Verici DX (LSE:VRCI) — Interim Results

0:00 Good morning, and welcome to the VERICI DX PLC interim results investor presentation. Throughout this quarter presentation, investors will be in listen only mode. Questions are encouraged, they can be submitted at any time by the q and a tab situated at the right hand corner of your screen. Simply type in your questions and press send. The company may not be in a position to answer every question received in the meeting itself. Have the company can view the questions submitted today and publish responses where it's appropriate to do so. Before we begin, I'd like to submit the following poll. I'd now like to hand you over to CEO, Sarah Barrington. Good morning.

0:28 Good morning, everybody. And I will just move the slides. Thank you. Just was once welcome everybody to, the interim road show, for the first half of twenty twenty five, and also a follow-up meeting, after our financing event, which, closed two months ago. So just as a quick reminder about who VERICI is, we are a kidney transplant company, with three products, two of which converged, commercialized. And we are at a pivotal point that the last financing was enabling us to move from a milestone based company into a commercial growth company.

1:22 We are moving forward on on that. So the company has raised 37,500,000, sterling to date to walk through the, the the all the milestones to get to commerciality. And we have two products, and we'll go through the products in in due course. But the, most recent milestone that we were waiting to achieve, which we did in April of this year, was to gain, coverage from Medicare on our lead products, to Tymia. I'm going to just move forward on that. Just as a reminder about our products, we have three. They're all based on, RNA based technology, and they answer, distinct clinical questions.

2:09 So the pretransplant test, which is known currently as Petra, previously known as Clarava, answers the question how, likely is or how aggressive is the patient's immune response likely to be, when when they get a transplant? This is done prior to the transplant, and this is a product that was licensed off to Thermo Fisher. Tutivia answers the question post transplant. How likely is it that the, patient is having a rejection event? And this is an important qualifier that the clinician needs to intervene, with their therapeutic options. And then with Protaga, still in development, but our longer stage product, answers the question, long term, is the patient likely to be having a rejection event that loses the graft in the face of progression for conditions such as fibrosis, and that is, still, coming out of clinical trials.

3:21 Just as a reminder, when we talk about our technology, why it's a differentiated product, and let's talk about it in the context of Tutivia. Clearly, when you look at the incumbent biomarkers, they're based on a technology called cell free DNA. I'm always saying very casually that that's like measuring the debris in the blood after an event. It's an injury marker, and it is referred to as a later biomarker. We are based on RNA. RNA is like this messaging system of the body, and because we're capturing that, it's much earlier, it's proactive, and we produce a risk score, to enable, clinicians to understand whether the, whether the patient is is a high risk or a low risk for rejection.

4:09 TUTIVIO is commercially available through our direct sales force, Medicare covered. And as I said before, the pretransplant test was licensed to Thermo. Let's talk a little bit about the Medicare coverage and why that was such a important milestone for the company. We got a reimbursement price of $26.50, but it's the coverage, determination that was important. That's when Medicare agreed to pay that price. And there's a, obviously, with with that, any sales that we make both from an accounting perspective, we can recognize the revenue. And from a cash perspective, we now are collecting reimbursement on our tests.

4:57 For transplant, this is particularly important. Nationally, Medicare covers about sixty eight percent of all transplants, and there's a very fast, payment cycle. So you're looking at Medicare straight than the traditional Medicare paying between fourteen and twenty one days. Medicare Advantage, is twenty one to thirty days. That's where Medicare has outsourced some of the administration of, reimbursement to the private payers, and there's about five operating transplant space. And our experience is the blended, average rate for us is about twenty two days. So, when you're looking at, the importance to the company, obviously, this not only enabled us to be fully commercial, but gives credibility.

5:49 Centers were waiting for this pivotal event. It is a long review. We were about one year in review with this, with CMS, with with, MolDX. And, that credibility from the extensive and deep review does matter into the centers, as well as, of course, this is an ease of process. We also found that we had quite comprehensive coverage. We had no exclusions. For example, the nearest gene expression test had been excluded for the first ninety days, and we do have we don't have any such exclusion. Also set suppressants for the commercial payers. Clearly, as the the five main underwriters in transplants are also those that, to the Medicare Advantage, they are, becoming familiar.

6:43 They are understanding that, this is a test that has been deemed to be useful, by Medicare and that sets a good precedence for their own internal discussions with us on a contracting basis. So where have we got to since, funding? You know, obviously, if we look at the first half of the year, you'll see, year on year, we saw a nice, big, steep increase there. And, obviously, for in q three, we got funding. This was enabling us to to, expand upon that previous success in terms of commercial market, and and and funding closed at the end of July. So it's really the last two months. But what we've managed to do, is a stated aim was to hire two new salespeople, incremental salespeople, and we've done that. They've both joined.

7:38 One in August, one in September, and I'm absolutely delighted by the caliber of, of of candidates that we were able to attract. These are very senior, well seasoned, very experienced, people, and and it's showing. We had given, them six months to start making a difference to the business. I think we'd stated that at financing, and I'm glad to say that they've already made a difference to the fund, to the company. So, out of the, the first area to to to focus in on, I think, funding, we had talked about twenty and one more coming on board. So in the last quarter, we've added nine new centers, three of which came from the first new sales hire. So as I said, hit the ground running, from that. We also looked to increase as you, recall going through the cycle of how, centers come on board. They they first find a clinician that's that's very interested in trying it. We bring them on board. We we deliver the kits.

8:45 They then try it. We're looking for the first champion, to to try us out. It'll be at a low level, then you're looking for that recurring, ordering from that clinician, then spreading to the other clinicians into that hospital group, or transplant center, and then each one of those going through the cycle of recurring. And then ultimately, if appropriate to be included into what might be standard of care measures, either very high regular auditing or a protocol. And we, you know, we've outlined the number of centers how they've gone gone through that pyramid of or or progression during that value chain. In the quarter, we did see a 19% increase in the cent number of, additional clinicians that's being able to say we've now moving people through from single, clinician to multiple clinician or in a situation where there's multiple an expansion into that center.

9:49 Was very pleased to see that that's a good, growth metric. And we also looked at our underlying volume and saw that the new and upcoming sites had actually doubled the number of orders in that period, q two to q three. So very encouraging sign. The the volume overall was was consistent with q q two.

10:15 And so we're really looking for indications that we're poised for that growth in q four. And I'm delighted to say that we, you know, we are very confident on that. We also hired a third salesperson who started this week. So we're looking to make that progression, that replaced an incumbent person. So we now have a total of four salespeople, and to support that, in those territories, we need a clinical result. A salesperson goes in, the clinician says, I'm I'm interested, but I want to talk to your clinical person about how I might use this test. That is a clinical support, and that person starts next week, which will add to our existing team, and supporting the sales people out in the field. So all in all, a very encouraging sign in the last two months that, we will be able to, get the growth that we're looking for in q four.

11:15 And as we move forward, have maintained although we were late to the party in funding, we're maintaining at the moment our overall revenue targets for the year, and, with with with it being inspired by the success that hitting the ground running from our, to do new incremental sales folks. So very exciting news. Just as a reminder on the overall strategy for VRCI, why this is quite an exciting opportunity. One always talks about an unmet need and we do do that, but but often, there's an unmet need where you have to also stimulate the market. We operate in as part of this market in the transplant space where the demand is already there, and we recognize that that, demand is not being met.

12:04 And it's, and Tutivia is well poised to to offer a product that can be served in that market. Let me give a little bit more description on that. We were estimated when we looked at all the protocols from the centers that we were, able to, that's on average, there's a weighted average of about 12 tests done per patient. And this go runs from a low level when it's a low risk patient and there's less looking at surveillance, capacity, to a high number of tests when there's a problem, when there's risk to the patient, a high risk patient that has a as a condition that the clinician feels that it's very important to monitor.

12:53 So a weighted average on 28,000 annual transplants of about 12 per patient, over probably an eighteenth to twenty four month period, gives us, when we calculated it, about a 900,000,000 addressable market. If we then look down on the kind of testing that happens, and how patients are being serviced in the current environment, we worked out that it was about a third, a third, and a third. A third were the very problematic high risk patients, where the current technology, is not ideal. It can't as a late biomarker in these early periods, clinicians have reported difficulties in using the technology for an injury biomarker when they're in the very first initial times, or when they have another condition that kind of compounds the answer.

13:50 Let me give two examples of that. Delayed graft function, it happens very, very early on.

13:56 And what it is, is if I can be very colloquial in this description, so I hope no clinicians are listening. But effectively, as we transport, organs, we put them on a glorified, medical grade cool box. It slows down the that's not gonna come out today, of the organ. But it means that they're kind of cold when they'd be put in the, in the body, and it takes a while to, if you like, gear up or warm up, and it's either slow graft function or delayed graft function. They haven't kicked into action yet. And that means that the clinician doesn't know whether the graft is not going to be accepted by the patient or whether it's just delayed. And we have, numerous clinicians and studies that have shown that Tutivia is very, very helpful in this period, where cell free DNA may be confounded because it's a later biomarker.

14:55 Another area is a virus. If you get a PK virus, this actually tells the clinician I've got to reduce my level of

15:05 drug therapy, the immunosuppression therapy. They're very large drugs. I've got to reduce it to allow the patient own immune system to deal with this virus, But cell free DNA, may indicate that there's a problem and the clinician may conclude that they have to increase the level of immunosuppression. We can distinguish. We don't get compounded by that. And again, these are all areas where we have a kind of niche offering of something where the progression into in technology is able to offer clinicians something new. Now we had calculated that twenty six percent of all patients have DGF. This is a very high testing protocol area as well.

15:51 At the conference that we've just been at, we did an informal panel. Most centers are seeing this, rising to between forty sixty percent, and I will come on to why that is in a minute. BK, you can see the percentages there. There are other areas, multiple, organ transplants need to be able to distinguish between the two organs, what which one is progressing. Cell free DNA is a very generalized marker. We are more particular, more precise. Also prior transplants. This is a very logical place, for us to operate in. When you have a second or a third transplant, they don't remove the, non foot, the injured, organ out of the body. They leave it in place.

16:39 And that is obviously shedding off these late injury markers and will confound a test on the new organ. We don't have that issue and so we perform very well. You can see all of that when we toss it out. Obviously some patients have both, but we think about a third of the testing market is on these high risk problematic patients and where we perform very well. And, you know, obviously, the more generalized later biomarkers, do struggle. So that's our entry point. And, for anybody that's interested in listening to clinicians discuss their cases in this area, we have a series on the website called Coffee and Cases. It's peer to peer webinars, but we do record them for anybody's interest.

17:25 We have clinicians who go on and pick an area like DGF or BK, and discuss how they've used Tutibia successfully in their practice and discuss case studies. And obviously this is great news for us in terms of KOLs, key opinion leaders talking to their peers. So, an entry point. It's about a third of the market also that, has been, late or skeptical biomarkers where is it useful? Can they use their own clinical judgment or old markers? And we do see a trend in the market to those centers now starting to look at biomarkers. And one of the reasons is this, that there was a CMS or a government initiative to to increase the number of transplants.

18:14 Transplants traditionally has been seen as a better, cost efficient, better for the patient in terms of outcomes, but better for the healthcare system in terms of the overall bill, as transplant is deemed to be a more efficient use of funds over and above in this years on dialysis. And so CMS was looking to increase the number of organs being transplanted. So 28,000, they would like to double that. To be able to do that, clinicians are being encouraged to take on more risky organs, but not to allow the rejection rates with other quality measures to increase. So there's this balance. And of course, the answer is to do more testing to make sure that they understand they're ahead of the issues.

19:04 And so there's about a third of the market that we think will be now looking towards biomarker testing, and we believe we have advantages in that areas that, you know, because we are earlier and more precise. And I think we can offer some some strong performance in that area. And of course, lastly, there's the third that already are very familiar with biomarker testing and then, you know, are using cell free DNA quite extensively. And then over time, we see clinicians being interested in using our test in that area. So for us, we do have quite a targeted approach to the low hanging fruit, which gives us an entry point to increase the trust and the usage that ultimately will allow us to kind of expand into the other two thirds of the market.

19:55 Obviously, fundraising was important for us to to grow two salespeople, to four salespeople. We do believe that we ultimately, to get national coverage, we would need 12 to 15 people. But this is a good start in, obviously, building out that commercial team, being able to show that growth back to investors is important to us. What about our other product? Obviously, we did do a license agreement with Thermo Fisher. I can tell you that we remain very close with them. We do look at commercializing together. The way have started this year in their pre marketing activities, looking for centers to expand their trials, to do local use cases, and we work very closely with them. We continue to do that.

20:46 And then obviously in the pipeline, we'd have that third product, Protaga, that there is some interest, from both clinicians and other partners in terms of seeing that development. A urine based product, we are looking at and progressing on that platform, and those continue, as planned. So in conclusion, when we look at this product, where I I I want to emphasize my excitement and my team's excitement at this moment. You can feel when a company starts that growth trajectory. We are there, and we're excited that we, we're able to do fundraising to be able to start addressing that and return results. Onto David and the financial report. Thank you, Sarah. Good morning, everybody. So just on the financial highlights, a few things just to pick off on this slide. Firstly, clearly, main highlight being the Tativya revenues, which we were able to recognize in the period, just over 1,100,000.

21:45 We also recognize in the period the final milestone payment from the Thermo Fisher transaction of 750. And the other highlight being post the period being, obviously, our raise in July. It was completed at the end of July raising just over $6,300,000 to sterling gross. That's with our cash or under cash at the end of September, $5,300,000. That all with our expectations gives us a cash runway through to at least '20 second half of twenty twenty six.

22:18 Oops. Sorry. I just wanted to share some insight in terms of how revenue is calculated. It picks up on the questions that has has come in while Sarah was talking. There are six variables that go into the calculation of revenue, of which the only one we have certainty over is the Medicare price. The one that is the the most variable is related to the commercial payers. At the time of doing the projections, and at the time of the end of June, we still didn't have any clear knowledge in terms of where that was gonna land, which then drives the rev the the average reimbursement price below the Medicare price because of the assumptions regarding commercial payers. I can say as we're getting more data on this, that the trend is upwards, but we won't know until really the end of December once we have enough data to be able to say where all these variables are landing and therefore where our average reimbursement price will settle.

23:17 Just moving on to the primary statements. So on the cash flow, we had cash outflow from operations of just over 3,500,000. And whilst we did recognize revenues on Totivia, just over 1,100,000, there was also there was about 800,000 of that had not been received in cash. So that obviously impacted that number. In terms of investing activities, we still continue to spend a little bit of cash on our patents and updating them. And then the financing activities is the cost related to rent and our capital lease payments. In terms of the income statement, we've talked about the revenue, the cost of sales all relates to the Tativya revenues, that's giving a gross margin currently at that price of about 70%. In terms of our expenditure, our largest expenditure continues to be payroll, and we were a team of 15 at the end of end of June. We're currently a team of 18, and with the other individual that Sarah referred to earlier, we'll be up to 19.

24:14 In terms of our r and d spend on the clinical trial and the like, that cost continues to come down. So just over 650,000 for this period, the comparable period to June 24 was just over 1,000,000. And then in the the other big area of spend is on sales support, everything to do with conferences, KOL publications, etcetera, leading to an EBITDA loss for the period of 2,800,000. In terms of the balance sheet, so that trade and receivables, the largest balance there being the amount due or in tests invoice. And our noncurrent assets, the biggest aspect of that is the patent portfolio. And then in terms of the trade payables, those of you who are familiar with the story will recall that that we've continued to carry we've carried for some time $750,000 in accruals being site accruals. This is cost incurred by the clinical sites, which had yet to be invoiced.

25:09 And 350,000 of that was invoiced just before June, so that moved a large chunk from the accruals into the payables line. And then our lease liabilities continue to be lease liabilities on a capital lease and the rental of the laboratory in Tennessee as required by accounting standards. Back to you, Sarah. Thank you. So as you can imagine, you know, we said earlier about the exciting opportunity. We do have an opportunity. We have a runway to address that, And we're looking very much about q four and q one performance to demonstrate that growth going forward.

25:56 So I think it's probably a good time to move to q and a. That's great. Well, Sarah, David, thank you very much for your presentation. Ladies and gentlemen, please do continue to submit your questions, and you can do so just by using the q and a tab that is situated on the top right hand corner of your screen. But just while the company take a few moments to review the questions that have been submitted today, I'd like to remind you the recording of this presentation and with a copy of the slides and the published q and a can be accessed via investor dashboards. As you can see, we have received questions throughout today's presentation. And Sarah, at this point, I'll hand back over to you to run through the q and a, and I'll pick up from you at the end. Thank you very much. And I'd like to thank everybody for the questions. There's nothing worse than having no questions.

26:42 The first one is how likely is European or even global coverage for TUTIVEA given the hundred thousand worldwide kidney transplants? The the answer to that let me just give a little of background about what would have to happen to be able to address a worldwide market. We have started in The US, and we are under clear regulations that enable us to have a one central lamp lab. Don't know what the lamp is. And each hospital or transplant center sends those tests into our central processing. So it is a service. We actually give the test result.

27:28 Long term, should we wish to set move from a send out into a kit format, we would need to go through FDA approval. And we have deemed that not to be worthwhile at the current time. When you look at going abroad, you're obviously, the the markets become more fragmented. So to duplicate that model of having a send out, you would want to put a hub in either in a specialty lab or, you know, in Europe, you've got got a very fragmented market. And it's fragmented not only in terms of national borders.

28:16 The regulatory in Europe is is a little bit more universal. But when you come to market access, which is about how you get reimbursed by each company each country, then you would need to go country by country. So a couple of things that I think if we were going to do that, first of all, I would look to, work with a distribution partner. And secondly, I may well think that it may, be a time to move our test from a service into a kit. And for that, I would need, some investments and some time, and then we could put it through the process. Would I like to do that? Absolutely. Is is the time now? No. I think we should, focus on The US market. So hopefully that answers that question.

29:04 Next question was on about the average price. I I think this may have come in before David's explanation on how we come up with an effective price. But just to, do a little bit of a refresh, nationally, sixty eight percent of, transplants are covered by Medicare, and the rest obviously with private payers. As you know, from some of the more shocking headlines that we had last year or the turn of the year, there is a lot of controversy around the deny deny deny mentality or perception from commercial payers. So when you look at the variables, the six variables that David outlined to get to a revenue position, part of that is saying, what's our effective rate once you take into account private payers who may give you nothing for some of the tests, or make up a number, or pay full full price.

30:05 And so it is a variable that we are still getting more data on. But obviously, terms of revenue recognition, we do wait until we have, collected, on those tests to be able to record revenue. So there is a there's a little bit of lag in the, in the revenue recognition, in the effective price, and being able to do it's it's not just a simple math, you know, one equals, one there. How do you position your tests against tests such as AlloSure? AlloSure is a cell free DNA. Just to refresh everybody's mind, mind on that, AlloSure, is from KDX, by the way. Natera also has their own product, Prospera.

30:54 Those are cell free DNAs. Those are the tests that have a place in the market, even alongside Tutiga in my view. They are later biomarkers. They are injury biomarkers. And if you think about it, if you're looking at a low risk patient where you don't think anything's going on, but you're looking for a biomarker test just to confirm that, I think they have a very strong place to play, because if there's nothing being picked up, then nothing is going on. The problem is that at least half the patients, and maybe more, the clinician thinks that something is going on. And for us to be able to be a more precise and earlier biomarker, something on a different technology that isn't confounded by such generalized infections, other, other organs, other injury, other viruses, cancer, so on and so forth.

31:49 We think that we offer something, refreshingly new and advantageous to the market. And in the clinicians minds where where they think the name, you know, if this the the issues in transplants are less about rejection and management, which they do with immunosuppression therapy, they're actually more interested about how do they finally titrate the level of they say we over immunosuppress. We're worried about other underlying conditions like infection and, cancer. We want looking for tests that can more precisely help us manage the problematic patients so that we get the right kind of dosing. And that is how we see the advantages that we're bringing in that step up in technology as being highly competitive and differentiated.

32:39 So hopefully that answers that question. With 30 centers onboarded, but flat q three orders, how soon do you expect new sites to translate into higher tests? So thank you for that question. Yes. It does take a moment, for, onboarding to happen. So onboarding for us is where the center signs up, says, yes. I'm interested in using your test, but now I've got to go through my internal, logistics. We deem someone onboarded once they're in a program that we call LifePoint. It's our customer portal. And for testing, you for receiving orders and issuing test results, there are multiple ways we can do that, but we do have our own portal.

33:27 So we like to register each center, each clinician into that portal, and they have received collection kits. So they are ready to go. Phlebotomy has those collection kits, so when they place an order, they can send their patient down to for a blood draw and then it can be sent into our labs. Then there is the process of ordering, and sometimes it's getting into their own systems. Sometimes, SendOut needs to approve it as a test. That's usually a pathology department driven decision. That may be a monthly meeting. It may be something that we can do earlier with our own mobile phlebotomy. There are various components to that. And then obviously, we have the progression when you're talking about higher, testing volume from those where they have placed orders. We are trying it out, and now they're saying, actually, I'm I see a place for this.

34:24 We see that taking months very quick in some centers, very long in in others. But I would say that we would be seeing progression from all 30 of those centers in q four. So hopefully, that answers. Obviously, the the the equation on how to get to high volumes from something that's been onboarded may be going into next year. What is the company's understanding of the numbers that we continue to to market expectations for the full year? 3,200,000 was the expected revenue for 2025, and we have not changed that for Tutibia.

35:15 Why was the fundraise delayed? Yes. We were waiting for regulatory approval, from the tax office, and that took, way longer than it ever has done in the past. And it took us a while to get that before we could pull the trigger on the funding. It was frustrating to us all. And the company had to go a little bit into into a holding pattern at a time when we really wanted to get on and be growing the business. So, yes, I agree. It hurt everybody and it was incredibly frustrating. I hope we never have that again. Any chance of a tie up with Tempus?

36:05 Obviously, I couldn't talk to that. It's an interesting piece of news from Reno Netics. I'm delighted for them. That's a great platform for them. But obviously, that's a separate company. And any kind of associations and tie ups and deals that we that we would do as an individual company, obviously, we'll announce as they they arise. I think we've come to the end of the questions. Perfect. Well well, Sarah, David, thank you very much for answering those questions from investors. Of course, the company can review all the questions submitted today, and we will publish the responses out on the Investor Meet company platform. Just before redirecting investors to provide you their feedback, so it's particularly important to you both, Sarah, could I just ask you for a few closing comments?

36:57 Yes. I will pick up on the delay in fundraising. I will say that I was delighted that we could, be successful in that and that we have the opportunity now to lean into wonderful opportunity for this company and this product, the lead product, to address a very large US market. And I'm looking forward to delivering some real growth numbers going forward and into next year. So very exciting time, a pivotal time for the company. And I'd like to reflect the excitement of the entire VRCI team saying we're delighted for the support that we got from our shareholders, and, we look forward to growing this company, over the forthcoming months.

37:47 That's great. Well, thank you once again for updating investors today. Could I please ask investors not to close the session? It should now be automatically redirected to provide your feedback, and all the management team can better understand your views and expectations. Apart from the management team of VERICI DX PLC, we'd like to thank you for attending today's presentation, and good morning to you all. Thank you. Good morning.