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

Good afternoon, ladies and gentlemen, and welcome to the Verici Dx investor presentation. Throughout the recorded presentation, investors will be in listen-only mode. Questions are encouraged. They can be submitted at any time using the Q&A tab situated on the right-hand corner of your screen, just simply type in your questions at any time and press send. The company may not be in a position to answer every question it receives during the meeting itself. How the company can review all questions and we'll publish those where it's appropriate to do so. Before we begin, we would like to submit the following poll. And if you could give that your kind attention, I'm sure the company will be most grateful. I'd now like to hand over to CEO, Sarah Barrington. Good afternoon.

Thank you, everybody. I appreciate the time. We just flipped through. This is a progress report, and we will also have a financial section on the results that were issued earlier end June for the year-end. Okay. So what I like to do is just give you an update. Obviously, the company is in its pivotal year, moving from just a pure-play R&D company over to a commercial company. And that's reflected in the launch of Tutivia, that was at the beginning of the year, and we'll cover some of those points and some of the feedback that we've got. Obviously, as previously noted, we are using an early adopter program for that initial rollout. The benefits being that, firstly, we can have KOL development, that means that the clinicians that are using it in their sites will be able to be out in the marketplace, talking to other clinicians as you recall, your best credibility as a clinician to clinician. So that will be a very practical way forward. Also for us, it enables us to understand how this gets rolled out, both commercially, how it sits within the clinic, how clinicians view it and I'll go through that impact and also how you get into repeat ordering, both in the center across clinicians and also across patients. You saw last week the good news on Clarava. So that was successfully exited from the validation study, and we'll go through the results and what those means, and then we'll have our initial commercial launch by the end of the year. On the commercial track, we did get a provisional pricing from Medicare. So what does that actually mean? So first of all, we talk about a code of price, a coverage determination. This is on the pricing. The way that CMS is organized in the U.S. is that it's got sub areas. We're in the Palmetto region under the [ MultiX ] area. There are 2 very influential what they call Max, those are the government bodies for CMS that gave their view and their recommendation on the pricing that tends to carry the day. So we are expecting this to carry through to national listing at the end of the year after public comment. This is the price that we asked for so we were very happy to get that endorsed by our major area. And then, of course, just a reminder, given this was recommended by the Palmetto there and all of our claims will go through the Palmetto, that is the pricing that we're expecting. For anyone that has seen a reduced price in the marketplace from us -- that is our long-term aspiration, which is to pull down this pricing. It's a bit like a volume discount. This is the price that we want to launch with it's under the competitors' pricing, but not so much so that it raises into question the credibility of the technology. But over time, we will pull that down if we can get into monitoring things and the volumes go up. So this is exactly our sweet spot for launch. Then also, we have what we call the fourth product. So if I can remind you our clinical products the Pre-transplant, Clarava, Tutivia, early acute rejection, Protega long-term. The first 2 are out of the clinical validation now, the third one still in the validation study, has a longer-term outcome. But then behind all of that, we have a research asset, and that's what we call our fourth [indiscernible] that was subject to the wider collaboration with Illumina that we announced and then essentially, that enables us to have revenue-generating collaborations in the research space. So again, that's what we see as our fourth product. Just as a reminder, we do have a large total addressable market. Happy to go through how we calculate that, that end-to-end platform is unique in our, [ CRM ] space. It not only is advantageous in terms of that continuum. But as we have noted before, the early data suggests that each test informs one another. And so you look out of launching 3 individual tests into being able to offer a solution, a platform as it were. And that is something that's highly differentiated in the market. And then obviously, behind all of that data, that's one of the largest sets in this area in this disease group and obviously, operate interest for collaborations moving forward. Operationally, one of the things you will have heard as the respond to the changing market conditions. As you all know, we IPO-ed and what we might call a growth market. We've recognized that tone of the market has moved away from growth into a revenue focused and prudent cash management, we have pivoted. We did issue before that we had extended our cash runway into the end of June 2024. And you will see us being slower than we might have expected an IPO, as we can serve those cash. So we have still hit our milestones but we continue to very actively manage our cash and how we move on to the next few milestones. Operationally, just so we can have a [ notch ] on the regulatory. We were already clear approved in 45 states. That was also subject to an audit before you get full certification. We did that this year. It was very successful. And now this is somewhat out of date as we address the remaining states. We're now 47 states and we are filed. Something that is of interest to both the clear regulators and the clinicians themselves as something called an analytical validation. Essentially, the purpose of that is to really look at the reproducibility of testing in our lab. The last thing you want is buried responses are depending on who is running the test at what time, et cetera. And we do the studies to prove that it's very, very consistent and that was successful. Obviously, we've talked before about the code. We're now on pricing and the other bit of, if you like, housekeeping that was exciting for us this year was the two key patterns in the new United States. Obviously, we've been having approvals on our patent portfolio worldwide, but I think these 2 were of particular interest, given the U.S. is our initial large market. And these are the two that covered our two lead products: Clarava and Tutivia. And so it was good to see that. Obviously, with patent protection, it's only one lagend in terms of how you preserve your assets, you have a defensive position. And what we have done is, as we progress as a company, with further developments, we will invent this initial pattern portfolio with our own file so that you keep extending not only the protection, but the time limits on those. And then obviously, we've talked about the research asset, which at some point, we will name a little bit not evidently. So feedback from Tutivia. Obviously, as we've gone out into the marketplace, as I've said, we're trying to get feedback. How does this really -- how is this perceived by clinicians? How do they want to use it? How do we get that widespread adoption. And I thought it would be very helpful to give a look at lesions themselves. So here are 3 key quotes -- let me just talk to you about the themes. When we look at Tutivia, there's this early theme, one is early in time. So if I can refresh your memory on the main competition in this area is from a technology called cell-free DNA. I've always said it's a bit like measuring the debris in the blood after the injury, it's a late biomarker. And obviously, our technology is hugely differentiated and so far, but it gives a reliable response anywhere from the first week post transplant. So those first few months are quite critical. A lot goes on then, and clinicians have felt that they haven't really had anything that they really rely upon in that time frame. So the other gene expression test is to be used in a surveillance or protocol biopsy center. That's after 90 days, and the cell-free DNA, although they have an apparent coverage from the -- from 14 days, we've heard clinicians say that they don't really trust the results until sort of 60 to 90 days in. And so this idea that we have, if you like, the first reliable early biomarker is reflected in that first quote. There's another aspect of being only and now is being proactive, and you'll see that from Dr. Formica's quotes where he's seeing this advantage to being proactive, not only for patient outcome. But in terms of looking at your resources, obviously, in a busy clinic, it's very easy to just allocate the same sort of time to each patient. But if you've got -- so in our clinical validation, only 25% of the patient population were high risk. If you know who they are in your Clinic, those are the ones who spend a little bit more time with, but also, you're going to have the expertise of the top clinicians in that clinic, very focused on the increased testing to monitor what's going on with those patients. So for him, the idea of being very proactive and being able to really focus on the importance of having a risk score, I think it's very important. Rose has always been a fan. She was in our original press release, if you can remember that and one of the things that she has noted is the advantage of the clinical study, it's what we call an all-comers. That really means in colloquial terms, we threw the kitchen sink [ faucet ]. And that is what you're going to see in the planet. You don't know your subgroup does and who you're looking at, and so you want all types to be included in a clinical study, to be able to show that that's really the performance you can expect in your clinic, and that's what we did. We did have a good PPV and that's responding very favorably to our competitors. But mostly, it was really impressive because there were no subgroups. There were no problematic groups removed from that performance that is highly reflective of what I might call the kitchen sink approach. So far, we're seeing some very good responses from our clinicians, and I'm looking forward to sort of building upon that as we go further into the marketplace on me. And obviously, use these kind of comments and reassurances clinician to clinician. Some of you may have seen some chit chat about CMS. So CMS obviously being a reimbursement agency on behalf of the government for Medicare. Medicare being the major source of reimbursement for transplant care. And they did an update. And this is our review of that update. CMS of Mosaic is basically said that this is just a clarification. But that has led to a little bit more of confusion in the marketplace, and we expect to see some further clarifications coming from them. So what does that mean to Verici? Well, long term, highly beneficial. One of the things we have been already marketing was that we were at a single biomarker test. With this balance accuracy, that means that the performance are good on both measures, the PPV and NPV, your sensitivity and specificity. It's good to sort of update that where the tests that have come before us were very, very high on the NPV, not so good on the PPV. So very much a rule out test, we have now come forward and said, with one test, we can progress the field in those performances. We were up against a trend in the marketplace without putting 2 tests together, a gene expression plus a cell-free DNA. It's what was being used as termed as multi-modality by some of our competitors. CMS said, no, we're not going to reimburse 2 tests, choose one. It's one biomarker per patient encounter. That led to 2 products being immediately withdrawn from the marketplace. And again, it sort of preserves what I call is our rare space. So as a single biomarker, this was, therefore, came to the forefront once again, highly beneficial long term to overreaching. Where we do see some confusion and where I would expect to see further announcements from [ MultiX ] is they use surveillance and protocol interchangeably. There are 2 ways of looking at this area of the work surveillance. One is protocol, it's time-based. So it centers, the -- so at a certain time point, we will have all patients come in for a biopsy. That's a protocol center. About 17%, 15% of all centers in the U.S. do that, quite a low percentage and if you have a surveillance, if you like, coverage, it's probably -- they're pushing them to be used in those protocol centers. But surveillance is also being used by the clinical community for monitoring, and that's more patient-centric. And so this clarification saying that it had to be were only used in a protocol center, but it was surveillance led to some confusion. And I would see us with CMS going down that route in response to clinical comment about that, that was more -- that need to move further clarification. For cause, there was also a clarification, a time clarification, a pretest is used before a biomarker test that's very standard of care. They then put in a time limit on that's just 7 days. This obviously has had quite a lot of comment back that, that flies in the face of diversity and inclusion measures, obviously, for patients that's not only highly inconvenient, but in some cases, detrimental. If you think about -- We, I think, have seen estimates of about 1/3 of all patients live more than 50 miles from their transplant centers. You can understand the difficulties of having to come back a regular intervals just to do your labs, and we do expect, given the reactions from a lot of the not-for-profits on this area to see some further clarifications. So if you do see some things, you'll see some clarifications in this area. I think that will be a highly beneficial. We do note that we are spending time in the marketplace -- attaching with clinicians on the CMS clarification. It somewhat detracts from the -- just the pure clinical conversation, but we anticipate overcoming that this year. It's just, I think, interesting to note that there are these industry-wide progressions in the background. Okay. Let's talk about Clarava. Now a wonderful curve there. If you're not a scientist, you will wonder what some of these terms mean. I can point out, if you see that red diagram, that represents random charts, and you obviously want to have an area or a curve that is to the left of that showing that you are statistically significant. You are more than random chance. That's what area adds on the curve and you see represents, as you can see, 0.72. We're very happy with that. The P value just represents that it was statistically significant there. So good results. The performance, which is up against outcome and biopsy that sensitivity and specificity, good results there. And I think 1 of the things that is highly significant, it becomes really intuitive as to why finishes may be very encouraged by these results is the odds ratio. What does that mean? Well, we are in a risk score, so we return you either high-risk or low-risk for this patient and the high-risk patients are 6x more likely to have a rejection than most low-risk patients. And what that really means is the test does differentiate in a very meaningful manner. There are more measures. There are more positioning that we would like to do before a commercial launch. This is a novel test. We are seeing evolving thinking from our clinical community on how they might use this so we are convening an advisory board to get some consensus on how we might roll that out before the end of the year. Obviously, we're in the summer, you know the joys of summer holiday schedules, so we would do that in the fall, ready for our abstracts further down the line and commercial launch before the end of the year. But very encouraging, we were delighted to see that. And we do -- the feedback that we have got in these initial responses is that it's going to be clinically relevant and very useful. And there's a lot of excitement about that. Let's do numbers. David, over to you.

Thank you, Sara. Good afternoon, everybody. So at the end of December, we had $9.8 million of cash and spending just over $10 million in operations and $1.3 billion on investing. In terms of investing, the largest element of that was our build of the Tennessee lab of just over $820,000, and that's obviously now complete. In terms of going forward, we would expect -- we do expect that level of spend to reduce and reduce for 2 reasons: one being that we are over the hump in terms of our clinical trial costs and secondly, as you would expect, taking an eager eye in terms of expenditure and monitoring that carefully and spending what we need. That said, in terms of with our projections and also our assumed levels of revenue, as Sara referenced earlier, we expect our cash run rate through to the midpoint of 2024. So the income statement, gained largest elements of expenditure being wages in R&D. As I mentioned earlier, R&D will come down this year. In terms of wages, we had at the end of the year, 15 people in the business, we currently have 14 people in the business. And then in terms of the balance sheet, so tangible asset is just over $2 million reflecting really the spend on the clinical lab in the year. The intangible is the base license that we purchased from relative to $1.5 million and plus additional cost on the patents and other things to protect that. And then the other thing I'd mention is we continue to hold a large accruals. That's mainly for site accruals. This is where the individual sites have incurred costs that have yet to bill us. So that number is monitored and is quite large at the end of the year. Thank you, Sara. Over to you.

Thank you David. I think many of you will have seen this slide. This sort of helps us provide a background to our market sizing and then obviously, we have put out a market size of about $5 billion over 5 years. Why do I do that? It's because Protega is a run over a time continuum. Just so that everybody understands how we came to these numbers. We put it on about 100,000 transplants being run every year, kidney transplants, I beg your pardon, let's be a little bit more precise there. And then we've assumed our own market size being how many times we would expect Clarava, Tutivia and Protega to be run, you can see up here. Clarava will initially be, one, I see that extending. Tutivia, we did assume 3 times. We still don't see this being all over the place in terms of [ market share ]. I can see there's one outlier that did 11x for this kind of testing from a leading institution. I was surprised by that, so I think 3x is a safe average. And then Protege will be run over a number of years. That's the long-term outcome in terms of fibrosis. And then obviously, this is just the addressable market in kidney transplants, if I can just refresh everybody on the overall vision. That as you can see in the middle, the time continue, We've talked about that. Obviously, this technology is likely to be highly applicable to other organs. And many of our PIs in the clinical trial, also deal with other organs. So that would be kind of an easy expansion to our technology. And we did see early technology with early results in other diseases I think RNA signatures, that's our base technology, very, very applicable to many different areas, highly expandable. And so there's plenty of further opportunity should we so wish. And then obviously, behind that, you see all the in-depth data that we call our fourth product. Let's talk about what's coming up in terms of likely news flow. We're divided in 2. This is one of the kind of more operational sides. So obviously, New York and California are two big states, we are subject to audits there, a little bit in their hands in terms of their time lines, but I would hope to see some news flow on that. We would like to obviously publicized some of the research collaborations that we expect to be coming up and then obviously, with the lead product to Tutivia, this year is the year we put in the file for the technical assessment for the coverage on to the local coverage determination so I would like to see that come out successfully. And obviously, the team in the background is working continuously on further accreditation. This obviously supports the robustness of the lab and our offering in the marketplace. Publications, publications, publications, right? That's the year, the theme of the next 12 months. Tutivia is submitted into a peer review journal where we're working through the comments right now. So I hope that, that is satisfactory and completed shortly. It will be great to see that out there. And obviously, once we have that, we'll move on to our application for coverage. Clarava publication, clearly, we've got some working terms of positioning. Once we've done that, once we've got consensus, we can shape that publication. I'd like to see that out there. We've had to wait on the clinical performance metrics before finalizing our health economics. I'd like to see some publications come out on that, very encouraging there. And obviously, we had always done back of the napkin, listen intuitively doing these test makes sense, and I'd like to see that done in a little bit more detail. obviously supports our sales as we move beyond clinician to clinician and moving to the C-suite at hospitals to be written into protocols obviously being having a flexible budget impact model is going to be one of those selling tools that would be very useful. And then lastly, we'll put the abstracting on Clarava. It would be nice to have a presentation slot today at ASN. But nevertheless, we'll probably be advertising our attendance there. It's a direct conversation with the transplant community in a face to face. It's always very useful going to conferences. Okay. So let's just wrap up. Obviously, our main focus now, although we have other sort of research questions, we still have Protega in the background really, the focus of the company now is that commercial expansion. And you'll see, as we are looking at this, all things that go into supporting widespread adoption there, health economics, utility studies, price determinations, coverage, et cetera. And then that's going to be the focus of the majority of the company. And that concludes our presentation today. I'm just going to move on and look at the questions.

That's perfect. Thank you very much, indeed, Sara, David,for updating investors this afternoon. [Operator Instructions]. Sara, David, as you can see, you had a number of questions from investors today. So thank you for your engagement this afternoon, if I may, Sara, hand back to you. If I could ask you, please, just to read out the questions and give a response or it's appropriate to do so, and I'll pick up from you at the end. Thank you.

Thank you. And thank you, everybody, for the questions. It's always very encouraging to have more of an interaction on these. So the first question is, "How big is the commercial opportunity for Tutivia?" So we obviously, we just walked through the total addressable market. One of the things that we do point people to is obviously what's gone before us and so I would urge you to review the CareDx, the company that I feel that you can are most accessible in terms of how testing has manifested into revenues. In the past because they are just transplant testing. Other companies are within larger components. So it's very difficult to get to that information. Last [ seen ] in a couple of hundred million in revenue, that is shared between heart and kidney but maybe it's half and half, and that may give you an opportunity to assess what one of our competitors have done and what their curves look like. They are one of three big companies in that space. There's Natera, Nurofen and CareDx really have the cell-free DNA. There are others and there are more entrants coming into that marketplace, but it does give you an opportunity to understand what has come before us. So Tom, what news for -- Hopefully, we answered that already. So I refer you to the slides there. Michael, "What is the likelihood of reimbursement happening? When do you think this will receive confirmation of this?" Again, covering in the news flow. Let me just give a comment on reimbursement. Coverage makes reimbursement very easy. It streamlines the process. Before then, we still get reimbursed. It's just a little bit more messy. There are processes with CMS, with private payers to pay out is called under in appeals process or that they'll just give you a payment right upfront if they've seen enough of your claims but there is a reimbursement before the coverage determination, but coverage determination obviously makes that very streamlined. That's where you get reimbursed by Medicare within 14 days and at full price. So that's the significance of the coverage determination to reimbursement there. "What's the difference between Tutivia and other biomarker tests? Are they different to significant enough to win clinical adoption?" Okay, let me just go over effectively how we differentiate Tutivia. Early. So that's the early in time, early by being proactive. That's the risk score. There are other differentiators, one being that it's highly dynamic. At the moment, if you're a clinician and you see an underlying change in your patient both naturally and in response to medication. You don't have a test that is responsive in our self-free DNA as one clinician put it to me a little sluggish in its response, and they are looking for biomarkers now in that monitoring question. If you think about RNAs or the messaging of the body and the instructions and so it is highly dynamic. And then lastly, we do emphasize that clinical trials have been run in a way that has garnered a lot of criticisms from clinicians, and they have been wanting more. We met that need with our clinical trial, all comers, international prospective, blinded, through the kitchen sink [ tank ]. So all of those were highly significant and rated by clinicians. So as you can see, if you take those messages of early, personalized, dynamic and obviously run to a high level. You can see that in your clinical practice, those are enough, I think, to be able to differentiate, have some rare space that no one else is competing in, and that should be significant enough to win clinical adoption. "Is there any likelihood of a takeover offer within 2023?" One of the things that I would say is, as a company, we are always open to all alternatives. My job is to maximize shareholder return. And therefore, we are likely to be nimble and reflect and respond to market conditions. And so we're always open. I couldn't possibly try and quantify a likelihood. "Have you had any interest from strategic partners? If not, why not?" I think that this is very much the same question realistically. We talk to everyone. It's quite a small community, and there is a lot of interest in multiple ways. And obviously, we'll look forward to reporting anything as and when it manifests.

That's great. Sara. David, thank you very much. And thank you to everybody for your questions. I think you've addressed all those questions submitted from investors. If any other questions do make their way to us Sara will make those available to you post today's meeting. I know investor feedback will be important to you, and I'll shortly redirect those on the call to provide you with their thoughts and expectations. But before doing so, unless there's any other questions you wish to take, I'd like to just ask you for a few closing comments.

Thank you. We had one late question come in, so and this is about when we start reporting volumes on a regular basis. We'll start that at -- obviously, there'll be a lot of interest on how the year went, Tim -- and so we would anticipate, obviously, addressing that at the end, Let's see how 2023 pans out. So thank you all. Lots of great questions here. I do appreciate the time. Obviously, this is a very exciting year for Verici. It is a dynamic year for us, moving from R&D into the commercial arena, undertaking those lessons, really understanding how we address 2024 as being the widespread adoption year for our first product. So very exciting, I look forward to giving you further updates later on this year.

That's a great Sara, David. Thank you once again for updating investors today. [Operator Instructions] On behalf of the management team of Verici Dx PLC, I'd like to thank you for attending today's presentation, and good afternoon to you all. Thank you.

Thank you.

Thanks very much.