LBT Innovations Ltd

ASX:LBT

Earnings Call Transcript

[Jack Brown, Corporate Development Director]

Thank you for standing by, and welcome to the LBT Innovations Quarterly Investor Call. [Operator Instructions]I would now like to hand the conference over to Mr. Brent Barnes, CEO and Managing Director.

[Brenton John Barnes, CEO, MD & Director]

Thank you, Jack, and welcome, everyone. I hope that you all remain well and healthy wherever you are based at this time. It's a great pleasure to be joining you from our head office here in Adelaide, and we are fortunate that South Australia are tracking very positively for COVID infection rates, and life for our local staff remains safe and effective.As usual, on today's call, I will talk through the activities of the previous quarter, followed by our CFO, Ray Ridge, who will then take us through the financials. And finally, I will wrap it up with the business outlook before handing it in an open session for question and answers. An audio recording of this call will be made available on our website later today.Now I'd like to introduce our Chief Financial Officer, Ray Ridge, who is with me on the call today.

[Raymond Robert Ridge, CFO & Company Secretary]

Thanks, Brent. The usual formality before we begin. I would like to remind those on the call that today's update may contain forward-looking statements, which do involve inherent risks and uncertainties. Those risks and uncertainties include those disclosed in our ASX lodgments, which we recommend that you review. There are reasonable grounds for any forward-looking statements made today. However, due to their inherent uncertainties, we recommend that you do not place undue reliance on those statements, and actual results may differ materially from those forward-looking statements.We're now ready to go back to you, Brent.

[Brenton John Barnes, CEO, MD & Director]

Great. Thanks for that, Ray. Look, this quarter has been really transformational for LBT, delivering a number of important milestones that support creating a platform for global growth and scale. Before elaborating about these really positive milestones, I did want to talk specifically about what COVID-19 means for our business as well as for our customers. From a broader market perspective, we continue to see pressure on our customers, who are these laboratories worldwide, also responsible for the ongoing and increasing COVID-19 testing. Added to this, some laboratories are seeing their normal routine testing volumes returning to near pre-COVID levels as elective surgeries and delayed medical treatments have now resumed. The impact of this is that it remains challenging for our sales teams to secure appointments with some of our prospective customers. However, as a business, we've moved quickly to adapt and ensure we can continue to engage with customers and progress new APAS Independence sales opportunities.A fantastic example of this was our successful installation at the Health Services Laboratory in London, where we innovated our service delivery model to support the installation remotely. Prior to COVID-19, we would have sent a service engineer, a scientist to support the installation, provide training locally. In the current climate, this was simply just not possible. Instead, installation was completed by our recently appointed service provider, oneservice, and instrument training was completed remotely via video conference. The process has been -- has now set, really, a blueprint for future installations and a testament to the ease with which the APAS Independence can be deployed to new customer sites with the instrument fully operational on day 2 for this Halo example.During the quarter, we also announced 2 significant strategic partnerships for the commercialization of APAS Independence: with the appointment of Beckman Coulter as marketing partner for Europe; and as previously mentioned, oneservice, for service and support globally. These new partnerships, along with our existing global footprint of key opinion leaders and sales personnel has positioned us extremely well to support future sales activities. The Beckman Coulter partnership, in particular, is one we've been working on for some time and is a great milestone for the company. Adding their scale and globally trusted brand will enable direct access to more customers than we would have been able to achieve on our own. Quite simply, their scale is impossible for us to replicate.To give you just a small example, perhaps, of the idea of this scale. The Beckman Coulter Diagnostic Europe LinkedIn page has over 8,000 active followers compared to LBT and CCS, who combined have around 1,000 followers. Similar ratios of scale exists with Beckman's YouTube account and their Twitter outlets as well. Beckman are now publishing APAS content through their social media channels, which creates significantly more engagement and reach. Importantly, the APAS instrument is an ideal fit within their existing product range and aligns with their workstation automation products. Our focus this quarter has been on bringing their sales teams on board with detailed product training and developing joint marketing materials. We've completed joint customer visits and continue to be buoyant by positive customer feedback and a high level of engagement with the Beckman Coulter teams.Knowing the importance of sales, we were delighted to announce a sale to the Limbach Group in Germany. The Limbach Group is one of the largest laboratory networks in Germany, operating in more than 30 laboratories across the country. After a 6-month evaluation of the technology, the sale has been completed with one of their technology innovator laboratories. The efficiencies gained from APAS will be watched closely by other laboratories within their network, which may lead to further sales opportunities for us.In the U.S., we have recently completed a series of short, 15-minute webinars to introduce the technology to new customers. This proved to be an effective strategy, enabling us to continue to create new sales opportunities at a time where travel is constrained. From a technology perspective, we have continued to address the requests for additional data from the U.S. FDA for our MRSA analysis module, the 510(k) submission and have completed the data capture phase for our VRE analysis module clinical study.In September, we received $750,000 of funding through the MTPConnect's Biomedical Translational Bridge program for the development of our APAS-AMR analysis module. This funding will be used to accelerate the development of the technology, enabling us to bring the module to market sooner. The APAS-AMR module is different to our routine analysis modules and adds a completely new technology feature to the instrument that supports the reading of antimicrobial susceptibility testing plates. These tests run in parallel to the typical urine and MRSA plates that inform clinicians of the appropriate treatment for patients. It is an exciting development and one that we believe will significantly expand the clinical utility of the instrument. I'll now hand it over to Ray to talk through the financials.

[Raymond Robert Ridge, CFO & Company Secretary]

Thanks, Brent. Hello, ladies and gentlemen. Before I run through the quarterly cash flow report, I would like to highlight some significant steps taken in the quarter to strengthen the company's cash position, this included the placement completed in July, and it raised $8 million or $0.16 a share before costs; and the share purchase plan, which offered existing shareholders to participate at the same price closed in August and raised an extra $400,000.I will now turn to an overview of the financial results as reported in our Appendix 4C lodged with the ASX. These numbers are all in Australian dollars and in accordance with ASX listing rules, are not audited. So for the quarter ended 30 September, LBT reported net cash outflows from operating and investing activities of $1 million or $1.30 million in outflows before taking into account the government grants. And this expenditure rate was consistent with that of the prior quarter. Net cash inflows from financing activities were $7.6 million. As previously discussed, the $8.4 million from the placement in SPP, less $600,000 for the cost of the capital raise, less $200,000 for our quarterly repayment under the SAFA facility. So in total, the company had total net inflows for the quarter of $6.6 million and finished the quarter with a cash balance of $13.7 million. Back to you, Brent.

[Brenton John Barnes, CEO, MD & Director]

Thanks for that, Ray. Now kind of turning to the business outlook. I said at the end of the last quarter that following our recent capital raise and with the Beckman Coulter partnership that the company is in the strongest position it has been in to be able to execute on the commercial opportunity for our technology since I've taken over as CEO a bit over 4 years ago, and I still strongly believe that to be the case today. It is really an exciting position to be in for the company, with the added sales opportunity provided by the Beckman Coulter partnership. We look forward to working with them over the coming quarters to bring the APAS Independence to many more customers than we've been able to previously. Our sales team will also be actively working with laboratories to support ongoing evaluations of our technology. This will include working with SA Pathology in the new Royal Adelaide Hospital, where we've recently completed an installation of the APAS Independence.The instrument will be evaluated alongside their existing total lab automation solution to provide screening for their routine MRSA testing. We will continue to progress the documentation to support the questions received from the U.S. FDA 510(k) submission. This is a lengthy and detailed process, but we remain confident that a positive outcome will be received, most likely in the first quarter of calendar year 2021.Over the coming months, we will be expanding our current team to accelerate the development of our APAS-AMR analysis module. We've already got a number of jobs advertised and posted, and we're looking to recruit these additional personnel in the areas of artificial intelligence, systems and software engineering. It promises to be a busy run into the new year with a number of projects ongoing from a technology and a commercialization process.I'd like to thank everyone for attending today. And I'd like to now hand it back over to Jack to talk through the Q&A process, and we've also had some initial questions coming overnight that we'll run through ahead of that.

[Jack Brown, Corporate Development Director]

Thank you, Brent. [Operator Instructions] Now before we open it up to the live audience, we'll run through the questions that came in overnight.So firstly, can you provide a more detailed update for the trial placement at Halo? Their 3-month trial should now be over.

[Brenton John Barnes, CEO, MD & Director]

Yes. Look, it's a really positive placement that commenced back in July. The initial focus was evaluating the clinical performance for the MRSA analysis module, and that's largely been completed and with really positive and pleasing results.Kind of extending from that, they've developed an interest in our urine module, and we're working on them to establish an agreed protocol for that. And so kind of chunking in the urine and in addition to the MRSA, it's likely going to obviously extend the evaluation. But overall, it's a really positive placement and an evaluation that continues to be ongoing.

[Jack Brown, Corporate Development Director]

Second question. How long have the trials been active at the Royal Adelaide Hospital?

[Brenton John Barnes, CEO, MD & Director]

Yes. Firstly, it's really fantastic to have an APAS Independence in a customer site in our hometown, here in Adelaide. The Royal Adelaide Hospital, for those who haven't been to Adelaide or know anything thing about it, is a really leading laboratory, and they conduct the majority of the pathology tests for the state. The evaluation literally commenced a couple of weeks ago, following an installation and training that we've done with them recently. Similar to the Halo that we spoke about just before in the U.K., SA Health are evaluating the MRSA analysis module.

[Jack Brown, Corporate Development Director]

The quarterly suggested the MRSA decision is likely to be the first quarter of 2021. However, previous announcements indicated a time frame of November 2020. Is this delay a significant concern? And is this understanding correct?

[Brenton John Barnes, CEO, MD & Director]

Yes. So kind of playing back timing around some of these things. We announced the 510(k) submission at the end of March of this year. And there is a 90-calendar day established review period that the FDA have. During that 90-day period of time, the FDA can ask questions, at which time they have an ability to stop the clock. In our last quarterly call, we indicated that the FDA had put our application on hold because they required additional or new information, and we were given a 180 days to respond to that.So that's kind of where that timing shift has occurred, where we're really confident that we've compiled much of the data that's been requested, and we're still very confident in an outcome. But that's why we're saying that the outcome we're expecting is in the first quarter of calendar year 2021.

[Jack Brown, Corporate Development Director]

Why wasn't the sale to Limbach Group marked as price-sensitive?

[Brenton John Barnes, CEO, MD & Director]

Yes, a good technical question. It should have been, and that was certainly our intention.

[Jack Brown, Corporate Development Director]

Given the urine module is already FDA cleared, what is the timing for a urine module that is CE marked?

[Brenton John Barnes, CEO, MD & Director]

So Europe, just to kind of separate from the U.S. FDA, it's a separate process. So it's a self-certification process that we've obviously done for MRSA already, and we've done successfully a number of times. Incidentally, the evaluation of the urine module's going to occur at the Halo Group. I mentioned that before. So we've already got an evaluation module in place, and that's a similar case for Labor Wisplinghoff, our key opinion leader in Cologne in Germany. So we're expecting to finalize the CE marking sometime in the first half of 2021.

[Jack Brown, Corporate Development Director]

[Operator Instructions] First question comes from [ Craig Murphy ].

[Unknown Analyst]

I saw one of your videos, and you said the U.S. distributor coming out in 2021. Is that going to be a distributor? Or is it going to be a marketing agreement with Beckman Coulter, like we have with Europe?

[Brenton John Barnes, CEO, MD & Director]

Yes. Look, it could be either. So I think the response is we're certainly expecting 2021 to be the year of us firming up our distribution strategy in the U.S. So we don't plan on having just a single U.S. salesperson. We certainly expect to put in place an agreement structure that allows us to maximize the opportunity. So look, it may be Beckman Coulter in a similar type of arrangement, or it may be someone else in a slightly different capacity. So too early for me to kind of give details around what kind of a structure that agreement will look like.

[Unknown Analyst]

And how is VRE tracking? Is it early 2021 still?

[Brenton John Barnes, CEO, MD & Director]

Look, it's -- like I mentioned, we've kind of -- we've started the clinical study component of that, and it's progressing well. We'll have an evaluation module that we'll look to install at Labor Wisplinghoff, our key opinion leader, during this current quarter. So look, we're still expecting in kind of that first half of 2021.

[Jack Brown, Corporate Development Director]

There are no further questions at this time. That does conclude our conference today. Thank you for participating. You may now disconnect.