IXICO plc (IXI) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen, and welcome to the IXICO plc interim results investor presentation. [Operator Instructions] The company may not be in a position to answer every question received during the meeting itself. However, the company review all questions submitted today and private responses where it's appropriate to do so. Before we begin, we would like to submit the following poll. And if you would give that your kind attention, I'm sure the company will be most grateful. And I'd now like to hand over to Grant Nash, CFO; and Giulio Cerroni, CEO. Good afternoon.

Thank you very much, Mark. So maybe just welcome everybody to our interim report. And with that I'll get straight into the slides and I hopefully you'll get a good overview of the half year and also the outlook going forward. So under the heading of precision in neuroscience, there is a strapline for where we're focused and what we do. If we maybe progress the slides on to the first one. Here, our purpose is important. Obviously, it sets the traction for the business. And what we do is we advance medicine in human health by delivering insights in neuroscience. And we differentiate ourselves by developing a proprietary AI analytics portfolio used by the pharmaceutical industry. On the left-hand side, just some key highlights in terms of why we're focused on neuroscience and describe some of the reasons why and the scale of the opportunity, but also balancing that with just reminding everybody some of the risks and part of the landscape that we operate in as a CRO supporting the pharmaceutical industry. So first and foremost, neurological diseases are the second largest development area after cancer. Dementia is the only major cause of death that we can't slow down or cure. And also there's a huge worldwide health care cost to dementia at GBP 1.3 trillion as of 2019. And clearly one that is only going to get bigger with the aging population. And this is clearly recognized not just by pharmaceutical companies, but also governments around the world, where we have a projected tripling of people with dementia to more than GBP 130 million by 2050. In terms of some of the landscapes and the associated risks, clearly developing drugs takes a long time, cost a lot of money and is very difficult. And these numbers just sort of demonstrate and reemphasize that point. So the likelihood of a Phase I clinical trial drug candidate achieving approval across all therapeutic areas is just under 8%. And with neurology, which is slightly more difficult and challenging, that's under 6%. So that's a very sobering point. But clearly, the opportunity and size of the price is sufficient to warrant the billions of dollars of investment made by the pharmaceutical industry to develop new drugs. And then finally in neurological disease itself, these are trials as I said that take a long time with neurological drug development time lines being amongst the longest at over 11 years. So just to give you a perspective on the fact that this is a business that you need to look at the landscape through those lens. And that's obviously where we're looking to then focus our technology services. And the strapline above the images there, which talked about our technology services being data-driven. And that's a very important point, which hopefully comes across in the presentation, articulates how we're doing that and achieving that and how we're accelerating that so that we're providing these data-driven insights that enable our customers to design more efficient clinical trials so that it increases the likelihood of approval of innovative safe therapies to market sooner. And we'll talk in the slide about the increasing use of imaging biomarkers as a means of doing that. So on to the next slide. So just a little bit of a retrospective look if you look in the rear mirror in terms of how we got to where we are today as a platform then to look forwards, so in the period that will be set up in the new strategy, 5 pillars are there, which we've talked about before, all geared towards delivering sustained double-digit profitability. And the key point I'd like to make here is that the numbers that we've achieved and delivered consistently over that period have been purely organic growth driven. And you'll see that in my second part, as I start to describe how we're looking forward, we anticipate that the element of partnership and M&A is likely to play a greater part in our growth story over the next 5-year period, but we'll come on to that. So if we move on to the next slide. So just some key highlights for the track record this management team has delivered on with that strategy. Clearly, we did raise funds around about GBP 5 million, and that's been utilized to basically get us to profitability 2 years ahead of previous expectations. And I'll talk to some of the key drivers behind that. But just some very high-level points there in terms of the consistent top line growth with very strong margins, which again, you'll see from Grant's presentation, have been consistently in the 60s. We've more than doubled revenues in that period. We've significantly increased the diversification of our projects and also a number of therapeutic areas. And again, Grant will talk to that and how that's positively impacting not just the results to date, but also how we anticipate that is going to serve us well going forward. And the other piece I just wanted to highlight, obviously, we talk a lot about our differentiated AI algorithms. But the other thing I wanted to highlight here is that we've been in this business and revenue generating for over a decade. And that's important because we've been able to establish a global network of over 900 imaging centers across 37 countries. And the reason that's important is what it says is that we have our imaging technology platform, our TrialTracker platform, adopted and used and sites across the world have been trained on that platform. And that's very important because when it comes to our bidding for new contracts and winning new contracts, one of the key things that our clients want to know is that our imaging centers around the world, our partners are able to leverage our technology so that they can get patients onboarded quickly. And obviously, the sooner they get the right sort of patients onboarded, the better and the more likelihood of success for the pharmaceutical clinical trial. So that's something that's has been built over a decade. It's not easily replicated and stands not only to facilitate our business growth, but also act as a strong barrier to entry to other companies that might want to come into the space. So you need scale in this business, and we've taken much time we've taken to build this, and we're now very well positioned to exploit that further in the coming 5-year period. And then finally, just some points here about the financial health of the company that's not just driven increasingly good P&Ls, but also strengthen our balance sheet so that we're now -- we've been operating cash generative and remain to and consistently remain debt free. So we're well capitalized to support the investment programs that we have planned for the coming years. So all of this is about basically how we've expanded our operational capabilities whilst also being able to invest in the business to scale. So next slide, thank you. And just to read some pointers in terms of what the sort of investments are that we've made in innovation, technology and infrastructure. So during that period, we've proven the resilience of the business, quality and the reliability. Obviously, we operate in a very regulatory compliant environment. We are audited often by large and small pharma companies alike. We've demonstrated the robustness of our centralized remote service model throughout the COVID pandemic. And we've also been investing heavily into our next-generation Microsoft Azure cloud-based TrialTracker development program, which is well advanced now. And a key part of our strategy going forward in terms of how we aim to scale our business going forwards. We clearly -- next few points really about our proven operational capabilities to scale. The key market for us, I think the win of the Phase III trials a few years ago were very pivotal in being able to demonstrate that we are able to deliver or not to win and deliver large Phase III studies as well as early phase studies. And then we've also been able to continue to see, show that we are leaders in our space in terms of innovation through the consortium collaborations that we have that keeps IXICO at the cutting edge of developments in imaging as well as in algorithm development. And all of that also has been driven by our ability to access more disease-specific data assets, which again I'll come on to in a moment as an example of how we've done that. Recently with a significant win with the consortium agreement we announced recently. And then finally, this is a business now that we're benefiting from an expanded portfolio of algorithms that are driving our leadership in analytics, and that's been demonstrated by a recent launch of our next-generation platform, our IXIQ.Ai platform. So just really some examples of the capabilities that we've built during that period of 4 years. So whilst strengthening the P&L, also investing and building capabilities to scale the business. And then the final point I want to say here is that probably one of the most valuable things that we have is a track record with the global pharmaceutical industry and obviously a current client project list, which again, Grant will talk into, but I really wanted to emphasize how that can be a major springboard for success in the long-term growth of the business. So if we go on to the next slide, this is now looking forward. So obviously, we haven't had the benefit now of how we got to where we are. This is really focused on where we can go and how we're going to get there. So it's going to be very much under the strapline of precision analytics underpinning our growth strategy so that we can further differentiate our offering to really address the clients' focus and need for objective measures, allowing greater precision and efficiency in the design of clinical trials. So 5 pillars in this strategy going forward. The first one is to build our commercial reach. We still have a relatively small commercial organization. And clearly, we want to make sure that we're at the table for as many opportunities as are open and available to us. But also, I just want to make sure that the listeners understand it's really important that we build the imaging CRO, scale and reach of the business. So of course, it's very important that we differentiate with our proprietary algorithms, but that's not enough. And the reason it's important to understand that is that actually IXICO is one of the few companies where we are actually bringing together the 2 capabilities, the imaging CRO, centralized laboratory services that we provide, but together with innovative algorithms. And that's something we need to continue to do in order to build reach and scale in the business. Innovation, I've talked to, but we need to continue the good work we've done on building the data assets and these are very important because obviously they underpin our ability to develop proprietary analytics capabilities with our AI platform so that we can become the leading neuro AI biomarker portfolio company. And the third point is to continue our march in penetrating the market further. And our view is that if there are neuroimaging contracts that we're always 1 of the 3 or 4 companies considered. But the gap between the sort of top 2 and then ourselves, it's still significant, but there's a lot of runway for us to go after. And obviously, that's what we're focused on doing. The fourth point is really one to just sort of put us as a market to say that what I see happening over the next 5 years is increasing interest in the use of AI in clinical practice as well as in clinical trials. And so we're just at the beginning of this, but our view is that we should look and see how as drugs come to market in the space of neuroscience, it's likely that considerations are going to have to be made in terms of how people might be diagnosed and therefore treated in the real world. So we're starting to develop our thoughts around how our capabilities within IXICO and our proprietary algorithms could potentially be used as proprietary algorithms related to biomarkers that are significant in diagnosing and treating patients with these neurological disorders. And then finally, my point about enhancing all of these things by partnerships and M&A that would accelerate our growth further. So the key point here is that the key takeaway is that we're investing to scale with a strategy to deliver. Just a few points on how we aim to do that under this precision analytics strapline focus, we still see the focus in neuroscience being important. And one of the key things I want to get across here is that it's recognized across the industry that drug development programs employing patient preselection biomarkers increases your likelihood of success. So broadly doubling the rate of success I mentioned at the beginning. And that's obviously very important because we see this being applied in CNS and central nervous system neurological diseases. And that's actually driving the increased use of imaging biomarkers. And of course, that plays to our strength, and imaging biomarkers are seen very much as noninvasive objective measure. And so imaging biomarkers are fundamental to the strategies that the pharmaceutical industry is adopting. And of course, the other point in CNS is one of the recognized truth is that probably the lack of success in neurological disease development, drug development has probably been not having the right type of patients in the clinical trial. And so there's a lot of focus by the industry on making sure they have the right patients in the clinical trial in the first place and the recognition that we're not all the same. So the idea of one size fits all doesn't work. And so the idea of identifying subsets of populations of patients is very much the approach and using biomarkers to do that in preselecting those patients is key, and we feel we've got a very strong part to play in that. And we do that because we have these algorithms that have been developed and validated as mechanisms that can be used for patient selection. And if we can demonstrate that our algorithms and our capabilities allow the systematic stratification and enables smaller, shorter trial -- shorter length trials with lower costs or alternatively increases the power of detecting subtle treatment changes, that's obviously going to be very valuable to the pharmaceutical industry. And the graph at the bottom is just highlighting that the use of LEAP and using our algorithms to identify small changes in the volumes of volumetric analysis -- objective volumetric analysis of biomarkers is a route to identifying the right sort of patients and therefore, reducing the number of patients you might otherwise put into your trial. But then we've also been working and we've been publishing scientifically on the idea of using predictive models that would further enhance the ability to reduce the number of patients that would be needed to get the same amount of power and interpretation from the clinical trial. So from the work we've done, we've indicated that could be in excess of 30% reduction, which is obviously extremely significant. I would also add here that we've been working with organizations such as GAAP, which is the global Alzheimer's platform, where they're looking beyond imaging biomarkers to blood-based biomarkers and their assessment is that the opportunity then, if you're looking at a broader portfolio of biomarkers, then those reductions could be up to 50%. So what we are highlighting here is that we feel there's a great opportunity for IXICO here. And that's just to illustrate how we position ourselves to be a leader in this precision analytics for neurological disease drug development. Next slide, please. And this really is my last slide. And this is really just, again, stepping back and looking at the bigger picture, but obviously many of you will be aware that in the last 12 months, we've had the FDA approval of Biogen's aducanumab, which is on the market now as you Aduhelm. But that is basically the first FDA approval in nearly 2 decades. And obviously, we all know that that's been a very controversial approval. And one of the reasons it's controversial is that there's been -- the 2 sets of data that were presented, that's basically conflicting information from that data and it kind of reinforces the importance of having very good data that you submit to the FDA if you want approval and again, reemphasizes the importance of having additional and the right sort of biomarkers supporting your claims when you do the submission. And the reason that's important is that there are then a next line of large pharma companies also looking to submit late stages approval requests for amyloid targeting drugs. Now one of those is Biogen with Eisai as a partner for lecanemab, but also other giants such as Roche with their gantenerumab and Eli Lilly with their donanemab. So these are all big players, all looking to come to market, hopefully, in the next sort of couple of years. And not only does that increase the interest and the level of dollars that are being spent in this area from those companies, but obviously encourages others to also want to invest in Alzheimer's. And as a result of that, we're also seeing a significant diversification in drug targets beyond just amyloid drugs. And so as a result of that, the takeaway message here is that this renewed biopharma interest in Alzheimer's disease represents a significant growth opportunity for IXICO over the coming 3 to 5 years. So with that overview, I'll hand over to Grant.

Yes. Thank you very much, Giulio. So I'm going to take you through the financial picture of the company currently looking at the first half of the year, but also looking forward to an extent. So starting with this slide, it shows our headline financial performance metrics for the first 6 months of this year and compares it to the performance across the same period over the last 5 years. So if you start with the graph on the left, this shows that following 5 years of consistent first half year revenue growth, the first 6 months of 2022 show an interruption in this established record of consistent growth. So this is the result of our 3 largest client trials, which constituted 12.8 million contracts, ceasing within the last 12-month period, which has had a significant short-term impact on our order book and on our revenue levels. So that top level reduction in revenues, however, and this is a point I really want to make clear masks a significant number of positives that have taken place within the company's financials, which I'll outline in more detail over the next few slides and which reflect an underlying strengthening of the position of the company as it looks forward across the medium and longer terms. Before I get to detail on that, just moving to the middle graph here. We continue to report strong gross margins despite the fact that we have had that weakened revenue level in the first 6 months of the year. And also, as we highlighted in our presentation in December for those of you who saw it, we've had a notable shift in the trial phase mix within our order book as the levels of the Phase III high analytical revenues have declined for in the recent trial descopes and cessations. Our recent contract wins, which have been primarily early phase have been onboarded. So this reflects an increased diversification within order book across different trial phases, which provides us with more shots on goal, where early phase trial drugs show positive safety and efficacy reasons readings, and we'll be able to move on to later stages and later phases. And what that means is that by having a wider diversity of early phase trials, we have more opportunity to follow those trials through to the larger later phases that tend to be more analytical rich and tend to be more profitable for us. On the right-hand side of the slide, you can see that we continue to report profitable EBITDA earnings and as was outlined in our RNS release this morning and on which I'll provide further detail in a few moments, we continue to expect to see strong profitability in the business across the full year of 2022. Again, as we outlined in December, our EBITDA reflects the impact of investments that we're making in the business, but also includes careful management of other costs whilst we navigate this more challenging period. So moving to the next slide. What I wanted to do here was provide a little bit more clarity on our investment positions. And this slide shows specifically the investments we've been making within R&D, within sales and marketing within general and admin costs across the period. And again, this compares to the similar period over the last 5 years. So what you can see from the graph on the left is that we continue to invest in R&D, specifically around our analysis pipelines and also the development of our next-generation Microsoft Azure cloud-based data capture and analysis platform. What this shows is that whilst we've maintained our base R&D expenditure at the level of equivalent to the last 3 half year periods, there's also been a substantial increase in investment in R&D overall with GBP 1 million being invested across the 6 months in the analysis and data capture platforms, double the amount that we invested in the same period last year. We continue to expect this platform to launch later in 2022, and what that will do is provide further benefits to our clients and partners as well as providing the platform infrastructure for us to deliver on our 2022 to 2027 strategic plans. Our sales and marketing spend, as you can see from the graph in the middle, is down on the prior year, which in part reflects the continued restructuring necessary within our commercial team as we adjust to the post-COVID-19 ways of interacting to businesses. This reflects a lower level of travel and conference attendance, but we're continuing to recruit into this team and have recently appointed a further business development director to augment the team who's joined us within the last month or so. Very positively, whilst this remains an area of focus for us in terms of our investment plans and securing the optimum balance between sales and science in our commercial proposals, we have signed new contracts year-to-date, which gives us a positive book-to-bill ratio for the year-to-date, meaning that essentially we've signed contracts with values that are greater than the revenue that we've recognized in the same period. And finally, on the right for completeness, our G&A expenditure, which as a public listed company is higher than would be for an equivalent private company, but reflects a reduction on overall expenditure compared to the same period last year and aligns with the level of spend in 2020. We continue to manage this general expenditure very carefully as we seek to expand our investment, particularly in our science, technology, operational and commercial teams. So moving to the next slide. Really, what I wanted to highlight here is that underpinning our investments is our strong and strengthening balance sheet. At the 31st of March of this year, we held GBP 5.8 million of cash, which incorporates GBP 200,000 of operating cash inflows in the 6-month period, offset by GBP 1.1 million of capital investments, whilst at the same time, we continue to be fully debt-free. In the same period, our overall balance sheet has increased by GBP 300,000, continuing the trend of net asset growth across the last 5 years as we've taken the cash that we raised in 2018 and invested in our operational and scientific capabilities, and these investments have subsequently converted to EBITDA profitability and operational cash generation. The key message there is that we are continuing this investment, as we've outlined and Giulio outlined in terms of the plans for the next 5 years with an expectation that continued investment will continue to trend of growth for the balance sheet and profitability across the medium and longer term. As you can see on the right, however, the trend is being and will continue to be interrupted across the short-term. That is in the nature of the clinical trials market, particularly in the area of neurology. Clinical trials do fail or cease earlier than our clients had planned. This has been a change for a couple of our largest clients over the last 12 months, which had a consequential impact on our order book and short-term outlook. The 3 largest clinical client trials that we've been supporting all announced their early cessation within this period, which combined resulted in GBP 12.8 million of contracted revenues being removed from our contracted order book, moving it from a position that would have been an order book of over GBP 25 million at this state to a reported level of GBP 12.6 million, as you can see at the 31st of March of this year. So what I'm going to do now on the next slide, I'm going to focus a little more as I did in December on what we have achieved in winning new contracts across 2021 and the first half of 2022 to diversify our order book despite the overall reduction in value and thereby build further resilience and opportunity for greater scale into the order book as we look forward. So what you see on this slide is, on the left, we have the specific movements in our order book between the 30th of September of 2021 and the 31st of March 2022. And as you can see, the book-to-bill ratio for the period has been essentially just under 1 with contracts on totaling GBP 3.8 million compared to revenues recognized in the period of GBP 3.9 million. So essentially, where we've recognized revenue, we've replaced it with new contracts. However, we've also experienced GBP 6.1 million at early trial cessations within the 6-month period, GBP 3.3 million of that we announced to the market in October last year and a further GBP 2.4 million we announced in January this year with a small level of other transportations or descopes shown. So our focus is clearly on further developing our commercial traction to build our order book back to higher levels, which in doing so will drive a return to higher levels of revenue growth that we've been delivering over the last few years. Now what's key on this is that the signs of success of that approach are already visible as I've shown on the graph on the right. Now what this shows is the number of different clients within our order book at the date at the end of financial year 2020, 2021 and at the half year this year. And by winning over 20 new studies since the start of the 2021 financial year, we've increased the number of clients we're actively supporting by 40% and the number of trials that we're actively supporting by over 60%. So we've moved our current clients actively being supported from 12 to 17 across that period and the number of client projects that we are actively supporting currently from 19 to 31. This is a really important achievement and reflects a level of commercial traction that we've been able to build up compared to 18 months ago. It's most starkly reflected by the fact that whilst there's been the large reduction in the Phase III HD trial that we've been supporting across that period, which now constitutes just over 20% of our order book compared to almost 80% of it in September 2020. Whilst we've been doing that, we've been refilling the order book to a great extent by the winning of many new studies that allow us to manage that change in structure of the order book. So that's not just a factor of commercial traction. It also reflects the investments that we've been making over the last 2 to 3 years, which have provided us with the operational processes and procedures to deliver high-quality services to our clients across a more diverse range of individual trials, individual neurological therapeutic indications and individual trial phases and clients. So this is now -- what this now means is we have a scalable model that the company has now embedded is underpinned by strong human and technological resources on which we're able to layer our innovation expertise. So over the next couple of years, we would expect to see some of these early phase trials that we've now won, achieved successful transition to later phase trials, which will be accompanied by increased high-margin analysis and increased overall revenues. And we're in a far stronger position looking forward to do that and grow those revenues to levels of growth that we haven't -- beyond those that we've previously seen simply because of the way we've been able to restructure our order book. And the fact that we have had these client trials be descoped and cease is risks hiding the achievement that we have made in actually setting the business for greater growth across the medium and longer term. And it's this approach to scale that we are very focused on to manage the inevitable risk of individual client trials cessations by diversifying and building that portfolio of contracts spread across all phases of development pipeline. And then just moving to my final slide before I pass back to Giulio. I just want to give an update for our full financial year 2020 and outlook for financial year '23 following the guidance update we provided in our RNS this morning. So the guidance update that we provided is affected in the graph on the left of this slide. Market expectations prior to the release this morning were for financial year '22 EBITDA of GBP 600,000, following a strong first half of profitability, where we've carefully balanced our focus on investments in our science and technology with more general expenditure management and with a view to a stronger second half of revenues as compared to the first 6 months of the year. We are very pleased to be able to communicate a material EBITDA upgrade and expectations for the full year. Whilst we retain our view at the revenue level, EBITDA will increase because of 4 elements within our financial projections for the second half of the year. The first is that as the large Phase III HD trials complete closure activities, we expect the spike of analysis work, which will be accompanied by stronger margins than we initially anticipated. The second reason for the upgrade is that the sales mix that we're delivering incorporates some specific analysis heavy tasks in the coming months, which we again anticipate will improve profitability for the second half of the year. The third element is that as we continue to develop our next-generation data capture and analysis platform, this will result in continued capitalization of development costs across the second half of the year. What this is doing is moving costs from our P&L to our balance sheet, reflecting the long-term value of these investments are expected to deliver for the company. And then the fourth element is that we will continue the approach that we've adopted across the first half of this year in careful cost management, whilst maintaining the key investment plans that we have in place. So the positive impact of the EBITDA change also will be visible with our cash at year-end as well. Then moving to the graph on the right. This is provided to illustrate the impact of the large HD Phase III trial cessation and the visibility and the outlook that, that is for our financial '23 year. So in the GBP 8.7 million of revenues that we expect to deliver for this year, we will deliver GBP 2.2 million of revenues that relate to the Phase III HD trial, which undertaking the closedown activities and specific analytical insight work that we will provide to our clients. This level of revenue is a significant reduction from the revenues recognized in this program over recent years, but still constitutes approximately 25% of this year's revenues. Now the long cycle times for new clinical trials to initiate and contract means that whilst we've done a really good job of winning new trials over the last 18 months, there is an inevitable gap created as these Phase III HD trials fully close. This, as we've outlined earlier, is in the nature of the clinical trials market and emphasizes why we, like all CROs serving this space need to attain a scale of programs and diversity of clients and client trials, which better compensates for the inevitable lumpiness that the early cessation of a large trial creates. Our investments over the last 2 to 3 years have made us much more resilient to these events than was the situation previously, and continuing our investment program and continuing to win new trials across the neurological therapeutic spectrum across development phases and with new and existing clients will further position the company to achieve the level of scale we see as critical next milestone for the company. This will be our focus over the coming years. And during this period, there will be setbacks inevitable to our space as we deliver the underlying strategy. So specifically on financial year '23, we therefore forecast a reduction in revenues on this year. And in balancing the long-term benefit of the company versus the short-term P&L presentation, we anticipate a temporary return to EBITDA losses as we continue to prudently invest for the longer term and believe that doing so will be in the best interest of the company. So with that, I'm just going to pass back to Giulio to summarize.

Thank you. So if we just go on to my final summary slide, really sort of hopefully captures all of the alerts that we've talked to and sort of summarize the investment case for IXICO. First of all, our market focus in neuroscience with these long-term macro drivers and obviously, the recognition that there's a requirement for new therapies in this wide range of neurological diseases and an increasing demand for our data-driven precision analytics by the global pharmaceutical industry. The client reputation that IXICO has established over that decade plus that we've been revenue-generating means that we are a trusted, best-in-class imaging CRO. And that's clearly very, very valuable and a springboard for us to build upon. And then the final aspect to consider there is that I should say as well that in many of our clients, we have still a relatively small proportion of their total spend in neurological diseases. So clearly, we're hoping to leverage that entrance that we have with them so that we can expand further across the range of therapeutic areas. The third point is the track record. Grant has articulated very clearly the track record we've been able to deliver and the fact that we moved rapidly to profitability as we move from a small company to the company that we are today with circa 90 staff members, and we're looking to continue to strengthen that balance sheet by continuing to succeed in the marketplace. And to succeed in the marketplace, we are very much focused on continuing to invest in our innovation with continued proven science and innovation leadership with the precision analytics growth strategy that we've talked to together at the same time, maintaining and building on that resilient scalable technology platform that Grant referred to. And finally, all of this hopefully demonstrates how the company is investing to scale with a strategy to deliver. So thank you very much for your listening, and I will be open to questions now. I guess, Mark.

Thank you to Grant and Giulio for your update this afternoon. [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 can be accessed by your Investor Meet company dashboard. Grant, Giulio, I haven't given you a lot of time to look at the questions that have come in, but you've received a few. Can I please hand back to you, if I may, just ask you to read out the questions and give a response where it's appropriate, and then I'll pick up from you at the end.

Sure. So I'll read out the question, and then I'll maybe delegate either myself or Grant. So I'll take the first one. The question is how many big contracts are there in the current market, like the one that you got pulled last year? What are the chances of successfully securing them, it seems like everything recently is much smaller scale, which is good for risk, but isn't game changing to the bottom line? So quite a few points in that question. So I'll probably -- I'll try to give a full response. I mean there are significant numbers of Phase III trials currently in progress. And obviously, new trials anticipated come online as those investigational drugs progress through the clinical programs from current Phase II studies, clearly. There's a paper by Jeffrey coming through or looking up, and that is just specifically on Alzheimer's Drug Development and it highlights that in 2021, there were 41 Phase III clinical trials in progress alone in AD. And then obviously each of those will have a significant patient participation of which imaging would be used as part of the protocol. Now in terms of IXICO, we've actually won 2 large Phase III studies in recent years: one in Alzheimer's, one in HD and also one open label large study associated with the HD pivotal study that we've referred to. Now the factors that allowed us to win and deliver on those trials are going to be the same, they're going to allow us to win and deliver future trials in the coming years. So I just thought maybe I'll highlight what those factors are. It's very important to be the incumbent imaging provider in the early phase studies to be successful and be adopted by the client in the later Phase III studies. So the other thing I'd say was quite often the most innovative and promising drug candidates are actually often found in biotech and midsized pharma. And so our focus on those companies is very important. And the reason it is so is that those companies then look to potentially license those drugs to big pharma that can take on the very expensive scale of large 3 phase studies. And that is exactly what happened with our success story in Huntington's. And so that's the model that we look to pursue. And that's why we're very pleased with the success we've had in acquiring new clients in biotech and smaller companies with the intention that some of those assets will be taken on by those companies to a point where they're then successful in licensing those drugs to large pharmas. So that's one key element that is very important in developing our next crop of Phase III studies. The other important element is we've got to demonstrate that we're a credible vendor to big pharma that can support 1,000-patient studies in multiple countries around the world. So again, the track record we've demonstrated with our recent Phase III experience demonstrates that we're not just an early phase study company and that you can look to IXICO to support your drug development across all phases of development, and that's very important, of course. And then the final point I would say is our ability to demonstrate that we do have scientific analytical and technology towards an expertise that means that we are the best-in-class partner for our prospective clients. And obviously developing our AI platform and the recent launch of our IXIQ.Ai platform is really a good indicator to the marketplace that not only are we deploying those cutting-edge tools in rare diseases such as Huntington's disease, but we're also looking to apply them in Alzheimer's, MS, Parkinson's to name but a few. So all of those are tools that we now have because of the success that we've demonstrated our credibility to the bigger market. And obviously looking forward to have that balance from a financial point of view, of course, is important, but also the scientific leadership and the ability to demonstrate that we're a credible partner to all companies throughout the whole development phase of clinical trials is important. And then the final thing I'd say as well is given that these are development time lines that take several years, as I mentioned earlier in my presentation, an average in excess of 11 years, it's very important to be there at the beginning so that we can be the partner for that 11-year period for the clients. And of course, we then benefit from good forward visibility to revenues as well. So a long answer, but hopefully a comprehensive answer to the question. I'll move on to some that Grant can respond to a couple of here, Grant. One is, has inflation had an impact on the business. And then a second one, which relates to one of our investors, which is what effect will the takeover of CIP merchant capital have on IXICO?

Yes, thanks, Giulio. So starting with inflation. So I think there are 2 ways that I think inflation can affect us or any business, frankly, is directly and indirectly. So we have a relatively small direct impact from the point of view that we have a low footprint. We're not high energy users. We've actually invested over the last few years in more efficient servers. We use data centers. We're also migrating as we've been saying to the cloud, all of which whilst energy costs are going up would have allowed us to bring those costs down and as well as obviously improving our environmental footprint at the same time. So in terms of direct impact, not significant. Of course, there is an indirect impact which is that impact that, that has on our employees and we are a people-based business, that all of our employees will have been having been -- will be feeling the impact of inflation. And in trying to support that, there are 2 elements to that. One is we've considered that as part of the annual pay review that we do each year. That was part of our thinking. The other element of it is that in the lessons we've learned across the COVID period, we've moved completely now to a hybrid model. What that means is that we maintain the social cohesion company by having people in the office a couple of days a week, but it also allows people to stay at home at the other times. And what that does is it reduces travel costs, et cetera, for those individuals. So we've looked at the inflation question in a number of different ways, but the overall impact for us compared to many different companies is small. In terms of the question about what effect the takeover of CIP merchant capital have on IXICO. We don't think it will have any particular effect at the moment. We've had conversations with the CIP merchant capital over the last few months. They have been and continue to be very supportive. We're actually speaking to them again later this week as part of our investor roadshow, which we normally do after any interims. And so whilst obviously, we're aware that the takeover is taking place, we don't have any concerns of any impact on us directly.

Thank you, Grant. So I'll take the next one. The question is, I hope I interpreted the question correctly, as the remuneration seems to be high compared to others. Why is this? So I'm assuming that relates to our margins and so in that context. So first and foremost, many of our competitors are providing imaging CRO services, which obviously is kind of where the industry has been, which relies on people and expertise, radiologists, to interpret the analysis. We've been investing in our AI platform for several years. So again, this is not something that's just popped up in the last 18 months. So we've been at the vanguard of using AI, and that's allowed us, frankly, to not only provide better interpretation analytics to our clients, but also allowed us to automate a number of processes that were previously very, very manual. So again, whilst we -- and the other thing I'd say as well is that that's coming through in the P&L. So even with the short-term impact we've had of the lower revenue line, you can see that we still maintained very good margins, which is a reflection of the business model that we have, which is different from many of our competitors. Next one, Grant for you. What are your priorities with regards to your future investment?

Yes. So I think, obviously, Giulio, you covered this in the presentation to a great degree. But really, what is our focus? Our focus is on scale and how we achieve scale as efficiently as possible. And that really is through the investments we're making in our technology, the investments that we're making in our operational footprint and capabilities to ensure we can deliver the level of services that our clients would expect across a greater range of clients, a greater range of trials, a greater range of phases. And of course, in the innovation piece, the launch of IXIQ.Ai this year has been a major step forward for us. It's building on, obviously, over a decade of innovation, but it is the next level for us. There's more of that to come, and we're seeing interest from new clients and new consortium that coming off the back of that. So continuing those investments to make sure that we're as placed to scale and make the most of growing market is the priority.

Okay. Another question. This one is, that I'm trying to take there's something of a reduced emphasis today compared with full year results presentation on the potential of the platform for future M&A. What are your current thoughts metrics, target areas for acquisitive growth? And actually, I understand the question. What I'd actually say is, to my point, I actually feel that M&A in partnership is going to be more pertinent in the next 5 years. And all the results we've achieved to date, as I said, in the previous 5 years has been 100% organic. What I say here, there is a reality check for us is clearly a year ago, our market cap was in excess of GBP 50 million. If the market cap is significantly lower, i.e., circa GBP 20 million or whatever, GBP 30 million then clearly, you have a smaller pond to fish in. And clearly, we want to make sure that any M&A that we do needs to be a quality M&A that strengthens the business. So that's one aspect that we're obviously mindful of and that's why we want to make sure that we articulate the value of the company as a public company. Clearly, our market capitalization is a factor. Having said that, the only thing I would say, though, is that there are significant partnering opportunities for the business and specifically because of the capabilities we demonstrated in the market in recent years. And that's not just technology. It's also our ability to demonstrate how we've been able to acquire lots of new clients across a wide range of therapeutic areas. But for example, the reason the TrialTracker platform next generation that we'll be launching, that clearly helps IXICO scale organically, but it actually opens up a number of opportunities for us where we might want to take advantage of partner opportunities that are allowed to us because of that greater capability that we have with the enhanced technology platform that we have. So I would say, whilst we have a smaller market cap, which does create a certain restriction in terms of latitude, there's plenty of opportunities for us to partner and leverage the capabilities we built in recent years. Grant, gives me the confidence for the second half of the year. What excites you most about the business? I ask the CFO of that question rather than the CEO, but I probably should answer it, but I'll let you till I catch my breath.

So I think the really exciting thing, I think, for this as a company. There are lots of exciting things. We're in a market that is growing a market that is becoming more attuned to the value of objective measures in analysis and understanding that very small differences in terms of a drug's efficacy and the patient population within that trial makes a difference potentially between success and failure of a trial. And that all plays to our strengths and what we're all about. I think -- so I think we are -- it's very exciting in the market that we have -- we are facing, it's very exciting about the positioning that we have put ourselves in with the investments we've made to access that. But I think also what is exciting is that whilst we talk about scale being so important and it is very important, being the size that we are, it doesn't take a lot. We have to win a lot of trials to start to materially change the size of the business. And we've shown over the last 5 years the operational leverage that exists in this company. The fact that if we double the number of trials that we're delivering, again, we will see that flow to our gross margin, we'll see it flow to our EBITDA margins as well. And we have the -- there aren't many companies of our size in this space that can boast the track record that we've got, the cash generative track record that we've got and having built up a balance sheet whilst investing. And those are things that are, I think, are hugely exciting for this company.

Great. So 2 last questions. So Grant, I'll give you the next one. I'll take maybe the last one from [ Michael T. ]. Thanks for the clarity of the presentation. Thank you, Michael. Do you have to compete for contracts on price or are you able to price according to reputation?

So it's a good question. And there's no clear answer -- the answer essentially is it depends. So there are definitely certain trials that are more competitive and more price conscious than others. And that will be, for example, a trial that perhaps has a relatively low level of analytical requirement is more about the CRO capabilities that we are able to offer. And that will be more price attuned than perhaps another trial, which may be looking very specifically at several biomarkers knows that if you want expertise in biomarkers beyond just the generic imaging analysis that some of our competitors can provide, then we are the company to come to and then it's really around the reputation that we've built up and the innovation that we've been investing in. So I think there's not a one size fits all answer to that question. It will depend on the opportunity of the particular trial, particular indication and the design of the trial itself.

And then a final question from Mark, which I think builds on nicely and that answers the last question. At a high level, what are the benefits of IXIQ.Ai versus the nearest competitors? And I think this sort of will hopefully give some color to the points of Grants just made around pricing. So at a high level, it allows us to provide a more precise interpretation of the imaging data that is available to clients. And what I mean by that using the example of the recent announced new contract consortium that we announced in Huntington's disease. That is data that's been analyzed using previously available analytics tools. And it's been decided by the owner of that data that is -- that they want to make available to the broader research community that IXIQ.Ai and IXICO scientific expertise can allow a retrospective analysis of that data to provide deeper understanding of how to interpret the data, for example, to allow better staging and understanding of how the disease progresses. So if you have a gold standard methodology to determine how a disease progresses, clearly, your ability to use that information to determine if your new investigative drug is efficacious is very valuable. So that's an example where the consortium now consists of ourselves, the charity and to biopharma companies. The agreement is set up such that as we do that retrospective analysis, other pharmaceutical companies are able to join the consortium. They're able to contract with IXICO, pay IXICO to do additional analysis on their behalf, but also they benefit from the work done from previous members' payments to get that analysis completed. So the reason that's all very exciting is that it obviously allows us to provide those members of the consortium, the cutting-edge tools that we've developed that they've decided clearly does add value to them, which they'll then take into their own clinical development programs but also allows IXICO, the opportunity to further strengthen our position as a leader in that particular therapeutic area and also give us greater exposure to a broader range of clients over the coming years. So all of that, of course, is because the clients see the value of IXICO's enhanced analytics tools to support their precision neuroscience strategies in developing new drugs.

That's great. Giulio, Grant, thank you very much on perfect timing as you hit the hour, and you've answered every question from investors. So thank you to everybody for their time this afternoon, and for submitting your questions. Giulio, Grant, I know investor feedback is important to you both, I shortly redirect investors so they can provide you with their thoughts and expectations. But perhaps, Giulio, before doing so, I know the investment case slide is up there. But if you could just have a few closing comments and then I'll redirect investors for their feedback.

Yes. I'll just -- again, just to thank everybody for making the time at the end of your day. I really appreciate it. It's really important to us. And we hope, we've done a good job in giving you a balanced view of where we are today and why we're excited about the future and how we plan to execute on our plans that hopefully we've given you plenty to think about. And we look forward for your continued engagement support and interest in IXICO.

That's great. Giulio, Grant. Thank you once again for updating investors this afternoon. Could I please ask investors not to close this session as we're now automatically redirect you to, so you can have the opportunity to provide your feedback and all of the management team can better understand your views and expectations. It may take a few moments to complete, but I'm sure it'll be greatly valued by the company. On behalf of the management team of IXICO plc, I'd like to thank you for attending today's presentation, and I wish you all a very pleasant afternoon.