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

Good morning, everyone, and welcome to the Lumos Diagnostics First Half FY '26 Results Investor Briefing. My name is George Kopsiaftis, and I'll be your moderator for today. The webinar is being recorded today and will be available on Lumos' website. With us today, from Lumos Diagnostics, we have the CEO, Doug Ward; and the CFO, Barrie Lambert. Good morning to you both.

Good morning, George. Thank you for being here today.

Good morning, George. Good morning, 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 should take about 15 to 20 minutes. And then it will be followed by a question-and-answer session. [Operator Instructions] And with that, I'd now like to hand it over to Doug to get us started.

Okay. Thank you very much, George. Thank you, everyone, for being on today's webinar. I greatly appreciate it. As George said, the presentation was announced today on the ASX. So feel free to pull that off, and you can have a read at your leisure. So with that, Barrie, do you mind going to the first presentation slide. One of the things that we typically always talk about here, even though most of you probably are very familiar with the Lumos story and have followed us for quite some time is who is Lumos. So I always like to put it in the perspective of, hey, Lumos is trying to change the practice of medicine. right? We are very bullish about what we do, how we do it, and we have the ability to develop our products, manufacture them and then commercialize and bring those to market. And we do that with a technology that allows us to do it very close to the patient, which -- that testing is known as point-of-care testing. So next slide, Barrie. So the history for Lumos really dates back where Lumos initially started out as what we call a commercial services business, meaning we were more of a contract developer or a contract manufacturing org for other IVD diagnostic companies. And with that, right, we've built a tremendous, not only competency and expertise, but also the infrastructure, the people with the skill sets necessary to develop and manufacture the IVD products. Those same resources that we were using to help other companies, we also use those for ourselves and bring our own products to market. And over the last, I would say, 2 years, 3 years, we've started to bring some of those products to market. And without a doubt, right, that flagship for this company is FebriDx. We'll talk more about that shortly. We've also announced, right, we've started initial feasibility work on our women's health portfolio as well. We'll speak less about that because it's very, very early days. But very excited about the business and its structure and the people within the company. Go ahead, Barrie. So listen, I can honestly sit here in reflection over the last 6 months. And I would say in the 3.5 years now that I've been here with the business, that was the best 6 months that we've had with the company. I'm very, very pleased with the performance. I feel, and hopefully, most of you who are familiar with the company, can think about us as we actually do what we say we are going to do. So all the accomplishments that you see here, which I think are transformative relative to the company, we have made it clear to people in advance these were the things that we had aimed to do in this first -- the first 6 months of 2026. With the signing of the PHASE deal and again, reminding new people what that agreement was, they're our exclusive distributor for FebriDx in the United States. And a lot is positioned on the pending CLIA waiver grant that we're expecting from the FDA. But with that, what we've signed is a 6-year agreement with PHASE as our exclusive distributor in the U.S. and they will bring a minimum of USD 317 million in sales to Lumos over that time horizon. So we're very, very excited about that. And obviously, we've already initiated work since we signed that agreement back in -- I think it was July, it was the first month of the year, in fact. Right after that, in August, we did complete our CLIA waiver study and submit to the U.S. FDA for grant of the CLIA waiver. As we've talked about many, many times, one, this -- hopefully, next quarter, I can talk about, that's our greatest quarter ever because we can sit here and we expect that we're going to have our FDA clearance here or grant of CLIA waiver by the end of this month. We continue to have great dialogue with the FDA, and we remain very bullish that, that event will occur here in the month of March, which we are now in. So very, very short timing to us being able to make that announcement, I hope, here in the coming weeks. So the next item, listen, in the U.S., it's one thing to have CLIA waiver or a 510(k), and it's -- as well as having a great relationship with an exclusive dealer signing up for 317 million. But for any of that to actually happen, in the U.S., you must get reimbursement for your product. We have reimbursement. We secured that right, a year ago for USD 41.38 per test for the physician to be paid by CMS or not paid by CMS, but it was set by CMS and the MACs or the Medicare groups within the U.S. or 7 of them have all now agreed to pay that full reimbursement for FebriDx. So again, it's critical that you actually -- the doctors get paid to do the test. If they don't get paid, quite frankly, people won't order the test. So it's really important again to have clinical benefit, which addresses an unmet medical need, which FebriDx obviously does by saying whether or not someone has a bacterial infection or not. Second is the whole issue around economics and that people, the doctors and the dealers and the distributors are getting paid and make margin, including Lumos. And then lastly, it needs to be done in a way that's easy to do. And obviously, FebriDx being such a great product, it's so easy to use and it's very fast and they can use it while the patients there at the doctor's office, once it's CLIA-waived, and it's a very, very simple test to do. So if you have those 3 things, you can be very, very successful in building this potential USD 1 billion market opportunity that we have. In addition to that, as you know, our -- the original CLIA waiver trial was paid for by BARDA, a part of the U.S. government. We did secure additional funding. I think it was approximately USD 6.2 million to fund our pediatric trial and extend our label to children 2 to 12 years of age, and we're expecting that trial to wrap up at the end of the calendar year at this stage. And then the last thing, again, given that we have such great partners in our top 2 investors, Tenmile and Ryder Capital and that they did work with us to establish a loan facility that if we need cash prior to the CLIA waiver event occurring, which on that event, right, very close after that PHASE will pay us an additional $5 million for prepayment of product. So we're sitting in a very, very good place from a financial standpoint. And I'd like to really, really stress to everyone that we've -- I think we've done a really good job over the last, I'd call it, 2 years in trying to bring as much nondilutive funding into the company, right? We did that with the Hologic IP. We also did a sales leaseback agreement with Hologic. And certainly, with the BARDA agreements and with the agreements with PHASE, we were able to bring in capital into the company that was nondilutive, right? So we'll continue to try to do that throughout this fiscal year and calendar year as well. So next slide, Barrie. And then I'm going to pass it over to Barrie for the next 2 slides. The only thing that I'd set it up, if you don't mind, Barrie, is just financials came in exactly where we were expecting them, given where we are with CLIA waiver. So very pleased with the results that we had here. And go ahead, you can go through the detail, Barrie.

Okay. Thanks, Doug. Just a couple of slides on the first half results. And obviously, these should be looked at in conjunction with the ASX announcements we've made in the first half financial statements, which we released on Friday last week. So just revenue and gross profit on this slide. So on the revenue chart on the left there, first of all. So first half revenue was USD 6.1 million. And just to remind everyone, again, our reporting currency is in U.S. dollars. So all these numbers are in U.S. dollars. So USD 6.1 million for the first half, as Doug said, was exactly where we expected it to be. So very happy with the result. There is a little bit of a change in the mix -- revenue mix here, which I just wanted to point out as, again, I guess, how that's changed over the first half. So products revenue made up USD 1.7 million. out of the USD 6.1 million versus USD 0.8 million in the prior corresponding period, so double the previous half year in FY '25. So largely FebriDx revenue, which was up significantly on the prior corresponding period with the increase in FebriDx revenue more than offsetting the reduction in revenue from the loss of ViraDx sales, which we've talked about in the past. So very happy with that result. On the services revenue, it was USD 4.4 million for the first half versus USD 5.5 million in the prior corresponding period. It was down on the prior period. I just put some notes there to explain the reduction. So as the length of the fFN project with Hologic has extended, primarily as Hologic changes the scope and we have to do extra work, we did recognize a lot less IP revenue in first half of FY '26, which was only USD 1 million versus USD 2.6 million we recognized in the prior half. So that's obviously the main driver for the reduction in service revenue, but that was largely backfilled with ongoing project work. And just in the last couple of months, we've actually been working on about 14 projects. So very happy with that sort of change in mix and being able to backfill that revenue with project work. Moving to the right, gross profit and margin. So we reported USD 4.2 million for the first half. Very happy with that number, considering the revenue was a little bit lower. 68% gross margin, also a very strong number there, was up 1% on the prior corresponding period and actually up 13 percentage points on -- 2 years ago. So a really good result on gross profit and margin. And I'll just move to the next slide. A couple of comments on EBITDA and cash flow. So there's a full reconciliation of how we drive these EBITDA numbers in the financial statements. So please take a look at that. So adjusted EBITDA loss for the first half was USD 1.4 million, slightly above the prior corresponding period, but a significant improvement over the first half of FY '24, which was a loss of USD 4.2 million. OpEx was up a little bit, which is to be expected when you -- we're running the 2 trials there, the CLIA waiver trial and the pediatric trial. That was the main reason for the increase in OpEx. But just a reminder, those costs are fully offset by the BARDA grants. So even though OpEx is up, it doesn't actually have any significant impact on the EBITDA number because it's offset by the grant income. We did increase some expenditure in sales and marketing spend for FebriDx in the U.S., and we did have some new hires to scale up. And unfortunately, in the U.S., medical insurance costs tend to go up on a regular basis, which is something we need to manage each year. And just a comment below that box there. So adjusted EBITDA excludes the share-based payments and one-off impairments or expenses. We did not actually have any one-off impairments or expenses in the first half. Nothing unusual there in none of those items. Final comments on the cash flow. You can see there is a significant improvement in operating cash flow for the first half. It was actually positive, USD 0.1 million versus an outflow of USD 6.8 million in the prior corresponding period and USD 5.5 million the year before that. As Doug mentioned, we had the nondilutive funding from BARDA. We received USD 2.8 million in the first half. And as we've mentioned several times, we're containing any spend on property, plant and equipment. That was minimal in the first half. So net cash flow generation, so that's operating cash flow, investing cash flow plus lease payments, was actually a positive USD 0.1 million for the first half versus the -- you can see the prior periods there. So big improvement in operating net cash generation. And as Doug said, we've got the finance facility there. You'll see in the financial statements, we did draw down USD 1 million a couple of weeks ago, and there's a USD 4 million remaining on that facility to provide working capital through to CLIA waiver. So I think that's it, Doug, I'm happy to take questions at the end. But as I said, there's a lot more detail in the financial statements that we lodged last Friday. I'll pass it back to you, Doug.

Yes. Thank you very much, Barrie. I love looking at these numbers these days. So with this, listen, I'll just wrap it up with an overview of the key priorities and where things stand. So like I said, we are very bullish that this month, we will have CLIA waiver. So with that, obviously, a lot of activity can go into motion. Right now, we're still limited in terms of being able to market FebriDx into the CLIA-waived environment. So once we have that, we can really start to initiate that work. And likewise, right, PHASE will then continue to work with us in regard to getting their sub-distributors on and starting to gear up the supply chain activity around the FebriDx product itself. Together, we'll both continue to drive the key aspect of what I call reimbursement coverage, that's to get the private payers, the insurance companies, those companies like United, Aetna, Blue Cross Blue Shield. You want to get your products into what's called a policy coverage. It's a written coverage where it's automatically paid. And that becomes a volume-dependent process. So with CLIA waiver, volume should jump significantly such that then we can get into the coverage policy documents from -- with those payers. And we'll continue to work the pediatric study, as we've discussed before, right, that will expand our market an additional 20% or so. So looking forward to that for, again, wrapping up that study toward the end of the calendar year. We just talked about what's going on in the services side of the business. Actually, it's doing very well right now. This part of the business is cash flow positive for us. And we have a great partner in Hologic. That continues to move forward in a very positive way. And the team has been able to sign up a couple of new large opportunities like the Aptatek deal that we disclosed earlier in the half. And then lastly is we'll continue to look to bring more products to market over time. And we've talked about bringing a women's health portfolio product that's in the feasibility stage within our research and development group here. So with that, we have one more slide that we did put into the deck. It just gives you a lot more detail. I think it's a good slide for investors to consider and have a look. I'm not going to go through this. Feel free at your leisure to go through it, if you wish. It's again, on the ASX and the announcement. And with that, we'll wrap up the presentation part. And George, we'll turn it over to you for any questions that people may have.

Right. Thanks, Doug, and thanks, Barrie. [Operator Instructions] So we've got a few questions here, Doug and Barrie. First one for you, Doug. What's the initial FebriDx product volume that Lumos is able to manufacture and ship, say, in the April to June quarter?

Yes. Good question. Listen, we don't give guidance around our revenue and certainly around the volume, which is just, if you will, a way to think about revenue to be quite frank, since it drives the revenue number. I would probably kind of go back to what we have said all along, which is, one, we have a great partnership in PHASE Scientific. And we meet with them on a regular basis, preparing for CLIA waiver and getting ready for the volume requirements that they'll have. And both PHASE and us, we feel very, very good about where we stand in our ability to supply them with the volumes that they will need. And I would just say, kind of added on to this, although it's not the exact question that's being asked, we also feel, for the first 2 years of the agreement, we have the capacity and capability to supply the demand that both we and PHASE expect for the product. And, right, we've also communicated to people. We will need to eventually make some investments into growing the capabilities for increasing capacity, probably getting ready for that year 2 and beyond, if you will. So hopefully, that answers some of your question. I just appreciate, can't and we choose not to give all the detail of our volume capacity.

Great. Thanks, Doug. The next one, there's a couple of parties that have asked a very similar question. So I'll just amalgamate. It's around the women's health product. It says, when do you expect to see some updates on Lumos' other products under development? And when do you expect to have a marketable product?

Yes, 2 good questions. So listen, the first one -- and that's why we don't have a ton of information in detail here is because in feasibility. And we started out with a menu of products and some things are going to go well, some things are not going to go well. That's the way it works. So once those are at a stage that they can either -- right, what's going to happen is either you're going to say, hey, they didn't make it through feasibility or it's going to go into development, right? So from that standpoint, when it goes into development, we'll be able to give people a lot more information around what those products are and time frames and so forth. To answer that second question, though, about, well, when might these products get to market? Listen, to bring a diagnostic product to market in this setting with this technology and so forth, think of it as a 2- to 3-year window that it takes to develop your clinicals and then get your regulatory clearance in order to bring the products to market.

Right. I'm not sure you can answer this next one, but I'll ask it of you anyway. If the waiver is granted, are there any plans to merge with or take over Atomo?

Yes. Listen, I can't comment on that other than to say like, yes, we don't anticipate right now that we have that going on. Who knows what the future would hold, but we don't have plans to that right now. Anything to add to that, Barrie?

No. I think you covered it.

All right. Great. Next question. If IP revenue is 100% margin, the increase of overall margin to 68% on a lesser IP of USD 1 million must mean that the other margin is very, very good. Is this correct?

Yes. I mean there's a change in -- obviously, the revenue from the IP agreement with Hologic does not have any cost, so it's 100% margin. So that reduction in IP revenue does obviously make the margin decrease. However, as we announced previously with the PHASE agreement, there is an exclusivity fee was paid by Phase of USD 1 million. So that was recognized in the first half revenue, which is obviously 100% margin as well. So it does offset it to some extent, George. And that's why we were able to maintain such a good high GP margin of 68% in the first half.

I would say, though, Barrie, also the difference between FebriDx and ViraDx, right, also has...

Yes. No, good point. ViraDx was obviously a much lower margin product versus FebriDx, which is north of 60%, correct.

All right. Great. Just one final question. This one actually was sent in earlier today. Is the total U.S. revenue for PHASE Scientific currently less than USD 15 million primarily from the sale of at-home tests?

Okay. Yes, I would just say, listen, we can't comment on PHASE's mix nor their revenue numbers. So sorry, wouldn't be appropriate for me to comment on PHASE.

Fair enough. All right. Well, there's no more questions at this time. So Doug, I might just hand it back to you for any closing remarks.

Yes. Thanks, George. Greatly appreciate it, and thank you very much for the questions. Listen, I am extraordinarily positive about where we are as a business right now. I think operationally, we executed exactly the game plan that we thought that we would. And that has also resulted in line with exactly where we thought we would be from a financial standpoint. So I think those 2 things combined have put us in a great place just prior to, hopefully, the most significant announcement in this company's history, which I expect to come sometime later this month. So be on the lookout, we're happy where we're headed, and I look forward to the next time I talk to everyone about CLIA waiver here with FebriDx.

Right. Well, with that, Doug, thank you. Barrie, thank you. That now concludes the presentation. You can all now disconnect. Thank you for your time today.

Thanks, everyone.

Thank you.