Vitasora Health Limited (VHL) Earnings Call Transcript & Summary

[Audio Gap] that we have promised to do, we have done, and we've done it in a timely manner, and I intend to continue to do that. So why don't we kick off straight up. Right. Okay. Here we go. As I said, this is -- this year is a large transition phase for us from R&D basically to a launch phase, commercialization phase. Things that we've done in the last few months, there's been a change in strategy from a device manufacturer to an e-health SaaS player. And I'll explain what that means in terms of the commercial opportunity later on in the presentation. We've also had clinical validation of wheezo close to finalization, and there are 2 more trials planned. So I will get into those details as well. But it's an exciting time for us as we are launching something that's never been available to patients before. We are manufacturing wheezo at the moment, and that's well underway, and we will be receiving first batch, small batch for wheezo in the next month or so. We have with great -- it's great pleasure that I announce that we have CE and TGA approval, which means that we are now ready to market in Europe and in Australia. And that is a great thing. And we've been able to move -- actually achieve that about 4 months prior to where we thought we would. We've done a great deal to cut unnecessary costs out of the organization. So the burn has gone from roughly $650,000 a month to $250,000-odd. And we've done that without compromising at all our ability to be able to move the organization forward to the launch phase later in 2020. We have a new CEO, and I've been lucky enough to be able to build a world-class team around me. We'll be making some announcements around that, but I will get into a little more detail later down the track. And as I said, this year is very much a transformation from an R&D-type organization to an organization that is ready to commercialize wheezo and SaaS platform. Just a quick overview of the company. The Chairman is Nicholas Smedley, who's on the line. And as you know, he has a great background in investment banking and has brought that expertise to the organization. There's myself, of course, who is a lifetime health care guy, so everything from big pharma to medical devices, to medical services, and I've had the privilege of working all around the world. So I'm -- that's all I've ever done. I'm not too good at too many things, but I'm reasonably good in this particular space. And of course, there's Bruce Thompson, who is the Dean of School of Health Sciences at Swinburne University. So -- and he is also the President of Thoracic Society of Australia. So it's a great team, a team that has a wealth of experience in this space and brings complementing -- competencies together, and we're very comfortable and confident that we'll be able to lead the organization forward to the commercialization later this year. Just a bit of background, I guess, to put into perspective, the size of the market, there are more than 350 million people in the world that suffer from asthma, and that number is growing. Interestingly enough, though, in an Australian study involving just under 4,500 patients, 70% of asthmatics who've thought that their condition was controlled were basically not controlled and putting themselves in danger of serious health events. So they -- and this is where the opportunity for wheezo and our SaaS platform lies. Patients think that they are being well controlled, but they are not. The other thing also, particularly in those patients that are our targets, in children and in the elderly, accurately measuring how effective that's the control is in these 2 cohorts of patients is very difficult because you don't get an objective, I guess, measured from a kid who's 5 or 6 years old, and certainly from the elderly. So that is really difficult to understand whether or not the intervention -- medical intervention is, in fact, having the desired impact, which is one of the reasons that we do get exacerbations and asthma attacks. There are currently no easy solutions that allow patients, parents, carers or physicians to monitor asthma outside of the clinical setting. This is where wheezo will be a wonderful addition to the armamentarium of treating -- not treating, but managing the asthma condition. Because when your doctor's not around, wheezo is. And that's fundamentally what it is that we will be doing and providing to our customer base to patients. And finally, the economic cost of poorly managed asthma is huge, Deloitte Access Economics estimate that it's almost AUD 25 billion in Australia alone and north of 100 -- sorry, $400 billion in the U.S., which again highlights the need for a different approach to managing asthma outside of the clinic setting and in the home and in the community, which is where our huge opportunity is. As I said, we are moving from a device company to an e-health SaaS strategy. And what that does is basically builds an ongoing annuity stream from an app subscription. Every month, there'll be a payment for the app. And that payment will be somewhere between AUD 5 and AUD 10. We've got a world-class team that we're pulling together. Our existing Chief Clinical Officer, Samaneh, is leading the algorithm development and content, clinical content together with Professor Thompson. And our CTO has -- [indiscernible] has great Silicon Valley pedigree, and is really leading how the development of the app will take place, the data management infrastructure and really getting us ready for the launch of the product and SaaS service and having the structure and competency in-house to be able to support that. The one thing that we've changed is we're accelerating the development of the application too, which is basically a asthma/COPD management system that will incorporate the wheeze rate that we capture. Environmental factors such as pollen count, weather factors, pollution, particulate information, et cetera, events diary, so when they had asthma attacks and other episodes, hospitalization and also importantly, medication usage. And what that will do is provide us with the ability to be able to forewarn patients when they may be at risk of an asthma attack due to environmental factors. The beauty of the system also is the cloud and data allows us to use this predictive tool, not just with the patients, but with their carers, their parents and doctors, in fact, anyone -- teaches even, anyone who is involved in the asthma management plan of that patient, which is the first time that this has been achieved. And importantly, once a patient starts with Respiri with the e-health SaaS platform, they will be a customer for life. Because once they start using Respiri and wheezo as a way of managing their asthma, it will be very difficult, particularly for even for parents to be able to cease using the tool when it becomes an intricate part of the asthma management plan. And obviously, longitudinal outcomes data will be very useful in the future when it comes to providing data to payers, HMOs in the U.S. and government payers elsewhere in the world by demonstrating that the interventions that patients are undertaking are, in fact, having the desired impact on the disease state and keeping patients well and safe. As I said, asthma is very poorly managed by patients, particularly children and the aged. We discussed the fact that 70% of people treated -- treating themselves of asthma are not aware that their condition isn't being controlled. And that is a huge problem. Having the correct diagnosis and regular preventers, et cetera, are keys to managing the disease state. Now one of the things is compliance and persistence with patients who are asthmatic is very poor. And if it's not poor, often they don't know how to take their inhaled medications properly. And what wheezo will do is help identify these issues for doctors and other people involved in the management plan for their patient and help to create a better approach to managing that disease state. And obviously, we know that remote access to carers and parents will have an improved impact on the health outcomes in the patients, particularly kids. I mean, being able to pick up the phone and remind your son or daughter that they haven't done their wheezo test or they haven't taken their medication or that their wheeze is high than it should be, will have a great impact, positive impact on that patient's well being. And basically, this will enable the patient to empower themselves when it comes to the treatment of their management of their asthma. They won't have to wait to go back to their doctors to get a feedback loop on how well they are controlling the disease they have. And that is a wonderful addition to anything that the patient does because to date, there is no real way apart from not getting an asthma attack that a patient knows that they're actually effectively treating their condition. So this is setting the scene for why we've gone with an e-health SaaS strategy. And to give you an opportunity, Respiri, our business is to become an essential lifetime patient partner in managing asthma. And the reward for the company will be recurring revenues in device sales. As I said, there are more than 350 million patients with asthma around the world. We believe that we can get a subscription of about $9 a month per patient. The device price is about $200, give or take. So if we only secure 1/4 of 1% of those patients, that's about 875,000 patients over a 2-year period that will result in subscription, recurring fees -- revenue, sorry, of almost $95 million per annum. And wheezo sales, device sales of $175 million over 2 years. So annualized revenues after 12 months post-launch are about AUD 190 million. Now that -- just to remind you, all I'm asking for is 1/4 of 1% of all the asthma patients in the world. And the reason I just raised this is just to highlight the huge market opportunity that Respiri has with its e-health SaaS strategy and the devices. And as I said, with the e-health SaaS strategy, once we have a patient, that patient will be with us for a very long time. And really, the model is no different to the way that mobile phones are sold by Telstra and any of the other telcos. We're following a very, very similar model, a model that we know works in other areas, and certainly a model that matches what needs to happen for a chronic disease state, such as the treatment of asthma or management of asthma, I should say. So big opportunity. And as I said, the numbers roll up very, very quickly from a very, very small proportion of the people who have asthma in the community. Now the one thing that we do know is that there is no way that little Respiri will be able to take on the world on same. And we are very much working with partners to optimize our launch onto the marketplace. We've just newly appointed General Manager of Commercial Operations, with extensive experience in health, that's all this guy has done, success in building teams as well and in launching new products. So he has the background and platform that we need to help accelerate the whole launch of wheezo in the Australian marketplace, which is our only focus this year, in quarter 4 this year. So as I said, commercialization in Australia is the only focus for the organization, the laser focus for the organization and our resources in 2020. Nothing else matters to us at the moment. And the reason for that is Australia is one of the key markets for Respiri around the world. And our key opinion leaders here are well-renowned across the globe. So once we get the model right in Australia, we will pick that model up and move it to Europe next year and U.S. soon after. We are already in discussion with potential pharmaceutical partners to help us with the promotion of the wheezo and e-health SaaS platform to respiratory physicians in Australia. These are the doctors who will be leading the charge for wheezo and the SaaS platform. These guys see about 70 patients a week, and there's about 1,000 of them in Australia. So that's about 3 million consultations a year. That is a huge opportunity for us, and they will be our targets because basically, they are the top of the pyramid. And they will then influence the GPs, as they start to use wheezo as a asthma management tool with their patients. So it is critical that we get these people on board and get them on board early. The channel strategy is a well-worn channel strategy that we've done in health care in this country many times. Pharmacies will certainly be dispensing or selling the wheezo at their stores, and we will be using pharmaceutical wholesalers to distribute our products. Now the benefit there is, of course, we don't have any warehousing costs. And they basically build the pharmacies, and we just have a single large account. So it is a cost-effective way of us doing that. We'll also be looking at a pharmacy partnership through the pharmacy yield and also the pharmacy associate -- Pharmaceutical Society of Australia to basically develop a program at the dispensary level to help patients that present with a script for an inhaled steroid, to consider wheezo as part of their management platform and I think the pharmacies are certainly doing in the community at the moment, wanting to get more involved with their patients and provide value-add to the patients apart in addition to simply sticking a label onto a box of tablets. Now the initial feedback we've had from this has been very, very positive from the pharmacies, but also from Asthma Australia. So this is something that we will also be working on. We also have our own e-health -- e-commerce platform, offering Afterpay options to patients on our own website for those that want to buy device using the Internet. As I said, we're in discussions with Asthma Australia to partner with us and go directly to their patients through their established channels. Now Asthma Australia's charter is to empower their patients who suffer from asthma to manage their own disease state. And they are extremely excited at the prospect of partnering with Respiri, but also what wheezo will be able to do for their patients to help them achieve their goals. And as I said, the SaaS pricing points that we've done, the testing that we've done so far, will lie somewhere between $5 and $10 per month. And as I said, we are looking at the pricing to be finalized on the device, but we're looking at somewhere between $200 and $300. And we're also looking at options to, I guess, amortize the cost of that device over the period of the financing deals that we come up with Afterpay and other organizations of civil health. So basically, we know what we're doing, and we know how we're going to launch this product, and we know who we're launching it to, and we know how to get it to the patients. So that's certainly consoling for me in any way. Clinical validation. As I said, we have 3 studies. One -- the first one is the stethoscope comparison study, which is near completion, and abstract was submitted to the American Thoracic Society for publication. That study will be finalized in the coming weeks, and we will have the results of that study available for us to use with physicians, but also potential partners. The second study is basically a correlation between wheeze rate and other clinical measures. So basically taking the way that asthma is measured today in the laboratory clinic or hospital, and using it to -- and then correlating how wheezometer relates to that. So that will give us a great understanding of how wheeze changes as asthma conditions either improve or deteriorate, which is very important. We had meetings with the respiratory physicians in the U.K. to, I guess, determine -- or that confirms the need for wheezo, but also to help us understand what we need to present to the U.K. government and bodies, NHS bodies and NICE guidelines to have wheezometry included as part and parcel of managing asthma. The final study is an outcomes-based study. Now basically, this is not going to hold up our launch. What this will do is provide us with information as to whether or not there are health outcomes to be had in patients that are incorporating wheezo into their asthma management plans. This will be an international multisite study with sites in Australia, the U.K., U.S. and probably Europe. And basically, it will involve 2 groups of patients: one group of asthmatics that are managing their asthma the way they do today and another group of patients with asthma who will include wheezo as part of their management plan. The idea being that we will be measuring events such as exacerbations, hospitalizations, medication use, et cetera, and see if there are any differences in the outcomes -- health outcomes for the different cohorts of patients, with the hypothesis that patients who have wheezo will have a better health outcome than those that do not. Now this study is going to be at least 18 months long, I would think, but we will have people working on this to, I guess, work out the size of the study and eventually, how long the study needs to run for us to get a meaningful result in terms of health outcomes between the 2 patient groups. Really important, as I said previously, for payers because this will then demonstrate to insurance companies, governments, health departments that investing in wheezo and our e-health SaaS platform, with patients with asthma, will have a positive impact on health outcomes and really reduce health costs to those organizations. So as I said, not critical for the launch, but critical for the next phase of our development as an organization when we start to seek reimbursement for what it is we're looking at providing patients. Building capacity, as I said, the great news is we know that we can make the wheezo, and the supply chain management forecasting, planning, [ procurement ] and strategic sourcing is in progress. We have a partner that we're using to manufacture the product in Australia. That partner has operations in Malaysia, and we're also looking at other options in Taiwan, India and China as potential options for manufacturing and to mitigate risks. So mitigating risk, having more than one place that can manufacture the device so that should something happen to a particular site, we have another one to fall back on and show continuity of supply. The other thing also is the wheezo does require quite a bit of assembly and anything that involves labor. Labor cost is not something that you want to be building in Australia, unfortunately, because of the costs. So it is imperative that we find an overseas manufacturing site to minimize these costs and manage our COGS down to a reasonable level. So -- and that we've already done and that we're already exploring with the view of moving production off-site this year. So that -- I guess the reason for today's presentation was just to reinforce to everyone. A lot has happened in the last few months. The opportunity for wheezo is huge. And the reason it's huge is because it will fundamentally change the way that patients with asthma manage their disease back. At the moment, they have absolutely no way of knowing definitively and quantitatively that their asthma is being effectively managed. Unfortunately, the first time they know that it's not being effectively managed is when they have a bad asthma attack, which is too late. wheezo will -- the introduction of wheezo will eliminate -- or sorry, minimize the chances of that happening because there will be a constant feedback loop to the patient and their carers team, parents, teachers, doctors on how well their condition is being managed. And management strategies can then be tailored to address issues that are patient specific. This does not exist today in the community. A patient needs to go to a doctor, a clinic or a hospital to get these measures done. And in the context of managing a chronic disease state, that's just not good enough. We know that the wheezo works, and we know that we've got trials in place that will help us gain additional information for payers later down the track. We know that we can manufacture the product. And we've got a first one manufacturing one delivering 500 units to us in the coming month. We know that we have CE mark and TGA approvals, and they were achieved 4 months prior ahead of schedule. Cost-cutting has made sure that we get bigger bang for buck without compromising our situation and launch plans. And we've got a team that we believe will be more than capable of launching this product on to the marketplace and ensuring that, that 1/4 of 1% of asthmatics that we need to make Respiri a $200 million company happens. And all that transformation has begun and will continue to -- and will continue throughout 2020. And we are on track for a quarter 4 launch, and we certainly don't see anything getting in the way of that happening. So really, that's our plan. I've given you a bit of an update, and I will continue to keep you all abreast of our plans and what we intend to do. And certainly have a whole series of things that I will be announcing over the coming months to do with some of the items that we've discussed in this particular presentation. So without further adieu, I might throw the floor open to any questions people may have, and I'll be more than happy to try and answer them.

Marjan, Nicholas here. Just wanted to -- if you could just go back to a little bit more of your background for a few of the people on the call that may not have done it or know your background in delivery with healthy sleep solutions and how we drive this strategy?

Okay. Thanks, Nic. For those of you who don't know me, that's probably not a bad thing. But my entire background has been in health care. So I started my career 30-odd years ago, working in pharmaceutical. So I've worked for worked with Merck and Co and I've worked for Pharmacia, launching many products across the globe. So I've worked in Australia, Europe, the U.S., Japan, have run Asia Pacific. So my whole background has been in that space. And I've worked quite a bit from there. Since the early 2000s, I've started my own health care businesses. The first one was the -- called Battaerd Mansley. And over that was a data of consulting organization that we subsequently sold to a -- then publicly-listed company called IMS Health, which was listed on the NASDAQ, and they purchased our organization. And I was asked to start the consulting business in Japan, where there was no business, which we did very successfully going from 0 billings to USD 32 million in billings in 2 years. So we're pretty successful in doing that. My last venture was founding and starting an organization called Healthy Sleep Solutions, where we also had ResMed, Peter Farrell and the Board approved some seed capital to be into Healthy Sleep Solutions. And basically, we created Australia's largest provider of home-based diagnostic treatment and monitoring services in the area of sleep apnea. So we worked with GPs, specialists, respiratory guys, as we do with Respiri, to deliver home-based diagnosis and treatment services, and very quickly became Australia's largest provider of these services, commanding north of 40% of the market. And we became one of ResMed's largest customer in the Southern Hemisphere. And one of the largest customers in the world, in little old Australia. So we're pretty proud of that. We then orchestrated -- well, I then orchestrated a trade sale to a French multinational core -- a CAC listed company, Air Liquide in 2013. And we -- and left the organization at the end of 2016. So the similarities between what we're trying to do with Respiri and what we did with Healthy Sleep are uncanny and very similar. So taking the management of a disease state into the home is something that we -- I've done personally successfully in another disease state that is very similar to asthma. And the learnings that we have and the things that we did at Healthy Sleep are very applicable to the models that we are introducing to the commercialization plans of wheezo for Respiri. So that's me in a nutshell. I won't bore you with too much more. But suffice to say that I'm not too good at too many things, but I know a little bit about this space. Any other questions?

Yes, I have a question, Marjan. If you want to grow the company $200 million size company, then why stock ranking website, the company's value of about $46 million now. If that's right, it's only about 4x the current size. That was a big higher growth than that. Your comments please, Marjan?

Yes. But that's in the first 2 years post launch. Now -- and as I said, the only reason I said those numbers...

Sorry. I didn't hear that sorry.

No, no, that's only 2 years data. And the reason I put those numbers up there is just as an indication of how little we have to actually penetrate the market to get to $2 million. I'm talking about 1/4 of 1% in 2 years. You never -- but that's -- I'd like to think we could do that in a canter, but anyway, we shall see.

I understand. What about a 10-year projection, any thoughts, on the sales?

Well, the 10-year projection, by about 10 years, anything can happen. We don't even know what the technologies will be intended, but we'll certainly be investing in R&D. But in 10 years, we would have launched in Europe very successfully. We'll be in the U.S. We'll have partners. And if you look at a model -- I mean, ResMed was built on one machine.

Correct. Perfect.

So if you look at -- and I don't want -- it would be [ bad ] on me to compare ourselves to ResMed at this stage, but this is where they started in the mid-80s, with one device, one disease state, and you can see what they're worth today. And I don't see Respiri any differently. Just in a -- well, a related disease state, but no different to the way that ResMed started 30 years ago, and we have every confidence that we have a good head start on any potential competitors. And yes, the barriers to entry in this market are pretty high. So it's -- so if you wanted a model to model Respiri around, I would just look at ResMed from inception, and that will probably give you a good idea. If I can do 10% of ResMed, we'll all be very happy, and then you can buy me a beer. Well, if there are no other questions, I'd just like to, I guess, end the meeting by saying, we'll be -- you'll be hearing a lot more from the Respiri team. You'll be hearing a lot more of good news and a lot more news that will tick boxes on our way to commercialization in quarter 4 calendar year 2020. And I look forward to enjoying success -- an ongoing success with you, the shareholders, and also the rest of our team. And here's to a big 2020 and beyond.

Wonderful.

Okay.

Thanks, Marjan. Thank you, everyone.

Thanks, guys. Bye.

Bye. Thank you.

Bye-bye.

Bye.