Prenetics Global Limited (PRE) Earnings Call Transcript & Summary

Hello. Happy holidays to everyone, and thank you for joining us for the iAccess Alpha Buyside Best Ideas Winter Conference 2024. iAccess Alpha hosts virtual investor conference featuring companies sourced from investors with a track record of generating alpha. Today, you will hear presentations from 11 selected companies. iAccess Alpha holds 4 virtual investor conferences annually, 1 per quarter. And the next event will be held or will be the iAccess Alpha Virtual Best Ideas Spring Investment Conference 2025, scheduled for March 25-26, 2025. Now let's begin with our first presenting company, Prenetics Global Limited. [Operator Instructions] I'd now like to turn the floor over to today's host, Mr. Danny Yeung, Founder and Chief Executive Officer for Prenetics Global Limited. Sir, the floor is yours.

Great. Thank you very much, everyone. Good morning. My name is Danny Yeung, I'm CEO and Co-Founder of Prenetics. Just a short background about myself. I've always been an entrepreneur. I grew up in the U.S., started multiple companies. I moved to Hong Kong back in 2010 to start an e-commerce company that was then subsequently acquired by Groupon. From 2010, 2014, I led Groupon East Asia as their CEO. In 2014, I founded Prenetics and the reason why I founded it was I wanted to create a company that was really invested into health care because at that time, I didn't feel that there was a lot of entrepreneurs tackling in this space. So for about the first 10 years or so, our main business was actually in clinical genetic testing. With COVID, that's where I think we've got a lot of attention globally. We pivoted quite significantly to doing lots of PCR testing in the U.K. as well as in Hong Kong. In fact, we're the leading provider of PCR testing to the Hong Kong government as well as to the U.K. sports teams from basically 2020 to 2023. In 2022, we were able to list on the NASDAQ with roughly about $1 billion valuation. Of course, looking back, yes, it's a little bit significantly inflated given where we're at today. But I feel over the course of the next 20 to 30 minutes, you'll understand what we've been able to do in the past 2 years to really create our own path forward and why we are excited about the upcoming years, especially 2025, '26 and '27, yes. I'll go to the next slide. So this is a high-level overview in terms of our business units, ranging from, again, on the right side, the clinical health business, which we started with clinical genetic testing. We have an existing DTC business called CircleDNA, which is basically selling direct-to-consumer DNA testing, a premium DNA test. We also have a cancer treatment selection business arm called ACT Genomics, which we acquired in 2022. Lastly, on the clinical health piece, we also have Insighta, which is our early cancer detection company. We're now currently in clinical trials here in Asia, okay? But more recently, we feel a big potential in terms of our future growth is actually going to be in the consumer health piece with 2 significant new pieces that we basically announced within the last 4 to 5 months, right? The first piece is Europa Sports. We acquired Europa Sports. It was in a situation where we felt that we can turn around the company quite significantly. I'll go in details more about that. And more recently, I think very excitingly, with IM8. We just launched IM8 roughly 3 weeks ago as a premium supplements brand. And of course, we've gotten a lot of attention due to that fact that David Beckham is our co-founder in IM8. As I mentioned right off the bat-wise, just gives you a very brief snapshot of the last 10 years since 2014. Again, we started off as a clinical genetics testing laboratory. We pivoted quite significantly from the early days, but I think we've been able to build a very solid business ranging from different very serious clinical genomics as well as now going to the consumer health, but we'll also be able to share with you across the next 20, 25 minutes why it's actually very relevant and there are synergies across the different business units, right? This just gives everyone a quick overview in terms of we are -- where we are at today. So as of today-wise, our market cap is roughly USD 63 million. We have 12 million shares outstanding. We made this forecast earlier this year, which we expect to achieve roughly $33 million to $36 million in group revenues. We have 0 debt. I think we have a very strong cash balance of approximately $98 million cash and other short-term assets. And a lot of people ask me, hey, Danny, what happened to the stock over the last 2 years? I'm sure you guys look at Yahoo Finance or whatever, you guys will see it, we've actually dropped quite significantly. And the reality is when we listed in 2022, it was still COVID times. We're still doing very significant revenues in COVID. At the height of COVID, we're doing roughly 40,000 tests on a daily basis. So very significant. Those 3 years, we made roughly about USD 700 million in revenues, had a net profit of over USD 100 million, right? I'm sure everyone can realize it's very difficult to create or sustain another COVID, but we feel in the last 2 years, we've been able to diversify quite significantly into creating sustainable business units. I also want to share in terms of our Board of Directors. Of course, you have myself, Co-Founder and CEO of the company-wise. We also have Ben Cheng as another -- as an independent director. He's formerly with New World Development, C Capital; Winnie Chiu, Independent Director, she's with Dorsett Hospitality. So to provide us a great network here in Asia. Within the last 6 months, given that our new focus is going to be on the U.S. market, we've been also very fortunate to bring on board 2 very experienced executives as Board members, the first one, namely being Kathryn Henry. She currently sits also on the Board of Lululemon, and this is her only other Board position aside from Lululemon being with Prenetics. She's been at Lululemon for approximately the last 8 years, I believe. And previously, she had an operational role at Lululemon at the serious senior level. We also have David Vanderveen. David, he's actually on the call with us today. And David joined initially as a Board member given his background in nutrition and the CPG space. And maybe, David, do you want to just give a quick intro to yourself?

Sure, Danny. Thanks for the introduction. My name is David Vanderveen. I'm -- as Danny mentioned, I'm a Board member and also now the President of the Americas. My background is largely in nutrition and working with athletes and celebrities and ambassadors in that space. I owned an energy drink company and sports nutrition brand called XS from 2001 through 2015. We sold it to -- owned it with partners. We scaled it up from 0 to about $156 million when we sold it to Amway. We're in about 30 countries and then I ran it for them through the earn-out for 3 years, say on for 5, scaled up to almost $0.5 billion. And it's in 60 countries today with a very interesting sports nutrition line that will probably lend a lot of value to where we're going in the future here. But we've had a lot of success post sale, too. I've been working in private equity with -- as an adviser to RX3 Growth with a lot of celebrity and athlete investors investing in consumer growth. And I was excited to get a call from Danny last year or earlier this year and hear about all the plans for IM8 and David Beckham, which made a lot of sense for why I would join Prenetics. And within a short period of time of coming on board, Danny and I were working together in number of projects. He asked me to help him with the operations of Prenetics in the Americas. And we're having a really exciting ride right now. A lot of great things happening that I'm sure Danny will get into. So a pleasure to meet everyone today.

Great. Thank you David.

Thanks, Danny.

So as you guys can see, again, the first part of the business I want to talk to you about, which we've just launched, but we feel is going to be a significant growth catalyst, especially from the early results that we've seen, yes. So IM8 -- so this is a brand that we've launched directly with David Beckham officially and his role is actually a co-founder of the brand, and he also has a roughly 4% stake in the Prenetics company. I think it's very relevant to mention that I met David roughly about 14, 15 months ago in London, just given my business network and et cetera. And then when we met, it was just like a very casual conversation, but I think it was quite clear that obviously, him being a very successful professional athlete and now moving past beyond the professional athlete, he's very involved in overall health and wellness. And he was saying, given Prenetics great scientific background and expertise, is there something that we can do in the supplement space together? Because for him and Victoria, it was always a very big challenge to get their proper supplementation on a daily and a consistent basis. And so that was kind of the initial thesis, how do we simplify the supplement industry. And then one conversation to other, he met with our scientific team, et cetera, et cetera, and then we've struck a partnership, right? But I do believe this speaks volumes in terms of our scientific ability and our ability to create a brand because I'm sure you know David, for the last 30 years or so, people have been constantly asking him to create a brand or invest into a brand doing supplements, but he's rejected them all until today. So I think that's a very big sign of confidence for Prenetics and what we're doing here. I'll skip this slide. Sorry, guys, because it seems like the slide is quite slow to react. But I think the key thing also to understand is that when we got David Beckham on board, we knew we could not just rest on David Beckham. Of course, he has 100 million people on social media that's following him, but we really wanted to create something that's best-in-class, world-class, right? So right off the bat, we set out to get on board some really amazing scientists, namely -- right now, you can see on this chart here, we have basically 6 individuals on SAB, Dr. Dawn Mussallem, she is an oncologist at Mayo Clinic; James Green, the former Chief Scientist of NASA; David Katz, former Founding Director of Yale-Griffin Prevention Research Center; Dr. Suzanne Devkota from Cedars-Sinai and from University of Florida. So individually, all these individuals come together to formulate IM8. At the same time, they come together to help us create a new pipeline of products. And then so what exactly are we creating here, right? I'm just waiting for the slide to come up. So I'm sure you can see, there's a very big opportunity across the supplementation place with VDS, sports nutrition as well as sports drinks and hydration. And as you can see on the next slide here, we do know that celebrity brands have done immensely well across the spectrum, right? You have Kim Kardashian of Skims after 3, 4 years, is already valued at $4 billion, right? You also have Rare Beauty with Selena Gomez. Again, after -- I think, 2, 3 years, they're already valued at $2 billion. So we believe we have a similar opportunity in the supplement space where arguably it's even bigger than the opportunities that I present to you here, right? But again, what's the key products that we're going out to play? So just to share with everyone, we announced -- we actually officially launched IM8 November 18, 2024. So just roughly about 3 weeks ago, right? So we're only coming out with 2 products. The first product we have on the market is called IM8 Daily Ultimate Essentials. And then so this is an all-in-one powder supplement with 92 ingredients that's designed to replace 16 different supplements that you would normally have to take. Because I'm sure you guys are all in the U.S., I mean supplementation is a very common thing. But once you start taking multivitamin, you want to add to it, you want to add your CoQ10, you want to add your probiotics, you want to add your hydration. So once you start doing that, it stacks up, right? And so what we wanted to create something is that, hey, how do we simplify this whole process? With something in a powder format that you drink that tastes amazing. And of course, you guys know in the U.S.-wise, our biggest competition is AG1. AG1, however, if you look at this side-by-side chart is that it's clearly that we've been able to create from a formulation perspective, something significantly better in terms of clinical dosages. So that's been always the bad feedback about AG1A. It's great, but they don't actually have enough clinical dosage in the formulation to create efficacy. But we have created something we believe to get significantly better with 200% more vitamin C, riboflavin and the list goes on and on. Given due to the time aspect here, I'm going to skip this, but this is all on our way website, im8health.com, you can see the side-by-side comparisons. We also -- what sets us apart, as you can see here, is that we also have run clinical trials, which have proven that the product works. In fact, after 30 days, 90% of individuals have felt better energy, 81% have felt greater endurance. Again, given time-wise, I'm just going to skip some of these slides here, focusing on the key slides. But I do want to show to you guys 2 key slides just to show what trajectory we're on based upon the first 3 weeks of launch, right? Again, as a new brand, again, as an entrepreneur-wise, you never know what to expect on a new brand launch. But I think this is quite crazy is that within the last 3 weeks, we've actually already achieved 4,000 orders 100% direct-to-consumer on our website with a 76% subscription rate. And again, this is very surprising to us. That means people really love the brand. They love what they see. They love the background with the science. They love David Beckham, all about it. Our average order value is $106. Our customer acquisition cost, which is something I look at on a daily basis, is right now hovering roughly about $64. But if average order value is $106, this becomes a very profitable business very, very fast, right? And the significance of the subscription rate is very, very important because, a, these 4,000 orders because we're getting such a high subscription rate is going to compound on a monthly basis. So what does this mean for us in 2025? So based upon the first 3 weeks, again, to be fair, we're still early days. We only have 3 weeks of data, but we're able to map this out for 2025, we're able to achieve a revenue of roughly $35 million to $40 million in full year 2025, just alone on IM8. And because, again, we're getting 4,000 orders, we compounded on a monthly basis. We have -- we're forecasting roughly a 6-month customer lifetime value. And if everything maintains by December 2025, our monthly revenue will be USD 7 million plus, right? That would mean that at least on next December 2025, we'll be almost approaching $100 million run rate revenue, right? And again, we haven't even started with TikTok, Amazon. We're going to be duty-free stores in basically 2025 as well. So we feel there's a significant growth driver with IM8 again, where people are loving the product, the product works, and we feel there's a significant gap in the market providing a very high-quality premium supplement that tastes good. So I think that's with IM8. Again, we're incredibly excited about IM8. I'll just kind of really skip through the next few pages in terms of the other parts of the business. As you guys can see here, with Europa, we acquired Europa roughly about 3 months ago. So Europa is a 34-year-old business in the U.S. They used to be one of the largest sports nutrition distribution companies in the U.S. Pre-COVID, they were doing roughly about $250 million to $300 million annual revenues. They got into a bit of trouble because they overinvested during COVID. We had the opportunity to acquire it. And we feel that moving forward-wise, given our pipeline products of IM8 of protein as well as collagen, we believe that there's significant opportunity to utilize that as a distributor channel. Just skipping through some of the slides here. Again with Europa, we work with roughly 100-plus brands. A lot of the key brands, Celsius, Labrada, Defiance, et cetera, all the key brands we work with and we distribute it across 10,000 distribution points across the U.S., right? We'll CircleDNA. I just want to spend a quick minute on this. So we launched this in early 2020 as a direct-to-consumer DNA test that gives individuals about their genetic risk of diseases as well as optimal diet and nutrition. So this is also a premium product where we sell online for roughly USD 350 to USD 400 per test. So we're the only company globally that's been able to sell a premium product. And again, this shows you the value in terms of how we're able to build new brands within Prenetics and do very well from an e-commerce perspective. The next 2 slides just kind of talk to ACT. So ACT again, quite different from our Consumer Health business. But what we are is that we are a leading player in Southeast Asia in targeted therapy treatment. So once someone actually has cancer, we will do a genomic test to identify what's causing that -- what mutations causing cancer and make sure you prescribe the right drug. Now I'm sure people are thinking, well, this is a very different business than our consumer health business. So again, we are in stages of looking at opportunities that we can create value from this business, which includes divesting of this business, but we feel that we are the market leader. This year is roughly generating roughly about USD 20 -- USD 18 million to USD 20 million in revenues and very, very close to breakeven. So -- but we believe this is a business where, again, it's very highly sustainable, but we are looking at opportunities to create more value from this in Prenetics here. The last part of our business, I just want to highlight is basically, we created a joint venture with called Insighta, which is a joint venture with Prof. Dennis Lo. And Prof. Dennis Lo, he is arguably one of the greatest experts or influential scientists in the space of early cancer detection given that his previous company called Cirina was acquired by GRAIL and GRAIL acquires IP for USD 300 million. After he left GRAIL as a scientific co-founder, he wanted to create something where, again, it was much significantly less expensive than GRAIL because I'm sure you guys know in the U.S., GRAIL is a USD 950 test. He wanted to create something which is much more mass market, and we believe we have some -- a test that we can go out to market within the next 3 years at 1/5 the price. So imagine a blood test where you can detect right now, we're working on 3 cancers: liver cancer, lung cancer and prostate cancer for under USD 200. Again, Prof. Dennis Lo, he was also a global inventor of noninvasive prenatal testing back in 1997. So lots of credibility to him and we're very, very excited about the potential with Insighta, given the significant opportunity within early cancer detection. And again, just to mention here, Insighta-wise, last month, we've also made an announcement that Tencent, again, Tencent is a $200 billion to $300 billion listed company, which is a very household name in Mainland China, which is very equivalent to the Facebook of China. They made an investment of $30 million into Insighta, where Prenetics sold our secondary shares. So just alone in terms of our value into Insighta, given our 35% stake is already USD 70 million. So we do believe at the Prenetics level, given all these initiatives and programs that we have in place, especially the growth potential of IM8 that we are significantly undervalued. And the reality is that we haven't gone out to talk to investors in the USA. But once investors understand our story, they see our traction with IM8 and with Europa-wise, I believe there's a great trajectory here. So I think that's it for my side of the presentation here. I know we have 4 minutes to answer on questions. So in terms of the questions, am I -- is it correct? I'm just reading all the questions?

I think we can just go through the questions they have up there right now.

Yes. Okay. Great. So I think the first question is, do you offer sports -- I'm just going -- are your products carrying certified sports designation [ at 2 ] NCAA Division I athletes and having products they could rely on not contain any banned substances is very important? Yes. So the answer to this is 100% yes from day 1. And again, given that we're working with the likes of David Beckham, again, you may have seen on our web page. We're also working with a lot of other additional athletes, namely Dustin Poirier from UFC, TJ DeFalco, he was also a bronze medal winner at the Paris Olympics as well Volleyball. Yes. So we actually are in the process of NSF certifications. From what we know, it's already been certified. However, we're just going through the formalities of getting that approved. But we do expect that in January that we will be able to announce that we're NSF certified for sport, which means that the testing process, every batch is tested for 280-plus contaminants in that product. So certainly, we expect this to be quite significant and again, given the sports opportunity here. The second question is that, do you offer a sports recovery product? Will you offer one if you do not currently? Currently, we do not offer one. So right now, we only have 2 products, right? So the IM8 Daily Essentials, IM8 Daily Longevity. So everything is for the optimal nutrition for today and for longevity for the future, right? However, with that being said, a lot of athletes have already started using IM8 for recovery purposes, just given how much nutrients it has inside as well as electrolytes. So people are already using that. But I can also mention that in towards the end of next year, our future product pipelines are going to be more in towards of sports nutrition, namely protein, 2 parts in terms of a very clean whey protein as well as a very clean plant-based protein and collagen, right? So we feel there's significant opportunities to create something best-in-class. And again, you won't see us launching, let's say, 8 to 10 SKUs on an annual basis, right? Because that's actually just way too much, but every product that we do launch, we believe it will need to definitely be best-in-class, similar to our 2 products into the market today. Next question, given your extremely strong balance sheet, do you have specific plans on what you're focusing this capital on primarily to launch IM8? Have you considered a share repurchase program at all? Great question. I think right now, we want to be very conservative with our capital because I'm sure everyone knows in the market-wise, we're in a very fortunate position to have such a strong cash balance, right? But I think in terms of growth and what we're focusing on, I think IM8, we believe it's a significant opportunity given earlier I mentioned in terms of trajectory-wise, it's quite crazy that for the next 12 months, we can be on a trajectory of $35 million to $40 million in revenue, because I think if you look at any new brand, and again, just a point of reference, another publicly listed company, I mean you guys may know ODDITY. ODDITY is probably about $2.6 billion listed company. I think they launched a new brand called SpoiledChild roughly 2 years ago. Their first year was $22 million. Their second year was $120 million, right? So for us to be able to have a run rate of roughly $25 million to $30 million is extremely positive. $35 million, $40 million, extremely positive coming off the gate for the first 3 weeks. So I think time is up from what I see, but I just want to share with everyone. I think, again, in the last 2 years, honestly, have been quite challenging post-COVID. But right now -- and we've never had a product into the U.S.. But now I think with our renewed focus, renewed energy with IM8, I mean everyone absolutely loves the brand. They love the effects of it. It also very -- and with the robust acquisition that we just did 3, 4 months ago, people see the synergies from the post pipeline. And we believe in the next 3 to 5 years, just alone IM8 can be a multibillion-dollar brand. Again, we have the cash balance to be able to execute in terms of growth. But at the same time, we're also watching expenses and operational costs very, very closely to ensure that IM8 can get to profitability as soon as possible. Yes. So I'll just leave it there in terms of my presentation here, but I really appreciate everyone dialing in. And yes, watch out for our story. I think we'll be making a lot of noise in 2025. Thank you, everyone.

Thank you. Ladies and gentlemen, that concludes the Prenetics Global Limited presentation. You may now disconnect. And please consult the conference agenda for the next presenting company.