Physiomics Plc (PYC) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen. Welcome to the Physiomics business update presentation. [Operator Instructions] Before we begin, we'd like to submit the following poll. And if you give that your kind attention, I'm sure the company will be most grateful. And I'd now like to hand over to CEO, Jim Millen. Good afternoon.

Thank you very much, and welcome to a company update for Physiomics, on Friday, the 17th of November, which I'll be doing together with my colleague, Dr. Peter Sargent. So what we'll cover today is just a brief introduction. Peter's going to speak mainly to the slides on our core business. I'll provide a brief update on the precision medicine initiative, especially in light of the recent Grant award that was announced just very recently. I'd say a few words about the biostatistics initiative that we've also flagged recently. And then we will go to a summary and the questions -- both the questions that were submitted before but also any that you guys might want to ask over the course of the meeting. And obviously, we'll not be able to answer absolutely everyone, but I'll do my best to get through as many as possible as usual. So first of all, just a few words of welcome to Peter, obviously, for a little while now, I've been acting as CEO and Chairman. And it is great to have Peter on board. He's an extremely experienced consultant and we'll be able to take some of the weight off my shoulders in terms of the day-to-day operational aspects of running the business, comes with a wealth of very relevant experience and is already proving his worth within the company. Also just to note, as announced fairly recently that we've moved office from The Oxford Science Park to Bee House. There is nothing sort of sinister in this. We simply needed a more flexible working environment as many other companies we're not -- not everybody is in the office every day, and we wanted a space that we could flex up or down depending on the number of people and that will actually lead to a fairly material cost saving for us over the course of each year that we stay here. So it's been a good move so far. And we will be holding our AGM here next week as we've also announced. So I'm going to hand over now to Dr. Peter Sargent and I will be back in 3 or 4 slides time.

Thank you, Jim. So as Jim said, my name is Peter Sargent and I joined just over 2.5 months ago as the new COO. So just a bit about myself -- my background before I start giving an update. So I have a Ph.D. in biochemistry and biophysics. Since then, I've worked in a number of different roles across both industry and government organizations, leading R&D and commercial teams. Just to give you a flavor for the last 2 roles, I worked, I took part in. So I was Head of Business Development for the National Institute for Health and Care Research, while supporting a wide variety of life science organizations from around the world, access research capabilities and facilities and infrastructure here in the U.K. as well as funding. And then prior to joining Physiomics, I was working for Syneos Health Consultant as a Strategic and Trustee Consultant, Management Consultants; primarily focused on supporting biopharma and start emerging talk to biopharma with R&D strategy and large-scale transformation projects. So it's a pleasure being here today and having this opportunity to take part in this company update and present to you all online. So to start, just as a reminder, around who we are as Physiomics. We are primarily a consultancy business, focused around supporting companies, developing oncology therapeutics with mathematical modeling. The -- I'll go into a bit more detail on what that service, that core service, ultimately looks like. But over the years, when developing the business and growing the business, we grew the business on a foundation of 3 main capabilities and expertise. The first one, as shown in this slide, is around quantitative pharmacology. So this is around looking at how drugs behave and interact within biological systems like mainly humans or animal models, data sciences, and biostats. So this is the ability to be able to curate and analyze large and complex data sets and derive an insights from those data sets, and then our understanding cancer biology. So now having worked on, as a business, on over 100 client projects and modeled over 135 models for clients, we're looking at how we can grow and add value to the business, leveraging these capabilities. This is where as you can see here, the -- we've been exploring new services around biostatistics and also precision medicine. So over the next few slides, I will give an update, as Jim mentioned, around the core mathematical modeling service and then I'll pass back to Jim regarding an update on precision medicine and biostats. So to focus in on the core mathematical modeling service. So as a reminder, this is a service we use to support clients gather additional insight from their R&D data or data derived from the public domain. That really enables them to kind of better design their R&D programs and meet the increase in regulatory requirements. So we do this by leveraging a wide range of tools and models including kind of industry standard tools, bespoke models which we design and develop for our clients and also our propriety tools such as the virtual tumor models, really to analyze this data and derive these insights. As I mentioned in the previous slide, our primary focus has been to date around oncology. However, a lot of these techniques and tools can be applied to a wide range of therapeutic carriers and drug modalities. And this is something which we have been -- we're keen to explore further going forward. And just as an example there out of a recent conference we attended, we have been speaking initial -- had an initial conversations with clients in both the neurological space and also kind of immunological space. So we are exploring opportunities in a different subset of class. So talking about our breadth of service with our clients. So we can support companies across the R&D continuum, from as far upstream as discovery right through to kind of translation into the clinic. I won't go through each of these points in any detail. I think the slide is probably self-explanatory and to that extent. But I just wanted to highlight, I guess, 3 main areas in which we support our clients with. The first area is around supporting clients gather deeper insights and generating predictions around that behavior of the drug, which they can then take to investors to support an investor discussions, which is obviously particularly important for those companies looking to raise funds or out-license their drugs. The second area is really around support our clients in regulatory activities such as kind of IND, CTA submissions and applications, and generating the required data and to ensure that those applications and submissions are successful. And the third area is to support our clients to help them gain deeper insights to support R&D decisions. So how can they make smarter decisions and accelerate their R&D programs. So where are we with our core business and kind of the success we've had so far. So over the last year, we've had a concerted effort in our business development and marketing activities, we have attended some key international and local events whilst kind of leveraging a range of different marketing strategies to really help kind of gather momentum in that pipeline. As an example of some of the events last week, myself and our Head of Business Development, has attended by Europe in Munich, where we had the opportunity to meet over 25 potential clients, some existing clients just kind of continue and build on our relationships with them, but the event yielded some new opportunities as well to some new leads. And then prior to that, I think back in September, a few of my other colleagues attended the AACR-EORTC event in Boston, which, again, was successful and enabled us to present some of the work we did with a previous client. So post the presentation and also meet some new clients. So these -- this kind of emphasis on business development and marketing and getting out there, meeting customers face-to-face is certainly yielding a positive momentum in our pipeline. And we've just put some numbers here to give you an example of where we are as of this week. So looking at our pipeline from a high-level perspective, we are currently actively pursuing 36 leads. What I mean by leads is very early discussions we've had with clients where there's a positive outcome and the client is keen to engage in further conversation. There are 19 active opportunities within our pipeline. So this is, I guess, the next stage dam, whereby there's a specific project or kind of opportunity identified with the client, and we are continuing discussions with that. Based on those 19 opportunities and out of 19 opportunities, 5 are at the proposal stage. So that is where either a proposal is being drafted up or as with the client and under review. I must emphasize, obviously, this is just a snapshot of our pipeline. So as I'm sure you're all aware, there is a natural attrition rate. Unfortunately, not all of those 19 opportunities will land as a contracted project. But hopefully, we will be able to kind of progress a few of those and deliver those into the business and as contracts in the near term. When you're looking at the mix of those opportunities, the types of clients repeat versus new, I think there's a healthy mix there by 50 -- approximately 50-50, would be new. I think the repeat shows to me that the clients, we are currently engaging with and have delivered projects for are happy and they see the value of our work, to the extent that they want to be engage with us. So I think that is a good story. I think the -- but then having a flow of new opportunities in the business is obviously good for our growing -- our pipeline and our revenue whilst trying to derisk the pipeline at the same time. So not relying too heavily on 1 or 2 companies, bringing in new clients into the business. So at the moment, the value of our pipeline and stated here. So this is a non-risk-adjusted pipeline is approximately the 1 million mark. But again, I must reemphasize that these opportunities, there are natural attrition. So some of these will drop away. But hopefully, with the continued business development efforts, we'll then be able to refill the pipe at the top end to ensure that there is a continued kind of flow of opportunities. So how that pipeline is translating into projects? So to date, at this point in time, there are 9 active -- 9 contracted projects, currently being worked on and they include the 3, which we announced back in August, so Bicycle, Numab and Merck. Out of these 9 projects, 7 are currently active and 2 awaiting data and on hold. I must say at this point that it is quite normal for projects to have these kind of natural pauses because quite often when we run a project, we will create models based on available data at that time. And then we need to have a pause whilst our clients then generates the next lot of data to be fed into the model. If you look at those 9 projects, they are made up of 5 companies, 3 of them I mentioned it before and our logos are in the slide here. So I think it's a nice mix of large pharma and kind of emerging -- kind of mid-tier biopharma. And then to our Research Institute, so one being CR-UK. So hopefully, you can see there's a nice mix of clients. So the last slide I wanted to touch on before passing back to Jim, is really kind of thinking about the future of core business. I think looking at, I guess, market trends and the kind of the pressures on the market, I think you can always see that the volume and complexity of R&D data have been generated into our development programs is ever increasing. And at the same time, there is kind of increasing pressures from regulatory bodies for companies to utilize that extra data -- that the breadth of the data using tools such as mathematical modeling and the FDA's kind of initiative around Project Optimus just highlights that. So our focus going forward is to continue to grow and diversify our client base, making sure that we don't rely too heavily on 1 or 2 clients and keep them bringing in new clients to kind of grow the business. We will focus on broadening our kind of focus to other therapeutic areas and drug modalities. An example of that, I mentioned around early on in my slides in the neurological space, we're also speaking to a company with advanced therapies at the moment -- advanced therapy at the moment. So again, looking at how we can support different drug modalities. We will continue increasing efforts in our BDM marketing. I think one of the challenges we have as a business is around messaging. We have a quite a complicated offering and been able to communicate that often effectively to a wider audience and can be challenging often. So we have really working on that. We're looking at how we can reach into both the markets, we've currently been working into, things like Europe and the East Coast, but look at kind of new markets, leveraging some of the organizations across the U.K. to help us enter into those markets. And we'll obviously keep a momentum around from events, presentations and publications. So just to kind of finish off, I think there's a couple of other areas. There's one area, which we are keen to explore in more detail going forward is how we can leverage partnerships or other service providers to reach out to new clients and also underpinning all of that kind of always outward facing, client facing activity is how we continue to strengthen our operations to ensuring that we deliver excellence and build new capabilities, which will put us in good stead for the future. So based on that, I will pass back to Jim. Thank you very much.

Thank you very much indeed, Pete. So just picking up where Pete left off. Just to talk a little bit about an update on the Precision Medicine initiative. As you all know that the story is to date is that we've developed a tool supported by some Innovate U.K. and NIHR funding, completed an initial observational clinical study done in Portsmouth Partner, which reported out -- that is the -- well, last Christmas, which basically confirms the ability of the tool to model the timing and extent of neutropenia following chemotherapy and specifically docetaxel in prostate cancer. We did identify that in order to make the tool work in optimally, it requires some additional -- very simple but additional blood tests over and beyond what would normally be included in the standard of care. And that was potentially a challenge for the commercialization of the tool. So we started looking for solutions to that problem. And again, as announced earlier this year, we entered into a partnership with Beyond Blood Diagnostics, which is a small company like ourselves, which is developing a device-based technology to be able to do the sort of blood tests that are normally done in a hospital in a primary care setting and possibly even in the patient's own home. So that partnership has now progressed to a Grant and I'll come on to talk about that just momentarily. The other piece of feedback that we got from the work we've done in personalized medicine to date, is that, although it's great to be able to predict neutropenia, what would be even more interesting and potentially more commercially valuable would be to be able to predict the utility of particular expensive biological drug called GCSF, which is used to counteract the neutropenia and is currently used in a somewhat empirical fashion. So a little bit blindly by clinicians, they're worried about perhaps an elderly frail patient who they don't want to get neutropenic and become ill. They might almost prophylactically prescribe them this biological drug. But we know that it's probably being overused and any guidance that could be provided to clinicians as to when would be the right circumstances to use it and when not, could potentially be valuable in terms of optimizing its use and potentially saving money and healthcare resources for payers. So the upshot of all of that was that we got together with Beyond Blood and with a new clinical partner, Blackpool Hospitals Foundation NHS Trust, I believe they're called, to get them their full title. And we made a Grant application to a call that was jointly organized by Innovate U.K. and OSF. And we were very pleased to recently announce that we were awarded that Grant to conduct a further trial called Predicton up in Blackpool. And that will focus more specifically on trying to optimize the tool to incorporate consideration of GCSF with the objective of coming up with a tool that can actually help to make some recommendations that will optimize the use of the product. So we'll help to advise clinicians when it will be right or not right for an individual patient. It's a substantial project. So the total project cost between all of the partners is over GBP 0.5 million. So that makes it by far, the biggest such project that we've been involved with. We, as part of the project, we'll receive GBP 137,000 which is 70% of our total costs. Our total cost being more in the region of about GBP 170,000-odd. But just to note because there were a couple of questions on this, that isn't a cash cost to us. That's really the cost of our staff who will be working on the project. So if you want to look at it, I mean, the way I look at it is it's effectively a subsidy to the employment of people, most of whom we're already employing anyway. And another way to look at it is that if we wanted to do this and we didn't have the grant, then we would have to fully fund it ourselves. So either way, I think it's really good news. We're really excited about this project. And we're already starting to work with both Beyond Blood and with Blackpool to scope out that clinical trial, which we hope will start next year. Another question that I had and I know I'm kind of preempting the Q&A was, well, does that mean we won't hear anything until October 2025. We will obviously be able to provide you with interim updates on things such as when the protocol gets approved, when we start to recruit patients and so on and so forth, just as we did with the PARTNER study. Obviously, the most interesting stuff does come at the end. But in the meantime, we continue to have a relationship with Beyond Blood and also -- sorry, with DoseMe in the U.S. So we have ongoing discussions with them and also are exploring other potential uses of the tool in its current form. But we do think that this project is particularly exciting because it precisely addresses the 2 main potential impediments to making this work. One of which was, well, my patients have to come back to hospital and they don't necessarily want them to do that or they don't necessarily want to do that. Well, potentially with a tool such as the one that Beyond Blood is developing, they won't need to go back to a hospital. They can go to their GP clinic. They can have someone come around in a mobile unit and do the test. And ultimately, the hope is, that they can even do that test at home. And then the second factor that we're aiming to focus on here is the use of GCSF. So I think this Grant project nicely addresses both of those. So that's all I was going to say on that for the time being. I will check the Q&A at the end and just see if there are any other specific questions. But as I said, very excited to be embarking on this further project. Then just to say a little bit about biostatistics. Some people call this biometrics, by the way. So if you see the word biometrics, then you can read it as biostatistics and vice versa. It does comprise a number of different activities within a typical sort of R&D process. So there are elements of biostatistics involved in the design of studies, in the analysis of the data that comes out of studies, in the management of that data and then the reporting of the results to regulatory authorities. We already do a small amount of what you might call biostatistics work in the -- with some of our plants, we do support the statistical design of their Phase I studies in parallel with the modeling projects that we do. And it was that -- for that reason that we felt, hey, we already have some overlap here with the field of biostatistics. So why not push that envelope a little bit and see if we can get maybe some more projects in that area -- perhaps projects that combine modeling and trial design, but also perhaps maybe we can get some projects that focus exclusively on trial design, also on analysis and reporting. So I think in all of these areas, we do have strong existing capabilities that can be leveraged in order to work more specifically on projects of this nature. In order to get us going on that, we made an external recruitment, which was also announced recently. It's clearly going to take a little bit of time to set up and get our feet under the table in this new area. Although we do have the advantage that we can go to a number of existing clients who we know are already use these sorts of services and start to talk to them about that. So we're not starting completely from a standing start. I think in this first year of the services operation, it will be a modest net investment although we do expect to see some revenues and when they come in, we will announce them. And then we hope that from its second full year of operation onwards, that it would be a net contributor towards in terms of cash and profitability. So that's our objective and we will revisit that. As I said, it's early days at the moment, but we'll revisit that as soon as we're able to give you an update on progress. So just to summarize, we remain confident that we have very solid foundations in the core modeling business. I won't repeat everything that I said in my April update, but clearly, we had a difficult year last financial year as a result of a reduction in the volume of work that came from our largest client, Merck, and also, unfortunately, from the delaying or cancellation of 2 large projects, just as was announced, I think, in April this year. However, the business development and marketing teams have done a fantastic job to help us diversify our client base such that we've moved from being, I think we said about 85% Merck in 2019 financial year to be less than 40% in the financial year, which has just gone. So we have really worked hard to build up our non-work client base. That's mainly small and medium-sized biotech businesses. And that client base continues to grow and that's evidenced in the pipeline, which Pete talked a little bit about earlier and which we also talked a little bit about in our full year results announcement. So I think we've already covered the increased business development, marketing efforts there. We continue to get very positive feedback. So we do have a lot of repeat business and I think that's a testament to the fact that the team does a good job and the insights that we generate are highly valued by the clients that we work with. They're also very willing to do thought leadership activities such as joint poster presentations like the one at URTC and Boston that Pete mentioned, but also joint publications, and we're currently working on 2 publications full peer review publications with clients. Obviously, they haven't yet been submitted. So we can't guarantee that they'll get published at this point. But we're substantially quite a long way through developing those 2. And there's another one that might come out of the last PARTNER study as well. So we're very pleased that we're doing more in terms of getting thought leadership out there. Also on the social media front, you will have noticed that, we've started to push out a regular newsletter to clients. And that's also generated a lot of heightened awareness of our abilities and think that will help us in our marketing drive as well. Precision Medicine, we're very excited about. I won't repeat everything I've said, but there is a substantial contribution towards the cost of that project in terms of cash GBP 137,000 over a couple of years. I think about the GBP 40,000 of that will probably be in the current financial year, just for your information, but that's very substantial. The other thing I forgot to mention about that, of course, is that in the last NIHR funded grant for partner, I think of the GBP 130,000-odd value of the project, more than half of that went to Portsmouth to pay for the trial. In this case, you'll notice that the NHS Trust, which is actually doing the trial is a partner in the Grant. And so there's GBP 100,000 going directly to Blackpool to pay for that study. So the entirety of the GBP 137,000 subsidy to Physiomics is coming to Physiomics and not then going back out of the door to a third party. So in fact, it's -- the value that we're getting out of that grant is really the GBP 137,000 to Physiomics plus the GBP 100,000 granted to Blackpool in terms of it pays for the study that's going to generate the data that we need. So it's even, I think, slightly better picture than perhaps I originally painted. And then finally, the new services line in terms of biostats and then potentially other related areas in future, we also see it as a material growth driver going forward.

So I think with that said, I will move across to the questions. I'll start with the questions that came in prior to and in the lead up to this meeting and then I'll take a look at the chat room and see if there are other questions that may not already have been addressed, and if there are, and if we can answer them, then we'll go to those as well. So please bear with me. So we obviously had some questions about the last raise. And I apologize that we felt that, that was what was in the best interest of the company in the summer. As I've mentioned already, we had a difficult year for a combination of reasons, partly because of Merck significantly reducing its outsourcing to all players in the outsourcing business, right? So it wasn't a Physiomics specific phenomenon. It was simply a decision that was made and very publicly announced a large company at the beginning of this calendar year. And then secondly, there were 2 large projects, which we thought we got 99% of the weight the finish post, but which then were pushed out. And unfortunately, they haven't come back yet. But the team has done a great job in replacing those in the pipeline and the pipeline still looks very strong even without those 2 projects. Those 2 projects may yet come back by the way. They're not canceled, they're just delayed at this point. So as and when they come back, then we'll add them back into the pipeline. So yes, I mean all I can really say about the raise is that the Board felt it was the right thing to do. Obviously, we apologize that there was a negative financial impact from existing shareholders. We are also a number of the senior executive team existing shareholders and we were also impacted. So it wasn't a decision that we took lightly. There -- I'll just acknowledge this, but without being able to answer it, there were a number of questions as they always are about why specific executives or Board members or combinations of the above, don't buy shares or shouldn't -- don't buy more shares than they have been buying. Well, for a start, I can't comment, if we were intending to buy shares, then clearly, I wouldn't be able to tell you for market reasons. But I can only repeat what I said before, which is that the Board doesn't have a policy on whether directors should buy shares. It's up to individual directors. We're not biotech millionaires at this point in time. We work hard for modest salaries in order to support the business. We make share purchases where we feel that we are able to and we will continue to do that, I'm sure, going forward, but we can't make any specific commitments and I'm sure you wouldn't understand that. So there's a question about our contact with DoseMe. And I think I addressed this a little bit in the slide that I spoke to on personalized medicine. I think DoseMe has been a really critically important relationship for us for 2 reasons because it really enabled us to kind of market test the offering that as it stood up to this point in time and it gave us a couple of critical pieces of feedback, which we are addressing. The first piece of feedback and you're really going to repeat what I said earlier. The first piece of feedback is that having patients come back in for multiple additional blood tests is likely to be problematic for some institutions and patients. So that's what led us to cast around to look for opportunities such as that with beyond blood whereby we can partner with an entity, which has a tool which could remove the need for those patients to come in back into hospital. And that would make it far, far easier to get those tests and would really facilitate the utilization of the tool as it stands. And then the second really helpful feedback that we got from that relationship up to this point in time was to maybe consider focusing on GCSF. So we've really absorbed that both of those pieces of feedback and we are -- the -- both of them integrated into the most recent Grant project and we're also thinking about other ways in which we can address that. We are still in touch with DoseMe and we're exploring other things that we can do with them in the meantime as and when we reach any material conclusions with those discussions, then we will let you guys know. So next question. So there was a question on the grant funding and the nature of the subsidy, which I think I've addressed. So as many of you will be aware, Innovate U.K. grant funds provide 70% funding to SMEs. It's actually less to bigger companies. I think it's 50% to bigger companies. On the other hand, an IHR funding, which was the source of the i4i partner funding that paid for the PARTNER study is 100% funded. So there's a range there but Innovate is at 70%. So if the project is costing GBP 100,000, for example, then you get GBP 70,000. However, as I pointed out earlier for Physiomics, those costs are primarily staff costs. So to some extent, there are already some costs and we consider this a nice deal. So it's a heavy subsidy of people who are already working for the company for the most part in order that they can work on a project that we think will be quite value adding. So I think that's all there is to say about that. Bee House, there was a question about the move, was it because of cost hybrid working or the off-road working Oxford. So it wasn't specifically the roads around Oxford, although people do complain about them. As I said earlier, it's primarily around hybrid working. So there is far more flexible working space in our new location. And obviously, because not everyone in the company comes into the office every day, we didn't want to be paying for office space that we weren't using the whole time. So I think from memory, it's going to save us GBP 30,000 to GBP 35,000 a year, something in that order of magnitude in terms of office space that we were paying for, but not utilizing before. And clearly, that's a material amount of money and we wanted to try and capture that. And believe we've only been in here a month or so. But -- so we will obviously run a slide rule over this after 12 months to see what the actual cost savings were but I think that's what was projected. There was an interesting question about the Horizon program. So as many of you probably know, the Horizon program was basically a series of grant funded programs that you could apply for that were administered by a European -- Central European entity but where participants from the U.K. could apply for grants. During the Brexit process, we were excluded from that program but fairly recently, we've renegotiated our way back in. We look -- we do horizon scanning on potential Grant projects all the time. We have a -- it's a standing item at our Board that we review potential upcoming grant calls. That's obviously what led to the recently announced grant, but now that Horizon is back in play for U.K. participants, we'll obviously include that rule. I would just say that the Horizon program grants tend to be extremely competitive. And obviously, they're open to every single European country. So 400 million people have -- how many is now, whereas Innovate and NIHR are restricted to lead applicants from the U.K. So -- and we've had a very strong track record of success with those U.K. based grants but we will certainly consider Horizon program grants in future as well. There were some questions about AI. As I think I've noted before, I think AI is kind of a little bit overused. I do see a lot of companies using AI in a very fast and loose way in order to try and get people excited about what they do. And when you dig into some of these companies, it's kind of hard to see really what they're doing and how AI is adding value. But of course, AI is the future. It's on the news almost every day at the moment. And as I think I've also mentioned before, there are some AI-type techniques. I mean, AI isn't a thing, right? So it's a bundle of techniques and capabilities. Machine learning is one of those and we do use that in our data analysis already. In particular, I think with the personalized dosing initiative, we've used machine learning and even a little bit of neural networks in order to analyze both data from the public domain but also data that's coming out of our studies in order to reach the insights that we have in that area. So we'll continue to use that and where we can flag that to the outside world then we will do. But I don't want to get to the place where we're kind of saying AI, AI just because it's a buzzword, I don't think that's the right way to go. But we do use AI capabilities in order to analyze some of the data sets and in order to generate some of the models that we do generate. There is a question about the grant again in relation to do we have enough people to work on it? Are we prioritizing it or are we're going to run alongside other projects. So yes, I mean, the short answer to this is yes, we have enough people because we have a number of external consultants who we can flex up and down. So we will lean to some extent on them. And then we always have some spare capacity internally as well. And so this is a great way to soak up that spare capacity. So obviously, from one month to the next, you might have a busy month. You might have a month where people have some spare time and where we've got Grant work that's going to have to be delivered over an extended period of time, we can basically then soak up some of that spare capacity with the Grant funded work. So this is why I say it doesn't -- if you use -- if you deliver the Grant in that way, then it's actually helping to subsidize the spare capacity rather than an activity, which costs us more than if we didn't do it at all. Even though that subsidy is only 70% of the time that people spend, if they would otherwise be doing activities that don't necessarily bring in -- it may add value, such as doing publications but they don't necessarily bring in cash. If instead, they do Grant work, then 2/3 of their time is reimbursed. So that's the way I look at it and I think it's a real positive for us over the next year or 2. It may be if things get busy in aggregate across both our commercial projects and our Grant projects that we need to bring someone else in. We have hired several new team members on the technical side over the course of the last 12 to 18 months, and we keep that under constant review. So an answer to the other part of this question, the Grant project will very definitely run in parallel with other things that we're doing. We will look in aggregate at the workload across both the Grant project and all other projects we're doing, whether that be Precision Medicine, biostats or core business. And as and when we see crunches coming up, if we think they're going to be sustained and represent a genuine long-term growth of the company, then we hire new people in order to make sure that we can service that business. There was a question about -- as someone found a publication that was based on a neutropenia model that looked a little bit like the one that we've been developing in our precision dosing project. I'll see if I can share that with you guys somehow. But I mean, at the end of the day, looking at neutropenia is not a completely new activity. I think the angle that we have on it is novel and the other thing is we've made it actionable for clinicians. So there's quite a bit of academic literature around this. But as far as I'm aware, there are very, very few companies who are actually generating tools that is not designed for and, in fact, in our case, have already been implemented on the DoseMe platform, that could potentially be used in the very near term by clinicians once they're approved for use. So we are really coming at this from the perspective of wanting to develop tools, which are can be used in practice rather than just sort of academic exercises. There's a question about the pipeline and conversion rates. So we can't really talk about conversion rates because I think the level of detail in which we've described our pipeline feels appropriate to me at this point in time. As Pete highlighted earlier, there's GBP 1 million worth of potential projects that could start in this financial year in the pipeline at the moment. That's a fact. Clearly, not all of those are going to turn into projects at the end of the day. So at the end of the day, our revenues are going to be everything that's committed up this and contracted up to this point in time, plus whatever we can convert out of that GBP 1 million. I would say that we're trading in line with expectations. Obviously, from where we would have put out a notice. So at the moment, we're aiming to hit the numbers that are out there for us. If we have a very high conversion of that pipeline and things are looking really hot later in the year, then of course, we'll let people know if the expectation is that we're going to beat our projections by more than 10%, for example. But at the moment, I don't think I can say more about -- specifically about conversion rates, which vary a lot from project to project in all honesty in any case. But I'm glad that by contrast with a few years ago when we didn't have enough projects in our pipeline to be able to do this sort of analysis, at least now we do have a substantial pipeline, which we can quantify both in terms of number of opportunities and total value, and we'll try and keep you updated on that periodically. Okay. Let me try and accelerate a little bit just in the interest of time and focus on questions that we haven't already been addressed. So this a question on Merck. I mean, obviously, Merck is important. Someone said they thought the Merck MSA had gone. That's not really true. We still have a master services agreement in place with Merck. It never specified how much business they would do each year. It was more an umbrella agreement that on which you could hang individual projects. So it's always been the case that we've negotiated on a year-by-year basis with Merck as to what business they're going to do. As you know, and as was announced a couple of years ago, they switched from an upfront forward-looking commitment at the beginning of every year more to feeding us projects over the course of the year. And then at the beginning of this year, there was the further event that they significantly reduced their outsourcing. So I think we said in our April announcement that Merck was going to represent less than 40% of the last financial year's revenues and that's about right. So I mean you can do the math, but it was a little bit less than 40% of last year's revenues. I can't say what it will be this year. But obviously, we still have a relationship with them. We have several Merck projects ongoing at this point in time. They remain -- we remain in very close contact with them and as you can imagine, we're doing everything we can to try and get as much business out of them as possible. I think I've talked about biostat. So there was a question on -- well, actually, there was a question about whether the biostats employee that we have brought in, work by himself or other team members. So there are other team members with biostats experience. So we can draw on them to some extent. Dr. Peter can also run projects by themself, potentially. And we can also contract with people externally if we need to. So we have a pool of reserves that we can draw on. Obviously, once we have a steady stream of business, then we would plan to expand that team with more full-time in-house employees. Pete, there's a question for you. Pete, there was a question said, where does Dr. Sargent see the priorities right now? And how does he think he is going to be help -- able to help support that so?

I see the business like my priorities as well as getting up to speed. Again, I've only been here for just over 2 months, but I think my priorities around ensuring that we continue with the momentum -- the good positive momentum with our pipeline for our core business model, and that was why I went out to Munich to buy Europe last week with our Head of Business Development, really provided her more support in how we approach our business development and marketing efforts and kind of the messaging we have for our clients. Secondly that is also supporting [indiscernible] and the rest of the team in the biostats service. I think those 2 are the key areas for me going forward. But I guess, I think there was one other question was around how I felt things were going so far and what was my first impressions of the company. I have been very happy joining Physiomics. I think it's a great team, speaking to some of our more technical folks, I've certainly got a lot to learn from them. They are very smart and knowledgeable individuals. And I think looking at the market and where the regulators are pushing drug development companies towards and kind of pressures, drug development companies are under. I think there is a lot of opportunity for Physiomics going forward. So in summary, I guess, we've got a great team. We've got a good opportunity in the market. I think it's an exciting time.

Thanks very much, Pete. I'm just looking at the time, I'll try and get through the remaining questions just quickly. There was a question about Project Optimus. The question was, has anything come from it? How is it helping us basically. I think it's an initiative, not a sort of specific requirement. It's an initiative by the FDA to try and encourage people to do modeling basically. So it's really perfect for us to help us in our marketing to companies. And I've mentioned it personally in every conversation that I've had with the potential new client this year, almost everyone ends up wanting to do a trial in the U.S. at some point. And I -- it's just the truth to say that the FDA expects models and that's what Project Optimus is all about. So it's not a sort of specific tick box requirement but it's an expectation on the part of the FDA that modeling is done. And that's quite a powerful marketing message when you're talking to new clients. And I know my colleagues as well, certainly use it very frequently. Last question that we haven't already covered from the questions that came in prior to the meeting. There was a question about the collaboration with the University of Sheffield, has it concluded? Hasn't yet actually. So they're still in the process of generating the data that we need to do our bit. It was only a small project, but I can say that there is another potential project in development there as well. So we would expect to conclude that in the next few months. But we're also hoping to do a more substantial project in fact with them, not guaranteed yet. So I don't want to manage expectations. But obviously, as soon as that becomes as and when that becomes a signed opportunity, then we will let you know as well. Okay. So I think there were some repetition of questions. So I won't go back to the ones that are the same as the ones we've had already. Let me just have a look at the ones that have come in over the course of the meeting. So there's a question about pipeline numbers again. So we can't speak to the value of specific opportunities. I think on -- I think we have said in the past that on average, our projects come in -- were sort of GBP 50,000, GBP 60,000. I think that's in the public demand but any given project could be anything between GBP 20,000 and GBP 150,000 or even more in a small number of cases. So there is a huge variation. And I don't want to be specific about the value of the 5 at proposal stage, but those averages generally pertain when you look across a large enough number of projects. Time to convert, that's an interesting question. So there's also a part of that question asking how long does it take to convert inquiries? And it can be quite a repeat business, it can be weeks. So for existing clients, they can come to us and say, "Look, there's an extra work, just send us the proposal, we will sign it and will start next week. So that can be really, really quick. If it's a brand-new client that you've never worked with before, especially if they're a big pharma company that can be a year or 1.5 years. I remember we did a project with Astellas a while back, you guys probably remember, that was 1.5 years in the making. But on average, I would say maybe more like 3 to 6 months. But obviously, if you're already at proposal stage, then you're quite a long way along that process. Level of recurring revenues and how is that developing? So I don't think I did this analysis in the -- just before this meeting. But I mean, I think Pete highlighted that the mix in the pipeline is about 50-50. I'm going to kill myself at doing this, but I wouldn't guess that it's probably somewhat similar in terms of our actual contracted revenues, probably something like maybe a little bit heavier on the recurring about 50-50 probably, but don't -- I will undertake to try and get a slightly firmer figure and confirm that with you. Okay. And that was the last question. Okay. So listen, I think unless there's anything else, which is going to come in right now, we will say thank you.

That's great. Thank you, Jim, Peter. Thank you so much for taking all those questions. If any further questions do come in, we'll provide those to you post today's meeting. Thank you once again for your time to both of you. Could I please ask investors not to close this session as we will now automatically redirect you for the opportunity to provide your feedback. In order that the company can better understand your views and expectations. It's going to take a few moments to complete. I'm sure it'll be greatly valued by the company. On behalf of the management team of Physiomics Plc, we'd like to thank you for attending today's presentation, and good afternoon too.