doing there. In terms of the optimization, which is our horizon 2, and this is our next stage of the strategic framework we would like to implement is we would like to complete a Board-endorsed IP regulatory and product corporate strategy, and we expect to come back to the market with that towards the AGM. Very importantly, and as an immediate priority. We want to grow the Australian and EMEA markets. And also, we have already paused the Optimus Prime program together with pausing the U.S. -- major U.S. market spending. Currently, we are in the process of looking at the APAC market strategy, and we've just hired a Head of Sales for the APAC who's going to commence on the 1st of July and will be a key driver of that strategy. We are in a process, and we're working very hard with the team to settle the culture after a major restructure we implemented. We're very pleased to report that so far, so good. Our teams are working wonderfully together under a new structure. And although nothing is perfect in a company, you always can improve things. I'm very grateful for our staff for picking up the tools and just getting on with the work after the restructure. The final thing that we are focused on, and we've already started that process is really identifying and evaluate potential partnerships. We understand that to scale. We need to look at product and corporate partnerships in the future. In terms of our next horizon, and that's in the next up to 24 months, is we want to look at the APAC rollout. This is subject to an approved market access strategy to drive our revenue. We've got new products that we are currently developing, and we expect to launch this within the next 12 to 24 months in Europe as well as in Australia. We want to grow our European and EMEA business generally on the back of the recent strategic milestone with Hvidovre Hospital. And we also want to use that to go into -- deeper into our distribution network. Whilst we've got instrumentation certainly secured for the next 4 to 5 years, we really need to look at instrumentation strategy beyond because actual development times are 2 to 3 years for this area. So we want to start that process towards the back end of Horizon 3 activities. And we want to look at the potential U.S. reentry possibly as an LDT option and also evaluate potential partnerships. How are we going to do that? And do we have the skills? I'm very pleased to report that we've got a wonderful and capable professional senior management team. We've got our CTO, Susanne Pedersen, who has got more than 20 years' experience in molecular diagnostics product development and she's been amazing at taking our development program further ahead as well as looking over our technology team, supporting our existing customers. We have recently appointed Angela Wang as Head of Finance after serving the company for 4 years of Financial Controller. And we've got John Buckels, who runs our sales in Europe and EMEA, and he's been with the company for several years. It's more than 15 years' experience and very deep contacts in that market. We've got Peter Njuguna, who's looking at our customers, who's got a technical experience, so he's more than capable of looking after bringing together systems into integration, customer service and quality assurance. And as I mentioned earlier, we have recently appointed Head of Sales for APAC with a view to develop a sustainable APAC strategy. So let me summarize by pointing out that we've stabilized the company, and we are now looking to optimizing and scaling the assets that we have. We've got the right cost base. We've got established strong customer relationships. We realigned the organization structure and established sustainable controls and reporting systems and increased our runway. It was critical for us to set up the company for future growth. We will focus on in the future. By the way, we are focused on right now on contracts that are economically feasible. Large contracts will remain very important to improve our unit economics, but cost -- but contracts will have to stand alone on their margin discipline. We are pursuing an outsourced business model. We have recently engaged our first major outsourced contractor who will facilitate and assist with completing a major product development. And we will focus on what our strengths are and that is developing and delivering to our customers a 3base technology that actually ultimately performs better than competition in infectious disease diagnostics. We have also implemented capital allocation discipline within the organization. I think there's just a mindset shift that has been happening on a daily basis from an activity-based spending to an outcome-based capital allocation in everything we do on every single level within the organization. We're very much focused on growth. This is an immediate priority for us to focus on EMEA, Australia and then build an APAC strategy, whilst the U.S. will remain a medium-term price, and we'll focus on -- we're focused on resolving the issues that we have identified while we looked at the U.S. market and then making sure that we're addressing those before returning. And finally, we are already in the process of utilizing partnerships with manufacturers, service providers, OEMs, instrument players within the market to actively pursue synergistic product and corporate partnerships. Thank you very much for your attention, and I will open up for questions right now.

Okay. I'm going to go through the questions. So if you give me a couple of moments, that would be appreciated. So there is a question on other estimated $5 million in savings, including the outsourced research and development costs. What are the estimated outsourced costs and how much has already been committed? So when we've established a $5 million savings, we've allocated capital for outsourced product development activities. So everything that we've currently planned in our product development program is already calculated into our current budget and includes that $5 million savings. So with the $5 million savings outside of that. We got another question on potential U.S. reentry with LDT. What settings do you see potential advantages of the 3base? I think, certainly, the 3base technology provides us improved sensitivity. I think the syndromic testing area is still where we want to remain, and we would like to look at a broader pathogen detection kits there, similar to what we've got in the European market, where we've got bacterial viral and parasitic testing in a single assay. So we have next question. So reporting the U.S. market, what is the impact on revenue, please? So we don't -- we haven't released a split of revenue. And also, we haven't released any revenue forecast in the past. So where there is -- in terms of what we've reported to the market, there is no impact on that. So there's a company -- I think that's the list of questions. Let me see whether there's any new questions that come up. I can't see any other questions. There is -- I don't see any questions. So thank you very much for all of you who participated. If there are no other questions, then I would like to close the meeting.

Thank you, Maria, and thank you, everyone, for attending today. We will now close the webinar.