IXICO plc (IXI) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen, and welcome to the IXICO Investor Presentation. [Operator Instructions] The company may not be in a position to answer every question it receives during the meeting itself. However, the company review all questions submitted today and publish responses where it is appropriate to do so. These will be available on your Investor Meet Company dashboard. I'd also like to remind you that this presentation is being recorded. Before we begin, we'd like to submit the following poll. I'd now like to hand over to Giulio Cerroni, CEO; and Grant Nash, CFO of IXICO. Good afternoon.

Good afternoon and thank you, and welcome to everyone. I'm Giulio Cerroni, IXICO's CEO. I'm joined today by our CFO, Grant Nash, as was said. Following yesterday's trading update, we're very pleased to be presenting all the reasons why, despite the uncertainties created by the COVID-19 pandemic, profitability for our year ending September 2020 is expected to be materially ahead of the market guidance provided earlier this year on June 24. For those of you for whom this is the first introduction to IXICO, IXICO was established in 2004 and has been listed on AIM since 2013. We're a fast-growing and profitable technology company, providing advanced analytics services to the global pharmaceutical industry, developing new therapies for neurological diseases, such as Alzheimer's and Huntington's disease. So the next slide is the regular disclaimer. So we'll move straight on to Slide 3, in which I'm looking to be able to outline how we do what we do and what we mean by advanced analytics and intelligent insights. Put simply, we focus on developing and deploying breakthrough data analytics at scale through our proprietary remote access TrialTracker platform. MRI and PET brain scans and remote wearable biosensors are increasingly being used in clinical trials as noninvasive approaches to capture objective imaging biomarker and digital biomarker measures. In the case of imaging biomarkers, they're using clinical trials for patient selection and stratification, early detection of potential drug safety issues and also assessment of drug efficacy for -- by measuring volumes of specific brain regions. In response to the uncertainties caused by COVID-19 to the clinical trial market, the FDA quickly issued guidance to the industry. And in his section, Grant will be speaking to how well we're operating remotely and continued compliance with these regulatory requirements, demonstrating the resilience of the underlying technology business model that we operate. So the key takeaway from this slide is that IXICO creates significant value for our clients by enabling better interpretation of the meaning of the increasing amount of data obtained from images in brain scans and data collected from wearable biosensors, whilst operating remotely in continued compliance with regulatory requirements. Next, on Slide 4, I'd like to describe how we combine our deep neuroscience expertise with artificial intelligence to innovate and differentiate IXICO in our target market. Our aim is to provide superior data analytics by deploying proprietary AI machine learning algorithms, which IXICO develops, utilizing highly curated data for neurological disease-specific patient cohorts from clinical trials. This means that our portfolio of algorithms also benefit from machine learning improvements over several years of deployment over many of the most important clinical trials run in neurological diseases. To illustrate the benefits we deliver to our clients and to our own operational model, this picture will hopefully help describe that. So on the top, from left to right, this is a brain -- an MRI brain scan of a single patient. Traditionally, this will be reviewed by a highly trained expert reader to identify any potential changes in the brain suggesting disease progression when compared to a similar image from an earlier MRI scan. These expert readers will be looking for very small changes of around about 1%, sometimes less, over a 6- to 12-month period for a trial that would span several years. On the bottom part of the slide, it's the same patient at the same time, but analyzed by deploying one of our proprietary LEAP fully automated, AI algorithms. I want to illustrate some of the typical benefits we see using fully automated, AI-driven analysis over visual reader interpretation. First one is speed. Now we do analysis in minutes instead of hours when we're using our automated algorithms. Another one is accuracy, improved further by machine learning as more data is pushed through our algorithms versus the potential risk of variation between different expert readers. We also get more information quite often. So from the same number of images, we can often extract more information that cannot be confidently interpreted by the naked eye, which, in turn, reduces the potential number of repeat visits made by patients to imaging centers over the life of the clinical trial. And finally, greater utility. We're often able to deploy algorithms on another therapeutic area where the same biomarkers are identified as important. Hence, we achieve high vitality index and return on investment on our own R&D investments. So if we move to the next slide, I want to talk a little bit about why the global pharmaceutical industry has chosen IXICO as a trusted neuroscience technology partner. As a company, we've been revenue-generating for over a decade, and this means that we are firmly embedded in multiyear global development programs with multiple global pharmaceutical companies. Consequently, IXICO has built a difficult-to-emulate operating footprint that continuously reinforces our merits against potential threats from competition whilst also acting as a springboard for future growth. Examples of these include the following: The first one, a scalable model that has no requirement for IXICO staff to travel to clinical or imaging sites in more than 50 countries in which we've supported clinical trials. This has proven essential in enabling IXICO to continue to deliver on client requirements during the disruptions caused by the COVID-19 pandemic, hence, mitigating the impact on financial performance experienced by other vendors to the clinical trials market. With a network of over 2,000 qualified imaging sites experienced in deploying our TrialTracker technology also provides our sponsors the ability to onboard patients more efficiently. This again has proven important this year to mitigate potential delays to clinical trial time lines associated with COVID-19 for our existing clients. Having analyzed over 100,000 brain scans in that period of operation, we have high levels of stickiness in client loyalty from our growing portfolio of proprietary AI machine learning algorithms. And finally, the pharmaceutical industry is rightly rigorous in its initial selection of vendors, and it does everything possible to ensure that it does not need to change vendors midstream in clinical development. Consequently, we see our existing client relationships continue to prosper and grow as our technology deployment is extended from early phase to grow into later phase clinical trials and potentially, into the clinic. In the next slide, I'd like to express a few words on the market that we're focused on. So IXICO is addressing 2 important issues with high social impact. The first one, a generic problem for the pharmaceutical industry, is that despite increasing levels of outsourcing over the past decade, the cost of bringing a drug to market are high and increasing. As clinical trials are becoming more complex, return on investment is worsening, and so our pharmaceutical clients are keen to adopt technology with potential to improve research in -- research ROI. More specifically to IXICO, there is a major global unmet clinical need in neurological diseases. In particular, in dementia, which is the only major cause of death that we can't prevent, slow down or cure. This slide highlights why pharma R&D spend in neurological diseases is second only to oncology and why, with an aging population, that this unmet medical need is forecast to get significantly bigger and more urgent. On the next 2 slides, before handing over to Grant, I want to highlight why we will be sharpening our commercial focus on Alzheimer's disease, which is the largest of the dementia diseases. In this slide, I'm highlighting why the single-biggest news in almost 2 decades in Alzheimer's drug development is Biogen's aducanumab. The FDA has Fast Track review for this drug on the 7th of March 2021. Now approval would break 18 years of false dawns in Alzheimer's drug development and never before have we been this close to a possible disease-modifying treatment for Alzheimer's. With a cost of around $10,000 per month, per patient, aducanumab has the potential to become a multibillion-dollar blockbuster drug for Biogen, if approved. Aducanumab also sets the precedent by the FDA to consider approval of Alzheimer's drugs that provide a relatively small benefit. This is a major incentive for other large pharmaceutical companies to prioritize Alzheimer clinical trials for new drugs that will not only need to be marginally more effective, but also potentially a better safety profile, will be easier to administer than the Biogen drug, all of which will increase the demand for the type of neuroimaging services provided by IXICO. In addition, if aducanumab is approved, there is also likely to be significant new post-marketing clinical imaging applications to select patients that would benefit from being prescribed the drug and new requirements for continued safety monitoring of those patients on drug. My last slide here, before handing over to Grant, I want to highlight that we're also seeing increased diversification in drug targets for Alzheimer's. After a slew of drug failures with amyloid drugs seen in 2018 and 2019, we're now seeing evidence that pharma is looking to increase the likelihood of success by increasing the diversification of drug targets being pursued in their drug programs -- drug R&D programs. This is an opportunity for IXICO as it creates new market demand for IXICO's specialist neuroimaging services and so represents an opportunity to capture market share over the medium to long term. So with that final point, I'd now like to hand over to Grant.

Good afternoon, everyone, and thank you, Giulio. I'm going to talk to you today about our recent company guidance updates, and then I'm going to focus more closely on our investment plans for the coming year and the reason that we see now as being the right time to increase our investment activities. So just to put the trading update that you see on the slide in front of you in context, in the first half of April, the peak of the uncertainty over the short-, medium- and long-term impact of COVID-19 on clinical trials, we advised investors and stakeholders that whilst we believe our remote working model means that we're extremely well placed to deliver image analysis services to our clients, irrespective of lockdown restrictions or the level of uncertainty over the impact of clinical trials. What that meant is that, like the majority of companies, we felt that it was prudent to withdraw financial guidance from the market until we had more clarity. We then worked closely with our sponsors, with their CROs and imaging sites across the next couple of months, which meant that in late June, we were pleased to reissue guidance to the market, not only for the financial year '20, which runs through to the end of September for us, but also in addition to our next financial year, financial year '21. In doing so, we were amongst the small minority of companies with guidance in the market, and particularly in reissuing guidance for both the current financial year and the next financial year. And as of today, this remains the case. So it's -- I thought it was worth just highlighting the reasons that we were able to issue guidance with confidence despite all that was going on and continues to go on with COVID-19. And this is, firstly, we are absolutely confident that we can continue to deliver all of our services in a manner delivered 100% remotely, i.e., with all of our staff working from home. Our contracted order book of work provides us with clear visibility of our short- and medium-term revenues and once we've obtained confirmation from our clients that they were able to continue with their clinical trials. As a result, as you can see on this slide, on the 24th of June, we reissued guidance for revenues of GBP 9.1 million, EBITDA of GBP 0.9 million and positive operating cash flows. It's worth highlighting that this guidance was in line with the guidance we have removed in April in respect of both revenues and cash and was improved at that stage at the EBITDA level following a strong set of first half year figures, with our first half year running to the 31st of March 2020. So as you can see from this slide, our full year growth performance reflects a greater than 30% compound annual growth rate of revenues. It shows an EBITDA margin of 10%, which is up from 6% in the prior year and reflects a rapid move from heavy losses in 2016 to strong profitability forecast for this year, and positive operating cash flows as the second year of profitability feeds through into cash generation. So now moving on to the next slide, to Slide 10. We are of course then delighted to be able to talk today about the upgrade to our expectations for this year, as announced to the market yesterday morning. Whilst we continue to see delays in new trials starting, on which I will speak more shortly, we are able to confirm that the short-term impact of COVID-19 on our financial year '20 performance has been largely mitigated by the ability of our clients and ourselves to find ways of working around the short-term lockdowns, the disruptions in specific regions of the world and being able to rearrange imaging visits and the corresponding analysis to enable our service to these trials to continue unaffected. As a result, we are now reconfirming, with just a few weeks of our financial year remaining, that we expect to achieve or even slightly outperform our revenue guidance of GBP 9.1 million, which, just to reiterate, is more than 20% increase from the prior year and builds up to that greater than 30% CAGR across 4 years, and that our operational leverage and efficiency improvements are feeding through to our profitability expectations, meaning we expect to materially outperform the GBP 0.9 million, the 10% EBITDA margin that we communicated in June. So this all underlines our continued progression on our organic growth plan for double-digit top line revenue growth and rapid move from annual losses to sustained, strong, double-digit profitability. We're, of course, even more delighted to be able to continue to deliver this progression at such a challenging time, and it is along -- and this is alongside our view of the growing available market for our core services, which means we have the confidence to accelerate our rate of investment to continue the growth trajectory we have delivered across the last 4 years into the medium and long term ahead. So what I'd like to do now, turning to Slide 11, is speak specifically about our investment plans. And in doing that, I just want to outline the decisions that we've been considering in terms of the accelerating investment and the -- what we've considered in doing so. There are 3 key factors that we've considered in assessing our investment plans. The first of those is looking at the medium- to long-term trends within our core markets of neurological imaging services to clinical trials. The second is then assessing that in the context of our own financial position as a company, which obviously underpins our ability to invest, and then thirdly, considering the current headwinds generated by COVID-19 to the initiation of new clinical trials. And I'm going to handle these -- each -- firstly, on the market on this slide, then we'll look at our financial position on the next slide. And on the third slide, I'll talk about the COVID-19 situation. So starting with this slide, still on Slide 11, the medium- to long-term trends in our core market. In 2018, a GBI Research report estimated that there were approximately 3,500 CNS entities across the discovery and development pipeline, of which about 1,000 to 1,500 were within clinical trials, with the remainder either in the discovery or preclinical development phase. Within this subset, a GlobalData Plc report estimated that there are approximately 200 clinical trials, which are relevant to IXICO's core indications as of today, of which 80% will be disease-modifying entities, and that is opposed to entities that are designed to deal with symptoms rather than cure. The 80% is the key figure because that's the component of those 200 clinical trials, which are likely to require a significant imaging element. And when you consider that and take a reasonably conservative estimate with the existing addressable market of IXICO, doing what we do today, is a value of between GBP 120 million and GBP 150 million per annum. And in the context, as you can see from this slide of where we are, we are servicing somewhere between 5% and 10% of that currently. The key message there being that even today, there is plenty of runway for growth, just doing what we do today. When you go then and consider some of the points that Giulio has already made in regards to the wider drivers of growth in the neurological clinical trials market, specifically in a number of people with dementia being expected to travel between now and 2050 and the global cost of health services increasing from about GBP 300 billion per annum to over GBP 1 trillion across the same period, and alongside the positive developments in understanding neurological disease because of the ability to use objective measures provided by brain imaging, genetic sequencing and other "omic" measures as well as continually improving abilities to measure and unpick the environmental causal impact on population health and the technology to process and -- the associated big data that results from all these analyses. There's never been a better time for a neurological drug research. And if you take all that and put it against the backdrop of the regulatory bodies, such as the FDA giving clear signals, as they have done with Biogen's aducanumab, that they are supportive of licensing drugs in neurological disease areas, even where the relative benefit of the drug is small, this all adds up to strong incentives for the pharmaceutical and biotech industry to invest in drug discovery and development for neurological disease. Just as an example of this, Clarivate Cortellis reports, the recurring pronouncements of increased investment in neuroscience, not only from big pharmas, such as Amgen, Biogen, Novartis, Roche and Takeda, to name but a few, but also in the mid-tier of pharma, by the likes of Celgene, Shire, Vertex and Alkermes, et cetera. The conclusion of this is all very clear. The market is well positioned for rapid growth in neurological research. That imaging will be a core component of this as an objective measure of brain in otherwise an accessible part of the body. And IXICO's service offering is entirely aligned with this growing requirement. So moving on to my next slide, Slide 12. This slide really shows the financial position that IXICO takes to be able to invest. So we've looked at this specifically by assessing, firstly, our visibility of future revenues; secondly, our ability to leverage our revenue growth into improved margins and, therefore, lead greater scope for reinvesting profits; and then thirdly, the strength -- looking at the strength of our balance sheet and the ability to invest, whilst at the same time managing for downside risk. As you can see on the left-hand side of this slide, we have a strong order book for contracted work. That is, despite COVID-19, an order book that hit a record high of over GBP 22 million in April of this year, as we reported at the time. This steady growth in our order book across a period of years, despite the fact that the order book has absorbed revenue growth at greater than 30% compound annual growth rate across the last 4 years, gives us a great deal of confidence in our ability to sustain and grow revenues across the medium and long term. If you then look at the center graph on this slide, the graph shows our margin development -- our gross margin development across the last 3 years and to the first half of our year, to the end of 31st of March this year, and shows that we can make investment decisions on the back of not only growing revenues but also sustained strong gross margins in the mid-60s -- mid-60%s. This strength of margin increases our scope to invest while still delivering robust double-digit EBITDA margins. And then on the right of this slide, we are showing the continued strengthening of our balance sheet. And I'd just like to remind you, this -- our balance sheet that -- in which we have greater than GBP 7 million of cash and we have no debt. So in combination, there's the visibility of future revenues, the strong gross margins that we've been achieving, a robust balance sheet. I mean we are very well positioned to invest. And indeed, we have been doing so, as many of you will recall from our first half year update when we reported increased R&D investment to 16% of revenues for the half year, up from 15% last year. Increased investment in sales and marketing, up to 20% of revenues in the first half of this year, again up from 15% last year, whilst we've been holding our G&A spend steady. At the same time, we've been increasing our investment in capital expenditure, and in particular, our platform to enable increased efficiency and scalability of our offering in the market. Across the first half of this year, with an eye to the future, we increased our headcount to an average of 74 for the 6 months compared to 61 for the full year last year, which is an increase of over 20% despite the COVID-19 environment. So now I'd like to move to Slide 13, which leads me to the third prong of our investment analysis, really the question being that should we invest at a time with short-term uncertainty, irrespective of the long-term market proposition and our financial position as a company to do so. So just talking more widely first about COVID-19, the impacts on clinical trials has been very clear. A July 2020 report from RSM Life Sciences reported a significant drop in the rate of new clinical trials across 2020 compared to 2019. Just to give you that context, in 2019, there were 1,000 or more clinical trials starting each month, none of which related to COVID-19. 12 months later and we're seeing fewer than 600 new clinical trials starting, of which more than 20% are COVID-19-related. Turning specifically to CNS trials, there was greater than 70% decline in patients enrolling in new clinical trials in April of this year compared to the same time last year. This inevitably means that there are fewer clinical trials starting currently than there would be without COVID-19. And clearly, we at IXICO cannot be immune to that impact. This will have a short-term impact, therefore, in our expected bookings. But importantly, and it's really important that this -- that I am to emphasize this clearly, these are not lost or canceled trials. They're simply delayed. And what we can, therefore, expect with confidence is to see a rapid rebound in demand as the COVID-19 pandemic abates. Against this backdrop, therefore, we are viewing our next financial year, i.e., the financial year starting for us in October, as a year to maximize our focus on further improving our service offering and positioning for further medium- and long-term profitable growth. This means that our focus for next financial year, whilst it will absolutely remain on growth, will be so at a more muted level than across the past 4 years and with an investment strategy dedicated to delivering an even better service offering and growth trajectory for financial year '22 and beyond. In terms of specifics that we've been focusing on with this in mind, we've had a clear COVID-19 response that aligns with our wider investment strategy, as is outlined on this slide. Firstly, starting with employees. We have placed our existing employees front and center to our plans. We see a path to continued growth, and we will need the considerable strength of our employees to deliver this. We have, therefore, continued to consult and communicate with our employees at every step of the way across the last few months. We have already been able to show that we're an effective and proven company as a remote working team. We've provided strong assurances to our staff in times of heightened uncertainty in the wider market. And we have seen this trust and commitment repaid through their approach and dedication. And we're particularly pleased to receive a very high workplace culture score in an employee survey conducted earlier in the year. We are further committed to our team by continuing to deliver on our recruitment plans despite the challenges of employing and then onboarding staff in a remote working environment. Moving to our clients. We have really worked hard to be on the front foot with our clients' needs during the difficult times of the clinical trials. We have supported sponsors by showing agility in rearranging work schedules, rapidly qualifying new imaging centers and sites, shifting visit patents and continuing to ensure delivery of our analysis outputs to agreed time lines. And because of this, we've received several highly complementary reports from clients of their experience of working through us -- with us at this time. And I think this really brings on to our key investments, which is, first and foremost, our clients are a key part of our investment plans with a setup of a specific alliance management function being introduced as we complete our current financial year. This is designed to ensure that, more than ever, our clients and their trials are central to everything we do. We're also investing further in our infrastructure, and in particular, in the next-generation image capture and analysis platform designed to increase efficiency of trial setup and ensure we are well placed to scale our revenue levels well above GBP 20 million per annum, i.e., more than double our current level. We're continuing to invest in our growing portfolio of AI algorithms, utilizing highly contextualized, disease-relevant data to train algorithms to identify biomarkers relevant to our core disease specializations. And we're investing in process improvement. We've appointed a Head of Process and Systems Improvement who, having had significant experience of change management in high-growth environments, will lead a structured portfolio of initiatives as we progress through the next financial year. To sum up then on this slide, our conclusion is that the market opportunity, the strong financial position of the company on the back of 4 years high growth, double-digit EBITDA margin profitability, a strong, debt-free balance sheet and high visibility of future revenues allows us to convert the challenges presented by COVID-19 into an opportunity to invest and secure a strong profitable growth for the medium and long term. Just turning to my final slide before I pass back to Giulio, which is on Slide 14. I just wish to make one further point, that we have a strong and highly supportive institutional investment base. Each of our institutional investors has recently invested in the existing management team's strategic approach, and despite COVID-19, has benefited from the greater than 100% accretion in our share price achieved over the last 18 months. We are really delighted to have such a strong portfolio of institutional investors. But given our growth trajectory and the investment strategy I just laid out, we continue to believe that we represent excellent value to prospective investors. So I'd now like to pass back to Giulio.

Thank you, Grant. So on my side here, I'd like to use a slide to evidence our 4-year track record that Grant has also showed. But from this and from the presentation today, I hope that you can see that despite the COVID pandemic impacting clinical trial time lines across the world, that our technology business model is proving very resilient and continues to perform very strongly. But the key takeaway message I want to make with this chart is that our expected improved profitability over performance compared to the guidance issued in June is due to this underlying strength of the business and not due to any exceptional, short-lived demand spike created by COVID-19. That's an important point to make. And then in my next slide, as we look forward in pursuing our path to profitability, I want to make the point that this financial performance that we've delivered has really been underpinned by a razor-sharp focus on executing on this 5-year -- sorry, this 5-point, commercially led growth strategy. Now having significantly enhanced the company's capabilities since 2017, we're now very focused on building on the continued success of these first elements of the plan to drive the next phase of sustained profitable growth. In particular, we anticipate additional demand for neuroimaging services in Alzheimer's with significant medium-term potential upside from large Phase III studies, and pursuant to the FDA approval of Biogen's aducanumab, additional potential new long-term post-marketing clinical imaging applications for our services. And finally, I just want to reiterate and close by talking to the investment case with IXICO, especially again in the context of the ongoing COVID-19 environment. As a health care technology company, IXICO has an impactful company purpose to provide valuable new insights in neuroscience to improve medicine in human health. As a trusted partner to a blue-chip client roster of pharmaceutical and biotechnology companies, we've proven the resilience of our underlying technology model and demonstrated that IXICO is well placed to weather the storm of the current challenging global business environment. We address attractive growth markets, underpinned by favorable long-term macro trends. Benefiting from revenue-driven operational leverage and a strong balance sheet, we're able to commit to a far-reaching investment program to support further scale-up despite an anticipated ongoing COVID-19 market environment. Finally, in addition to anticipating this September 2020 fiscal year contributing to achieving a greater than 30% full year revenue CAGR and an accelerated path to profitability, the business has continued to build a healthy order book. As Grant indicated, this provides strong forward revenue visibility and further underpins management's confidence in being able to sustain double-digit profitability over the medium to long term. So with that final slide, thank you all for listening. And we'll now take some time to answer questions.

Giulio, Grant, thank you very, very much indeed. [Operator Instructions] But just while the company take a few moments to review the investor questions submitted already, I'd like to remind you that a recording of this presentation, along with the slides and the published Q&A, can be accessed via Investor Meet company dashboard. Also before we actually go into the Q&A, I'd like to remind you that a feedback is really important to the company. Immediately after the presentation has ended, you'll be redirected for the opportunity to provide your feedback in order that the company can better understand your views and expectations. Giulio, Grant, I guess before we address the questions that been submitted during the live presentation, we had a couple of questions submitted pre-event by investors. Of course, the functionality is there for investors to do that. Perhaps if we could start with those, and then I'll hand over to you to the live Q&A, if that's okay with you guys.

Sure. Absolutely.

Perfect. So I guess the first question is perhaps to Giulio. What, if any, updates are there regarding the development of your data analytics for Alzheimer's disease? And how will this development benefit IXICO going forward post the initial setbacks in development? Sorry, Giulio. I think you've just put your microphone on to mute. If you'd just click on to the top of the panel where it's got the microphone, if you wouldn't mind clicking on the microphone, and it will turn your mic on. Grant, just while we wait for Giulio, obviously, we had a third question that came in, and perhaps I can go back to Giulio when he's back online. But the question received was, having delivered 20% growth on the previous year's revenue and outlined that your EBITDA will be materially ahead of current expectations in what can only be described as a difficult environment, how confident are you that this level of growth is sustainable?

So I think the best way to answer that, and I think, obviously, we covered that to a certain extent in the presentation. But we do fully expect to see continued growth. Obviously, the COVID-19 environment is -- meaning that there are fewer new trials starting. And therefore, we expect the growth next year to be more muted, and that I think that's reflected in the market guidance that we -- that was put out. But at the same time, the fact that there is clearly both a big market for us to play for now but also the -- a lot wider macro trends for encouragement of drug development discovery in the neurological space gives us every confidence that we're in a good position to continue to grow at rates that we have seen previously across the medium and long term.

Perfect. Giulio, I've just unmuted you, so you'll be free to come into the room. Apologies to investors for that earlier. So Giulio, the question, just to rephrase it, is what, if any, updates are there regarding the development of your data analytics for Alzheimer's disease? And how will this development benefit IXICO going forward post initial setbacks in development?

Yes. So just to make sure, you can hear me okay?

Yes, absolutely, sir.

All right. Very good. Well, in relation to innovation in general, I just want to make the point that we're really seeing the positive impact of our innovation really coming through in our numbers. And we know this is -- one of the internal measures that we monitor closely is our vitality index, which is the contribution of 12 months revenues from new products commercialized during the previous 24 months. And this has been particularly strong in this year driven by the products commercialized to support the success of our new contracts that we won, and in particular, in Huntington's disease. But in reference specifically to Alzheimer's, we see this now as our largest single opportunity for new contracts going forward, for the reasons that I mentioned in the coming years. So consequently, we've been very busy this year also developing further Alzheimer analysis solutions to measure emerging imaging biomarkers. Three new Alzheimer's data analytics solutions, you can expect to be commercialized from IXICO, will be [ through ] PET, which is a measurement increasingly taken across Alzheimer's trials. And also in Diffusion MRI, where we set up algorithms to quantify free water component in Diffusion MRI, which serves as a proxy for inflammation, a mechanism of increasing interest in Alzheimer's. And then finally, also something called arterial spin labeling MRI, which is an emerging technology used to measure cerebral blood flow and, again, discussed as an Alzheimer biomarker. So those are some of the very key specific areas. But in the short term -- looking longer term in terms of areas that we're focused on development. We've also joined 2 important Alzheimer initiatives during the past 12 months. One of these is called ADNI, which stands for Alzheimer's Neuroimaging Initiative (sic) [ Alzheimer's Disease Neuroimaging Initiative ], which develops novel imaging biomarkers in one of the largest Alzheimer's natural history studies. We're now part of this public-private scientific board, and we're looking to be part of shaping, impacting future planning of this initiative alongside pretty much all of the big pharma companies active in this space. And then the second one is we also joined CPAD, which is -- which stands for Critical Path for Alzheimer's (sic) [ Critical Path For Alzheimer's Disease ], which is a pre-competitive consortia, bringing together the FDA and the pharma industry to develop biomarkers for Alzheimer's. IXICO is actually the nominated expert for imaging, and we will be contributing alongside key pharma companies such as Biogen, Takeda, Roche and Lundbeck in this pre-competitive consortia.

That takes care of the presubmitted questions. I know you guys haven't had an awful long time to review the questions that have been submitted today, but I guess if I could draw your attention perhaps to the questions on the Q&A tab that are being fired in. If I could ask you just to read out the question just so other investors can see the questions that have been submitted. And of course, just to remind investors that the company will review all questions today even if we don't get through to answering them in the live event and, of course, we'll publish responses where it's appropriate to do so as well. So just to remind you, if you won't mind perhaps starting at the top and reading out the questions and then perhaps giving your response where it's appropriate.

Sure. So I'll read one and then maybe hand over to Grant. But -- so a question in from somebody who -- I don't have information on him, but if aducanumab is approved by the FDA in March '21, how many years would you expect it to take for the effect to be seen in IXICO's financial numbers? So a very good question. So what I would say is, because of the point that I've made, we'd actually expect to see a positive impact on our bookings in 2021 because of the fact that, that -- as I said, the precedent set by the FDA is that they're approving a drug which has a small but important effect. And so there will be a race by other pharmaceutical companies to come and initiate and progress trials for drugs that will be slightly better in some way or other. And so we expect though -- we expect to be beneficiaries of that additional investment and focus and prioritization. So most likely, we'll see it in bookings next year for revenue in '22 onwards. So that's how I'd answer the question.

Sorry, Giulio, just to cut in. Of course, feel free to mention the name. That question was from [ Sam M. ]. So do feel free to mention the name as well. My apologies.

It's all right. No worries.

Grant?

Yes. So there's a lot of questions here, so let's run through them. There's a question here, yes, it's from [ Fraser E. ] Can you give existing and potential new shareholders some comfort that following the better-than-expected EBITDA and strong net cash position announced yesterday, there will not be any dilutive fundraising going forwards? So I think the answer to that question is that we absolutely have, as you can see from the slides that we presented, a balance sheet that is strong enough to deliver on the investment, the organical growth plans that we have in place. So we had no requirement to raise additional funds in order to deliver on the organic growth plan. Something that Giulio has spoken to as well, that if there was a sensible opportunity to look at nonorganic -- inorganic acquisition and M&A transaction, then that will be the type of scenario where we might look to the market to raise funds, but we have no immediate plans to do so at current. Giulio, do you want to take one?

Yes. Sure. So a quick one, [ Steve B. ] What is the regulatory acceptance of your products? So as I said, obviously, we operate in a very regulated environment in terms of not just GDPR but, obviously, servicing and supporting the clinical trials market, which we've been doing for over a decade. So you can take that as a blanket statement. And obviously, we are compliant in all the ways that we need to be. We have, in addition to our own quality audits, also -- we're also audited by CRO partners as well as pharmaceutical companies. And then in relation to the products themselves, we're not operating in a clinical setting per se, so these are not products that require 510(k) approvals, that type of thing. Having said that, I did mention that as some of these drugs do make their way to market, then obviously, there will be opportunities for imaging modalities to be used as companion diagnostics. And so that might be the area that we would then look to develop regulatory approvals in that sort of application. So more relevant and more appropriate for clinical applications versus clinical development, which is where our current business is very much focused on. Back over to you, Grant.

Yes. Thanks, Giulio. So a question here from [ Sam M. ] The improvement in EBITDA in 2019 did not translate into corresponding improvement in operating cash flow, as shown on my first slide. Following your trading update yesterday, your -- Nomad increased significantly the profit forecast for 2020 and 2021 but made hardly any change in its cash forecasts. Is there a reason why improvement in profits will not feed through to an improvement in cash flow? So I think the answer to this one, [ Sam ], is that, firstly, obviously, we've already -- out into the market, we expect to be making positive operating cash flows this year. The reason that we were profitable last year but operating cash flow negative was largely due to timing. So we received an upfront payment from a customer at the end of 2018 financial year and then did the work associated with it during 2019, which just meant there was a slight timing difference between cash and profitability, which meant that we didn't quite break the sort of positive operating cash position at last year. But as you'll have seen from the guidance and the -- and Cenkos' broker statement, they've outlined an expected strong operating cash position this year. In terms of the wider cash position, really that links to our investment plans. So as we've really highlighted in some detail in this presentation, we are expecting, and we are planning to make some substantial investments over the next -- both we have been this year and we're expecting next year, which means that really what we're doing is, whilst we're generating operating cash inflows, we are utilizing that cash in capital investment and investment more widely. Giulio, back to you.

Thank you. So I have a question here from [ John R. ] Do you subcontract in relation to the development of your AI algorithms or are they in-house developers? So the answer is they are all in-house developed. We -- it's a core capability in the business. What I would say is -- well, though, is that we have deep relationships with a number of the leading institutions in London which we've worked with on a collaborative basis. But it's not to say that in the future, it's not that we're against the concept, it's just that, again, going back to Grant's point, it's a core capability of the business, and we have the funds to take a long-term view. And so this is an area that we're very focused on because we see it's a key area for differentiation combined -- but it's also important to make the point, combined with our neuroscience expertise and our link with the academic consortium that I referred to in my talk. So short answer, all in-house developed, and we expect to expand that with further investment in the coming 18 months.

I'll pick up a question here from -- again from [ Sam M. ] Am I correct that competitors such as Bioclinica's service trials on a broader range of areas in CNS? Does this provide them any advantages or disadvantages? So firstly, [ Sam ], yes, you're correct. Bioclinica is -- essentially was built through acquisition across a number of areas of expertise, one of which is neurological imaging. So I guess in terms of their advantages in the fact that they are bigger than us in terms of scale and they hold -- they are a dominant player in the market at the moment, but there are also a number of disadvantages. Firstly, they are generalists, whereas we are almost unique in the fact that we are expert purely in neurological disease. So if any customer or client speaks to -- on a neurological trial, speaks to someone within IXICO, they are speaking to someone who is fully -- fully understands neurological disease, whereas that wouldn't be the case necessarily with our competitors. And then also, we have the benefit of that we are able to be agile and take the decisions, such as we're taking now, where we can see opportunity, and we're able to invest from a position of strength in our market. So there are clearly advantages to scale, but there are also disadvantages. And we feel that we are well placed to grow against the competition that we have in the market.

Can I also add something else? Well, add something to that answer as well, is going back to the slides that Grant showed. I mean this is a very, very important strategic decision that -- when I looked at the business when I first came in, and it sort of underpinned our focus. 5% to 10% market share in what we do today, there is plenty of runway for growth, so let's go and do more of that before we start going into other areas. And it's not to say I'm against the idea of going to other areas, and that might be touching on the point of inorganic strategy. That might be a rationale for doing that. But in terms of our organic focus, our organic investments, when we're in -- we have -- whilst we have a valuable position, it's a relatively small market share of a large market that's growing. The key -- and I'll tie this answer to another question that's come up. The key to us is our success in building continued traction momentum as a specialist in neurological diseases. With that in mind, and the next question I want to read out is from [ Julie Anne H. ], which says, what are your considerations in expanding in other disease areas? What additional resources would that require? So again, building on the previous question, a consideration in expanding in other disease areas is absolutely -- but within neurological diseases. A good example of how we've done this very successfully is our success in Huntington's disease. In the last couple of years, you'll have seen announcements of major wins. For example, in April, we announced a GBP 10.5 million natural history study -- sorry, extension study in Huntington's. So we've now built up a very strong market position as the go-to people in Huntington's. And we see other diseases, and some of these are rare diseases, where there are opportunities. So for example, another one might be -- would be PSP. So whilst Alzheimer's is very much the big market that we're chasing after, we do still see opportunities to diversify into other adjacent neurological diseases. And again, we can do that in a very agile way because, as I mentioned, we are able to use the development we made in one therapeutic area in neurology and deploy them very quickly in another, which means we can get to market very quickly and commercialize products very successfully. So that's basically our diversification strategy is go after the big markets but also diversify into adjacent neurological diseases. Back to you, Grant.

Yes. Thank you, Giulio. So a question from [ Joanna R. ] Do you subcontract in relation to the development of your AI algorithms?

I have answered that one, Grant.

You answered that one already. Sorry.

You should have been listening.

Okay. So how -- [ Miles R. ] How much of IXICO's offering is patent protected and which areas? And if so, what is the patent strategy? So we do have patents, and we do have some of the algorithms in place with patent protection. But the key message, I think, that we want to give here, which is -- again, this is a question we've been asked in the past, is that developing AI and developing algorithms is not -- it's not particularly unique in itself. We are very -- we believe we're very good at it. We believe we have very good algorithms. But what really adds to value is the contextualized data that we have access to, which means that we are developing algorithms on datasets that are very specific to the disease areas that we are addressing. So particularly in some of the rarer disease areas like Huntington's, PSP, et cetera, getting contextualized datasets that really allow for automation and algorithmic tools to be used to assess the efficacy of a drug is not just about strong algorithm creation, it's about the data that we have available as well. And so being a company that's been around for over a decade, that has serviced over 100,000 individuals through clinical trials, we are in a position where we have a USP, if you like, in terms of the contextualized data that we have available to us as well as the protected IP in terms of the algorithms, et cetera, that we have in place. Giulio?

I'm sorry, Grant. Just take the next one.

Yes. No, just to give guys a couple of seconds because, obviously, you've had an incredible amount of questions coming in and also mindful of time and the fact that you want feedback. Just to remind investors, of course, if we don't get around to answering your question during the live event, where it's appropriate, the company will respond, and these will be accessible via the platform, and we will send you an e-mail as soon as they are available for your review. So just to remind, if a question doesn't get answered during the live event, there will be opportunity for the company to review. And of course, there is a considerable number of questions that you guys are very kindly dealing with. So with that in mind, perhaps, I can hand back to you guys to take over and address any more that you can within the time that we have.

Can you hear me okay again? So I can...

Yes. Absolutely, Giulio.

Yes? Okay. So I'll take maybe one more, [ Brian S. ] What are your churn rates and plans to improve churn? I'm not -- so I'm not sure which aspect of churn, but it's either about clients or it's about staff, so I'll answer both. So in terms of clients, we've been -- as I said, we have very loyal clients, very sticky clients, and I'm very pleased to say that we don't experience churn because clients aren't happy in any way in terms of the services that we provide. So I can say we have -- I've been with the company now for 4 years, and I don't recollect any experience where the client has not wanted to continue to do -- not just do business with us but actually do more business for this is more of the common experience. But of course, we are in the clinical trials market, so that's not to say in my 4 years here that we haven't had trials that have been terminated early because the pharmaceutical clients decided that they should terminate that trial. And in actual fact, I'd say as well that -- now obviously, that does impact our financial performance in the future, but it's actually part of the value that we provide. Clearly, it's a big investment decision to move from one phase to the next. And the way that you should consider this is by providing the services that we provide, we enable these companies to make the right decision, and so they value that. But of course, the end result of that could be that there are, from time to time, can... [Audio Gap]

Apologies. We may have just lost him briefly, Giulio. I think we've lost Giulio just momentarily. Grant, I don't know if there's a final question perhaps you want to take.

Yes.

And then perhaps I can redirect investors for feedback and give you the chance to wrap up.

Yes. That sounds good. So a good question from [ Brian S. ] What is your security approach and data protection guarantees? So I think it's a really good question. And so we've invested a lot of time, money and over recent years, to make sure that we keep ahead of the crowd in terms of our security approach. We obviously operate in a regulated environment, so we undertake a number of security audits on behalf of our customers who are, obviously, big pharma, et cetera. And we put in place ourselves penetration tests and various reviews on a regular basis to make sure that our environment is secure. I think the data protection question is an important one as well because this is sometimes a question that -- where there's confusion as to what we do. Because what our key provision is to provide a platform onto which brain images that are being taken in clinical trial sites are uploaded, and then we provide those manual and algorithm-driven analysis of those brain images. We don't actually need to know and actually, nor do we want to know the details of who that brain image relates to. So the brain images that come into our area are all pseudoanonymized. And what that means is essentially there's a code that comes with them, which means that within our environment, they're entirely unidentifiable. But of course, they are identical back to the clinical trial sponsor themselves when they can map -- match that code to the individual. So we have close GDPR policies in place, and we also have policies relevant to the wider world in that respect. But we don't ourselves deal with patient's data or on unanonymized patient data, I should say. So hopefully, that helps answer that question.

Perfect. Giulio, I think you're back in the room.

Yes. I'll just finish -- if you can you give us a moment, I'll just -- I'll finish off my question. I think I'm pretty [ interested in answering the staff part ] in terms of the churn question from [ Brian S. ] So in terms of the staff, this year, I'd like to say that we have less than 5% on our churn rate. We also monitor the staff that have joined in the last 18 months, and then that's even lower, so we're delighted. And I think that talks to the emphasis that we've placed on supporting staff and open communications that Grant referenced in his slides. So we're delighted with a very low -- and for the industry, I think that would be a very -- seems to be a very good level of churn in terms of staff.

As I said before, any questions that we haven't got around to and we're just obviously very mindful of time, that the company will review, and as I said, we will publish responses where it's appropriate to do so. Grant, Giulio, thank you ever so much for the presentation. Perhaps, Giulio, just very briefly, I could ask you to wrap up. And then I know that investor feedback, is it particularly important to you guys? And then I'll just explain how investors can provide you feedback.

Thank you so much again. On behalf of myself, Grant and all of our colleagues in IXICO, thank you for taking the time out of your day to meet and listen to us. And hopefully, you got out of the presentation what we owe you to hear. So thanks. Thanks to you all.

Thank you very much, Giulio. Ladies and gentlemen, thank you very much indeed. Could I ask investors not to close the session as you'll be automatically redirected for the opportunity to provide feedback? If you accessed this meeting from our website, the feedback will appear automatically. If you accessed this via the link that we sent you by e-mail, it will take you a couple of moments, but please do log in and submit your feedback. It is incredibly important to the company. So on behalf of IXICO, Giulio, Grant and us, the Investment Companies, thank you for attending today's presentation. That now concludes today's session.