Verici DX (LSE:VRCI) — Business Update

0:00 Good afternoon and welcome to the VERICI DX PLC business update. Throughout this recorded update, investors will be in listen only mode. Questions are encouraged and can be submitted at any time by the Q and A tab situated in the right hand corner of your screen. Just simply type in your questions and press send. The company may not be in a position to answer every question received during the meeting itself. However, the company can view all the questions submitted today and publish responses where it is appropriate to do so. Before we begin, I'd like to submit the following poll. I'd now like to hand you to CEO,

0:34 Welcome everybody. Thanks for attending. This is the half year results and business update. Obviously, there is our disclosure slide. I'd like to kick off by presenting the slide that I have presented before and then showing how we are translating this into our current view of the business. So this has been our vision slide for how we operate with the company. You can see the kidney transplant testing, the suite of products being pre transplant, Plaratha, early stage damage post transplant, Trutivia, late stage Protaga.

1:24 Collectively, those three tests have covered the end to end spectrum of testing in kidney transplants and we have always maintained that there would be a movement from individual tests to more of a solution based offering as we look at the integration of those three tests. Collectively and with other programmes, we have called this the Clinician's Platform and indicated that each area of those tests are and will be developed as applicable to other organs outside of kidney, the usual transplant organs of heart, liver and lung, and can be applied and extended into adjacent diseases such as autoimmune.

2:22 Behind that, we've talked about a research asset from both the physical samples that we generated as well as the data associated with that. If you recall, we sequenced that's the entire transcriptome, that's a wealth of information, so we have a big data aspect to this and we have been referring to that as the research asset. I'd like to reframe that vision picture to reflect our new stage of company which is very much focused on revenue generation and to demonstrate how that is now in three main revenue generating centres.

3:16 Let's start off with Clarava, the pre transplant test. As previously disclosed, that was subject to a licensing arrangement with Thermo Fisher and we will give them update on that, but you can see that aspects like that will be held under licensing revenues. Direct revenues reflect the next commercial product, Tutilea, that's early post transplant, and that is subject to our direct sales force. That is where we offer it directly to the company, and obviously building on that is a centre that we'll call direct revenues. Obviously with a pipeline of products, we've covered that before, we will give an update on status on that, for example Protaga being the late stage, we have a choice whether that is offered through the licensing revenues model or with the direct.

4:22 So that to be determined is not uncertainty, it's choice. So Again, those will feed into the centres of direct licensing. Then thirdly, the third source of revenue is what we're calling the services business. That research asset, that cloud we had shown before, that is now being grouped together and offered to the market as a services business, and we'll give an update on that as well.

4:58 Let's start with the licensing revenue center. Back in November 2023, we discussed that we had signed an agreement with Thermo Fisher for the pre transplant test, that we had a number of milestones attached to that and David will give the numbers later on in the presentation, then there will be an ongoing royalty stream. That's the structure of the agreement there. The update is in the first half of the year, is that we have completed that transfer. So, the test is now up and running in Thermo's labs and that successful transfer was subject to major milestones within that structure and those have now been achieved.

5:52 Underlying that, Thermo have been focused on gearing up for their commercial launch that will be announced in due course, but what we did see is obviously this being introduced to the clinical community at a major conference which was called ATC and that was done in June. Looking forward with that agreement, we have some minor milestones to be achieved at the rest of the year and into next and those are mostly subject to the launch plans of Thermo. We can report that we are on track and we're focused on those for the rest of the year.

6:43 Direct revenues, this is Tutivia. Tutivia is the early post transplant test and we have now three sales people in our team that are focused at both opening new centres and exploring what we call recurring repeat ordering within those centres. We're now increased to 15 ordering centres and we were able to, at the last conference, present new data in this field, a new subgroup called DGF, delayed graph function patients, where it's an unmet clinical need in that area and the presentation of the applicability of Tutibia within this subgroup was very well received and has resulted in an increase in orders behind that.

7:38 The timing of the revenues in this area are subject to our coverage determination that we expect towards the end of the year. So whilst we are not recognising any revenue at the moment, due to this process or being in review in this process, the technical assessment for our process requires you to hold claims. We do expect to be able to submit all of those claims at the end of the year with the coverage determination and retrospectively be able to record that revenue. That way we should be able to recognize the revenue in 2024. We've now completed all states under the clear regulatory process.

8:25 New York State has some additional steps and data presentation requirements. We have completed those and that is now submitted into New York State for review. We did expand the commercial team. We now have a total of five, three sales people and medical affairs, and we're also looking at deploying those for the rest of the year and into next year hiring in terms of reaction to increased volumes that we would expect next year. Very much the investment in the sales force this year and then any increases being in response to an increase in demand.

9:15 Key opinion leader educational program is part of the increase in clinical awareness and outreach to the clinical community. Key opinion leaders being able to explain our underlying technology, the applicability, use of Tutiva and sharing their experience is an important component in being able to get widespread adoption of our testing. The patient outreach was

9:46 completed with the patient journey that was launched formally at the transplant games in July, but this is an educational tool that enables patients to navigate and understand their process all the way from the initial diagnosis of kidney disease through to completion and maintenance of the transplant. This is something that in conjunction with centres is an offering to patients to be able to understand their journey and the requirements of the transplant interaction with their teams.

10:30 Other revenues in terms of product development, we spoke at the beginning of the year about Protago, our third product in the core testing. We have completed the twelve month visit and we do expect after the data cleansing and analysis to be able to issue a test out into the market in terms of validation and performance in the first half of next year. So, we continue to be on track with that program. We did in fundraise request funds to be able to be applied to expanding that cohort right into the twenty four month visits.

11:17 So that clinical trial is now going to cover the twenty four month period. That will be added to the test offering and provides us with a more robust test offering in terms of long term outcomes. Are the programmes funded and in the pipeline? Are the urine programmes, applicability to other organs, etc? All of those are expected to yield products in the medium and longer term, and all of those programmes are on track. Turning to our third source of revenue, which is our services business. We did complete the transfer of the urine samples per the agreement, some of that recognized last year, some of it this year.

12:08 That is now complete

12:10 and fully recognised. We've also announced a collaboration based with an academic institution in Sydney, Australia. This is grant funded and enables us to demonstrate the ability of our tests being deployed internationally and within the environment of both education and standards elsewhere in the world. It's a very exciting collaboration. We do have other opportunities in this area and they're all at various stages, but recognizing that we're having both a lot of interest in this area all the way from testing with lab capacity all the way through to the team's expertise.

13:09 This enabled us to turn and look at outbound activities, and we do have a dedicated sales resource now employed in this revenue center.

13:25 Market trends to be aware of, some of you may have noted the FDA did extend its oversight into that developed testing into our area of testing from the CLEAR process. That oversight was expected as VERICI is fully compliant and is able to offer the TUTIVIA test without any disruption. Future phase rollout has an increment with the New York State process. The FDA are using that as a proxy in their oversight and obviously we are fully submitted there and will simplify any future compliance needs.

14:17 On the reimbursement front, we are, as noted, we submitted our application in Q1 of this year and we are in an active review process and are on track to meet the expectations of the determination before the end of the year. Industry wide, we noted last year that MolDX had given some guidance in terms of the interpretation of the LCD that had caused some confusion. They did withdraw that guidance and instead turn to a process where they would amend and solidify that into an LCD.

15:05 We are expecting that this summer. We do have plenty of scope to be able to incorporate any unexpected changes within our process, but guidance says that it will be very much in line with the guidance they already gave, and so we are not expecting any additional requirements.

15:30 If they are some, we obviously have a process in place to deal with that. David, can I pass over to you for the numbers? Thank you, Sarah. Good afternoon everybody. Pleasingly the six months saw us record £3,300,000 of revenue, that's revenue across our licensing business and the services business that Sarah has just spoken about. Our EBITDA loss for the period was £1,100,000 again referencing our tight control over costs. Cash balance at the end of the month, at the end of the six month period was £7,000,000 That was obviously augmented by the successful fundraise in February, which raised the net amount of £7,500,000 And therefore, that cash balance and our assumptions for revenue for this year and beyond, we still remain view of that on-site of cash going into 2026.

16:26 Turning to the primary statements, so the cash flow statement for the six month period, cash outflow from operations £3,200,000 notwithstanding the fact it was a £1,100,000 EBITDA loss for the period. We received 1,500,000 of the revenue in 2023, which was recognized in this period, so that impacted that cash outflow number. Minimal spend on CapEx and the £7,500,000 net amount raised in February. Turning to the income statement, 4,400,000 spent on expenses in the period. Our two biggest expenses remain staff costs and R and D expenditure.

17:12 On staff costs, we started the period with 14 people in the business. At the end of June, we had 19 people in the business. That was three additional individuals hired into our commercial team and two individuals into our bioinformatics team. Again, of those were as expected and as outlined to shareholders at the time of raising funds in February. And then finally to the balance sheet, we have a large receivable of £1,500,000 at the end of June. This reflects the invoice that was issued to Thermo Fisher in June. And then on the payables we continue to hold a prudent amount in terms of site accrual costs. This is our estimate of costs which have been incurred by both sites as part of clinical trial that have yet to be invoiced and that amount is currently standing at £745,000 Thank you, back to you Sarah. Thank you.

18:09 So very much a message of on track and expanding, and I would like to take a moment just to walk through the summary of the company. So far, in the four years since the IPO, we have obviously had a strong track record of delivering on time and to expectations. Part of that is that we have commercialized two tests, so being through the product development, validation and right away through to commercial. One being the licensing opportunity with the pre transplant and the other one representing the direct revenues. And obviously, we have a clear pipeline of subsequent products, which we can be offering to either the licensing or the direct revenue lines.

19:04 Those diversified revenue streams also include the services business, recognizing that there is value not only in our underlying tangible assets, such as samples of the data, what we have been referring to as the research asset, but also the expertise within the company and the team giving a rich opportunity to have collaborations with other companies, other institutions, both in research and commercially, either on a fee for service or in a more grant funded monetarization. That obviously gives the company a little bit of security in terms of a diversified we're not a one product company, we're not a one source of revenue company, and obviously that enables us to expand on multiple fronts.

20:04 We do have a large addressable market. What is interesting is we had previously done our market sizing, particularly for the Tutivier assuming that it would be two times a transplant patient. This has proven to be in our experience in the marketplace very conservative and perhaps over conservative. We are seeing that the numbers of testing being anywhere up to monthly and that is obviously a much higher multiple on each transplant patient. We do offer, it's a hackneyed phrase, the next generation of technology, but it is true. So with the RNA signature approach, we're able to offer technology that is more personalized, is more proactive and in fact is able to be offered where there is still unmet need in the marketplace.

21:07 That has been extended to our other products where, for example, Clarava, there is not another similar offering, same as Protada. And so at each point, we are addressing in a very large addressable market that critical need. It's not just enough to do product development within healthcare. You also have to understand you're operating within quite a structured regulatory and complex reimbursement environment. That is something that we're at in advanced stage, almost a completion with the regulatory with New York State and obviously in the last stages of coverage with Tutivia under that LCD process. So all in all, as we're looking to expand going forward, we have now moved from just a product development company into one that is quite clearly focused on revenues.

22:04 And I think if you're looking at a growth of a company, that is what I would call Stage two. Out of pre revenues, we're now into revenues and building up that and obviously looking forward to the third stage of in the future profitability and cash flow breakeven stages. So definitely firmly in the revenue, that's how we're seeing the company, that's how we're driving the expansion. So we do aim to be at the center of RNA signature testing and are poised very well-to-do so. That concludes my presentation. Thank you. Perfect, Sarah, David, thank you very much for your presentation. Ladies and gentlemen, please do continue to submit your questions just by using the Q and A tab which is situated on the top right hand corner of your screen.

22:50 But just while the company take a few moments to see those questions that have been submitted today, I'd like to remind you that the recording of this presentation along with a copy of the slides and the published Q and A can be accessed via your investor dashboard. Sarah, at this point, if I could maybe just hand over to to read out the questions, that'd be great. And then I'll pick up from you at the end. Thank you very much. We're getting questions on obviously short term catalyst for share price appreciation, obviously, I think that really refers to news flow for the rest of the year. Obviously, the key aspects that I'm sure folks will be looking out for is the formal launch from Thermo on the Clarava, more news in terms of conclusions of the LCD process and year end figures on the results of the direct revenues approach and any other kind of announceable information that we'll be able to make on the services business.

23:56 Not all of those will be announced for and that may be a discussion at year end, But I would say that those are the major catalysts moving forward, very much revenue focused there. What are the next steps with regard to timescales? How near are you to commercialization?

24:18 Hopefully, this presentation was helpful in terms of saying that we really are in commercialization right now. We're very much in terms of looking at the business from a revenue center perspective. So obviously, the licensing we've had

24:38 we've completed major milestones there. That's well underway and close to completion. Now it will be into the launch from Thermo. On the direct scales, we have I think it's almost doubled our centers in this period, and we continue to expand in that area and gain traction there. Some comments on delisting. Yes, I'd like to address that. Can't talk for other companies, obviously, but I do note that many of those were because of funding requirements and clearly we closed around this year in the period.

25:26 So that's not really a direct comparison. I would like to say I remain a huge supporter of Amos and Exchange. I do believe it has a unique role in the world and it's one of the reasons that London has been in the forefront traditionally of being a financial center. I would like to see AIMS fully supported, maybe even expanded and I remain committed to supporting it going forward. So hopefully that answers that question. Competition. There's different comments about competition as we think about each program.

26:16 So we have in the end to end testing, the best served part of that journey for patients was in the first year post transplant and that is what we've offered with the Trutivia test. Now, in terms of competition, we offer quite different technology and an advancement in that area. It's a hackneyed phrase to say that you're the next generation, but I do believe that that's appropriate in terms of looking at our approach to that area. There were a number of areas within that testing that the competitors were not addressing and we do. And to that point, I think we had some very clear differentiation and we're priced competitively and we're seeing that in the adoption of the test.

27:12 The other two products in that end to end, the pre transplant, If I can just take a step back and say pre transplant has been there are three aspects to the transplant equation when you're looking at rejection. There is the patient, there is the organ and then there's the compatibility. It is the compatibility that has been best served to date. There has been some measures of tests over the organs but what had really not been addressed was the patient themselves. That is what CRVA does. It answers the clinical question how aggressive or benign is the patient's immune system likely to react in the face of an organ and therefore was unserved. So if we say that there is no competition in that area, it is because it's a novel offering to the market and there's a huge amount of interest from the clinical community in seeing such a test.

28:15 Protag is the same. Long term outcomes are very poorly served in the environment. Fibrosis is a well known condition, not only in kidney transplant but other organs and other disease states. It is basically scarring of tissue and to long term failure. The question there is, are you progressing at a slow or a fast pace there? Will it lead to rejection? Are you likely to lose your graft in five years which is problematic or will you keep it for thirty or forty years which is the ideal? Clinicians don't have a good risk based assessment tool there and therefore when I'm saying Protalor it also doesn't have competition, it's because that is a unique offering and therefore is of interest. So hopefully that answers the question about competitors.

29:19 I see that there is some questions about market sizing. I just want to return back to that point. If you recall in previous presentations, we have put the testing kidney testing market about £5,000,000,000 That looks to be too conservative because it was based on Tutelia being run only two times, and we are seeing anywhere up to, let's say, nine times monthly after the first quarter post transplant. But there is a variety of protocols. Each center has its own protocol, but it looks like two times would be overly conservative. I've always said that when you get into the billions and you're saying, do I have a large addressable market? The answer is just yes.

30:10 It is large, it is addressable and I think one of our nearest competitors value the kidney transplant market at about £10,000,000,000 and they're probably baking in the increased amount of testing that there is done, but hopefully you can see that there is some very large revenue numbers to be had there. What steps have been taken to make the Thermo Fisher agreement a success? I think this is an opportunity to give a shout out to both teams. To successfully transfer technology from one lab to another requires a high degree of cooperation and a sharing of information and to do it to time, when everyone's got 100 other priorities, a testament to how focused Thermo and their interest in being able to offer this test. We remain good friends.

31:18 We have a good working relationship with Thermo. We'll continue to support that team and we were thrilled at the efficiency of both teams in getting that transferred. As we move on, we had talked about supporting them commercially with some joint presentations. Those have happened and you should see news of where we jointly offer some educational programs. So there is a lot of reason to work together. The base technology of RNA signatures requires a certain amount of education and discussion in the clinical community. Obviously, with pre transplant are going to be interested in the post transplant and vice versa.

32:05 So, what we are seeing is a high degree of cooperation and sharing between the two teams and that continues. I've asked for more details on the collaboration with Westmead Institute and other potential research partnerships. The research with the Australian group was important to us for many reasons. One, it proved that we would be doing collaborations with high profile academic centres, not only in The US and Europe but beyond, and I was thrilled to be able to give a nod to that international community.

32:53 The details of collaboration is that the government were interested in understanding, genetic based testing within this environment and how that could be incorporated into national healthcare and bringing on the new wave of education to the up and coming nephrologists. So that's it. They funded this very large study and we are part of that. So the results for that is that we are recognised and tested within the government environment and also one where the education of the new generation of nephrologists will incorporate the results of that testing. So very important all the way around and the Westmedia Institute is an organisation that we're very proud to partner with and they were actually in our clinical study and they have a number of high profile publications themselves.

33:52 I felt that this was a very high quality example of a collaboration in the research environment with academia. The problem with research is everybody wants to keep it quiet. It's commercially sensitive and we have the same issue which is one doesn't always want to reveal what you're developing, what the pipeline is and the details there. And so where we are doing research partnerships and we're not always able to disclose what they are, RNS contracts, etcetera, because of the sensitivity.

34:39 Where we are able to, where there is mutual interest in publicizing those collaborations, we will and I hope to be able to do something in the second half of the year around that. But by and large, that is not an area where we'll be highly disclosive, but obviously those will come into our figures at the end of the year. Next question is I am sorry, I am actually struggling to read that. What strategy are you in place to further increase the adoption of DetermaVu in transplant centres across The US? I don't think we need to change our strategies at all.

35:31 We understand, first of all, there is the ability to recognise that when you're going into a new centre, there is not only a clinician and a transplant team education, there is also a logistical element to it. It's what we used to call the easy button. Then there's also being able to go through a process to make it on the list of approved tests for send out, for phlebotomy, and also within their IT systems. So that is all encompassed in what makes a centre an ordering centre.

36:18 We have been working on that and have successfully opened 15 centres. Within that then there is a focus that you don't want to spread your team too widely just in opening centres. There's an amount of follow-up and encouragement to increase and to look at recurring revenue and that ordering from the clinical team has a certain amount of habit forming. Is it easy to order? Do I know what it is? Can I understand where I'm using it with my patient care so on and so forth? All the way up to being fully baked into the IT systems and ultimately into protocols.

37:03 That's the approach there. For us, we've asked for an investment in expansion of the sales team. We've divided into territories. We have the original business development person working on that recurring revenue, setting up a model for what really helps clinicians feel comfortable with the test and putting it into their business as normal in terms of testing for patients. But we also have made an investment into the new salespeople. We'd like to see those build out into their territories. After that point, we have said we would hire in response to increased orders and be able to meet the demand with additional salespeople and that would really be the strategy, which would be to build out that sales team until we've got national coverage and to extend beyond our initial target of centers into the full 180 that eventually we want to get to.

38:11 What is the long term vision for VRCI in terms of the product portfolio and market presence? Hopefully, that's been covered with the presentation today. I believe that we have offered up a vision where we started in kidney transplant testing, proven out the technology of RNA signatures and product development and validation, the utility of that testing within a discrete area, kidney transplant testing. We then said then you're able to sort of widen that field and you build upon your own success. We've had two successful products, a third on the way.

39:00 Those products are then translatable to other transplant areas and ultimately this idea of using the recognized expertise of the company and the team in terms of doing this product development and development of RNA signatures which are widely applicable. We've seen them, we've suggested that adjacent disease groups could be in the autoimmune but in fact it can be used very, very widely, oncology being a big area. So when we say right at the end of this presentation we aim to be at the centre of RNA signature testing, it is a big new wave of technology that's being offered in testing in the medical community and at the moment we are demonstrating not only our success in validating signatures to be products, but we're also demonstrating that they have usefulness and that they are adopted commercially with all the wraparound in terms of the regulatory and reimbursement.

40:10 And I do believe that we are well on our way for a long term vision of being an RNA signature company. But that's not built overnight. We've always demonstrated how we would focus and build upon success so that we don't get ahead of our skis. I believe that we have delivered on that and we continue to deliver on that. Over time, we'll be able to address and widen the disease groups for a long term vision. Perfect. Sarah, I think you've covered all the questions from investors. Of course, the company can review all the questions submitted today and we'll publish those responses on the Investor Meet company platform.

40:56 But just before redirecting investors to provide you with their feedback, which is particularly important to you both, Sarah, could I just ask you for a few closing comments? Thank you. I'd actually like to in the period, obviously, we did a fundraise and investors permitted us to really invest in acceleration of previous success to other product areas. It was a very successful fundraise when in a time when market conditions are perhaps not that conducive to raising funds. I'd like to thank the shareholder base for their ongoing support. I'm looking forward to reporting on that continued success at a faster pace, and we're very excited for the rest of the year.

41:46 Sarah, David, thank you once again for updating investors today. Could I please ask investors not to close the session, as you know, redirected to provide your feedback in order that the management team can better understand your views and expectations. This will only take a few moments to complete but I'm sure will be greatly valued by the company. On behalf of the management team of VERICI DX PLC, we'd like to thank you for attending today's presentation and good afternoon to you all. Thank you. Good afternoon. Thank you.