Lumos Diagnostics Holdings Limited (LDX) Earnings Call Transcript & Summary

Good afternoon, and welcome to the Lumos Diagnostics First Half ' 25 Results Investor Briefing. My name is George Kopsiaftis, and I'll be your moderator for today. With us this afternoon, we have Lumos Diagnostics CEO, Doug Ward. Good afternoon, Doug.

Hey, George. Great to be with you.

And CFO, Barrie Lambert. Good afternoon, Barrie.

Hi, George, and good afternoon, everyone.

The format for today is for Doug and Barrie to walk you through the presentation that was released to the ASX this morning. This presentation should take around 15 to 20 minutes. It will be followed by a question-and-answer session. [Operator Instructions] I'll remind you that this briefing is being recorded, and a copy will be made available on the Lumos website. That concludes my housekeeping for today. And I'd like to now hand it over to Doug and Barrie to get us started. Thank you, Doug.

Terrific. Thank you very much, George. Okay. Welcome, everyone. It's really a pleasure to be with you this afternoon here talking about our first half results for 2025. We have about 5 slides or so. I'm going to go through 2 of them, and then Barrie is going to go through a few on the financials. Barrie, why don't we progress over to the first slide. So really, quite frankly, this was one of our best quarters since -- or half year reporting since I've been here at Lumos in the last 2.5 years. I was really, really pleased with the performance, especially when you compare how we were a year ago, right? So the first half of 2024 fiscal year compared to this one, truly an about face. And I think we're very proud of what the team has accomplished, and I'm very excited to talk about those results and also some of the expectations that we have in how the company will have a number of priorities for the second half of the year, and that should be significant milestones to be achieved for the company. So to get into this first half of this fiscal year, revenue up significantly, right, 128% compared to a year ago, first half of fiscal year '24, just over USD 6 million in revenue. And what I'd like to emphasize is both parts of the business, both the Services and the Product revenue had very nice increases in their percent growth. And even more importantly, a really healthy, nice increase in our gross profit margins getting up to 67%. So we love seeing a little [ attrition ] in having those sales come in, in the first half of this year. Overall, EBITDA loss of just under [ $0.9 million ], which is a significant increase from the prior year's fiscal first half, right, with a 77% improvement going from $4.2 million EBITDA loss down to the $900,000. So very, very happy with those results for the company as well. Now some of the more tactical elements just to give you some highlights. As you all know, we signed the BARDA agreement in Q2 of this -- in this year. And working with BARDA, we were able to initiate first patient in that study in December 18th. That was a little bit later than what we had hoped to start the study. But having said that, we're seeing significant uptake in having patients tested in the trial. Right now, as we speak, we're about 300 patients have been enrolled into the study, okay? Now we were expecting that we would probably enroll somewhere between around 800, let's call it, to get our 180 bacterial positives, which is what the FDA need.

120 -- like 120.

I'm sorry, 120. Yes. Thank you, Barrie. Greatly appreciate that. So getting 120 bacterial positives. So while we started a little bit later than what we had hoped, the good news is we're seeing from the 6 sites that we have enrolling significant uptake, especially over the last, I would say, 4 weeks or so. So again, coming in right now around the 300 number. We expect that we should achieve our 500 patient in by the end of March. Now not a guarantee, obviously, it has to do with the number of people that present with the symptoms and illness. But that also would trigger a nice milestone payment for us as well at our 500 patient in with the BARDA agreement. So we can be reimbursed for that. Obviously, as you guys know, the way that BARDA works is while it's a $3 million agreement, we get paid in arrears, right? So while we started work on this earlier in the fiscal year, we didn't get our first payment from BARDA. And correct me if I'm wrong in this, Barrie, but I think we received that in January of 2025. So we were -- we've been spending the money in order to do the trial. And as we hit these milestones, then we get reimbursed for those things that we've spent. So again, things are moving along very, very well. We're feeling very positive about the trial at this stage in the game. So overall cash position was officially $5.5 million. But I did mention that we did receive that BARDA payment in January for another $900,000. So put us in here at a pro forma number around $6.4 million for that first half of the year. So a pretty strong number in that regard. And then lastly, I would just say the great work continues to progress with Hologic on their next-generation fFN agreement. We have, as we announced, you've seen us announce various milestones that have occurred, and things are progressing extraordinarily well. I'd say so well. In fact, that you would have just seen that we have announced that we did a hardware scope expansion agreement. So this agreement added an additional $600,000 to $800,000 to the work that would be done in this calendar year, as a part of this overall remaining $3.7 million payment for the Phase III work that will be done from now through the end of calendar -- calendar year this year. So feeling very good about the Hologic agreement. I think a testimonial to how well the work is actually progressing that they are indeed willing to even make additional requirements on the project, and they're willing to pay for those. So a great job by the team in that regard. So those are the highlights for first half that I'd like to talk about. Barrie is going to go through a number of the financials for everyone over the next 3 slides, and then I'll come back and talk a little bit more about our priorities.

Thank you, Doug. I've just got 3 slides for today, just one on the income statement, one on the balance sheet and one on the cash flow. And a lot of these numbers, you would have seen in the financial statements that we released last week. But I just want to touch on a few points just to highlight some numbers and clarify a couple of items. So once again, just reminding everyone, these are in U.S. dollars and in thousands. So as Doug said, total revenue was $6.3 million for this half versus $2.8 million in the previous half year FY '24 up 128%. You can see the split there between Services and Products revenue. So Services was $5.5 million versus $2.5 million in the half year -- first half FY '24, up 118% and Products revenue was $838 million versus $256 million in the half year from -- first half from FY '24. On the Product side, the strong contributions, as we said in the quarterly from ViraDx. There were sales of FebriDx, as well, both in the U.K. and the U.S. The international markets, primarily the U.K. is doing very nicely. On the Services side, strong contributions from the 2 agreements with Hologic, obviously, the development agreement and the intellectual property agreement as well. A quick comment on gross profit. You can see that the total dollar value there was $4.2 million versus $1.5 million in the previous half, up 178%. And as Doug said, we picked up 12 percentage points. So we moved from 55% last year up to 67% in this first half. So very nice pickup in the GP, obviously, helped along by the IP agreement with Hologic, which made a strong contribution to moving that up a bit. Other income there, just to remind everyone, so that's where we report the BARDA grant. You can see there $964 million. The BARDA grant of $925 million we booked into the half year and received the cash in January. On the operating expenses, you can see the increase there, it's 8%. And just to remind everyone, a lot of that increase is due to the costs related to the FebriDx CLIA waiver trial. So the CLIA waiver trials for FebriDx go through operating expenses and the refunds from BARDA go through other income. So just to remind everyone, that's a driver of the increase in OpEx there. Adjusted EBITDA, $938 million loss, a big improvement over the previous half, $4,167 million loss. Not a lot of movement on depreciation and amortization. Finance costs there dropped down significantly because we redeemed the convertible notes in the prior year. So it was $802 million, and that dropped down to $300 million cost. Most of that's related to leases. And then there's a share-based payment, which we've shown the below adjusted EBITDA, is as it's a noncash item. And the net loss there for the half was $2.8 million versus $6.4 million in the half of last year, a significant improvement. So I just wanted to highlight some of the numbers on the income statement and happy to take questions at the end as well. A couple of comments on the balance sheet. Look, these are pretty straightforward. I think the balance sheet of Lumos is very clean these days. Inventory was a bit of an uptick there versus the previous half from FY '24. A lot of that's raw materials in preparation for the U.S. flu season related to ViraDx. In trade and other receivables, that's where we had the BARDA receivable at the end of December. You can see that's $1.6 million. The contract assets is primarily related to the accruals on the development agreement, where we are booking revenue, as we do the work versus when we tick over the actual milestone and receive payment from Hologic because the benefits are accruing to the customer, as we go along basically on a monthly basis, not specifically tied to the milestones, which the milestone payments are sort of more structured towards the end of the project. Intangibles, just a quick comment on that. So in the intangible number, we've got our readers. That's the Lumos proprietary readers, FebriDx IP and some other items. The main movement there is really due to amortization and a movement in the exchange rate. A lot of the intangible assets, particularly the reader intangibles are held in Australia and they're in AUD, so they fluctuate as the exchange rate between AUD and USD moves. Contract liabilities, the other big number in liabilities there is mainly related to prepayments by customers, and most of that is the Hologic IP agreement, which sits in there, and then we record the revenue, as we go month by month. And net assets for the half compared to the first half in FY '24 lifted about $2.7 million with the support of key investors during the capital raise in September '24. Just a couple of comments on the cash flow. Receipts from customers. As you can see there, we reported $3 million versus $6.3 million revenue for the half. So the main difference there is the Hologic revenue we're recognizing on the development and IP agreement. And with the IP agreement, most of the funds were received in FY '24. So you get a differential between the revenue recorded in the actual cash receipts, I should say. On the development agreement, I think from the announcement we've made and the information about Phase III, you will see a lot of the cash receipts for that development agreement actually come into the company this calendar year, so between now and December '25. I've made a comment about expenses. Payments to suppliers and employees, you can see there, $9.2 million was up over the first half FY '24. And a lot of that is the payment for the FebriDx CLIA waiver trial costs, which I think in the half was around about $1 million. very similar to the BARDA refund we received at $925 million. So that has a significant impact on the payments to suppliers and employees number. And as I mentioned, there's some payments for inventory in that number, as we prepare for the flu season in the U.S. Cash burn, again, highlighted in the quarterly, just to repeat that, so it was $6.8 million for the half, as I mentioned, impacted a lot by the CLIA waiver trial costs and the additional inventory we had to purchase for the flu season. And just one -- couple of last comments on the cash flow. You can see the net proceeds there from the capital raise from September '24, $6.2 million, so that's net of costs. And I think I also mentioned in the quarterly that the FX movement on the AUD had a negative impact on our cash. You can see right down the very bottom of that table, it was about $400,000 negative. If we see an improvement in the AUD against the USD, that will swing back the other way and increase the available amount of cash to the company. And Doug already mentioned the closing cash was $5.5 million, but it was $6.4 million if we include the $0.9 million from BARDA received in January. And the reason we say that is because the costs went out in the first half and the cash came in, in January. So I think just sort of showing that number pro forma makes sense to me. So I think that's -- yes, that's it on the financials for now, but happy to take questions at the end of the presentation. I'll pass it back to you, Doug.

Okay. Thank you very much, Barrie. Appreciate that. Okay. Just a quick update on key priorities through the second half of this fiscal year going into the full calendar year. Number one, right, #1 priority right now in the business is to implement our -- what we call enrichment strategy for the FebriDx CLIA waiver trial. So as I said, we have about 300 patients currently enrolled in the trial. However, because the flu season has been so pronounced here in the U.S., what we're seeing is we're getting a lot more non-bacterial patients being tested versus the number of patients enrolled. So it's bringing down our modeled rate of bacterial positive. So we did and the FDA anticipated this from a -- well, wonder if this happens standpoint, what can we do to continue to keep the cost on track and to not test all of those patients that have such a high flu rate. So what we'll do is starting in March, we will implement enrichment. And what enrichment basically is any patient that is positive for a strep test, so that's a bacterial infection, they go and see the doc in their protocols, they would first do a strep test. Those patients now would automatically go into our trial. And the other enrichment category is any patient that a doc suspects to have bacterial infection, and they prescribe an antibiotic. So those patients would also now be a selection criteria to go into our trial. What this will mean is now we'll be able to hopefully quickly identify more positives in the trial and do a lot less testing, which does save us money instead of testing all the flu patients. We have enough bacterial or non-bacterial patients in the trial and enrolled. So it's now really just about getting to that 120 number of bacterial positive patients. So we're implementing that here in March, and we expect that to have a significant impact in cost to the trial as well, meaning lowering cost to the trial. And also, hopefully, although we don't know yet, we'd love to see if this can't speed up the trial a little bit. Now to be honest, we don't know that. We'll have to implement that and see what the data says, see if we're improving our rate of positive samples going into the trial. Okay. So second part of our BARDA agreement is another $5 million agreement for a pediatric claim, okay? And in this specific one, we work with BARDA to align on a study design. We have submitted that to the FDA. And we do have a date, I think it's around April 16th, I believe, is a date with the FDA, where we will get their feedback on that design protocol for a pediatric label. And again, that would be ultimately, if and when we start that trial, that would be reimbursed by BARDA up to $5 million. So great news there. Next is FebriDx, we talked about that, huge expectations, right? We all want and believe that, that product is a no-brainer that it's going to improve the practice of medicine for doctors, especially in urgent cares and ERs. So -- but the product is just not well known in the market, right, because it's new. And we just secured that FDA clearance recently. So we are doing everything we can to drive that product awareness, especially with a couple of key partners here in the U.S. that are helping to fund and to bring forward promotional materials, but also to host webinars for us so that we can take that out to doctors and urgent cares and ERs to further promote awareness of the product into the market. So I can say that it's diagnostics, introduction of a new product, it takes time. It's not an immediate S-curve, right, type of slope there in getting that implemented. However, I am seeing some very, very good initial work done by people like MedPro and others in getting the number of evaluations completed. Again, I think we're now up to roughly -- I think the last time I publicly spoke about it, I think we had a couple of new customers from MedPro and something like 9 or 11 evaluations. We've landed a few more of those. Those evaluations were successful. So they've told us that they do plan now in bringing the product online. So we got a few more customers, who have now initiated this, and these are in multi-setting urgent cares in the U.S. So we are seeing some really nice pickup here of awareness and some adoption into the market. In regard to Hologic, we are continuing to have great relationship with them. They are feeling very, very good about the project. We continue to progress our milestones as we go. And now you've seen that we've signed up this newest agreement with them, the scope agreement. We will plan to close out milestone 2 of the Phase II, and that will close out over the next, I think, a couple of months here. And then over the remainder of the calendar year, there would be an additional -- the Phase III milestones, which is an additional, right, $3.7 million in payments to us to complete those. So we'll keep you aware and make announcements as those things progress. And lastly, I would just say the team has continued to develop our own branded women's health products. As I said before, we don't -- we haven't communicated exactly what the biomarker or biomarkers for the test or tests are. But what I can say is that we've had, I'd say, terrific initial feasibility work done by the product development and research team here at Lumos, and we continue to progress those. And I would expect we'll probably put ourselves in a position to formally say in probably mid to second half of this calendar year, what that product or product biomarkers will be. So looking forward to communicating our success, as we progress that new branded product to our menu. So that's everything that I wanted to talk about is those things that you should keep your eye out for, and we'll have some -- a number of announcements around these things as the fiscal year continues here, second half of 2025. And we're feeling very, very bullish about the first half, as well as what you can expect in the second half. So with that, George, I'll turn it over to you, and we'll take any questions from anyone, who's joined us.

Thanks, Doug. I suspect we're having problems with the Q&A box because there's no questions in it at the moment. [Operator Instructions] While we're waiting for that, there are some questions that came in through an e-mail. So I might just start with those. So this is one for you, Barrie. The cash flow last quarter was minus $3.7 million. We're 2/3 of the way through this question. Will the cash flow outflow improve in the current quarter?

Sorry, I was just talking. Yes, is the short answer. I think in the quarterly and as we said in the last presentation and again today, so we incurred quite a lot of expenses in Q2 related to the FebriDx CLIA trial. And also, we've mentioned previously that the U.S. flu season was delayed some, I think, about 6 weeks. So a lot of the sales sort of we expected in October, November are pushed into December, January time frame. So -- and the BARDA payments are in arrears. So we have to spend the money before we actually get a refund from BARDA. They all impacted the Q2 cash flow. I think I mentioned inventory as well that we needed to purchase inventory raw materials. So they impacted Q2 cash flow. So we do expect Q3 cash flow to be better than Q2. We are still obviously incurring costs on the trial, but we will get another refund from BARDA shortly, as we get to the 500 patient in. So hopefully, that answers the question, George.

Thanks, Barrie. One for you, Doug. You said you were helping institutions in the U.S. using FebriDx overcome the delay in the insurance companies refunding $42 per use. Do you have any update on that task?

Yes. Yes, sure. So yes, let me go back and kind of talk to you guys just a little bit about that process, right? So because this is a new test, and it's just not in the patient care pathway for institutions, both at the ER and the urgent care, but also with the payers themselves, right? So as people are bringing this on board, they send their claims to their payers, right? That could be the U.S. government, but many times, right, the payers will be private insurance companies here in the U.S. like United, Aetna, Blue Cross, Blue Shield and so forth. Because it's new, they would not have seen -- even though there is a PLA code dedicated to the product and there is an amount associated with that because it's new, the insurance companies typically just reject the reimbursement payment to the docs or to the laboratories and so forth. So what typically you have to do is then basically write back to the insurance companies after they give you what's called an explanation of benefit, EOB. They'll say deny because, okay, it's not a known code or something like that. And then we have a small team of people that are working with those urgent care centers or ERs and hospitals to help them prepare the responses to those EOBs to basically say, well, no, this was the medical necessity. This is a cleared product. Here is a dedicated PLA code and kind of put down all that -- the medical, technical and economic facts, if you will, and resubmit that to the payers. So I do know that one institution, we've -- they've submitted over 100 claims so far. I'll tell you the majority of those were rejected. And now we are working with those -- that that group to now resubmit these, if you will, counterclaims in order to get these things overturned, if you will. Just to give you an idea, time-wise in the U.S., that could take 2 weeks, that could take 90 days, okay? So feel free to continue to ask us about that if we don't bring that up in conversation and so forth. But I would say that's going to need a little bit more time to have the impact we want and where we start to see that these things are -- they go through the first time, and they're paid. Typically, this does take a little bit of time to get this ball rolling and make it efficient, if you will. So -- but thanks for the question, and hopefully, that answered it for you.

Thanks, Doug. [Operator Instructions] Another question that was e-mailed in. This one is directed at you, Barrie. What is Lumos' response to the auditor's comments in the half yearly of a material uncertainty exists that may cause significant doubt on the group's ability to continue as a going concern?

Yes. Thanks, George. First of all, I'll just reiterate or just to let everyone know, the financial statements are prepared on a going concern basis. And Lumos accounts have always been prepared on a going concern basis, and we expect the company to continue as a going concern. The comment by the auditors is really -- it's really -- it's a sort of a stock standard comment. It's the same comment they put in the June FY '24 financial statements, and it's the same comment they had in the financial statements prior to that as well. And really, what they do is if there's a company that's in a cash flow -- cash outflow situation, they really look forward for sort of 12, 14 months or longer and sort of say do you have the cash to cover that period of time? And if you don't, then they just put that comment in, and that's a standard comment. But the directors and the auditors have both signed off on the accounts on a going concern basis. No adjustments were made to any values related to that. So that's where we stand at the moment. It's really just sort of boiler plate comment from the auditors.

Great. Thanks, Barrie. That there seem to be no other questions at the moment. Again, if you did want to ask a question and feel free to send the question across to me to my e-mail, and I can pass it on to the company. Otherwise, I think that's all the questions for today. Doug, I might just hand it back to you for some closing remarks.

Yes. Terrific. Thank you very much, George. Appreciate all your help there. And most importantly, I want to thank all of you who support us, who've invested into our business and those, who are thinking about investing into Lumos. We greatly appreciate that. We do think that we are transforming the practice of medicine, both with our products like FebriDx, as well as bringing out this next-generation fFN product for Hologic. So thanks again for being on the call today. And always feel free to get in touch with us if you have questions or would like to talk more about the performance of the company. Happy to do that at any time. So thank you so much.

Great. Thanks, Doug. Thanks, Barrie, and thank you to everyone, who participated today. That now concludes the investor briefing. You can now disconnect.