Proteome Sciences (LSE:PRM) — Interim Results

0:00 Good morning, ladies and gentlemen. Welcome to the PROTEOME SCIENCES PLC Interim Results Investor Presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged and can be submitted at any time using the Q and A tab situated on the right hand corner of your screen. Just please simply type in your question and press send. The company may not be in a position to answer every question received during the meeting itself. However, the company review all questions submitted today and publish responses where it's appropriate to do so. Before we begin, we would like to submit the following poll, and I'm sure the company will be most grateful for your participation.

0:32 And I'd now like to hand over to CEO, Doctor. Mariola Good morning. Good morning, and a very warm welcome to the presentation of PROTEOME SCIENCES Interim Results for the First Six Months of twenty twenty two. My name is Mario Lazuengan, and I'm the CEO of PROTEOME SCIENCES. Cannot spare you the disclaimer for just a second, which basically points to the fact that we will be making forward looking statements in this presentation, and this this presentation is not based as an investment advice. So for those of you not that familiar with PROTEOME SCIENCES, just a short introduction what we are doing and who we are. We are a leading provider of contract research services, and this is all around PROTEOME biomarkers.

1:24 Now our business consists of basically two main business areas. One is TMT, tender mass tax, and the other one is our service business around this set biomarkers. So what are TMTs? Tandem Mass Tags, these are molecules that are used to lay proteins. And by labeling them, mass spectrometry can pick them up more easily and can analyze them, basically. This is a big advantage. We'll come to that so that we can provide more precision and more depth in our evaluations and testing. And these products are exclusively distributed by Thermo Scientific, very big company, very strong muscle. So very happy about this cooperation.

2:13 Our CLEANTAIL is primarily pharmaceutical pharmaceutical and biotechnology companies, but we also work for other sectors like, for example, academic research. The other business area is, well, the service business, where we receive samples from customers and analyze them to detect biomarkers. So these contract services are done primarily with mass spectrometry. And the method or this area is called proteomics. Sounds quite complex, but it's actually pretty easy to explain. You might be aware that over the last, well, at least two decades, genomics was the name of the game and still is obviously the name of the game. Genomics is meant to detect the genetic information behind, for example, a certain disease.

3:12 That is, well, a great advancement, obviously, but the problem is that as a gene that codes for a certain protein, codes for quite a number of proteins. So knowing the genetic information does not really give you the full answer which proteins will be produced in the individual cell and then ultimately in the body. And these proteins can have quite opposing functions. So genomics, only part of the answer proteomics, much fuller answer. And hence, there is so much interest also in the market and in the medicinal area to work and to work with proteomics services and analysis. With doing that for our clients, we are fully aligned with the drug development process.

4:03 And particularly, we are not only supporting primarily clinical trials or in vitro diagnostics but also help to prepare them. When you use proteomics measures and you can identify biomarkers, you can, well, make sure that there is a very targeted drug development, and you can be guided in your drug development, which patients, for example, to treat. Now with all these activities, we are producing really tons of data, and you definitely must make sense of these. So and this is done with bioinformatics. And we have very proprietary capabilities here and a very experienced department to help our clients in not only analyzing but also interpreting these data.

4:58 Last but not least, we also retain our science led business focus, of course. What does that mean? So we are developing new analytical methods and data analysis tools, but we are also, and we'll explain that later, adding currently quite an exciting service, which is single cell proteomics, and I will explain what this is all about. Plus, obviously, to honor also our other business area, develop new reagents and expand the existing reagent range. Just a short introduction who is on the call today for you, starting at the bottom. So Richard Dennis joined the group five years ago, and he has a very strong commercial background, spending over thirty years in the global and life science research sector.

5:48 And he has held, throughout his career positions both in UK and U. S, managing international sales teams. Then next, Doctor. Ian Pike has over twenty years experience working in the diagnostic and biotechnology sector, obviously, with deepest knowledge and expertise around our technology, and he also covers IP matters. And then myself, Mario La Zungin, long standing experience in the pharmaceutical industry both in The U. S. And Europe. I've been in the C suite of various companies over twenty years and a serial entrepreneur. And I'm also very happy and thrilled to announce a fourth person, which is not on the call who is not on the call today. But this morning, we have announced the nomination of a new director.

6:36 Abdel Omari will join us on September 1 as Chief Financial Officer.

6:45 So the key differentiators and unique selling points of Proteome Sciences. Now we are obviously not alone in the market, and there are other companies also providing proteomic services. But there are quite a number of points that differentiate us from those. We are an established business around for nearly thirty years now. We have a good brand name, well recognized in the world market, and we are revenue and profit generating. Also, the depth of the protein coverage is much bigger and deeper than with regard to other competitors. We have just named two here, so Myronogic and OLINK. So we see 8,000 proteins. Usually, our competitors see not this amount.

7:34 We use our proprietary IP to launch, as I said before, a very exciting service in the near future, which is to sequence the proteome from a single cell. We will call that or we are calling it already SUSCLINT SEP. And that is important. Just to give you an example why this is so exciting and so important. When you, for example, in a cancer patient, take a biopsy and then try to analyze the sample. And you are, for example, interested what the exact type of cancer cells is there. And this sample, as tidy as it might be, will consist of millions and millions of various cells, so from connective tissue to blood cells to immune cells to cancer cells, obviously, but also precursor cells, etcetera.

8:31 So when you really want to look at the cancer cell, you really have to go down deep, deep, deep in the sample and try to analyze up to single cells or very low number of cells. And this is what the single cell proteomics does. You then can provide the proteome or the protein portfolio that this individual cell type has and make certain therapy decisions, for example. So then with regards to our other big business area, TMT, we hold the IP and manufacture TMT. And this is currently, as you have seen in the numbers or will see in the numbers, a major revenue generator of the group and also very important for our future.

9:23 Now with all these USPs, the value for our clients is big. We provide an unbiased detection of known but also unknown proteins. Unbiased detection means really that with the methods that we are using, the TMT labeling and the mass spectrometry, we can not only look for the needle in the haystack, so knowing that we are looking for the needle, But we can also look for everything else that is or anything else that is in this haystack. So you might find quite surprising things there. But if you only look for the needle, you will only find the needle. So this is what unbiased means. And this is a key advantage vis a vis our competitors who mainly work on the basis of biased methods. So they are looking for known proteins, at least to a large extent.

10:20 So only high resolution mass spectrometry, the method we are working with, offers this capability. And this then translates into a greater depth and precision of the protein detection, so a big advantage for our clients. But not only that, we have also implemented for many years now high quality standards. Just to name the two main methods, it's the isonorms. So we have a certification here and then also working according to GCLP standards. So this really translates and enables more focused targeted drug development and better decision making, and that can save our clients quite a lot of money in the drug development processes, for example.

11:04 Now coming to the financials. And I'm always reporting here in GBP comparing the first half of this year to the first half of last year. So this year, total revenues were $3,240,000 compared to $970,000 quite a nice increase. The PROTEOMECI Services delivered revenues of $850,000 versus $680,000 TMT sales and royalties were showed quite a pronounced increase of €2,390,000 this year versus 1,290,000 last year. Total costs increased to €2,980,000 this year versus 2,230,000 last year.

11:50 And the adjusted EBITDA was €640,000 versus a loss of €110,000 last year. Profit before tax was this year 70,000 versus a loss before tax of €410,000 last year, and the cash reserves increased by midyear to €3,200,000 versus 2,140,000 last year.

12:20 The operational commercial summary is on this and the next slide as and we are just looking back a little bit what happened since end of last year. So as in 2021, we had a good increase in orders supporting the increased interest in proteomics platforms or services. But I think one can say, in general, in the market, there is a really increased interest in proteomics technology. Again, we received a number of contracts, and we have announced this year September in the excess of 500,000 The increase grew by 13% compared to last first half of this year.

13:11 And as I've shown on the last slide, the service revenues increased from €850,000 to

13:20 increased from $680,000 last year to $850,000 this year. We continue to see multiple clients reordering services, which is very much reassuring to us, obviously, as this exemplifies that clients are satisfied with the services as we deliver them. And we also shipped our first service based on a so called MesoScale Discovery platform, which is a service that we have implemented earlier this year. Now COVID is still not over. The regulations in Germany are much stricter than they are in The U. K. So for example, we still have these quarantine regulations. And considering this, we maintained a fully operational facility in Frankfurt.

14:11 So we regard this really as an achievement. And big thank you to all our employees for being so strict and controlled with how they lead their lives. TMT, TMT PRO revenues remained strong. The sales increased 116% compared to last year, so really a remarkable increase, underlining the USP we have in this field and with these reagents.

14:38 This has allowed us to continue strategic investments, not only in new equipment. So mid year, we have bought a Cellin One machine from company Cellenion. This is needed and supports single cell proteomics, but we have also and are still adding staff.

14:59 And these are lab technicians, an expert in single cell proteomics, project manager, bioinformatics and chemistry. And that obviously strengthens our workforce. The launch of single cell proteomics, this current SAP, is expected towards year end. And the internal R and D priorities are currently focused on further improving the internal workflows to, well, speed up the processes and provide better service to our clients.

15:31 We have summarized here some key performance indicators. So revenues have mentioned already. The profitability as well. And so the adjusted profitability was exemplified by the adjusted EBITDA, 640,000 this year versus a loss of €110,000 last year.

15:53 The cash expenditure, we had a net cash inflow of €1,060,000 from operating activities, and the percentage of revenue from services was 26% this year versus 34% last year, also largely due to the strong increase of the TMT sales, as I've presented. Now the strategic positioning and outlook.

16:24 With the successful management of ongoing relationships this year and also the attraction of quite a solid group of new customers, we have a good basis for the continuation of this year and next year. There is a high demand for services or there was a high demand of services in the fourth quarter, which, well, resulted in quite a big chunk of orders carried into 2022. And that was, as reported, a good basis or led to strategic investments in equipment and staff. And this is continuing in the second half. So we are not yet done with the recruitment of new staff, but this is ongoing.

17:09 And then not to forget the significant order of €500,000 for the analysis of clinical trials trial samples received. So that is keeping us quite busy. In follow-up of the strategic evaluation process last year, we have reported on the outcome in our full year results. We are concentrating for this year on adding high value and high demand services. Single cell proteomics is here the name of the game. And as said, we expect to launch this before year end. And then also in line with our other business area, the reagents, and to increase also the USP in this area, we are developing new and innovative reagents as well.

18:06 So I've mentioned the single cell proteomics launch. And yes, what we see is that in our customer group, obviously, the return to on-site working is driving our sales of TMT PROTEOME SCIENCES with this really pronounced increase and of 116%. And subsequently, we also saw an increase in royalties of 54% when we compare the results to last year's first half. We see that the progress over the last three years has created an excellent platform for development of the company. We have a strong order book, cash position, strategic plans are a good basis to grow all aspects of the business in 2022.

18:55 You will recall that we have dedicated this year to a more organic growth just to strengthen our baseline, And we'll move into the next steps of our strategy, which is further internationalization, as we called it, towards year end, beginning of the new year. And with the arrival of our CFO, Abdul Omari, we are building here the baseline to, well, provide further support of this next strategic step. The strategic investments to deliver a step change, I've mentioned and are ongoing, adding instrument and staff. And well, the Board has great confidence that we can show profits growth in 2022 going forward.

19:51 So this concludes the presentation. We are now very happy to answer your questions. And I thank you for your attention interest. That's great. Doctor. Marietta, thank you very much indeed for updating investors.

20:12 I'd just to remind you that the recording of this presentation along with a copy of the published Q and A can be available via your Investor Meet company dashboard. I may, Ian, ask you just to unmute your microphone. And as you can see, you had a number of questions submitted from investors ahead of today's event, and you've had several that have come in throughout today's live meeting. And I wondered if I may just hand back to you, Ian, to read out the questions and give a response where it's appropriate to do so, and then I'll pick up from you guys at the end. Wonderful. Thanks very much, Mark. And, Mariola, thanks for, taking us through the presentation of, what's been a very, strong performance in, the first half of this year. Now, we do have three questions presented live, and there were also 11 further questions submitted prior to the meeting. So we'll run through those in turn, and I will first read out the question and then invite one of my colleagues as appropriate to answer that.

21:13 So the first question is, could you explain what the new Sisquant service is that Maria referred to? And that was the Sisquant SCP or single cell proteomic service that we aim to launch by the end of this year. For all of the reasons that Marietta said, there's a lot of interest in being able to measure protein changes in single cells. We probably need to analyze somewhere between 500 and a thousand cells per individual to be able to map how individual cells of interest, for example, immune cells in in response to immuno oncology treatment are behaving in different people.

21:59 So this is a very critical development for the whole field of drug development and is one that we're very excited to be at the forefront of in terms of delivering a commercial service for that. The second question was around the use of artificial intelligence, quantum computing, particularly with reference to the IBM Quantum Cloud offering that's out there. So I will address this within the CSO function, and it is something that we use already in terms of, machine learning, which is, you know, artificial intelligence is really a form of machine learning.

22:46 And it's common across most of the different omics technologies, so that's a significant part of how you interpret the data that's being generated with our mass spectrometers, in our case, or DNA sequences in the case of genomics and transcriptomics. Where I do see significant potential to power better discovery through the use of artificial intelligence tools is the linking of large publicly available data sets on health outcomes, against particular biomarker profiles. But I would also caution that many of the efforts around that at the moment are proving difficult to reproduce with different mechanisms.

23:31 So one person's individual AI may find a a particularly intriguing result, but others aren't necessarily able to replicate that. So something we watch carefully, our head of, bioinformatics, doctor Michael Brumang, is, very well versed in the field. And, as we see, new opportunities in that space opening up around what we do, we'll be sure to evaluate them and if necessary, bring them, onboard. Right. Next question is regarding Randox and why are they being so slow with the stroke test, and that aligns with one of the questions we had in earlier, which was to say that with the release of the Randolph Stroke Biotech assay in the coming months, does PROTEOME SCIENCES expect to provide further licenses to other companies planning to introduce their own stroke blood tests?

24:25 So I'll start with that, and and then, Mariola might want to come on board with with some more general comments. But, in the context of Randox, well, we strive to get information from Randox. I think they've been completely focused for a long time, in the last three years at least on their COVID efforts. They, have previously indicated that recruitment of patients' clinical trials of the stroke test and other tests they're developing have been majorly impacted by that. We believe that that situation has improved as COVID restrictions are easing, but many sites are still struggling to implement significant clinical trial activities into their patient management while COVID remains a significant issue in hospitals.

25:17 So at the moment, the, situation is Randox have not indicated, at least to us or indeed more generally in the marketplace as far as we're aware, a particular time that they expect to launch a product. More broadly, when they do launch a product, we will benefit not only from, the development milestones and then, running royalties from those sales, but it also helps raise awareness of the biomarkers and the IP position. So for sure, some of the companies we've spoken to off and on over the last few years as we continue to do, will, certainly look again with interest at the potential for, their developing a straight test with our technology, and I'm sure that will enable, further discussions and potentially completion of new licenses, but we'll just have to wait and see.

26:10 So, Marietta, I don't know if you have anything else to comment on the relationship with Roundup's. Yeah. Thanks very much, Ian. I think you described it perfectly, so nothing to add. Thank you. Okay. Rather late in proceedings this time, but at least we have it. The perennial question, when are we going to be strengthening our balance sheet, paying down loans, and potentially being in a position to pay a dividend. So, Mario, I'll pass that one to you. Well, the it is really difficult, and I would say, close to impossible to give specific guidance on refinancing the company's debt.

27:01 It's as you can imagine, it is quite an important item on our balance sheet. It's being discussed with the respective shareholders, but it's also heavily linked to the strategy of the company going forward. So I would like to ask for some patience when we move into the next steps of the company. Obviously, this is always, a part that, is being, well, discussed, taken care of. And, yeah, we we don't lose sight on that. Thank you. Thanks, Mariola. And, just, sort of somewhat connected to that, we have another question reprising the investment experience since 1999 of a long term shareholder. And whilst returns have been disappointing over twenty three years, they state There is is there a prospect now that our growth will still be through a transformational event, or are we now sort of embedded into a steady growth model with building profitability over time? And I think, Mario, you can speak Yes. Directly to We're very happy to.

28:13 No, it's we are not, well, kind of tied to an organic growth forever, not at all. I mean with the strategic evaluation that we did last year, we could very well define our degrees of freedom and saw that before really going the next bigger steps, we need to do some more homework, which we are doing this year. And you are well aware, this is the organic growth part, and this year is dedicated to that. So adding new services, adding new reagents, making the company stronger in this regard. And also then adding, well, new resources, which with the arrival of Abdel O'Mari, our CFO, is, I think, a strong sign that the company is expecting here much more and will need very international expertise.

29:12 Aptar has been instrumental in his current company, Paion AG, to develop that further to do all sorts of strategic steps and turnaround situations. So he brings this experience and expertise on board, and this is our preparation for next year's steps. Okay. Thanks, Mariela. Yep. Very good. Turning to some of the presubmitted questions. I think that we can lump a few of them together. They're generally around what's happening with Galaxy and their stroke trial, what's happening with other IP licensing. So I can talk to those issues as the person that generally manages the IP.

30:03 I would say that in terms of Galaxy, part of our licensing conditions with them for the stroke markers was to have an equity position in Galaxy. And whilst we receive updates as a shareholder, they're not in the public domain, and we're not at liberty to disclose those. Having said that, we have not yet been informed of when Galaxy intends to start any of their clinical trials. The issue around the stroke IP, we've already discussed. So as clinical trials start, as products come into the marketplace with our existing licensees, we expect that to generate more interest and more potential for further licensing of that technology.

30:50 We have other IP, of course, around the tandem mass tanks, which are well licensed with Thermo Scientific. They're the biggest provider of scientific research reagents and tools globally. I don't see why we would want to, move away from them. And, more importantly, we have other biomarkers in the Alzheimer's disease space, that we continue to pursue, and we do monitor, what people are doing out in the community. And if we see anyone using products that fall within the scope of our IP, we'll be sure to let them know that we have that IP and offer them the opportunity to license it as well. Of course, that's a very complex field. We don't tend to enter it lightly. We have specialist advisers in the form of internationally experienced patent attorneys that we work with in managing our IP portfolio, making sure that we look to leverage the maximum value from it.

31:52 I think that answers several of the previously addressed questions. And then we also have related questions about technology developments around tryptophan metabolite assays, clustering assays, and other IP around tag development. So, again, I can talk to those just to provide a brief update that the high demand for our contract services this year has really impacted our ability to do internal research and development. So whilst we have several of these assays developed, we don't have them at market readiness, and it will take us, you know, a few months to complete that work.

32:44 And, unfortunately or fortunately, because we're so busy with commercial work, we won't be able to do that likely before the end of this year, but we'll do what we can, and we'll update shareholders towards the end of the year on that. In terms of, other IP, we certainly work continually to monitor, what we're doing in the space with chemical tagging reagents and so on, And we will, again, update shareholders as we have information that we're ready to share with the market. Obviously, we're not gonna tell people publicly what we're doing and give others a potential heads up so that they can get into that space or develop com competing technologies. So we are active in that space, but, again, we will notify people as and when we're ready to do so.

33:34 Okay. We've had some more questions coming in. One asking if there are any major changes in the shareholder register, And can we give a brief summary of the current management incentive program? Mariela. Sorry. So now I'm unmuted. Yes, thank you. Well, to our knowledge, there's no major change in our shareholder base. I mean it's we always are dependent of on we're being informed if someone buys a bigger stake or sells a bigger stake. So we have not been informed. Otherwise, we would have announced this.

34:24 So that seems to be stable. What was the second part of the question, Iain? Something about the management incentive program possibly triggered by the release today regarding Amtel. Yes, yes, yes. Well, the management incentive program, if we are referring to the release today, is outlined there. So it is basically the share options that we are that we will give to our CFO. This the incentive program otherwise with regard to the directors is summarized in the full year results of last year. So I would encourage you to to have a look there. We have a full disclosure there. Thank you. That's that's the best way for people to to access that sort of information is reading the full year. I think we're pretty much at the end of that session of question, and I will hand you back to Mark at IMC.

35:28 That's great. To lead the closeout of the meeting. That's great, Ian. Thank you very much indeed for hosting the Q and A, and thank you everyone for your engagement this morning. Doctor. Mariola and Ian and the rest of the board, obviously, I fully understand that investor feedback is important to you all, and I will shortly redirect investors on the call to provide you with their thoughts and expectations. But I wonder before doing so, if I may, Doctor. Mariola, ask you just for a few closing comments, and then I'll redirect investors to give you their feedback. Yes. Thanks very much, Mark. And indeed, as you mentioned, it's very important for us to receive your feedback, and such meetings are a great opportunity to interact with each other. So having said that, thanks for coming, your time, your interest and your questions, particularly.

36:16 We hope that the exchange was helpful. You will understand that we cannot always give all the details that we would love to give you. But as a public company, we are under certain restrictions as well. And yes, this concludes our meeting today, and we are looking very much forward to welcoming you again in the very near future. Thank you. That's great. Doctor. Mariola, thank you and to the rest of the Board for your engagement this morning. Can I please ask investors not to close this session as we're now automatically redirect you for the opportunity to provide your feedback in order that the company can better understand your views and expectations? This may take a few moments to complete, but I'm sure it'll be greatly valued by the company. On behalf of the management team of PROTEOME SCIENCES PLC, we'd like to thank you for attending today's presentation. That now concludes today's session, and may I wish you all a very pleasant morning. Thank you.