Verici Dx Plc

LSE:VRCI

Earnings Call Transcript

[Sara Barrington, executive]

Welcome, everybody. Thanks for attending. This is the half year results and business update. Obviously, there is our disclosure slide. I'd like to kick off by presenting the slide that I have presented before, and then showing how we are translating this into our current view of the business. So this has been our vision slide for how we operate with the company. You can see the kidney transplant testing. The suite of products being pre-transplant, Clarava; early-stage damage post-transplant, Tutivia; late-stage, Protega.

Collectively, those 3 tests have covered the end-to-end spectrum of testing and kidney transplant. And we have always maintained that there would be a movement from individual tests to more solution-based offering as we look at the integration of those 3 tests.

Collectively and with other programs, we have called this the clinicians platform and indicated that each area of those tests are and will be developed as applicable to other organs outside of kidney. The usual transplant organs are heart, liver and lung and can be applied and extended it into adjacent diseases such as autoimmune.

Behind that we talked about the research assets from both the physical samples that we generated as well as the data associated with that. If you recall, we sequenced that's the entire transcriptome, that's a wealth of information. So we have pretty good data aspect of this, and we have been referring to that as the research asset.

I'd like to reframe that vision picture to reflect our new stage of company, which is very much focused on revenue generation and to demonstrate how that is, it's now in 3 main revenue-generating centers.

Let's start off with Clarava, the pre-transplant test. As previously disclosed that was subject to a licensing arrangement with Thermo Fisher, and we will give an update on that. But you will see that aspects like that will be held under licensing revenues.

Direct revenues reflects the next commercial product, Tutivia, that's early post-transplant, and that is subject to our direct sales force. That is where we offer it directly to the company and obviously, building on that is as a center that we will call direct revenues.

Obviously, with a pipeline of products, we've covered that before, we will give an update on status on that for example with Protega being the late stage. We have a choice whether that is offered through the licensing revenues model or with the direct. So that's to be determined is not uncertainty is choice. So again, those will feed into the centers of direct and licensing.

And then thirdly, the third source of revenue is what we're calling the services business. So that research assets that proudly mentioned before, that is now being grouped together and offer to the market as a services business, and we'll give an update on that as well.

Let's start with the licensing revenue center. Back in 2023 -- November 2023, we discussed that we had signed an agreement with Thermo Fisher for the pre-transplant test that we had a number of milestones attached to that. And David will give the numbers later on in the presentation, there would be an ongoing royalty stream. That's the structure of the agreement there.

The update is in the first half of the year is that we have completed that transfer, so the test is now up and running in Thermo's labs. And that successful transplant was subject to the major milestones within that structure, and those have now been achieved.

Underlying that, Thermo have been focused on gearing up for their commercial launch that will be announced in due course. But what we did see is, obviously, this being introduced to the clinical community at a major conference, which was called ATC, and that was done in June.

Looking forward with that agreement, we have some minor milestones to be achieved at the rest of the year and into next, and those are mostly subject to the launchpads of Thermo, we can report that we are on track and we're focused on those for the rest of the year.

Direct revenues. This is Tutivia. Tutivia is the early post-transplant test and we have now 3 sales people in our team that are focused at both opening new centers and exploring what we call recurring or repeat ordering within those centers. We've now increased to 15 ordering centers and we were able to, at the last conference, present new data in this field, a new subgroup called DGF, delayed graft function patients, where there's an unmet clinical need in that area and the presentation of the applicability of Tutivia within this subgroup was very well received and has resulted in an increase in the orders behind that.

The timing of the revenues in this are subject to our coverage to termination that we expect towards the end of the year. So whilst we are not recognizing any revenue at the moment, due to this process of being in review in this process, the technical assessment from our process requires you to hold claims. We do expect to be able to see almost all of those claims at the end of the year with coverage to termination and retrospectively, be able to record that revenue. Frankly, we should be able to recognize the revenue in 2024.

We've now completed all states under the CLIA regulatory process. New York State had some additional steps and data presentation requirements. We have completed those, and that is now submitted into New York State for review.

We did expand the commercial team. We now have a total of 5, 3 sales people and medical affairs. And we're also looking at deploying those for the rest of the year and into next year hiring in terms of reaction to increased volumes that we would expect next year. So very much the investment in the sales force this year and then any increases being in response to an increase in demand.

Continuing our educational program is part of the increase in clinical awareness and outreach to the clinical community. Key opinion leaders being able to explain our underlying technology, the applicability of the new sub-Tutivia and sharing their experiences, an important component in being able to get widespread adoption of our testing.

The patient average was completed with the patient journey that was launched formally at the Transplant Games in July. But this is an educational tool that enables patients to navigate and understand their process all the way from the initial diagnosis of kidney disease through to completion and maintenance of the transplant, and this is something that in conjunction with centers is an offering to patients to be able to understand their journey and the requirements of the transplant interaction with their teams.

Other revenues. In terms of product development, we spoke at the beginning of the year about Protega, our third product in the core testing. We have completed the 12-month visit, and we do expect after the data cleansing and analysis to be able to issue the test out into the market in terms of validation and performance in the first half of next year. So we continue to be on track with that program.

We did -- we fundraised, request funds to be able to be applied to expanding that cohort right into the 24-month visit and so that clinical trial is now we're going to cover the 24-month period. That will be added to the test offering and provides us with a more robust test offering in terms of long-term outcomes.

How the program is funded and in the pipeline are the year-end programs, applicability to other organs, et cetera. All of those are expected to yield products in the medium and longer term and all of those programs are on track.

Turning to our third source of revenue, which is our services business. We did complete the transfer of the year-end samples per the agreement. Some of that recognized last year, some of it this year. That is now complete and fully recognized.

We also announced a collaboration based with an academic institution in Sydney, Australia. This is grant-funded. And enables us to demonstrate the ability of our tests being deployed internationally and within the environment of both education and service elsewhere in the world. It's a very exciting collaboration.

We do have other opportunities in this area, and they're all at various stages but recognizing that we're having both a lot of interest in this area all the way from testing with [indiscernible] capacity all the way through to the team's expertise. This enabled us to turn and look at our balance activities, and we do have a dedicated sales resource now employed in this revenue center.

Market trends to be aware of. Some of you may have noted, the FDA did extend its oversight into that developed testing area of testing from the CLIA process. That oversight was expected as Verici is fully compliant and is able to offer the Tutivia test without any disruption. Future phased rollout has an improvement with the New York State process. The FDA are using that as a proxy in their oversight. And obviously, we have fully submitted there and will simplify any future compliance needs.

On the reimbursement front, we are -- as noted, we submitted our application in Q1 of this year, and we are in an active review process and are on track to meet the expectations of the determination before the end of the year.

Industry-wide, we noted last year that MolDx has given some guidance in terms of the interpretation of the LCD that has caused some confusion. They did withdraw that guidance and instead turn to a process where they would amend and solidify that into an LCD. We are expecting that this summer.

We do have plenty of scope to be able to operate any unexpected changes within our process, but guidance says that it will be very much in line with the guidance they already gave. And so we are not expecting any additional requirements. If there are some, we obviously have a process in place to deal with them.

David, can I pass over to you for the moment?

[David Anderson, executive]

Thanks, Sara. Good afternoon, everybody. So pleasingly, the 6 months. So of record $3.3 million of revenue. That's revenue across our licensing business and the services business that Sara has just spoken about. Our EBITDA loss for the period was $1.1 million, again, referencing our tight control over costs.

Cash balance at the end of the month -- end of the 6-month period was $7 million. That was obviously augmented by the successful fund raise in February, with netting -- which raised a net amount of $7.5 million. And therefore, with that cash balance and our assumptions for revenue for this year and beyond we still remain [indiscernible] into 2026.

Turning to the primary statements. Surely cash flow statement for the 6-month period, cash outflow from operations, $3.2 million and notwithstanding the fact it was a $1.1 million EBITDA loss for the period received [Technical Difficulty] expenses in the period, our 2 biggest expenses remain staff cost and R&D expenditure.

On staff costs, we started the period with 14 people in the business. At the end of June, we had 19 people in the business. That was 3 additional individuals hired into our commercial team and 2 individuals into our bioinformatics team. Again, both of those were as expected and as I outlined to shareholders at the time of operating funds in February.

Then finally, the balance sheet. We have a large receivable of $1.5 million at the end of June. This reflects the invoice that was issued to Thermo Fisher in June. And then on the payables, we continue to hold a prudent amount in terms of state accrual costs. This is our estimate of costs, which have been incurred by the site as part of the clinical trial but yet to be invoiced and that amount is currently standing at $745,000.

Thank you. Back to you, Sara.

[Sara Barrington, executive]

Thank you. So very much a message of on track and expanding. And I'd like to take a moment just to walk through the summary of the company. So far, in the 4 years since the IPO, we have obviously had a strong track record of delivering on time and to expectations. Part of that is that we have commercialized 2 tests.

So being through the product development, validation and right away through to commercial, one being the licensing opportunity with the pre-transplant and the other one representing the direct revenues. And obviously, we have a clear type client of subsequent products, which we begin offering to either the licensing or the direct revenue lines.

Those diversified revenue streams also include the services business, recognizing that there is value not only in our underlying tangible assets such as samples or the data, what we have been talking to -- referring to as the research asset, but also the expertise within the company and the team and giving a rich opportunity to have collaborations with other companies, other institutions, both in research and commercially, either on a fee for service or in a more grant-funded monetisation.

That obviously gives the company a little bit of security in terms of a diversified that we're not a one product company, we're not a one source of revenue company. And obviously, that enables us to expand on multiple fronts.

We do have a large addressable market. What is interesting is we had previously done on market sizing, particularly for the Tutivia, assuming that it would be 2x a transplant patient. This has proven to be in our experience in the market base very conservative and perhaps overconservative.

We are seeing that the numbers of testing being anywhere up to monthly, and that is obviously a much higher multiple in each transplant patients. We do offer -- it's a hackneyed phrase, the next generation of technology but it is true.

So with the RNA signature approach, we're able to offer technology that is more personalized, is more proactive and in fact, is able to be offered where there is still unmet need in the marketplace, where that has been extended to our other products where, for example, Clarava, there is not another similar offering same as Protega, and so that each point we are addressing in a very large addressable market that critical need.

It's not just enough to do product development, in health care, you also have to understand your operating within cost structure, regulatory and complex reimbursement environment. And that is something that we're at an advanced stage. Almost at completion with the regulatory with the New York State and obviously, in the last stages, the coverage with Tutivia under that LCD process.

So all in all, as we're looking to expand going forward, we have now moved from just a product to product developing company into one that is quite clearly focused on revenues. And I think if you're looking at the growth of the company, that is what I would [indiscernible] stage 2. Out of pre-revenues, we're now into revenues and building up that and obviously, looking forward to the third stage of -- in the future profitability and cash flow greatly from stages.

So definitely, funding and the revenue, that's how we're seeing the company, that's how we're driving the expansion. And we do aim to be at the center of RNA signature testing and are poised very well to do so. That concludes my presentation. Thank you.

[Sara Barrington, executive]

Thank you very much. We're getting questions on, obviously, short-term catalyst for share price appreciation. Obviously, I think that really refers to new reports for the rest of the year. Obviously, the key aspect that I'm sure folks will be looking out for is the formal launch from Thermo on Clarava, more news in terms of conclusion to the LCD process and year-end figures on the results of the direct revenues approach and any other kind of announceable information that we'll be able to make on the services business, not all of those will be announced or that may be a discussion at year-end. But I would say that those are the major catalysts moving forward very much revenue focus there.

What are the next steps with regard to timescales how your own to commercialization?

Hopefully, this presentation was helpful in terms of saying that we're really are in commercialization right now, we're very much in terms of looking at the business from a revenue center perspective. So obviously, the licensing we've had -- we've completed major milestones there. That's well underway and post completion. Now it'll be into the long-term Thermo. On the direct sales where we have -- I think it's almost doubles our centers in this period, and we continue to expand in that area and gain traction there.

So comments on the listing. Yes, I'd like to address that. I can't talk for other companies, obviously. But I do note that many of those were because of funding requirements. And clearly, we closed around the share in the period. So that's not really a direct comparison. I would like to say, I remain a huge supporter of [indiscernible] Exchange.

I do believe that has a unique role in the world, and it's one of the reasons that [indiscernible] has been in forefront traditionally of being a financial center. I would like to see, I'm pretty supportive, maybe even expand it. And I remain committed to supporting it going forward. So hopefully, that answers that question.

Competition. There's different comments about competition and as we think about each program. So we have -- in the end-to-end testing, the best served part of that journey for patients was in the first year post-transplant, and that is what we've offered with the Tutivia test.

Now in terms of competition, we offer quite different technology and an advancement in that area. And it's a hackneyed phrase to say that we're the next generation, but I do believe that's appropriate in terms of looking at our approach in that area. There were a number of areas within that testing that the competitors were not addressing and we do, which at that point I think we had a very clear differentiation, and we're priced competitively, and we're seeing that in the adoption of the test.

The other 2 products in that end-to-end, the pre-transplant. If I can just take a step back and say pre-transplant has been -- there are 3 aspects to the transplant equation when you're looking at rejection. There is the patient, there is the organ and then there's the compatibility. It is the compatibility that has been best searched today.

There has been some measures of testing with the organs but more has really not been addressed with the patient themselves. That is what drives the dance. It answers the clinical question, how aggressive or benign was the -- is the patient's immune system likely to react in the phase of organ-organ. And therefore, it's unserved. So if we say that there is no competition in that area, it is because it's a novel offering to the market, and there's a huge amount of interest from the clinical community in seeing such a test.

Protega is the same, long-term outcomes. [indiscernible] served in the environment. Fibrosis is a well-known condition not only in kidney transplant but other organs and other disease states, it is basically scarring of tissue and to long-term value. And the question there is, are you progressing at a slow or a fast pace there, will it lead to rejection, are you likely to move your graph in 5 years, which is problematic or we keep it for 30 or 40 years, which is the idea.

So clinicians don't have a good risk-based assessment toward that. And therefore, when I see in Protega, it also doesn't have competition, it's because that is a unique offering and therefore is of interest. So hopefully that answers the question about competitors.

I see that there is some questions about market sizing. I just wanted to return back to that point. If you recall on previous presentations, we have put the testing -- kindly testing market, about $5 billion. That looks to be too conservative because it was based on Tutivia being run only 2 times and we are seeing anywhere up to, let's say, 9x monthly after the first quarter post-transplant. But there is a variety of protocols. Each center has its own protocol but it looks like 2x will be overly conservative.

I've always said that when you get into the billions, and you're saying, do I have a large addressable market? The answer is just yes. It is large, it is addressable. And I think one of our nearest competitors [indiscernible] the kidney transplant market is about $10 billion, but -- and they're probably baking in the increased amount of testing that there is done. But hopefully, you can see that there is some very large revenue numbers to be had there.

What steps have been taken to make the Thermo Fisher agreement to success?

I think this is an opportunity to get a shout out to both teams. To successfully transfer technology from one map to another, requires a high degree of cooperation and sharing of information and to do at a time when everyone's got 100 other priorities is a testament to how focused Thermo were in the interest of being able to offer this test.

So we remain good friends. We have a good working, good relationship with them, and we'll continue to support that team and we were thrilled at the efficiency of both teams and getting that transferred.

As we inform, we had talked about supporting them commercially with some joint presentations. Those have happened and you should see news of where we jointly offer some educational programs. So there is a lot of reason to work together. The base technology of our RNA signatures requires a certain amount of education and discussion with medical community. Obviously, those who've pre-transplant are going to be interested in the post-transplant and vice versa. So what we are seeing is a high degree of cooperation and sharing between 2 teams, and that continues.

I'm asked for more details on the collaboration with Westmead Institute and other potential research partnerships. The research with the Australian group was important to us for many reasons. One, it proved that we would be doing collaborations with high profile academic centers, not only in the U.S. and Europe but beyond. And I was thrilled to be able to give a nudge to that international community.

The details of the collaboration is that the government are interested in understanding, if you like, genetic-based testing within this environment, and how that could be incorporated into national healthcare and bringing on the new wave of education to the up and coming nephrologists.

So that they funded this very large study, and we are part of that. So the results for that is that we are recognized and tested within the government environment. And also one where the education of the new generation of nephrologists will incorporate the results of that testing.

So very important all the way around, and the Westmead Institution is an organization that we're very proud to partner with, and they were actually in our clinical study, and they have a number of high-profile publications themselves. So I thought that this was a very higher-quality example of a collaboration in the research environment with academia.

The problem with research is everybody wants to keep it quiet. It's commercially sensitive and we have the same issue, which is one doesn't always want to reveal what you're developing, what the pipeline is and the details there. And so where we're doing research, there are partnerships and we will not always be able to disclose what they are, RNA's contracts, et cetera, because of the sensitivity. Where we are able to, where there is mutual interest in publicizing those collaborations, we will. And I hope to be able to do something in that [Technical Difficulty].

[David Anderson, executive]

What strategy is in place to further increase the adoption of Tutivia in transplant centers across the U.S.?

[Sara Barrington, executive]

I don't think we need to change our strategies at all. We understand -- first of all, there is the ability to recognize that when you're going into a new center, there is not only a clinician on the transplant team [Technical Difficulty]. So that is all encompassed in what makes a center an ordering center.

And we have been working on that and have successfully opened 15 centers. Within that, and there's a focus that you don't want to spread your team too widely just in opening centers. There's an amount of follow-up and encouragement to increase it and to look at recurring revenue and that ordering [indiscernible] clinical team has a certain amount of habit for me.

Is it easy to order? Do I know what it is? Can I understand where I'm using it with my patient care, so on and so forth? All the way up to being fully baked into the IT systems and ultimately into protocol. So that's the approach there.

For us, we asked for an investment in expansion of the sales team. We've divided into territories. We have the original business development person working on that recurring revenue, setting up a model for what really helps clinicians feel comfortable with the test and putting it into their sort of business that's normal in terms of testing for patients.

But we also have made an investment into the new salespeople. We'd like to see those rolled out into their territories. After that point, we have said we would hire in response to increased orders and be able to meet the demand with additional salespeople. And that would really be the strategy, which would be to build out that sales team until we've got national coverage. And to extend beyond our initial target of centers into the full 180 that eventually we want to get to.

What is the long-term vision for Verici in terms of the product portfolio and market presence?

Hopefully, that's been covered with the presentation today. I believe that we have offered up a vision where we started in the kidney transplant testing, proven out the technology of RNA signatures and product development and validation, have the utility of that testing within a discrete area of kidney transplant testing.

We then said then you're able to sort of widen that field and you build upon your own success. We've had 2 successful products, a third on the way, those products are then translatable to other transplant areas. And ultimately, this idea of using the recognized expertise of the company and the team in terms of doing this product development and development of RNA signatures, which are widely applicable. We've seen them, we suggested that adjacent disease, which could be autoimmune, but in the fact that it can be used very, very widely. Oncology being a big area.

So when we say right at the end of this presentation, we aim to be at the center of RNA signature testing, it is a big new wave of technology that's being offered in testing in the medical community. And at the moment, we are demonstrating not only our success in validating signatures to the product, but we're also demonstrating that they have usefulness and that they are adopted commercially with all the wraparounds in terms of the regulatory and reimbursement.

And I do believe that we are well on our way for a long-term vision of being an RNA signature company. But that's not built overnight. We've always demonstrated how we would focus and build upon success so that we don't get ahead of our space. And I believe that we have delivered on that and we continue to deliver on that. And over time, we'll be able to address them and widen the disease groups for a long-term vision.

Thank you. I'd actually like to -- in the period, obviously, we did the fundraise and investors permitted us to really invest in the acceleration of previous success to other product areas. It was a very successful fundraise when -- in a time when market conditions are perhaps not that conducive to raising funds.

So I'd like to thank the shareholder base for their ongoing support. I'm looking forward to reporting of our continued successes across the pace and we're very excited for the rest of the year.

[David Anderson, executive]

Thank you, good afternoon.

[Sara Barrington, executive]

Thank you.