Novacyt Sas (Euronext:ALNOV) — Investor Meeting

0:02 Good afternoon, ladies and gentlemen, and welcome to the NOVACYT Investor Presentation. Throughout this presentation, investors will be in listen only mode. Questions are encouraged and could be submitted at any time using the Q and A tab situated on the right hand corner of your screen. Please just simply type in your question and press send. Given the significant attendance at today's meeting, the company will not be in a position to answer every question it receives. However, the company review all questions submitted and publish responses where it's appropriate to do so. These will be available your Investor Meet company dashboard, and we will send you an email to notify you when they're ready for your review. I would also like to remind you that this presentation is being recorded. Before we begin, we would like to submit to the following poll. And if you could give that to your kind attention, we would be most grateful.

0:48 And I'd now like to hand over to Graham Hullis, CEO from NOVACYT. Good afternoon. Good afternoon, everyone, and welcome to this investor meeting. I'm delighted that so many of you can join us today, and I look forward to sharing the exciting plans we have for the business with you. First of all, we appreciate that the timing in mid August is not ideal. However, our results calendar and AGM have been delayed by almost two months this year due to some unforeseen circumstances. We will post a full recording of each session on the website for those that could not make this event and for future reference.

1:25 As you will have seen a few weeks ago, on the July 22, I announced my intention to retire from NOVACYT after thirteen years as CEO. And I'm delighted that we have found a successor of the caliber of David Ellman to lead NOVACYT through its next phase of growth. I'm immensely proud of what we've been able to achieve at NOVACYT during this time. And until I leave, we will continue to push the business as hard as we can. As far as I'm concerned, it is business as usual. Before we move into the next part of the agenda, I want to say a few words about the trading outlook. On the 06/22/2021, we gave the market a trading update, included full year guidance of £100,000,000 in revenues, excluding any DHSC revenue, for the year 2021.

2:12 At this time, we see no reason to change this guidance and remain confident in the opportunities that we see for the company during the second half of this year. Today, I would like to give you more detail on the strategy we announced as part of the full year 2020 results and the reasons we believe we can continue to be successful. As part of the company's development, we have been able to recruit strong new members to the NOVACYT team, and you will hear directly from Ajan Reginald, Paul Eros, Guillermo Raimondo, and James McCarthy, who are bringing this strategy to life and converting it into actionable plans. This will give you as investors an opportunity to meet some of the key management and also give you an opportunity to ask questions of the team, which we will cover at the end of the presentations.

3:00 The following slide shows why the molecular market is such a key focus of NOVACYT as it is fastest growing segment of the overall clinical diagnostics market and it is a market in which NOVACYT has been able to demonstrate some significant commercial advantages. The acquisition of Primer Design in 2016 was a major strategic step to build out a molecular capability for the group, which had previously relied upon the LAB21 healthcare protein based diagnostic portfolio. The acquisition of Primer Design at the time was a huge step for the group, and the management did an excellent job of integrating all aspects of that business. The rationale with this acquisition was to enable the group to accelerate the development and sales of molecular clinical diagnostic products.

3:47 And as shown, this has been a major growth engine of the group. Since this acquisition, we have been first to market with various products over the years to fight diseases such as Ebola, Zika and now COVID-nineteen, and we have been able to establish ourselves with best in class products. These foundations and this focus will, we believe, sustain our growth in the future too. NOVACYT is continuing to deliver against this strategy. The strategy pillars of R and D, organic and acquisitive growth coupled with the opportunities provided by the COVID-nineteen pandemic have enabled the company to not only demonstrate this but accelerate the certain parts of its strategy. At the half year results in September 2020, the company provided an update on its three pillar strategy of organic, R and D and acquisitive growth, which included the following: investment in R and D to support respiratory bacterial and viral diagnostic markets underpinned by investment in developing new IP investment in commercial infrastructure to establish a direct sales force in key markets in Europe and The U. S. And selective product and technology companies for M and A.

5:03 NOVACYT continues to deliver against this strategy. Investment in R and D to grow its respiratory portfolio for COVID-nineteen testing And to date, NOVACYT has launched over 28 new COVID-nineteen related products since the beginning of 2020 and has moved from one to three major molecular diagnostic product platforms, The first of which is GeneSig PCR tests for small to medium central laboratories, high throughput GeneSig PCR tests for large scale laboratories, and Promet PCR tests for near patient testing. Investment in a broad base of both protein and molecular platforms and a range of testing settings.

5:48 Near patient, hospital laboratory, and high throughput laboratories. Developing a range of PCR, ELISA and lateral flow antibody and antigen tests for near patient central laboratory and HT settings that can run on many open laboratory systems as well as our own Q16 and Q32 rapid PCR systems

6:13 establishing a direct commercial infrastructure in The U. K. To support the installed instrument base in the NHS and the growing private testing business the acquisition of ITIS International Limited to secure key instrumentation IP and expand the company's core capabilities and product offering enhancing our internal R and D with an expert business development function, which has developed a global network of innovative partners and has successfully in licensed antibody antigen and workflow solutions to expand our product offering. So the next steps of our new strategy. We have demonstrated a strong track record of success over the recent years and also an ability to adjust and enhance our strategy as required.

7:04 The last eighteen months have seen unprecedented changes and challenges in the global diagnostic market and at the same time unprecedented opportunities. As a management team, we have responded swiftly and successfully and we want to maintain this momentum. The next steps of our strategy are to develop our portfolio beyond COVID so that the business is well positioned as and when COVID diagnostic demand normalizes improve our capabilities in near patient testing and systems delivery by accessing and developing better instrumentation and workflow solutions and finally, expand our geographic footprint to leverage the international credentials that NOVACYT has built up over the last few years.

7:52 You will now hear from the key members of the management team who will take you through the key pillars of the strategy, and I will wrap up at the end and lead the Q and A session. Thank you. Good afternoon. I'm Adrian Reginald, and I serve as the chief technical officer of NOVACYT Group, leading the r and d and product development teams with responsibility

8:12 for the group's innovation agenda. I spent more than twenty years in health care, mainly in biotech and pharma, serving including serving as the global head of emerging technologies for Roche Group. My academic trading includes University of Oxford and Harvard Business School. I joined NOVACYT at the height of the pandemic, and like many people, I wanted to help and to contribute. And I found with NOVACYT, a small company that had a very significant impact in helping with the pandemic. Innovation is at the center of NOVACYT's culture and operations. We focus on developing novel diagnostics in areas of high unmet medical need. By developing faster and more efficient diagnostics, we're able to create real patient value.

8:57 Therefore, we're expanding our test menu to COVID and non COVID tests with a portfolio of 26 new assays by the end of twenty twenty two. This expanded portfolio builds on our track record of best in class product development with the first CE Mark COVID test in 2020, the first variant testing in February 2021, the first Delta variant test in April 21, and then ESCAPE Plex, which tests for the ESCAPE mutations in June 2021. We're able to deliver these assays in a direct to PCR format with the best in class Primate direct PCR assay.

9:46 Our innovative product development platform is underpinned by three tenets: bioinformatics, clinical trials and our ability to scale up regulatory and manufacturing. Our industry leading bioinformatics platform has been applied to COVID, COVID plus and to our post COVID portfolio. This is an automated platform that allows us to analyze over 2,000,000 genetic sequences per week to identify mutations, but also to utilize machine learning to identify the best diagnostic targets and the best assay design. This is a key source of competitive advantage and unprecedented amongst our IBD peers.

10:32 This enables us to generate novel innovative assays that underpin our broad patent portfolio. Once we have discovered and developed novel assays, we need to test them in a formal and rigorous clinical trial environment. Our industry leading in house clinical trial capabilities allow us to generate the high quality patient data required for regulatory filings and market access in a rapidly evolving infectious disease market. We've conducted more than 15 trials in over 20 locations in The UK and worldwide. These clinical trials showcase and evidence our best in class clinical performance and is a key source of competitive advantage in the rapidly evolving in vitro diagnostics space.

11:27 Our regulatory and manufacturing capabilities allow us to scale up and bring these innovative diagnostics to a broad market around the world. This includes 16 new CIBD products that have been registered, which include COVID and post COVID assays, and 10 new products that are planned by the end of twenty twenty two.

11:52 Our in house regulatory capabilities allow us to file registrations in The UK, in Europe, The US, and in major markets around the world. By integrating our regulatory and clinical trial strategy, we're able to rapidly bring these products to market and accelerate market access. Our track record of scaling manufacturing to meet pandemic and peak demand and our broad portfolio of two fifty assays in our catalog allows us to provide an industry leading infectious disease portfolio. Hello. My name is Paul Eros and I'm the Chief Business Officer at NOVACYT Group. I've spent the past thirty seven years working in the diagnostics industry before joining NOVACYT four years ago.

12:42 I've held various executive positions in a number of blue chip diagnostic companies. And in my current role, I work on new technology sensing and developing new business opportunities for NOVACYT Group. I joined NOVACYT just after the acquisition of the Primary Design business and did so as I felt that NOVACYT had an opportunity to make a real difference in molecular diagnostics. The style of the company is also one that creates an environment in which individuals can shine and make a real contribution. The molecular diagnostics market has, for more than a decade now, been the fastest growing technology segment in IVD. Growth of the market has been further accelerated during the COVID pandemic.

13:30 And whilst the post COVID market is likely to slow, molecular diagnostics will continue to show significant growth and will remain a significant sector of the overall IVD marketplace. The IVD market in general and the molecular diagnostics market specifically comprises the elements of reagents, instruments and kits. NOVACYT competes in each of these areas with an extensive portfolio of molecular reagents, kits for IVD applications which can be used on generic real time PCR instruments, and our dedicated GeneSig and ProMate IVD kits, for example, for COVID, winter respiratory viruses, and other, targets.

14:20 Each of these can be used exclusively with our own Q16 and Q32 molecular instruments. Understanding the molecular diagnostics workflow is key in understanding how and where NOVACYT currently operates and the direction of travel for us as a company. It all starts with a clinical sample, swab, blood, urine or some other bodily material. The sample is first stabilized to protect it before processing to extract the critical nucleic acid, either DNA or RNA. Once isolated, the specific section of nucleic acid of interest is replicated in a process known as PCR.

15:09 At NOVACYT, we are experts in the PCR process and design optimized kits to work with our real time Q16 and Q32 PCR instruments. The instruments capture data generated during the PCR process, which is automatically analyzed and reported as either a qualitative, that's a positive or negative result, or as a quantitative result, for example, as a viral load value.

15:38 The acquisition in 2020 by NOVACYT of the ITIS instrument and software business marked a significant strategic move for the company. For the first time in its history, NOVACYT now had, through its Primary Design division, world leading capabilities for design of molecular reagents and test kits and the ability to optimize performance of those test kits in combination with the dedicated ITIS Q16 and Q32 instrument platforms and software. By combining cutting edge and innovative research and development, the company has been able to optimize direct sample to PCR technologies on the Q16 and Q32 platforms.

16:28 This technology, which we call PROMATE, enables simpler processing of samples and deployment of PCR outside of traditional molecular diagnostics laboratories. The development of PROMATE has necessitated innovation in molecular rearranging chemistries and manufacture, creation of new cartridges for use on the Q16 and Q32 instruments, and a simplified reporting algorithm to facilitate ease of use and speed of reporting. Whilst initially developed for COVID testing in decentralized and close to patient settings, these new technologies are now being developed for use in other molecular diagnostic applications.

17:14 As well as having access to innovative direct PCR systems, NOVACYT is also able to optimize molecular diagnostic tests mainly from blood, which requires specialized purification and concentration of nucleic acids. This purification and concentration is performed using automated robotics, which increase speed of sample processing and improve overall performance of the process. With its ExigMAG chemistry launched in early twenty twenty, NOVACYT now has the capability of controlling every aspect of the molecular diagnostic workflow and is able to deliver fully integrated solutions, including reagents and kits, instrumentation and software, for use by customers in decentralized and near to patient settings.

18:10 Whilst other well known companies already have such workflow solutions, these are focused on high throughput central laboratory solutions or cartridge based single point of care solutions. The latter having limited throughput and still requiring significant time to generate results. By contrast, the NOVACYT S. Solutions with their small footprint, low complexity, but powerful architecture can be deployed in critical decentralized testing locations like airports, film sets, and care homes, as well as in mobile testing solutions such as the company's own Versalab system.

18:56 By focusing on tactical segments such as these, the company will avoid competition with heavyweight molecular diagnostic players. The impact of the COVID pandemic on the future development of IVD solutions will also be felt in nonmolecular segments, which the company is continuing to operate in. However, the principal focus for the company's instrument strategy in the immediate term remains in molecular diagnostics. By leveraging our ITS instrument and software division and the primary design expertise in design and development of molecular diagnostic assays nucleic acid isolation, stabilization and purification, the company aims to build a world leading system architecture for infectious disease and other applications

19:50 tailored to specialized decentralized test settings. Hi, my name is Guisermo Raimondo. I am the Chief Commercial Officer and I joined NOVACYT six months ago. I lead the commercial structure which includes marketing, sales, service and our regional subsidiaries. I have been in the healthcare market for more than twenty five years now in different leadership global positions in different countries and my education is in business management. The reason why I joined NOVACYT is because of its people and culture, The can do attitude and the speed of innovation reacting to customer needs are the key assets of the company and it matches perfectly mine as well and that is the reason why I joined. Let me share with you why NOVACYT has a great present and future as a company.

20:41 NOVACYT is one of the market players in the molecular diagnostic space that offers diagnostic solutions that extend the lifecycle of revenues at different stages of of disease progression. We can offer products for screening, for diagnostic, as well as for customer care. We enabled through our COVID portfolio millions of patient tests over the last eighteen months. At the same time, we are one of the companies in the market space that can address a variety of customer segments and their specific needs from healthcare providers like hospitals, clinics, GPs and laboratories in the public as well as in private sector and the new near patient segment, which is emerging, following the trend for many years right now of decentralization and closer to the patient healthcare services.

21:35 This trend has been accelerated by the pandemic. Our customer focused marketing team, our sales channels mix and our commercial innovation power in adapting our offerings to the market needs is one of our key competitive advantages. Customer driven innovation and fast time to market are essential values

21:57 and drivers in the commercial organization. Together with our R and D and business development colleagues, we have implemented customer sounding boards, which is a crucial element of being a successful customer focused organization. We understand this as the key enabler for technological and commercial innovations. Being close to our customers is fundamental to anticipate their needs and demands for the short, mid and long term. All this enabled our strong revenue growth over the last months. In the second quarter of this current fiscal year, we saw a revenue increase of 3x with our five biggest customers in the near patient testing segment versus first quarter.

22:45 And if we take the DHSE contract out of the equation, our first half revenues grew by 20% versus previous year. This is a solid growth rate, especially when you compare it to a lot of companies that emerged during the pandemic.

23:03 Our patient and customer centric approach are supported by a very strong commercial footprint, which has largely been developed on our Life Science and Food business in the past, which evolved to a molecular diagnostic solutions provider in the recent years. Over the last years, we have built a customer base of more than 5,000 customers, We have a well established distributor network of more than 400 distributors combined with an own direct commercial organization. Our strong sales channels mix was, is and will be essential for our success. Having a direct presence in key markets enable us in an effective and efficient way to listen to our customer needs, anticipate changes in market trends and react with the right solutions.

24:00 Also, when we look into our revenue split by regions, we can prove that we are already present in key markets. In a few moments I will share with you on how we intend to further expand our regional footprint. Another big asset of NOVACYT today is our brand. We are recognized and valued as a fast and innovative molecular diagnostic player. NOVACYT has already proven that it knows how to do business on a global scale and our capability in managing a huge customer base. Now going forward, allow me to share the main pillars of our commercial strategy.

24:47 Firstly, we will focus on our top line growth by increasing our share of wallet at our customer base by maximizing our revenue streams. Leveraging the extended menu derived from a close collaboration between commercial and R and D team is essential. Helping our customers on maximizing their instrument throughput from a clinical and financial point of view will be of essence. To do so, we will further invest and develop our capabilities in consultative selling. Our broad portfolio enable us to go for cross selling opportunities as well. The combination of customer specific strategies, test menu expansion and further instrument placements

25:37 are of essence here. Secondly, we are focusing on gaining market shares to generate new revenue streams. To achieve it, we will strengthen our direct international presence, which is crucial to penetrate key markets, the best way to build a brand and to gain significant market shares.

26:00 Direct local presence through own sales and service organizations is a critical success factor. We have demonstrated its effectiveness in The UK during the last three quarters by doubling our team and the result in revenue growth endorses it. We are now in the second phase of our global expansion strategy establishing our U. S. Subsidiary. At the same time, we are preparing ourselves for the third phase, which is expanding our market access and presence in key European countries. The rate of investment and direct sales will be managed according to the accessible opportunity, the need for product registrations and the regulatory progress made locally in these key countries.

26:53 Making use of our strong brand will be essential and we will continue with customer and key opinion leaders collaborations in the main markets. And finally, we will continue investing in developing our customer relationship management to further increase our customer intimacy and become more relevant for our customer base and new customers to come. NOVACYT has an excellent track record in evolving to the ever changing market needs, driven by its innovation power and manufacturing scaling up capabilities, evolving from a life science and area manufactured with a strong distributor network. Next step, which is already started, is to become a well recognized and successful global clinical diagnostic commercial player.

27:45 We have what we need. Drug technology and commercial innovation is our main driver.

27:51 Good afternoon. My name is James McCarthy. I joined the NOVACYT Group in January of this year as chief financial officer. I have over thirty years finance experience gained in a diverse range of international businesses, including fast moving consumer goods, specialty chemicals, packaging, and logistics. And I've worked in both publicly listed companies and in private equity. I have led business transformations and change in my various experiences, including quite a few years as general manager, which gives me a broad base and understanding of business partnering.

28:33 I joined NOVACYT because it was an exciting company that made a big difference during the pandemic in 2020. But it was actually the people that really appealed to me and the culture of the company. It's a company that takes care of its people and cares about the community it works in, and that really appealed to my values. The challenge of converting NOVACYT from a relatively small company into an international diagnostics player is really exciting and a challenge I'm really looking forward to. I would now like to focus on the key elements of the investment case for NOVACYT. You have held some of the highlights from the other colleagues by now, and specifically that NOVACYT operates in a high margin and rapidly growing market. You have held about our exciting plans to expand our test menu and the development of instruments and delivery systems.

29:24 You will also have heard about plans for expanding our footprint geographically. Let me now add some further colour to those plans. Let's start with revenue. The success of NOVACYT in recent times has been dominated by COVID related products. We know that the demand for COVID testing is likely to fall as we get the pandemic under control across the world. Our working assumption is that COVID related testing products could halve every year going forward. This is a company assumption and with all things COVID it is very difficult to forecast. However, we believe it is a prudent assumption. It does not mean that NOVACYT sales will half each year however as we are taking a number of actions to mitigate this underlying trend which we have already shared with you in this webcast.

30:13 We will continue to drive innovation in COVID diagnostics. And our agility means we can flex our portfolio to suit market opportunities. This means that even in a declining COVID market, NOVACYT can continue to win share with new products and new customer segments. We will use our core capabilities to expand our test menu beyond COVID, as you have heard earlier in this webcast, supported by an instrumentation strategy that secures repeatable sales through an installed base. We will extend the geographic footprint of NOVACYT, which has had a strong UK focus in recent years, to pursue opportunities in The US and the rest of Europe.

30:59 Gross margins have been boosted by COVID demand in 2020, where the Group posted gross margins of 76% compared to a historical range of 63% to 64%. As the market develops, we will see some downward pressure on gross margin as more supply comes on stream and prices come under pressure. We will, however, be able to mitigate some of this downward price pressure by focusing on our COVID product innovation in higher margin segments where there is a premium for efficacy and for our agility,

31:35 targeting our new test menu development on profitable niches, continuing to invest and develop our supply chain to drive efficiencies, and using our patent portfolio, which we have already highlighted to protect our innovation. Looking forward, the company is targeting gross margins in the region of 70% as a sustainable level for our business. Moving on to operating costs, or OpEx as we often call it, the business has had to rapidly invest in core capabilities over the last eighteen months across R and D, supply chain, sales and commercial, and back office and corporate functions. The scale of this investment has been quite remarkable. By way of illustration, R and D has gone up fourfold from 2019, where we spent just under £400,000 to spending £1,600,000 in 2020.

32:29 Similarly, sales and marketing has almost doubled in spend from £2,400,000 in 2019 to £4,500,000 in 2020. Going forward, we are targeting OpEx at around 30% of revenue. With gross margins targeted at 70% of revenue, that means an EBITDA target margin of around 40% when the business gets into a more steady state. Moving on to cash flow, I would like to talk about cash conversion. That is, how much of our EBITDA should we expect to convert into cash flow. For these purposes, I mean operating cash flow, which is cash flow before any M and A or financing activities.

33:14 Our targeted cash flow conversion is around 80 of EBITDA. This means that for every 100 of EBITDA we generate, we should see 80 of cash flow. The main difference is corporation tax, which is currently running at 19% of sales, and the balance represents 1% of sales for CapEx. This may seem a relatively low level of capital expenditure, however, this is a low CapEx business and we feel 1% of sales is adequate for our near term future. It is worth noting that we have a considerable upside in corporation tax if we can avail of patent box relief, which would be applicable as and when patents are granted.

34:00 This is a UK scheme that allows a reduced rate of corporation tax on those profits covered by novel patents. The credit can be backdated to the profits earned from the time the patent was applied for. I have focused mainly on the organic business of NOVACYT and I would now like to take the opportunity to talk about mergers and acquisitions. Our priority is to build and develop a clear strategy and to determine the capabilities we need to execute that strategy. These capabilities will include skills and capabilities of employees, technologies and innovation some we already possess and some we will need to recruit or buy. M and A will feature where we accelerate our strategy by acquiring capabilities that otherwise may take too long to build organically.

34:53 This can therefore be in test menu, instrumentation, R and D, new market access in new geographies. The company has a solid track record of successfully integrating acquisitions, and this stretches back from the initial Primer Design acquisition to the most recent transaction with ITIS, as Paul mentioned previously. These are great examples of where we can quickly add capabilities and build in our experience of quickly integrating acquired businesses. You have now had a chance to hear from the executive team articulating the key pillars of the strategy and helping investors understand the key competitive advantages NOVACYT has created relative to its competition. Hopefully, that will give you more insight into the detail of the plans and confidence that we have capable management to take this agenda forward.

35:43 I'd like to summarize. We are developing our strategy to respond to a rapidly changing diagnostic market and in particular to addressing the post COVID testing environment. We also see continued demand for COVID-nineteen as long as NOVACYT continues to respond to the changes in the market. We have a strong track record of success in terms of innovation, first to market products, profitable sales growth and a balance sheet that underpins our plans for the future. We can identify and integrate good quality acquisitions such as Primer Design and ITIS to support our growth strategy. And as diagnostics move closer to patient settings, we can now develop our workflow, our instrumentation and testing delivery systems to meet these new future needs.

36:34 We now have the products and the financial strength to expand our geographical footprint and build on our rich heritage as an international business. I would now like to open up the session for Q and A. As it is a live broadcast, we will be conducting this Q and A in English. And the reason for this is we wanted to accommodate as many questions as possible in a limited period of time, and we will ensure that the French translations of Q and A will be made available after the event. I will address questions to the most relevant members of the team as required. And some of the team are in remote locations, so the quality of the audio may vary slightly. Graham, thank you very much indeed for your presentation today. Ladies and gentlemen, please do 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 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 investment company dashboard, and we will send you an email to notify you when they're ready for your review.

37:40 I'd also like to remind you that your feedback is important to the company. And 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. Graham, we did receive a number of presubmitted questions, quite a considerable amount, in addition, of course, to those questions that are being submitted during the meeting itself. So firstly, thank you to all of those investors that have taken the time to submit the questions. Obviously, it's not gonna be possible to address all of them, but what we can do is, I think, in order to make best use of time is to put those into themes and categories. So perhaps if I may, Graham, if I could start off with this first question around the DHSC. Are you able to give any update on the DHSC contract dispute and the new contract award announced today?

38:28 Thank you, Mark. And I will take the first question. So as you would have seen this morning, we've announced a new contract with the DHSC under the Public Health England National Microbiology Framework for the supply of chromate to the NHS, which confirms the continued relationship we have with the DHSC and the NHS hospital system here in The UK. Based on the DHSC estimates for the nine months supply of Promet reagent, the contract could be valued at GBP 4,700,000 and although it is important to note that there are no minimum purchase levels specified with this. The Promate reagent is actually being supplied and used by the Q16 and Q32 instruments, which were actually deployed under the second contract.

39:16 And that specifically answers one of the many questions that have just come into the forum during the last thirty six minutes. The UK is a key market for NOVACYT and throughout the pandemic the NHS testing demand has remained a key priority for us. We're therefore delighted to announce this contract award as a testament to our continued commitment to The UK and the NHS. Unfortunately, we have no update on the dispute with the DHSC regarding the second supply contract. No further news since the disclosure in June this year. Both sides are bound by confidentiality and the clause of the contract. So there is no further clarity that we can give on the dispute at this time.

40:01 You very much, indeed, Thank you very much, sir. James perhaps the next thing is more relevant for you. It's around guidance and outlook. In the event you said you see no reason for the outlook for full year 2021 to change. What update can you provide on 2022? Thank you, Mark. Look, just to reiterate twenty twenty one first. As we've confirmed today, we are reiterating the GBP 100,000,000 revenue guidance for the full year, excluding DHSC. And I think we're feeling pretty confident about that number. I think as we mentioned, we see growing private testing market and we also expect overall demand to increase as we head into the winter with the potential for higher infection rates.

40:49 And I think it's too early to talk about 2022. I think as I mentioned in the presentation, COVID revenues won't be around forever. And I think our walking assumption is that they probably have a half life every year. But we still need to do more work and get a bit more certainty before we really can start talking about target for 2022. Okay? Thank Thank you, you, sir. Again, I think, James, potentially one for you here around the cash position. Given the cash position, do you expect to pay a dividend or undertake a share buyback in the short to medium term? Thank you, Mark. Yes. So look, if we take short to medium term, I think if you refer to our annual report, which we published recently, we confirmed or the Board confirmed we're not proposing to pay a dividend for the year 2020.

41:46 And the reason for that really is to continue to invest in R and D, manufacturing and the more commercial aspects of the business. Some of that hopefully you've seen in this presentation, some of the areas we're looking at to really try and build a post COVID business. So we feel there's still plenty of opportunities. This market is still emerging. So we think that's the priority for our cash. I mean, of course, we'll keep this under review. I mean, is something we would certainly review annually, if not more frequently than that. And a dividend policy would form part of a wider review of capital requirements, capital structure as the business moves forward. And of course, we will let shareholders know if we change policy on that.

42:33 Okay. Back to you, Mark. Thank you, James. I guess an interesting conversation here around communications with shareholders being the next kind of category of questions that we received during the event and before the event. Do you believe that NOVACYT communicates with its shareholders enough? And how can you improve this? Yes. Thank you, Mark. I'll take this one. Look, we understand that shareholders are eager to learn and understand more about NOVACYT's business and operations. But we also need to be cognizant of operating in the group's best commercial interests. This means that certain commercial information such as who we are working with in certain key markets may not be diverged for competitive reasons.

43:19 It also means as an example through most of last year, the company did not give many media interviews, although we were invited almost on a weekly basis at certain points during the year. And we deliberately kept an appropriate profile when working closely with government organizations, particularly here in The UK, but also with NGOs such as the UNICEF. Just to actually reflect on our communications to date, I mean last year we actually issued 62 material announcements and so far this year we've issued 21. So I believe that we work hard at communicating through the regulatory framework with our shareholder base. And I can assure you we take communication very seriously and we update the market and we'll continue to do so through the appropriate channels.

44:13 That's great. Thank you very much indeed. Moving on to the next theme, which talks around post COVID nineteen and your area of focus. You talk about your post COVID activities without specifying any specific disease areas you are looking at as crucial to your next generation of diagnostics. Can you update us, please, what disease areas and why chosen? Ajam, would you like to take this one? Sure. Yes. Thank you, Graham. So the areas we've chosen are infectious diseases, respiratory and transplant. And within these areas, we've targeted niches where we believe there is still very high unmet medical need.

45:02 So within these niches, we believe we can provide faster, more accurate or easier diagnosis and thereby provide better patient care. Within these areas of high unmet need, we have deep expertise and we believe our innovation can drive better diagnosis. We're going to focus on expanding our COVID-nineteen portfolio and maintaining an industry leading position, particularly focusing on the rapidly evolving variant market. We're also developing COVID plus assays in areas such as flu B, flu A and RSV. And then our post COVID-nineteen portfolio includes areas like sepsis and transplant, CMV, EBV, BKB.

45:54 This portfolio is continuing to support both large central labs and near patient testing. And thereby, I think we can continue to provide the broadest range of assays in the infectious disease, respiratory and transplant market. You very much indeed. Paul, I don't know if you'd Sorry, forgive me. Carry on. That's all right. I think Paul may like to add a little bit to that. Yes. Thanks, Ajaan. I just want to add a comment in relation to our platform strategies. And I think as we've mentioned a couple of times during the presentation, with the acquisition of ITIS, our company is now in a unique position to optimize development of complete system architecture for the various different applications that Ajane has mentioned and for different market segments.

47:01 We'll continue to leverage our capabilities and develop our platform strategy. And by doing this, we'll be able to optimize and control the full molecular workflow. And in doing that, we'll be able to deliver vastly improved workflow solutions, performance outcomes and clinical outcomes for our customers in both decentralized, centralized and inter patient testing settings. Settings. Thank you very much indeed, Paul. That's great. Moving on to the kind of next theme that we've put investors' questions in is around the distribution network. How does the distribution network work? NOVACYT S. A. Sales force seems very strong in The UK with heavy recruitment, but how big or effective are the distributors in the rest of the world?

47:54 Thank you, Mark. I'll I'll ask Guillermo to respond to this one. Sure. Thanks, Graham. As previously presented, we have a very well established distributor network of more than 400 distributors currently. And our distributor network is essential for our growth strategy going forward. The channel represented approx 35% of our business without the DHAC contract in the first half of the year, and its geographical distribution is also very well balanced with revenues in The Americas, including Latin America, of approximately 30% EMEA, which includes Europe, Middle East and Africa, with approximately 55% Therein, 25% is U. K. And Ireland.

48:48 And in Asia, we have 15% of our distributor business. The indirect sales channel is one of our key enabler for our global presence. Sales And if we look into our direct sales, it generated 65% of our revenues, again, without the DHAC contract in the first half of twenty twenty one. And as mentioned during my presentation, a well balanced sales channels mix will enable our future growth. Increasing our market access is a key pillar of our commercial strategy in increasing our share of wallet at our customer base and generate market share gains. That's great. Thank you very much indeed. Let's turn to kind of the next theme, which is really relating to around the progress you see outside of the molecular diagnostics, including, LFT.

49:39 What about your business outside of molecular diagnostics? What progress is being made with LFTS, and how much revenue do you have from LFT? How do you expect LFT to fit within the future COVID testing? What percentage are they likely to make up of sales mix? And do you think the technology receive more attention in the future? Quite a few questions for you there, but perhaps you could give some color on those. Yes. So Mark, we've, as you say, had quite a lot of questions around lateral flow. And I think I'll ask Paul, who is helping us with our LFT strategy to outline where we are. Yes. Thank you, Graham. So the first thing to say is that in the last few months, we've launched LSD tests for both COVID antigen and COVID antibody detection.

50:33 And these tests have been launched for professional use in the first instance. But we've already also, should I say, submitted data to regulatory authorities for patient self testing applications. And professional use and patient self testing applications are viewed slightly differently by the different regulatory bodies, but we're well progressed in the discussions on that second self testing application. I think in relation to sales, as of today, it's a little bit too soon after launch to give any specific data on sales. But I would just like to say that as far as The UK is concerned, there is an important consideration to be taken into account when we look at The UK market and that's regarding the government's freely distributing free of charge lateral flow tests. And so we need to get more of an understanding of when that will cease and what opportunities therein will be for us in The U. K.

51:46 Market. But notwithstanding The U. K, there remain significant opportunities in other non NHS sectors in The UK as well as opportunities outside of The UK. I'd also like to add that our COVID LSD portfolio also complements our existing pass flow portfolio of Lap and Flow devices. And as well as COVID, we've now got an extensive portfolio of lateral flow devices, which cover calprotecting, adenovirus, streptococcus as well as Legionnaire. That's great. Thank you very much indeed.

52:33 Turning really to merger and acquisitions, which was a pretty common theme. With M and A, could you outline what a good acquisition for NOVACYT would look like? And how would you finance it? Would it be from cash? Or would you need to raise capital? So I think this is a good question for James to respond to. Okay. Thanks, Graham. Look, I just maybe to think M and A doesn't really exist in isolation. M and A for me is always part of a strategy. It can't exist in a vacuum. And good M and A for me is one that accelerates our stated strategy. And as I think I might have mentioned earlier, we're really about we need capabilities to execute our strategy, whether that's across building a test menu or instrumentation or in fact going to new countries.

53:23 We need these capabilities. And if M and A can accelerate those, then that's a good acquisition, assuming a fair price, etcetera. I think it's also worth noting our M and A process. I mean the Diagnostics industry is very fragmented. I think COVID has massively accelerated the amount of innovation, startups, all sorts of different opportunities out there. And I think if we look at our capability and particularly in R and D and particularly what Eisen mentioned around clinical trials, I mean we've got capabilities to screen potential acquisitions much better than we've ever had before. And we really shouldn't underestimate the importance of that capability for a company like ours who look at lots of different opportunities.

54:10 And for financing, I think there's no hard and fast rule here. I think smaller acquisitions, the more bolt on type acquisitions, most likely to be from cash. Clearly, something larger or more strategic might require us to raise capital, whether that's equity or debt. So that's really how you should think about it. Okay? That's great. Thank you very much indeed. If we may move on to the next theme, really relating around the expansion of ProMate technology. How transferable is the ProMate technology? Can it be used to streamline other products and tests such as Winterplex? If so, are there any plans to do so with the existing test menu?

54:57 I'm afraid that's another one for you, Paul. Okay. Thanks, Greg. So first off, Mark, I'm making a presumption that that question refers to how transferable the ProMate technology is beyond COVID. And if that's the case, I just want to make sure that everybody understands that with PrOMADE, the company has established a really strong position in direct PCR sample processing. And that's taking an aliquot of the sample direct into PCR. And this processing lends itself well to a number of areas. You've already mentioned Winterplex. And one of the most interesting areas for the company is the application of the probe made technology in the respiratory disease area.

55:52 We think that by leveraging expertise, we'll develop molecular tests for respiratory diseases that are easy to use in different settings, will provide much faster time to result and allow much more streamlined testing workflows. And it's these streamlined and less complex workflows that will serve to significantly improve testing efficiencies in central, decentralized and near patient testing settings. So the short answer to your question Mark is, yes, we do believe the ProMate technology is transferable And we have targeted some specific areas to expand that ProMate technology into around respiratory.

56:41 That's great, Paul. Thank you very, very much indeed. Next theme is around your listing. Are there any plans to change your listing? Will you list in The U. S? Mark, I'll take that question and give a fairly succinct answer to this one. As of today, we have no plans to change our listings on Aim or Euronext. And just to remind everybody that two thirds of our shareholder base are actually based in France and the remaining one third broadly are based in The UK. So this actual dual strategy actually makes sense for the company today. You very much indeed. That's great. Yes, thank you so much. Turning really to the expansion in The U. S, can you advise on where we are with U. S. Expansion?

57:30 Yes. We appreciate there's lots and lots of questions around The U. S, particularly being the largest diagnostic market in the world today. But I'd like to remind everybody that we've only recently hired new senior management that have joined us in the last few months. So we are in the process of developing our plans as we speak. And hopefully, the near future, we will update all shareholders with those plans and perhaps at an event similar to the one that we're experiencing today. That's great. Thank you. There were a number of questions that were received regarding the rationale really behind the acquisition of ITIS. Please can you explain what the ITIS acquisition has done for NOVACYT?

58:19 Yes. I'll let James take that one. Thanks Graham. It became clear during the course of last year, the shift towards near patient testing. And this is really where instrumentation plays a role. So I think for NOVACYT to acquire ITIS, it's a very logical, if you like, marrying up of the reagent supplier and the instrument supplier. So this really enables us then to develop reagents alongside the instruments, securing key instrumentation IP and expands our capabilities in terms of product offerings. So really, really nice fit. And I think the company has done a super job integrating the acquisition into the broader company in a matter of months. So really great job there.

59:15 Thank you very much indeed. Obviously, we are coming up to the hour. And once again, may I thank on behalf of the company all the investors on this call. There are significant amount of investors on the call who have been generous in submitting their questions. Obviously, it's not a opportunity to answer every question. But perhaps and and I know investor feedback is important, Graham. But perhaps before we conclude today's session, the final question, theme of questions were all around business diversification. Does NOVACYT plan to move into providing a testing service like other manufacturers? Yes, very interesting question. Obviously, with COVID-nineteen testing, there have been a significant number of new service providers popping up all over the world, actually, not just here in The UK. And this is a question that's been asked of us many, many times.

1:00:10 The way I would respond to this is NOVACYT is a developer and manufacturer of diagnostic products. And we have no intention of expanding the business into testing services as well. The main reason for this is we are a pure play manufacturer, which means that we can be agnostic with a large number of direct customers that we engage with. If we actually had our own service in addition to the manufacturing as well, then we would actually be direct competitors with the very customers that we're trying to sign deals with at the moment. And that would create a huge conflict of interest. Some of you will be aware of the origins of the LAB21 model, which was actually all around testing services.

1:00:55 So this is a very conscious decision that the Board and the management have taken about the business today. Today. Great. Thank you very much indeed, Graham. And also thank you to the rest of the team also for addressing questions today. Of course, the company review all questions submitted by investors today, and we'll publish those answered on the Investor Meet company platform that are appropriate to do so. Graham, I do know that investor feedback is particularly important to you and the company. So perhaps before I redirect investors to provide you feedback, I could just hand back to you for a few closing comments. And as I say, I will then provide the investors the opportunity to let you know their thoughts and expectations. Yes. Yes. Thank you, Mark. Well, as I understand it, there are over 500 people that have dialed into this call, which is fantastic.

1:01:44 So it just really leaves me to say a really big thank you to all of those people that have taken the time to listen to us. I hope you found the information that we provided of interest. We're not able to answer, of course, every question, as you've already said, Mark, but we've done our best to actually pull these questions into certain themes. And I would like to suggest that this is an event that will also occur in the future too. So we'll do our best to learn from this event and we'll apply it to the future. So once again, thank you all for your time and for your attention today. That's great. Thank you very much indeed, Graham, and thank you once again for updating investors. Could I please ask investors not to close this session as you will now be automatically redirected for the opportunity to provide feedback in order that the company can better understand your views and expectations.

1:02:38 This will only take a few moments to complete, but I'm sure will be greatly valued by the company. On behalf of the management team of NOVACYT, we'd like to thank you for attending today's presentation. That concludes today's session, and good afternoon to you all.