RUA Life Sciences plc (RUA) Earnings Call Transcript & Summary

This meeting is being recorded. This morning, we also published a note with a slight tweaked forecast. So you can find that up on our website, which is equitydevelopment.co.uk. Otherwise, we can through the presentation now from Bill Brown and Caroline Stretton, and then there will be an opportunity for Q&A at the end. So over to you, Bill.

Thanks very much, Hannah. Thank you for reporting this. If I can just kick off. These are the interim results of RUA Life Sciences for the 6-month period to the end of September this year. Just a reminder, RUA is a business that's building upon its underlying Elast-Eon technology and developing our own devices within that. But I think as the course of the presentation, go through the bit that we should celebrate and the success with it and also the -- how the Contract Manufacturing division has performed over the course of the last 6 months. So RUA at a glance. Where are we -- what are we. Just move on to the next slide. Thank you. So RUA Life Sciences came about through -- of the -- from the acquisition of RUA Medical Devices by the AorTech back in -- the deal completed in April 2020. The acquisition was announced in March 2020. So that actually was kind of went over the period of when the country went into lockdown. Since that time, the business has been developed, professionalized with the number of staff have increased from about 20 at the point of the acquisition to about 43 as it stands just now, and a huge amount has been done in that period in developing all 4 of the business units within the group. Operate from 3 sites in the West Coast of Scotland, Ayrshire, just side of Glasgow. So moving on to the Executive team. This is part of the team -- main parts of the team put in place last year. Caroline became Group Managing Director, and we brought in-house, both regulatory and financial parts of the business, with Lachlan Smith taking over as Group Chief Financial Officer, and Iain Anthony, dealing with the regulatory affairs of the business. And in each of those areas, we've seen a lot of positive development over the course of the last 12 months since they all joined. So just dealing with the finances of the group first before we go into the individual details of the divisions or segments. We had an exceptionally good first half. So revenues increased by 56% over the corresponding period last year, and that was split in sales within the Biomaterials business and just short of GPB 190,000 and the Contract Manufacturing business turning over about GBP 917,000 in revenue. So great 66% growth. That growth was actually achieved with a greater level of gross margin that we enjoyed in previous years. So the gross margin up to 79%. Admin expenses, which includes our investment in development projects or R&D stood at GBP 1.9 million. And collectively, that resulted in a reduction in the loss of the -- for the period by 15% down to GBP 1.1 million. We've managed to control the cash burn within the company, I think, exceptionally well. The cash burn in the period was just under GBP 0.5 million with the cash falling from GBP 3 million at the financial '22 year-end to GBP 2.5 million at the interim period. And I think some of the investment that we put into the financial reporting part of the company, it has enabled us for the first time to do proper segmental reporting on the underlying profitability and the value added of the various business units. So we'll focus a bit more on that as we go through the presentation. So can I get the slide on forward? So just sort of in summary, the consolidated income statement. We had a good result from the Biomaterials business. The revenues that grew by 20%. That is a second half weighted business. So it shouldn't annualize the revenue in the first half. It's always a much better second half. Contract Manufacturing performed exceptionally well. That sales are up now nearly up 66% in the period, a high 6-month period of revenue from that business in the company's history. The driver in that was volume partly helped by some price increases, but a volume driven. The team did an exceptional job and were able to turn over increase in volume without any additional headcount in manufacturing or having to result over time, so to see some real good efficiency drivers in it. The gross margin across the board increased from 75% to 79%. And as we said earlier that all of the R&D investment in Vascular and Structural Heart went through the P&L account just under GBP 1 million of investment in that area. So operating loss of GBP 1.1 million. Cash burn of GBP 454,000. what's not recognized in the interim statement is the R&D tax credit for last year, and we account for that on a cash basis. So it will go through the P&L account and the balance sheet when received, but the amount that has been claimed from HMRC amounts to GBP 328,000, which is up from the GBP 270,000 that we've got for the previous financial year. So all in all, the finances seem sort of going well. We've described the various business units historically, but say we haven't actually put numbers towards. One of the tasks that Lachlan took on when he joined a year ago, was to really beef up the management information systems within the business. The segmental reporting that has been one of the benefits of that. We will give more detail as we go through the presentation on how each of the individual business units are performing. But the 4 units or segments of Biomaterials which is the Elast-Eon licensing business, there's a GBP 0.5 million of recurring revenue in that, towards IP and towards all the Elast-Eon license agreements. What we're now calling Contract Manufacturing, just previously people have seen as RUA Medical just to focus on that third-party work. So it's soon to become GBP 1.5 million of annual revenue, giving some big OEM customers and is back on the growth trajectory. It's looking very exciting in that business. They are good too -- too good profitable business areas and cash generating. And the more developing companies as RUA Vascular which is producing the vascular graft pipeline and RUA Structural Heart, which is developing a synthetic heart valve for the -- using the Elast-Eon material. So I'll just move on to briefly give up a little bit more about RUA Biomaterials. So this is the building and the use of the Elast-Eon material. A theme that will come through in various parts of the presentation is the fact that Elast-Eon is a non biogenic, biogenic being from a living organism. And there's certainly a demand from patients to move away from animal-derived implants, and we believe that from a regulatory perspective as well. So the material is ideal in that area. I mean, Elast-Eon, it is remarkably biostable and is highly durable and proven clinically. One of our major licensees company is Abbott, which had acquired St. Jude Medical a few years ago, and they report on every 6-month basis on the performance of their pacing leads and cardiac rhythm management business that uses Elast-Eon as the insulation on the leads. To date, there's over 8 million leads have been implanted over the course of the last 15, 16 years. And the data on the use of Elast-Eon is that it has reduced the failure rate of their leads by 80%. So at 15 years, what had previously been very successful, 95% without failure, they've managed to take that up to 99% without failure. So it's demonstrating that in a very aggressive environment, Elast-Eon material has been able to withstand the abrasion events with the pacing we get. So it's good news for other long-term implants, such as the vascular graft or [indiscernible]. So we all know the IP in that. The business is a virtual business. It's all licensed though to subcontract manufacturers and people pay license fees for the rights to use Elast-Eon material. A number of regulatory advantages is that the material -- this device is approved globally, U.S. markets, Europe, Japan, Australia, for the use of Elast-Eon, the FDA material master file. From an engineering perspective and how you make a device, is readily processable. You can use lots of different kind of manufacturing techniques. So then looking at RUA Biomaterials as an investment business segment, what they've been doing. The key in this business is a highly predictable income stream. It's got good steady growth, it's kind of 5% to 10% is what we'd be anticipating from it, but also it's an exceptionally high-margin business and cash generating. So virtual business is IP holding. It generates royalties and license fees from the contracts. It's got, and has the benefit of a clinically proven material. The revenue growth in the 6-month period was 20%, taking to just under GBP 190,000. As I said earlier, it is second half weighted. So the financial year 2022 revenue was GBP 487 million but the trailing 12-month rolling revenue is just under GBP 520,000. The net profit, so it's not just net margin but net profit, that's after all the costs that we're going to identify that are relevant related to that business area is 82%. So the underlying business itself, which is sort of growing at a kind of 5% to 10% per annum with normal rate has certainly got -- it's got to have a value to the group. It's probably akin to almost an annuity-type revenue and income base. So what's the best way to value. My thoughts are probably on a yield basis. What yield you would apply to. It's your view is as good as mine, but say a 20% yield would be about GBP 2 million, 7% yield is worth north of GBP 6 million. If I was looking to sell it, I'd be certainly looking for a more likely 7% or a lower yield. So it's a good business there. Generating profit, generating cash and as the underlying technology in which other parts of the business are being developed. The real celebration in this 6-month period has been the performance of Contract Manufacturing, and now I'd like to hand over to Caroline, who will take you through that area.

Thank you, Bill. Our Contract Manufacturing business segment really is a very profitable obviously a cash-generative safe business. It designs and manufactures for the life science industry and aims through the FDA registered clean room facilities. And this business is born out of RUA Medical, which was purchased by AorTech International in 2020 for GBP 2.45 million and a majority share consideration. As Bill mentioned previously, we have had an outstanding half year with revenues increasing by 66% to GBP 917,000. We don't specifically report the gross margins achieved, but the net profit margins are a very healthy 42%, very exciting for the future is we're currently working with a number of global businesses in the commercial application of implantable fabrics. And there's great potential to double revenue over the next 2 to 3 years. Pick up that again in the next slide. As with all medical device manufacturers, we hold ISO 13485 certification, and this summer, we actually expanded the scope of the quality management system to include the entire RUA group of companies. So we're not just covered for third-party contract manufacturer, but also to design and manufacture medical devices in our own right. And the additional factory unit, which we purchased last year will increase our footprint by around 40%, and it provides us with a facility for scaled up commercial manufacturing of the vascular grafts. Next slide, please. We have -- it's been really good growth during the half year. That equates to certainly for the last -- the trailing 12 months. We're now at about GBP 1.5 million in revenues and healthy EBITDA margins of 57%. A couple of growth drivers during the period. Number one was a signing of a new contract with a global business for the supply of components for their medical device portfolio and other gross drivers was increased demand for product from our major customer due to not only a post-COVID increase in hospital procedures, specifically in the key U.S. market, but also at stock build for European markets in advance of the transition from MDD, Medical Device Directive, to MDR, Medical Device Regulations. And during this period of growth, our customer service levels really have been exceptional at 100% on time in full. We actually changed our business model for this business last year to ensure that we focus on business development activities for long-term strategic opportunities that would add a minimum of 10% to our revenues. And currently, our opportunity pipeline has recurred request for quotation values of around GBP 2 million in annualized revenue. So as we said, the potential to do -- to double our current revenues over the next -- in 2 to 3 years. These products that we're looking at manufacturing are already established products in the market with customers looking for alternative suppliers. And the net profit margins are similar to what we're already seeing in the Contract Manufacturing business, very exciting. We had, I think, about the business foundation of RUA Medical business that was acquired on an EBITDA multiple of 2.8 by year 2020. And if we use a very conservative valuation of 10x EBITDA, it values that this is now at around GBP 8.5 million. It is worth bearing in mind that the Contract Manufacturing industry as a whole has always been seen as a very prudent choice for return on investment and private equity firms in particular, have shown a rapidly increasing level of investment over the years, some of up to 20x EBITDA. Next slide, please. Moving on to vascular. It's our pre-revenue business, focusing on the development and commercialization of vascular grafts. Shareholder value being maximized by growing the grafts business attract -- to achieve attractive levels of profitability. So we believe we have a real opportunity to become a significant player in the open surgical thoracic aortic graft market. The total addressable market is around $1 billion, and the aortic grafts currently in the market are based on very old technology and there's really been very little innovation in the last 50 years, simply because there's such attractive margins to these products. It's a niche space. And our target of a 10% market share to $73 million is probably quite conservative. The graft market itself is dominated by 2 key players: Terumo and Maquet. They're using nearly 40-year-old technology, and their large grafts, in particular, are all coated with materials of animal origin. The initial products that we are developing within the graft pipeline are the large bore straight grafts and also the grafts -- the large bore straight grafts of polyester tubes of between 18 and 36 millimeters in diameter. And both of them are sealed with Elast-Eon. And average selling prices recommended is anything from GBP 700 to over $3,000 in the states. And our large bore grafts are the enabler for development of more complex products in our portfolio based on similar technology, such as the frozen elephant trunk, which sells for up to $32,000 in the U.S., which is quite constructible. Next slide, please. The thoracic aortic surgical graft market is the specialty area of heart surgeons rather than cardiologists. The aorta is a large blood vessel that carries blood from the heart to the body via the abdomen. And the thoracic aorta is that part of the aorta above the abdomen. So the aortic arch and the ascending and descending aorta. Our grafts are used to repair or replace damaged and diseased vessels of the aorta, of which there are mainly 2 types, an aneurysm, which is a bulge caused by a weakness in the wall of the aorta or a dissection of the inner lining of the aorta is torn and begins to separate from the rest of the arterial wall. Our grafts will definitely the world's first non-biogenically sealed large bore grafts, biogenic, as Bill said, free from animal-derived tissue. Next slide, please. You can see the criteria that we're using to demonstrate that our grafts are substantially equivalent to the Predicate device, which is Terumo's Gelweave. Our graft is the, amongst other things the same, intended use, critical performance, principle of operation, sterilization methods and packaging. The Terumo's Gelweave is coated with gelatin, a material of animal origin. Our graft is quoted with the synthetic polymer Elast-Eon. Next slide, please. The all sealants, which are used in grafts, they prevent intraoperative bleeding through the graft interstices and Gelweave is a wet graft. It's coated with gelatin, and that's actually sourced for a very small resource of BAC-free [indiscernible]. It's our synthetic polymer Elast-Eon as a sealant well, not just eliminate risk associated with animal-derived tissue, but also cross-species contamination. And patients will actually finally have a choice to avoid implants made from animal products as well. Our polymer means that we can improve the control of manufacture and also the raw material supply and there is an excellent usability features for the surgeon, where our sealant is not damaged by handling. It doesn't require presoaking in ether and because our graft is dry, we also offer a solution to manufacture and sterilize valve conduits. And these devices are where the graft tissue is a component part for the combined graft and wet heart valve device where the selling price of this combined product is more than double the selling price of the individual components. We do have in vivo data on our lasting coated grafts, and that's shown that the fibrin growth outside the graft which occurs as part of the natural healing process is completely encapsulated. So there is very little or no adhesion between the graft and this external fibrous capsule. It could arguably give rise to many clinical benefits such as lower inflammatory response. So there's no collagen for the body to get rid of, less bleeding, and also allows for reoperation and potential graft removal because of this clear plain dissection between graft and signed detaches and that's not seen in the predicate grafts. The world is changing. There will be the inevitable phaseout of animal-derived material when a viable alternative is available. And Elast-Eon is really key to derisking the future of all current animal-based medical devices. Next slide, please. Late last year, we submitted a 510(k) to the FDA. However, the difference in the healing process between our graft and the Predicate Gelweave meant that the FDA requested additional information on the healing process. And we've just recently completed a pre-sub with the FDA, where we have agreed the preclinical in vivo studies, the biocompatibility trials and the bench talk testing plan, but most importantly also confirmed that we can continue to use the less onerous 510(k) premarket notification rate to market clearance. We have also recently agreed with the FDA's clinical reviewers clinical trial design, which is a relatively small trial with a performance goal with the primary endpoint of the trial being measured at 6 months post-operation. We just have the one minor statistical issue still to be worked out, which is not a barrier to progression. Next slide, please. I hand over to Bill, just to take through the investment summary of the Vascular business.

Thanks, Caroline. The RUA Vascular, it's been a start-up, really a start-up company within the group and the principal activities within that and the main development only going to be started on the acquisition of RUA Medical. So the investment into that business area has really only been underway for 2.5 -- just over 2.5 years, and the total investment to date has been about GBP 3 million. I think we've achieved a huge amount in that period. The RUA Grafts and the large bore grafts are progressing well down the regulatory stage, and we have a further pipeline of products behind that with an agreed pathway to the FDA on how to progress the regulatory approval of the grafts. We've been undertaking a fair bit of a surgical, kind of questioning, running a wet labs on the performance of the grafts. And there's been some great feedback from that. There are potential benefits of the RUA graft from a surgical perspective. It eliminates a lot of the guesswork that often got on sizing grafts and training kind of new surgeons out to handle grafts and the word awesome came up in the review a number of times. I think from a surgical perspective, we've got product that not just the -- does what the existing products in the market do, but of course, some benefits. As Caroline mentioned, the in vivo trials have had some good results from it. The last 12 months have been a lot of work done by the R&D team in really commercializing the manufacturing process. There's been big steps made in that. So the infrastructure has been established and manufacturing products in place. The pilot line is ready to manufacture in angle. The manufacturing process is much more efficient than we were just even 12 months ago. Our costings look like the costs, including overhead recovery of the RUA Grafts will be about 20% of the selling price that RUA will achieve. So again, another good high-margin business. We've expanded the ISO accreditation to enable us to be a manufacturer of our own products. And we have the opportunity of building a much bigger plant, the [indiscernible] store. One of the areas that I'm personally particularly quite excited by is that in late-stage discussions on the commercial route to market, and I think that will be a validation for the commercial opportunity within this project. So if I look at it just from an investment perspective, we added to the investment by about $620,000 in the half year period. That takes total investment to $3 million to date. The pilot plant itself should be capable of producing an additional contribution to the group of about GBP 4 million per annum. So that's just a small plant if you -- your arithmetics as good as mine. So there's a GBP 4 million contribution that would suggest a GBP 5 million of revenue up to RUA out of that plant. That's just a fraction of the achievable market that Caroline mentioned earlier. But looking at -- has investment been well spent, we believe it's a question of when not -- if we get regulatory approval. Once the product is in the market, we believe that there'll be surgical demand for it. We will get a reasonable market share. So just on the pilot plant in itself and the profit potential from that. If I get a 10x multiple on that, on the EBITDA from that business area, would put a GBP 40 million plus value on the graft business with a lot of further growth to come from it. And so it's certainly an area that say we want to continue to invest in and bring those products to market. Moving on to the Structural Heart area. There's been a -- we haven't missed and spent a huge amount of time and focus in past presentations, and I won't be get into a huge amount of detail this time around. Just to remind you what we're looking at here. It's a big market but dominated by kind of 1 or 2 big companies in it. There's 2 types of valve. There's the mechanical valve, which is pyrolytic carbon leaflets and animal tissue and they're implanted surgically. The average selling price of those devices of between USD 3,000, USD 6,000. There's a much higher value product called transcatheter, which relies on animal tissue leaflets, and they're selling for about $30,000 each. So surgical market, between GBP 1.5 billion and GBP 2 billion in size just now and growing. The TAVI market is probably 2.5x that just now and is growing faster, but it's all relied really on the bovine pericardium material that supports these valves. So just sort of quickly looking, if we move on one of the slides, part of why are we in this -- move on, please. Why are we in this area. The old aortic business has been looking at alternative leaflet material for almost 30 years. The entire -- well, the entire TAVI industry and 80% of the surgical valves are dependent upon bovine pericardium material. That material can only be sourced from 2 countries, which is New Zealand and Australia, and the entire $12 billion business is dependent upon the continuation of supply of that material. The industry recognizes the risks to that alternatively for material. It's something that is right up, as one of the major risks and topics of conversation. And we believe the work that has been done gives us a great opportunity of having some disruptive technology in that area. Proof-of-concept is there with AorTech having first-in-man and managed to get a valuation of GBP 120 million. So getting to that stage, that's the type of valuation that this project should be looking towards. So just moving on to where are we with the investment, there's been 2 conversations I've had in the last 12 months that are particularly stuck in my mind. One was a cardiac surgeon who was advising me as to which heart valve I shouldn't be looking at and when I asked about one of the newer bovine pericardium leaflets, he said, well, that's fine, but we don't have any data. We don't know how long it will last. The marketing data is fine, but do you want another procedure. And the other conversation that I had was with one of the R&D VPs, one of the big heart valve companies. When we were discussing polymeric valves and the comment was made that we don't want another Björk–Shiley. Björk–Shiley was a very small number of catastrophic failures in mechanical valves back in the 1980s. So what the industry needs and the industry recognizes that it needs an alternative leaflet material, but it wants something that is going to last to be able to show up a patient, that they're not taking an undue risk on having a valve with that new material. So we have the pure Elast-Eon leaflets looking kind of very good Elast-Eon material itself has been clinically proven in the long term in pacing lead. So it's a difficult environment one is going to get. But we've been looking to see if we can get something that just takes the blood contacting benefits of Elast-Eon onto a higher level. And the work has been on creation of a new novel composite material. We've done finite analysis at the material level that is indicating that the substrate will take all the strain without there being any strain or pressure placed on the effective coating material. So we've retained that Elast-Eon at the blood contacting area, but without it being under any stress or strain during the cardiac cycle. We've made some prototype valves, which have shown some very, very attractive hydrodynamic data and have actually been performing well. I mean there's a screen grab of one of the valves in a hydrodynamic tester. And you can see there that on closing that valve is completely closed. There is no back flow and the pressure gradients required to open it were probably better than the best of the bovine pericardium leaflets and approaching the hydrodynamics of the mechanical valves. It looks a very, very good design. So we've got that material. It's been optimized. We managed to get a very thin, very flexible ideal for a leaflet. The design of the leaflet to say, has been optimized to minimize stress within sort of taken it on from the 100% polymeric leaflets. And we're now just in the engineering phase of perfecting the tooling to manufacture the repeatable valves that can be put into the testing process properly. So a lot of development has come through that. So we know Elast-Eon is a great material. We know it doesn't calcify and no thrombosis. It's very biostable. We've got a great design there. We're on the verge of having it manufactured properly. So we'd start in testing on it. Since the restart of the aortic business, then became RUA Life Sciences, the total investment in the heart valve area has been about GBP 1.5 million, and that has been built upon over GBP 30 million that was spent on it by AorTech historically. Our target or the price that we're looking at is getting a valuation for this business segment that's not dissimilar to what AorTech did at the point of first-in-man. So it's not necessarily commercializing but looking just to capture and have recognized that sort of value. So GBP 120 million at the point of getting through some animal trials and the durability trials should certainly be within our targets. And so that's the summary of the Structural Heart business. So RUA Life Sciences itself, just in somebody looking at the portfolio. Our Biomaterials business is growing really nicely; 20% revenue growth and 82% net profit margin. Barring that, the 7% yield covers the existing market cap of the company at GBP 6 million. Contract Manufacturing has had a stunning period. The team has done an exceptional job growing the revenues at 66%, and that's been done with the same number of people without any overtime, so the efficiencies have been pushed through a lot. That's a business at 57% EBITDA margin. The new global customer win. We've got, say, new business opportunities that I think, can really within the next couple of years, double the scale of the business. Even just under 10x EBITDA margin on the current business without that growth coming through gives that -- would give about an 8.5% or again more than the valuation of RUA Life Sciences in the market. And then RUA Vascular, RUA Structural Heart, the 2 developing businesses, RUA Vascular, the value created from the investment made to date, I would argue is significantly more than the GBP 3 million cost. We're making really good commercial progress, the regulatory pathways understood and agreed. And just on getting into the first territory and getting a reasonable level of market share supplied at the pilot plant I think, can justify a GBP 40 million value for the company or for the division of the segment at that point. And then again, within Structural Heart, the team has done a lovely job in creating a novel material, that hybrid material, between textiles and Elast-Eon. Super design, looking very attractive, both competition modeling and the actual valves working. The recent investment, again, has only been GBP 1.5 million directly into it with a target of looking to try and achieve GBP 120 million at the -- at the point of first-in-man. So I think it's been a really good 6 months, revenues up. Costs are controlled, cash well managed. The opportunities developing in all 4 of the business segments. So I think that probably everybody has heard enough from me and happy to deal with what questions may be arising subject, of course, to being something we're allowed to talk about.

Thank you, Bill. And I think I've got a couple here that you will be able to answer. So on Contract Manufacturing, does the company think there is a sense of momentum starting with word getting out about RUA's ability to be a successful contract manufacturer in medical devices now that a second major has signed up and is looking to offer more work?

If I can answer, David Richmond, when he owned RUA Medical, put in a huge amount of time and effort in promoting the RUA Medical business to one of the large companies whether it being under a corporate ownership or whether it's just the time process for these discussions and the seats to start to Germany in potential customers' minds. They're now coming through. The medical device industry or business is hugely frustrating from my perspective because things just take forever, whether it's regulatory, whether it's getting people to take on business. And I think that the investment and the time and effort put into both in David's time on since AorTech acquired RUA Medical, I think we're just starting to benefit from that just now. The reputation that the Contract Manufacturing business has with -- as Caroline said, 66% uplift in the volume into customers in the 6-month period and achieve the 100% on time. So no orders were missed. It was 100% performance and that was done without any extra people or -- the capacity is there to grow it. The reputation is building. And I think for whatever reason, there seems to be a sort of need coming through for particularly the textile offering that RUAs got. I think the strategy that we adopted of, not trying to focus on a small early-stage development projects, which can be kind of any time consuming, but not terribly remunerative. The focus, as Caroline described, is taking the business into business strategy. Anything we do must be able to produce a decent level of revenue. Over the long term, on an annualized basis, I think, it's paying dividends as well. So it's been part of change of focus, maybe a bit of luck, maybe the fact that COVID is now over and people want to kind of move their businesses ahead. But I think we're in a really good place, a really good time in an industry that lets you command an 80% net margin is quite attractive.

Sounds it. One here on the Vascular division. It was said and I quote, "The commercial opportunity is in active discussion and our partnering strategy will be the subject to future updates. This seems a definitive statement when along the trial time line does the Board think a potential partner would pull the trigger on such a deal? Would it be, for example, before the clinical trial starts?"

Yes.

That is another definitive answer. Thank you, Bill.

Yes, it will come out when we talk about it in more detail. But what we have is a really exciting product. Caroline described the partner in that, but there are people we can partner with, and we're properly looking at partnership, it's not just somebody taking a product and showing it -- kind of showing it through hospitals is helping grow that market. I think we've got some really exciting discussions underway. We are -- I wouldn't be saying if I wasn't pretty confident that we'll turn that into a contract. It's not 12 months away.

Does the planned clinical trial enable the next-gen products to progress via 510(k) patches, for example?