Ekf Diagnostics Holdings (LSE:EKF) — Interim results for the six months ended 30 June 2020

0:05 Good afternoon, ladies and gentlemen, and welcome to the EKF DIAGNOSTICS HOLDINGS PLC Interim Results Investor Presentation. Throughout this presentation, investors will be in listen only mode. Questions are encouraged and could be submitted at any time via the Q and A tab situated on the right hand corner of your screen. Simply type in your question in the box below 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

0:36 is appropriate to do so. These will be available via your Investor Meet company dashboard. I'd like to also remind you that this presentation is being recorded. Before we begin, I'd like to submit the following poll. I'd now like to hand over to Julian Baines, CEO and Richard Evans, CFO of EKF DIAGNOSTICS. Good afternoon. Good afternoon, everybody. Welcome to the first time we've ever done this. So forgive us if we make a few mistakes along the way, but welcome to EKF's interim results for the end of June this year. I'm delighted that we can present in some form in these unusual in the unusual world that we live in. You might have seen this morning in our, press release that we are focused very much as a company on the core business, to let shareholders know that not only are we doing very well with, PrimeStore MTM and the COVID, sample distraction distraction device, but we're also very focused on the core business.

1:43 And we were very pleased to, announce that even though it's a negative, the actual core business of EKF only reduced by 8% in the first half of this year. But I will naturally come on to that in a lot more detail as we go through the presentation. So to to give an overview of the results, I just so our revenues are up 23% to 26,330,000 against 21,400,000 compared to this time last year. Adjusted EBITDA was up 60% to 8,930,000. Net profit was up a 189% to 4,140,000. Net cash generated by the operating activities was 6,940,000 increase compared to this time last year, which is 4,340,000.

2:38 So our net cash at the moment is 16 point oh, at the end of June was 16,280,000. As you all know, we will be paying a dividend of 1 p per ordinary share to be paid on the December 1 this year for the and shareholders are on the register as of fifth of November of this year. So operational highlights, what we'd like to talk through, the core business revenues did deliver a far more robust performance in the face of COVID nineteen headwinds and management expectations, which is really good news and also shows the the need in in one way of the core diagnostic products that we have. We have had an 8% year on year decrease in core business, but sales are already showing signs in h two of of growing. In fact, in September, we should see our best core business, revenues since the first quarter of this year.

3:43 So we are really, really pleased about the robustness of the of the business. Our diabetes sales were down 2%, but what is very important for everyone to see is that our BHB sales were up 5.7% to £5,070,000. BHB is the is the product that we supply in The US for the detection of ketoacidosis in diabetic patients. A number of diabetic patients present themselves to hospital in a ketoacidosis state. However, they're often tested for hyperglycemia when the issue they have is ketoacidosis. And this is a very, important business to EKF that we've grown every year since 2010.

4:32 And even during the the COVID pandemic, we've managed to increase the sales of this by 5.7%. Quote test sales were down by 420,000, but that is easily explainable in that we supply an awful lot of h b a one c testing into The Philippines. And fundamentally, between March and June, The Philippines shut down. We were unable to sell any products into The Philippines. And we had substantial orders last year. And so far this year, we had good orders in the first quarter from a company called Labmate. But in the second quarter, it slowed right down. However, we are seeing signs again that Labmate are picking up the business, again in the, in The Philippines.

5:23 Hematology sales were down 12%. The vast majority of that were in was in Peru. We supply hemo control into Peru. We have revenues of around 2,000,000 per annum in Peru. And, again, in March, April time, Peru shut down completely. And that was, you know, that had a negative impact on our hematology sales. But we are also seeing signs now that Peru is beginning to open up again. We are easily the number one supplier of hemoglobin products into Peru, and they they are used for testing programs on malnutrition in children, for poor families within Peru, and we supply all the products for hemoglobin testing there. We are showing signs now that that is, picking up.

6:15 But conversely, despite the, shutdown of doctor's offices in The US, we show we saw strong DIASPEC TM sales and especially through McKesson. And just as a reminder for shareholders, McKesson is a contract that we have in The US that where we supply our DIAGNOSTICS TM. What happened about two years ago is that Danaher acquired our biggest competitor in this market, HEMAQ, and informed McKesson that they had intentions of going direct in The US. What McKesson then did was ask if they could OEM our DIAGNOSTICS TM in The United States with a view to replacing as many of their HEMAQ instruments as they possibly could in The US. Their revenues in The US in hemoglobin point of care were around $26,000,000 a year.

7:12 So we started that program in April 2019, and we're still seeing strong growth from McKesson in The US, which is tremendous return considering that for about two months of this year, the doctor's office were closed in The US, but McKesson is still out there placing placing business. Overall, now we've seen good contributions from both McKesson and Fresenius with regards to our our DIASPEC TM product. The one thing that I think is important as well in The US is through BHB HemoControl DIASPEC. We have a significant relationship with Cardinal, Fisher, McKesson, and Henry Schein.

7:58 Even though we're a little old EKF, we do have a very, very strong relationship with the May three of three or four of the major distributors in The US, which is always bearing fruit in terms of security for EKF moving forward. We have always have the security that those big guys are are constantly selling EKF products. Central lab and life sciences sales were down 5.5 during that time, but that is predominantly, believe it or not, timing of supplying a Roche order. The Roche order will go into August of this year, again driven slightly by COVID, but that is just a delay in sales to to Roche.

8:44 Obviously, with MTM, naturally I'll come on to later with MTM, Central Lab and Life Sciences sales totaled 9,100,000, up from 2,960,000 in 2019. Finally, the big main growth driver for the first half of this year was 6,460,000 of PrimeStore MTM contract manufacturing. So we're now very much supplying MTM throughout The US. We have as you'll have noticed from a previous trading update, we signed a big contract with a a major industrial partner in The UK. I emphasize industrial, not NHS.

9:29 This industrial partner has set up their own PCR testing labs to test their own staff on a weekly basis because they cannot cannot afford a big shutdown in their warehouses. We supply Prime Store to them in The US and in The UK, and we hope that during, q four and the beginning of next year, we will roll these products out into Europe as well for this major partner. We're also since, the winter is approaching us and the autumn and winter is approaching us, we are very much engaged now with health services throughout Europe. We're very engaged at the moment in The UK because there is a a remit to get UK testing up to 3,000,000 tests.

10:18 I think it's a day, Richard. I can't remember. 3,000,000 a day, I think it is. And at the moment, they're about a 100,000. So there's a there's a big focus on testing. And the big advantage, just as a reminder, the big advantage of PrimeStore MTM is that when you put the swab into the test tube, the reagent kills the virus. It releases the DNA and RNA, but the importance of killing the virus means that there is, in terms of transport, there is no risk to transporting it, and there's no risk to using it when you're testing the sample. This means that, at the moment, the NHS are transporting pretty much live virus in a swab, in a test tube, and it can only be tested in category three labs.

11:03 Whereas if you used PrimeStore MTM, it would mean that you could test in category one, category two, and category three labs. Therefore,

11:12 in in reality, tripling your ability to test on PCR. So we are very much scaling up. We've got so we're just moving into a new facility in Cardiff to scale up for our ability to do the testing. Cardiff is at the moment at about 70% capacity. Germany is at about 30% capacity. So we've got plenty of opportunity for growth to fit into to this market. And also, naturally, are manufacturing in Texas and in Elkhart, Indiana, this product. So in terms of business unit performance, diabetes care was 9,400,000 revenue. The hemoglobin was 5,900,000.

12:01 I described both the BHB and DIASPEC TM growth in McKesson in those two areas. And our central lab stroke contract manufacturing stroke life sciences business, revenues are up to 9,100,000 revenues. So what that means in terms of life sciences is we've seen growth in that area of 208%, but, obviously, that is mainly down to MTM. The other thing that's important whilst I'm talking about MTM is that it kills any virus. So it's important for people to know that in the future, MTM is now on the on the map. It is something that is now established. Public Health England are recommending it as the safest form of transport media in The UK.

12:48 It means that if you ever wanna test for other viruses, TB, malaria, HIV, any of these, it does exactly the same thing. It kills the virus and releases the DNA and RNA for testing. Moving on, we have also a large growth in our contract manufacturing and life sciences, capability. One thing that's really important is that, as I mentioned at the start of this presentation, we focus very, much on the core business for this particular, presentation. The reason being is that we can see a longevity in COVID testing. Of course, we can. But nobody on this call, myself or Richard, can actually see what's going to happen over the next eighteen months. And it was very, very important to us to let shareholders know, that the business not only has been very, robust in the first six months of this year, but also we had a tremendous amount of plans in place to expand the business and to grow the revenues.

13:59 Before COVID came along. We put in place a number of plans to do with contract manufacturing and to do with enzyme manufacturing because one thing shareholders are asking us is that in point of care, your revenues seem to grow 1 to 2,000,000 per annum. And my argument back to that is that if you're selling an average instrument for $500 and a test for 50¢ a test, that's a lot of instruments and tests to get you up to 2,000,000 a year. That's a really tremendous result of which we're very proud of. But if you really want to see big revenue growth, then our focus should be much more on pharmaceutical and molecular enzymes and contract manufacturing.

14:45 And that's the area in which Richard has plays a big part. So you'll be pleased to hear. I'll just hand over to Richard for for this next slide so that he can talk through certainly the the enzyme production, which is the big growth opportunity for the company. Yeah. Well, I'll start with the contract manufacturing opportunities. So Mike Salter, who runs our US operation, came with quite a knowledge of this area through his background with GE Healthcare. And he's continuously had phone calls from various companies on the West Coast asking if he can contract manufacture various things. I won't read out all the different types of things that we're doing, but the the business here is simply contract manufacturing.

15:30 We're we're packaging and QC ing various types of kits for various companies over there. It's not a huge business, but it's good to see that we're able to pick up that kind of business fairly quickly and fairly easily. The more important issue for us is enzyme manufacturing. And as many of you picked up earlier in the year, we leased a new facility in South Bend, Indiana, about thirty minutes drive from the old facility or the current facility, I should say, at Elkhart. And the reason we did that was due to the continuing business with Auragenyx and the fact that Auragenyx is likely to make a breakthrough at some point next year and will require significantly more enzymes.

16:22 And so we leased this new facility, 25,000 square feet, which is double the size of our current one. And we will put a 10,000 liter fermenter in there. We'll put a number of purification suites in there, and that will be the basis for our Auragenics business. But obviously, Auragenics won't be taking that much business from us. So we will also have expanded our capacity to take on other business. And as I think I've said to some of you in the past, one of the major frustrations of the past was that we kept getting calls from people who couldn't find anybody to do fermentations for their pharma products. And the reason for that in The US is simply that there are many universities who do small scales fermentations.

17:16 There are some big companies who make washing powder and stuff like that in 100,000 liter fermenters, but there are very few companies in this middle ground. So we just took a decision two or three years ago to get involved in this. The things are going quite well with Auragenyx. We've decided to put the fermenter in at the end of the year. We will or at the beginning of next year, that will be a capital expenditure in total of about $3,000,000 spread over the two years. And we're actually all pretty excited about that happening. We've done a couple of other things as well, a couple of other customers. So Mike knew a customer called iGenomics, a molecular diagnostics customer from the West Coast, and he got them to start placing business with us last year, contract manufacturing business.

18:10 And at some point in November, they came to us and said, Mike, we want you to develop a new enzyme for us. And so we've been working on that with them. That will be, fairly significant revenue once it's all developed and approved and all the rest of it, which is probably not going to happen until next year. But, we nevertheless still we still make money from them, during the development phase as well. And Exela, we've talked about as well, food grade fermentation, it's, for a product to help your gut microbiome. And we have made several we've done several fermentations for that already. They're still in their development cycle. But I would imagine that they'll get there before the end of the year, and we'll have a product that we will be able to provide much more enzyme for.

19:03 So we see here incremental revenues for Life Sciences out of that 2,000,000 to $3,000,000 per annum. And lastly, and the thing that the facility in South Bend has become very useful for in the short term is that the continued demand for Primestor has meant that we've moved some tube sorry, we haven't moved, but we taken on additional tube manufacturing in the South Bend site, which is great. And also, we took a decision that because of the danger of perhaps the Texas site being taken down by corona, we would balance our risk by starting to manufacturing manufacture the bulk product in South Bend as well. So they'll be doing their first, bulk, mix this week, and that will mean that we've got bulk product coming out of two different sites. It will just give us a little bit of risk protection in case something should happen in either site. So that said, I think we've got a big, big future in this business in enzymes.

20:12 And I think, we're both very pleased with the developments that we've had in the past twelve months, largely driven by Mike, I have to say. And I also think that with this investment that Mike and Richard have made and and got this operationally up and running so quickly is that we can perceive revenues increasing quite substantially in 2022 onwards once we've got all these enzymes through the process. And and and rather than talking one to two million, you you are talking, just to give investors an idea, you know, ten to fifteen million in terms of growth opportunity minimum in 2022.

20:54 That's why we're making this investment because we can see the opportunities there in front of us. So, again, just wanting to show that it's not all about COVID. This is all about how EKF can manage and grow the business long after COVID, has gone. The next thing I want to talk about, which I think is, very important, but also a missed opportunity, I think, sometimes with with shareholders, is the importance of our commercial partnerships with Mount Sinai Innovation Partners. Mount Sinai Innovation Partners is part of the Mount Sinai Hospital Group in New York, and it is a unlike The UK, it's the hospital is a not for profit organization.

21:42 However, they invest heavily in new technologies to bring them to market, and the profits made on those new technologies are fed back into the hospital group. And ice I think that just as an example, as mentioned in our press release this morning, if you're an EKF shareholder and you had your dividend in SPC of Renalytics shares, today, those Renalytics shares are worth equivalent of 24.4p per EKF share. So it's a tremendous investment and a tremendous value for for shareholders. And the board of EKF has often sat back and said, yes. We're very cash generative at the moment. What is the best way of rewarding shareholders and also, doing the best for EKF and the patients?

22:32 And and we feel very strongly that investing in technologies alongside Mount Sinai is really important. We we often get asked what you're gonna do with your cash. You're do share buyback. We've done a few share buybacks in the past, and and they've they've meant very little. They've meant very little to shareholders. The share price didn't move, and they also meant very little benefit to EKF as a company. So what we do is that the interesting thing about the Mount Sinai partnership is that these businesses Greenalytics is a classic case. These businesses are run by the experts. They're not run by me or Richard or anybody else. They're pretty much led by the need for this innovation. So you take GreenLytics, it was led by doctor Barbara Murphy who was the lead one of the leading nephrologists in the whole of The US.

23:26 And that means that there is a need for these products.

23:30 And the latest one that we are doing is that we've invested $5,000,000 of EKF money into Trellis. Trellis is a technology for inflammatory bowel disease, and the biggest reason for absenteeism in The US is actually linked to inflammatory bowel disease and not anything else. And so the insurance companies and the, trade unions want to make sure that patients are given the best best support they possibly can if they're suffering from Crohn's disease, gastroenteritis, anything like that. And what we have here is a company that's being, again, led by doctor Marla Dubinsky who's one of the leading gastroenterologists in the world, and they're the ones that drive this. And because we dividend in species this out to our shareholders, I don't think that there's any better way of rewarding shareholders than it's a it's a it's a much better reward than just just doing a dividend every year because you're doing two things. You're investing in new technologies.

24:36 You are getting free shares in those new technologies. And what we're doing is significantly improving the quality of people's lives, whether you're investing in Reenalytics, Vorici in the future, which is coming up, which is obviously Reenalytics spin out, or into Trellis. It is something that is beneficial to everyone, not not just shareholders, but actually to people, and you're making a difference to people's lives. We, Richard and I, are really, really proud of this partnership, really proud of our input to it, and what we're able to bring to it because it's made a huge difference to to everyone. And I think EKF is now in a very special place on AIM in that we we have a unique offering from your base diagnostic business through to management of samples right the way through to this this partnership with Mount Sinai.

25:30 So, you know, as I say, I feel that it's a very valuable tool for EKF shareholders to have. And we look and Christopher, Richard, and I look forward to carrying on doing this. This won't be the last, but this is what we think is the best use of EKF cash. Naturally, we'll carry on paying a dividend, and we will also, at EKF, invest in technologies that we feel are appropriate for EKF Diagnostics as well.

26:02 K. On to the next slide. So very briefly, I'll I'll run through all the business entities of EKF. So with Central Lab and Life Sciences, this slide is pretty pretty self explanatory. The revenues were up by 6,000,000 of which, as you will know, the vast majority of that or or nearly all the upside of that was an MTM, which will continue certainly throughout this year, and we will continue to update the market through the final quarter this year about next year. At this moment in time, I do not think it's correct and right for EKF just to make guesstimates about what's gonna happen next year. We'll have far more clarity in q three the rest of q three and q four about what the winter will bring in terms of COVID, what the testing regimes will bring, and what the demand will bring. And at the right point and when we've received confirmation from all the organizations we will we're dealing with, we will then look to focus on what 2021 will will bring. I also remind everyone on the call that we've already increased our revenue targets in general between analysts from 44,000,000 to close to 60,000,000 in our EBITDA from, 12.5

27:32 to 23,000,000. So it's not like we haven't reacted to this and and shown the the potential, in this business moving forward. Clinical chemistry is also, up just by percent, and that's a lot to do with we announced about a year ago that we'd supplied a lot of small clinical chemistry analyzers to the Jordanian army. Well, they have carried on purchasing those

28:00 those products throughout the whole the whole time and through the pandemic. So we're we're making progress on that, and we're also having glycated albumin now is being trialed in some major testing houses in The US. So overall, the the outlook for central lab and life science is is extremely strong. In diabetes, you'll see that our revenues overall were down, 196 k, but very importantly, BHP

28:31 liquid color was up a 139 k k, and stat side BHP, which is the handheld BHP reader, was up a 132,000. So we continue even in the most tough of times toughest of times to show increase in beta hydroxybutyrate. CoLab continued to grow. That's the the low cost analyzer. It was only a tiny amount, 1%, but we saw a quote test CoLab growing, but we saw quite a big drop in quote test primarily down, as I mentioned, right at the beginning of this meeting, primarily down to The Philippines. And Biosen was a very small reduction, but we're seeing we sell a lot of Biosen into China, and we've seen quite a sharp increase since lockdown has eased in China, quite a sharp increase in Biosen in in China.

29:24 Hematology, I know I've been through this, so I'll go through this very, very quickly. Revenues were down 810 k, of which the vast majority of that was Peru and The US WICS centers. So The US WICS Centers are WICS stands for women, infants, and children. So just like Peru, there's special programs that are utilized in The US to test children from very underprivileged backgrounds who suffer from malnutrition malnutrition. They also test the parents for iron levels or the mothers for iron levels and everything else to make sure that the baby is getting the best care possible. These these programs were completely shut down during COVID in The US, and so those two areas are two of our big areas for hemo hemo control.

30:16 But we counterbalance that by the increase of DIASPEC TM to up a 165,000, mainly down to the McKesson performance in The US. I will not go too much into the next slide because it's self explanatory, but the impact on COVID, we thought it would help you to see, to see what the impact on COVID is, globally. We have not seen a huge impact in North America in in The US in terms of because we've had MTM there. But we also it hasn't been too bad in The US even in in certainly in BHP and in hospital use. So hospital use products, Hematostat, BHB, they performed pretty well. Where we did suffer a bit is the closure of doctor's office, which are now reopening in The US, but we saw minimal impact on our core business in North America.

31:19 However, in Latin America, we saw a huge impact right across Latin America. As we'll be seeing from the news, there was massive increase in COVID in Mexico, Peru, Brazil, Argentina. All these areas, we sell quite well into. So there there was quite a big impact. And only Richard and I are only seeing signs of Peru improving at this moment in time, but hopefully, the others will come online relatively shortly. Revenues in Europe, Middle East, and Africa, again, were we're a 134 k ahead, but our base business was only 100 k behind. So, again, we've maintained a very strong level in EMEA.

32:06 And, also, we are seeing there was a a slight downturn in Russia in May, but now we're seeing quite a quite a big upturn in in Russia. So things are improving there. China, we are now definitely on the on the road to recovery. In Southeast Southeast Asia, prolonged lockdown, I've mentioned many times, in The Philippines,

32:30 and we and we've had slow sales in in Southeast Asia, and the same can be said of India. So overall, we are to have an 8%, decrease in core business with all the impact that we've had globally.

32:46 A, shows the tremendous robustness of our product range and our sales and our distribution channels. And so despite the impact, we're, as I said, very delighted with the pro progress. And what it also means is that as the core business is coming back online in h two and with the continuation of testing, we're looking forward to a to a very strong h two. And I think this time, I was asked a question earlier. Do we think if lockdown comes back, these products will go back into yeah. You know, there'll be concern over supply. I honestly can't see how that can happen because if you if you're a diabetic or you've got low iron or you've got anemia, you know, you can't just stop altogether ever testing patients ever again. It's got to you know, whatever happens in the next year, eighteen months.

33:38 The governments of this world cannot afford a massive increase of deaths due to diabetes, cardiac disease, anything else along those lines. They can't afford it. So I do not see lockdowns coming in the way they have in the past because there's a hugely increased knowledge of the of COVID nineteen. The treatment for COVID nineteen is now a lot better than it was back in March. So I do believe that we might not get back to a 100% of where we were, but I I think we'll see continued improvement throughout, this year. So our outlook is the board, expects continued strong growth from the business throughout 2020, particularly in The US.

34:25 Everything's in line with our management expectations. We will, update the market on q four as long as soon as we have a a feeling about q four in 2021 and where that is going. But as I've mentioned, we we won't we won't do this until we're you know, till till shareholders

34:43 can rest in peace that what we're talking about is is fact. And so we are just evaluating Boris' moonshot exercise and everything else, and we're evaluating what that actually really means to us as a company globally and and also with our industrial partners in The UK and throughout Europe. So we'll continue to benefit from that throughout the year. McKesson is showing a big big upturn in q three already. We should, by the way we've been waiting for three years for this, but we should see we hope by the end of this year approval finally for our quote test cartridge. China has been so difficult to break into, and it's not any easier with The US China relationship at the moment. But if we do get quote test approved in China, to

35:37 give you an idea, back in 2014, we we had revenues of well over £1,000,000 in China for quota. So we are hoping to to get that approved in China. Already talked about the 5,000,000 investment in Trellis Health. And don't forget that Vireci will be spun out of Reenalytics in in q four

36:01 to the benefit of anyone who's got EKF shares will have had Reenalytics shares. And if you kept them, then you will, you know, you'll have additional value to that with Vireci. So overall, I believe that the outlook for now and the next eighteen months, from the core business, what we're investing in enzymes with MTM, with everything that we're doing in terms of cautious expansion. The outlook for 2021 is is very, strong. And, that, I believe, is the end of of the presentation. Thank you very much, Richard, and thank you very much, Julian. Ladies and gentlemen, please continue to submit your questions using the Q and A tab situated on the right hand corner of your screen. But just while the company take a few moments to review those investor questions submitted already, I'd like to remind you that a recording of this presentation, along with a copy of the slides and the published Q and A, can be accessed via your Investor Meet company dashboard.

36:57 I'd also like to remind you that feedback is important to the company. Immediately after the presentation has ended, you'll be redirected for the opportunity to provide feedback in order that the company can better understand your views and expectations, and we very much encourage you to do that if that is possible. Julian, Richard, obviously, before we look at the questions that have come in on the Q and A chat panel on the right hand side of your screen, investors had the ability to pre submit questions. A number of them form, I guess, a theme. So what I was going to do is perhaps just address some of these questions covering those themes and then ask you then to move on to the live Q and A. So with that in mind, there were two particular questions here. Would the company consider a pro rata distribution with lockups of its stake in Renalytics now that it is very noncore?

37:48 And the other question is, is EKF going to hold on to their shareholding in Renalytics or dispose of the shareholding eventually? Okay. The the first answer to that is the we're not thinking of a pro rata distribution. We are looking at we will we will naturally sell down marine analytics over time. We don't want to be disruptive in any way to the market. We're currently under a lockdown anyway a lock in lockdown. Excuse me. A lock in anyway because of the flotation of Ringalytics onto Nasdaq. However, in a very, very orderly fashion, we will look to reduce our green analytics stake. But what we would hope to do is reinvest that money into other Mount Sinai technologies and other technologies within diagnostics globally.

38:41 Thank you. And I appreciate you may have touched on these within the presentations just for the benefit of other investors. The next question is with the high and sharply rising cash balances, is it the management's preference to distribute the cash to shareholders? Or is the present environment throwing up sufficiently compelling reinvestment opportunities? As I mentioned, that is I I think I addressed most of this in the presentation. I actually feel that we will be reinvesting it in reinvestment opportunities. We will con in my opinion, we continue to pay a dividend, and we will also, by investing in things like Trellis and Reenalytics, that is a way to me that we are distributing cash to shareholders in very novel way and in a really good way where it's a double benefit to the patient and to shareholders.

39:34 Thank you. Why is the company not more involved in COVID-nineteen testing initiatives? Has it missed the golden opportunity? The reason we're not in it, we're not a testing house, we don't have the capability to test COVID patients. We manufacture the sample extraction, but we the time it would take us to get a new laboratory, set it up, get all the PCR testing going, and get all the staff involved and everything else, COVID would be be long over. So so we're better off actually supplying the sample extraction. We we are not in a position to be a testing company. And so, no, we haven't missed a golden opportunity because we couldn't have competed in that space against people who are already established like Roche and Abbott and even the small guys like Source and Eulogene, etcetera, etcetera. We we have never been a testing house. Thank you. Just two more questions that were pre submitted. Are any of the manufacturing contracts with Longhorn on an exclusive basis? No.

40:36 They're not. But because it's not possible, there's so many tubes required globally that EKF could never ever have the capability of manufacturing all those tubes worldwide. We could never meet demand. But what we are is the only manufacturer of the bulk reagents. So we can make hundreds and thousands of liters of bulk reagents a week to to meet demand. We never struggle to meet demand with bulk reagent. So we manufacture all the bulk reagent for long horn. And the chances of them moving to somebody else are very slim because it's the bulk reagent that is the patented part of the business, and they would not want to give their priority IP, their IP to anybody else. There there's a total trust between EKF and LongHorn. So they feel very comfortable at us just manufacturing the bulk, which we then supply at at a very good margin to other tube fillers throughout the world.

41:39 Thank you very much. And finally, what is the potential for PrimeStore MTM to enable or particularly support new rapid diagnostic tests? It can't. It's it's very much tied to molecular PCR. MTM won't support rapid tests. But as I mentioned earlier, the demand that they're looking for now just in The UK alone is 3,000,000 tests a year. The the problem people who are on the call who know my background, I come from the lateral flow rapid test market. That's where I began my career. And there are a number of challenges at the moment with rapid diagnostic tests because the preference of the government is to allow people to do it themselves in their own home, and you've heard them quote many times pregnancy tests, etcetera etcetera. But, lateral flow test can only ever be, at best, 97, 98% specific, mean which means two out of a hundred people normally would get a false positive or a false negative.

42:41 So the MHRA are being incredibly careful about how rapid tests are released into the market. I have no doubt they will be used, and I have no doubt they'll be used quite heavily. But I still think they'll be very much done in a in a clinical setting. But I may I may well be wrong on that. But we MTM does not help rapid diagnostics because it's a simple finger prick of finger finger prick of blood that you put onto a lateral flow device. Thank you. Thank you very much indeed, and thank you for addressing those. If I may, and I know you haven't had a particularly long while, and I know given the significant number of investors that are on today's call, obviously, I can see the q and a tab is quite full. Bearing in mind, we've got about fifteen minutes, and I know that investor feedback is particularly important.

43:33 Perhaps I could ask you perhaps to start at the top. That will be the first questions that came in. And of course, just to remind investors that the company review all questions submitted today and where appropriate, we will look to publish responses. So if I wouldn't mind, hand over to you. And if you could read out the question because, obviously, no one can see anyone's Yeah. Okay. The first question was, what is your policy on whether or not you make an RNS announcement when you win a new contract or get a contract extension? There's two answers to that question. You've your you've put your microphone off. Oh, I'm sorry. No. My apologies. That was, that was me putting you on to mute. My apologies. I will start again. Did did everyone hear the question, or should I start? The question's fine.

44:20 So, basically, whether we release an r and s or not is fundamentally based around market abuse regulations, so mar rules. So if we know that there's going to be a significant growth in our revenue and EBITDA, and that normally constitutes 10% that that by the way, there's no law around this, but it normally constitutes 10% increase in revenue or EBITDA, then you should be informing the market against your projections in the market. Conversely, if it goes the other way and it's over 10% the other way, that's also constituted as a profits warning. So we don't have to inform the market every single time we win a new contract or get the contract extension because that is seen as normal course of business if it's not gonna make a substantial change to your your end of year figures or or your forecast figures.

45:13 So the upgrades that we've given this year is because, as I mentioned earlier, we're going from 44,000,000 forecast revenue to 60,000,000. That, of course, if we didn't announce that and let everybody know, then that would break market abuse regulations. So so that's how it works. It's all about whether we are within those regulations or not. The and the next question was, in the core business, are you seeing any impact from the development of more home monitoring and other non point of care products? The answer to that is, at the moment, no. But home monitoring is always a an area in the industry that we look at. The the problem you have with home monitoring, and this goes back to my days when I was working for Aliyah and for Ron Zwanziger. His passion was to get people to monitor their own health.

46:11 The issue is is that it comes twofold. One, people don't trust themselves to monitor their own health properly, and they'll always revert to a doctor at the end of the day. Fitness levels, yes, you can monitor with Fitbits, etcetera, etcetera. But when it comes down to key diagnostics, the preference is always to revert to to the doctor. And so we're not seeing any real impact on home monitoring. And and Richard and I, at the moment, aren't really seeing what we would call high quality home monitoring products. The the only thing really that works really well is pregnancy still in terms of of home use tests, but it's something that we are very aware of. I don't know, Richard, if you've got anything to add to to that. Or No. As you as you know, I'm very interested in this as a as an area, and I I would love for us at some point to be able to get involved in it. But I think you're absolutely right.

47:10 We've seen nothing so far that would be of any real value to us, I don't think. So The next question we had is how big could the addressable market for non COVID PrimeScore be? I wish I knew that answer, and I genuinely mean that. The pre COVID, nobody had heard of PrimeScore, nobody had heard of LongHorn, and nobody had heard of MTM. It was turning over very low revenues, $102,100,000 dollars per annum. I think now with and we, EKF, were not marketing it at all. We were just a a small manufacturer of this product for them. I think now that the, you know, that MTM is now really well known, I think it opens potentially opens up the flood gates in, certainly, in markets like Africa and India where there's a prevalence of of TB and malaria and in these sorts of countries, HIV in Africa.

48:11 So I think the market is very large. I think one of the issues we we have is that the tube the the labeled tube and the bag and the reagent. They're they're relatively expensive for these markets, so we'd have to look at that. But I think the post COVID prime store could be a a a very decent market size for us. Next question was the investment in Trellis Health is reasonably sizable for EKF. Although you have a healthy cash position, has the 5,000,000 now being paid, and was it injected purely as equity for ordinary shares? The 5,000,000 has been paid, and it was injected. We we now have circa 31% of Trellis, and we will be dividending out those shares in due course over the next few months.

49:04 The next question, the 5,000,000 the does the 5,000,000 take it to IPO? The answer to that is yes. It will do. Although, Mount Sinai have invested cash into it as well. So we have do have enough cash to get through to IPO, which should be by the end of q one twenty twenty one. By the way, the difference with Trellis to read analytics is Trellis is once we've got all the software and everything in place, which we're we're close to doing, is it does not need FDA approval. It's a care pathway technology, and therefore, it should be revenue generating in q one next year. So it's a very, very different business model to Read Analytics, but again, a huge unmet need out in the market.

49:57 We're not a minority shareholder in Trellis. 31% could be perceived as a minority shareholder. So the question is, EKF is a minority shareholder in Trellis. What level of control does EKF have in practice? Is it the de facto managing partner, financial adviser, for example? Well, the impact we have is that we are the company that will and the management team that will get them through the IPO next year. We are the people who advise them, but we're also a very significant shareholder in that business as a 31% shareholder. And on the board, I am the the chairman of it. Mike Salter in The US is on the board of Trellis. So we have a significant impact on how Trellis and the timing of Trellis. So I would say that we overall have the expertise.

50:47 Plus, it has to be remembered that our relationship with Mount Sinai Innovation Partners is extremely strong and extremely close. If you look at, what Mount Sinai, have done and and have benefited from Ringalytics and I don't meant just mean the cash. I mean the testing capabilities and everything they can employ in in Mount Sinai. They've got to a point with Greenalytics that would've taken them far, far longer if they didn't have the drive and the input and the cache from, first of all, the AIM listing and then the Nasdaq listing. So I think that, and the other thing about the Trellis IPO is I have to keep mentioning this is that it's always, Mount Sinai follow their corner.

51:33 So they will always invest in anything that they IPO, which is, again, if if the people leading the technology and the people behind the technology and then the actual hospital group invest in it, I don't know how more secure investors can can be. What is EKF's current net cash position? I don't think we should answer that question. I was about to say we can't answer that because that's exactly inside, but we're fine. I can I can say that the investment due to the large cash inflows from PrimeStore, the investment in Trellis has not made a significant difference to our cash position Yeah? Since half year end. Yeah. Yeah.

52:19 How material is the h two planned expenditure at Elkhart? Richard, can I hand that one to you? And have I Yeah. Correctly that it has to address both new contracts? Yeah. Material. I'm not sure material in comparison to what, but if you take it materiality in comparison to our cash balance at the end of June, for example, It's important, but given that we'll be putting a lot more cash on the balance sheet between now and the end of the year, I don't think it's really significant or anything to be worried about. And I think, obviously, we've looked at the potential profits coming out of that at the other end, and I don't think it's a good investment.

53:07 No. It well, sorry. Yeah. Sorry. It does touch both, the the new contracts and the manufacturer of PrimeStore MTM. However, the capital investment required for the manufacturer of PrimeStore MTM is fairly minimal. It's about $100,000 for a line on which we can manufacture about 250,000 tubes a week. So it's fairly fairly reasonable. And the good thing about this is that we have space, and we can increase the the number of tubes we manufacture just by putting another $100,000 line in there and adding another six or eight people to the whole thing. So The next question thanks, Richard. What is the duration of the LongHorn March 2020 agreement?

54:04 The the agreement is for bulk manufacture. As I said, the tube manufacturer is nonexclusive because we couldn't manufacture all the tubes at EKF alone. The, March 2020 contract actually dates back further than that because it's open ended because we're the only manufacturer, as I mentioned earlier, of the bulk reagent, and we will continue to be the only manufacturer of the bulk reagent. I think I meant the next question, it was everyone would love to have the contract manufacturing. What competition do you face in renewing the contract with Longhorn? Well, a lot of people do have contract manufacturing from for tubes globally. However, two things, the quality of our tube filling and the quality of our label labeling and capability.

54:49 And in in Europe, EKF has signed the contracts with our our partners, not LongHorn. So in Europe, we're very, very protected because it's our contracts with these major industrial partners. In The US, LongHorn are totally reliant on us. They they are without us, they would not have a business. EKF is their business in terms of bulk manufacture, distribution, storage. For example, LongHorn is a four man company, probably six people now, and we do all their storage for them in Elkhart and in Texas of all their tubes, all their swabs, all their everything you can think of. Their bulk reagents, we store for them. So we literally are their logistics people.

55:36 It doesn't have sorry. Does the long horn agreement contain any minimum order levels? No. It doesn't contain any minimum order levels, and we'd be massacring them now anyway because we're we're way above that. So I I do still wanted to say that, you know, LongHorn is really important for this year. It's really important for next year. Hopefully, it'll broaden out into other viruses. But, you know, just like other companies, you know, EKF is very focused on its core business as well because at some point, COVID will decline and and and so, you know, whilst I understand the investment case of Longhorn, I also feel very strongly that the investment case of our core business, Trellis, Reenalytics, and all the other things we're doing are are equally, if not more important than that.

56:30 The next question is, could you see EKF investing into re Vireach at the time of the IPO? No. We don't need to. My my opinion is that the Virici fundraise will be has been very positively received, so there will be no need for EKF to invest in it. Plus, this is a Reenalytic spinout, not an EKF spinout. So so so I do not I do not see EKF investing in that. Next question was, is the introduction of swab tests a threat or an opportunity? The swab tests are what we're doing. I think that might be slightly confused. Swab tests are actually what the swabs go into our our reagent.

57:16 So we take a swab and put it into there. Certain cases, as I mentioned earlier, lateral throat flow test might compete with this, but I don't think that they will because there is a globally huge increase in testing required at the moment. Do we envisage arrangements with Longhorn expanding over time? Yes. I do. I'm just hurrying through these now because I'm aware of time. Please, could you elaborate a bit more on Trellis offering? I can't because I'm afraid to say back to the questions earlier, if I elaborated that on that just like the cash situation, then we would be bringing people inside at the moment. So I'm I'm not able to elaborate on that.

58:03 So I'll let let, unfortunately, I can't answer that. The company was for seven years incentivizing managements to achieve an exit. Isn't is is a sale no longer an objective? I can honestly say that there's two answers to that. I think any company in our position would be for sale at the right price. But as I've mentioned throughout the presentation, there's so much excitement around EKF at the moment, so much opportunity in front of us across the whole business that unless the price was right, we wouldn't be looking to, sell the business. The incentivization now for Richard and I is is to grow the business both from a revenue EBITDA, but also the investment cases make them successful in the Mount Sinai partnership to make sure that the Trellises are successful.

59:01 I'm the chairman of Vireci, so it it's important for me to make that successful. So I'm not saying that the the exit is out out of the window, but it's certainly not a priority because we got so much that we're going through at the moment. Yeah. The next question, you mentioned that Trellis wouldn't be the last deal with Mount Sinai. Are the new ventures chosen by EKF from their portfolio? Yeah. Some of the new ventures will definitely come from Mount Sinai, and it definitely won't be the last one we do. But we focus on them one at a time because, you know, we have to invest in them, make sure they grow, make sure they deliver on what they promise, and then spin them out on to to aim. So, therefore, we we do focus on on them one at a time. But next year, we will almost certainly sign another agreement with Mount Sinai, I'm sure, and we get to review technologies on a regular basis. But it's not the only way we're going to invest. Richard's mentioned significant investment in in enzymes.

1:00:07 We're investing all the time in point of care, in our lactate medical product, etcetera. So so investment goes across the board. On the enzyme production, how long is the production cycle for enzymes, Richard? Any It's, like, two to three days for the fermentation and probably another couple of days for the purification. Is there a possibility of companies who are big in tubes, BD becoming a competitor from a prime store? No. Because it's it's patented. There's significant IP behind this, and we'd probably buy the tube from b we don't actually buy the tube from BD, but we buy significant tubes from companies. So, no, I do not see BD being a competitor.

1:00:59 And can saliva be used as a sample in PrimeStore MTM? Yes. It can. And we're working on saliva collection at the moment. So, yes, you can run PrimeStore MTM with a saliva sample. And I think I'm running out of breath now. I think that's it. Absolutely brilliant. Thank you very, very much indeed for addressing all of those questions. And as I said, you know, have we missed any? Don't think we have missed any. If any come in after the event, obviously, we'll have them on your dashboard. Thank you very much for updating investors. Perhaps before I redivert them for feedback, perhaps I could ask finally just ask you to wrap up and then, as I say, we'll redirect them for feedback. Okay. I'll just answer the last one from Phil b. You couldn't resist, whoever, Phil. Is EKF committed to South Wales as a base for future UK expansion?

1:01:47 How much support does EKF had from Innovate UK and the government's catapult program? We are pretty committed to South Wales as that's where all our infrastructure is. Should we expand in The UK? We only, in reality, expanded due to Prime Store, but we are taking over another facility. At the moment, we haven't had time to go and ask Innovate UK or the UK government for financial support. I'm sure when we have the time, we will be able to do that. But these entities tend to ask what's your balance sheet like, what's your cash generation, what and you you end up putting more work in and then benefit you get out. But we haven't, at the moment, contacted anyone. Sorry. Okay. Nope. So that that's perfect. Thank you. So if I just ask you to wrap up and then, as I say, we'll divert investors to give you feedback, feedback, which I think is which is gonna be important.

1:02:40 Okay. I just hope you have all found this beneficial and helpful. Personally, it's a great way of addressing you all. I'd still rather now be settling down and answering your questions over a nice glass of wine as we've done in the past, and maybe one day those days will come back. But, in reality, I'd just like to thank you for all attending this meeting and asking some important and pertinent questions. And and hopefully, you got the feedback you were looking for. So thank you. Many thanks from me too, and I look forward to seeing you all in London next year. Yeah. Thank you. Julian, Richard, thank you very much for updating investors. Could I ask investors not to close the session as you'll be automatically redirected for the opportunity to provide feedback? If you access this meeting from our website, the feedback page will appear. If you accessed it via the link in the email, it will take a couple of seconds, but please just log in and provide the company feedback.

1:03:35 On behalf of EKF DIAGNOSTICS, we'd like to thank you for attending today's meeting. That concludes today's session.