Physiomics (LSE:PYC) — Final results for the year ended 30 June 2020

0:03 Good morning, ladies and gentlemen, and welcome to the PHYSIOMICS Final Results Investor Presentation. Throughout the 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 beneath and press send. If you are accessing this via mobile device, the question box will be underneath the presentation. 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 is

0:33 appropriate to do so. I'd also like to 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 Jim Millen, CEO of PHYSIOMICS. Good afternoon or good morning, sir. Thank you, Mark. Yes. My name is doctor Jim Millen. I'm CEO of PHYSIOMICS, and I'm gonna spend about twenty minutes giving you a a short presentation, which hopefully you can all see. And then we'll spend a little bit of time answering some of the questions that we've received and some others that will probably come in over the course of of of the next half an hour or so.

1:16 So just to remind everyone, I assume that that many of you are investors in the company, but but there may be some people out there who are less familiar with us. So PHYSIOMICS is essentially a a a scientific consultancy focused focused on cancer. So our key areas of competency are understanding the biology of cancer, understanding quantitative pharmacology. That's how much drug, you give someone, what effect it has, where it ends up in their body. Thirdly, the ability to understand where data comes from. So where is the useful data that can help give us the insights that we can then pass on to clients? And then fourthly and and finally, understanding how to manipulate that data in in smart ways to actually drive those insights.

2:06 In terms of the company's current business model, you know, it's mainly fee for service. And on the left hand side of this slide here, you'll you'll see, you know, a short reflection of of all of the activities that that that give us commercial revenue. So all of our, you know, fee our paying clients are are represented on the left hand side here through projects that we do with companies of varying sizes from from small startups right through to major pharmaceutical companies. And I have a slide. I think the next slide sets out some of the some of the companies that we've worked with both now and historically. What we do for clients rather depends on their size. So for the smaller clients, we can provide a a kind of a soup to nuts, outsourced quantitative pharmacology function That could involve identifying data, visualizing data, interpreting data, as well as modeling out that data in order to give useful insights.

3:08 We have importantly, we have, an in house technology platform that we call virtual tumor. This is a a computer based model of cancer that we can use to try and predict the response of various different types of cancer to, various interventions, usually combinations of drugs. On the other hand, on the other side of this slide here, we've got some other activities that are more, r and d r and d driven activities, in the personalized oncology space. So these activities have been funded, entirely through nondilutional grants so far. So we've had a couple of grants from Innovate UK, and one this year from NIHR, and I'll talk a little bit more about that later on.

3:54 But this activity is, is directed at developing software tools to help doctors make smarter decisions about how much drug to give to patients in order to optimize, the outcome of their cancer.

4:11 In terms of, the companies that we're working with currently and those that we've worked with historically, you can see some examples here. On the top, big pharma companies, current clients include, the German Merck. That's the Merck Serrano. It used to be called Merck Serrano based in Darmstadt. And then recently, we were very pleased to announce the addition of Astellas Pharma Inc as a a further large pharmaceutical client. In addition, however, we have a number of undisclosed clients, and we have clients that are more small to medium sized biotechs. Examples in the latter category include, CellCentric, which is a up and coming, UK based company developing a first in class prostate cancer drug.

4:59 And then Bicycle Therapeutics, perhaps more in the midsize space, is a UK and now US also based company that I believe floated on Nasdaq last year and with whom we now have a pretty deep relationship, deep and ongoing. In addition to these commercial clients, we also do quite a bit of grant funded and academic collaboration work. Although we're working remotely at the moment due to COVID, normally, our offices are on the outskirts of Oxford, and we maintain very close links with the university and the the hospital there, and, in particular, with their oncology research departments.

5:42 The sorts of questions that we're helping clients typically to to answer are are these or or these are amongst those questions at least. So as I'm sure you all appreciate, you know, the challenge with cancer drugs is that they, they can cure, but they also have nasty side effects. And finding, the right balance of efficacy and toxicity is is one of the key challenges, for most companies that are developing drugs in this therapy area. And one of, the primary uses of of, the modeling, out of the consultancy that we do is to help advise companies, you know, where their therapeutic window is. So how much drug to give, how often, which drug, and for which condition, in order to, optimize that, that balance of efficacy and toxicity.

6:31 I won't read all of these bullets out, but, you know, you can see that there's a variety of activities that we support clients with. I guess one point I would like to make in particular is that we're doing a lot more work in the in the translational space and in the clinical space than we were a couple of years ago. What do I mean by that? So as most of you appreciate, I'm sure when drugs are are are developed, they start off in a in a research phase. They move on to preclinical experiments, usually in mice or rats. And then once they're proven to be safe and and and effective in animals, then you move on to human beings. And that that jump from animals to humans is called the the translational step. And, you know, that that is brought with challenges and difficulties.

7:19 And and one of the the ways in which we can genuinely add value and support clients is in helping them to, take that step, as safely and effectively as possible. So coming on to the highlights of numbers that were released, just last week, I I won't spend too long on these. You've all seen them already. I'm sure you've all had a chance to direct digest them. I'll just pick off some of the highlights here. So total income top line increased 7% to just over 840,000. That is our highest ever revenue as a company, of which, you know, I'm obviously very proud. Our losses further narrowed to, you know, to to just over £60,000 post tax, including r and d tax credits.

8:13 And, obviously, you know, our our goal for the next financial year is is to to to turn that around and and be breakeven and and profitable whilst at the same time, not wanting to scrimp on on making, you know, appropriate value generating investments. As you also know, we concluded a very successful placing in May of this year. It was significantly oversubscribed, actually, and we've raised just under £830,000 gross, at an issue price of 3.5p per share. Just to remind you all what we said we would do with that money, one thing was to further invest in our personalized medicine initiative. The second thing was to, expand the team to cope with the higher workload that we're currently experiencing and that we anticipate going forwards.

9:06 And the third thing was to increase our our marketing effort, which is primarily through collaboration with external third party marketing agencies at this point, in order to generate more leads and to to build out our pipeline. And, again, I'll I'll be talking a little bit more about that presently. At the end of the year, the surplus of shareholders' funds was over £1,300,000, you know, obviously, as a result of of the placing and of careful cash management over the course of the year.

9:41 Operational highlights. So, you know, we have a long standing agreement with Merck KGAA, which we first announced, I think, in December 2000 and, '17. We're now in our third or or fourth year of that even, and that that continues very successfully, I'm pleased to say. In addition, we've grown our pipeline, but not only grown our pipeline of clients, but also got a lot of repeat business. So I think we're now on our fifth project, for example, with Bicycle Therapeutics, who are fast becoming a, you know, a a really important client of ours. But most of the clients that we've taken on in the last couple of years have come back to us for for repeat business, which is which is fantastic.

10:32 I mentioned that in March, we were awarded an an IHR grant, that's National Institute of Health Research, to further fund activities connected with our personalized dosing tool, with our personalized medicine initiative. And, again, I'll speak a little bit more about that in a couple of slides' time. I've mentioned the award of the Astellas contract already. We are in ongoing discussion with a number of other service providers around possible collaborations. I won't be able to say a lot more about that at the moment, but, you know, that's one of a number of areas that we're exploring where we believe that we can accelerate growth other than by, you know, organic growth of the consulting business. And then just finally on this slide, you know, we we do now have our strongest ever business development pipeline as a result of of investment in marketing, which started prior to the placing in May.

11:29 So, you know, we we started making a higher investment in marketing in 2019, continued that in in q one this year, but have now accelerated that further as a result of the, you know, the financial flexibility that that the PYC has given us.

11:49 So here's just a simple visualization of the last four financial years. These are basically the years since I took over the stewardship of the company, and the trend is pretty clear, you know, increasing top line, significantly increasing top line, and and declining losses.

12:10 So just a couple of words as I promised about how we're planning to evolve our business model over time. Obviously, we're we're we're doing all of the things you would expect any consultant based business to to do. So we've, as I've mentioned already, increased our marketing spend to generate more leads. We're driving a higher level of repeat business. We're moving our clients up the value chain from, you know, early adopters through to champions such as Merck. We're we're diversifying in terms of the phases of r and d that we work in and in terms of the geographical location of our clients. So we're we're doing all of that. You can you can take that as ready. In addition, however, you know, there are a couple of other things that we're exploring in parallel that that could take the business that could help us accelerate the growth in our business.

13:01 The first of these I've mentioned already, which is a possible collaboration with a broader based service provider. Obviously, we're very proud, and, really, it's our it's our unique selling point that we focus exclusively on cancer, and exclusive exclusively on on modeling and quantitative pharmacology. However, we that there may be an opportunity to apply that expertise in the context of a of a broader based offering with another company, and and so we have a couple of discussion discussions ongoing of that nature. The second thing is whether or not we may possibly be able to license the virtual tumor platform. Again, just to be very clear, at the moment, that technology platform is a tool that we use in house. It's not something that we we sell as a package to clients.

13:49 What we're selling to clients is consultancy often using this tool in order to drive insights that are really helpful for them. However, some clients, especially our larger clients, have from time to time expressed interest in, potentially, you know, licensing that platform, and bringing it in house so that their own employees can use it. And that's something that, you know, we are taking a look at at the moment. The final thing, and, you know, there've been a lot of questions on this is is whether or not, you know, we can do more success based, deals. And and, of course, you know, we're always on the lookout for creative ways to engage with with our client base, over and beyond, you know, simple fee for service arrangements.

14:36 You know, there's a couple of historical examples there, you know, Ceramic one, Vallrex being the other. I think there are some questions on Vallrex, so I'll I'll hold that until a little later on. So, again, I I promise to say a few words about what we're doing in the personalized oncology space. The drivers for this are are clear. Oncology drug drugs cost, you know, vast amounts of money, especially in The US where they're two or three times more expensive than they are even in The UK. There are huge cost cost pressures in in all health systems in the world. And so there's a real drive to want to get more bang for your buck out of the drugs that are being used.

15:23 Our idea was to create a tool that could help optimize the use of certain forms of chemotherapy in certain cancers. We chose a particular combination, which is docetaxel in prostate cancer as our sort of proof of concept for the tool, but there is a broader applicability of this technology to, you know, to other drugs and and and other cancer types. And the idea of this tool is that it helps provide decision support for treating oncologists as to what the right dose of a drug is for individual patients. To date, we've had two Innovate UK grants. There's a little typo there that should say 2016 and 2018, I believe. And then we've had the NIHR grant just this year that I mentioned already.

16:15 So that NIHR grant is being used to fund a a clinical trial down in Portsmouth. It's an observational clinical trial, designed to gather data, which will be used to to further validate and develop the tool. This trial, was due to start in summer. We're now hoping that it will start in q four this year. If we can get away with a one quarter delay after all of the the COVID related holdups that there have been, then then we'll consider that a job well done. We will keep the market updated as and when we have more news on that front. And in parallel with that, however, you know, we are having a number of discussions in The US with organizations which already commercialized personalized dosing software.

17:06 And, you know, we're looking to see whether or not there's a possibility that we could we could accelerate the commercialization of of the software platform in The US. We don't know yet whether or not that would be possible. And, again, we will update the market as and when we have some, you know, something definitive to say about that. I will just pause at this point because I don't have a car a a slide dedicated to COVID, but I I will just say that that for us, COVID has has, touch wood, not presented too many challenges so far. So much of our

17:39 client interaction historically has always been via via Zoom, Webex type calls, so remote interaction. We do not need to travel to client sites in order to do our work. And, also, many of the employees of PHYSIOMICS have historically worked flexibly to some extent. Therefore, you know, moving to remote working and servicing clients, you know, without seeing them face to face has not been a problem for us. And in fact, I would say, almost paradoxically, one benefit of COVID in in terms of business development has been that, you know, that people are spending more time at home and less time on planes. So some of the people who I think we would have struggled to get hold of because they were in meetings or or traveling around the world are now of necessity, restricted in in their movements.

18:31 I think that's also in addition to the marketing effort I mentioned already, one of the factors that that has led to us having a a very deep business development pipeline right now.

18:47 So I think this is my last slide, and it's really just a summary slide. You know, the the strategy is is a combination of all the things I've mentioned already. So organic growth of the consulting business, getting more business from existing customers, getting existing customers moved up the value chain, and attracting new customers. You know, we're we're doing all of those things, of course, whilst simultaneously broadening our our geographical presence, and diversifying our customer base. We're also driving up the value chain from, earlier preclinical stage projects to higher value clinical stage projects, and and and that's an ongoing shift that that's really happened over the last three or four years and and will continue.

19:35 And then finally, in addition to,

19:40 the core business, we're also pushing out in other areas such as immuno oncology and personalized medicine as we think that, you know, these have real long long term potential to to add value to the business. Fantastic. So I think that is my last slide. Mark, I think we had a few questions. We did indeed. And I'm happy to to try and address some of those now plus any that that that may have come up over the course of the last half an hour or so. That's brilliant. Thank you very much. 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 we take a few moments to review the questions that have come in ahead of the pre submitted questions as well, 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.

20:30 I'd also like to remind you that 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

20:42 Many thanks for that, Jim. And obviously, the pre submitted questions, if I could start with, and then we'll move on, as you say, those that come in during the live event. The first question received was, earlier this year, you mentioned that the prostate cancer decision tool was to be tested at PTTU and that due to COVID-nineteen, the trial had been suspended. Have the Board got a further update on this? If and when the trials start, will the trial still be for the original twelve months?

21:11 Yes. So I think I may have covered this to some extent already. The trial wasn't suspended so that the trial had not yet been approved at the time when the COVID lockdown happened. And in a way, that was beneficial to us because we didn't face the disruption of having to stop a trial and restart it again. What it has meant is that the approval of that trial to start, which was expected to be, in the summer, has now been pushed back to to q four this year. But we are in the in the very late stages of getting that done. And as and when we have more news on that front, then we will we will announce it via RNNs. So I think, I think that's the answer to that question. Thank you. Next question. At the time of writing, VAL-two zero one results have not been released by ValyriX.

21:58 We know that an RNS from 2011 saying that PHYSIOMICS won't receive a fee for the work it carries out, but will instead be handed a percentage of any licensing income from the compound, which is being developed to combat prostate cancer. That decision appears to be a master stroke

22:13 now. Does the Board expect to do other deals like this? Or do they expect a fee for companies using their IP? Yes. So, I mean, as I think I've made clear, our business is primarily fee for service. But, again, as I hope I've made clear, you know, we are continually continually looking for creative ways to engage with our clients, and they, you know, potentially may include value sharing agreements. We have to look at each potential opportunity on on a case by case basis. So, yep, we're always on the lookout for ways to to add more value to the company and to add value for shareholders. Thank you. In the r and s about Asteris contract, PHYSIOMICS mentioned that a small cap institutional fund had taken some of the raise.

23:00 Is the fund, please?

23:02 Yes. So I I did get asked this question immediately after the placing. I apologize that we were not able to disclose that at the time, but that fund is Canaccord. So we we have now got sort their their, their permission to disclose that. So that fund is Canaccord. That's very kind. Thank you. About scalability a question about scalability. How scalable is the company's business model? I know you've touched on it, but perhaps you could, expand a bit further. Yeah. Sure. Well, I mean, I I would really just, point people back to, you know, this slide that I showed earlier, which is from, a base of employees that that has increased only very slightly over the last three years. You know, we've increased revenues by, you know, over three times.

23:50 So I think the the the business is certainly scalable. You know, the the question is which is the, the optimal way to do that?

24:00 And, again, I think I have covered this, but it will be a combination of of traditional methods of increasing the size of of consulting businesses together with any sort of breakout opportunities that we can create through those various other paths that I set out a little bit earlier. Thank you very much. In the final results on the September 30, you mentioned about getting a foothold in Japan due to the Astellas deal. However, as far as I can see, Astellas have not mentioned this deal or PHYSIOMICS in any way. So how can you capitalize on this? Yes. I mean, it it it wouldn't be it's not unusual for very, very large companies not to talk about business they do with with with small companies. So I wouldn't read anything into that at all, anything negative into that at all.

24:46 But what I was extremely pleased about was the fact that Astellas were willing to have us, you know, use their name in in public, soon after having signed the agreement.

24:58 And just as when we signed the deal with Merck, the first big deal with Merck, three years ago now, I think that external validation is absolutely critical in helping us to attract and retain new clients. Certainly, it helped after the Merck deal. And I think the fact that we're working with Astellas in the field of immuno oncology, will be, you know, significant asset for us as we, continue to expand our marketing effort going forwards. Thank you very much. Doctor Miller has said that a new blog on precision personalized medicine is due. Are there any time scales for this to be published?

25:38 So we will try and get that out before the end of the year. And and, you know, because of COVID related events, we've we've been a little bit distracted. So I'm conscious that we started as what was meant to be a series of blogs in q one this year, and, you know, it it it has been a little bit on the back burner, but we are still planning to to continue that series. Did you have other questions, Mark?

26:09 Yep. My apologies. The next question, I guess, is somewhat kind of in line with the scalable question that you asked about the business model. But could you give us some guidance on the potential size of the market opportunity available to you and the industry growth drivers? Yeah. That that's a trickier one to answer. Mean, the size of the market is potentially enormous. You know, the the the growth drivers are, you know, increasing computing power, increasing understanding of how cancer works, you know, increasing use and recognition of the value of, you know, quote, unquote, AI techniques, including things like machine learning that have actually been used for for many, many decades and and are certainly amongst the tools that we

26:57 have at our disposal. So, you know, I think we are well positioned at the center of a of a number of things that are changing in the industry at the moment. And although it you know, I won't try and quantify it at this point. I think there's significant potential for for growth in in what is an enormous market. It's very kind. Thank you. Could you characterize the competitive landscape for us? Where do you stand in relation to companies like Simulations and Schrodinger? Yeah. So, I mean, I we are somewhat more more specialist in the you know, we focus more or less exclusively on on cancer, and, you know, we've some we focus more or less exclusively on quantitative pharmacology.

27:46 So, you know, that is both a unique selling point for us, but also, you know, I guess, means that that we are we're niche.

27:56 Now at the moment, we're taking full advantage of that fact because clients like a company which is focused and which has deep expertise in very specific areas. But one of the ways in which I think we can expand further, as I've mentioned a couple of times during my presentation, is to look at tie ups with broader based companies. And so, you know, I can't say which ones, but we are talking to a variety of companies that have, you know, a broader base capability in order that we can look to see whether our capabilities would be synergistic with theirs. Thank you. A question here around the personal dosing tool. Is the strategy now only to use it as a dosing tool for this or other medication stroke indications?

28:42 The original idea seemed to be more universal than encompassing cancer decision support system. Has there been an evolution of the product strategy? So the the the tool has always been focused on the personalization of dosing. You know, it is a decision support tool in that, you know, the idea is ultimately, if it if it has the appropriate approvals, it could be a computer program that resides on the Internet or on a, you know, laptop or or a tablet accessible to the doctor at the point when they're making a a prescribing decision.

29:18 And given certain information about individual patients, the two would provide the doctor with with a range of possible outcomes of that prescribing decision that would enable the doctor to be better informed in in making that decision. So it's not a tool that tells the doctor what to do. It would be a tool that that provides additional information and context for the doctor to help them actually make decisions that will provide, hopefully, better outcomes for for specific individual patients. As to its applicability, I think I already mentioned mentioned that although we're starting off with docetaxel in prostate cancer, we do believe that the personalized dosing could be extended to, other, treatments and to other cancers also.

30:10 That's great. Thank you very much. You've talked about bringing on a commercial partner for precision, dosing and possibility such a partner being in The US. Given potentially different drivers to the two sides of the business, do you envisage, at some point, personalized oncology being split off in some way via a demerger or JV? That strategy worked exceedingly well in terms of creating shareholder value for the likes of EKF Diagnostics and Renalytics. I think it it's very early to to answer a question like that, you know, in any sort of a meaningful way. I guess the answer is, you know, we're always open minded, and we're always exploring ways in which the PHYSIOMICS business model and structure could be evolved to optimize value.

30:55 But, you know, we're very pragmatic people, and and, you know, we have our sites very firmly fixed on on the first step, which is to get people excited about this personalized dosing tool to generate evidence to support its commercial potential. And then after that, you know, we might think about, you know, how best to structure the organization to take advantage of that, but but one step at a time. It's very kind. Thank you. I guess I've got a question over engagement here. I welcome your use of the investor meet company platform to communicate with private investors. How is your engagement building with private investors, particularly in this current environment? With private investors, I'm not quite sure what we mean by private investors here if I'm if I'm absolutely honest.

31:45 I I you know, in terms of retail, this will be the first time that we've used investment in company, and we'll get some feedback hopefully after this presentation. So we'll see whether you guys, value it or not. If you do, then we consider doing it again. Other than that, I'm mostly meeting with, you know, with with with professional investors, I have to say. But I'm always very mindful of of of the small the smaller investor that represents the majority of our shareholder base. I always try and treat them with respect. If people send me or ask me reasonable questions, you know, politely worded, then I'll try and respond. And so yeah. I mean, I just like to say that I very much appreciate the support that small investors given this company, since the time that I took over as CEO.

32:38 That's very good. I've actually just realized in in the I'll move on to these, these, couple of the q and a questions that have been given. Oh, that's brilliant. Thank you. Yeah. Course of the, the the the presentation here. So we've got a question about r and d tax credits. Can I ask if the company has benefited significantly from r and d tax credits this reporting year? I think the answer is yes. I I I am ashamed, so I do not have the figure to hand. But, you know, in the appendix to this presentation as well as in the full figures that were released last week, you will find a line in our p and l that relates specifically to r and d tax credits. Obviously, the more profit closer we get to profitability and the more profitable we become, the smaller the tax credit will be. But historically, yes, you know, we we've certainly benefited, and and we are very careful every year to to optimize our our tax credit claim. As with many small r and d based companies, it represents, you know, an important component of of our p and l.

33:39 Another question here, do I foresee any direct COVID nineteen related work? So some of the because there's some overlap between some approaches to treatment of cancer and some approaches to treatment of of COVID, some of the companies that we work with, you know, are also involved in COVID. We do not currently have plans to to start doing modeling work in in the COVID space. You know, as I've, I think, reiterated a number of times over the course of this presentation, Our our expertise, our deep expertise, and what clients really value is the fact that we we know we are really excellent at cancer. So I think at least for the time being, that will be our our our main focus. I have another question here. How's the landscape in your industry for m and a, and what sort of company might tempt you to make an offer both in consultancy and personalized medicine?

34:36 So there seems to be quite an active landscape for m and a in in in this space at the moment, but it's it's mainly bigger companies buying, you know, smaller companies our size rather than the other way around. I think the intent of that question was might we buy something? And, yeah, I I guess the answer is, you know, never say never. If there was something that was highly complementary in terms of technology or focus, then we might look at that. You know, the the that's not an active search for us at the moment. On the other hand, looking at it the other way around, you know, there have been a number of modeling companies that that have been acquired by other modeling companies or bigger companies over the course of this year. That's something that we keep an eye on. But, again, you know, it's it's it's not something that I can predict or or really comment on.

35:26 My 100% focus is on growing the top line and and the bottom line of this company to to create as much value for possible as possible for shareholders. Okay. Look. I I think that is probably gonna be it for now, Mark. So most definitely thank you for that, Jim. I think you've taken most of the questions that have been submitted both pre and during the event itself. Perhaps as before we we wrap up and ask investors to provide feedback, if I just hand back to you for your final comments, that'd be great. Yes. Well, look. I mean, it's been a pleasure talking to smaller investors directly. Please do complete the survey that you'll receive sent to you by investor meet company. It will be helpful to understand whether you find this sort of session useful.

36:16 Apologies that I haven't been able to get to all of your questions. If there are some that I've missed and we think we can answer them, then, we will do so and publish that as a q and a on our website. I believe, Mark, that the actual recording of, this presentation and the answers to the questions will be available on the IMC website. That's correct, sir. That's absolutely correct. Yes. Well, thank you very much indeed for that. That's great. Thank you once again. Could I please ask investors not to close the session? As Jim said, we will now pass you through to a feedback form where you can give your company your feedback. That would be greatly appreciated if you could do that. Once again, thank you for that. On behalf of PHYSIOMICS, thank you very much indeed for attending today's presentation. That will now conclude today's session. Good morning to you all.