Novacyt S.A. (ALNOV) Earnings Call Transcript & Summary

Good afternoon, and welcome to the Novacyt H1 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 will review all questions submitted today and publish responses where it is appropriate to do so. Before we begin, I'd like to make the following call. And for those -- and for the benefit of those joining us in France, [Foreign Language] And I'd now like to hand you over to David Allmond, CEO. Good afternoon to you, sir.

Good afternoon. Thank you. And good afternoon, everybody, and welcome to the 2022 half year results presentation, in which we'll also cover an extensive update on strategy and the execution against our strategy. Next slide, please. Please take the disclaimer as read. Next slide, please. So as an organization, we are blessed with our capability from our talented team; our product portfolio, which you'll see in this presentation, is extensive and expanding; and our operational capability from R&D through to scale-up manufacturing and international supply, regulatory and beyond. From a vision perspective, we will want to reinforce our vision, which is clear. We are committed to becoming a leading global clinical diagnostics company in infectious diseases. That is our strength and our legacy, and we continue on that path. From a purpose perspective, we are proud to have protected many lives during a pandemic, and we will continue to protect lives across multiple settings in infectious disease. Next slide, please. I'm joined today by James McCarthy, CFO, who will walk us through some of the key financials. And not here on this slide, of course, are the executive team who are bringing bench strength to the leadership of the organization, along with the wider talented team and the very strong support we have from our Board of Directors. I also wanted to flag to you, from a leadership perspective and from a capability perspective, you'll see that we've rightsized the company. But I want to reassure everybody that we've maintained core capability to execute against future strategy. Next slide, please. I'm going to pick out 1 or 2 things here before I hand to James. I think the most exciting thing for me on this slide is that we have yesterday signed a deal, global deal for accelerating our clinical CE marked infectious disease assay menu with over 40 new assays that are already approved across the therapeutic verticals that we were already pursuing based on our market research. This is a huge accelerator to allow us to build into the clinical market setting with non-COVID portfolio on our instrument platforms. So in addition to the menu expansion, we are also enhancing the workflow solutions to be able to take the chemistry and testing to the right place at the right time, largely in decentralized laboratories, spoke laboratories, private laboratories, where near-patient testing is a growth area. The other point I will flag on this slide from my point of view, which I'm also excited about, is that we have really gone back to our research-use portfolio, which is over 1,000 products across veterinary, food, environment testing, et cetera, which I'll come back to later. But we have really done some extensive work on relaunching that exciting portfolio, which we think is world-class. So you'll see more about those points as we go through. And with that, I'll just get James to add to my comments on this slide and cover the financials.

Thank you, Dave. Good afternoon, everybody. So I'll just put a few points out here. Just to confirm the closure of the Microgen Bioproducts and Lab21 Healthcare business, this was something we flagged to you back in January, that we were doing a strategic review and confirmed in April, subject to consultation. So that business has now been closed. And I think also, at the start of July, in the face of declining COVID sales, we announced that we would do some further adjustments to our cost base as we announced a program of restructuring. That also completed more or less by the end of August. So I think just from an execution point of view, it's good to have those 2 things completed. And the third point is on DHSC. Just to reiterate on DHSC, on the 15th of June, we filed a defense of the claim received from the DHSC on the 25th of April and a counterclaim for GBP 81.5 million. The value of the claim and the counterclaim are broadly in line with what we had put in our accounts at the end of 2020, and the company position in relation to the claim remains unchanged. And we believe we have strong grounds to defend the claim and assert our contractual rights under the counterclaim. That position hasn't changed. Unfortunately, as you may appreciate, the company is unable to provide detail on the case. All the confidentiality clauses in the contract are still in place. It's also, as a legal case, sub judice. So we are limited in what we can say. I mean, I assure you that as anything material happens, we will keep you up to date. Next slide, please. So there was quite a lot of detail in the release this morning, including the accounts themselves. So I'm just going to spend a few minutes running through a few of the highlights maybe just to orientate you towards a few things, but there are quite a lot of detail in the accounts themselves. And the first thing I might say, as you read the financial statements for the first half of this year, please note that the Microgen Bioproducts/Lab21 Healthcare business has been reported on a separate line. It's a loss from discontinued operations in accordance with IFRS 5. So -- and that's been restated for '21 and '22. So both sets of numbers you're looking at here excludes those businesses in the main. So they are comparable. And if we start with revenue, revenue of GBP 16.5 million compared to GBP 52 million in the same period last year, and the decline is mainly a result of COVID sales declining. And the quantum of that really was GBP 13 million of the GBP 16.5 million was COVID this year versus GBP 47.6 million in H1 last year. So you can see there's been a significant falloff in COVID sales in the first half. I mean, geographically, the business is still well balanced. I mean, U.K. accounts for just over 50%. Well, next 20% is -- roughly Americas, 20%; Europe, 20%; and the balance then split between APAC, Middle East and Africa. So still quite an international business. And beyond Lab21 -- post the closure of Lab21 Healthcare, Primerdesign is going to be about 95% of total revenue. So I think the whole strategic rationale of having a more focused business around molecular is really now borne out of the numbers. If we look at gross profit, the gross profit improved from GBP 1.2 million last year to GBP 4 million this year. Now last year was subject to a lot of significant adjustments in relation to DHSC. This year's gross profit also had some adjustments, some additional stock provisioning and write-offs in relation to falling COVID-19 demand. I think the important point was if we exclude those from this year, the underlying gross margin would be in excess of 60%, and that's a key number for us as we go forward, saying what's the underlying margin -- gross margin we can generate in this business. And in OpEx cost terms, OpEx costs fell 17% from GBP 13.3 million last year to GBP 11.1 million this year, and that was mainly a result of reducing general and admin costs. And that's quite important because it meant that we were maintaining investment and, in fact, increasing investment in what I would call the front end of the business, which is R&D and sales and marketing. I mean, in the case of R&D, we increased R&D investment in the first half of this year by GBP 1.4 million over H1 last year. It was like a 74% increase, and sales and marketing was pretty much comparable year-on-year. So overall, even though we've been addressing cost in the business, we're maintaining investment at the front end of the business. And as a metric, just of size, if you like, overall head count, which includes direct staff, at the end of December was about 283; at the end of June, around 210; and I think as we sit here today, goes to about 160, just to give you an indication of how we are kind of resizing the business post-COVID. In terms of profitability, we reported an EBITDA loss of GBP 7.1 million compared to a loss of GBP 12 million last year. And that GBP 5 million improvement effectively is the GBP 2.8 million of gross profit I just mentioned and the GBP 2.2 million savings in OpEx. The loss after tax is GBP 5 million, improved by GBP 7 million versus last year. And that's effectively the GBP 5 million of EBITDA we saw, plus an improvement in other financial income. And that's mainly the revaluation of intercompany balances and other balances based on the weaker sterling, which has flowed through in other financial income expense year-on-year. Just finally on discontinued operations, which I mentioned upfront. You'll see a line in discontinued operations which is moving from GBP 3.7 million loss this year versus GBP 0.6 million loss last year. I think it's very important to understand that number in context. The bulk of that number is noncash. And so there's about -- of the GBP 3.7 million, roughly GBP 700,000 is what I would call trading. So it's lower revenue and gross profit as that business continued to struggle, which is part of the strategic rationale for closing it down. There was about GBP 3 million of noncash write-offs in relation to the closure, which are things like the impairment of the asset -- of the building lease we hold, stock write-offs. There's also a deferred tax change. So a lot of these are noncash items, which make up that significant loss. So moving on to the balance sheet. The cash position at the end of June was just under GBP 100 million, which is comparable. We had GBP 101.7 million in December 2021. So the business still was in incredibly strong cash position. You'll see working capital, if we exclude cash, fell by 1/3 from just over GBP 18 million at the year-end to just under GBP 12 million at the end of June. That's really based on falling revenues and actions taken in relation to COVID-19 stock. The capital expenditure, you'll see a decrease. And in H1 last year, we spent around GBP 2 million. And in H1 this year, GBP 300,000. And I think you should look at the GBP 300,000 as a more normalized number for this business. GBP 2 million in H1 last year had still quite a lot of scale-up. We were, if you remember, in-sourcing manufacturing, bringing manufacturing in-house and investing behind that, still supporting quite a strong COVID business. But I think, again, thinking of the business going forward, this year's CapEx is a better indication of what we should be spending in CapEx going forward. And just finally, to call out our patent for ORF1a/b, that patent covers quite an extensive amount of our business. What it means of the U.K. patent box tax regime is that tax on profits associated with this patent can benefit from a tax rate of 10% rather than 19%. And it will not be a cash refund. It will be an offset against future tax liabilities, which is still, of course, valuable for us. And we estimate that at the moment to be around GBP 5 million. So look, I'll leave it there. I appreciate that's a quick run-through. As I said, there's a lot more detail in the accounts themselves. And of course, at the end, we'll happily take questions. So I'll just hand you back to Dave. Thank you.

So what I'm going to do now -- thank you, James. What I'm going to do now is talk to you about our delivery against the strategy that we've previously set out, where we are very proud of what we've achieved in the last months to prepare ourselves for future growth in a non-COVID environment. So this slide is -- we've shown before, but let me just remind you all of our core strategic imperatives. If you look on the bottom left-hand side of this chart, there's an illustration. But prior to the pandemic, we were really a research-use-only life science molecular company in the GBP 10 million to GBP 15 million range of income. And I have to remind myself every day of what the company achieved in the pandemic was amazing, really first to market in Europe and an extensive portfolio to protect lives. And that nominal peak there was driving significant growth in the scale of the company and its revenues and its cash. But of course, inevitably, the downturn in that, which is perhaps good for us from a public health perspective but less so from a business perspective, is that it declines quite quickly in highly vaccinated settings. And we're seeing testings decline rapidly. That's not unexpected but hard to predict. However, therefore, we turn -- as we turn to our opportunities for growth beyond the pandemic, we are very fortunate as a company to have a significant portfolio already. And you'll see in this presentation, we are enhancing that portfolio significantly. So we have a human in vitro diagnostics portfolio, which is not only COVID, but it's already expanded into respiratory. And you'll see when I go through the deal with Clonit, that now expands radically as of signing yesterday. We have a RUO portfolio, which was the strength of the Primerdesign days, which is over 1,000 products spanning various areas of veterinary, food, environment and human research. And we are switching that back on, and I'll come to that separately. And then we are able to run either chemistry on instrument platforms, either the MyGos through RUO or the q series for the human diagnostics. So we can offer workflow solutions in the right place at the right time in diagnostics. So that concert of 3 key areas of portfolio really allow us to now turn to build a sustainable base business, which is growing and predictable. Last thing I'll say on this slide, last 2 things. One is that the RUO portfolio is an innovation engine if we choose to advance something into a clinical use. But keep in mind, that now requires a long journey because of IVDR. The regulation came in, in May of this year. That's more like a 2-year journey to bring products to human use. It's no longer a few months. And the last thing then is to say we will continue to be a global first responder. We are proud of that. That's something we've done very well in the pandemic. We did it before we did Ebola, Zika, H1N1 and more recently with monkeypox. Next slide, please. So again, I've shared this slide previously, but I think this sets us up in this presentation to walk through the key pillars. So the question we are quite rightly always asked is, "In 2021, you were more than 80% reliant on COVID business or income and 20% non-COVID. How are you going to get to the other side to be 90-plus percent non-COVID and residual COVID revenues? And can you make it?" Because the moat just got wider, but the price on the other side is probably bigger. And I want to convince you that we are supremely confident we will get to the other side, but it does take some time. There are 4 key pillars. Portfolio development, which we are making significant steps as I walk you through that in just a moment. Instrumentation is the enabler to the chemistry. And again, we are making significant advances in enhancing our instrument workflows to deploy the chemistry and replenish the chemistry in a Nespresso-type model. From a geographic expansion perspective, I'll cover that momentarily in terms of our distribution base and our direct team. And we have really, really now accelerated our efforts for business development, which has actually led us to today with the deal with Clonit. But we're not stopping there as we advance the funnel for transactable M&A opportunities. Next slide, please. So I'm going to walk through each pillar to show you the progress we've made since we last engaged on each of these, which I believe is substantial, and it really is now setting the foundation for future non-COVID growth. So firstly, portfolio development. We're really excited to have signed a deal with Clonit for global access to a broad approved, CE marked menu of assays, which span the therapeutic area of interests that we already have identified in our market research, from respiratory, gastrointestinal, insect-borne disease and sexually transmitted infections, so immediate access to a broad portfolio. The European opportunity, we estimate the market size for that portfolio, is in the order of GBP 470 million with a healthy CAGR of 10%, approximately. So a really significant opportunity to deploy near-patient solutions with our workflows and chemistry in that setting. We relaunched the RUO portfolio. But just so you understand what that took, that wasn't a situation of just launching it. It was a case of making sure that the very extensive portfolio was fit for purpose and ready to go back to a focus in the market. We've prioritized over 250 assays, checked that they're ready to go and have them on the shelf for within a week turnaround. And we will maintain the other broad portfolio of customers to order on a slightly longer lead time of 6 to 8 weeks. And that will be -- it would evolve as we learn the demand. We've had some early wins since going out with that portfolio again, already seeing uptake in Canadian salmon farms, which is big business for maintaining -- ensuring the salmon stock is in good health, especially in spawning season, and also in Poland with salmonella testing in chicken farms. We expect to see these to grow. We may see repeat models of this in other countries. Just to give you a flavor, that's already seeing some early wins. And then we have advanced our own organic R&D, which is not today the center of our presentation because it is absolutely ongoing in the background. But it will take a little time to come through under IVDR to drop into the clinical efforts we're making with the Clonit portfolio. So really, this is -- Clonit offers us near-term growth and momentum to drop our future developments into. On the instrumentation side, pillar #2, we have now sourced an extraction system to put into the workflow, which will be needed for genesig assays or Clonit assays, if customers don't already have extraction. We are enhancing and expanding the CO-Prep flexibility for automation in the workflow beyond PROmate where it started into genesig dry and Clonit assays. And then we've launched the lateral flow portfolio. 18 of 21 of those assays are non-COVID. And actually, I'm delighted to say they span the same therapeutic verticals as our molecular portfolio that I outlined above. So really, this is a decentralized workflow to deploy and enable the use of our assays in the right place at the right time. Next slide, please. In terms of geographic expansion, another really extensive piece of work we've done is to review that globally. We've deployed our own talent selectively in countries in Europe. We're already in the U.S. In Latin America, we have initial boots but really to manage distribution, which we've enhanced significantly now, making sure that in each jurisdiction, we have the right partner for RUO and the right partner for clinical and, in some cases, the same partner. And then we will manage tightly the relationship with those partners to ensure they are well trained and motivated to deliver successful channels to market across the globe. You wouldn't -- I wouldn't have expected originally until I reviewed this, given the rush of the pandemic, which was more reactionary to the business. We actually had 18 markets in the EMEA where we didn't have good distribution coverage. We've now entirely plugged that gap. We've been also optimizing our network in the U.S. and Asia Pacific and Latin America as we speak. I've just come back from Portugal, where we've just had the first round of training of our EMEA distributors on our diverse portfolio, getting ready to go to market as we relaunch RUO and our clinical portfolio. They were very excited to see what Novacyt can offer. From a business development point of view, not a day goes by now where James and I and some of the other senior members of the team are focused on business development across the 3 key areas of innovation, acceleration and strategic transaction. And I hope you join me in seeing that we've delivered on that already with the Clonit deal. We're investigating additional panels to drop in, which are already approved to see if we can even expand further into GI. And we've found now a number of strategically aligned, executable opportunities for M&A coming through the funnel. I can't be more specific. But rest assured, we will not rest until we find best use of our capital for shareholder value and future growth. Next slide. When one comes through a pandemic and the attention responsiveness to a pandemic takes, you turn around to the warehouse and think, what do I do? And here, we are very excited as a company because we don't have to build from nothing, from scratch, to redeploy our teams and to drive for future growth. We have the PROmate direct to PCR platform, which we're expanding in organic R&D; the genesig platform for clinical and RUO applications; our lateral flow platform, most of which is non-COVID; our SNPsig assays for delineation of variants of concern; and a very extensive portfolio of instrumentation to deploy our testing in the right place at the right time. So we are immediately now deploying this. In fact, I've just come from a sales team just down the road briefing again on how to deploy these offerings to the right customers across our regions. And I'll be going back there this afternoon to keep up the momentum on driving for growth. Next slide. The research-use portfolio, I've sort of covered earlier. But many of you will be familiar, it spans veterinary, food, environment and human research. Importantly, our MyGo range is a partner to this because the assays can be run on the open systems of 16- and 32-well thermal cyclers. Again, in the chicken farm example I gave you, they would be deploying the instruments and the assays for salmonella. And in the salmon testing example I gave you, they've been looking for viruses in salmon, again, using q32s or MyGo 32-well systems so they can do the work on the farms in the immediate vicinity. Those are early wins. This is an extensive portfolio, and we see growth opportunity now as we take this forward. Next slide. We were already on this track, depicted on this slide, focused on COVID-19 initially because we dropped everything to focus on such a dramatic situation. We had already expanded into respiratory with our winter panel with influenza A, B and RSV, in addition to COVID. And the genesig version is on the market. We still await CDTA (sic) [ CTDA ] approval, which we're chasing every day. But now with the Clonit deal, rather than waiting 2 years under IVDR with our organic efforts, which continue, we are now able to already move into respiratory, non-COVID assays, gastrointestinal infections, sexually transmitted infections, insect-borne viruses and insect-borne protozoa not listed here. So we really have hugely accelerated our opportunity to enter these clinical markets. Next slide. From an instrumentation perspective, we see this as the enabler. And you'll see here, if you look on the left, next to sample collection is an example of an extraction instrument, which we will bring into the workflow because the genesig and the Clonit chemistry would require it. Some customers have this already in different forms, but we would be able to offer it where needed. The CO-Prep was a PROmate-enabled system for automation, allowing that convenience, walkaway time, reduce contamination risk and human error risk. But we're now bringing on the genesig, our dry formulations, which we've just announced recently, and also the Clonit chemistry into the capability of the liquid handler. And then as you, I'm sure, know, we can attach or daisy-chain, if you like, multiple q32s or 16s to 1 liquid handler, up to 8, in fact, which could take you to well over 1,000 tests a day, if you were seeking to scale up with a semiautomated workflow. And from a deployment perspective, this workflow, either a part of it, if it's a q16, you could, in a carry case on a battery, could go out in the field. But from a VersaLab perspective, as we did in the pandemic, it can be deployed into areas of need. We did that in the pandemic in airports and the Port of Dover and in employee settings, et cetera. So we have that ultimate flexibility. Next slide. From a Clonit deal perspective, it comes in 3 phases as we see it. Number one is now, and that means we have access to over 40 approved assays across those areas I've outlined, including a very extensive transplantation portfolio that complements the work we were already doing. Number two, we start to validate those in a prioritized way onto our q instruments. We've already completed a number of STI validations, which led us to the signing of the deal because we became confident. And we will now move to the respiratory GI in the next couple of months to get those validated onto our platforms. And then we'll bring in the entire workflow to make sure that we can deploy the whole automation and scalable workflow. And that's only into next year, we'll be ready for that. Why have I asterisked insect-borne? It's just because we need to define a clear international regulatory strategy because most of those disease occur ex Europe, and we want to make sure that we're prioritizing the right countries for regulatory access alongside the validation work, which requires our R&D team to undertake that work. Next slide. I said to you in the illustration earlier that we want to build a solid, sustainable growth base business with our extensive portfolio not beyond COVID, and we will do that. But we then can remain responsive to outbreaks. We've done that recently with monkeypox and adenovirus F41, one of the suspected viruses in juvenile hepatitis cases. And we can turn those assays in 3 weeks. And we are proud of our ability to respond fast when we are needed. Next slide. In terms of business development, I touched on this earlier, but let me give you a little bit more color of what we've delivered against these 3 subheadings that we shared with you earlier in the year. Number one, on innovation, which is earlier technology where we're seeking to develop disruptive technology, we're advancing our efforts on codevelopment of a point-of-care biosensor platform. That's early, but it's advancing towards stage gains. From an acceleration perspective, in the middle bucket, that's where we've had the biggest traction, which leads us to today's presentation with a huge expansion in the approved menu to run on to our systems. We've also added a digital reader into the lateral flow portfolio. We've expanded, as I've described, our capability that we're expanding the capability on the liquid handler and bringing extraction in. And rest assured on the third pillar here of strategy, we really have now increased the funnel for strategically aligned transactable deals. I can't give more detail, but we will be coming back to you once we have something that is announceable. But we are working tirelessly to deploy capital towards strategic transactions to accelerate growth and deliver shareholder value. Next slide. So in -- by way of summary, I won't repeat too much here what I've said, but I just will say this. We are -- I want to reiterate on the revenue side, we see Q3 '22 at circa GBP 2 million, similar levels in Q4 and an expected full year loss of GBP 13.5 million. But I think the key takeaway for me as we prepare ourselves for future growth is that we really think we're now well positioned with our core capabilities maintained despite downsizing to drive towards our vision to be a leading global clinical diagnostics company. I hope you've seen today that on every pillar that we set out to make it to the other side as we transition to become a non-COVID growth company, we've hit a lot of positive results, and we will continue to execute on that plan. And with that, I'll stop, and we perhaps could go into some questions. Thank you.

[Operator Instructions] David, James, we received a number of questions, both presubmitted and live from investors. And I want to start off the Q&A session with this one here, which reads as follows. "Why have you chosen to focus on the specific areas outlined in your strategy for development of your portfolio?"

Okay. Yes. So when -- about 6 months ago, we completed some significant market studies, market research studies. We've centered mostly on Germany, U.K., Nordics as examples of key markets, where really we were researching the question of which are the most attractive markets we should consider in the future in terms of addressable market, unmet need, competition and reimbursement potential. And then alongside that, in parallel, we were considering which is the best strategic fit for the company, given our workflow so that -- in terms of could we leverage Novacyt's capability and could we offer differentiated propositions in a decentralized setting for our customers. And from that, we picked the key areas, which are respiratory, gastrointestinal, insect-borne. STI is a growth area in that near-patient setting. And the transplantation assays, which we were already embarking on, we've now expanded that. So I'm very confident that we've done the diligence from a market perspective on which are the most relevant areas of focus. But what I'm most excited about is, I now don't have to wait 2 years for our own organic R&D, which will be highly contributory. I can get going now with the team in deploying our workflows and chemistry into what we believe is in the order of GBP 470 million market opportunity, which is growing significantly. And that's Europe only. We will reach beyond Europe with our capability. So there's a really complementary business development deal here, and it's fully aligned. And I said to you earlier, the lateral flow portfolio is also aligned to those therapeutic verticals as a screening tool ahead of reflex for confirmation. So I think hopefully, that gives you some reassurance that we're on to the right therapeutic areas.

That's great. How does the reduced cost base leave you place to execute your strategy?

Yes. So I shall take that one. I don't think it affects our strategy as we lay it out at the moment. I think I mentioned in the results, particularly in relation to R&D, that we actually increased our R&D spend in the first half of this year over last year. We increased R&D spend significantly. So I think we're working out to protect the investment, as I would call and repeat, the front end of the business, which is R&D and sales and marketing, the commercial end. And I think if you look at our full year costs, I think it's around like GBP 10 million, which is about half of our cost base, which is under half of our cost base this year, will be spent across R&D and commercial. So these are considerable sums. We're still investing in the front end of the business, and we believe that is sufficient to support the strategy as we've laid it out at the moment.

The next question here reads as follows. "Can ITIS machines purchased by customers for COVID-19 testing also support testing for other diseases?"

Yes. I'll take that one. It's Dave, yes. So the answer is yes. But actually, let me go a bit further than that. So if you think of the ITIS machines, which are, we believe, best in their category, from the -- we have the MyGo range, which are open into 16-well and 32-well thermal cyclers. They can be used extensively across the RUO portfolio that I shared with you, across those broad areas. And indeed, they are sold together with chemistry for that purpose. If you then think about clinical use, the q32s, q16s, the answer is yes. We can use our new assays, such as the respiratory assay. And all of the Clonit assays of relevance will be validated onto the q32, q16 as appropriate. And what we'll be doing is updating the IFUs working with Clonit, who would update their IFUs, once we do the validations, which doesn't push us into IVDR because these are seen as minor changes. So it really gives us an acceleration of the versatility of our instrument platforms across a very broad menu. So that's a good question, but that's actually why we're excited about both the offerings we have, bringing them together.

The next question is really around institutional investment and this -- and asks if you're looking to attract any institutional investor.

So I'll let James take that.

Yes. Look, in a short answer, yes, of course, we'd love to have more institutional investors on board. I think if we look just briefly at the history of the company, I think during the COVID period, I think it's difficult for institutional investors to get involved because of the uncertainty of COVID revenue, and I think that's proven to be the case. So look, I think part of explaining the strategy or part of setting out a clear strategy is to demonstrate to all investors that, look, there is a road map. It's a road map that can be valued, that can be measured. And look -- and ultimately, we have to produce a track record against that strategy to attract all investors, institutional investors, in particular. So look, in the short answer, yes, but I think we have to put more runs on the board, have more track record before realistically are expecting institutional investors to come on board.

The next question, we've had this question from a few investors. I can see there's one from [ Stuart ] and [ Sam ] here. And just grouping those together, what is the latest update in regards to the dispute with the DHSC?

Yes. So I shall take that one. Look, in my statement earlier on, I mean, I just outlined where we were in the process. We've filed our defense of their claim and our counterclaim for GBP 81.5 million for unpaid invoices plus interest. I mean, I would repeat the company position. We believe we have strong grounds to defend the contractual rights and to enforce our contractual rights out of the counterclaim. It's still a legal case. The confidentiality clauses in the contract remain in place. So we are very limited in what we can say about this in public. So -- and I think that's very frustrating for people. I think people would like to hear a lot more about the case, would like to hear about -- more about the exchanges. But unfortunately, that's not going to be the case as we go through this dispute. All I can assure you is that as something relevant for the investors occurs, we will always share it with you as we have done. Yes, it's taking time, and it's a slow process, and that frustrates everybody. And certainly, it frustrates management. But I think it's a process we have to see through now. And again, that's maybe unsatisfactory to a lot of people because we're not getting into the detail. But I think in this instance, that's as good as it's going to get, I'm afraid.

The next question here of, can you comment on the CTDA approvals?

Yes. Absolutely. I'll take that one. So the CDTA was in motion last -- late last year and set up to approve these tests, as you all know. And it's been a headwind for us to get through those process. But we're very pleased that we've made significant progress to get 5 of our products now approved by the CDTA, which is the most, we believe, of any U.K.-based company. In recent times, we've had the approval of the PROmate assays for the 1-gene assays for q16 and q32 instruments and also a 2-gene PROmate assay approved on the q32s. And then post period in July, we also got a U.K. approval for exsig direct assay, which was great to have that validation of that assay based on the clinical evidence. And we are continuing now to see through, hopefully, the final approvals, particularly winter panel. I'm raising that every other day to get that approval through because the winter is coming, and flu could be an issue as we've seen in the news. There is also a 3-gene genesig assay under review. And then we have -- the final 2 will be the lateral flow. So we have more to do. I appreciate when government put in new processes, that they need to take time to bed in. It has been challenging. I think we've done the best possible job we could do as a company to deal with the regulatory requirements.

The next question here is really around expansion and asks, how is Novacyt attempting to grow the business internationally, including in the U.S.?

Yes. Okay. So what we've done internationally is that, number one, we were a U.K. -- operationally a U.K.-based company, and that's the home market. But James has shown you, that's not -- that's half of our business. We were already expanding into Europe. We have more direct presence in Europe, covering Germany, covering Southern Europe, but we also have coverage now directly to manage our distributors for the Middle East. And we will be very judicious in deploying our teams on the ground. But we are certainly enhancing the distribution network with those individuals initially. As I described to you earlier, we've had a huge amount of work to get the right partners and make sure we're working closely with them in all the key markets. But I will -- in the future, if we see an opportunity in a particular market where we need to go more direct and the business case is clear, that is certainly something we will look at on a case-by-case basis. Outside of Europe -- I mentioned Europe because that's our primary focus because that's where CE marks apply across the European economic area. The other areas, we have deployed in Latin America someone to manage in local time, local language our distribution. We have deployed previously, as you're all well aware, in North America, managing and optimizing our distribution. And we have revitalized our partnership with our agent in Asia Pacific who manages distribution in the APAC region. And then from a central perspective, through our international team, we still liaise on a regular basis with the WHO, UNICEF and the NGOs, where we had a huge demand and success during the pandemic. So what to expect there is to build success, build growth and then one step at a time, where should we invest directly next and can we get the best out of our partners. I think we're making great progress to be -- with international reach, given our scale.

The next question here, "Are the new LFTs CE marked? And have we developed them by ourselves?"

Yes. So yes, the LFTs are CE marked. So they're all professional use. One of them is actually a self-test, saliva-based antigen test for COVID-19 and, therefore, can be used by individuals. The rest of them are professional use. They're all CE marked. We didn't manufacture them ourselves. We have not the lateral flow originator, if you like. So they're an OEM from another party. They're our brand, under the PathFlow. And as I said in the presentation, what I'm excited about, if you have an offering, it's complementary to the molecular portfolio because it conveniently expands the same therapeutic verticals for where we're focused on the molecular side. And you do see in health care, in certain settings, screening and then reflex to PCR confirmation. So yes, we can offer a lateral flow across a range of settings, transmitted infections, gastrointestinal infections such as norovirus, respiratory infections and insect-borne infections. So that portfolio really, as I said earlier on, it's very nice to have that complementary to our molecular portfolios.

The next question here is as follows. "How do you intend to use CO-Prep post-COVID?"

Yes. So I sort of covered that earlier, but let me just go over a couple of key points again. So CO-Prep was launched earlier in the year. It's been deployed already in settings, largely for film and media testing, where it allows an efficiency around the staffing of the laboratory staff and the sample stewardship, reduced contamination risk and walkaway time. But because we now have an expanded menu beyond PROmate with dry formulations, we also have genesig platform, and we have a very diverse Clonit chemistry platform, we'll open up the CO-Prep functionality in the workflow, so all of that chemistry, to give it flexibility so that the semiautomation with multiple q series could offer whatever the spoke laboratory or private laboratory needs from 40 or 50 samples a day up to 1,000. So the CO-Prep is an enabler within that flow and, I think, offers significant value for efficiency in certain customer settings. So we continue to be excited about it.

And perhaps one final question. I know we're coming up to the hour. What tests and instruments are we working on?

Yes. So if I go back a little bit from the prior presentations we gave, let me just go back to those. So number one, we are working on our own R&D, on using -- on PROmate platform, initially on GI panels, so viral and bacterial panels, which is a very significant opportunity. As you can imagine, the sample type is complex. So that requires quite a bit of work on the master mix to being able to do that in a direct to PCR. But that's advancing nicely now through R&D. We also have completed work on some transplant assays we were working on, but that's now hugely complemented by the Clonit deal, which has one of the most extensive transplant portfolios around. So that's been accelerated. We're working on respiratory panels, which are non-COVID. That's not just influenza and RSV, that's into other respiratory panels such as parainfluenza, adenovirus, rhinovirus, et cetera. And the insect-borne viral panel, Zika, dengue, yellow fever and chikungunya virus, which as we may have seen, if you look up the arbovirus initiative under the WHO, you can imagine under climate change, insect-borne diseases becoming highly problematic with dengue outbreaks expanding now from what was 10 countries into over 100. And this will only get more challenging as mosquitoes, et cetera, migrate their habitat. So all of that continues. And I said it wasn't the centerpiece of today's presentation really because we're so excited about the acceleration on the Clonit side. But we will be updating you in due course as those come through our pipeline. And you can imagine with a commercial background like myself, being able to get started in a much more clinical play alongside our RUO relaunch with -- over the next couple of years gives us real near-term opportunity and momentum to drop our own R&D products into that team as they come through.

I think you've addressed those questions coming from investors. And of course, the company will review all questions submitted today, and we'll publish those responses on the Investor Meet Company platform. But just before redirecting investors to provide you with their feedback, which I know is particularly important to you both, David, could I just ask you for a few closing comments?

Yes. My closing comments, thank you, it would be, firstly, foremost, thank you to everybody for taking the time today to come and listen to our interim results and our strategic update. I hope you joined me in seeing the amount of work we're putting in to rightsize the company, clarify the strategy and execute. And we will continue to execute tirelessly, and we will continue to seek to deploy the capital for future growth and shareholder value. And we'll be keeping you up to date as things progress. But thank you and wishing you a wonderful rest of the day.

David, James, thank you very much for updating investors today. Could I please ask investors not to close this session as you now will be automatically redirected to provide your feedback in order that the management team can better understand your views and expectations. This will be -- this will only take a few minutes to complete, but I'm sure it will be greatly valued by the company. On behalf of the management of Novacyt, I would like to thank you for attending today's presentation, and good afternoon to you all.