IXICO plc (IXI) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen, and welcome to the IXICO plc full year 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 where appropriate we publish such responses on the Investor Meet Company platform. Before we begin, we'd like to submit the following poll. And I'm sure the company will be most grateful for your participation. Before handing over to Giulio Cerroni, CEO, I'd just like to say that we'll be taking the cameras down to make the slides bigger for you during today's presentation and then return them for the Q&A. So if I may, Giulio, I hand over to you, sir.

Thank you very much. So thank you, everybody, for attending today's call on our full 2022 results. I said I'm just going to go off camera and talk through the slides as we go through. So if we jump to Slide 3, heading up with as a company driven by our purpose. We have a very clear purpose. And in this update, I'll begin by highlighting how we're making excellent progress. Sorry, this is slide too many. Slide 3. You've jumped one slide there. Go back one. This Slide. That's right. Just that we're making excellent progress towards our strategic objectives in building a best-in-class and resilient technology platform in neuroscience. Grant will then follow on and provide details of our financial results. And then I'll finish off by describing our new Precision in Neuroscience strategy, which is aimed at ensuring we established a strong foundation for medium to long-term growth for the next 5-year period. In particular, during the presentation, we'll be highlighting the resurgence in Alzheimer's disease, which many of you are sure have seen lots of media coverage. And while we have good reason to believe that there's a growing use of brain health imaging biomarkers by pharmaceutical companies, which will result in increased demand for IXICO's advanced AI-driven computational analysis of imaging biomarkers. In being driven by our purpose, just explain what that means. It's basically very clear that we want to broaden our range of neurogenerative diseases. And that's going to be very evident in terms of the rapidly aging population, which are having a devastating social impact and cost in global healthcare systems trillions of dollars. So our focus is very much on addressing an attractive pharma services market, which continues to grow as pharma and biotech companies look to outsource and collaborate with companies like IXICO. So whilst this is an area of significant investment, it's also important to recognize that there will be bumps on the clinical development road, but the long-term signs of the price for the pharmaceutical industry and company such as IXICO that support their efforts in clinical trials is significant. And in particular, in the case of neurodegenerative diseases, where the requirement and beneficial impacts to society or a new drug approval is particularly urgent and large. So in this slide, what we're articulating here is that we continue to be focused on developing neuro imaging biomarker platform for a broad range of neurological diseases. And it also highlights what's different about IXICO, and put very simply, three key points. We're a pure play in neuroscience, and that's recognized by the industry as experts in neuroscience. We have a track record of innovation, which again is recognized by the industry for being able to deliver tailored AI-driven analytical services to each client's trial requirements. And thirdly, more recently, we're recognized now for being able to deliver operational support for clinical trials across all phases of development, including large Phase III studies. And this is obviously a reflection of the investments that we've made in recent years to support trials of any size in any global location. And of course, the key thing here was our demonstration that we were able to deliver the world's largest Huntington's disease trials in recent years. We've established a very valuable position as a trusted partner to many of the world's leading pharmaceutical companies. And that track record is really fundamental to our continuing to build a strong position as an improved vendor of choice for these companies to support our delivery of projects in the coming years. Going to the next slide. So in addition to our operational capability and our expertise in-house, we also, over the last decade, have been building a very extensive scientific network with academic collaborators and opinion leaders in the different therapeutic areas. And this is very, very important to our differentiated proposition in that we are very much involved with these organizations to gain access to highly contextualized data, which allows us to develop highly sophisticated, advanced analytical tools. First of all, for use in this Disease Consortium, but with the aim of those tools being adopted by the pharmaceutical industry. And clearly, this is very important, and it allows IXICO to be seen as very much at the forefront of not just neuroimaging, but also the different therapeutic areas and be an integral part of the ecosystem that determines the gold standards in terms of the different therapeutic areas, how those diseases develop over time and, therefore, what might be the appropriate biomarkers to assess the progression of the disease, which is obviously very important as companies look to develop their own clinical trial protocols to determine whether new drugs have efficacy in being able to slow down the progression of a particular disease. So the most recent example of this has been the Huntington's Disease Consortium, which we highlighted a few months ago. And what we're basically setting out to do with our next 5-year strategy is to replicate the great success we've had in Huntington and deploy those into the much larger therapeutic areas of Alzheimer's, MS and Parkinson's. But with a particular focus initially on Alzheimer's, especially given the very positive news from recent readouts of the pharmaceutical companies that were presenting at CPAD last week. So I'll have more about that in a moment. So next slide. So this slide basically summarizes some of the key achievements over the last 5-year period, which has been very successful. Obviously, we're going to be building that over the next 5 years. But in addition to reporting a 16% revenue CAGR since 2021 and four years of consecutive profitability. We're very proud to stand behind the fact that our business model has demonstrated tremendous resilience, not just through COVID, but also a number of early trial cessations that obviously are part of the landscape. But however, at the same time, we've also demonstrated a consistent and continuous ability to acquire new customers and deliver projects across a broader range of neurological diseases with high levels of quality and Grant will talk more to this in terms of our current shape of our order book and the composition and the success we've had in acquiring new customers over the last 12 months. In parallel, the other thing I want to highlight here is that we've utilized the profits generated in recent years to invest in expanding both our analytics franchise, but also our operational capabilities so that we are a credible vendor to more pharmaceutical companies around the world. And so with a strong balance sheet, continues to be debt free and cash position of just under GBP 6 million at GBP 5.8 million at the end of September. We're well positioned to continue to invest and support the long-term growth ambitions of the business. So with that, I'll hand over to Grant now who will present our FY '22 financial results.

Thank you, Giulio. Yes. So on Slide 9 and across the next few slides, what I will do is to provide a summary of IXICO's financial performance over the last 12 months as compared to recent years and where the strength of the company's financial position and insight into the visibility we have looking forward. As Giulio has just outlined, as a company supporting the search for solutions to large unmet medical need posed by neurological diseases. We have a very clear and very defined purpose. In acting this purpose, we are essentially executing on a clearly defined strategy, which is to capture an increased share of the neurological clinical trials market by offering the best end-to-end services to our clients, including the most accurate measures of biomarkers that relate to neurological disease. Ultimately, what that translates to us is that to achieve our goals, we need to win more projects with more clients across a broad range of neurological indications. And it's with this same that we're balancing the short-term realities of decline in revenue growth, the reasons for which I will go into more detail in which we've disclosed on several occasions previously. With a focus on the market opportunity that will support a return to growth for Mexico and the achievement of increased scale in the business. Consequently, as a company, we are viewing the current period as a transitionary period. As you can see in the revenue graph on the left, having shown rapid growth across the period to the end of 2020 when we reported GBP 9.5 million of revenues. We've been successfully -- been successful in holding our revenues relatively stable across 2021 and 2022, despite the fact that during that period, we lost approximately GBP 14 million of contracted revenues from our order book since the start of 2021 as a result of the early cessation of large Phase III HD trials and a large early-stage [indiscernible] Phase III study. Now again, just to emphasize, when I say we lost those revenues, it wasn't because it's something we did wrong. That's just the nature of the business that we're in and some in CNS in particular, which is a very difficult area to achieve market approval of a drug. Most trials fail. And therefore, when servicing this area, this market is important for us to have a diversified order book to manage that. So we've been achieving on our strategic goals by seeking to penetrate the greater diversity of early phase clinical trials, which deepen our order book in terms of client numbers and projects, thereby reducing specific project and client risk. This is a significant positive across the medium and longer terms. But in the short term, these trials are lower in value individually in the larger trials that have ceased because they're earlier phase. They also tend to have a lower proportion of analysis work, which for us is higher margin and a higher proportion of project management type work, which is priced at typical CRO rates and is therefore lower margin. So the consequence of this is that whilst we have seen a small decline in revenues across the period between 2020 to 2022 and expect this to continue into 2023 as we seek to continue to win and start up new client trials to fill a gap created in our order book by the large client trial cessations. The change in revenue mix is reflected in our gross margin, which while still strong at over 60% for 2022, as you can see in the graph in the middle of this slide, has reduced from the high that we saw in 2020. Again, we anticipate our margin will come under further pressure in 2023, in line with existing market expectations, reflecting both the change in revenue mix and the impact of slightly lower revenues. But with this said, we are particularly pleased with the ability of the company that were in managing to maintain our EBITDA profitability over the last three years, which can be seen by looking at the graph on the right. In reporting GBP 1.5 million of EBITDA in 2022, we're reflecting the level of revenues achieved as well as that maintaining of strong gross margins. And this performance also reflects the investment in our next-generation TrialTracker platform, which has resulted in the capitalization of costs onto our balance sheet to reflect the long-term returns we expect from these investments. We've also benefited in the period from a couple of onetime impacts. We have benefited from foreign exchange movements and also the anticipated lapse in a number of share option awards that have been accounted for as well as the careful management of costs. So looking forward, with the clear unmet need across CNS, increasingly a focus of governments globally, our conviction is to continue to invest to ensure we're as best placed as possible to service this demand and return the company to growth. In doing so, we do anticipate that we'll return to losses in 2023 as we're impacted by lower revenues, increased costs and the drop out of the P&L of some of the onetime beneficial impacts we've seen in 2022, whilst at the same time, continuing to deliver on our investment plans. And if we turn to Slide 10. This shows the change in our year-end being the 30th of September order book position across the last five years. As you can see, at the end of 2022, our order book consisted of GBP 16 million assigned client contracts. The revenues related to which we expect to recognize over the coming few years. This provides us with reasonable revenue visibility despite the significance, as I said, approximately GBP 14 million of recent large client trial cessations that order book has had to absorb. And this is a really important point that I want to make sure we convey clearly that across the last two years, our order book has had GBP 14 million of revenues removed from it because of these large trials destinations. And yet across that period, our order book, we managed to maintain that GBP 16 million, which lower than we would have liked it to be and effectively returning us to a position we were at the end of 2019, actually contains significant grounds for optimism. As you can see from the graph on the right, during the year, we signed GBP 12.6 million in new contracts. That included 11 new projects across six clients, three of which were new to IXICO. And if you set aside the fact that GBP 6.8 million of the order book was lost through client trial descopes, what that means is that we achieved a book-to-bill ratio of approximately 1.5, which really underlines the potential for IXICO to continue to scale across the medium and longer term. And to emphasize that, we just turn to Slide 11. I want to give a little bit further visibility into the makeup of our order book. Again, these graphs show the order position as at the end of each financial year across the last five years. The graph on the left shows our order book split by trial phase and highlights that we have increased the diversification of our order book across trial phases, particularly over the last two years. This has changed the focus of our order book from Phase III, which made up 80% of our order book in 2020 to a much greater proportion across earlier phase trials, approximately 75% of Phase I and Phase II in 2022. And really, what that reflects is the, a significant portion of those late Phase III trials that ceased in 2021 and early 2022 have been replaced, albeit by smaller but early-stage trials in the interim period. And that has two distinct benefits to IXICO's future prospects. In 2020, the Phase III portion of our order book was dominated by Phase III HD trials, which provided very strong revenues and margins that placed significant reliance on one client and one compound. Over the last two years, we've won many more trials in early phases that have partially rebuilt our order book, but also significantly reduced the reliance on any one client or any one project. We've achieved this both by winning new clients, but also by being recognized as a lead provider in image analysis services across a greater number of CNS therapeutic indications. And therefore, we've won new projects not only with new clients, not only in therapeutic indications that we were already well recognized in, but also in new therapeutic indications with both existing and new clients. And the second benefit is that by having a broader number of clients, which is what is shown by the graph on the right, which shows the order book split by clients where we have approximately doubled the number of clients and double the number of individual projects that we're supporting compared to two years ago and therefore, brought down the proportion of our order book relating to a single client from just under 80% in 2020 to just over 1/4, just under 25% in 2022. We're now in a position where we have many more shots on goal. And what I mean by that is that by having a greater number of trials in early phases, whilst not all will be successful and some will fail early, which is the nature, as I said, of the business that we operate in. There is a greater likelihood of some of these projects moving from Phase I to Phase II and from Phase II to Phase III. And by being and involved in these trials early, it is likely that IXICO will then continue to provide services to those projects and those clients as their trials progress through the phases. So a key continued strategic imperative for us is to continue to win new early phase trials, which provide a scale basis for revenues within our order book and then a company that those successful subset of trials through to Phase II and to Phase III, which will augment IXICO's revenues and profitability whilst increasingly providing it with a scale to manage the inevitable client trial failures that will happen along the way. The key message that we're giving here is that whilst we've experienced challenges with those large Phase III trials ceasing early, the importance of having built up and rebuild that order book with a large number of earlier phase trials is that we give ourselves much more chance to get into Phase III. For a company of our size, Phase III trials can be transformational. So with only one or two large Phase IIIs whilst being augmented by a strong and continuing pipeline of early phases, we actually put ourselves in a position for the longer term to ensure sustainable growth and profitability. And just on my -- on Slide 12, just before I hand back to Giulio, I wanted to give a bit more visibility on the context within which we're able to make decisions to continue to invest for the medium and long term, even though we're experiencing challenging times, both in terms of the specifics of having these large trials ceasing early for us, but also in the current macroeconomic environment, where we, like other companies are experiencing rising prices and challenging market conditions. By having a strong balance sheet, we remained fully in control of our own prospects, but also are able to continue to invest for that future opportunity whilst others are having to be much more cautious in their approach. So as you can see on the graph on the left on this slide, we completed the year with a cash balance of GBP 5.8 million. That included just under GBP 1 million of operating cash flows, and that's before we include R&D tax credit inflows on top of that, offset by GBP 2.3 million of technology investments designed to support the IXICO's growth strategy over the coming years. As you can see from the middle graph, whilst our investment program peaked in 2021, we have continued to pursue across 2022 with the primary focus being ensuring that the three pillars of our technology offering are market leading. And just to emphasize what I mean by that, when I talk about three pillars. The first of those is we need to make sure and we are making sure that we have a resilient secure IT infrastructure that complies with the rightly high expectations our large pharmaceutical clients have of any vendor operating in the clinical trial space. So having state-of-the-art infrastructure doesn't win you a trial, but it loses a trial if you don't have it. And so it's a significant barrier to entry. And we've invested just over GBP 1 million in that IT, base IT infrastructure, over the last three years to make sure that we are able to deliver on the expectations of our client base. The second pillar is that we have been investing, and we talked about this before in our next-generation TrialTracker platform. That's the platform we use to capture brain images from imaging centers across the globe. This development is now well progressed, and we expect to launch it later in 2023. And the third pillar is the biomarker analysis pipelines, i.e. the pipelines that we use to measure biomarkers in the brain, from the brain images that we collect from the clinical trials and is included our next-generation AI platform, IXIQ.Ai. That was launched this year and provides increased sensitivity and accuracy for client trials, thereby supporting reduced costs in CNS trial design. And it's worth highlighting, as Giulio mentioned earlier, but this has given direct and rapid ROI through a consortium agreement that we signed during the year with CHDI, one of the world's largest Huntington's disease charity alongside with two biopharmaceutical companies, where we are reanalyzing data that had already been analyzed by others, but using our state-of-the-art analytical capabilities to make -- to provide the best MRI data set available in the market. So from a balance sheet point of view, the strong combination of our cash balance and the capitalized investments, the capitalized future-looking investments that we have plus the fact that we continue to be debt-free mean that we've further augmented our net asset position to GBP 12.5 million over the last 12 months, an almost 10% increase on the prior year. So just before I hand back to Giulio and really returning to where I started, which is whilst we have been and we will continue to manage a challenging period for the company, following the large client trial cessations at the time, at a time of increasing cost pressures. The market we serve and the capabilities that we have developed gives us confidence that we look to the medium and long term in our ability to grasp new opportunities. We're confident that as we continue to diversify and build our order book and deliver on our purpose at a greater scale than has been the case to date. Giulio, I'll pass back to you.

Thank you, Grant. So Slide 13, we talked about being driven by our purpose, and that's by advancing precision neurology. So if we go then on to Slide 14, I'll just highlight the precision in neuroscience strategy that we're laying out for our journey over the next five years. So the first three pillars, as I laid out here are about building traction and further penetrating our core neuroimaging market with a particular focus on maintaining what we believe is a leadership position in rare diseases, such as Huntington's disease, but also recognizing that we plan to significantly ramp up our intensity on larger therapeutic areas such as Alzheimer's, Parkinson's and MS, in which we'd like to achieve significant market share gains over this next 5-year period of the strategy. The last two pillars are all about commercial partnering to create additional stretch growth momentum in our core market or to enable our technology deployed in new large attractive markets. And this would be through a number of different possibilities. But I'll talk a little bit more about that as I go through the slides here. But the key takeaway here is that we are more convinced than ever that there is a sufficient runway for growth in neuroscience without having to diversify into new and different therapeutic areas such as oncology to build a business of scale and value to all our stakeholders. There's also an intent stated to develop these commercial partnerships, which is additional to the past five years, where all of our growth has been very much grown out of our own organic capabilities. And so acknowledging that to accelerate our trajectory to scale the business and to reach more clients in a designated target markets is that we plan to devote significant efforts in developing these commercial partnerships. So we'll go on to the next slide. And here, I just want to talk a little bit about the historical meeting that took place last week in San Francisco, where the space of Alzheimer's in particular, had really got a very big boost of confidence and really good news. You'll remember that just over a year ago, I talked about the significance of Biogen's aducanumab drug approval, which is the first drug approved in this space for nearly two decades. But at the same time as well, it's a very controversial approval. And there was an approval based on the ability of the drug to reduce the level of amyloid in subjects, but it actually didn't -- there was some conflicting data around whether that came with clinical benefit. But again, going back to the urgent unmet medical need, the FDA approved the drug and has been on the market for over a year now. However, with the news from Eisai on their lecanemab drug they reported out last week that they demonstrated that amyloid removal does actually come with clinical benefit, and that's clearly a major achievement. And with that, some key points to bear in mind is that, first of all, PET imaging and the use of blood-based biomarkers have been used in determining that amyloid reductio. So those are clearly the methodologies and have been validated as being able to support potential drug approvals. There's also the FDA decision approved to fast track this in January with an anticipated approval in July. So that would mean that we would have two drugs in the space of 18 months that have been approved, whereas previously, there hadn't been drugs for over 18 years. And then the other key thing is that all of these drugs come with a warning label that there are potential side effects, notably ARIA. And so for this reason, there's likely to be a requirement for post-marketing surveillance trials. And the way that ARIA is monitored is through MRI. So the key message in terms of what does that all mean for IXICO, and companies like IXICO, it basically means that it looks like we are going to have an approval for an Alzheimer's drug in 2023 that used amyloid as a key biomarker. And that throughout that process, reinforcing importance of imaging, both MRI and PET imaging during the clinical trial itself, but also talking to the significance of a requirement for MRI monitoring once the drug is out in the market. So more MRI in pet before, during and after clinical trials is the message. So -- in addition to Eisai, the other companies that also gave important updates. The most notable one is Eli Lilly, and they talked about their donanemab drug, and they're expecting a readout for that drug in 2023. And again, reemphasized all similar points in relation to the importance of imaging and the importance of monitoring area. There was also news from Roche, where they actually indicated that their drug has actually not succeeded in meeting its milestones. And so gantenerumab was called out, is not progressing further. And this is an example of where -- this is a trial that we weren't involved in the Phase III study of but actually now creates an opportunity for IXICO in that the key question now for a company like Roche is, okay, if their lead candidate now is not progressing to approval. What do they plan to do? Do they pull out of Alzheimer's? Or do they double up their efforts? And obviously, I'm not privy to their strategy, but clearly, with Eisai making progress, Biogen making progress, Lilly making progress. I think that could actually well be an opportunity for us to, again, get involved early with potential new assets that companies like Roche will be looking to in the next 2 to 3 years. So lots of activity, and the upshot of all of this is will be the whole Alzheimer's space will have a real resurgence. And for that reason, it's going to be the #1 area that we'll be pointing our efforts to in order to really look to scale the business in the coming years. So if we go to the next slide. This again is just the reason I just want to put this slide up was just to highlight that it's not just the big guys. And it's not just late-phase studies. But actually, there's a very large cohort of companies out there, basically ranging from big pharma to new innovative biotechs, all with a range of different investigative drugs ranging across a number of different targets, gene therapies, disease modification and also symptomatic drugs. So a number of these companies, while I'd say, on this slide are actually existing current clients of IXICO, or clients that IXICO has worked with before. And then of course, some clients here that IXICO hasn't worked with, and we've taken the opportunity whilst we're at CTAD to connect with all of the above, and we're looking forward to developing those opportunities as part of our pipeline of opportunities. I guess the three key takeaways I took away from my meetings with the pharma executives that I met last week are the following: the first one is that Alzheimer's drug development is experiencing a significant resurgence and confidence in future FDA approvals; two, the MRI, PET molecular imaging and blood-based biomarkers are essential and growing in utility in Alzheimer's disease drug development programs; and three, the increased diversification, drug timings for Alzheimer's disease therapeutics will drive further demand for neuroimaging, in particular, for amyloid and tau monoclonal antibody and anti neuroinflammation drugs. So with that, I just want to move on to what we're doing in terms of making sure that we have the right portfolio and services to be able to meet those requirements. So in Slide 17, this really reinforces the message that IXICO is very well known as a leading provider of MRI services for volumetric measurements of imaging biomarkers used in clinical trials. And what you'll see without going into all the different scientific aspects of this slide, if you just look at the very top of each box, we've just got the tick and basically saying that we have everything that we feel we need to have to address not just the Huntington's disease era, but also these other therapeutic areas. So we have the toolkit, and we're actively, as you can imagine, engaging with many companies, many of the ones that I showed you on the previous slide, to be their vendor of choice for MRI. And of course, also acknowledging that we're obviously often competing with large billion dollar corporations, usually North American. So it's very important for us to have a differentiated offering, which goes back to my talking to the deep scientific network that we have and the capabilities that we have as a pure-play neuroscience expert in demonstrating that we really understand the space and we can provide low value-add services to our pharmaceutical clients. So MRI, we've got a very good track record, very strong position, and we have all the tools to go after that requirement. And the next slide is talking about PET molecular imaging. And just to highlight that pet molecular imaging is used for what are called radiology reads and quantitative analysis. Now radiology reads are basically where you're able to have a network of radiologists that are able to read the image and interpret the image often looking for safety aspects, and I mentioned some of them earlier, but also historically, a lot of visual read to do -- to try to attempt to do volumetric analysis. And clearly, our expertise is automating volumetric reads and utilizing AI tools to make that more efficient and also to be able to get more granular detail from PET images. And so what this slide is highlighting is that in the last 18 months, we've been very busy in building our portfolio of pet. And the reason for that is that we, frankly, have been asked by clients to do so. And so you'll see that in the last 24 months, we've built a portfolio, which is pretty comprehensive. We've still got some areas where we -- we are actively investing to build a capability. Alpha-synuclein, for example, is a very hot area that we see opportunity, and we want to develop our portfolio for. And just to give maybe some insight in terms of the progress that we're making here is that in 2019, around about 19% of the studies that we were supporting included a PET requirement. And in 2022, this has increased to 29%, so just under 1/3. So the key message here is that we've got really good momentum. And the other point to make is that PET, we're seeing increasing use of PET in Alzheimer's. And clearly, as we've identified Alzheimer's an area we want to focus. We're basically saying that we want to build on our strong MRI platform and be able to offer both and be one of a few companies that we think have credible offerings in both areas. And secondly, that we're keen to develop this so that we can also go into Parkinson's disease, and PET is often the imaging modality of choice in Parkinson's clinical trials. So by developing the portfolio for Alzheimer's, we're also building a capability to address the PET requirements in Parkinson's. So the other thing to point out is in the 5-pillared strategy I talked earlier, where we talked about commercial partnerships. In the era of PET, in particular, this is an area where, in addition to our own in-house development capabilities, we see an opportunity to develop partnerships with other companies to accelerate our own scientific capabilities and global footprint so that we can address more opportunities with more clients around the globe. So this is an important development for us, which I said we've already got good momentum, but we anticipate being a key driver for our growth in the next 3 to 5 years. So as a final slide, just a quick summary of hopefully, the messages that you've heard as we've talked through the slides. First and foremost, that clearly, we're addressing an attractive market with long-term macro growth drivers. And we've really built a really strong position that is very well received by our existing and also prospective clients. I would classify us as an emerging leader. We've got great capabilities in our analytical capabilities, but also combine that with end-to-end project management services, which really puts us in a very strong position to be able to be an end-to-end service provider but with a very specialized premium analytical capability for pharmaceutical companies. And we've also demonstrated the ability to deliver across the whole spaces of development from early phase to late phase. And Grant talk a little bit to the barriers of entry that exist in the marketplace. This is a very difficult market to get into. The clients are very conservative, rightly so. It takes time to build their trust. You have to go through a lot of hoops around building massive service agreements and being approved vendors. We've achieved all of those things. And of course, there's more to do, but we've got a very strong platform to build on. And then finally, our precision in neuroscience growth strategy demonstrates our commitment to continue to innovate, to continue to look to penetrate and scale to support that growth ambition but also to acknowledge that in the next 5-year period, that there are opportunities that we should fully investigate to partner and where the opportunities provide themselves to further accelerate our three early -- the first three pillars with M&A to accelerate that organic growth. So that's -- with that, I'll close and thank you all for your listening, and I hand over back to Mark.

That's great. Giulio, thank you very much, indeed. And Grant for updating investors this afternoon.

[Operator Instructions] Giulio, Grant, as you say, you've had a number of questions from investors throughout today's call. So thank you, firstly, to everybody for your engagement this afternoon. If I may, Giulio, if I hand back to you, I could actually just read out the questions where it's appropriate to do so, and then I'll pick up from you at the end.

Well, that can be easy because -- sorry I was on the wrong tab. Okay. Matthew asked, how do the different phases of trials, different revenue terms generally when you say they could be transformational? Maybe, Grant, do you want to.

So can you just repeat that question [indiscernible]

How do the different phases of trials differ in revenue terms generally when you say they could be transformational?

Yes. So in terms of the revenues per trial phase, it obviously varies and there are a number of factors that are involved. For a Phase I trial that's usually in the region of GBP 0.5 million to GBP 1 million of the revenue. If it's a Phase II trial, it's usually somewhere between GBP 1 million or GBP 750,000 up to as much as GBP 2.5 million. And a Phase II can be really anything from a couple of million up to GBP 10 million or more in terms of value. So in terms of the, if you like, transformational element to that, you obviously can find yourselves that you need to -- you find running potentially up to 20 Phase Is, might be equivalent in revenue terms to one very large Phase III, but the operational effort to deliver those 20 different Phase Is will be relatively higher than the Phase III, which is the some of the balance that we have to strike as an organization that actually you need to be in the Phase Is in order to get to the Phase III. It's very rare to just win Phase II or Phase III. But actually, or a lot of Phase Is to get to Phase IIs to get to Phase IIIs. So from a transformational point of view, you only need a couple of Phase IIIs to really transform the business. As we saw, we had a very large Phase III back in 2020 that ultimately failed for no reason of ours, but it was a transformation in the business across that period. We were able to build up our business development function to an extent across that here, which means we've won better and more trials since then. So the key is about having the sufficient balance of enough Phase Is, Phase II coming through to manage trials the fact that there will be trials that fail whilst getting that sustained growth and profitability by those Phase III trials coming through.

I guess, thanks Grant, I mean what I'd add to that is a Phase III trial might generate GBP 3 million of revenues in a year, it might take you 10 Phase Is or maybe more to generate similar revenue numbers. So that's the kind of transformational impact that it has on the P&L in the short term. But as Grant's point said, doesn't mean to say that the 10 or 15 early phase are not valuable because they all are shots on goal for potential future Phase IIIs. Okay. How much -- so [ Shaga ] asked the question how much capital investment will be made in 2023? Grant, so I'll push that to you as well.

So capital investment, we would expect to be lower than we've invested in 2022, which again was lower than 2021, but we still expect it to be over GBP 1 million. So we are investing for medium and long term. So that's still very much part of our plans. And so it will be north of GBP 1 million, so less than we have been in the last couple of years.

Great. Okay. So a few questions here. Shaga asked as well. I'll try and spread it around a bit. Do you expect any M&A? So obviously, we can't comment on specifics until they're specific. But I think being realistic, I mean, we have to be realistic, right? So over 1.5 years ago, our market cap was GBP 50 million. Today, it's a lot less than that. So that makes it a little bit more challenging to do M&A. But I would say that also other companies' valuations have also seen a similar impact just in terms of the macros of the public markets. But I guess the best and most honest answer I can give to that is that if there are out there to be done and they accelerate the first three pillars, then we will do them because they're the right thing to do. But that's the key thing for us. It's really -- we have a very robust, strong organic plan, and that's where our focus is. But if we see an opportunity to accelerate those plans, then we should do so. But we wouldn't do M&A for the sake of M&A and doing something totally different. And it's very important. As I said, we're a pure-play neuroscience business, and that's our intention to stay there because we see lots of runway for growth. So that's the other strategic thing because we think we've already built a business that is very valuable and very well recognized as a neuroscience specialist. And so all the things that we do should be about further enhancing the value of that asset in that position in that high-growth market. So another question from Sam, which I can take. So what confidence do you have that you will not need to raise additional equity to fund operations in '23 and '24. So again, I'll answer that as honestly as I can, or as I can. So basically, as Grant pointed out, we've got a very strong cash position. We're debt free. So we -- we don't need to raise capital to do the things we want to do. What I would say though is if the opportunities are there and they're compelling to accelerate the opportunities, then I think that's always an option. That's obviously one of the reasons for being a public company. But as I said, the straight answer there, the simple answer is, and again, we're very -- we've put ourselves in this position because of the traction of the business throughout the whole of COVID and everything else that we've all experienced. During that period, the company has continued to build and invest and add people and building technology. All the things you'd expect us and want us to do if we have the conviction that there is a market opportunity there that we can address. And obviously, we do think so, and we do have the capital to support that. So that's my answer to that question. Let's have a look. The business is expecting a decline in '23 revenue. How bad do you think 223 will be? Well, I think that's easy it's in our guidance. Otherwise, we wouldn't give the guidance. I don't think I need to say anything more than that.

Is helpful different that a in terms of [indiscernible] Yes. Just in case people haven't seen it, the guidance in the market is the revenues of GBP 7 million and EBITDA loss of GBP 1 million. So that -- we announced that previously, that's in the market. So it's publicly available information.

Okay. Steve Kay, how much of your future revenue can you see and how and what drives potential cancellation in trials? So I'll answer the second bit. And maybe Grant, you can answer the first bit. So what drives potential cancellation in trials? Again, just to take a step back. We honor so developing drugs is difficult. It can take over a decade. And also the success rate of a drug going from beginning to end is single digit. So the industry that we all know is a very successful industry, very profitable industry. We all need it to succeed because we all want to live longer and healthier lives. Developing drugs is very difficult. And the sort of things that means that drugs don't make it all the way to the end. The first and foremost, most important thing is patient safety. And you can imagine if it's just ourselves or our family on a clinical trial, first and foremost, we want to know that being on the trial doesn't do them any harm. So a reason, key reason why a drug trial will be terminated early would be for a safety reason. The second one would be for it not meeting its endpoint, which would be probably around does the drug do a good thing i.e. Is it slowing down the disease progression? Is it curing the disease? So if it doesn't meet its milestone to support submission into the FDA. That would be another reason. So again, the whole clinical trial thing is about managing risk to reward. And if we take the situation in Alzheimer's disease, drugs have been -- the Biogen drug has been approved and put on to the market. There is a known high percentage of potential side effects with the area side effect, but yet it's still been approved. And that's because of the very significant unmet medical need. So depending on the therapeutic area, obviously, the FDA makes the core on the risk-reward profile of the drug. But those are the reasons. First and foremost, safety; secondly, efficacy of the drug. And of course, at the end, if they do submit the drug to the FDA, the FDA needs to be convinced that it's the risk-reward benefit to the population of having that drug on the market warrants its approval. So maybe Grant then in terms of how much of your future revenue can you see.

Yes. So I think the best way to answer that question is really refer back to the order book slides that I talk through. So we had an order book at the end of September, the end of our financial year 2022 of GBP 16 million. And what that means is that we have signed contracts with clients to deliver services to their clinical trials that we have not yet done, and therefore, we have not yet recognized associated for revenue of a total contract value of GBP 16 million gross numbers of clients and numbers of projects. So what that means is that we have visibility as at the end of September of GBP 16 million of future revenues, which is spread over several years. We then -- we build up our expectations on the fact that we will obviously recognize revenue of that each month. Those projects will develop. And so we have the opportunity to sign new change orders, and frankly, upsell additional analysis. So that has a potential to push that revenue up further. There's also the risks associated that some of those trials may and make their [ value ]. So the revenue that we -- the visibility that we have essentially is tied to the contracts that we've signed and then the expectations we set in terms of things like guidance, driven by our own risk assessment on that. But as the fact that we know that we're bidding on other trials currently, and we hope to win some of those, and they will augment that revenue visibility going forward.

Thank you, Grant. Again, Shaga has asked a question. Could you justify the high director salary pay? So I'm not sure if that's saying to you Grant or me, but I'll take it as me. So I guess, again, the short answer is yes. And again, on the basis of what we've achieved with this business over the past 4 or 5 years, I think something for us to be very proud of. And it's been reflected in making sure that we get the best talent in the company, not just at the director levels but across the company. I would say as well that we're -- as we currently look to strengthen the company and in particular, as we look to be able to address new markets such as North America, the fact of the matter is that if we want to compete for talent, we're going to have to pay the expectations and requirements of the best talent that we can bring into the business. So I would say that we've gotten very good value of the organization that we have as a business. It's gotten to where we are now. And I'm very confident that we can continue to attract the best possible people to be able to achieve the ambitions that we set out. [ James Si ] asked a question. Does your sales process have to change as you target a deeper pool of smaller trials rather than the concentrated large trials. So James, just to be clear here because maybe is how we articulate it. So our sales process isn't changing and that we've always looked to bid on the whole range of types of therapeutic trials. What we -- and maybe we're overdoing it a little bit. We're trying to articulate that we obviously had -- we were successful in demonstrating that we weren't just a small clinical trials company. We could also win and deliver large trials. And that's important from a credibility perspective because there are lots of trials to be won. We've obviously -- that trial was terminated early, and there other trials that get terminated as well. All that we're highlighting is that to operate in this clinical trial space, you need to be able to do both. You need to be able to win lots of new trials to provide you long-term shots on goal, but also when you are chosen for a Phase III trial. You need to be a Phase III trial ready. You can't say great, we'll be ready in two years' time. Pharmaceutical companies need to know that you're there and you've got the resources to do it. So our sales process, what it does need to do is to scale. And so we need to be in every meeting that we can be. We need to be at the table whenever we can be. We estimate at the moment that we're probably at half of the opportunities that exist in the market. Some of that is because we've not had the products. Other times, we just don't have the commercial reach and access. So obviously, we're working hard to be seen as a credible vendor so that we do get the request for proposals from clients. And then when we do get them, we win them. And at the moment, our win rate is around about 30%, 35%, which is very credible. Grant talked to our bookings-to-billings ratio of about 1.5, which again is very credible in the industry. I mean, in the last 18 months, it's been over 2. So in terms of industry metrics, we're doing well, but there's a lot more to go after. And so it's really more about how we ensure that we build our pipeline faster and convert it faster as we build out our product capabilities. So no change in our process, just building out our reach and our visibility to clients so that we get the opportunity to bid and show them how good we are basically. So the Board are handsomely remunerated, yet have Board very few shares and hold a tiny fraction of the company. This is a statement from Francis. Should shareholders be concerned about this divergence of interest. So again, a bit of a difficult one to answer since other than to say, clearly, I don't believe that the Board has a diversion of interest from other shareholders. We have terms of shares specifically, I can only talk to myself. I mean, I've obviously over time, acquired shares, acquired them at ATP plus, obviously, myself and Grant and other parts of the management team have long-term incentive programs, which are geared around making sure that our interests are aligned with the shareholders. So I think -- and I would question -- I mean, I don't think we're overpaying our Board of Directors based on comparators that I've seen. And so I think, again, that's a honest answer, I think, as I can give to the question. So Michael D. great update. Thank you, Michael. I appreciate that. How is the search going for the new Board members? Maybe Grant, I'll give you an opportunity to talk to that one.

Yes. So what have you seen in RNS this morning following great years on the Board of IXICO, our Chair following good governance practice, will step down during 2023. And existing [indiscernible] nonexecutive director will step up. And we are, as a result, looking to appoint a new nonexecutive director. That process has really just started. The Board only made the resolution recently, which is why it was announced today. So we're just starting that recruitment process now, and we will hope to be able to update the market with some good news in that respect early in 2023.

Okay. We've got two final questions, both from Sam. So first one, Grant, following the likely loss in FY '23, is it plausible that IXICO could return to profitability in FY '24? Obviously, you not being able to give forward-looking projections, but just how would you answer that question?

So I think the answer is yes. It's definitely plausible. And I think the sort of extra color that I'd add to that is good. As a company, we could have been profitable. We could have put guidance out of profitability this year. The reason we didn't do that, and we thought long and hard about that was because actually, the big price for IXICO as a company and we believe for our shareholders as hopefully long-term investors in the company is the fact that we are serving...

I think, Grant [indiscernible]

Can you not hear me?

Yes. I can hear you now.

Yes. We're serving a market that is growing and is growing rapidly, that is going to need an increased amount of objective analysis of brand biomarkers to distinguish between incremental improvements in addressing these hard to address neurological diseases. And we are really very well positioned to provide that service. But in order to do so successfully, we need -- as Giulio said, we need to be credible not only in terms of early phase trials, but being able to run 1, 2, 3, 4 Phase IIIs. And so making sure that we invest to put ourselves in a position to do that over the medium to long term may mean whilst we weather some challenges in terms of trial failures in the short term, that is actually the right decision to return to losses for a period of time to make sure we're well positioned for the longer term. And that's the decision that we've taken. That's what we're doing. We're doing it carefully. We're not throwing caution to the wind. We are -- but we do have a careful cost management process. So what I'd say is that we anticipate and plan to continue to rebuild our order book following the loss of these recent clinical trials. And that in doing so, that will increase, we hope our revenues. And because we have operational leverage because we have a well-invested company, we are -- we have invested in infrastructure. We don't have an infrastructure deficit. We would expect that the profitability would follow that. So hopefully, that provides a clear answer on that. I think we've got two years. I just wonder whether I pick up that.

Yes, just one final question there. If you'd be so kind Grant, that would be great.

Yes. So again, a question from Sam. You are now ruling out moving into oncology, explain this by the expanded opportunities in urology. But is there anything you've learned about oncology to rule out moving into oncology? So I think the answer I give to that is that there are many companies operating in oncology. And if we went into oncology, without essentially acquiring something already there, then we would have to ask ourself the question why we thought we were a better place to be successful in that space than those companies are already there. That's very different in neurology. We've been working neurology for well over a decade. We've built up a very strong reputation. We have a workforce and employee base, they are very strong in neurological expertise. And so being in neurology makes a lot of sense. In terms of acquisition, never say never, if there was a right opportunity, but it would have to be one that really progressed our overall strategy for clinical trials. And right now, it would seem more likely particularly with our valuation where it is that we would find a technology type acquisition that would be in neurology rather than oncology. So it's not that we don't believe that the value in oncology is just that we believe where we are with far better placed and for more likely to be successful by focusing on the neurology space in that diversification.

That's great. Thank you very much, indeed, Grant and Giulio. We've taken the two final questions for Sam. So thank you once again to everybody this afternoon for your engagement and apologies for the loss of connection momentarily during today's meeting. Giulio, I know investor feedback is important, and thank you very much, indeed for taking all of the questions today, but I'll shortly redirect those on the call to give you their feedback. And I wonder if I may, just ask you for a few closing comments to wrap up with after which I redirect investors for their feedback.

Yes. Thank you very much. So again, I'll just begin by thanking everybody for taking an hour of the day to listen to the update today and generally hope that people found it informative and transparent and learn a little bit more about this and hope you go away from today with some of the enthusiasm and confidence that this is an attractive space and that there's lots of opportunities, and that we, as a management team, are very focused on bringing that to the company and to the benefit of all our stakeholders, including our shareholders.

That's great. Giulio Grant, thank you once again for updating investors this afternoon. Ladies and gentlemen, please, could I please ask you not to close the session. We're now automatically redirect you for the opportunity for you to provide your feedback in order that the management team can better understand your views and expectations. Just going to 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, we'd like to thank you for attending today's presentation. We wish you all a very pleasant afternoon.