IXICO plc (IXI) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen, and welcome to the IXICO half year results for the period ending 31st of March '21 investor presentation. [Operator Instructions] The company may not be in a position to answer every question received during the meeting itself. However, the company will review all questions submitted today and publish responses where it's appropriate to do so. These will be available via your Investor Meet Company dashboard, and we will notify you when they're ready for your review. I'd also like to remind you that this presentation is being recorded. Before we begin, we would like to submit to the following poll. And if you could give that your kind attention, we'll be most grateful. And I'd now like to hand over to Giulio Cerroni, CEO; Grant Nash, CFO; and Robin Wolz, CSO, from IXICO. Good afternoon to you all.

Good afternoon. And thank you, everyone. We're going to initially take ourselves off camera so that, hopefully, you get good-quality audio. And we'll rejoin once we get back to the Q&A session. So we'll switch off [ in a moment ]. You'll see us in full technical glory once we've gone through the presentation. So thank you. And again welcome to our interim earnings presentation for the first 6 months of the 2021 fiscal year. I'm joined today by Grant, our CFO; and Robin, our CSO. We're delighted to have the opportunity to speak directly with you today on recent developments, in addition to giving you an update on the business. I'll be providing an update on our strategy and strong commitment to innovation, and Grant will be giving you an update on the financial performance in recent period. And Robin will be providing more color and detail around our innovation road map and some exciting developments that we have planned for the rest of this year and going into the future periods. So if we go to Slide 2, we have our regular slide and disclaimer slide. And then if you go to Slide 3. This is really outlining IXICO and our position as a specialist company in CNS clinical trials. The information on the left-hand side articulates that this is an attractive market, but management estimates around about GBP 120 million to GBP 150 million which IXICO has less than 10% market share. So plenty of runway for us in terms of growth. It's a market that we see has long-term growth prospects, with one of the key drivers being an aging population but also recognition that for the pharmaceutical industry this is the second largest area of investment for clinical development after oncology. And so we see a long-term growth opportunity for the company by being and remaining focused as a specialist in CNS. In particular, I just want to highlight Alzheimer's. Actually, in recent years, our growth has been fueled by very strong performance in Huntington's, which is actually a rare disease, but there are a number of factors now coming together which mean that Alzheimer's is an area that we see as having a lot of opportunity for us. Obviously it's one of the largest neurological diseases. It's the sixth leading cause of death in North America. Worldwide, there's around about 50 million people suffering with Alzheimer's. That's expected to treble by 2050, so the burden on the global health care systems is going to be immense. Now the good news is there's a very active pipeline of development in this area. There's over 120 clinical trials running currently around the world. We actually have less than 5% of that, so again opportunity for us to expand our footprint significantly, but the other thing I want to highlight as well is it's also been significant failures in this area in the last 3 or 4 years. There's actually a very significant event coming up on the 7th of June, which is the FDA are determining whether to approve Biogen's aducanumab drug, which is a drug based on the amyloid target. And this is very pivotal in that there's not been a drug approved for Alzheimer's for over 15 years. And if this does happen, of course, there are a number of other companies with drugs that they will be looking to bring to market. And then of course, if it doesn't get approved, it also stimulates a reinvigorated requirement to come to market with a drug, and that will drive that new trials in this area for other drug targets in Alzheimer's. So either way, from an IXICO perspective, we feel that there are going to be lots of fair opportunities for new trials requiring the sort of services that IXICO provides. The slide on -- the right-hand side of this slide in particular just highlights the other areas where we're looking at, which are Parkinson's and MS; and just making a point that imaging as a modality has been increasingly used in clinical trials in these areas. And so what we'll be doing in the coming years is making sure that we further strengthen our portfolio so that we can capture a bigger portion of this growing market. And as I said, Robin will talk in detail around the innovations that we drive in that, which will be very much driven by our capabilities in AI, which has been developed over the past decade in operating in this area. So if we go to the next slide. This slide, I use often because it's fundamental to the success that we've delivered in the past 4 years but also is a road map for the future momentum of the business. So the first 4 section of this are, of course, organic elements to growth. Clearly, we have been focusing on delivering scale and operational excellence. We've grown considerably in the last 4 years, as just reflected in there. Recently, the -- in 2016, our revenues were GBP 3.1 million for the full fiscal year, and we just reported GBP 4.9 million for the first 6 months of this year. So clearly, we have delivered and operated. And we've obviously, during that period, delivered more trials and bigger trials than previously. That obviously needs to continue. And our investments going forwards will be to ensure that we can continue to scale the business when those opportunities arise. In addition, our fundamental strategy is to accelerate penetration of the clinical trials market by targeting the early-phase trials and really making sure that we're ready for those later clinical phases. This has been a bedrock of IXICO's success. It really plays to our strengths as an innovative company with very deep relationships with both the pharmaceutical clients but also the key opinion leaders in these different therapeutic areas. And again, Robin will talk a little bit to how we do that. And then the fourth point about innovation was -- I've always described the strategy as a commercially led strategy. It's very important to understand. It's underpinned by our strong commitment to R&D and innovation and in particular in the areas of AI, automation and data analytics. And again you'll see that come through in Grant's slides in terms of where we're making investments; and also in Robin's slides in terms of how we turn innovation into commercial services that we can charge a premium price for, which in turn gives us premium margins which again will come through in the numbers that Grant will speak to. And the fifth point, the enhancing the organic growth through selective M&A: A point I'd like to make here is that, in the past 4 years, all of our growth has been organic. So it's 100% driven by our execution of this plan. Going forwards in the next phase of the company's growth and as we look to diversify into other technology modalities while still remaining in CNS, it's quite likely that partnerships and M&A will play actually a role in our road map. So just really highlighting that, now that we've grown the company to the stage that we have, and you'll see from the numbers we have a very strong balance sheet, we feel now that the next 4 or 5 years is one where we can add incremental growth and scale both looking at partnerships and M&A. So if we go to slide -- next slide, Slide 5. So this one, I just used to highlight the sort of companies that are investing in neuro. And of course, these are all well-known, large corporate companies. And of course, they're all addressing this area because there is such a large unmet medical need. What I -- whilst we can't identify which companies IXICO works with, I can say that we've worked with 9 of the 14 companies here. And obviously we in the coming years would look to want to do more business with the companies that we currently work with and -- but also acquire new companies that we've not worked with before. The other thing that this slide doesn't illustrate is that biotech companies are very active in this area. And quite often, what you'll see is that biotech companies will be involved in the early phases of development. And they will have their exit strategies with the idea of selling their assets to big pharma who then have the resources to do the very large Phase III studies across many countries. The other thing that this slide shows which I think is important to understand is that actually the volume of clinical trials is actually, of course, the earlier-phase studies. And obviously, by default, the idea is that many drugs don't get to late Phase III studies, but that's the nature of the industry. Obviously, developing drugs is difficult, it's expensive and it takes time. And our job is to make sure that clients can progress their drugs through the development process. And that sometimes means that they'll finish before they get to the next phase because they didn't -- they weren't efficacious or they weren't safe for patients to take. So our job is to be there with the right solutions to help our clients run clinical trials more efficiently, smaller trials that they can get to decisive points of decision sooner in the whole clinical development process. And this is why as a strategy we're very focused on winning lots of new trials but in particular in early phase. And again Grant will talk to that when he describes our recent successes and how that has built up our order book in the recent period. So my next slide before I hand over to Grant. In this slide, I just want to give a flavor of, a, why scientific collaboration is so important and fundamental to IXICO's innovation road map; but also how it piggybacks on the back of some macro trends that we see as real growth drivers to the market that we address. And so on the left-hand side, we -- these are familiar ones, the aging population; the investment in rare disease by the pharmaceutical industry; and also the idea that, of course, the pharmaceutical industry is constantly looking for new therapeutic areas and approaches to tackle a particular disease. On the right-hand side, these are some of the things that are becoming more prevalent and actually, as a result of the COVID pandemic, more important, and have really received a supercharge, if you like, in terms of the interest of the pharmaceutical industry. So there's a -- one key terminology that's on everybody's lips at the moment is decentralized clinical trials. What this basically means is technology that allows pharmaceutical companies to do more of what they need to do in clinical trials outside of a clinical setting. That's obviously a lot more convenient for a patient, but this also means that these measures and monitors are able to be taken in a real-world environment. And so a lot of technology is being looked at in terms of how we can accelerate that process. In addition also, a lot of companies previously had to have specialist people travel to the clinical site to administer the tests, and that's another reason why there's a lot of interest in digital technologies. The other point is earlier intervention. It's becoming more and more prevalent that there's an acknowledgment that, the sooner you find the right patients to put into your trial, the better. And so technology, again, that allows you to do that more efficiently is again very valued. And again, Robin will be able to talk to how we've actually been playing a role in that. And we see significant opportunity for us to help our clients pick the right patients going forwards. And then finally, the patient-reported outcomes ties into the idea that people want to be able to have more control over what's being reported and how they're feeling. And again, technologies such as wearables that allow us to do that are becoming more widely adopted in clinical trials. And again Robin will highlight why we're interested in that and some of the activities that we have so that we can be a player in that new emerging market. So I mean those are the overarching things. The key thing that as a value proposition that we do is we provide the client with new and better ways to measure biomarkers, and we're very much wanting to use AI, the AI activity that -- actually that we've developed over the past decade. So it's important for you to all understand that we've been developing and deploying AI-driven solutions for over a decade. It's not something that is new to IXICO. And again, Robin will talk to our exciting developments there in terms of the next-generation platform that we've developed and is proprietary to IXICO. And also, Grant will be talking to the investment that we've been making in our data management platform. This is a major investment for the company and it supports our ambition to further scale the business over the next 3 or 4 years. So with that overview, let me hand over to Grant, and he will be able to provide you with detail on the financial period we've just run through and also an insight into our order book and our pipeline as we go forwards. Grant?

Thank you, Giulio. And good afternoon, everyone. So just turning to the financials. Slide 7, as you can see in front of you now, shows our financial performance for the 6 months to the 31st of March and compares it to the same period in the previous 5 years. So starting on the left, what this graph shows is our revenue performance and reflects the fifth consecutive first half year of revenue growth. We're, of course, pleased to be able to report 8% growth achieved in the last 6 months but do highlight the growth rate has been impacted by COVID-19, where we have seen and continue to see new clinical trials having their start dates delayed. Our growth over the period, therefore, has really instead come primarily from contracts signed prior to the pandemic. And that reflects the lag between contract signing and the associated revenue delivery, which has been exacerbated by the delays in new trial start-up from COVID-19. Also then, to an extent, this is also reflective of the multiyear nature of clinical trials; and the relative complexity, particularly in CNS, getting these trials set up, recruited and initiated. The middle graph shows our sustained strong gross margins that we've been reporting over the last few years. Once again we've increased that to just under 68%. And as we've presented previously, these have been augmented by the success we've had in Phase III trials, which contain a relatively high proportion of high-value, high-margin data analytics services as compared to the more traditional but essential CRO-type services of project and imaging site management that we also provide. So as we look forward, and I'll speak to this in more detail shortly, where we see a greater component of our order book and therefore our revenues, in the earlier phases of trials, we do expect to see these margins come under a little bit of pressure. Finally, on the right, we show the rapid progression of the company across the last 5 years from substantial EBITDA losses to substantial profits. We've achieved a 31% growth in EBITDA compared to the same period last year. And that delivers an overall EBITDA margin of 18%, reflecting the relatively fixed-cost nature of the business and has been achieved despite the focused reinvestment of profits to position the company for continued growth across the medium and longer terms. So just turning then to Slide 8. What this shows is some of the areas that we have been investing in, so particularly in R&D, which Robin will speak to in more detail, but as you can see from the graph on the left, our investments in research have increased significantly over the last couple of years. That is driven not only by investment in more research, which we've been gradually increasing the amount that we've been investing in that, but also into development activities, which we're obliged to capitalize under International Financial Reporting Standards. And what that means is that we've invested within R&D as a whole just under GBP 1.2 million in the first half of our financial year, which is equivalent to 23% of our revenues. The R&D investment combines proof-of-concept research into brain and digital wearable analytical tools, which Robin will talk more about, with the capitalized production-ready development of algorithms which we have now either adopted or are expecting to adopt on client trials. In addition to this, we're investing in our new data capture and analysis platform, which is based on the Microsoft Azure cloud infrastructure, as Giulio mentioned, and is a key [ start to the ] partnership with Microsoft that we communicated to market earlier in the year. Moving to the middle graph, you can see that we have reduced our expenditure a little bit in sales and marketing. That, however, is primarily linked to COVID-19, where we have seen no travel or conferences taking place in physical presence in the last 6 months. Now considering that, we are particularly pleased with the greater than GBP 10 million of contracts that we've signed year-to-date, which is a book-to-bill ratio of approximately twice; and reflects that we -- despite the fact we've had less ability to travel, we have still been able to meet client expectations and sign new contracts. And then finally, on the right, we have our G&A spend, GBP 1.6 million, which we continue to carefully control and where we expect this to level off across the second half of the year to align with the full prior year expenditure levels. If we move now to Slide 9. What we're showing here is an overview of our other financial KPIs focused on return on our FTE investment, our financial position and contracted orders. On the left, we show our revenue per FTE and our average head count compared to the last 5 full financial years. As you can see, we've continued to invest in people, with the growth in head count reflecting both a reaction to our growth -- to the growth of the business over the last few years but also a recognition that the market opportunity exists and is expected to grow much further if we make the right investments. This is what we've been doing. So a number of those who have been employed now are engaged in activities designed to promote our scalability and service offering for the future either in R&D or in our platform development. That inevitably hits our revenue per FTE a bit, which was reduced from a peak of GBP 120,000 in -- across '19 and '20 to just over GBP 100,000 in the first 6 months of the year. But we do anticipate to see that become more than reversed and improve again, perhaps not across the rest of this year and next year but as we move into 2023 and beyond and the real benefit from the investments we're making now come through. Moving to the middle graph. The thing we have to think about in terms of underpinning our ability to invest is not only the fact we're generating profits as well as our conviction that we're well positioned to continue to grow in the market we address but also that we have the strength in our balance sheet to do so. And by being able to report that we had GBP 7 million of cash again on the balance sheet at the end of March despite investing just under GBP 1 million in capital assets, including our data capture and analysis platform; we -- the fact that we continue to be debt free and, in the past 6 months, our total net asset position is increased by GBP 1.3 million or 15%, we can show that we're in a very strong position from a financial position point of view to continue with our investments. Finally, on the right. We continue to have a strong contracted order book with a position of GBP 19 million of contracted orders as at the end of March. This is despite the fact that we have had the impact, as disclosed to the markets in March, of the failure of our largest client's Phase III and open-label extension HD trials that resulted in a significant de-scope of the work we expect to provide to them. What this means is that, whilst our order book is slightly down on the financial year '20 close position of GBP 21.7 million, it remains double the revenues reported for the full year 2020. And because of the -- that -- the impact that we've had and the negative news around the largest -- our largest client's HD trials, we felt that we could use a couple of slides just to provide a little bit more detail on our order book. So if we go to Slide 10. What this shows is the development of our contracted order book over the 12 months to 31st of March. So a year ago, our order book was at GBP 15.3 million. We then announced in April 2020 the signing of the HD open-label extension contract with our largest client, which added GBP 9.1 million of revenues to order book, and as -- and it's within that blue box of 11.6 new contracts that we won -- GBP 11.6 million of new contracts we won in the second half of 2020. We then delivered GBP 4.9 million of revenues in the second half of 2020, which along with a couple of minor de-scopes meant -- and a bit of FX meant that our order book hit a year-end high of GBP 21.7 million. In the last 6 months, we've signed another impressive total of contracts totaling GBP 9.4 million, which is that blue box. Different, however, to this, for the contracts we signed in the second half of 2020, that hasn't been dominated by a single large contract. Rather, it reflects 9 different client wins across 5 neurological indications. In other words, we've diversified our client base and portfolio of projects whilst augmenting our order book. We then recognized a further GBP 4.9 million of revenues. Then in March, as we announced, we received news that our largest client's HD Phase III trial which we won back in 2018 and open-label extension which was the trial we won in April 2020, as shown, had failed and therefore dosing of the patients was being stopped. Although this didn't mean all of our services in these trials stopped, as there remain significant value to the client in the safety and analysis services we're providing irrespective of the trial failure, it did result in a GBP 7.1 million de-scope with the trial, meaning our closing order book at the 31st of March closed at GBP 19 million, as compared to GBP 26.1 million which would have been where it would have closed if we hadn't had that trial failure. So in other words, we would have had an all-time-record order book at the end of the half if it hadn't been for the trial failure. Now clearly whilst this is a negative event for us and obviously a devastating blow for the HD community, we are really extremely pleased to be able to weather the impact of such a significant trial failure within our portfolio. It does, however, of course, impact the profile of our order book. That means, due to the ramp-up time of new trials as well as the ongoing drag to these start-up times created by COVID-19, we expect to have a leveling off of growth across the remainder of this year and possibly even a small contraction in financial year '22 before the benefit of the recent trials we've signed year-to-date starts to fully impact on our revenues. This is a simple reflection of the fact that we've taken a GBP 700,000 hit to our expectations for this year and near GBP 3 million hit to our expectations for next year on the basis of those Phase III and open-label extension trial failures. Those are clearly significant gaps to fill. And whilst we feel we're extremely well positioned to continue the growth that we've been -- the underlying growth in terms of new trial wins, there is a short-term period where we expect that gap to become apparent because of the time it takes for new wins to come through. And to really emphasize how that order book is now made up, just if we turn to Slide 11, I'm going to give again further detail on our order book to help understanding. So what this slide shows is the 2 pie charts on the left, the far left-hand, side relate to the makeup of our order book as it was at September 2020 both in terms of the relative split between Phase III trials and other Phase I/Phase II trials and also the split of the large -- the 5 largest projects we're working on and other projects. Then the 2 pie charts in the middle show the same information that as was the position at the end of March '21, so after we have included the de-scope of those HD Phase III trials. And then on the right, we show our pipeline of opportunities by trial phase, which is the pipeline that our business development team are currently pursuing to secure more contract wins. So what this shows is that, following the Phase III and open-label extension trial de-scope, our order book has become more balanced between Phase III and the earlier phases. And the size of any individual project is also more balanced than was the case in September 2020. Now to be clear: If an opportunity to win a large-scale Phase III arises, we're clearly not going to seek to turn that away, but the real benefit we've had from being -- having that Phase III -- those Phase III trials over the last couple of years is that it's really grown our credibility in the market by being able to show that we're able to win and operate such large trials on behalf of a global -- top global pharmaceutical company. And that's really been very well recognized across the industry and supported an acceleration of the wins in the earlier phases and across a wider range of clients that we've been seeing in the last few months. So in other words, whilst we do expect a slowdown in growth over the next 18 months, at the same time, we go into the period with a more balanced, more diverse order book with a value not significantly lower than it was at the end of September '20. Added to that, we have a diverse pipeline of opportunities which we feel confident of winning. And whilst it will take time for the revenues related to those to be delivered, it means we go into the period with an order book which has a lower relative risk profile than was the case just 8 months ago. So what all this means is that, despite a short-term bump, we do feel as confident as ever in our medium- and long-term growth prospects. As Giulio mentioned, the market opportunity hasn't changed. If anything, it's grown. And through the investment plans that we're well positioned to continue with, plus some careful management of our costs, which we will always -- was always part of the way we look to manage the business, over the next 18 months, we'll be in a very good position to grow even further as we pass through that period. I'll now hand over to Robin, who can put some more color on the R&D areas that we've been investing in.

Thank you, Grant. Good afternoon, everyone. So what I'll do, I'll try and dive a bit deeper into the way we innovate and the way we work scientifically. Giulio has outlined that concept in principle, where it's really around developing new and better biomarkers to address emerging needs if that aging population are going into new therapeutic areas. And the way we do this is really focused on understanding the science, understanding the biomarkers and then combining that with our deep understanding of AI and data analytics, which is why I'll start with this brief overview on AI just to recap. And obviously artificial intelligence as a concept has been around for decades. More recently, it's been often used interchangeably with the concept of deep learning, which is really something that has developed over the past decade where we're now able to resolve neural networks with increasing compute power and can actually feed them with an increasing number of available data sets. And that has revolutionized data analytics across industries. And it's obviously something IXICO has been focused on over the past 10 years, really extending from our work in more general machine learning. So if we go to Slide 13, we see -- on the top part, we see really a zoom in into that transitional period between traditional machine learning and deep learning concepts over the past 15 to 20 years roughly. And what we're looking at here is illustrated in a quite widely used benchmark in the AI community looking at image classification, just standard classification of images. And what we see is how deep learning has really facilitated to develop algorithms that outperform human performance in that particular task. So we see -- right at the roughly 90% level, we see, is very [ procurement ] performance. And between 2014, 2015, AI has started to outperform the accuracy with some of the widely used neural networks in that space. You see some of the big names like Google on there. And that really is a quite strong message, I think, that shows how the past 10 years in particular have been transformational in terms of what is possible with data analytics. What we see in the bottom now of this graph is IXICO's time line, obviously founded in 2004 by the leading London universities focused on imaging science and also data analytics. And with our founding IP already, we had a strong standing in more traditional machine learning focused on alignment of various images initially with the IRTK toolkit. We then quickly started to -- development in-licensed semi-automated algorithms for brain imaging; and from 2009, 2010, have started to pioneer fully automated imaging analysis technology with the LEAP platform, which still forms the backbone of a lot of the analyses we do and provide into clinical trials. Over the past 10 years, however, we've started to transition and focus our research efforts onto deep learning, as with the community. We've initiated data access programs by about 5, 6 years ago now, really strategically focused on securing access rights to the data we collect. We've started various deep learning programs; set up infrastructure and so on; and then started to release into production, first, algorithms focused on deep learning, [ interestingly ], on digital end points. So sleep first and then I will go to the imaging platform soon, but one milestone that is worth highlighting as well, that we now see year-on-year increase in the number of clinical trial data sets. We actually have rights to use for R&D. And that has increased to more than 40% as of last year, giving us significant value in terms of AI development. And what I'll then focus on, on the next couple of slides is really that new AI platform we've developed on the back of the data and leveraging new technology for image segmentation and illustrate how it works and how we've deployed it on first use cases. So if you go to Slide 14, please, we see an application to Huntington's disease and -- of that platform. So what -- when I say platform, what I mean is a set of predeveloped AI models and associated code infrastructure, preprocessing workflows and really pretrained data sets. So the technical term here is transfer learning. So as we are focusing on a more specific problem, we are using these pretrained models. And they can very quickly adapt it to a specific problem in a given domain. And that gives us 2 advantages both in terms of the prototyping and the development cycles but then also increased accuracy when we go into production. And so here we're looking at segmentation of the putamen, which is one of the key biomarkers in Huntington's disease. It's a highly challenging region to segment just because of contract -- contrast properties in the brain on an MRI and because of its shape and structure. So what we've done here is we've used data sets across 4 different clinical data sets, more than 1,000 training cases highly contextualized through manual segmentations of that frame structure. And then we trained the AI platform for that specific problem, so we can deploy it on unseen data. And as we can see in the prototyping section, that has a significant benefit during our model development, so with sleep, the more traditional machine learning platform we're still using, we can do that kind of customization, but it takes days for the learning cycle, whereas with AI platform especially deployed on a GPU hardware, this goes down to minutes, significantly increasing process. And then once in production, as we see on the bottom right box, we see an increase in QC pass rates certainly from the standard LEAP platform but also over the optimized P-LEAP algorithm that we see in the middle here to more than 90%; and then the increase in run time in production, reducing it to minutes or even less than that, which is a nice benefit in an -- from an operational point of view in clinical trials but offers opportunities from real-time applications like the ones we see in clinical practice. So if we go to Slide 15 is we'll see in a bit more detail how we work on those kind of concept and how we collaborate with our different partners. So what we see in the left panel is a recent publication we did together with Imperial College London and the computer science department there on the technical validation of this platform. So again looking at the putamen here as an example, we'll see actually an outline on a slice of an MRI scan of that brain structure delineated by an expert, in red. So the red outline is the gold standard, ground truth label of the putamen. And then we see overlaid in 4 -- in those 4 rows, in green, the automated segmentation by different algorithms. Starting in the bottom, we look at FreeSurfer, which is the most widely used image analysis tool for brain imaging used by some of our competitors, used in -- used quite widely in both academic research as well as clinical trials. And we do see that there is some disagreement between the expert label and then the automated segmentation making -- kind of like deteriorating the quality of the segmentation and causing down some problems in the clinical trial. Similarly for the unoptimized LEAP algorithm, we see mis-segmentation, but if we go to the optimized P-LEAP algorithms using the optimized LEAP platform, we see good agreement. And that increases further with the AI platform. So on top of the pure computational advantages, we see a significant increase in accuracy. And the case illustrated here is actually the median case out of a larger data set of test cases. And if we move slightly to the right, on the top graph here we see a metric called [ dismetric ] which is basically volume of -- percentage agreement between the expert rater and the automated algorithm. We see that the 2 optimized IXICO algorithms are in the mid-80s. It's around 85% on average in that population. And then the FreeSurfer reference tool is around high 60s. And for reference too: Expert readers would probably get somewhere in the mid-80s as well. So as we've seen for that example of image classification, we're at a stage now where we are competitive with regards to human performance. What we've done then in this use case is a more detailed clinical evaluation with one of the leading labs in HD research at UCL, where the clinical expert would be rating the automated segmentation, again comparing our AI platform to FreeSurfer as a quality pass or quality assessment in 4 different categories. So green is a usable segmentation. And then the red shades would show segmentations that can't be used in analysis and would result in a QC fail in a clinical trial. And we're looking at 3 different brain regions all highly relevant in Huntington's research, putamen, caudate and thalamus. And as you can see, with the FreeSurfer algorithm, we're getting up to 50% failure rates. And that's where it gets highly relevant to our clients and to the application in clinical trials because obviously, the more data pass rate -- or the higher the data pass rate is and the more data we can actually use, better are the chances we identify a treatment effect. We're more sensitive to more subtle treatment effects or in turn, have the possibility to reduce sample sizes in the trial and then reduce costs accordingly. And then we have the side effects like reduced -- smaller run time or shorter run time and so on. This is -- this pipeline, as I said, we are releasing for full production later this year. And we have started to pilot it for the past year already. We have worked with one of our top pharma clients on validating and developing this platform as part of their proprietary work for one of the upcoming trials, and there's a publication and press that will come out shortly on this piece of work. And then furthermore, we are working to translate this technology into other therapeutic indications or basically apply the platform for the segmentation of structures relevant in other brain disorders. We have presented at the recent conferences in Alzheimer's, where we have deployed the same concept to segmentation of any relevant brain regions, again showing increased performance of our state-of-the-art technology. If we then move on to Slide 16, I'll try to change or shift gears slightly and spend just a couple of minutes on digital biomarkers, which as Giulio said in the beginning is an area we are actively engaging in for a couple of years now. We do see a lot of synergies between the development of biomarkers in imaging and wearables. Applications are parallel in terms of patient selection, safety and efficacy assessment, but there are also significant similarities in terms of the scientific work involved, the regulatory stages to go through in order to validate those biomarkers and then finally deployment from an operational point of view, which is why we feel well positioned to engage in that field. We have -- the work we've focused on over the past years was in sleep and activity. We follow a device-agnostic approach where we can work with standard actigraphy devices, most typically research-grade devices, but we've worked with consumer devices as well. The idea is to add value by developing specific analysis algorithms and validating them in our specific therapeutic indications. We've done this for sleep and Parkinson's, for example. And we've also run commercial trials in other indications, psychiatric indications, for example, looking at activity. An area I'd like to briefly look at today is this gait and walking more specifically. So as you see on this slide, there are a couple of biomarkers, in orange, we're actively working on. One is walking, as it's a highly relevant measurement in movement disorders like Parkinson's, Huntington's, PSP and so on. So if we move to my last slide, on Slide 17, we just see some examples of proof of concept we are working on at the moment on developing AI technology for gait assessment. I should say that a couple of stages before what we're doing in imaging in terms of maturities, or it's really developing early evidence on what is feasible. So most technology in gait assessment currently is focused on in-clinic assessments where quite sophisticated sensor setups collect a lot of data and then enable well-controlled analysis. In order to really make this applicable for real-world data collection and remote clinical trials and more generally at-home data measurements, you need to move to something more -- or less invasive. So our focus again is on wrist-worn devices, simple [indiscernible] similar to what we have successfully deployed in other domains. And what we've developed here on various data sets is an algorithm to segment the -- or detect the different stages of a step or of walking, so basically heel impact and then leg swing and standing. Once these different characteristics are identified, we can look at interpreting this from a clinical point of view. That's working quite well. With the neural network-based algorithm, we're getting around 90% acuity in delineating those steps, so if you validate that over a long period, it gives a very robust and strong signal of gait and then enables to look at various end points like obviously number of steps, which is a metric widely used and also available in fitness trackers, and so on; but then the more subtle and more sophisticated measurements that enable early detection of abnormalities or difficulties in gait like stride length, symmetry, cadence. These are all clinically relevant measurements that are assessed at current in-clinic assessments. And it's part of our Parkinson's work, for example, and where at-home measurement over long periods will be highly valuable. And we have started a project recently with Bristol University. We're really validating these aspects in the clinical setting. And that's really where we believe we can add value, as we have a deep understanding of the therapeutic indication, yes. And at the same time, we are developing the algorithms. So this is in a Parkinson's population where there's a specifically configured house in Bristol called the SPHERE house that has ambient sensors installed, silhouette videos, cameras; and at the same time, offers clinical workout that's a gait mat in there, for example, to measure gold standard walking characteristics; and Parkinson's patients, with their carers, staying in the house for several days to 2 weeks and are being assessed through the sensor technology. And what we provide into the study is our wrist-worn -- or our nominated wrist-worn device, together with the developed data analytics. And we can then compare against the clinical assessment UPDRS, for example; a detailed gait assessment; and other measurements that have been taken to really understand how far those digital biomarkers can go towards assessing what is currently taken in a more clinical assessment. So that's an exciting study. And once we interpret those results as they come in, it really enables us to design the next phase of this program to see how the technology can be developed and eventually rolled out into clinical trials and to patients. And with that slide, I would like to close and hand it back to Giulio.

Thank you very much, Robin. So just as a summary slide, the last slide, which is entitled Focused on growth. I just want to highlight that that's -- really underpins everything that we do at IXICO. And obviously, the points we're making here, there are sort of 4 pillars really that, hopefully, you've got a sense of why we see the market that we're in as one that's attractive with long-term growth prospects underpinned by some very strong and consistent macro trends that will continue to be there for likely decades rather than just individual years. Also, during these particularly challenging 12 months which has obviously brought challenges as well as opportunities, we've demonstrated that our business model has been very resilient throughout the pandemic. And it's allowed us to deliver another very strong set of financials not just in terms of top line growth but also sustained high margins, tech margins. And very pleased to be able to report a 30% increase in our EBITDA to a level of 18% for the last period. And looking forward, we've -- Grant has, I think, done a very nice job of articulating where our order book is, how we got there. And also we've talked to the fact that we've been able to really have a very strong first 6 months in terms of bookings to billings with a ratio of 1.9, which is a very, very strong performance. And we've got an attractive opportunity pipeline that we'll be continuing to look to convert in the coming months and years as well. So in terms of financially, we're well placed. We've got a strong balance sheet. And we'll continue to be debt free and so well positioned to continue to invest in those programs that you've heard about, with the intention of scaling the business but always very focused on innovation and how we can ensure that we can provide our clients with the best possible tools to develop the best possible clinical trials so that they get the return on their investments in this area; so that we can get new drugs out to the population, as we see that these diseases have such a large, devastating effect on the families that it affects. And then finally, the fact that, in addition to the organic investments we're making, obviously now we have a market cap that is significantly higher than it was 3, 4 years ago. And we recognize that we want to, in scaling the business, stay very much focused on CNS. We think that's where we can create the most value as the go-to technology partner for the pharmaceutical industry. And so as we look to diversifying into new modalities and technologies, we feel that, the next 4 or 5 years, we'll be very much looking at potential partnerships and even M&A opportunities that allow us to further accelerate our ability to diversify and create a bigger technology platform that gets adopted by the pharmaceutical industry. So thank you very much for your attention. And with that, I think we can come back onto video and maybe deal with the Q&A.

That's brilliant. Giulio, Grant, Robin, thank you very much indeed for updating investors today. [Operator Instructions] I'd like to remind you that a recording of this presentation, along with a copy of the slides and the published Q&A, will be accessible via your Investor Meet Company dashboard. I'd also like to remind you that your feedback is important to the company. And immediately after the presentation has ended, you will be redirected for the opportunity to provide feedback in order that the company can better understand your views and expectations. Giulio, obviously investors have the ability to pre submit questions, and perhaps I could hand over to you to read through those. And then the live Q&A, if I could ask you to read out those questions, that would be most useful. Thank you once again.

Okay, thank you. Well, the first one we'll start with is, "What are your main risks going forwards?" And maybe I'll direct that on to Grant.

Yes, sure. So the main risks that the company faces are -- we outlined some details in our annual report, but the 3 key risks, I think, that are worth highlighting now are, firstly, the risk of loss of a key commercial relationship or the early termination of a client's clinical trial. We've obviously felt the impact of this in the last 6 months, as outlined in our market statements in March and April and obviously during this presentation. We operate in the clinical trials business within CNS, an area which is a very high failure rate in terms of achieving new drug approvals. As a result, there is always a risk, particularly with material client contracts, that a safety or efficacy failure of the drug may result in an impact on our revenues. So our focus is really to continue to diversify our portfolio of clients and projects such that, as we grow, no single client or project materially changes our prospects even across the short term. So now I say that's a key risk. Second risk will be that we operate in a highly regulated environment and we must ensure we comply with data privacy and protection regulations. Any failure for us to do so results in substantial damage to the trust and relationships we've built up with our clients, so as a result, we continue to take very strong precautions over personal data, particularly client-related data, via [ synonymizing data on receipt ] and having multiple layers of IT and other controls, ensuring data protection requirements are integrated within our processing activities and practices. And then thirdly, as has been widely publicized over recent weeks, risk of cyber attack across all industries remains high, but health sector particularly has been a focus of that. We've invested significantly in our IT infrastructure and security over the last couple of years, and of course, we'll continue to do so. Giulio?

Great. Thank you, Grant. So I'll take -- next question is, "What are your greatest opportunities going forwards?" I'll take that one. So as I highlighted, we've obviously got the -- a large neurological disease market which we have less than 10% market share, so we feel there's -- our largest opportunity is to keep on doing what we're doing bigger and better. In particular, I highlighted Alzheimer's. That's the largest area that we see. And so developing the new tools that Robin mentioned and applying those into Alzheimer's, we think, will give us a lot of growth opportunity. And then just touching on the point that -- the risk elements that Grant talked to: Clearly, if we're able to deploy our technologies across a wider range of neurological diseases, that will diversify and derisk. And so again, we've got a track record of being able to do that. And so those opportunities are out there, and we're very focused on capturing those opportunities and also at the same time diversifying the risks that are obviously out there in terms of developing new drugs. So really those -- lots of runway for growth for what we do today. Longer term, as I said, we are looking at other new modalities such as the wearables technology that Robin referred to. That is very exciting, but it's a longer play. We don't expect revenues in the near term, but we definitely feel that, over the next 4 or 5 years, those are going to be very significant markets. And we want to make sure that we're getting a slice of that pie over the next 4 or 5 years. With that, maybe the next question, I'll go to Robin, which is, are there any new product, services in your pipeline?

Yes. Thanks, Giulio. Well, I think I've shown a couple of examples just now. So clearly, in terms of analytics, there's a significant release coming up with the new AI platform that I've illustrated. And that will immediately enable us to offer some specific biomarkers in some specific indications, but it will also form a foundation for more rapid innovation and more rapid prototyping and development. The other area, of course, is digital measurement. Giulio just mentioned this and I've also shown some examples. It's an area we're continuously working in. And the focus there is [ earlier at the moment ]. And another is around developing the evidence for specific measurements, but we are also expecting new product releases. This gait measurement from wrist-worn devices that I've shown is something we're expecting to go into production in the next 12 to 18 months, for example. So these are the big trends, I would say. And these are the big areas in innovation we are focusing on, but then apart from those bigger topics, we are continuously developing new analysis solutions as new imaging options get available maybe, I should say. So in terms of MRI, we have a continuous development of imaging sequences that enable us to essentially look at different things. And in PET imaging, we have new tracers that enable us to measure new things as well. And there's -- there are quite some releases. we're planning to show [ them there ]. So we have a new product release coming up in MRS. So spectroscopy of the brain. We have an analysis solution for ASL, which is arterial spin labeling, which enables to look at perfusion in the brain. And we have some other techniques in diffusion-weighted imaging that will enable to measure -- take proxy of inflammation, for example. So these are incremental solutions we're releasing as new imaging techniques mature, so -- and we certainly see that to continue over the coming periods.

Thank you, Robin. So we've got actually a very good and long list of questions that have come in live, so I'm going to jump to those. So the first one, actually I'll go to Grant. It's a question from [ Simon C. ]. Do you see G&A at GBP 1.6 million being stable? And how much costs, if any, do you have to have to grow revenues?

Yes. Thanks, Giulio. Thanks, [ Simon ]. So yes. So in terms of our G&A spend, what you'll have seen over the last few years is that we've been bringing G&A spend down as a percentage of revenues year-on-year. The -- I -- the expectation that I've -- I outlined earlier is that we would have a G&A spend for this year that will be in line with the G&A spend last year despite the fact that -- the fact we've been growing. And so I think, our G&A, you should look at as being sort of semi fixed in terms of it's the right level for the organization. It might go up a little bit, but essentially it just continue to come down as a percentage of revenues. In terms of how much cost, if any, do we have to add to grow revenues, the answer is that we've done a lot of the investments that we needed to do to deliver that over the last 18 months, so we're actually now well positioned with our cost base to deliver increasing revenues from where we are today. One of the investments we're making are actually about the scalability that allows us to address a bigger market and making sure we have the cost base to deliver that. So I think we are well placed at the moment without having to add material costs to deliver increases in revenue.

Great. Thank you. So next question, from [ Lionel H. ], which I'll take. "Does a lot of the contracts to your biggest client free up resources to focus on more profitable and diversified opportunities?" So the answer to that is, of course, it does free up resources, which we will and are applying to other areas; however, not more profitable things because the fact of the matter is that a lot of the work that we're doing there were the very profitable data analytics that Grant referred to. So -- and that's why Grant made reference to the fact that, in terms of margins, we will anticipate some pressure on those margins. So we will be redirecting those resources. And they will be able to allow us to pursue some of these diverse opportunities, but of course, it will take time for those to get to a point where they'll provide us with the margins that we were receiving from those very large contracts. And next one, I will -- let's have a look. [ Vivek S. ]. And I will have an attempt at this one. "I'm a new shareholder. Do forgive the question. How will the developing CRISPR gene editing, mRNA approaches to pharmaceutical impact IXICO? Is this a threat or opportunity?" So let me answer that. It will be a -- impacts IXICO positively and in the following way. So I mentioned earlier about the pharmaceutical industry's interest in new and diversified targets and new therapeutic approaches, and one of those is gene therapy. So for example, in Huntington's, which is a hereditary disease, gene therapy is seen as a great way of not just treating the symptoms but actually providing a potential cure because it addresses the particular gene that is driving the disease. And so as the pharmaceutical looks to new gene therapies, it uses imaging as a way to monitor whether the gene therapy is having its desired effect. So in short, it's another tool in the toolkit for the pharmaceutical industry to identify new targets which will drive and require more imaging and more analyses of images, which will, of course, drive demand for sort of services that IXICO provides. Next question. Could you give me -- this is from [ Shrugar S. ]. "Could you give me more detail on the Microsoft partnership and your thought on their recent AI acquisition?" Grant, do you want to have a go at that?

Yes. So thank you for the question. So the real attraction, I think, between ourselves and Microsoft was in terms of obviously we are redeveloping our data capture and analysis platform using Microsoft Azure technology. Now that is absolutely in the sweet spot for Microsoft in terms of their own strategy where they're investing heavily in the health care sector. What -- and by bringing together the health sector in -- with imaging and the AI capabilities that we have. This is something that they're very enthusiastic about and very interested in. So they are providing us support through what they term black belt expertise, where they're bringing in some of their best Microsoft expertise to support us in the development and design of our platform. And that's very helpful for us in terms of simply the design and the effectiveness of the design but also making sure it's as flexible as possible so that as we build the business, not only can we build that platform so it suits the requirements that we can see and know about today, but also it allows us to adapt through Microsoft's infrastructure technology to other data types as the business develops. And this really ties into some of the work that we're doing around wearables, where wearable technology can also be -- and data can also be integrated into our platform as we move forward. So obviously, Microsoft as a whole -- I'm not specifically clear on the particular AI acquisition you're talking to. Obviously they've done a number of acquisitions, but they -- this is an area that they're very interested in. And we see the benefits of working with them. We've actually got a couple of other workshops with them in terms of our wide array of capabilities that we feel are going to be very valuable to us...

So it's probably the radiology business they recently announced that they'd acquired. And what I'd say there is a lot of -- over the next 4 or 5 years, we do see that there is going to be the -- there is going to be a crossover from that clinical trials into clinical practice. And clearly the market size is significantly larger in the clinical practice market, so I'm sure Microsoft, like Google and others, are all looking at the clinical practice market and the size of that market and wanting to deploy digital technologies to relieve the burden on the health care system. So from our point of view, we are doing things that are of interest to Microsoft. We don't want to get ahead of ourselves. So at the moment, it's early days, but they're obviously a great partner for us to work with; and are obviously very, very keen to get more involved in health care. So Grant, another question, just a few questions on M&A, as you would expect because I mentioned it. So just really in terms of how we're going to fund potential M&A. I'll merge a couple of questions to make it easy but how we'd fund M&A and also would be looking to smaller M&A or larger M&A that we could fund from within the balance sheet, sort of thoughts on those 2 aspects.

Yes. So I mean it's -- always it's a slightly theoretical one to answer whilst -- until we have a clear target in place, but in terms of M&A, the balance sheet that we have built up, we have built up largely with, if you like, addressing the organic market that we've identified. So we are clear that, for our organic growth plans, we have the balance sheet to support that going forward. If and when we identify a suitable M&A opportunity, then looking at how to finance that will depend on the specifics of the opportunity that it is, but that would be the time when it would be likely we would look to raise capital in the market to support that M&A. In terms of debt finance, never say never, but at this point, yes, it's not something that I think will be our first choice. It is something that we would definitely look at, but it's more like to come from a capital raise, again depending on scale. So I think that's probably the best I can answer the point.

Yes, cool. I'll [ answer the other one ] M&A, and then I'll hand one over to Robin. So from [ Sam M. ]: "You mentioned looking at partnership or M&A over the next few years. Can you clarify this will be only within CNS, or are you looking to diversify outside of CNS?" So the obvious answer I'd give there is that we are looking within CNS, as I said, because we -- all the reasons that we've highlighted. One of the key things that we bring is client access as well as our technology and our deep heritage in the space. And there's a lot of value to that both for our clients and also potential partners, so that's why we -- it's highly likely to be within CNS, again on the basis of never say never. However, if there is a very nice business that is in imaging but outside of CNS but we see a lot of synergistic opportunities in terms of client access or geographic reach, then obviously we'll pass our slide rule over it and we'll take a look at it. And if it's a good business that we think we can -- that can be accretive to us and that we can scale, then I think we'd look at it seriously. So that's my honest answer to that question. And then one for Robin. Robin, a little bit commercial, but I think it also touches to why we think our products are good. "So if you have less than 10% market share, how are your clients fulfilling their analytical requirements? In particular, how many use competitors? Who are the biggest ones? And how much is performed in house?"

Yes. Thanks. So maybe the one thing to keep in mind before going in detail is that in some of the rare indications in particular, the market share is certainly higher than 10%. I think we'll put numbers out, but if we use some of the rare indications, I think data sit quite well how we're approaching it, which is that we're going with specific analytical technologies in the early stage. And that's where we differentiate most at the moment. And then if the trials are successful, we expect those clients to transition with us into the later stages and to take some of these analytics forward. So that's an opportunity for us to get into late-stage trials. In terms of the overall market share, that obviously is heavily impacted by these later-stage trials which are -- often are run by competitors, we should say; and where often the focus is on the delivery and the more operational CRO services, as opposed to the specific analytical services we provide. We do see an opportunity, though, to get more into those late-stage trials by positioning our services in earlier stages and then move through the stages with the pharmaceutical clients.

Excellent. Thank you very much. And then I've got a question again from [ Shrugar S. ]. "How will you prevent culture change in the business from M&A?" So again it's a generic point but an important one obviously. So I actually take that question with there's inference there that we have a good culture in IXICO. So I appreciate that, if that's the intention, because we've obviously worked very hard in recent years to creating a professional organization with a very clear stated purpose of helping medicines come to market sooner across neurological disease where there's a very high unmet medical need. That's important to us as a company, as individuals. We've laid out very clear values that we demonstrate and our organization to -- demonstrates every day and is clearly demonstrated through the pandemic period. And also we're very focused on our clients, and we continue to look to do what we do better for our clients. So these are all the cultural aspects that are important to us. We've got many people in the organization, including myself, that have acquired businesses and recognize the importance of culture, so we'll be working very hard to make sure any acquisitions fit our culture. And our culture will be one that will be very client centric and focused on delivering sustained long-term growth for our shareholders.

Giulio, I'm just going to cut across just because I think you've addressed all the questions that have come in from investors during the live meeting. So thank you to those investors that submitted those questions; and of course, to the management team, for being so generous with your time as we're 15 minutes through the close of the meeting. Giulio, perhaps I can just briefly hand back to you just for a few closing comments. And then I know investor feedback is important, and I will redirect them to provide their thoughts and expectations.

Sure. Well, thank you. Well, again, I mean, first and foremost, from our side, we want to thank everybody for making time in your busy schedules to join this presentation. I hope you've gotten what you wanted from it and that you have a good insight into IXICO and go away with a good feeling about what we've achieved over the past 4 years. And again we look forward and appreciate your sustained support in the coming years. So thank you very much.

Giulio, Grant, Robin, thank you once again for updating investors today. Please, could I ask investors not to close this session? As we'll now automatically redirect you for the opportunity to provide your feedback in order that the management team can better understand your views and expectations. This will only take a few moments to complete and is greatly valued by the company. On behalf of the management team of IXICO plc, we'd like to thank you very much for attending today's presentation. That now concludes today's session. And good afternoon to you all. Thanks once again.