Fusion Antibodies (LSE:FAB) — Full year results briefing

0:00 Good afternoon, and welcome to the FUSION ANTIBODIES PLC investor presentation. During this recorded 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 questions and press end. The company may not be in a position to answer every question it receives during the meeting itself. However, the company can review all questions submitted today and publish responses where it's appropriate to do so. Before we begin, I'd like to submit the following poll. And I'd now like to hand you over to Adrian Kincaid, CEO. Good afternoon, sir.

0:31 Thank you very much, Lily. Thank you everyone for joining us today. It's good to see the back end of the year that we've got to talk about, but we'll also be covering some of the more recent data. There is another quarter that's already in the public domain. So without any further ado, we'll move on. Of course, we have disclaimer, which I will leave you to read at your your leisure. Thank you very much. What we'll do on the agenda is cover some introduction and highlights, particularly for people who maybe haven't got too familiar with FUSION as yet. We'll do some financial performance slides, which will be led by by Steven, and then strategic focus update, which I'll cover, and a short summary.

1:23 We have had some questions already submitted, so it's good to see the engagement. Thank you very much once again. So as an introduction to FUSION ANTIBODIES, I should introduce myself first. It's I'm Adrian Kincaid. I'm CEO of FUSION ANTIBODIES. Been with the with the company now for just over two years. I'm a biochemist by training. I have a PhD in biochemistry from Southampton University and have been in pharmaceutical discovery, agrochemical discovery, including CRO and biotechs for a good long time, twenty odd years, plus several years in reagents and diagnostics as well.

2:12 So FUSION is relevant to all of those sectors that I've worked in so long as they're interested in antibodies. We really are experts in all things to do with antibodies from their discovery right the way through to supply. We don't go into supply for clinical reagents. So what we produce is for the lab, maybe for animal testing, but not for going into into people. However, we divide up the the work that we do do into three different sections. So discovery in the first instance, someone nominates a target, a protein or or otherwise, and we can discover antibodies for that that maybe never existed before. We have a number of different technologies available to us. Some of those are proprietary.

3:02 Some of those are industry standard methods for antibody discovery. The ones that we choose depends on the target, depends on the client, depends on their budget, depends on the target product profile of the antibodies that they're looking for. Once we discover an antibody, it's not the end of the story. What we can do then is engineer those to make them the best possible antibodies that they can be. In some regards, just being the best in the world isn't good enough. We sometimes want the best that it can be and being much better than anything that has existed before. And that's where FUSION has really cut its teeth, got a a really excellent reputation as being one of the world leaders in in engineering in particular.

3:50 Humanization was one of the things that the the company was really well known for, and we consider that to be part of engineering, changing the genetic makeup of the gene that encodes the antibody so that it's the best that it can possibly be. Of course, you then need material to put into tests, and that's where the supply comes in. We can do that in a relatively rapid format using transient gene expression, or we can develop a stable cell line that would give consistent production of the same antibody time and time and time again. It is quite an investment, so people don't tend to do that until they're ready to go into production for clinical purposes. But we can take them all the way up to that point and get them ready for going to clinical manufacturing.

4:42 So the kind of people that we work with are basically anybody that values antibodies and works with antibodies and wants the best possible antibody for their for their project. So certainly drug discoveries where antibodies themselves are often the drug, they're the ones that we particularly engage in. That's a fairly biotechnology led sort of industry, so the biotech companies are definitely there. Companies nowadays are outsourcing an awful lot of the work that they do, and there are several virtual companies that don't even have labs of their own, but still run projects. And they need people like us because we do the the lab work for them or at least some of that lab work. They might go elsewhere, for example, for animal models.

5:31 More recently, we've added veterinary medicine to the people that we're we're engaging with. So drug discovery or diagnostics, but for cats and dogs in particular, it tends to be companion animals much more so than agricultural animals, cows, sheep, etcetera. Although there are an overlap with high value race horses for equine veterinary med is something of of interest. In addition to the drug discovery and therapeutic side of things, we also work with diagnostic companies. We also do research work generating antibodies not for therapeutic purposes or even for diagnostic purposes, but actually for research reagents to add into various different tests that those people might be involved in. And that particularly is research institutions.

6:31 Frequently, however, the research institutions want to take the antibody that they've discovered one step further, and often that requires manipulation. So we do work with universities, etcetera, in that regard and other academic centers. And then lastly on this list is, of course, large pharmaceutical companies who probably have access to an awful lot of what we can offer, but still engage with us specifically because we are the best in the world or have that proprietary technology that they really value and want to move forward with. So we work with all sorts of life tech industries of all sorts of different sizes across discovery engineering and supply and indeed put them all together in an integrated antibody service from FUSION for particularly therapeutics, but increasingly also interest in doing that for diagnostics.

7:31 The other thing that we do for the client is we accelerate their their journey. We've done it before. We've done it many, many times. We know the processes. They're very slick, efficient processes that we run here at FUSION. So it's really excellent to bring that level of expertise, process involvement, specialization to even the smallest of businesses so that they get professional platform professional services, taking them all the way through, eliminating or minimizing risks as far as they can that can be done, and always thinking ahead. One of the mottos for fusion antibodies is to begin with the end in mind. So we consider what the target product profile is for that client, what they're wanting to do with that antibody, and make sure that the journey that we plan for their project really picks up on the risk factors and makes sure that we we give them the best chance of success.

8:28 So what we're trying to do as fusion antibodies, our mission statement is to get better antibodies into the clinic more rapidly.

8:38 Some of the discovery engines that I mentioned before are worth highlighting. So we have five listed here that we can offer to clients. The top three on this list are the proprietary ones. Our flagship remains Optimal, which many of you will already be aware, is in a validation study with the National Cancer Institute in The United States, part of their National Institutes of Health. It is a fairly involved process. So that validation, we agreed a two year term for that with them. So we're partway through that now. The library size that we can offer in that is 10 to the eight or possibly 10 to the nine. So 1,000,000,000 different sequences or different antibodies that we can pan against to find that hit in the first instance, which we can then engineer or manipulate, improve on in subsequent areas.

9:38 The important thing about an OPTIMAL is that we use a mammalian expression system, which presents a fully intact IgG molecule. That's another word for an antibody. So fully intact antibodies, human antibodies. So, again, coming back to that begin with the end in mind for particularly human therapeutic projects, this would be a really good way of actually selecting the antibody that's most likely to to work and need less optimization going on.

10:13 So the the stage that we're at with that is beta testing, non namely with the the NCI and ex doing other parts of it, research parts of it in house. It is still in research mode. It's not fully developed, ready to go service, but we are working on that. AIM lab is available now. AIML stands for artificial intelligence machine learning, hence image of the computer on the left hand side. And this is a new way really of doing in silico generation of antibody sequences without necessarily even the target being available.

10:59 You know what the target is typically and then generate antibodies in silicosis, sequences. That can produce a huge number of potential sequences, and the computer algorithm then ranks those. In typical format, what people would do is take the top, say, 90 sequences and have them individually synthesized one by one to make a very short list of antibodies. Doing much more than that becomes quite an expensive and involved and slow process. We can do that for for clients. In fact, we do do that for clients. But the other thing that we can offer them is the ability to take that output from their algorithms and look at many, many more sequences. So tens of thousands, hundreds of thousands even of sequences and put them into a library format, which is then synthesized as a library rather than one by one and enables us to then screen that in a in mammalian display.

12:12 We need to use mammalian display because the algorithms are ranking things according to their fully intact antibody structure or theoretical structure. And so they want to present the fully intact IgG molecule to do that testing. So it's a perfect fit really for our mammalian display platform. Optiphage, well, phage display is sort of the industry standard, so we've, to some extent, reverse engineered. Here, we only look at a fragment of the antibody. It's not the full antibody molecule. It's just the the endpoint parts of the molecule that would directly interact with the target. That's all that phage display can really routinely cope with, but it is the industry standard.

13:02 So we've taken the other part of Optimal rather than the mailing display part, the Opti library of the gene synthesis that represents a huge proportion in most cases of the human genome or immune immunome, and we can put that into a phage display format. Now that does two things. It makes it industry standard in terms of phage display. It makes it cheaper to actually do the panning at the compromise that you're looking for only a fragment, and you then have to build that up. So it adds complexity later, unless, of course, it's a fragment that you're actually looking for. Again, different clients want different things. Some of them are looking for fragments. Optophage is the way to go for them. That's still what we would classify as being in development.

13:50 Some of you will have noticed that we released an RNS showing a project that we were undertaking for a client to develop Optiphage for them in a nonhuman species format. So that's basically starting from scratch, but it was really the design of the Opti library and the principles behind that that the client was particularly interested in, and they wanted it fit to their their phage display. So we were quite pleased to bring forward the OptiPhage platform

14:24 for that client. And then hybridoma's traditional ways of doing screening. So this we use an animal host and allow that animal to produce antibodies. We then harvest those and and move forward. B cell cloning is modification of that where the b cells from blood of the animal, typically a rabbit, are then used to find the gene sequence and move forward in the usual way. Sorry. So moving on to the business and how we've been doing. Highlights, and there were certainly some lowlights for the year that ended March 31.

15:11 The highlights were significant increase in sales pipeline act opportunities during the second half of f y twenty four. So from around October onwards, we saw things certainly starting to pick up. And by the fourth quarter, in other words, the start of calendar year 2024, things were certainly on on the increase. So that was that was certainly the highlight. The whole industry had had a a very difficult time. Our clients had had an even more difficult time than than we had had. There are increased numbers of commercial opportunities identified in that improving pipeline. Of course, one of the other highlights for us was that a collaboration agreement with the National Cancer Institute, highly prestigious, real experts, and key opinion leaders in mammalian display.

16:03 So we couldn't wish for a better partner to do that validation of Optima. We did undertake a company reorganization in the face of those difficult headwinds that we were going into for the whole market, which resulted in a significant reduction in the cost base, and we're still seeing benefits of that coming through now. Stephen will take you through some of those in a moment. We also implemented a new commercial strategy. This was partly because we felt we were overexposed to the investment sent sensitive VC funded biotech sector, particularly for therapeutics. Whereas diagnostics, for example, had done extremely well, particularly out of the pandemic and had money to spend a lot of diagnostic tests, use antibodies, and so it's a really good fit with the things that we could offer. So we had a a bit of a push to increase our presence in the diagnostic sector.

17:11 One of the benefits of that strategy, really important benefit, is it reduces the risk of fluctuations from, for example, VC money, venture capital money drying up for our clients because not all of our clients in the extended customer base are that sensitive to it. But in addition, there's more clients to go after, bigger market, and so it helps in that sense as well. So as you'll know, financially, we had audited Redwood News of 1,140,000. The order book at the end of that year was a much more healthy 750,000, representing about 65,000,000 of 65%, I beg your pardon, of the f y twenty four audited revenues.

18:00 And that was purchase orders received, ready to go, work in progress, etcetera. The cash position at March 31 was 1,200,000 versus the the previous year where we were down at 200,000, and the increase in the cash was really due to fundraisers that we had done.

18:24 So I'll hand over to Steven now. If, Steven, you could just introduce yourself and then take us through the slides. Thank you. Thanks, Adrian. So by way of introduction, my name is, Steven Smith. I'm a chartered accountant and partner at accounting and business services firm, AAB. We have offices throughout UK and Republic Of Ireland. And I've been in the role of interim chief financial officer at FUSION, for just about a year. So we'll initially look at the, the income statement for the, the audited period. As Adrian mentioned, the company recorded revenue for, the year ended 03/31/2024 of, 1,136,000.

19:12 This was a decline of $1,650,000 or 60.8% over the previous twelve months. This resulted in a gross loss of £45,000 and a gross margin of minus 4%. This is compared to a gross profit of 574,000 and a gross margin of 20% for the previous reporting year. It is worth notice noting, and I think Adrian touched on the restructuring efforts, but it is worth noting that restructuring efforts continued well into fiscal twenty four, with the gross margin, for example, in quarter one of, of fiscal two thousand and twenty four being minus 54%.

20:01 So significant overhang from legacy legacy expenses that, were dealt with successfully throughout the year. I think the success of the restructuring process enabled the company to significantly reduce its cost base, to the point where GM had recovered or gross margin, I should say, had recovered to 10%, positive for the final nine months of the year. And we've seen that recovery into our fiscal twenty twenty five numbers as well. EBITDA for, financial year 2024 was a loss of 2,068,000, a decline of 303,000 or 17.2 over the preceding twelve months. And, again, I think given a a 1,765,000 fall in revenue, a fall in EBITDA of only 300,300,000 highlights the, the success of the restructuring undertaken by the company.

21:09 We'll turn to the, summary financial position. Noncurrent assets, which is effectively our plant and equipment, fell from 375,000 to a 158,000. That was purely a result of the amortization depreciation, charge for the year. There were no additions or disposals. Inventories have fallen from 539,000 to 460, due to both a small, obsolescence write off and a concerted effort by the company to, manage its inventory requirements. I would hope and expect inventory to, continue to fall, as we report these numbers, on a on a cyclical basis.

22:00 Receivables, at the March 31, were 603,000, of which 437,000 were trade receivables. That number is net of 147,000, pound provision for bad debts. 46,000 related to our R and D tax credit with 113,000 representing accrued income and prepayments. The reduction in receivables year over year from, 953,000 to 603,000 is largely driven by a reduction in the R and D tax credit from 262,000 last year to 46,000 for this year.

22:51 Cash and cash equivalents was 195,000 at this point in time last year thirty first of March last year, and is sitting at or was sitting at 1,200,000, as of the 03/31/2024. So, obviously, a much more healthy position, from a cash perspective, you know, given there were two raises during the year, but also a significant, effort made at reducing, expenditure. Current payables, sitting at 584,000, at the last year end. This comprised trade creditors of 283,000, accruals of 125,000, deferred income of 101,000, and, payroll and other taxes due, 43,000.

23:47 Pensions payable of 11,000 on the current portion of our, higher purchase liability, which is 20,000. The fall in, current payables year over year from 878,000 to $5.84, was primarily driven by a 240,000, pounds fall in our trade creditors balance. I think it was, you know, this time last year, we were sitting on a precarious cash situation, and creditors had had sort of the lead time on paying creditors had been longer than we would have liked. But, that is, not a situation we are currently dealing with. Noncurrent payables, 43,000.

24:34 It's broken down as 23,000, for the noncurrent portion of our higher purchase agreements and our carry forward £20,000 leasehold, dilapidation provision. Equity has increased, effectively due to the two raises, in fiscal, 2024 from, 1,124,000 to 1.1793. Fund raising activities for the year totaled, 2,700,000, net of fees.

25:11 Return to our, summary statement of cash flows. Cash our cash burn for the year was, 1,767,000. We had nothing really other than a thousand pounds of interest income in the way of investing activities. No additions to, capital assets as I previously mentioned. And then the financing activities, which is the, 2,770,000 of, of the the two fundraisers, during the year in in June and, right at year end in March 2024, it was sort of the 2.77 net of fees. So a positive cash movement in the period of just over, just over £1,000,000, moving the the balance year over year from 195,000 to 1,200,000.

26:07 Adrian, I will hand it back to you. Thank you very much, Steve. I particularly prefer to focus on what's happened since the end of the financial year, so some key highlights here for h one twenty five to date. So as I mentioned previously, there was the first Optiphage contract, which we really brought forward the the plans for Optiphage because a client was out there asking for it. We responded to that, explaining along the way that we're in research mode for it. They're happy to do that and fund us to do the the work developing a nonhuman antibody species phage display library for them. So we received that work in or that order in April.

27:01 There was a little bit of a delay whilst materials were gathered, which were get being gathered by the client, but work is progressing really well.

27:11 We also received per further purchase orders under a master services agreement that we should originally announced 04/14/2024. So it's really great to see that one coming back, repeat business. It's building and going extremely well with that client. Very pleased with them. I think they're very pleased with us. Otherwise, they wouldn't be placing so much business with us. Similarly, one of our other major clients is a US biotech,

27:42 and they we had announced deals with with them, purchase orders with them for $650,002 and £200,000. The reason why we chose to express the latter one in pounds was because it's almost exactly 10% of the market expectation for the company for this this current year.

28:06 Ongoing AIML project. So this is not AIM lab as such, but using AIML to investigate what makes antibodies good expresses or less good expresses. That work's being undertaken with the University of Oxford and, again, progressing quite well. It's a research project. It's a little open ended. We're not we're not doing that really to get a an end product as such, but we're certainly learning a lot along the route and really delighted to be working with such bright people at Oxford University.

28:45 We also, as I mentioned earlier, with our mammalian display platform, platform, which is working really well, we decided to use it for other proteins. So these are it was designed for antibodies to be expressed on the surface of a mammalian cell. Could we use it for other beg your pardon. Could we use that for other proteins than antibodies? So that was a really interesting one as well, and I'll give you a little bit more information on that as we move through the rest of the presentation. Of course, we continue to sign new clients. Not all of them are big projects. In fact, the majority of business is relatively small projects that come through.

29:33 Collectively, they certainly add up. One of them, which I've highlighted here, I was particularly pleased about, was a the pharma division of a very well known Japanese conglomerate. They could go anywhere in the world. They chose to to try FUSION and come with us, and we're delighted that they did so. Hopefully, we'll be able to to build that relationship going forward.

29:59 But it was really pleasing not only because they're a company of significant size, but also because they're in Japan. Remarkably difficult market to crack, but it shows that, again, it's just another example of our global reach and the business that we command in from here in Belfast. The positivity overall in the industry, and in particular, our client base is much better than it had been. Everybody suffered in the industry

30:33 quite a significant downturn due to the drop off in investment, and that in turn was due to increasing interest rates and inflation rates. So we've seen that that seems to be washing through and in some cases has washed through. People are back to progressing their projects at the speed and the the rate that they would normally have done, and it's really great to be working with those those clients. Some people are still suffering. It's still not easy out there. It's it's still very really quite challenging to raise money if for our biotech clients who are trying to do that. We appreciate that, but we're particularly pleased about the positivity amongst the the industry to show that things are on the the right trend and upward.

31:27 And that's particularly reflected, I think, in the un audited q one revenues that we released in the trading update some time ago

31:36 of £522,000 compared to 241 in the first quarter of the year that we've been discussing in these in this update today. The revenues from both therapeutics and diagnostic sectors are now growing.

31:56 So it's really good that it's not just diagnostics that's coming back. It's therapeutics as well. But it is also worthwhile pointing out that the efforts that we put into targeting additional revenues from diagnostics has paid off, continues to pay off. And as a snapshot for now, we are making about 20% of our recognized revenues in the year to date from the diagnostic sector. Single point, quite crude in terms of numbers. I wouldn't read too much into it, but it's a nice little indication that we did the right thing at the right time. We've significantly improved revenue recognition, and that places us on plan, our own internal plan, and very much on track to meet the market expectations.

32:47 £2,000,000 is what the analysts are suggesting. We're not arguing with that. We can do that without further investment. We are pushing that runway out and very comfortable with the cash position that we have. So I've moved on to strategic focus and a little update on that. So as I've said, during the calendar year 2023, the market was really adversely affected by a reduction of investment into biotechs in particular due to increased interest rates caused by a spike in inflation, and we all know the global reasons for that. FUSION revised its commercial positioning to improve traction in its existing markets and the way that we position and sell FUSION.

33:43 That's had an impact in how successful we are in conversion, attracting opportunities, but also converting those opportunities, I'm sure. And we've also improved traction, as I mentioned, in diagnostics, veterinary medicine, and even research of antibodies, which are often considered to be low value. But if you've got the right one, they're certainly worth a significant amount of money. We also launched the AIM lab offering, which I think was very timely. A lot of people looking for alternative ways to reduce costs, go to to see whether AIML was going to be able to help them with antibody generation. The jury's still out on that question. I think it's fair fair to say.

34:31 There's still certainly a need for the other kind of platforms including Optimal, Optiphage, and, of course, the industry standard hybrid donors and b c cell cloning, etcetera.

34:44 But as I mentioned earlier, we were really pleased to bring forward Optiphage for an early adopter even though it meant that we had to tailor it to their nonhuman target.

35:01 So particularly in diagnostics, it's benefited from the whole sector has benefited from very, very significant cash flows in particularly because of COVID testing. Along with the cash flows, it's also benefited from a significantly increased perception and understanding from the public, from investors, as well as demand for their products. People having got very used to doing a nasopharyngeal swab, are now, wondering what else they should test for and quite willing to to take diagnostic tests to get an early indication of what health challenges they may have. An early diagnosis is the root and the key through to better outcomes as well.

35:48 Our clients in diagnostics, in particular, are seeking to establish new assays for sure against new diseases or new targets of old diseases. But they're also looking to improve their existing assays and get improved security of supply for their antibodies. And all of those things, FUSION has the expertise to solve those issues, and we've been very much proactively engaging with diagnostic companies to make them aware of that and indeed to sign contracts from, as I mentioned before, they now make up about 20% of f y '25 revenues to date. Some of that has come from the deal that we have with the master services agreement, that's for sure, but it's not only them.

36:36 There's an awful lot more that's come from other diagnostic clients. So it does really does bode well, and I think confirms that we did the right thing. The mammalian display, I promise to tell you a little bit more about. So that was developed as part of Optimal. There's the Opti library and then the mammalian display way of doing it. Provide surface expression in the way it was originally intended for an antibody on the surface of the mammalian cell. Now we've collaborated with a client who asked us, could we try it with three of their proteins, which they currently use in highly valuable commercial assays, and they're they're doing a very good business of selling these. So we tried it with three, and in the first one, we had a tenfold improvement in expression.

37:22 Second one, twentyfold improvement, and the third one, thirtyfold improvement. So this technology that we have developed primarily as a enabling technology to allow us to look at antibody expression in optimal libraries clearly has a lot more application. And if it's doing things that are orders of magnitude improvements over the existing commercial processes for commercial assets, that makes us very much worthwhile talking to and people coming to us for our mammalian display even if it's not the antibody things expertise that we're really well known for. So work is ongoing on that, and I will look to update people on progress in due course. But at the moment, suffice it to say that it is extremely exciting for us and shows a tremendous amount of potential.

38:18 So I'll move on then to summarize and bring the meeting towards a close or towards the q and a, first of all. As I mentioned, calendar year 2023 was very challenging. We weren't insulated or isolated in that regard. It was the whole industry that was hit, which meant that we were hit quite quite difficult. But we not only survived, but we've emerged much more efficient, a much leaner organization. Yes. Headcount is down, but we're we're doing more work per head than we did before. And we are fitter, and I mean that both or primarily in the sense that Darwin meant survival of the fittest. We fit our environment and the market conditions that we now face really very well compared certainly compared to where we were back at the start of 2023.

39:14 Yes. We've had to do significant cost reduction exercise. It's now completed. It's reduced the burn rate, and we're still seeing benefits of that coming through in the figures, etcetera. The platforms that we've commercially launched despite everything else, it strengthens our unique selling proposition and our differentiation. It gives us proprietary technologies where people want to engage with us for them, and they do, then they have to come to us. So that's Mammalian Display, AIMLAB, Optimal, and Optiphage moving forward. So we continue to make progress with those, bring them to market, move them forward, and indeed look for ways to sweat the assets, get more out of what we've done, and make make the best value return for the company and our shareholders.

40:10 Antibody remark markets themselves remain very valuable, highly valuable. About half of the drugs coming to market are antibodies. Four of the top 10 best sellers are antibodies, and FUSION has world leading expertise to help people, help companies move their targets forward, not only in therapeutics, but in diagnostics as well. So q one f y twenty five, which we've released the trading update for previously, showed a marked increase in revenues and in prospects, and we remain on plan, on track to become profitable. The cash runway has been extended to h two of f y twenty six, which should give us enough time, certainly, if we remain on track to do that and become profitable.

41:00 There are therefore no plans to raise investment through equity placement. One of the other items which we've done somewhat in the background, but it's probably particularly relevant to this audience, is that we've launched an investor hub. So if you want to find out more about FUSION, if you want to dig into some of the things that we we've got, There are videos, for example, with myself on there. Don't let that put you off. There are opportunities to ask questions, and the company will respond with answers as and when we can. Obviously, things still need to be announced by RNS, so we can't release information through the investor help unless it's gone through the appropriate channels beforehand.

41:48 The QR code on screen will take you to the relevant page. So please do use that. Do register if you haven't already, and please engage with FUSION through that format. It's there to make the transfer of information easier from the company to the the investors, the shareholders, but also to give us something of feedback from how you feel, the things that concern you, and the things that we should really be addressing and giving you information on as best we can. So at that point, I will finish the main session there, and I think we can turn to Q and A. Is that correct? Adrian and Stephen, thank you very much for your presentation.

42:37 Ladies and gentlemen, please do continue to submit your questions just by using the Q and A tab situated on the top right hand corner of your screen. Just while the company take a few moments to review those questions submitted today, I'd like to remind you that recording of this presentation along with a copy of the slides and the published q and a can be accessed via investor dashboard. As you can see, we have received a number of questions throughout today's presentation. Can I please ask you to read out the questions and give responses where appropriate to do so, and I'll pick up from you at the end? Yeah. I'll start. I'll take the first one, Adrian. Can you give some indication on how gross margins have developed in financial year 2025 to date? For financial year 2024, gross margin was minus 3%. It was actually minus 4%, but it's not our view over minus one.

43:26 Unaudited gross margins year to date, so fiscal year twenty twenty five, are actually ahead of our internal budget, which we hope will accelerate the company's return to profitability. I think, you know, I spoke in the presentation about how March had had improved, throughout fiscal twenty twenty four, as the effects of restructuring took hold. And I think we're really starting to see the benefit of that now, in this, in this financial year. Adrian, a second question is for you, I think. Thank you. Yes. What is the development status of Optimal? Specifically, how much r and d investment is being made? Well, we continue to invest in our r and d programs, but it's fair to say at a very much reduced cost to the business.

44:19 I've highlighted some of the ways that we've done that. Much of it is due to entering into agreements with clients to tailor r and d projects towards their needs so that we can generate revenues whilst doing our r and d. It just that it overlaps, and there's more than one party that's interested in the outcome. So that's a really cost effective way of doing r and d. It does mean that we somewhat reduce our options, but it's a necessary compromise to ensure that the business remains on track to be profitable. OPTIMAL itself, therefore, remains within research. Whilst we are willing to discuss beta test options such as we did and are in the process of doing that validation with NCI, we're happy to discuss that with other potential early adopters and beta testers as well.

45:17 Steven, I think it's back to you. Yeah. Very similar question again. Another question on margin. How did restructuring costs affect the gross margin in financial year '24? I think I actually mentioned this in my presentation, you know, restructuring costs had a significant impact on the, the gross margin for the, the year under review, particularly in the first quarter when the, gross margin, was minus 54%. And that number climbed, as the year progressed and, you know, on an even basis over the final nine months of the year, gross margin had recovered to, to 10% and has continued to climb, more importantly, for me anyway, has continued to climb, since year end.

46:09 Adrian, thank you very much. So next question was, you said the optimal work is going well. Can you give us more detailed update on the status of the validation? When might we expect some published detail? And are you already marketing the service to clients? So I don't wanna say too much more at this stage. Publications on the validation work at NCI are covered by the agreement, and we've agreed a process for that. Essentially, publications will be joint publications, so we will be coauthors. They will be peer reviewed, and we will likely be targeting high impact journals as befitting not only the technology, but also the collaborators that we're working with. They are highly prestigious, and we want to make sure that that continues.

47:00 So please bear with us. The it also is worth considering that peer review process does also take some time to complete. Next question is also for me, which is, is the expanded optimal agreement revenue generating I e r n c I paying for the humanization? No. We undertook the humanization process as a goodwill gesture and look forward to having the benefit of publications with NCI as coauthors or or possibly just them as being the authors. As I mentioned before, they are excellent people to be working with. They have a great deal of success in publishing work. Indeed, the antibodies which we worked on in humanized, we have completed that work now, had themselves in their prehumanization form being subject of a nature paper.

48:00 So pretty high profile and likely to get us noticed. So any cost that we may have incurred, I'll put down to the marketing budget, but the cost themselves minimal. There was only a bit of our time for humanization. We don't have to buy any reagents or anything like that. So I think overall, a really good deal with a really good client, and we should have some really excellent antibodies producing really high value publications in due course. Next question was how is the Optiphage contract going? Have you successfully designed the library, and has the client taken the exclusivity option? Have you had any more contracts for this service? So this, as I said, is in development.

48:46 The project was done as ahead of schedule for Optiphage. It's very much on track. We're not yet at the at the completion point, and, certainly, we're not the client is not in a position where they can make a decision on exclusivity. So it's on track, but it's it's ongoing work. Steven? I can take the next one. Yeah. So why did you change auditors? I think while we had a very strong relationship with with PLC, I'm actually ex PLC myself, It's no secret that the big four have been offloading a significant number of audit clients to focus on audit work at the higher end value chain for them, both in fee size and profitability.

49:38 PLC been completely transparent. PLC had indicated they would continue to service FUSION for, financial year 2024, but sensing the likely need to appoint a new auditor sooner rather than later. The board felt it prudent to begin that process immediately. And we were very happy and successful in in the appointment of Crest and Reeves. So no not a nonstory really other than that FUSION find themselves in the similar position to many, many other clients that the big four are moving away from the the lower fee range when it comes to their other clients. Yeah. I should add that it's worked very well with Crest and Reese. We were pleased to be challenged with some fresh questions from a fresh point of view, and the whole process works very well.

50:38 I think it's actually just good practice to change auditors every now and then so that you get that fresh set of eyes looking over everything. So, yeah, pleased to do that one. Next question was that it's great to see your cash runway getting longer. It certainly is. What specific factors caused this this year? Have you reduced costs, or are revenues higher than you forecast? Well, the short answer is both. The costs were reduced as we've explained as part of the restructuring process. That process, I'm pleased to say, is now complete, although the savings continue to be recognized. Revenues themselves, though, higher, broadly in line with our internal forecast, in fact, a little bit ahead of that, which is is great. We've also reduced the risk.

51:33 So having turned the corner and turned the things around, we're now on much more of a trajectory, and we know what that trajectory is. Mhmm. Thankfully, it's even better than we had originally planned. So the margin for error, which, of course, we have to take into account whilst we're thinking about our cash flow forecast, has been shown to be overly prudent. Nevertheless, we continue to be cautious when discussion discussing cash runways. We know that things can change. We only have to look back to the year that we've just been discussing to to tell us that. Steven, did you wanna add anything else? Yeah. Other than to say, I think our internal cash runway forecasts are very encouraging.

52:20 And, certainly, I view them as further evidence that the company is on target or, as you said, slightly slightly ahead of target on its journey back to profitability. Thanks. Next question was, at the last investor meeting investor company meeting, you said you were part of a large consortium waiting for news on grant funding. Consortium included QB, Queen's University, Belfast. Questioner has said noted that the Northern Ireland economy minister, that's minister Murphy, has now announced a plan, and there's a link to a PDF to invest in this consortium.

53:09 What does that mean for FUSION? Well, I'm not familiar with that document, so I can't really comment too much. What I can say is that there's not yet been any definitive news on the consortium or the grant. These things there's a lot of moving parts that need to be locked down for for it to go forward. Things take a long time to deliver, when they are so complex and involve as many partners as this one. In fact, this is the largest one that I've been involved in. And I'm really grateful for the efforts of the project coordinators. I think QB has done a fantastic job and continue to show do a fantastic job. They've shown tremendous vision, foresight, determination, and not a little tenacity in holding on to this as it goes through.

54:03 One of the reasons they're doing that, I'm sure, is that Northern Ireland and particularly the life technology communicate community based here is worth investing in. It's not just a fusion that are worth investing in. There are other companies here as well, and there's some tremendous science that is gonna have an impact around the world that's being done here. I should, however, also be clear that we've not factored any grant money into our projections. Obviously, we would like grant money, but if it comes, it will be additional to our plans. It'll be a bonus. I think the next one's for me as well. The company is clearly undervalued.

54:51 Is is there a company at similar stage of growth with similar technologies that you might compare to to FUSION that is correctly valued without naming them where do you think the valuation should be right now. I don't think there is another company that has quite the technologies that FUSION has. We have a number of different offerings. Both other companies only have maybe one. So we're quite really well positioned in that regard. But answering the question, how much should we be worth right now? Well, many times what it is today, multiples of what it is today. It's clearly undervalued, and it has been for quite some time.

55:37 In my opinion, the the main reason for this seems to have been perception that we weren't going to survive. Well, we're still here. Not only that, but we're now thriving. We're fitter. We're better than we were before. Alternatively, maybe we would survive, but we were going to require significant amounts of additional investment and dilate everybody out and probably in this marketplace at a lower price. That is clearly outdated, ill founded in terms of an assessment. We don't need the money. We have no plans for an investment raise. So I think those people have got it wrong, and the impact on the share price is wrong, and it needs correcting.

56:24 And we need to take that depression that's been on the share price away. I think, I hope that the information that we shared today helps, in doing that because, clearly, we are worth an awful lot more than the market has been suggesting. Steve, I'm just trying to see some of the more Yeah. We have specific sort of comment during the would you I think they're probably mostly for you. Would you like me to read them and you to answer them? No. I think I can I've got one or two, so I'll shoot from the hip for some of these. I'm also conscious that we're about to run out of time, so I may not get through them all.

57:10 You've moved into the veterinary medicine diagnostic market. What proportion of future revenues do you expect? Well, that really depends on the markets that are in them. We want to take money from as many clients as we can whilst getting the margins that we need. So it's not business at any cost. If that doesn't fit with prospective potential clients, they're not clients. So we will continue to do that. I'm very comfortable about the mix that we have, and I suppose the best way to look at where the percentages might wind up would be to look at the value of the antibody market as a whole, and it'll probably reflect that. How we get there, I don't know, and I'm very, very comfortable about it.

58:03 Going back a few years, there seem to be a number of grants awarded to FUSION ANTIBODIES. Okay. I'm not so sure about that. The grants seem to be less frequent nowadays. I've seen an uptick in grants being won by some of our clients, particularly in The UK and in Northern Ireland in particular. So I would not agree necessarily with with that question or the premise of that question. Another one, you've been very quick to release trading update following the year end and also q one this year. It would be great if you could continue the trend and issue a h one trading update ahead of the interim results. We'll certainly keep that in in mind.

58:56 Appreciate you giving that feedback. I thought it was really important to get the q one statement out there because it was the first solid significant whole quarter's information that really showed that what we had said was happening really was happening as evidenced by recognized revenue money in the bank, etcetera. So it was really good to get that out and important to do so. I don't plan to do quarterly updates. That was done because it was a turning point and really relate to the defined strategy that we'd had and the information that we've put out there. I think we're gonna have to call it quits at that. Sorry. We're out of time. Take a look at some other questions and try and get back to you with those.

59:47 Adrian, Steven, thank you for answering all those questions you can from investors. And, of course, the company can review all questions submitted today, and we'll publish those responses on the InvestoMeet company platform. Just before redirecting investors to provide you their feedback, which I know is particularly important to the company, Adrian, could I please just ask you for a few closing comments? So I think I've said it several times over. We don't need any more money. We're not raising any more cash. The company is massively undervalued considering what we've done. We are leaner, fitter, more agile, more, dare I say it, suited to a profitability statement, which is very much our focus on how we're going forward. The future looks really good, really bright, and I'm looking forward to doing some more of these updates.

1:00:35 Thank you. Adrian, Steven, thank you for updating investors today. Can I please ask investors not to close this session as you'll now be automatically redirected to provide your feedback in order that the management team will better understand your views and expectations? This will only take a few moments to complete, and I'm sure will be greatly valued by the company. On behalf of the management team of FUSION ANTIBODIES PLC, we'd like to thank you for attending today's presentation, and good afternoon to you all.