Metir (LSE:MET) — Pre-Close Trading Update

0:01 Good morning, ladies and gentlemen, and welcome to the MicroZec Systems PLC pre close trading update investor presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged. It can be submitted any time by the q and a tab situated in the right hand corner of your screen. Simply type in your question and press send. The company may not be in a position to answer every question received during the meeting itself. However, the company review all questions submitted today and publish responses where it's appropriate to do so. Before we begin, I'd like to submit the following poll. I'd now like to hand you over to Glenn Tracy, CEO of MicroZeck Systems PLC. Good morning. Good morning, and thank you to everybody for attending this this update. So what I'll do is I'll get straight stuck straight in. For those of you who don't know me, I'm I'm Glenn Tracy, the CEO.

0:46 And what I'll do to you today is to to update you on the r and s we released earlier this week, which reflected on the progress of 2021, and I'll give you, my view as to where we're gonna be in 2022. What I'm gonna do is turn my camera off so you can, actually see the slides,

1:07 and I'll turn it back on when we are towards the end, and I can answer some of your questions. Okay. So, headlines for last year. So a million of orders for the year, which represents a major turnaround on 2020 for the company and, puts us ahead of pre go pre COVID levels. We will be reporting margins and cash at a later date, but, suffice to say that 2021 saw us accelerating market access while seeking to be prudent in operational expenditure, and, we are attracting a very comfortable margin. We did experience some global supply issues. Most of us have done in our personal professional lives, but this really only affected about 10% orders to shipments.

1:54 And, in any case, that bug backlog will be shipped early in the year this year. So in actual fact, the effects of, the global supply issue were relatively contained, and we'll continue to to mitigate whatever comes our way. But what I what I do wanna show is that 2021 was about underlying transformation in the business, and that really has occurred since taking our 5,500,000 placing and strategy pivot early last year. First is our transition to workflow solution sales. You know, that that's really the the important aspect here. That's establishing a much higher level end user engagement, and that will drive significantly the opportunities during 2022.

2:41 Also, we've refocused on growing our business in conjunction with partners such as DeepVerge in real time water analysis, detection collaborations, contract research organizations in bioprocessing, and also the extension of our Chinese facility with a range of local partners in China. 2022, we're gonna be building out a range of strategic partners. We're having some very good discussions with across markets in environmental and human health. And, really, the takeaway for this slide is, you know, if 2021 was about turnaround or transition, then this year, 2022, is about significant business inflection. Now what I'm gonna do, obviously, you know, this is all about the the the progress of last year. So I'm gonna just take you through some of the highlights of of last year.

3:37 Okay. So starting in May, we we announced a collaboration with Swansea Medical School. This collaboration includes the environment agency and also industrial partners in The UK for environmental water monitoring. It it involves lab analysis, real time screening for remote samples, and also monitoring in established utility companies. And the overall aim is to inform inform monitoring efficiency by embedding our technology within a artificial intelligence layer to inform faster decisions at the point of need. And also this this research or the research that spins out of this will also inform a link between forever chemicals and specific genetic changes in the human genome.

4:24 So really some quite large aspirations with that collaboration. But basically, in the short term, the information and connections are gonna be invaluable in driving sales and commercial activity in 2022. Just taking you through the year again. So in July, we announced that we demonstrated a world first method for real time monitoring and control of biologic therapeutics manufacture. And those, of course, range from, biologics therapeutics, which is vaccines, anti cancer treatments, etcetera. And by integrating our miniaturized powerful technology through software and analytics into bioprocessing workflows, we we were able to show that we could speed up the potential drug development timelines and also reduce the cost of scaling up production.

5:14 We're different, one, because of our size and, two, because we can monitor multiple elements in the bioreactors in one go. And so it can be done real time, and you can drive decisions real time. The market for current bioprocess instrumentation is around 390,000,000, and we intend to take a share of that because we simply displace a lot of incumbent technology because we do it different, and we do it, quite frankly, better. Collaborations and betas in this area will be taking place this year.

5:52 Okay. So in August, we announced the launch of our soil and water monitoring system. So taking the traditional approach in the picture left above, which is a large, expensive, traditional centralized lab, very much removed from the point of need, I e, water contamination happens in our waterways versus the picture below left, which is our technology in the back of a car, which is in the progress of analyzing water samples, which are collected at the point of need. But the real power isn't just about point of need per se, but it's actually the fact that we can install multiples of these units through an ecosystem to measure slices either geographically or through time to actually, know, monitor what's going on. And with the addition of AI, artificial intelligence, we can start to make models and predict outcomes.

6:49 So, basically, we're shifting away from we're not just detecting what's happening, but we can start to predict what's gonna happen. Market sizing is a tough one. Some indicative numbers are on the right. You can kinda see some large numbers there. And even if we take a small fraction, you can see that that's, you know, quite substantial. We sold a number of units for our partners at Modern Water who are installing these units along with their own MicroTox technology through a range of frontline opportunities, water authorities, utilities, and so on. And we're gonna be extending that in 2022. And we released RNSs last year about those sales to to deep virgin modern water.

7:38 In September last year, we announced the opening of our China facility, which is acting as our sales service and integration office in China. And that really is important given the fact that China is about to go into lockdown or is locking down quite significantly in certain certain geographies within China. Really, this provides a forward capability for us in China. In any case, COVID aside, you can't do business in The UK For China, you've gotta be there. We're still gonna be manufacturing in The UK, but, basically, we are able to integrate and add some value to our instrumentation around workflows and environmental and human health and also achieve medical license for certain applications in therapeutic drug monitoring.

8:26 And you need that presence in China to do that. This kind of model would like to duplicate elsewhere in other geographies such as North America. Okay. So slide nine. As part of our wider focus on delivering higher level services, our bi bioprocessing services will showcase our automated bioprocessing capabilities and also enables us to work work much closer with, contract research organizations, contract development, manufacturing organizations, end user pharma. And, really, this is all about detection plus workflow plus software plus AI plus expertise. So the transition for Microsaic very much is around, you know, moving away from that just the the detection, the box, and capital sort of very lumpy sales towards, you know, selling a complete solution, complete workflow, service, and expertise, and really running the business off a much more smooth smooth annuity model.

9:33 And then the latter part of the year, we announced the addition of GC or gas chromatography capability to our PUP platform. Now that it it really is exciting. You know, I know a lot of you won't know what GC and LC is, but, basically, this this massively opens up the numbers or the amounts or this the the breadth of of things that we can actually measure in the markets we're in. So, basically, we can now measure complex and simple molecules in a in a much greater variety of matrices. So we'll be incorporating GC. You can see there's a little GC box there with our small mass spec into our workflow and our automation ethos.

10:19 And it means we can extend our addressable market considerably at the point of need in in our applications in human health and environmental, and that market space is worth over 1,000,000,000 today.

10:38 So I just want to end the quick update on, you know, what's really driving the business and outlook. So as I've mentioned, you know, we we transitioned. We pivoted the strategy early last year, and we've really spent a lot of time, effort, and energy in transforming the company. We do have, you know, some some great successes last year in in view of that, particularly in h two as the the new business model started to come through. You know, we wanna be the solution, not just the box. We wanna be purpose built for industry 4.0, which enables analytical detection and characterization at the point of need. And that will be driven through our markets in human and environmental health.

11:24 We are, you know, especially applying effort to driving the sales pipeline in drug bioprocessing human point of need care and environmental monitoring in water and soil so that we have some very, very specific key markets that we are we are going after. And those are driving not only the the the development to drive the top line in 2022 in terms of the the workflow extensions, but also the commercial relationships we are pursuing right now and have been pursuing. But, ultimately, you know, the the the the aim in 2022 is to significantly drive the top line growth. Okay? So as I said before, 2021 was all about transforming the business.

12:11 2022 is really about significant business inflection. So I e, growing the top line whilst maintaining some decent margins, sort of extending beyond the capital model, smoothing out the the revenue into more of an annuity platform or annuity model, should I say. The outlook in 2022 then, we've already entered the year with a healthy sales opportunities pipeline, probably the most healthy I've seen since my tenure, and that's that's as a result of the transition business model and also, you know, some great work from from our BD crew. We've got some key revenue opportunities in scientific services, particularly in bioprocessing and water markets, and that's really key. That's new for Microsaic.

13:00 And we're extending our our detection platform in human environmental health. I've mentioned the GC capability by a processing of water workflows, therapeutics, etcetera.

13:12 So the company intends to grow in conduct conjunction with with our partners, particularly DeepVerge in water detection, contract research organization, contract research organizations, and CDMOs in bioprocessing. We're gonna be really focusing on China, extending our local partners in China, and I should say also in North America. And we are actually pursuing some very, very chunky OEM and strategic partnerships as we speak. So I'm gonna switch my camera back on and hand over to questions. Glenn, thank you very much indeed for your presentation. Ladies and gentlemen, do please continue to submit your questions using the q and a tab situated on the right hand corner of your screen. Glenn takes a few moments to review those, investor questions we've had submitted already. I'd like to remind you that recording the presentation along with the slide deck and the published q and a can be accessed via investor dashboard.

14:12 Glenn, did receive a number of presubmitted question from investors, perhaps we could start the q and a session off with these. You have touched on this, but the first one reads as follows. How are things doing in China for MicroZag?

14:24 Yeah. Very, very good. So, you know, we we we deliberately set up well, deliberately, obviously, we we we've been exploring setting up a a facility in China for a long time, and and we've done that now. And you can see some of the pictures on the previous slide on some of our social media channels. That's really, really helpful. So it means that when we step away from being in China, you know, we've got a physical presence that continues those discussions. They have a great demo facility. They've got very good experience in mass spec, etcetera, etcetera. So that that's a major change from where we were. Our BD director, who is of Chinese origin, was out in China for eight weeks prior to Christmas.

15:14 He managed to get into China, despite there being some still quite still some quite, significant, restrictions on travel to China. And, actually, the BD discussions he was having there were were, you know, really, really transformative. So China for me is is it feels a lot closer. It feels more tangible, and it feels like we've got much better momentum now. Brilliant. Thank you indeed. Next one we've got here is when do you think MicroZerg will be profitable?

15:42 So I can't give that translates to profit guidance, obviously, I which I can't give. But, you know, what I would say is I've got no intention. The ball's note got no intention of going back for additional funds on the current business model. Naturally, if something really compelling comes our way and it would require additional funding, we would put that to shareholders. And as I said, we're gonna release an update on on cash position and margins at a at a later date, but there's no cause for concern there. Great. Thank you, Glenn. Next one we have here is, are delays in the launch of Microtox BT purely due to regulatory issues? Okay. So so Microtox is a is a DeepVerge product. Obvi obviously, DeepVerge and and work very, very closely together.

16:35 You know, what I can do is is is update, you know, any any

16:43 kind of DeepVerge centric product information, you know, you need you need to to contact Jerry and company on on that one. Great. Thank you, Glenn. Next one we've got here is, does Microsaic drive any inputs income from products slash services of the Skin Trust Club? Okay. So so another deep verge question, but but, obviously, we we do have significant overlaps. The the direct answer is is no, at least not in the short term. However, you know, there are some very good synergies with with our technology and where deep verge is heading, particularly in the in the microbiome. So, you know, I I wouldn't say that there's, you know, immediate, I e, you know,

17:29 income from from product sharing in in that front between DeepVerge and Microsaig, but but certainly the collaboration would point in that direction. How near to completion is the beta testing for bioprocess automation? And when would you expect the first client for this service to commence using it? Okay. So we we've been we we run our product development. So we we don't we don't spend years just incubating, keeping it to ourselves. We actually do our product development with end users, with with collaborators, actually. So, you know, really from the outset, we're putting things in front of people. So in a in a way, beta beta ring has has been going on.

18:13 But in anger, this is gonna happen in q one, q two of this year, and we'll probably put out some announcements around that around that to show show what progress we're making. Great. Thank you. Since the interim presentations, are we any closer to progress regarding the in situ cancer diagnostics? No. Unfortunately, no. I think, yeah, we've seen some delays there for a variety of reasons. And what I would say is I I still think this is an amazing you know, early early science show that this is an amazing opportunity for us. And not just in in cancer diagnostics, but I think in surgery in general. And we are exploring actually a number of different routes.

18:53 And and, again, we'll update you when I've got more on that. Perfect. The delay has nothing to do with our technology, by the way. Perfect. Another China related question. Have we applied for the China medical license, or does this application have to follow the distribution agreement? Yeah. It's a good question. Yeah. You you we we haven't yet applied for the license. And, actually, you know, I would say that it it's probably in the plural, not the singular. So we are talking to a number of of, Chinese distributors, OEMs, in that market. So, you know, it it's it's, you know, hopefully, the medical license will come off the back of several conversations, not just the one.

19:40 Great. Apart from the Omicron outbreak, are there any other issues causing the delay in concluding the agreement with our Chinese distributor? And when do we reasonably expect this to conclude? Again, it's it's in the plural. So although we've we've signed up with the forward sort of facility in China. We're we're talking to a number of of Chinese distributors. So, you know, we're not just we're not just single source in in either a distributor or a market. We're talking to a range. So, you know, I I wouldn't I wouldn't say that this this I would say that by having that that presence in China is is actually accelerating those discussions rather than rather than hindering them even with Omicron and any other virus, indeed.

20:34 You know? So, yeah, I I don't I don't see any other downside particularly to to to what we've done. In fact, you know, as I say, by putting that in place, it it's very much upside. Fantastic. And this is the penultimate question we've got. Can you quantify the annual saving, if any, in reduced expenses, e. G, salaries, r and d, rents, marketing, etcetera, from the collaboration with Deep Verge?

21:01 I I sort of look at it as more and more as upside. So, yeah, that yeah. There's of course, there's savings. So at the moment, we're we're using their CAT two facility for a nice application in blood serum testing, actually. I I can't give any more details right now, but but, obviously, you know, MicroZeck does not have a category two facility. So, you know, that would cost hundreds of thousands of pounds to put in place, and we're able to use deep verges. Sales channel. So we, you know, we sold a, you know, a nice chunk of, of instruments, to to to modern mortar, using their sales channel. You know, I've always said that, you know, that that's one of the reasons we we teamed up with the as a sales channel. And so, therefore, you know, hasn't

21:47 had to invest in, you know, I don't know how many people in offices, to to do that. So, yeah, I mean, there there are real turn, real real, world savings, but, you know, I kinda look at it more as upside actually than than savings. But sure. There there would there will have been potential savings by by doing so. Fantastic. The last question we've got here presubmitted is the overabundance of warrants seems to be seriously holding the true value down. You have any plans to address this? Okay. Share price. So, you know, there have been no warrants or options or anything else exercised. That's that's the first thing. You know, my my reflection on share price is it's it's all about, short term selling, short term profit making.

22:38 You know, it it's across the board. You know, retail, there is some some institutional churn. And and, really, you know, the board can't, you know, stop buyers or sellers. You know, we we just cannot. Okay? And, also, I just can't give you guidance on where the share price is gonna be in a year. I've got my own feelings on it, but I can't give any financial advice, I'm afraid. Yeah. What I can do is is give you an understanding of where the company has been, you know, in terms of transitioning last year and where it intends to go. That is sort of significant business inflection. And, really, you know, my my goal is significant long term value in the company, you know, both in terms of real term and, hopefully, in share price. You know, I I'm not gonna you know, this isn't about day to day, you know, share price, you know, inflection. This is about creating the long term for the company and for for shareholders.

23:39 And as I said, you know, 2021, all about transition. 2022 is now about building on that and providing that long term long term value. Great. That concludes the presubmitted questions, Glenn. As you can see, we received a number of questions today, and thank you to all the investors for submitting those. Glenn, can I just ask you to click on that q and a tab? And Yeah. Where appropriate to do so, just read out the question, give you a response. If could start at the top, that'd be great. Okay. A zed a, when will you hit the one p mark? I don't know. As I said, I can't give you guidance on share price. Have deep version negotiated any exclusive agreements for the provision of any Microsoft products or services? I don't know whether they're negotiating exclusive. I know that they are they are extensively negotiating.

24:26 They're doing a great job, actually. You know, as to the nature of those agreements, you know, I I don't necessarily have have the insight into it. You know, we're we're providing the kit into them and the expertise. You know, again, it is probably a a question for deep urge. Is it possible to apply monetary value to patents held by MicroSAIC?

24:52 Probably probably not an easy one to do. You can you can value patents, but that sort of tends to seriously undervalue the execution of them. You know? The value is in the eye of the beholder. Suffice to say, you know, we've got a a platform that, you know, is is well covered by patents, and we intend to sort of inflect the top line with with the deployment of those patents in products and services. So it's it's a really hard one to answer.

25:27 Lots of exciting opportunities. Is there a risk of spreading ourselves too thinly? Could we be more focused in one market application versus spreading out from there? Yeah. I mean, if I was, I'd probably be get be accused of being too focused. I mean, you you you you've seen, you know, obviously, with environmental factors, COVID, the supply issue, you know, emerging regulation environmental, you know, the shift in sort of the the demand for for human health, you know, that you there's not one market that you would necessarily go for. And, actually, you do wanna sort of you do want a degree of spread, and human environmental health is is are the two markets we decided to go for. But even in there, you know, we decided to focus. You know, environmental health is water monitoring. Human health really is about drug manufacture and therapeutic drug monitoring. So, you know, there there is quite a degree of of focus within those markets.

26:27 And the key is is that, you know, we've we've built a platform of technology which you can extend through workflows, services, businesses, etcetera, into those markets, but the key technology is actually, you know, very similar. It's just how you you go about deploying it. So, yeah, I'm I'm happy that we are, you know, both both spread and focused. Right? So, you know, we're not gonna be entering any radically new markets, but we're not gonna be chopping markets off because I think I think that would be that that wouldn't have long term value. You're quite right to seek to give us positive outlook. Can you tell us what looming downsides or problems we should be aware of?

27:13 I you know, the continued pandemic, you know, I I don't know. You you see the same news as I do. You know, I I think we're coming out of it. I think travel restrictions will will ease off. I think it'll be patchy. China's probably the the big one for us where, you know, I think that will linger. But but as I say, having that that facility in China is gonna help us. And and really to the previous question, you know, what are the downsides? I mean, there there's always gonna be a cyclic aspect to any market, and the key thing is to, you know, spread yourself enough where you can sort of ride over the cycles in one market with with the other, but not not too much where you, you know, you you're you're frankly stuck because you got too much going on.

28:03 So, you know, I I don't see any particular looming downsides at the moment apart from the ones you read about in the press. When are you gonna need additional capital? I don't intend on on any with the current business model. As I say, if there's any anything coming out of any discussions we're having where there's an amazing opportunity that requires funding, but there is a decent upside, we'll we'll let you know. To what extent do you see supply issues affecting growth in the next year? Yeah. I mean, you've seen that they they affect 10% of orders to to sales last year. So 2021, we we had over a million of orders and and ship point nine. So, you know, whether whether that's a an indicative measure of of of the the extent of it. But, you know, essentially, what we're doing is forward buying. So whereas we would have you know, our process is we've got a very great controlled manufacturing and supply chain process where we may have called off every quarter.

29:09 We're just extending it to to do that in advance for long lead time parts, and that's how everybody is managing it. Of course, so, you know, we don't know where we're gonna end up. But as, you know, as, you know, globally, I mean. But, you know, we're our best to mitigate. What's the competition for microSAIC? Oh god. You know?

29:35 How long how long do you have? I mean, you know, mass spectrometry is a, what, $7,000,000,000 market if you just look at mass spectrometry. You know, what I would say is is that we are we are not so, you know, our technology is mass spectrometry. We're not selling mass spectrometry. Mass spectrometry is a very, very powerful technique, and what we've been able to do is to shrink the technology down and access new markets that I've, you know, briefly described in the presentation and tons of RNs where mass spectrometry isn't being used. So there is no competition. You know, it it's about sort of either displacing different technologies or being first first mover advantage in certain markets.

30:32 Yeah. Comment on private investors being cannon fodder for large players. I was asked last time if I thought point two five was cheap. I look. I do. I I really do. But that's my own personal personal personal feeling here. You know, it's we're not in this to screw personal private investors. You know, we've we've consistently put out good news. We we are consistent. The executive and the board are consistent in driving the business, and that's what we'll continue to do. You know, we we can't stop shareholders selling as we can, you know, make them buy. So, you know, hopefully, with with increased continued good news, you know, the situation will change.

31:29 Are we looking at working with other universities in, say, food, mining, or chemical? Yeah. I mean, we're to I think to the question before, you know, we we are we are focusing our efforts. So, you know, mining isn't, example, isn't isn't a target market for us. But, yeah, I mean, the the aim is to certainly work with academic institutions where where relevant. Yeah. It's got there's got to be a decent and and very clear payoff for for Microsaig to do that. And often, sometimes with academic collaborations, you know, it can be quite lengthy. So, no, absolutely. And there are some very good ones in The UK. Okay. So I think that's most of the questions I can answer there, That's fantastic, Glenn. Thank you very much indeed for addressing those questions. Of course, Glenn will review all questions submitted there if any further questions come through, and we'll publish responses where appropriate to do so on the investor meet company platform.

32:30 Again, before redirecting, investors to provide you with some feedback, which I know is particularly important to you, could I just ask you for a few closing comments, please? Yeah. Of course. I mean, I you know, sort of reflecting on last year, you know, the the COVID area, you know, really demonstrated a need for for faster solutions to real world problems, and and it's shown the ingenuity of scientists to meet that challenge. And in particular, I think we've seen that real time detection is a is a central facet to that. And, I hope what you can see is that Microsaic is really well placed, therefore, to demonstrate that response to that post COVID era mindset that is now with us, which is, you know, just acceleration to market across a range of different applications, such as in frontline biologics and environmental water.

33:20 You know? And I'm I'm really encouraged how, Microsaite bounced back, after COVID. And in fact, we're, you know, we're we're a lot stronger than what we were entering COVID yeah, for a variety of reasons, you know, the the funding, beginning of the year, the transition that we've put in place with the board. And so, you know, I'm I'm really very pleased with MicroSAIC's bounce back and, very excited about 2022. Glenn, thank you, and thank you for updating investors today. Can I please ask investors not to close the session? It should be automatically redirected to provide your feedback. In order that Glenn and the team can better understand your views and expectations. This will only take a few moments to complete. I'm sure it's greatly valued by the company. On behalf of Glenn and Microsoft System PLC, we'd like to thank you for attending today's presentation.

34:07 That concludes today's session. Thank you, and good morning to you all. Thank you.