Verici Dx plc (63V.F) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen, and welcome to the Verici Dx plc Final Results Investor Presentation. [Operator Instructions] I'd now like to hand you over to CEO, Sara Barrington; and CFO, David Anderson. Good afternoon.

Good afternoon, everybody, and thank you for your time. I just want to emphasize that the focus of this presentation are the financial results. We will touch upon the clinical trial results, but in brief. And just to let everybody know that details will follow on those after we have presented to the clinical community in early June. Those conference rules do require that we don't publish details ahead of time. So obviously, we gave an RNS on general terms. And then post that conference, we will host another meeting to discuss those in detail. Okay. So financial results for the end of last year, let's get cracking. Obviously, this is our disclaimer language. But I thought it would be helpful just to remind everybody about who we are and where we're going with all of our technology. So here is our vision slide. I have presented this before. For those of you who have seen it before, I apologize for repetition. For those that haven't, I hope you find this useful. When we went out back in 2020 to the markets, we talked about 2 products, a pre-transplant, kidney diagnostic product called Clarava and an early stage Tuteva. Fairly quickly, we were able to license in the technology from Mount Sinai to add to this end-to-end view on individual tests called Protega. That's for late-stage damage. And although we're launching as 3 individual tests covering the time continuum, pre-transplant, early stage, late stage, one of the things that we've highlighted in previous presentations, is we feel that these are very informative to one another. And being able to use the same patient population, the same clinical trial is very advantageous for future studies and publications linking the 3. We'll commercially launch as 3 individual tests. But fairly quickly, where we see the power of this is in an end-to-end solution where each test informs another and the integrated becomes part of what we call the clinicians' platform. As we look at this going forward, we're very conscious that there will be other technologies that will be very beneficial to answer the kind of gnarly questions that the clinicians have facing them in making their determinations and judgments in patient care. And those would probably be either in-house discoveries or in-licensing opportunities. Obviously, these days, we are very conscious that life science is not just about biomarkers, but in fact about the data as well. And you can see in the background -- we understand that as we -- our techniques are based on sequencing, we sequence the entire transcriptome. We have an awful lot of information to mine in the future, both ourselves and in collaboration with others. And we recognized that it was not just a biomarker company, but a data company too. To that end, at the beginning of this year we announced our work with Illumina, and that continues. But it enables us to provide a very structured environment. I liken it to, at the moment, a company can create an environment that's a bit like Dropbox with a lot of very tidy files, taking it to that level where you're creating a very productive space for collaborations with other companies. That's where we've moved to with the ICA environment with Illumina. And as we go forward, that will build out. And then obviously, as you look further down the line, although we're very focused on kidney transplant at the moment, the obvious question is, does this apply to other organs and further still will be autoimmune diseases. This is very much, the RNA signature is very much based on biological systems, and the immune system being one of the largest. So that's just a reminder of kind of the vision of the company. I thought it would also be useful to just throw out. As you know, we were in our last presentation, when we were fundraising, we put up these time scales. And to just give a quick update on where we are with them. We are to time. We have published the results of the Tuteva in general terms, that will be presented at ATC. So we're doing that, and Clarava is being processed right now. That will lead to the pricing discussions with CMS, that's being submitted in June with an answer back at the end of the year. So we're on track with that. We'll be pushing forward with our Tuteva launch with the time on that. We'll be building out our commercial team and looking forward to doing what we call the commercial proof of concept, effectively like a soft launch, trying to get it into real-life clinicians' hands and practices so that they can really see how it works for themselves. As we know, the health care community believes other -- their peers [ way morely ] than the companies. So that's a very important strategy in terms of rolling out a product into that area, gain their trust. So everything else on here is to time. Let's just talk very quickly about where we were the clinical trials. We did put out an RNS saying we'll take an extra month to increase the numbers. We had some delays on the European side. And I can tell you that it was worth the wait. We had hit our endpoints of about a number of about 107. But by waiting to be better represented from Europe, that enabled us to have an overall trial size of 156. That's actually 1 of the largest in the industry and was well worth it. And it didn't slow us down. That's the point we made in the RNS, is we actually had the scope and the time because realistically, we will still be launching at that conference in early June just as planned. The good news for us is, I think one of the competitive advantages to the way that we did this trial is to be able to say to the clinician, we've designed it in a way that it will design -- it will reflect what you're going to see in your own clinic. It's all comers. It's very independent and multi-centered across all their protocols. And it also covered all types of rejection: the antibody, T cell, borderline, subclinical, everything that they are going to experience in their clinic was covered by our trial. And also, it was performed in a COVID environment. And again, this is part of our new normal. And to be able to reflect a clinical trial result within that time, I think is highly significant for the clinical community. So high performing, we're very satisfied by those results, looking forward to pushing that forward during the rest of this year. Next steps, always important to know. We will be presenting that data, as I said at ATC. We'll be going to the pricing committee. We will be submitting the file for the local coverage determination criteria, and we'll be expanding that commercial team. So now we're the other side of R&D, now we're on our commercial track and we're on time. Clarava, we're still processing that. There should be an RNS coming out shortly once we've got the headline figures on that. And again, the same idea: present the data, go to the pricing committee. This one, obviously, because it's novel, then we have to do more studies in terms of utility. There is no local coverage determination for this. So this is more the traditional path, but we expect to be set up for that by the end of the year. Okay, David, over to you.

Thank you, Sara. Good afternoon, everybody. So the year to December 2021 ended with cash at $10.3 million. In March, you'll all be aware that we raised gross proceeds of GBP 10 million, approximately $30 million. And that really takes us out to continue the development of Protega, build our expanded laboratory in Tennessee, the commercialization of Clarava and Tuteva. There's other opportunities which are out there, which we'll look at speculatively, build on the data assets that Sara referenced earlier and also, obviously, to continue to fund working capital. That cash raise, together with current resources, takes us out to sort of late 2023 currently. Just going through the primary statements themselves, the cash flow statement, net cash used of $7.4 million. At $6.3 million in operating activities, that's lower than the EBITDA loss, mainly because of site accruals so we accrue for the cost being incurred by the sites in the clinical trials, which they then invoice us later. So that accounts for that delta. And in terms of investing activities, we've spent just over $600,000 on capital equipment in the period and another $350,000 odd on patents and licenses in the period. In terms of the income statement, so adjusted EBITDA is adjusted for the share-based payment charge, which is obviously noncash, is a loss of $7.1 million, very much in line with expectations. Largest item expenditure, 2 areas, wages, $1.9 million and R&D cost of $2.8 million. In terms of wages, headcount -- average headcount for the year was 8 and we are now up to a team of 12. And then in terms of the balance sheet, that intangible asset, the initial license that we acquired back in May of 2020 was $1.5 million. So that's been augmented by the spend to date on our patents and other licenses. Receivables are mainly prepayments, and that payables number is largely inflated by accruals, the biggest item of that being the site accruals I referred to earlier. Thank you, Sara.

And that concludes our presentation.

Sara, David, that's great. And thank you very much indeed for your presentation this afternoon. [Operator Instructions] If I could please just hand back to you to run through that Q&A tab, and where appropriate to do so, if you could just please read out the questions and give your response, and then I'll pick up from you at the end.

So the first question is, did you approach Illumina or did they approach you? And what is the potential of this collaboration? So the choice was made by us to select the ICA for our pipeline product and it was in development. So this was back in early 2021. And we did make the choice that this was a market leader. They were putting a lot of support [ through pry that ], and so we would take the chance and work with a product that was in development. Because we made that choice, we're actually 1 of the first clinical customers that they have. And when they launched it, they asked if we could be a flagship product for us, which of course we were more than happy to do. So we've had quite a lot of support from the Illumina marketing team as well as the product team. They asked us to present with them at a key conference, which we did this year. And they are interested in taking this further. And we are in discussions with them on several fronts, none of which have reached a full conclusion, apart from that we are committed to working within the ICA environment and building out from there. And then if you think about it, we have kind of 2 types of products. One is the data, which is more of a research tool, and the other one is just being able to process our clinical work through that. And that's already up and running, and they are interested in WeWorking on the research area. So what's the potential of this collaboration? I think we'll continue to build with them. As I said, it's -- we have a lot of interest from them, it serves their strategy as well as ours. And I always find that very reassuring with a big company, that if you're in their area of focus that you do get the right amount of attention and development work. And so far, that's been very productive. So let me know if you wanted any more from that answer. How is the launch of Tuteva structured with Illumina? So I'm not sure that I fully understand this question, but let me do my best to answer that. Tuteva will be launched by us as an LDT, and by so doing uses, obviously, the Illumina tools: the ICA environment, et cetera. And -- but it's very much our commercial launch and very much sort of our efforts to do that. Will there be more from a collaboration in the future? Quite possibly, there is some interest in that. But I would say the launch of Tuteva is a Verici endeavor. Next question. You have Clarava, Tuteva and Protega. What's the plan re further development of new products for the pipeline? So Clarava and Tuteva have obviously come out of clinical -- the initial clinical trials. Protega is still in it. So it's still in development and then there is the development of the integration of 3 individual products as an integrated solution. So that's one plan. Going forward, I am interested in looking at other transplant areas, but we would have to bring on additional members of the team to do that. And at the moment, with the focus on revenues and cash management, we'll have to take a view on that and see how the launch goes for the first flagship products, and see how confident we are in that diversion of cash resources to R&D. But that would be the order that I would look at it. Are you surprised that the share price is so far below the recent placing price? Am I surprised? Unfortunately no, looking at the general market conditions. I think that -- I read a stat somewhere that something like 200 life science companies are actually trading at a discount to cash. And so we are not in that situation. Was I disappointed that on the back of really good news, we didn't have what you would expect. But these are not unusual times. Unfortunately, there are times when you can't fight the market and I'm seeing trends that are more market-based rather than individual company base. And so I would say that I was disappointed. And we will continue to just head down, execute and when the market forces weaken and the company performance comes back into play, into the share price, then I hope to see it being reflected there. So at the moment, my job is really head down and execute and keep hitting those milestones. How important is the relationship with Mount Sinai? So obviously, that's where our original technology came from, but we are not actually doing any of our clinical work with them. And so it is great to have them as the inventor source and as a major investment -- investor, apologies. But in terms of the clinical rollout, I -- they're not front and center. So I always find Mount Sinai to be helpful. And certainly having Erik on our Board has been very helpful, but clinically the relationship is not that important at the moment. Have you seen any developments in the competitive environment recently? Yes, I have. So obviously, for Clarava there are no competitors; for Tuteva there are a number. We have seen quite a lot of movement on the urine-based side. So Biotech needed a distribution agreement with Thermo Fisher, who have identified that they do need to do further studies by all accounts. And so that one is still in development. Though we have heard that NephroSant is not pursuing the same commercial path that we anticipated. I'm still waiting to verify that. So that would be all the activity in the urine-based testing side. On the other side, we've heard that the major companies who are also struggling with focus on share price and market areas may or may not be focusing so much on the transplant. So I see movement, but nothing particularly significant in terms of our rollout. Are any of the goings on at the FDA and general unsettlement likely to have any effect on your plan launches? No. Very simply, we do not -- and we have said right from the get-go, during COVID, I was involved with a COVID-based product that needed to work with the FDA and saw firsthand how under pressure they were and how much burnout there was, and that, that was likely to go on for a number of years. In fact, they actually published on that. We made the choice not to go to FDA. We have run the clinical trial up to FDA standards. So if we ever change our mind in the future, we have a [ track ] that we can use, but we don't need to go to the FDA, and we are launching as an LDT like everybody else in the industry. And what that means is we don't distill down to a kit and send that out to hospitals. What we do is we ask for the blood to be sent to us, and we process it in our labs and send them back the result. So that's the main difference. So the FDA environment is just something I keep an eye on. I'd love to go there sometime in the future. But if we get snarled up right now, it would slow down our commercial launch. So I've got no interest in that. And we have never tried to pursue that to date. So go back to my very simple answer of no. I think that was the last question. Are there any other questions?

Absolutely. Sara, David, thank you very much indeed for taking the time to address all of those questions that came in from investors. And of course, if there are any further questions submitted today, we'll make these available to you immediately after the presentation has ended for your review. And ladies and gentlemen, we'll publish all those responses where it's appropriate to do so on the Investor Meet Company platform. Sara, perhaps while redirecting investors to provide you their feedback, which I know is particularly important to yourself and the company, if I could just ask you for a few closing comments to wrap up with, that would be great.

Yes. Obviously, this is one of our probably quicker investor presentations, given its focus more on the audited results. And one of the things we're very excited about is meeting again very shortly to discuss more, in more detail our products and our commercial launches. But at the moment, I think, hopefully you can see by throwing up the time line that we're very focused on that time line and currently are to time for that.

That's great. Sara, David, thank you very much indeed for taking the time to update investors today. Could I please ask investors not to close this session, as you'll now be automatically redirected for the opportunity to provide your feedback in order that the management team can better understand your views and expectations. This will only to take a few moments to complete, but I'm sure will be greatly valued by the company. On behalf of the management team of Verici Dx plc we would like to thank you for attending today's presentation. That now concludes today's session. So good afternoon to you all.

Thank you very much. Goodbye.