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

Good morning, and welcome to the Novacyt investor presentation. [Operator Instructions]. Before we begin, I'd like to submit the following poll. And for the benefit of those joining us from France, [Foreign Language]. I'd now like to hand you over to Lyn Rees. Good morning to you, sir.

Thank you very much, and good morning, everyone, and obviously, thank you for joining us and taking some time up to listen to our interim presentation this morning. Presenting to you today, myself, I'm now the CEO at Novacyt, been in situation since the first of May. Prior to that, I had spent 6 years at Yourgene. And prior to that, I was with BBI. So in the industry for 20-odd years plus, done lot of acquisitions and looking forward to presenting the results today. Alongside me, we have Steve.

Good morning, everyone. Thanks, Lyn. So yes, Steve Gibson, I'm the CFO. Been with Novacyt now for around 7.5 years. And prior to that, I spent just under 12 years at Hewlett Packard in a variety of different roles.

Thank you, Steve. Okay. So just a quick introduction to what it is that we do here at Novacyt. We're an international molecular group, a diagnostics company with a growing portfolio of clinical assays, instrumentation and research tools. And this is how we're basically structuring the business now, as you can see on this slide. We've obviously got the Novacyt Group. On the left-hand side, as I look at it, we've got Yourgene Health, which is our clinical division. For long-standing shareholders of Novacyt, you'd have been aware of the strategy to develop a clinical diagnostics business. Well, that is effectively what the group bought when it bought Yourgene. So we got Yourgene Health, which is clinical IBD assays DNA size selection. We have Primerdesign that sits in the middle, which is research use-only qPCR kits. And then we have our automation piece of our machinery piece, which is IT-IS, our Ranger technology. As a business, we cover human health, predominantly reproductive health, precision medicine and infectious disease. And in non-human applications, we have veterinary animal, food, water, agriculture and plant genomics. In terms of where we're based, the picture you can see on the left is our facility in Manchester. We also have facilities in Southampton and Stokesley and we have a small sales office in Miami, a sales and finance office in Singapore, manufacturing and R&D in Canada, and we have commercial presence in over 65 global territories, either through direct sales or through our distribution network. We're headquartered in Velizy in France, and we listed on the London Stock Exchange and the Euronext Growth Exchange. Currently, Novacyt employs about 240 people. And those numbers were accurate towards the end of June. In terms of our business segments, we're going to touch a lot more on this later. As I mentioned earlier, on the left-hand side, we have our clinical products, predominantly in reproductive health, where we have an NIPT product, a Cystic Fibrosis product and other rapid aneuploidy tests. That side of the business is growing really, really nicely. Steve is going to explain a little bit more around those growth cycles when he goes through the numbers. We also have our precision medicine, which is our pharmacogenomic product, and that's where we put our clinically improved infectious disease products. So Winterplex is the COVID product that you would have known and we have some additional multiplex PCR panels in there as well. In the instrumentation side and DNA, this is our range of technology. For all of those Yourgene shareholders, this is size selection technology that is used when you got your sample and before you sequence your sample and start looking for the DNA. So we've got a next-generation size selection. We've got our automated version of that, and we've got some target enrichment technology. And this is also where IT-IS lives, which is the MyGo, the qPCR hardware capability sets. And then on the right-hand side is our research use only products. This is the old Primerdesign business. This is the business that we've been focused on in the last 6 months getting back to being more quick to respond, more fleet of foot. It's a sort of GBP 5 million business at a high margin. And in there, we have products for human health, agriculture, animal health, environmental as well as our pharmaceutical research services, whole genome sequencing and whole exome sequence. And is this part of the business that responds to pandemics and the like, and we'll touch on that a little bit later on. So I'm going to hand over to Steve now who's going to talk us through the integration.

Thanks, Lyn. Good morning, everyone. Yes, we wanted to provide a bit of an update on how integration has progressed from a cost savings perspective. And if you remember, one of the rationales for the acquisition was that we believe we could deliver savings of around GBP 5 million across the 2 businesses by the end of year 3. So we've completed actions that will deliver that annualized benefit by the end of FY '25. So around 18 months quicker than we had originally planned. And those savings have been made across 4 key categories. So firstly, we refocused the Primerdesign business back to its core DNA of being an RUO business. And that did certainly mean a number of people left the business. We also have 2 sets of management teams and leadership teams and 2 sets of boards, and we need to consolidate them and pick the best of the both teams. We also had a number of external advisers and consultants. And again, where we had duplicates, we picked one and for other services, we terminated them. And then finally, we saw general efficiencies and economies of scale across multiple areas, facilities, costs, insurance costs and recruitment fees. So we have made good progress, but there is still more to go after. Now if we turn to the financial highlights. And obviously, top of the list is the successful resolution of the DHSC dispute and that resulted in a net cash inflow to the business of over GBP 7 million. Now this settlement also triggered a number of accounting adjustments that inflated our gross profit and also our OpEx number in H1. And I'll chat through them more in detail. So from a revenue perspective, we increased year-on-year by GBP 7 million to over GBP 10 million, and that's been driven by the inclusion of Yourgene sales post-acquisition. And Yourgene has seen really strong growth from a pro forma perspective, and it's reproductive half range products of over 30% and also in its core NIPT business of over 5% at the end of H1. It's worth noting that the FY '22 revenue figure of GBP 16.5 million also includes around GBP 13 million of COVID sales. So you can see we've made good progress over the last 3 years and growing the top line. From a gross profit perspective, we delivered GBP 26.5 million or over 250%. However, that's been inflated by the reversal of the GBP 19.8 million, product warranty provision that's no longer required following the resolution of the DHSC dispute. As we remove the impact of this onetime entry, the underlying gross margin was GBP 6.7 million or 65%. Now we were targeting as a business to deliver a margin in the range of 60%, and we've done so. And that's been achieved through strong sales in our PCR range of products. And what we saw is our Primerdesign business delivered a gross margin of over 80%. If you look at the FY '22 and FY '23 gross profit numbers, they were heavily impacted by COVID-19 stock write-offs, the diluted margin that we haven't seen again in 2024. And from an EBITDA perspective, we were broadly flat year-on-year at a loss of GBP 5.6 million. Now the upside that we saw on gross profit was offset by the booking of a GBP 20 million bad debt provision as a result of the DHSC invoice no longer being produced. Now if we move on to look at revenue in a little bit more detail. If we kick off from a business unit perspective, what we're demonstrating here is that the mix has changed substantially year-over-year. So Yourgene now accounts for around 3/4 of our total group revenue and it delivered GBP 7.8 million of revenue in H1. Primerdesign delivered just over GBP 2 million, but this is where you can really see the mixes change year-on-year. Last year, Primerdesign accounted for around 80% of the business and this year, it's just over 20%. If we also look at revenue from a geographic perspective. We remain well balanced and we have a diversified income stream, and we're not reliant on any one region for our revenue. Our biggest region is Europe, and that delivered sales of over GBP 5.5 million. And if we dig into it a little bit deeper, our domestic U.K. market, which is where we have our largest commercial presence, continues to be a key player and delivered over GBP 2.3 million of revenue. Now France generated sales of over GBP 1.3 million, and that's because of our long-established NIPT customer base. And then the Asia Pacific region continues to grow and delivered over 25% of our group revenue. And we've seen there strong demand for our reproductive health range of products and in particular, our Cystic Fibrosis tests. Now if we move on to look at OpEx. This increased to over GBP 32 million as a result of booking a GBP 20 million bad debt provision, following the settlement with DHSC. Now if we remove the impact of this onetime entry, that means our underlying OpEx costs were GBP 12.1 million compared to GBP 7 million in the prior period. And this GBP 5 million increase was driven by the inclusion of Yourgene cost. Now a better way to look at the OpEx cost is to look at H1 '23 on a pro forma basis. And the H1 numbers on a pro forma basis for FY '23 totaled GBP 14.7 million. So it means on a like-for-like basis, we delivered savings of around GBP 2.6 million, or if you annualize them, it's over GBP 5 million. And that's what underpins the integration savings that I talked through earlier. So as I said, look, we've made really good progress on the cost base, but there's still more to go after, and we will still deliver further savings. From a profitability perspective, as I mentioned, EBITDA was broadly flat year-on-year. But in addition to that, we saw exceptional cost totaling just over GBP 8 million, of which the majority related to the DHSC. So there's around GBP 7.5 million of exceptional costs, specifically related to DHSC and the biggest item by far was the DHSC settlement for GBP 5 million. And then in addition to that, there was around GBP 700,000 of other costs that covered restructuring fees and Taiwan divestment fees. So this meant, overall, the group reported a loss after tax attributable to the owners of GBP 17.7 million in H1. Now if we move to the balance sheet, what you'll see that there's been some big swings since year-end, and that's all been driven predominantly by the DHSC settlement. So our trade and other receivables balance has decreased by around GBP 20 million, and it's driven by 2 factors. Firstly, we wrote off the December 2020 DHSC invoice for GBP 24 million, including VAT, as it will no longer be paid, but we offset this by increasing our VAT receivable balance by around GBP 4 million, and that increased to over GBP 12 million. And as investors will know, we issued the RNS in August that was the good news that the HMRC in the U.K. have repaid us the GBP 12 million. Current liabilities has decreased by around GBP 16 million, and that was driven by 2 factors. Firstly, we released the product warranty provision to just under GBP 20 million as it's not required, but this was offset by the booking of the GBP 5 million DHSC settlement in June that we then subsequently paid in July. Now if we turn to the final slide, I'll be presenting. We'll talk through cash flow. So what this slide is showing is that we consumed around GBP 11 million of cash in H1. We closed the period with just under GBP 33 million in the bank. Now it should be noted that some of the cash outflows in H1 are not repeated in H2, such as the contingent consideration and also DHSC-related payments. This slide though, it does exclude the GBP 5 million payment to the DHSC that we made in July and it also excludes the GBP 12 million VAT refund that we received in August because they're post-period events. So if we roll forward a couple of months to the end of August and our closing cash balance was just over GBP 36.5 million. That's the brief financial summary. And if you'd like to see further details, they are on our company website, and I'll hand back to Lyn now.

Thank you, Steve. Okay. So let's talk through some of the operational highlights. So I guess from a corporate perspective, Steve has very nicely articulated the GBP 7 million swing in our favor from a cash perspective. It was just nice to get that overhang away from the business and the shares so we can start to focus now. So thank you to the team that was so instrumental in resolving that DHSC situation. We've also completed the disposal of our Taiwanese facility as well. So as we've spoken about before, we've been positioned in a lot of our APAC customers to direct customers rather than send out customers. So we saw the usage of our lab in Taiwan decrease month-on-month, and we successfully completed the disposal of that business last month or the month before, again, making sure that we've got a clear runway ahead of us as a business to execute our plans in the next 3 years. So pleased with the progress there. I think from a Board position, obviously, you would have seen the announcement this morning and I'd like to formally acknowledge and thank James Wakefield for 9 years of really great service, guiding the business through some real defining acquisitions, driving the business through the uncertainty and the unknown COVID explosion and then the post-COVID cooldown. So thank you, James, for all your support and effort that you put into this organization over the last 9 years. With James leaving, John Brown steps into the Chairman role. John, huge sector experience. I've worked with John closely in the past, really looking forward to him becoming Chairman as we go through this next stage of our growth journey at Novacyt. So really looking forward to work with John. And obviously, myself, Steve and Jo, we are kind of still into our sort of first 5 or 6 months in this role. So pleased with the progress we're making. I'm looking forward to sharing more around our plans in H1 next year from myself, Jo and Steve. IVDR certification, that's a big one for me. The market is changing. The regulatory landscape in Europe is becoming far more challenging, far bigger hurdles to achieve as an organization to be able to effectively sell a product with an IVDR certification. We've invested heavily in that. I'd like to think we're ahead of the curve. We've already had our cystic fibrosis product, which is probably the fastest-growing product in our portfolio right now put through the IVDR process. Next up is our prenatal aneuploidy test. Then our NIPT test will follow. My view on the IVDR certification, it's going to make the market more challenging to operate in. So for quality organizations by Novacyt who have made that investment historically, it means that we're going to be able to get through the IVDR process. But there's going to be a lot of companies that won't be able to single product companies and companies that just simply kind of look forward the investment in IVDR. So I see IVDR as a differentiator in the coming years and I hope that it will lead to less competition and less price pressure in this space. So I'm delighted with the progress that our technical and quality teams have made already on our IVDR journey and look forward to updating you with more news on that in the coming months. In terms of product development, this box looks a little bit empty. It's just got the norovirus and Oysters test in there at the moment. It's this box that we'd expect to fill up significantly over the next 3 years. So the next time that Steve and myself are presenting, we'll be accompanied by Jo Mason, our CSO. And Jo is going to lay out the product development time line, a new product innovation launch date. So you can see what content is coming to market when because I firmly believe that we've got to invest in R&D, we've got this pace across the world. Now we've got this diversification on the geographic and product level that Steve has articulated, we need to invest and get more products into that space. So look forward to sharing those plans with you in due course. I think in terms of our reproductive health care business, our core growth drivers are NIPT testing, our cystic fibrosis testing and our rapid aneuploidy. So let's start with NIPT. I mean we're currently where we sit at the end of September. We're tracking at about -- we're double-digit growth. I think we 12% growth at the moment, Steve. We see that as a result of natural adoption for this technology. More and more parents to be -- want to use this technology. It's quicker. It's safer. It's a more accurate results. We see natural adoption. But also, we've seen quite a lot of competition come out of the marketplace in the last couple of years with favorable reimbursement policies from government, routine national screening now set in place, patient demand rising, all of these things are leading to good growth for us there. I think the key for us moving forward is continuing to refresh our content in NIPT space. I'll share a little bit more about that with you later on. Cystic fibrosis is the biggest, fastest-growing product in the portfolio at the moment. That's got a 30% plus CAGR year-on-year, particularly driven by increased prevalence and rising awareness for CF, approval of new drugs, which means that more of the population is getting tested alongside gene therapies and continuing health screening and reimbursement, specifically in the APAC region. So that product is growing really, really strongly. It would be good to have some additional content around it. So we are looking at bringing additional assays alongside our cystic fibrosis, not assays that we develop themselves, assays that we can outsource from other parties to take advantage of this market growth opportunity. And so when I look at this slide, this is the core of Yourgene. Yourgene was a clinical business that was focused very much on reproductive health and the 2 big products in that space are both growing at double digit at the moment. And we expect that -- and we hope that to continue with the general prevalence of the use of this technology in the marketplace, but also some additional new products that we intend to bring to the market ourselves in coming years. In terms of other opportunities, where we still got our Ranger technology. And so we continue to see that grow. Revenue slightly down year-on-year. That's because we sold more hardware last year and we move into a reagent model this year. That's certainly supporting the margin improvement that we're seeing across the group compared to budget at present, and Ranger remains a key part of our growth strategy because it straddles multiple market segments. It's not just reproductive health care, synthetic biology or fake DNA, it's liquid biopsy, which are becoming more and more the go to kind of test for early diagnosis of cancers. And then there's a plant in animal genomics market as well, which is rapidly expanding. This technology addresses the key industry challenges of sample prep and high-volume requirements for gene synthesis and it's a proven technology now haven't been in the market for 5 years plus. So we now have dual manufacturing capability for Ranger, we can make in the U.K., we can make in Vancouver. We just sold our first NIMBUS product in Europe, which is the largest scale machine that we do. And we continue to see reagent pull-through coming through from that exciting range of instruments that we've taken to market. Precision medicine continues to be a focus for us. It would be good to have some new products alongside this. This is a bit of a product orphan in our portfolio at the moment. And when Yourgene had some funding issues, it was the R&D around that product development that we have to put on hold. So really pleased that -- and the Jo Mason's team, we've been able to reinvigorate our R&D efforts. And I think we definitely need a new DPYD product because the market-leading product that we launched kind of 3 years ago now, some of our competitors have added some additional markers that now make our product look a little bit less punchy compared to some of the new guys in the market. So we've got a new product development aren't working as we stand right now, looking forward to launching that next year and continuing the growth in this exciting space as long as -- as well as putting some additional products and services around that as well to make more of a range sell to market. And then the RUO, that's Primerdesign old straightforward business, 1,200 assays. We can make an assay in a couple of days and get it out to the customer in their hands. We've got a growing pipeline of animal, agriculture, and this is the side of the business that will always be there to deal with things like infectious disease, rises, mini pandemics, et cetera. It's a very, very high-margin business. And effectively, this part of the business should be the cash cow that funds the rest of the business funds the effort we want to make in R&D and our commercial growth plans, et cetera. And again, speak a little bit more about that a bit later on. So if we go into those with a bit more detail, I think where we look at our driving global sales we're making really good progress there. Cystic fibrosis 30%, NIPT, 12%. Our core products are all double-digit growers. As I've already mentioned, we have the first European sale of our NIMBUS product, our highest throughput on the Ranger technology. We have put new NIPT customers in Europe this year in France. In Asia, we've just done the first NIPT system in Panama, in Bogota -- in Colombia, sorry, in Bogota. So we still keep those -- that part of the business growing nicely, and this is why we're seeing the double-digit growth there. We've launched MagBench, which is another one of our automated systems into APAC and Middle East. We've already made quite a lot of progress, I think, over the last 6 months there. Future milestones. Well, the future of NIPT is all about adding additional content. It is my hope that sometime next year, we will have the only IVDR product in the market for NIPT that has microdeletions, the 3 [ trisomy's ] copy number variations. And I think once we've got that product in the market and it's approved, it's very difficult for our potential customers to use lab developed products or an inferior product because once there's an IVDR approved product that ticks all the boxes. The customer base has to kind of use them. So I see the future growth of NIPT come in through that next generation of products that Jo and the team are developing right now. We're also upgrading our cystic fibrosis product. We're not resting on our laurels. It's market-leading at the moment. So we're going to be adding some additional content to that, just the future proof of that product alongside, as I said, the DPYD product investment. And then as we move to a more of a consumer model for Ranger, we'll probably see a dampening of the revenue, but an improvement of the margin. And we're looking to add some functionality to the LightBench technology that looks at fragmentation as well as size analysis, which will significantly reduce the need for capital purchase at this essential stage of the sequencing workflow. So our existing core products, we've got new product development plans coming out around them. We're already seeing really strong double-digit growth, really confident the progress we're making and where the future of those products and services are head in. In terms of IVDR and R&D, I've tried to explain the importance, I think, of IVDR, I think that's a real differentiator for us as a business. And the way it works is if you have an IVDR approve the product in a region, local labs, local hospitals, local research industries, institutes have to use that product rather than non-approved or developed in-house or lab developed tests or RUO or whatever you want to call them. So I think that's going to be game changing for us. So we're going to continue to invest in that. We've already got a cystic fibrosis product through, and we're just to go -- about to go through with our [ QStar ] assay, which is our aneuploidy assay. And I think in the future, more of that to get our first accreditation, get the DPYD update planned and through the accreditation and then make sure we get the NIPT product approvals in a timely manner as we possibly can. When we look at rebuilding the RUO business, as I said, that's predominantly the Primerdesign business. We've launched a norovirus product in oysters. I mean who knew that it was oysters that spread norovirus every Christmas. So we've got a great point-of-care product that sits literally by the sea where the product is obviously brought in untested near the harbor's office, so to speak. We are in the process of updating our monkeypox assay. And I guess a lot of you on this call are -- want to going to know about monkeypox. So the reason we've been quite about monkeypox is it's not really material. I mean we've received orders through June and July and August. Our product is one of 50 probably products available in the market. So it's nowhere near like it was early COVID where Primerdesign had the only product in the market. So we've got more competition. Our product isn't approved as a research use only product. There are some approved products already out there. And because there's a vaccine already available in the marketplace for $100. This isn't another COVID. We will make revenue from it. It will be interesting to see what happens over the winter season because that's typically where you see higher numbers of monkeypox cases. People staying indoors, closer to one another. But yes, I mean, it showed what Primerdesign does. There was a problem. We reacted, put a product in there. We sweated all of our distributors and historical contacts to see if anybody wanted product and we sold some product off the back of it. But we're in the same position for swine flu, for Asian flu, for COVID when it starts again, that's what the business does, it sort of peaks and troughs around these sort of pandemics. But for anyone that's thinking that monkeypox is going to be like COVID, it's not going to be like COVID. We will make some revenue from it, but that is unlikely to be material revenue given the size of the group revenue that we sit today. I think in terms of what the future for this business is to continue to make it fleet of foot. As I said, I want customers to ring up and being able to get a customer asset within 2 or 3 days. I want to be able to ship product anywhere in the world really quickly because I haven't got a big clinical quality procedure around the business. And I think we've made some really strong progress in those areas. We're going to be looking at new agriculture and veterinary products. I think there's a significant market opportunity there. We've got a very complete range and having worked personally in those spaces historically, I think there's more we could be doing there. We've got our customer asset portfolio growth and supporting customer clinical trial builds and bringing more products to market like the DNA extraction kit that works for bowel cancer. That we will have right to then sell into the market. So the research you saw in the business with the old Primerdesign get it back to that sort of GBP 5 million sort of business, splitting out high-margin products and effectively becoming a cash cow, so we can invest that money in further R&D and further commercial expansion. And to accelerate that, the more partnerships we have, the better we're partnering with PacBio still for our Ranger technology. We've got ongoing collaborations with a number of key institutions, and that's around infectious diseases, around reproductive health care, looking at the core segments of our business. I think, longer term, launching more functionality, so the work we've done with PacBio has showed that if we can get fragment analysis alongside our Ranger technology, which is size analysis, we've got a bit of a home run then because it's half the capital equipment purchase that you'd require to do a pre-sequencing work in your sample. So again, when I look at the progress that we're currently making, I'm pleased with the progress. I think a lot of our time has been spent looking at the cost side of the business. Myself and Jo and Steve are only a couple of months into this. Next is -- once we've got that cost base out, we can then really focus on the growth drivers. But from my perspective, they're in really strong shape at the moment. So trying to pull all of that and summarize that together. We're an international business. Steve has demonstrated geographical dependence is well diversified. We're strong across the world. We've built a really strong foundation, GBP 20 million plus revenue that we need to now grow and kick off from. We have a range of reproductive health care products. We have a range of precision medicine products, and we have a range of infectious disease products. So straggling 3 of the fastest-growing markets within the molecular space. We're well ahead, I think, of the integration of Yourgene Health. I think we promised cost savings 18 months down the line, and you'll see from the pro forma analysis that Steve has done today that we've already made GBP 2.5 million savings in the first 6 months of this year. You extrapolate that out for the rest of the year, then the GBP 5 million savings. And as a leadership team, we're still focused on delivering more savings. We think there is more synergy to be had over this business. And we're not going to rest until all of that has been captured and executed. We've got a broader technology portfolio, stronger end-to-end offering. So we've got the automation. We've got the machine capability, and we got the product development and manufacturing, which is why we're looking forward to continued growth for those key product areas because we can make them in lots of different places, and we've got good flexibility there. As I said, we completed the actions that have delivered the annual cost reductions. The margin is up significantly on where we thought it would be because we're focusing on prioritizing the high-margin products and really pushing our efforts to take them to market. And to really get the future growth that this team wants to deliver for our shareholders, for our Board is having that strategic investment in R&D we need new products. When Yourgene had these fundraising challenges, it was R&D that we cut. So some of those programs were absolutely stopped in this tracks. I think when Novacyt started going on a clinical journey, that is a long process. And they've absolutely expedited that by buying Yourgene and having all of that already existed in 1 division which makes it easier to have a clinical division, a research use-only division and then these analytical instruments divisions. So the business is, I think, in a really strong place. We've got great cash in the bank. And if you look at some of the comparator companies of similar size in a similar market space, we've got double-digit growth in the key product areas. We've got a lot of cash in the bank and we've got an experienced team to deliver this from a well-funded manufacturing base. So our plan, I think, is to come out in another couple of months, sometime in H1 with much more granularity around the numbers, much more specifically around the costs because everyone wants to know how long is our cash going to last for. I can say now, we're comfortably confident that our cash flow last long enough for us to reach profitability, but we're not resting on our borrowers there, and we will go after additional savings to further protect that cash. But we've got good cash in the bank. We've got good existing products. We've got a new pipeline of products coming through, and we're very, very excited about the future. So thank you for listening, everyone. I think I hand back now to the question-and-answer side.

We have received a number of questions, both pre-submitted and throughout today's presentation. So I'll just dive in with the first one here. I think you did touch on it in your presentation, but maybe some more color, if you can add some more color, that would be great. What was the opportunity for Novacyt in monkeypox?

Yes. I mean I still think it's early doors in monkeypox. There's a lot of talk. There's a lot of tenders out there at the moment. So I think we'll have a bit more news over the next couple of months. Existing research use only [ Ginseng ], generated some revenues in July and August. We're entering some tenders. But those numbers aren't material at group level. The market is far more saturated, as I mentioned earlier, compared to the COVID-19 pandemic, lots of available products, vaccines, et cetera. So it's not like COVID. We are currently updating our assay to get this Clade 1b strain in it seems to be the most dangerous strain, the strain that's more infectious than any other strains. And there's not a product in the market currently with that. So we do have an opportunity to differentiate there. We've got the R&D team working on that product as we speak. And we will continue to monitor and assess whether there's going to be enough demand longer term to take this into a test for clinical use to get the IVDR approval in it because as I said, at the moment, is research-use only. So we've reacted, we've seen some incremental sales, we're not material. The opportunity could develop more as we go into what is traditionally a busier period for this type of infectious disease, and we'll keep you updated.

The next question here. When will the integration of Yourgene be complete?

I think it's largely complete now. Steve has very clearly articulated where we save money and how we got to those sort of GBP 5 million cost savings. We've refocused Primerdesign back into the RUO market. The cost base is down significantly there. But more importantly, the speed of which we respond to our customers is up significantly. Eliminated the duplicate corporate functions, integrated all key operational departments. We've gone through a big product rationalization. So that's where we maybe appear to be losing some revenues at the moment because there were certain products that we made that we just didn't make any money on or unprofitable. So there's a big rationalization of products and services that has happened and is continuing. And we've also rationalized our distributor network. So I think we're ahead of the curve on the cost savings that we said. There is more to come, and yes, I'm really pleased with the way the integration is working out. By H1 next year, we'll have all of this work done. So myself, Steve and Jo will be presenting to you a very clean cost line, a very clear understanding of where these products are coming from in terms of new content and when they come into market and some clarity on our future growth expectations as well.

The next question asks if you're evaluating future M&A opportunities.

Not at the moment. I mean, our current focus is on the strategic things that we mentioned today, the rationalization or the integration of Yourgene and Novacyt. We're investing in R&D. We've seen organically, that's where new products bring new revenues. So we're putting a chunk of money into R&D to bring some new products to market. And with this and our combined commercial strength, we think that's more enough of an organic story to take to market. Obviously, if things drop on our lap, and of interest, we will consider them. But our focus at the moment is very much organic growth.

Turning to next question. Would you consider a trade sale to a larger company?

I'll hand over to Steve for this.

Yes. So similar answers, I think, really what Lyn gave from an M&A perspective, right? Our focus as a business is to continue to grow the new business, the combined Novacyt-Yourgene business, right, and making a success of it. But clearly, if an opportunity comes along, it's in the best interest of shareholders, then we would consider it absolutely.

When can we expect a more detailed update or some more guidance?

Yes. I mean I keep saying H1 next year, guys, and that's the date. Sorry, I'm not going to be more specific around that at the moment because we're still working through our plans. I mean this new leadership team has been in place for just 5 months, we've integrated 2 complex businesses. We've demonstrated on a pro forma basis that we've got the GBP 5 million cost savings already under our belt. We concluded the DHSC dispute. We sold the Taiwanese business. So I think the team has done a good job. The foundations are certainly in place to accelerate growth around the product portfolio in the years to come. We look forward to updating the market with that and going back to more of a traditional market model of numbers in the market, analysts reporting on us in H1 next year.

Understood. Can you provide an update on the progress of our RUO business? And can you provide an update on the multiplex infectious disease products?

Yes. So again, we've kind of touched on this in the presentation. That old Primerdesign business sits at about 1,200 assays at the moment. I think we delivered close to 500 custom assays. In June, we launched a real-time PCR workflow for rapid on-site detection of norovirus. It's not going to be a massive market. There aren't that many oysters that are farmed, but it shows that you can put some point-of-care technology right in the field of use, get a clinical results. So that could be used in an animal farm and in crop farming, just doesn't have to be in shellfish. So what we're going out and doing here is demonstrating that we get a hardware and an assay that can be run next to the place where you harvest the product or you source the product. So it doesn't need to go to a central lab. Products [ aren't ] sent on the road at risk because they haven't had a pass or fail result with regard to what you're testing. So I think that's all about proving the model, and we just chosen norovirus to do that. Additional aquaculture and veterinary products will be following very quickly from this team. But as part of this positive product evaluation that we did, we decided not to continue with the clinical side of this business. It was slowing things down. It was very expensive and effectively Novacyt bought that capability when they acquired Yourgene. So the business is moving much back to the business that I remember Primerdesign being nice to be customer Primerdesign. Quick, greater customer service, great quality product, but from a research perspective, not a big clinical product, and easy to get your hands on. And I'm pleased with the progress that we're making there so far.

Moving to the next question. What is the impact of your global demonstration/training events?

Yes. I mean I think this is something we spoke about last time, this was around creating awareness fundamentally, we are a relatively small brand compared to the likes of Illumina and PacBio, et cetera. So we've been able to partner with those guys, created awareness for us. It's from these global demonstrations that actually the request came back from the customer base to add fragmentation analysis to the Ranger technology. So that's a product upgrade that was driven by market feedback. We're working on that now. And yes, I think the purpose of these events is fundamentally educate customers, make them aware of our product and hopefully lead to better sales of our products. And predominantly, it's NIPT and the cystic fibrosis and Ranger that are going out and being promoted in these things at the moment, and we can see the results and the growth rates we get in there.

That's great. The next question, why is there lack of news flow?

Okay. Well, I mean, the way the stock market works is we can only announce news that's material. So we haven't had any material news. The new management team has been in place for just 5 months. That's a relatively short period of time to bring together 2 quite complex businesses. We've got to protect the culture. We got to protect the product efficacy. We've got to protect existing customers. You don't rush those things. You only lose a customer once it's very hard to win them back. So we've taken our time with the integration and working hard to combine the businesses and making sure that when we come out to market in H1 next year, we have a very, very understood cost base, a very clear understanding of the growth opportunities of the business and a very clear time line on when we're going to be launching our new products and what investment we're going to be making into that. So I appreciate everyone's patience. I'm sure you'd all like to hear more news. But we will come to market, as I said, in H1 next year with all of these stories refreshed in a very, very clear picture of where the business is headed and what milestones you should be evaluating our performance on.

And maybe time just for one more question. Can you explain the reason for publishing the RNS VAT reimbursement in the middle of the day?

That's a Steve question.

Yes, it's an interesting question. Let me talk about that. I think the key thing is we're fully aware of what our AIM obligations are, right, to announce without delay. But maybe let me be a bit on the bones in terms of how it works practically, right? So we have multiple bank accounts as a business. So obviously, the team coming in the morning and once they have identified that the large cash payment have dropped into our bank, they then inform me, and then we kick in to gear and get the ball rolling on getting the announcement ready. Now obviously, it has to go through a number of internal reviews and then external reviews. And I was really pleased that we announced it within about 3 hours of finding out, right. So we announced it without delay.

Thank you very much, and thank you for answering those questions you can from investors. Of course, the company can review all the questions that have been submitted today, and we'll publish those responses on the Investor Meet Company platform. Just before redirecting investors to provide you with their feedback, it is particularly important to you both. Lynn, could I just ask you for a few closing comments?

Yes, certainly. And again, thank you, shareholders, for being supportive of our business and for being patient as we go through this transformational integration of Yourgene into the Novacyt Group. I think the couple of things I'd just like to just remind you on before you leave is that our core products are growing really well. Cystic fibrosis up 30%, NIPT up 12%, as we said at the moment. A fantastic result, I think, with the DHSC dispute having a net GBP 7 million swing in our favor, puts us in a cash position of around about GBP 36 million for this time in the business which compared to many organizations in the same size and the same market for us, we are streets ahead from a cash perspective. So I think that's really, really strong for us. We're putting a lot of investment into new content. So we're reinvesting into R&D in what I think are the right areas for R&D to put new products around existing products or to improve existing products that are already taking market share in market. We've got the IVDR framework that's come in that I think will change the market space. It will reduce the number of competitors in there. It will make it harder for -- or make it easier for high-quality companies like ourselves to take our products to market. So I'm really looking forward to ride in that IVDR wave. And then there's product rationalization that's going on in the background and more looking for additional synergy opportunities means that Steve, myself and Jo will work closely with the rest of the Board to protect that GBP 36 million cash flow as long as we can. We believe we've got more than enough to get us through to profitability and with the new products that we're going to be bringing to the market and the existing products that we're going to be bringing to the market, we expect to see some positive updates over the next couple of years. So we look forward to coming back in H1 next year and presenting these stories for the first time to you and reimagining or breathing life into our investment story, I think is one of our next key milestones, but leave us have another couple of months just to finish off the rationalization work, finish off the synergy work, and we look forward to seeing you in the new year.

That's great, Lyn. Steve. Thank you very much for updating investors today. Could I please ask investors not to close the session as you'll now be automatically redirected to provide your feedback in order the management team can better understand your views and expectations. It's going to take a few moments to complete, but I'm sure it will be greatly valued by the company. On behalf of the management team of Novacyt, I would like to thank you for attending today's presentation, and good afternoon to you all.