Verici DX (LSE:VRCI) — Half Year Results

0:00 Good afternoon, ladies and gentlemen, and welcome to the VERICI DX PLC Half Year Results Investor Presentation. Throughout this presentation, investors will be in listen only mode. Questions are encouraged and can 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 and press send. The company may not be in a position to answer every question it receives during the meeting itself. However, the company will review all questions submitted today and publish responses where it's appropriate to do so. These will be available via your investor me company dashboard, and we will notify you by email when

0:31 these are ready for your review. I would also like to remind you that this presentation is being recorded. Before we begin, I'd like to submit this following poll. And now I'd like to hand you over to Sarah Barrington, CEO, and David Anderson, CFO. Good afternoon to you. Good afternoon. Thanks for hosting. And then, obviously, I'm gonna slide walk through the slide deck today. You know, I'll be testing everybody on the small print, so I'll disclaimer. But let's get into the meat of the presentation. For some of you, this will be a little bit of repetition, but I thought it would be helpful if we did a quick recap, on who we are and what we do, and then we'll get into the results itself.

1:20 So we call ourselves an immunodiagnostic company. We are focused on transplant care, and the first area of focus is kidney. The reason for that is kidney disease is a, huge problem. It's a little bit of the poor relative, to oncology, but I think it's emerging as, an area of, prime importance. You can see why with those stats from the WHO of five to ten million people dying annually from kidney disease, it fast surpasses even the leading cause of cancer death. We operate in the transplant area, so we're at the tail end of the process.

2:05 Hopefully, more optimistic end as people get transplants as treatment and a new lease of life, especially when you look at dialysis issues. There are about three hundred thousand, people globally waiting for a transplant. Only about a third of those, get get, transplanted in a year. There is a supply issue, and part of the push on that is to encourage living donations. Donors, that are living are encouraged, to do so, because you can operate on one kidney. And the survival rates and the success rates from living rather than cadavers, is is higher. But to do so, they need to be encouraged that obviously transplants will be successful.

2:56 And and this is where we come in with our diagnostics assisting on the transplant journey, to to increase patient outcomes and success of those transplants. We have, three initial products. One is pretransplant, that's called Clorava. The other one is for early stage, that's Tutiva. They're currently in validation studies right now, and they are due to, be completed at the end of the year. Longer term, we have Protaga that's, long term survival. It addresses, fibrosis, which is, later stage damage, and that will remain in the clinic for another couple of years. We have licensed out of Mount Sinai, the underlying technology, and it's a it's a fairly novel approach to this area. It uses RNA signatures, to determine. And why do we do that?

3:50 Well, it's RNA is way more dynamic than genes, that tend to be set in stone. RNA is about change and real time information. And the signatures, you know, although primarily are focused on the immuno, system for the for the body, also recognizes there are other other biological pathways that are also, important. Not only does the graft suffer damage, but you wanna know how the patient is being able to, cope with that. This is not just a patient outcome. Obviously, that's the most important that the graft survival, but that does have a health economic aspect to it. And that's really important as we come to look at our commercial strategy.

4:43 Just a reminder on the board, there has been a change. Our founder this year, Barbara Murphy, unfortunately passed away, and she had selected a long term collaborator to kinda step into her shoes when she was sick. This is Lorenzo Gallon. He's out of Northwestern, long term collaborator, very familiar with technology, a leading and well known researcher and clinician, and a great addition to our board. The advisory board remains the same, know, all very, very well known, very active. You can see, there are six past presidents of all the major foundations and professional associations.

5:30 It's a little bit of the who's who. And obviously, know, are now sort of doubling down with their support to us in the absence of Barbara. There's a huge enthusiasm for getting this kind of approach more readily, adopted in the marketplace, both in research and commercial acceptance of the products that we're launching. For those that, just need a refresher on the issues, it boils down to, the clinician having a therapeutic dilemma. They're playing a balancing act. When you come to put a graft in, you've really got the administration of, immunosuppressants as your main tool in the care pathway, but they're flying blind. They've got to do this balancing. If you give too much of, of the drug, you're suspending the entire immune system, and too much too long means that you're opening up the patient to underlying conditions such as, cancer or passing, infections.

6:33 And of obviously, in the world of COVID, this becomes even more significant as an issue. Too little, then obviously the immune system can, you know, can attach the graft. They don't have very good information pre transplant. There's any clinical factors. There are way too broad. They're generally ignored. And post, post, transplant, there are tests on the marketplace, but they're highly, nonspecific. So they can say a measure that there's something going on. So it measures cell free DNA, that's the debris in the blood from some kind of infection, but they can't actually be specific and say this is happening now and it's happening in the graft. And so it's useful information, but not as useful, as our as our information.

7:19 Two leading products, and again, that we'll be looking at the commercial launch next year. The pretransplant is with Carava. It's a gene, it's an RNA signature that provides a risk score. So it's very focused on the patient, the recipient of the graft, and it will give a very simple but highly, significant result. Is that patient's immune system aggressive or fairly benign? If you've got an aggressive immune system, you know that you're going to need to keep that dosing high and for longer. If it's fairly benign, you have more confidence that you can taper off that dosing without you know managing that through you know looking to see if there's damage. So it gives the clinician very valuable information about how they're going to you know set up and personalize that care pathway for that patient.

8:17 Tutiva is the early stage. And again, what this is doing, it's a signature that is looking and giving the clinician real time information. Is there damage happening? Is it in the graft and not a passing infection? And if so, what it also takes a, you know, pathways such as cell repair, metabolism, etcetera. How well is the body coping with it? So the the result is that actionable information, highly significant. Just a quick note to the market size, the general message is it's big and it's growing. We've calculated on these two leading products as our most, you know, near term addressable market. It's about 700,000,000 per annum, but obviously that doesn't account for the substantial growth that's happening in kidney disease, mainly because we know it's being compounded at the moment with COVID and we need to kind of get an assessment of that to understand how much kidney disease has been promoted also with the COVID issues and complications.

9:24 So let's get on to, that's a, you know, hopefully enough of a refresher, you know, of who we are. Our performance of our of our, test was high, very actionable, very much focused on PPV, which is, you know, what's happening clinically, how relevant is it, can I take action on it? That was in the pilot. We're now into a multicenter, international blinded validation study. And in the period, we were able to bring on five leading US centers for for those lead products. And and you'll see that after the period, we're now up to 12, and that covers Europe as well. We did take an additional license post IPO for that Protaga product.

10:15 We had some, you know, patent protection around fibrosis, but it wasn't as on point as the one we wanted here and we licensed that in January. So and put that straight into the, into the validation study, and that's something that will come out of, you know, in the next few years. Obviously with COVID there's always a risk of your patient encrawl and bringing on centers. There's lots of destruction in the marketplace. So we were delighted to announce, this about the c top trial. That was a trial that had been done over multiple centers over a few years. It's the c top 19 clinical trials in organ transplant. It seeks to look at the impact of of of drug therapies, amongst other things.

11:03 But the agreement with them, which was to help them with the processing of their study gave us access to the control group, which was hit all the, you know, the the criteria for our trial and therefore gave us some protection in our patient accrual. And we also decided to accelerate our commercial path by opening a lab in the Palmetto region for reimbursement, that's Tennessee, and appointing someone to manage the opening of that in the regulatory pathway for that clear approval. And that's, know, that was a full year ahead of time. At the end of the year, the period, sorry, the half year, keep saying year, it's a half year.

11:51 We had a loss that was under budget and David will cover that later on, but we also had a very strong cash balance.

12:01 Just looking, in the period after the half year and to date, we did actually get our clear approval a year early. So I'm delighted to announce that. That enables our commercial plans to be a little bit more certain, a little bit more in our control. Whenever we're ready to launch post clinical validation, we already have that in place. We are allowed to launch those tests. So that approval was extremely good news for us. The presentation says 11 sites. We've just opened another one that is now 12 sites. These are leading. We are in The US where we've got two in Italy, one in Spain, one in France.

12:46 And we're looking to The UK sites to open shortly. We did complete our patient enrollment for the first two leading tests. As I said, there were three in the trial. The first two have been enrolled now. We did that early, that was tremendous news as we are in COVID times and a lot of trials were delayed or had slow enrollment. So we were very proud of our centers for being fast on you know, onboarding and also very focused on their patient enrollment. We do need to wait to the endpoints and that will be at the end of the year. So looking forward, when you look at our milestones, we are looking to be able to analyze all of that data and publish, you know, submit for publication and you know, give the performance metrics at the end of q one of next year.

13:42 These are our milestones. So what I've done here is I've taken something that we issued at IPO. You know, obviously shown in gray that we've completed those that we have completed early. You know, the point of this is to say anything within our control, we are trying to deliver early so that we can support anything that's outside of our control, those milestones being on time. And that is the overall message, from us at the moment is that we are on track. Looking forward to next year, coming out of the r and d phase for those two lead products and into laying down the foundations and commercially launching. That's the activity of next year and you'll see more announcements on that as we go forward.

14:36 David, can I just hand over to you to do the financial pages? Sure. Thank you, Sarah. Good afternoon, everybody. So our reported loss for the period of 2,900,000, but an adjusted EBITDA loss of 2.5 is I mentioned earlier, that was slightly below our expectations. And if I can use the analogy that was we we spent a bit longer on the runway, but since take off for Ascent has been slightly steeper.

15:05 In terms of that adjusted EBITDA of 2.5, just under 800,000 on employee costs, at the end of the period, we had eight full time employees, currently got 10 full time employees. The laboratory development cost, that's the cost of the trials to date. That does not include any labor cost. That is pure external cost and professional cost and and other cost. The biggest item in the other cost is the rent that we pay on our lab in New York and in Tennessee. Just moving over to oh, excuse me. Sorry. We're we're competing for the slides. I will take control. There we go. Thank you. So balance sheets are intangible assets as the license cost. We do not capitalize any development cost in that. That is just the pure cost of the licenses and the related fees in maintenance and and improvement.

16:04 Cash, as Sarah mentioned also earlier, that's that's that's a bit more positive than we're expecting, but it goes back to my earlier comment that we took a bit longer to to take off, if you will. And so the other debtors and other liabilities, that's principally prepayments and accruals mainly, accruals for clinical trials. And then just in terms of the share capital, just a point to note that the options outstanding of $1,440,500,000 of which 10.6 have fully invested. Moving on to the cash flows. So cash used in operations, 2,800,000 being the 2.5 referred to earlier and about 300,000 of working capital movement.

16:50 Post of tangibles, biggest spend there was on a net gens a net sequencer. And then the intangible assets is the costs of the ongoing work on patents. Bit of a foreign exchange bump because of the strength of dollar strength of sterling is the dollar, giving us an ending balance of about 14,500,000. Thank you, Sarah. Back to you. Thank you. And then as we just look at summarizing our philosophy as a diagnostic company, just before we go into q and a. Just a reminder that, you know, with diagnostic companies, the days of just having good science and presenting it to the market and hoping that it would be sufficient are long gone. You really do need to start there and we do have very clearly differentiated technology.

17:46 And when we talk about the commercial strategy, I will come back to that. You know, we have something that's useful. It does improve, patient outcomes. It really does inform the therapeutic protocol, and we are seeing, you know, a very strong response to the so what question. You never do anything alone. We do have some very key partnerships, and we are expanding upon that. And you'll see more news on that as, you know, towards the end of the year. And, obviously, we do have an efficient path on the regulatory, you know, the clearance already done on the clear. We don't need FDA. We can choose to go down that route to a later stage. There are a number of advantages or potential advantages, but as we all know, the FDA is a little bit overstretched with COVID at the moment. And so being able to go down this pathway of an LDT is enormously helpful.

18:40 The good news for us is when we opened up our lab in the Tennessee region, being in the Palmetto region for reimbursement for Medicare, It was proven to be a very good choice. In April of this year, they gave what they call a local coverage determination. This is a precursor decision. We do not have to go and prove to this region that it's a useful test for the Tutiva. They've already predetermined that this area is useful and any diagnostic that replaces a biopsy will be covered already. So that was a huge bump in our, you know, accelerated path there and obviously a reduction in future costs. So that choice of opening up in that region was well supported by that determination earlier this year.

19:31 And we clearly have a competitive advantage. Our science and our approach means that we've got real time and actionable useful information in an environment that is looking to to have more personalized information for the patients. So I'm just gonna stop it there in the summary so that we can get into q and a.

19:59 And maybe I can just, jump straight into the questions. So, I have a question. Can you elaborate further on the commercial opportunities? So one of the things that, I'm very pleased about in this area is that when we come and we turn out of being an r and d company, into a commercial operation, we are not having to do a huge sales force. There are about between two hundred and thirty and two hundred and fifty transplant centers in The, US and that's mirrored about in the EU, which means that when we come to launch this, these products, we are talking to transplant centers, and therefore it's much more of a business to business. We need a highly developed team that can go in and present to the c suite, not only the clinical and patient outcomes, but also the the health economics and the commercial advantages to the transplant centers for adopting this technology.

21:02 So first of all, you know, it's much more of a targeted play. Secondly, our major competitor in The US is a company called CareDx. I'm sure you're all familiar with them. They did the heavy lift from transplant care from tissue into blood. And they are very well aware that our science is very solid and is competitive to them. But, you know, we have an opportunity to capitalize on the hard work that they have done, is moving the interest into blood by coming along with just a better test. So in terms of the commercial opportunities, we look very early next year into utility studies and early opportunities with from the early adopters, you know, sites and folks that have been following us for a number of years.

21:56 And then we'll build upon that to a much more kind of mature commercial, strategy, after that. Did you see your future growth coming through organic means or do you see m and a paying any part? The the honest answer is a bit of both, and both are strengthened by, by a strategy in each area. So, obviously, we will be building up our presence and going to the transplant centers ourselves. But there are opportunities to collaborate, with others to accelerate that. And there are also opportunities to to look down the m and a pathway both as a target and as an acquirer.

22:47 Part of our strategy is to become, the clinician's platform of choice. And to do that, it's not just our technologies we're looking at, but others to be able to support the idea that we solve the clinicians major problems. And so I think a combination of the two is likely in our strategy. And then can I briefly explain what alternative solutions there are? This is the competitive field. So for Clarava, there's nothing. There's no information given. They use clinical factors that are way too broad. And so that's a good news story in terms of we have no competitors, but obviously we have to build the case that that's a useful piece of information. So that's Clarava.

23:32 Tutiva, as I said, there are the three major players in this area are cell free DNA technologies. That's the debris in the body, the the high NPV nonspecific. That's CareDx, Natera, and Urefins. And they have been out there for a number of years with that technology. Number of problems already highly documented. And we believe that we have although we're competitive, we have a different approach that sets us aside. And we have a focus on highly specific actionable data. And I think that that gives us the clear competitive advantage that we're looking at. There are a number of, emerging technologies coming out, in this area, recognizing the need to take a different approach.

24:23 We are seeing a number of progressions in urine based testing in this area. We've got some ways to go in terms of their proof points, but it's an interesting area and I think very interesting in terms of looking at the at home testing market, you know, rather than the transplant care. So, you know, I would say that they're additive to the whole solution, very helpful in patient care, not necessarily directly competitive. Can I explain a little bit more how the validation studies work?

24:59 Sure. So, with a multicenter blinded trial, what you are doing is you're putting your test to work, and you're looking for a comparator. And you're looking for two things. One, how does the test perform? That's your sensitivity and specificity against the comparator. So for, Clarava, clearly, there's no comparator. So we have to wait for outcome, and we use a six month outcome. Within that time, there's either an event or no event, but that early pre transplant information is therefore tested by outcome. And then Tutiva is compared to a three month biopsy. It's the early stage damage.

25:47 And obviously, you know, the standard of the care, which is the serum creatinine, misses about thirty percent of all cases. So we decided to use biopsy as the higher comparator. And that will test the performance of of our test against other approaches in the area. And then you're looking at what we call PPV and MPV. And that takes account of, okay, it's not so much the comparative, but how would this, know, perform in the clinic where essentially you're looking at an instance rate. And so an NPV is, usually determined to be a rule out test. Years ago I worked on prostate cancer that was highly significant. You're looking to give the clinician a reason to say no, don't do biopsy, right? You can wait and see. So that's a rule out test.

26:36 Kidney transplant is not like that where really knowing that there's a high instance rate up to fifty percent of organs have an event. So you're looking for something that's got a high prevalence and you're looking for a good reason to say something's going on and you need to you need to do something about it. So that's the point of the validation studies. And obviously we, you know, we collect the information from, at the moment, 12 sites. We're hoping to be 15 or more. But I think for Plurava and Tutiva, as we've finished those sites, will be 12 sites, collect it all together and then look at it overall so that that's representative of what will happen in real clinical life.

27:21 So that's how the validation studies work and then you publish on it. Next question is if Clorava and Tutiva become successful products, how long would it take to potentially transfer the technology to other organ transplants? The answer is potentially not long either. You know, clearly we do look at other disease areas and you know, this is a very broad approach. We are seeing it being not only to other transplants, other organ transplants, but to other disease groups as well. And realistically, because they're about the pre, you know, very early stage, then when you're in a validation study, your endpoints are quite close. And so you can see that expansion happening in a relatively short period of time. We're not talking about needing to do a five year study.

28:14 So I hope that answered that question. Hi, Sarah. Well, I think you've addressed all all the questions from investors today and of course the company will review any further questions submitted and published responses where it's appropriate to do so. Sarah, I just wondered before redirecting investors for feedback, I could ask you for a few closing comments? Absolutely. So I've got to say that it's it's probably going to be a reassuringly boring message is how I would put it. You know, the company has made a philosophy of anything that we can control, we'd like to deliver early if at all possible. Because underpinning that is things that we can't control, and we'd like to be on track. And so far, that's exactly what's happening in difficult COVID times. We've been early with our patient enrollment, and we are on track for the end of the year completion of the validation.

29:06 We've been early with our clear approval so that again, when we're ready to commercially launch, we will do that. The the other reassuring message is that we are very focused. Although we've been doing things early, we've been very focused on our cash management. We have preserved cash so that we have a nice long runway and we have cash for other opportunities, which would support that commercial launch next year. And we have a very heavy eye on that and platform expansion. So, you know, a reassuringly boring message is we are on track. Sarah, David, thanks again for updating investors today. Could I please ask investors not to close the session as you'll now be automatically redirected for the opportunity to provide your feedback in order that the management team can better understand your views and expectations.

29:58 This will only take a few minutes to complete, but is greatly valued by the company. On behalf of the management team of VERICI DX PLC, we'd like to thank you for attending today's presentation. That now concludes today's session, and good afternoon to you Thank you. Thank you.