Diaceutics (LSE:DXRX) — FY21 Results Webinar

0:00 Good afternoon, and welcome to the DIACEUTICS PLC full year results webinar presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged and can be submitted at any time by the q and a tab situated in the right hand corner of your screen. Just simply type in your questions and press send. The company may not be in a position to answer every question it receives during the meeting itself. However, the company will review all questions submitted today and publish responses where it's appropriate to do so. Before we begin, I'd like to select the following poll. And I'd now like to hand you over to Peter Keeling, CEO. Good afternoon.

0:32 Good afternoon indeed, and thank you very much to everybody for taking time out to get an update to DIACEUTICS in its business. And we're gonna dive right in, actually. And what I want to take you through today is how we've been transforming our business away from a professional services business to being a platform company servicing, the precision testing space. But before I do that, I want to, introduce, Nick Roberts, who is our new chief financial officer. Nick joined the company a few days ago, but, thankfully, it's been more worth working with myself and the outgoing CFO to, kind of make sure he's up to speed really quickly. So, Nick, do want to introduce yourself? Yeah. Thanks, Peter, and, it's a pleasure to be here. I'm delighted to be joining DIACEUTICS. It's such an exciting time in its growth journey.

1:24 I'll just give a quick overview of of my background. I'm a fellow chartered accountant with over sixteen years experience. I trained in orders originally and more recently have been involved with, two high growth aim listed, companies, most recently with ergomed PLC as a head of group reporting, and then, before that with Sirius Power Holdings PLC as a group financial controller.

1:52 Very good. Thanks, Nick, and welcome to the team. I'm Peter Keeling. I'm the CEO and founder of the company. The company was founded some sixteen years ago. Let me sort of really dive right into what it is that we, we focus on. So we are a health tech data and services business, and we're focused on a particular neighborhood within precision medicine. Let me explain how that works. So our pharmaceutical customers,

2:21 are increasingly launching, new smart or targeted drugs. These are drugs which are, in essence, working in a small group of patients. And in order to find those patients, you have to test them first. So in essence, those drugs are dependent upon high patients are being tested. The problem that that creates is that up to fifty percent of those patients will not or may not get access to those drugs just because of the poor testing infrastructure surrounding them. Labs might not be able to run the test. Labs not might not be aware of the new test. All of that creates a loss of patient and, obviously, economic revenue to our pharmaceutical customers. We have seen over the many years of working with them that they're willing to spend up to $15,000,000 per therapy to eliminate those diagnostic hurdles.

3:14 And that, once you multiply it by the number of new drugs and new opportunities coming to the market, eventually ladders up to about a $3,000,000,000 market opportunity by 2020 by 2030. Today, it's sitting around $250,000,000 as an available market, and we're focused very much on providing service to our pharmaceutical customers in that space. If I move to the next slide, and hopefully, it will start to explain how we do that. So, our customers are pharmaceutical companies. In fact, last year, we had 56 pharma therapy brands. These are therapy brand teams that are launching new drugs upon which, which are dependent upon testing. Those customers, all top 10 of the leading pharma companies, I'm pleased to say, are our customers, plus a number of diagnostic companies, which is new to our register, this year. And what we're in essence doing is providing them with three key components.

4:13 First is a global network of labs. This is a network which is increasingly online our platform. So they are plugged into our platform so that we can help them change management at the frontline of testing really quickly. I'll come back in future slides and explain that a little bit more. We have a range of highly innovative products. These have been created on the job with our pharmaceutical customers and and deliver a very specific kind of end to end diagnostic commercialization, service. Some of those products are data, some of them are technology enabled services. And indeed, speaking to the data, we have been amassing over the last almost ten years a world class data repository and applying machine learning and algorithms to that data to allow us to slice and dice that data and sell it back to our pharmaceutical customers.

5:11 So what are we selling? We're ultimately selling services through our platform and products and data, and we'd speak to those shortly. I'd like to just maybe speak a little bit about the the kind of financial performance for those, who kinda want to get an early snapshot of that. Nick will cover this in a bit more detail later. But we had a good year, good solid year for us in our first year where we had launched the platform. It's our first full year of of being a platform company versus a professional services company. £13,900,000 sterling was the revenue number, and at a constant currency, that was 18% growth over the previous year. So the although we were obviously in the process of launching the platform, we were also growing the business.

5:58 But it perhaps it is to the right hand side of the slide, which is the, the kind of the biggest transformation in terms of the impact of the platform on the quality of our revenues. We went into 2021 with the assumption that 20% of our business, our professional service business, would convert over to the platform. And I'm pleased to say that at the end of the year, a full 60% of our business moved on to the platform. What does that mean? It means that we moved our customers away from those old terms and conditions, which were very much based on a project basis, and moved them into license and subscription revenues, which obviously allow us future predictability to our revenue flows and allow us to book revenues into future years. And indeed, I'm pleased to say that for the first time, not only were we able to provide subscription revenues for the rest of 2020, two, but it allows us to book revenues into 2023 and 2024.

6:58 So the platform revenue model has really started to fuse through our business. Another piece of evidence of that is its impact on our gross margins. What we were able to do in in the pre platform days was to take one of our data products, for example, a lab mapping, which is one of our products. That lab mapping would traditionally have taken, four to six weeks and with labor time and delivery back through PowerPoint slides and Excel sheets. It's a data product, but it was very much delivered in a kind of a two dimensional way with the platform, with all the data preloaded and the way that we've we've got the tools. That's a product that is delivered within hours. So the labor saving is enormous. The client delight is very significant. So all of that has started to work through our business this year.

7:49 We invested £5,200,000 in the platform. Again, we'll cover that in later slides as to what we're investing in. But in kind of a quick cliff note, in essence, we're investing in data. We're investing in the building that lab network to really pursue, the total available market, which we know is moving kind of on a 10 x speed. If I move to, the next slide and just speak about some of the other transformations that have been underpinning, our business. I've mentioned already the platform revenues. I've mentioned the multiyear contracts, that we're signing for the first time ever, which is, demonstrative of our shift to platform. But equally, we've been growing the platform, and our goal is to have a a platform that ultimately has 2,000 labs plugged in online.

8:41 I'm really pleased to say that in the first year, we brought about 20% of that. Some 560 odd labs are now plugged in online. What does that mean? It means they too have signed up to a set of terms and conditions that allow them to collaborate with us in terms of our pharmaceutical projects. We can which we're like to sell back to pharma as well as as providing exhaust data, the more they collaborate. We use a collaboration model within our platform. In other words, we we put our arms around a group of labs that might be 70 labs or 80 labs in a given country or a given disease. And we say, let's work together to solve a problem. That problem might be how they interpret a test, or that problem might be they're not aware of the new test. And and I'll show you shortly how those how those products work. And so we really saw a a significant kinda milestone improvement to first year of of building that platform network. Really excited to see that. And a second component is around our data, and our data continues to improve. We're pulling data in from thousands of different sources and both on on claims data, on lab data, epidemiology data, and our data science team are transforming that.

9:55 As we ended the year, we had 490,000,000 patients worth of data from over 15 different countries. This is the largest single testing data repository, that exists, and it allows us to be highly competitive with our pharmaceutical companies and our customers. And we doubled our data science team, really helping us, you know, seek and develop new data, new ways to slice and dice that data. And we started our first automated data data feedback into our customers, which really moves you past that hands on, you know, in person transaction to a kind of plug and play, data flow back into our time. So really leveraging the platform. But another component that I want to touch on here, which underpin the transformation of our business in 2021, was our readiness for scale and our readiness for marketing.

10:50 As we entered into 2021 and remember, we had just launched the platform a couple of months at that stage. We had three, senior salesman, US based, appropriate for a a professional services business, but not appropriate for a platform business. And we have spent, twelve months bringing on board hiring and bringing on board 12 new client managers, all of whom are much more platform facing, much more able to deliver the scale that we require and and communicate the benefits of the platform to over 50, five, fifty six therapy teams that we're currently working with at the moment. And we also added operational support. We added, new senior management, involvement from my team, at the senior table so that they were, equally, focusing on on on product suites, and we hired a new head of sales and marketing.

11:48 In total, all of this constitutes our readiness for scale. We, in essence, were accelerating our shift from the old web doing business to a a new way, and you'll see why in a minute why we think that was an imperative.

12:04 Perhaps one of the ways of kind of putting this into the into the context of DIACEUTICS journey, we we've been presenting over the last while a what we call a strategic road map. And if I can just walk you through this for a second, hopefully, it'll you'll see how these pieces fit together. So we started life some fifteen years ago as a professional services business. And we were very much working with the pharmaceutical companies, working those same therapy teams. We had a limited product

12:31 list. At the same time, we were able to to kinda grow a business, but most importantly, learn the business, learn the needs of our pharmaceutical customers. We used that in 2019 and 2020 to build the platform that we now call DXRX. And so the first full year of that platform on market was in 2021. And what you see here is the milestones around products, around data, and around platform all speak to the component parts of how that platform has evolved. Most importantly, they have all laddered down to a financial impact that is that is starting to transform the quality of earnings of the business. But perhaps it is to the future and and and our continued investment in product data and platform that allows us to really embed ourselves with our pharmaceutical clients. The more useful we are, the more the platform has that global reach and it's and and creates a high functioning utility, the more we believe that we will be plugged into our pharmaceutical customers.

13:32 I'm pleased to say that already, and you have seen some announcements recently and r r and s announcements, we've started to see some of those what we call enterprise licenses. These are plug plugged in permanent licenses, which allows us to auto renew both our data flows and other services over multiple years. So that that intent, for the future, I think, is already starting to shape our business.

13:59 I want to maybe just hopefully describe the the kind of the context above, but through the eyes of our customers and what we're doing. And maybe the best way to do is kind of return to what exactly do they need, what's what's the problem, or what are the questions that they're asking. And you'll see on this slide the way that we phrase it as a a prelaunch launch and life cycle management, optic for them. They are thinking about how to launch this diagnostic alongside their drug before they launch it. During launch, they're thinking about the issues of launch, and and they're having to live with that diagnostic alongside the drug for seven or eight years of that drug life. And some of the questions that they are asking of that kind of diagnostic dynamic is, you know, what's the testing landscape in my key market? How many labs can even run this test?

14:49 And if they are able to run it, are they able to run it at consistent quality? When you move into the launch phase, they want to know how quickly can I get labs up and running? And to put this into context, if if a pharmaceutical company is launching a new drug in, let's say, breast cancer or prostate cancer, they need at at at a minimum, you know, between 50 and a 100 labs out of the blocks to be up and running and ready to run that test. Otherwise, when they go and talk to the doctors and the doctors try to order that test, the labs that the doctors are familiar with aren't able to run that test. So it's really speed is of the essence there. And by plugging in these labs, as you can see in a second, into our platform, it allows us to be shovel ready or button ready, if you like, to bring those labs up to speed really quickly. And on life cycle management, the their needs continue because they're they're they're often leaking patients away. They they know that they're selling the drug, but they don't believe they're not make they're not making their market share, and they're asking what's the problem. And often the problem is patients aren't being tested. So all of these

15:54 questions from multiple different departments across the pharmaceutical division is really the articulation of the space that we're operating in. And so what we've done is to what we've run is to articulate, the way to service that business as a platform. And because, ultimately, we're integrating many moving parts. And the platform that we have does several things. It brings all the data that we've gathered over the last eight or nine years, and it presents that data in ways that are easy for our pharmaceutical companies to see where the gaps are, which labs cannot run the test, how many labs should run the test but don't, what is the test adopted, and how many patients were tested positive. That data flows back to our pharmaceutical companies through, through the platform.

16:41 The second thing that our pharmaceutical companies want to say is, okay. You've shown me where the gaps are. I want to fix this. I want to move those labs really quickly so that they go from zero to hero. And and that's why bringing those labs online, plugging them in so that they are ready to go when our our pharmaceutical companies need it is a really important part of the service that we are delivering. The bigger our lab network, the more that we can sell those services back to our pharmaceutical customers. And lastly, the products. These products that we built, alongside our pharmaceutical companies are very much designed to do a very specific job. If I move to that, a slide, I'll try and explain that. So back to the needs of our pharmaceutical customers. Remember I said they they have needs at a clinical development stage, a product launch stage, and a life cycle management stage. And what you see here is through the experience of working on hundreds of projects with our pharmacy companies. We've been able to break that those down into these little tiny bite sized chunks. And on the left hand side of each of these these three segments, you see how we have articulated all the things that our pharmaceutical companies need to do if they want to get maximal or they want to optimize the test for the drug. And by breaking that down, it has then allowed us to develop specific products, data in purple, or services as represented in pink to really address each of those needs.

18:08 And, hopefully, what you can see on this slide is ultimately our our ambition and our appetite is not to service some of the needs, but actually to be the diagnostic commercialization platform for the pharmaceutical industry. That is in essence what we built, and that's what we launched, last year. I should speak to the data. And, you know, health care data is a, it's a messy business, and the data does not come in ready packets. And you have to hoover that data in from literally thousands of sources. We have an engine now within, within DIACEUTICS that allows us to cleanse and standardize that data in a way that allows us to to use a machine learning and AI algorithms, which which really helps us map out individual patient diseases.

18:55 It might surprise or maybe not surprise many of you listening on on on this phone call that a typical lung cancer patient, if such a thing exists, often will travel up to four years before they get access to the right drug. And along the way, that they could have had up to seven or eight or nine different testing events, all of which may have been missed opportunities to get them onto that drug faster. Our data shows that, and we slice through those disease pathways, slice through that to provide really smart insights back to answering the questions that were on

19:29 the previous slide. How many labs can run this test? How many patients were tested positive? How many labs should be able to be how many labs do you need in order to meet your forecast? Really pleased, in quarter four last year to launch, a a pinnacle product for us, if I could put it that way, which we call Signal. Signal is a weekly data flow. It's coming at the minute only from our US market. And that weekly data flow allows us to identify by ZIP code patients who were positive in that region. Why is that important? Well, that allows that really empowers our pharmaceutical customers to go to their pharma reps and say is get in front of those doctors, explain that there are positive patients in those ZIP codes, and that our drug is the right one for them. So it's final meeting, that final mile of travel.

20:20 We know who's testing. We know where the patients are, and and we know what the labs are doing, and we now know that the prescribers can match that. That is the power of the data that that that we have built, the the data engine that we built.

20:33 If I can bring this all together, and I'll only select a couple of examples here, just to give you flavor, you can read the others at at your leisure. So I've mentioned the product signal. So here's a here's a a real life example of a pharmaceutical customer in The US. And and the problem it's saying is, I am not getting the market share that I should. I'm missing patients. Can you help me find patients? And what we're using is a weekly data flow subscription, which, allows, our pharmaceutical customers to see by ZIP code where those patients are. What have we done since we switched that on for the last three months? We're identifying hundreds, yes, hundreds more patients that are potentially treatable.

21:20 Not all of them will will go on to drug. There may be other mitigating reasons why they're not, but it really presents a treatable and actionable patient pool that our pharmaceutical customers are going after. I'm pleased to say that when we launched Signal in quarter four last year, we signed up six subscriptions, which are monthly, a monthly data flow. Six subscriptions. Those subscriptions auto renewed in January of this year, and we've added a further seven already, in the quarter. I believe signal represents for us a high functioning, high utility way to use that data across our business. The second one on here is is not a data product. It's a technology service. And here, we've been working with two leading pharmaceutical companies. And their their problem is that they are poised to launch a new drug, which is dependent upon a test. Interestingly, this test already exists.

22:14 The problem is is that the scoring system for that test, the interpretation of that test does not meet the needs of that drug, and many, many patients are going to be missed. What we've done is to recruit from our lab network 75 of the influencer labs. After all, our data tells us which labs are sitting in front of the greatest number of patients. So we've picked 75 influencer labs in 14 different countries, and we have been, using our lab education module to retrain the pathologists in those labs and how to run that test. The great thing about that is there's a data flow right across that entire thing, and that data flow starts with the baseline. How were they scoring it at the beginning? How did we move the the needle in terms of their interpretation? And how many more patients are we able to capture at the end of it? All that data feeds back into our, into our data repository.

23:08 These both of these products are high value, highly profitable, services, again, being run through the platform. Just before I, hand over to Nick, I just I'm gonna come back a little bit more to kind kind of the big picture in a second. But I just want to speak a little bit about the kind of ESG footprint of the business. I know that's increasingly important to to our investors. You know, interestingly, DIACEUTICS, the mission within DIACEUTICS is to get more patients on the drug quickly. It's a lofty mission. Pleased to see that we are doing that. But the the kind of the footprint the cultural footprint that is underpinning that has really allowed us to reach into a, I I think, a very modern way of running our business. We have a very passionate, very enthusiastic team. They are both in in investors in the business themselves. We're continually training and retraining them to make sure that we're we're we're we're fitting that platform and model.

24:09 Let me hand over to Nick to talk a little bit more about the numbers that have flown through our p and l balance sheet in the last, in the last twelve months. Nick? Thank you, Peter. So, yes, as as Peter mentioned earlier, these are the key financial KPIs that we we pulled out. I can't stress enough how much this has been a transitional year for DIACEUTICS moving from a legacy professional services business now to a platform business. It was only in October 20 October 2020 sorry, 2020 that the business launched the platform. So 2021 is the first full year that that platform has been in situ and being used. And during the year, 60% of the revenues were migrated to the platform and generated through that.

24:59 And that's a that's a very large undergoing. That's renegotiating contract terms from professional services with our existing pharma customers, moving them onto the the new platform t's and c's, which then allow us to

25:15 basically extract better quality earnings through the subscription and license revenues, and that gives us more visibility in the future. We've managed to grow revenue 10% to 13,900,000 in the year, again, at, you know, a big feat considering the big transition in the year. And, on a constant currency basis, that has increased some 18%. Like many businesses in The UK focused in the health care sector, our revenues are predominantly, generating US dollars. So the FX head headwinds have an impact. It's important to look at that revenue growth on a constant currency basis, and 18% is a is impressive growth for the year. I think the the the migration to the platform and the quality of earnings is really starting to show through now at

26:06 the margin level through to the profitability, the adjusted EBITDA down to operating cash flows. I'll speak to those in a bit more detail, but, really, the gross margins increased two percentage points to 77%. A large proportion of that is now made up of the amortization of technology, the investment we've made in in the current and past years. Excluding amortization for the gross margin, that's an 89% margin, which is, you know, very impressive. The adjusted EBITDA has had a a big step up in the year to 2,300,000 from only 500,000 in the prior year, and that's starting to flow into the operating cash flow as well. It's an important metric. We continue to invest in the platform, and I'll talk about that in a bit more detail.

26:54 5,200,000 in the year, slightly down on the prior year, but as expected given that this is, the post launch year, 2020 was the the launch year, so investment was a bit more intensive. And we end the year with 19,700,000 of cash and a strong balance sheet, really in a good position to invest for the future. Future. So I mentioned we talk a bit more about revenue. I think the graph on the left really demonstrates the transition of the business. You see all of the revenues generated in 2020 for professional service based, and that has fundamentally changed in 2021 and is the trajectory of the business going forward. So you see now that 60% of the revenues are generated through the platform, predominantly through data, but we're starting to see the tech enabled services take a bigger slice of that pie, and that will continue to increase.

27:46 We'd launch four additional tech enabled services in the year. We also see on the right hand side that the the cost of sales, although hasn't moved and is at 3,200,000 for the current and the past year, the makeup of that cost of sales has significantly changed. So in the current year, we see that 50% of the cost of sales are now made up of staff and other costs, the other 50% being amortization of the platform. So to date, we've invested about £10,000,000 in the platform, and that amortization is is coming through. But we've managed to deliver 18% growth on a constant currency basis without essentially increasing the actual cost base of business.

28:35 I think that really talks to the the, you know, the transition of business, the quality of the earnings, and, and how those are going to be how we can leverage that platform for growth into the future. It's a real solid foundation to be starting 2022 on.

28:53 This is a quick snapshot of the key elements of the income statement, and I talked to the top section in the previous slides, revenue and the gross margin. I just wanted to pull out a couple of the other lines just to highlight how those are impacting our overall profitability. In the year, you can see we had no exceptional costs, really making that adjusted EBITDA number a a clean number that there's no add backs in there. In the prior year, there was point 4,000,000, and those were predominantly at the end of twenty twenty and were undertaken by the business to fundamentally re redeploy and restructure people within the business to make sure that it was sufficiently geared up, sufficiently structured to drive the business as a platform entity in 2021.

29:47 As a result of that redeployment of employees, we don't see much of an increase in admin costs at all. So the actual overall admin costs only increased by 400,000 to 10.4, relatively flat year on year considering that there's been a significant shift in transition of business. The adjusted EBITDA margin increased to 16% and again is on the right trajectory, and we'll see that increasing, I think, in future years. And really pleasing to see profit before tax shifting from a loss last year to GBP 500,000 profit this year.

30:29 In this slide, I really want to talk about the investment in the current business in the year and also what that might look like for the future. Peter already explained that the the total addressable market that we could be looking at in in in the next sort of six, seven, eight years could be $3,000,000,000. And we'll have to keep investing into the the data, into the platform, and those AI algorithms to make sure that we maintain our first mover advantage and and that competitive edge that we have. So in the year, we invested 5,200,000 in the in the platform and the and the the the data. That's down slightly on the prior year, but I mentioned earlier to be expected given that a little bit less intensive as this is the first year post launch.

31:22 Adjusted EBITDA, the operating cash flows, two point three and point five respectively, they are key. That that move to leveraging the platform, move to profitability is really gonna facilitate the investment in the people. And it's the people and the technology at the at DIACEUTICS that are leading the innovation and leading the growth of the business. We enter 2022 with 19,700,000 in cash. Again, that's a very strong position and will really drive our platform growth for future years. Finally, I'd just like to talk about the the journey so far, the transition of the business, the transition of the revenue, and and the growth trajectory.

32:11 Just mind you, everyone, did the business, IPO ed in April 2019 as a professional service business with the ambition to transition to a platform business. The key first step in this was to develop and launch the platform, which was done on time in October 20 in October 2020, and that allowed the business to really push forward the transition to a platform business in 2021. I I think the strongest figure to demonstrate that being the 60% of revenues now generated off the platform. That will continue, and you can see here that we continue to transition customers from professional services in the future into platform based data and the value added technology enabled services as they start to take grip, and we can add that additional service to customers.

33:05 Thank you very much indeed, Nick. Two more slides, and then we'll go to q and a. And if you have questions, I see some coming in already. Please feel free to add in, and we'll address them in a minute or two. And just like to zoom out really, for a moment if if I can. We've talked about the the really, the DXRX has has formed a category in in combination with the pharmaceutical companies about what their needs. That has meant that we are first to market. We've we've taken the decision back in 2018 that rather than growing as a professional services company, we would jump over the top of ourselves and become a platform business. We raised the finance. We launched on time, and we've driven that adoption in year one. And I and in my view, that was an imperative to make sure that we can retain that first mover advantage and and really stay in step with an industry that has moved digital.

33:58 And, you know, one of the features of COVID not not mentioned at the minute is the acceleration of COVID, the acceleration of digital within the health care industry has probably moved forward by five years in in one year. So we're right in step with that. I believe that we built a competitive edge. Our value drivers are, you know, our network is second to none. Our data is the largest data repository focused on testing, and it's global. And our products have been built alongside our customers. They resemble nothing else in the industry, but in combination, they are very much fit for purpose, for the needs of of our pharmaceutical companies. They're unique, they're innovative, and they're high functioning. And our our our the strength on our balance sheet allows us the agility to stay in step with an in with a business that is moving really at quite some pace. We've already seen in the last year, pharma invest in areas that that it in terms of of of diagnostics that it has not looked up before. Things like inherited retinopathy, dengue disease, it's another infectious disease, autoimmune disease, cardiovascular disease, these are new horizons for them as they start to apply the precision medicine model into other diseases outside cancer. We are absolutely in step with that. Some 15% of our projects last year were done outside oncology.

35:22 We have a proven track record. If if you take one message away from this, is that the fifteen years of understanding the business and has been hugely valuable to us, not just to win the hearts and minds of of the leading pharmaceutical companies, but really to understand their needs. And that proven track record allows us to to turn around with confidence and say, we're bringing you a platform to do this at scale. We want to do this cheaper, better, faster for you than you're able to do it elsewhere. And that that that scalability and that platform really then needs to translate back into, you know, a a high margin, high growth business. You can see that the already the evidence of that starting to flow through the entire business. And if I conclude on on the slide is there are a number of growth drivers other than just growing with the available market share with with our pharmaceutical companies at the moment. They're investing outside oncology.

36:21 They're bringing more new therapies to launch per year, and and they're spending more on diagnostic commercialization. Right at the top of the meeting, I mentioned that our pharma clients, we believe, will spend up to $50,000,000 per therapy to fix this. We knew we have some track record on that. Our largest brand that we've been working with for over seven years has spent $78,000,000 with us. Same therapy, same team, multiple countries, $78,000,000. We know that the capacity is there to do that. What our customers wanted was a a better, smarter, faster, scalable solution. And so if I take a snapshot today, of kind of the business momentum, Nick has mentioned on the constant currency growth, you know, our our growth last year was 18.

37:08 Not a lot was going on underneath the hood of DIACEUTICS as you can see, but we still grew the business. As we come into this year, the investment in sales and marketing and product and platform, in my view, is already starting to move that growth number up. And and we should we should start to see that really, again, affect, kind of our business across the year. Most excitingly, it's allowing us to see revenue into the second half of this year and 2023, 2024 as we move to a recurring revenue business. I'm gonna stop there, and, I see a number of questions coming through, which we can try to answer. Alexander, is that how you want us to do this? Peter, Nick, thank you very much for your presentation.

37:53 Ladies and gentlemen, please do continue to submit your questions using the q and a tab situated in the top right hand corner of your screen. But just while the company take a few moments to review those questions submitted today, I'd like to remind you that recording of this presentation along with a copy of the slides and the published q and a can be accessed via your investor dashboard. As Peter and Nick can see, we have received a number of questions throughout today's presentation, and thank you to all the investors for submitting those. Could I just ask you to read out the questions and give a response where it's appropriate to do so, then I'll pick up from you both at the end. If next looks like you're up for the first couple. Yeah. So, you know, I won't I won't be that way. But looking at the I think that you you just need to read the question because people won't know why they're doing that. So how does the circa $56,000,000 per annum development spend evolve in coming years?

38:40 What's the estimated steady state development and R and D spend? So I think, yep, we saw 5,200,000 of investment in the technology. So that's across the platform, the data, and the AI algorithms behind that. I think that's the right level. And as we see it, that's that's gonna allow us to continue to expand and to continue to grow the offering to our customers and expand with the total addressable market. I think for now, we see that as the as the steady state, and we'll we'll keep a a watching brief on that to make sure that we're getting the right balance of investments to meet our customer needs. Okay. It looks like the next one you should take as well. Yeah. So how isolatable are capitalized costs from future admin expense and cost of sales? And can we really look at the net and gross margins ex this investment when assessing your ongoing margin level? So, yeah, So second point, that's I think it's a good point.

39:44 We look at both our margin including and excluding amortization. We think it's right to look at it including because that investment has been made in the past. That cost has been paid. Yes. It's been capitalized because it's got a life longer than one year, but that that amortization is realistic measure of the erosion of that benefit that we put on the balance sheet, and we should be recognizing that as a direct cost to sell because it is in in part generating that revenue. I think the we look carefully at the balance of admin and and capitalized costs. Yeah. We we take a lot of care to make sure that we're capitalizing costs that are relevant, have a life, and will contribute to the the future profitability of the business.

40:42 Let me grab this one. So the question is what happens to the development resource when the current platform projects finish? If I interpret this right, and so I I think if you think about the utility of the platforms, the utility of the platforms are grows organically because we're adding labs that Those labs themselves are adding data. We're adding collaborations. Each of those collaborations allows us to expand. So the the once the the individual delivery for our client and for one project might finish, And often what we've done through that project is to enhance kinda put more dollars in the bank, you like, or more resource or or intellectual property into the bank, and we can withdraw that intellectual property from multiple customers.

41:32 I'll give you an example. You know, when we're providing our signal data that that weekly data flow, we now have 13 different customers that are signed up for that that weekly data flow in whatever it is, four months. And and and often that data flow is overlapping their needs. So they may equally be competing and looking at breast cancer. They may be equally competing and looking at lung cancer. So we have a lot of repeatability, in terms of flexibility and repeatability, in that. So to us, whilst I know from an accounting point of view, we've put a, a kind of a capitalized time frame on the asset, The way that the platform is built, like many platform business, it should continue to evolve and grow, and we are we have an ability to kind of rinse and reuse both the data and the projects that we're running through that platform for other clients.

42:32 What's the capacity, what's the capacity of near term version of DXRX, however it's defined? Well, I this is this is a good this is a good question, and and you can say I just have a kind of a a a an off path answer. But maybe look at it this way. From a data point of view, the data that we're able to deliver in a kind of a a help yourself way to our pharmaceutical clients really isn't doesn't really have a capacity. And, you know, that data is in our data repository. It's being delivered with a sort of a help yourself approach to our clients within ours. And so the the data has not really got a a capacity as such.

43:20 We have a really good technology stack underpinning that data. It's world class, as you would expect, from billions and billions of rows of data. So, there's no capacity there as such, and we will continue to add new diseases and new insights. As you would expect, we're bringing in more data all the time, from different sources. And all that is really in anticipation of of, our clients' needs. But perhaps the best way to look at this to say is how many drugs are coming to the market that will need what we do? And we we, in 2021, worked on 56 therapies. And some of those are at a prelaunch, some of those aren't launched, and some of those have been launched a couple of years ago.

44:05 Every year, for the next couple of years, the pharmaceutical industry is suggesting there between twenty five and fifty new launch or new indications for existing drugs. So that that already shows you the build for us. And behind that are some 450, drugs that are coming through pharmaceutical pipelines. We have built DXRX to address those needs. That that's that's what we see coming towards us, and we built the platform to really be able to service that sort of capacity. What incentivizes diagnostic labs beyond the platform? Absolutely brilliant question. And, you know, the the work that we've been doing really over seven or eight years, working with labs is not overnight, has really allowed us to learn what's important to them.

44:54 And and we have approached this from a kind of a a multi value proposition to them. First, by bringing them onto the platform, we are making we're giving them a head start and making them aware of of new diagnostic needs coming towards it. We're plugging them in to the, kind of educational flow that is pulsing across precision medicine. So they're out in front of this. They can hire new technologists. They can, think about the platforms that they have inside their their company. So that's the first thing. The second thing we're doing is we're involving them in collaborations. We're bringing them hands on to projects, and those projects are really helpful to help them do change management on the ground, change their lab practice in real time, as well as support and their competitiveness, between one lab and another because labs do compete for those patient for those with those patient tests. And the last, is this idea that everything that we're doing is laddering up to providing them with scientific and clinical involvement.

45:54 Labs to a to a person are really interested in making sure that their credentials as labs are are of the highest order. They have quality guidelines that they need to meet. And all the work that we do with them allows them to support that that those quality support. We will publish many of these collaborations. We're using those collaborations to give them a quality stamp. So in combination, our labs are saying is there's a real value proposition. For the first time, somebody has thought about us and our needs, and, and you're sharing data back with us at the same time and showing us where we fit in the ecosystem. And a bit of a follow on there. Okay. Network, 21%. How quickly do you expect this to grow? We we have a a target.

46:40 So the question here sorry. Great progress on the lab network. How quickly do you expect this to grow? So we have in our sites some 2,000 labs, and our data tells us that those 2,000 labs pretty much will cover between 60 to 70% of the patient testing, volumes in the top 10 to 15 markets. So it's a kind of a think of a kind of an early doc an early adopter target. We brought 560 onboard. And when you work the math there, that's roughly 10 a week. That run rate is continuing, through quarter one of this year, and we will seek opportunities to to to continue to step that up. We're probably talking about another two years before we get to the 2,000 labs, maybe eighteen months. I'm not quite sure. And one thing we do know is that somewhere between, you know, five hundred and sixty and two thousand is what we call a network effect.

47:36 More labs will come on board because there are labs on board. We see a little bit of that happening anecdotally, but to build expectations around this table, I would say that we're probably the end of this year before we have, you know, a cadre of labs where others want to join. And I think that would be super for us. I think it'll really help us with that capacity. Yeah. So a question here on additional staff costs in 2020 sorry, 2022. So I it was all one of the slides. I didn't I didn't quite cover it off, but the the headcount at the end of twenty twenty was a 125. That only increased marginally to a 129 at the end of 2021, and that was because there was a lot of redeployment of staff that that that transitioned to a a platform business.

48:27 We've already grown staff in 2022 in quarter one to a 142 employees, which I think is pretty much all of our anticipated headcount growth for the the whole of the year. So we are fortunate enough to go ahead and and find those individuals and and get them get them locked in, which is great. I think the, you know, staff cost is probably the the single biggest cost for the business, and we will see that increase, particularly with wage inflation, but that's certainly within our within our budget expectations. Next question. Who who are our major competitors? So there is no direct competitor. I the way we think about the competition landscape for us is if you think we and, you know, we're we're we're servicing data needs for our pharmaceutical accounts. So there are data there are data companies in the marketplace, predominantly in The US, not really in Europe and and APAC.

49:29 But those data companies can do some of the data cuts that we do. They don't do it the same way. They don't do it automatically on the platform, but there is a competition there. And then on the services side, we don't, again, have a direct competitor. And but what we do see are some of the large consulting hires that sometimes put together a team to fix a particular lab testing issue that that a pharmaceutical company might do. Of course, the way that that consulting model works is they build that team and then they blow it up when it's finished. They don't need it anymore. We don't do that. We have an installed system that allows us to plug in a kind of a forever solution. So we don't resemble anything else. And the reason we don't do resemble anything else is deliberate because all we did was focus on a single area that is pharma needs better testing. It needs these patients to get access to the drug. And we've architected our business and our platform, very much tailored it for that need.

50:25 And we are conscious that that gives us a first mover advantage, and we've talked about our investment in data and our investment platform. So I think it's really important to stay out in front of that. And, you know, we're coming from a company that they've trusted, that we've been working with these leading pharmaceutical companies for well over a a a decade. And and we're asking them not just to trust us now with the the the projects that we've done in the past, but to trust us to scale that and plug us in as a kind of an enterprise solution. And I think that's that it's at that step that I think we we very much move past the kind of the competitive landscape that we're operating in. We're never complacent, and we won't be. But I think we we're very much deploying our our competitive advantage Well, really important with pharma that you don't overpromise and under deliver.

51:14 And the reason why the platform's important for us is that it allows us to scale properly with them and not and not in any old professional service way is kind of promise that we can do it and then find that we could. So we're we're proving to our clients that we can do it. Okay. Just one final question, if you don't mind. I'll open that one. Thanks, Peter. How feasible is it to expand the weekly patient data tier? It's feasible, and we're working on it. And, it it is genuinely harder to do that, but we have a line of sight to, to countries and areas where we believe that we will bring that that data, that data in. And we we currently have a good monthly data flow, and, you know, that that is servicing the majority of our clients' needs. So it's not like we're we're necessarily losing out. But I agree with you that weekly data flow in Europe would would certainly help electrify, that that that part of our business.

52:12 You know, we're a health tech data company. We will address this question in time. It just it just will require investment in collaborating with labs and collaborating with professional bodies in those countries to make sure that we're doing it the right way. As you know, GDPR and in The United States, HIPAA are really, really important compliance frameworks, which, frankly, I welcome because they create a barrier to entry for shopping practices. And we meet that bar, and we meet that bar on some with our pharmaceutical clients. So what we want to do is is is to fulfill those data needs, work with our clients saying, what do we need to do here? How do we do it? And we build that road map to that weekly data flow, not just in the European markets, but I think beyond into some of the leading APAC markets. So it will come. I I just don't wanna sit here today and put a date on that.

53:04 Thank you very much. I actually think you've managed to address all those questions from investors today. And, of course, if any further questions come in, we'll get into the company and publish those responses on the investment company platform. Just before we direct investors provide you with their feedback, which I know is particularly important to the company, Peter, could I ask you for a few closing comments? Yeah. I I I I think, you know, what hope hopefully, Nick and I have tried to convey is really our our exciting journey at the minute. You know, 2019 would seem just around the corner. Think about it. We raised the finance to build the platform. We did it. We delivered it in in October 2020. And this first year has been driving that adoption, that proof statement that we can service the client needs, that we can deliver the data quickly, and that and that that will flow through to a high growth, high margin business.

53:54 We can see that tangibly, impacting the business. I believe we're at an inflection point in the company. I think we've done a lot of the heavy lifting. The next stage is skill. Peter and Nick, thank you very much for updating investors today. Could I please ask investors not to close the session as you'll now be automatically redirected to provide your feedback in order that the management team can better understand your views and expectations? This will only take a few moments to complete, and I'm surely will be greatly valued by the company. On behalf of the management team of DXRX PLC, we'd like to thank you for attending today's presentation, and good afternoon to you all.