Fusion Antibodies plc (FAB) Earnings Call Transcript

Good morning, and welcome to the Fusion Antibodies plc Investor Presentation. [Operator Instructions] Before we begin, I would like to submit the following poll. And I would now like to hand you over to CEO, Adrian Kinkaid. Good morning to you.

Thank you very much, Alex. Thank you very much, everyone, for attending. Stephen and I will do our best to take you through the presentation. It's probably worth pointing out for anyone who doesn't already know that the financials that for the year ending 31st March 2025 are going through the audit process, as you would expect. So we can't comment in any more depth than we've already said in the trading update on the financials themselves. So Stephen will have an easier time of it today. But the company is going through a really exciting time. So we certainly wanted to expand on the points that we put out in the trading update and explain more about what that means for the business going forward. So much of the presentation today will be focused on that side of things. So without any further ado, I will move us forward. There is, of course, the matter of -- the usual disclaimer that I will take it that everybody has read. And for anybody who's not familiar with Fusion Antibodies, essentially, we are a contract research organization or we sometimes prefer to call it a collaborative research organization, offering services to do with antibodies right the way across from their first being identified, in other words, discovery of the antibodies, making them the best that they can be in what we would classify broadly as engineering them, so that's molecular biology to tweak the sequences and change the characteristics of the antibody themselves and then supply. And for us, supply is research quantities of antibodies for research purposes, so not to go into people. But we do develop stable cell lines, which can then be taken on through appropriately regulated manufacturing processes to produce the final antibody that goes into clinical trials, for example. And then that cell line becomes the production cell line if and when the product is approved, for example, as a therapeutic. In addition to the therapeutics, which make up the vast majority of our client base and project areas, we are seeing much more traction, particularly with diagnostics applications. So we also do these antibodies for diagnostics reasons, which changes the kind of things that people are interested and want to see from the projects that we deliver. But it broadens our appeal in terms of the industry. It's not just therapeutics, it's increasingly being diagnostics as well. And in addition to that, there's even research antibody providers who have an interest in the kind of things that we can do. So as well as the integrated process going from discovery through engineering and into supply, we do allow clients to dip into the different precise sort of subprojects that they might want to use. So it doesn't have to be the whole integrated process. Obviously, that's better for us. It's more work. It gives better for the client because it gives us that more collaborative approach and better results at the end of the day. But we can allow and we do a lot of smaller projects dipping in and doing one issue at a time. So I've mentioned diagnostics companies. Obviously, the therapeutics come in lots of different shapes and sizes. There's biotechs, there's large pharmaceutical companies. There's virtual companies are just starting out. Research institutions might be interested in getting proof of principle on a particular target, a particular biological pathway. And they often spin out into other companies as well. Matched with that academic centers, much more focused on the educational side of things, but again, a good source of spinouts, et cetera. And then the final point on this slide that I'd like to point out is that it's not just humans. Obviously, human therapeutics are very significant, but there's a huge industry also in veterinary medicine, particularly for companion animals. So I'll talk largely about things like humanization. We can do caninization, which makes antibodies suitable for dogs or felinization for cats as well. So the other things that we do and deliver for our clients is essentially giving much less risk profiles, much reduced risk profile and accelerate that project going through because we're ready to hit the ground running. We have an excellent team of scientists who really know what they're doing, lots of experience developing these -- the processes that we use, which are very well documented, very well adhered to so that we know that we can give the absolute best efforts rather than feeling our way as people might have to do for their first sort of projects. So we're experts ready to be brought to bear on anybody's projects in the field of antibody discovery, engineering or supply. We do use -- area of interest to a lot of people. We do use appropriate levels of AI/ML to help us in that. So we are very much at the cutting edge and balance out the advantages of machine learning and those rapid data manipulation techniques, but retain also the intuitive expertise that is built up over a lifetime of dealing with antibodies and getting the best possible antibody for the job at hand, be it therapeutic, diagnostic or a research antibody. Stephen, would you like to introduce yourself and just go through the financial position?

Thanks, Adrian. So by way of introduction, my name is Stephen Smyth. I am the Interim CFO of Fusion Antibodies. And as Adrian commented at the start of the presentation, we are currently going through our annual audit process, so are somewhat limited in what we can talk about today, namely what we have previously released in our trading update. So a very quick presentation today. We will be back, I think, in August with a much more robust financial presentation. But for today, the highlights are unaudited revenues for fiscal 2025 of GBP 1.196 million (sic) [ GBP 1.96 million ], so a hair under GBP 2 million. That compares with GBP 1.14 million for fiscal '24, a 71% increase on the previous financial year. The equity fund raise that was announced on the 18th of March raised approximately GBP 1.17 million before costs. The cash position at the end of March was GBP 400,000 that compared with March of 2024, where it was GBP 1.2 million. We do have some timing issues that sort of largely explain the delta between the 2 years. So of our GBP 1.17 million raise, GBP 570,000 of it actually came in after the year-end and also our initial FMI grant payment was also received after year-end. So they are not reflected in the GBP 400,000 figure. Again, a very short presentation, but we will be back with more when we're cleared to do so after our audit. Adrian?

Thank you, Stephen. So anyone who's not familiar with the FMI grant, I will expand on that a little earlier, but there's RNSs around it already. It's a brilliantly constructed grant that is of tremendous value to the business. And as Stephen indicated, that was -- the cash position there was without that initial grant payment. I can confirm -- we have confirmed that, that payment is sitting in the bank now. So coming back to what we do and the technical side of things and how we position ourselves to recognize these revenues from all of our customers. What we're trying to do particularly is drive the growth of the discovery services. So if you look at the column of lozenge shapes in the center, essentially, that's the journey that an antibody discovery program or a typical one might go through, starting with the blue ones and the scientific evaluation, the antigen design, et cetera. And then you get to the meaty part of actually identifying an antibody, which is the platform selection and the antibody screening. So that's the bulk -- the blue parts of the discovery process. And then we go into development, which is the engineering and indeed the supply elements of what we've got. So the first thing to get across here is that if we can capture a project, if we can capture a client's interest in working with us at the discovery stage, we can then hold on to them into the development stages. And that's really the fundamental principle behind the integrated antibody services, be that for therapeutics or diagnostics. So what we want to do really is give a real reason why people would want to work with Fusion, not just that we're really good at what we do, and we can do the same things as other people, but we want to give them a USP, a unique selling proposition that differentiates us from other people. And that's where the engines, the discovery engines come in. So we have an AI/ML-Ab approach using AI/ML algorithms combined with our antibody display mechanism, the mammalian display platform which is 1/2 of OptiMAL. So there's mammalian display, which puts a fully intact antibody onto the surface of mammalian cells, and we screen against that. And it's really a significant advantage from scientific reasons because you're looking for what you want as the end product. You're searching for a fully intact antibody, and you can screen by actually binding your antigen to those antibodies. They stick -- the best ones stick to it, the ones that you're not interested, don't stick and then you separate them out physically. So the, mammalian display capability is really important and differentiates us in doing that. We're not the only people that have mammalian display. But so far as I'm aware, we're the only people that offer it at the scale that we do. And by having that scale, it means that we can bring our Opti design of library of antibodies, sequences of antibodies to bear. And the Opti part is the second part that makes OptiMAL so important and attractive. Now if we put the mammalian display part aside, you can use the Opti sequences and the rationale behind how those antibodies -- that antibody library is put together in a different format, which is known as Phage display. Phage display can only handle fragments of antibodies. It's just not capable of representing the fully intact antibody. You need mammalian cells to do that, but Phage display is widely used. So we've taken the Opti part to make OptiPhage for those people who want to discover fragments. So they're kind of our engines that we're developing to differentiate the business to give a real hook to clients in the discovery phase and then hope and expect to keep those through the engineering and supply phases of what we offer. So it's really important for the development of the business. Now OptiMAL, combining both the Opti library and the mammalian display is our flagship platform. And part of the trading update, we announced or updated you on the latest position with regard to an agreement that we have with the National Cancer Institute, which is in the United States with -- we have an agreement for them to do validation work on OptiMAL, essentially using it against some targets of their choice and agreed number of -- agreed targets. And they will use it in [ ANGA ], and then we will work together to basically validate that process. The NCI, National Cancer Institute, part of the National Institutes of Health in the U.S. Really, we couldn't ask for a more prestigious, more knowledgeable and more expert partners to be working through this process on. They're very keen to not only generate antibodies for use in cancer therapies and diagnostics as well. But also they are very keen to publish to just talk about best practice. And so they're excellent partners provided, of course, the validation process works. So just as a reminder, the Opti library design really closely models the natural human immunome, the way human beings make antibodies. And it was that really the initial design that intrigued the NCI when combined with the mammalian display. The design in the Opti library gives us an absolutely enormous mind-blowing diverse repertoire. So it's one with 45 zeros after it, which would take quite a long time to write out. So we call it 10 to the 45. Now when we sample from that, we're doing libraries of 100 million to 1 billion different antibodies at any one time. So that would be 10 to the 8 to 10 to the 9. So far as I'm aware, no one comes even 1% close to offering that scale of mammalian display as we do. So the mammalian display is presenting multiple copies of that fully intact antibody on the surface of a mammalian cell. And one of the other important things for that is that it pre-filters for what's known as manufacturability or developability where the antibody is required to be made in mammalian cells. So if there is a problem with a sequence that means that it's more difficult to express, we're essentially filtering that out. So we're combining the discovery elements with the developability. Is it really going to be a manufacturable product upfront? And the feelings that we've got, the market intelligence that we've got out there are fully supportive that, that is seen as added value to clients looking to get particularly therapeutic antibodies. Now the NCI have identified, so this screens that they've run in their lab showing that they have identified a significant number of positive cells against the various targets that they've looked at. And Fusion have reproduced those findings. So we've got this confirmed in 2 labs that cells indeed are positive. Now another thing that, that demonstrates is that our technology, the OptiMAL technology platform can be moved into an independent lab, somebody else's lab where it can be run and run successfully. And that demonstrates that we have the propensity here to license out our technology to other companies pharma companies, for example, and it shows that it works in that way. So it can be licensed out. It can be run in other labs. It's not just something that only we can do, and therefore, we represent a limit in terms of capacity for using it. It can be made much more widely available. We're not going to constrain the uptake and therefore, the commercial value of this platform by only running it in-house at Fusion. So where we're up to with the NCI is that Fusion are sequencing the DNA from those positive hit cells and subcloning those and then resynthesizing fresh antibodies made new and independent of the producing cells that are encoded by that antibody -- by that DNA. So that's quite an involved process. It's -- we've got a good number of hits that we want to process through that. So it's going to take a bit of work, and that's one of the reasons -- the main reasons why we did the fundraise in March. So where we are up to is that we have now demonstrated binding for a resynthesized antibody from OptiMAL de novo. It's a new sequence, it's a new antibody that has come out of the Opti library in the mammalian display platform that makes OptiMAL and it works. So resynthesized means that it's not to do with the cell, the peculiarities of the cell, it is the antibody that is causing this. So we know now that OptiMAL does work, which is a tremendous technological step forward. To convert that into a commercial step forward, we have to do some more work. So the next steps are to demonstrate how well OptiMAL works. So we've got a significant number of hits resulting from the NCI run screens. That's enough material, we believe, to demonstrate that it's -- how well OptiMAL is working. So this phase that we're going through now is really important. It works. We want to show how well it works and see how much it's going to be worth to other potential clients. So the hits have to be ranked example antibodies resynthesized in their affinities, how well they stick to the target evaluated. We've got enough hits, so we're going to have population characteristics for OptiMAL and it's across different targets. So you've got different screens. It's not going to be something that's fully target restricted. So again, the scope of the NCI validation is working very much in our favor, excellent partners to do it with, really looking -- keeping the end in mind, which is to make this commercially viable and attractive to big pharma, big biotechs, small biotechs. So what we're looking for out of that and hoping to achieve from that is actually quite a wide dynamic range of affinities. So we want really strong binders if we can get them down to -- actually, we do want fairly low affinity, relatively modest binders to the targets. And that shows the diversity of the platform, the versatility of the platform to pull out antibodies of different affinities so that we can best match those to a wide range of client needs and the marketplace, therefore, becomes higher. Now we still have in our back pocket our RAM technology, which is Rational Affinity Maturation, which means that we can increase the affinity for hit molecules. So even if the antibody that comes out of OptiMAL is not the end product. We, of course, have our processes to then develop it, to engineer it into the best product that it can be. So this platform, this OptiMAL validation is obviously going to position if it all works. OptiMAL adds a fully commercial viable platform for our customers to use. It is also because of the way it goes together, providing proprietary platforms for other significant commercial development as well. So if I just demonstrate that, I'll try to explain that a little bit. We've -- from the mammalian display side of things, that's a remarkable technique and capability in its own right. There are probably -- I don't know, but I'm pretty sure, there are probably pharmaceutical companies who are going through a similar process that we've done in terms of designing what we consider to be viable, well-designed antibody repertoire, in other words, the Opti library. Pharma companies may well have their own version of that. What we can do is combine that with mammalian display and put that into a platform for them. So it doesn't have to be just our library that we can use and we can change this, we can manipulate this, we can adapt it according to clients' needs. So it's highly applicable to a very wide range of antibody needs across the marketplace. We're also doing further market research to find out how many cases that might be. And of course, the validation process to generate the scientific data. We are dealing with scientists. They are our clients. We need to have the scientific rationale to bring those over the line. So this process that we're going through also includes us refining our business models in plural, whether that's the full OptiMAL library, the mammalian display stand-alone whichever processes best match different client needs. That can include or has the opportunity to include royalties and milestones or it may be more sort of upfront fee generation processed and biased. So a lot of this work is ongoing now, and we are working towards a formal launch of OptiMAL as a service, obviously, dependent on the results coming through this validation and demonstrating quite how well OptiMAL works. We know it works, trying to find out how well it works in the next few months. OptiPhage, just a short update on this, and it is an example of the multitude of -- multiplicity of platforms that we're generating from the OptiMAL program. It uses the same design of libraries as OptiMAL, but it's packaged into that more standard sort of Phage display format, limiting to just fragments of the antibody. So you then have to stitch those fragments together in engineering approaches, which obviously we can do as well. Phage is widely used in the industry. If that's what's widely used, if that's what people are looking for, then we need to offer it so that we can hook them in. If they can see the benefits and are willing to pay a premium price for the premium OptiMAL service, we will upgrade them to that. If they want to stick with Phage, then we want to be able to offer that to them. Now one of the difficulties that Fusion has had is that we haven't had in-house the ability to do Phage, what they call Phage planning, the actual discovery process of that. We did look at doing so, but it was going to cost us quite a lot of money to do building alterations in order to accommodate the bacteria numbers that are required to do phage display whilst keeping that separate from when we're doing cell line development, for example, where we need to make sure that there's no bacterial presence at all. So rather than doing that and throwing that money at building, the FMI grant allows us with the FMI as a whole to actually set up Phage planning or the FMI to set up Phage planning capability in the Future Medicines Institute building just down the road in Belfast. Our library, the Opti library can then be put into that Phage display and screened. It's only us that can use that library, but the commonality of the panning at the FMI is going to be extremely valuable to us. And of course, we don't have to sink the money into it. So it's also worth pointing out, and we have had a contract that we have announced about this. The Opti design can closely mimic the immunomes, not only of the human, which, of course, was the original design for the OptiMAL Opti library, but also standard host animals, so we can do it again for rabbit, mouse, sheep, goat, dog, et cetera. which means that if you want to discover antibodies which are in those formats to fit into pre-existing platforms, which have anti -- whichever species antibody to do detection, you now no longer need to use animals to do that. And that's particularly of relevance where the EU directive listed here applies. There's a legal requirement to reduce the use of animals as well as, of course, scientists not wanting to use animal experiments if they can avoid it anyway. And again, no 2 libraries, same as with OptiMAL, where we're sampling 10 to the 9 from 10 to the 45. No 2 libraries are actually the same, so we can license this out multiple times without the successive licensees seeing a decrease in the value of what they're licensing. We're not having to take hit molecules out and then passing on what's left to the next client. Each library is untouched by what's gone before. They are different libraries. And therefore, if anything, you get an added value. So the first OptiPhage contract was announced in April '24. The library is with the client, and they have an option on exclusivity of that library going forward. So -- moving track to some of the other things that we've announced over the past few months, grant funding. The FMI, I'm a big fan of this is patently obvious. The FMI is a wonderful grant the way it's been written. It's a multimillion grant initiative that was announced on the 4th of December. Fusion is only one of many partners, several partners that are involved in the FMI, but we do play a central part in that consortium. Essentially, a lot of the consortium want to use antibodies. So having Fusion in the center of that helps tremendously, and it helps us. So there's nondilutive funding of around GBP 1 million, which enables Fusion to develop our own platforms. There is also access to around GBP 5 million worth of capital equipment within the Future Medicines Institute. We're using some of that equipment already, and it's allowing us to leapfrog where we were in the past and really take a step forward technology-wise to the most modern techniques of doing some of the things that our clients are asking us to do. And of course, that capital is being met by the institute from the grant. So it's not a cost for the company to bear. There's also the access to the FMI laboratories, that's facilities down there, meeting rooms down there as well. As well as around 20 expert FMI staff covering various aspects of what we do. And because antibodies are so central to the life sciences, future medicines, that expertise is really compatible with what Fusion are doing as well. And there will be a similar number of PhD students starting across the next few years, also funded by the FMI. So tremendous advantages that the FMI bring the region and also to Fusion ourselves. Another grant that we've announced is what we call the DR5 grant. So DR5 stands for the excellently named Death Receptor 5, which is a cancer target. Antibodies to this have been difficult to generate in the past. Some of them have needed to be conjugated to nanoparticles or other ways of making them bigger and stretch across a larger area. Some are made with by sticking various antibodies together in a more complex structure. On a project which we had done previously with QUB, we've identified antibody format, which had the effect but without needing the added complexity. And this grant allows us to take that antibody further forward. So we have that antibody. We know that, that the antibody is a really good starting point and it works. Fusion are going to humanize the antibody. Queen's are going to test that humanized antibody in various models to show that it works and has the desired effects in the cancer setting. And then comes back to Fusion to generate the stable cell line to take that forward so that it is ready for partnering in a preclinical ready to go into the clinic manner. So the therapeutic antibody that we're going to be working on, we're developing will be co-owned by Fusion and QUB. And it's a really nice example of us being able to generate an asset that can be partnered downstream to pharma biotech company, but at the same time, generating case study data to show off some of our capabilities and use it in marketing capability. So feeding this into how we're seeing grants now and in the future, we will continue to seek grant funding to exemplify our technological advantages, show us in the best possible light -- and where possible, if it's appropriate to then grant produce assets, antibodies that we can subsequently partner with commercial partners to generate significant, hopefully, significant revenues off the back of that. So the outlook. We've certainly had improved traction from our commercial activities. The diversification strategy, particularly with diagnostics and the push that we've had there is working, and that's evidenced by the 71% year-on-year growth that we've had between -- sorry, there's an error in that slide. That is year-on-year growth between FY '24 and FY '25. And revenue expectations for the year FY '25 have been met and a colleague who monitors our sector, not to do with Fusion or Fusion partner, but he made an excellent observation that if you're hitting your market expectations this year, which obviously Fusion did, you're exceeding market expectations, which is a very nice accolade for us. We are working on improving our margins, which will hopefully be coming through. I'm not going to say any more about that at the moment, but it will take time for those to come through. And particularly as the grants help us for a period of time that they apply, that will also help the margins. There are -- the restrictions that we've had because of budgetary constraints on R&D activities have been eased because of the additional funding, which we need to do to help the validation process of OptiMAL going through. And we have also from that funding some additional resources for commercial activities, positioning us, hopefully, for the launch of OptiMAL itself. OptiMAL also allows us a significantly enhanced market awareness. So other clients out there, prospective clients out there hear about OptiMAL and the things that it can do, it opens doors for us, and we see synergies from that feeding into the other things that we offer as well. So it's not just about OptiMAL, it's really helping us to move that forward. And then Grant Funding to support development of platforms, which is the FMI grant and potential assets, in this case, the DR5 asset with QUB is a really good step forward. So antibodies are really, really important for therapeutics, diagnostics and life science research in general and being at the forefront of that is an excellent place for Fusion to be. The market does appear to be recovering. We've made a 71% increase in revenues FY '25 versus FY '24, which is the correct comparison to be making. And it may be said that we are recovering our revenues more rapidly than the market itself appears to be recovering, but that bears testimony to the excellence of the team within Fusion and the offerings that we have to bring to the market. So the expansion into adjacent markets is ongoing. We've made really good progress. We're seeing increased revenues, particularly from the diagnostics sector in terms of that diversification. It does reduce our dependence on the VC-funded sector and therefore, reduces that significant volatility that we see with VC-funded clients. OptiMAL also helps with that because it opens the door to the big pharma, bigger biotechs, the less volatile clients as well. So again, it's reinforcing that strategy that we've already outlined. Positive development of OptiMAL platform through the validation with the NCI really does position this company in a very enviable way for establishing commercial relationships, driving those revenues up and taking things forward. It will take time. These things in science always do, particularly in therapeutic research, but we are in an extremely good position to deliver on that. And I'll leave you with a small teaser before we go to the questions in that there is more to come. I have a few more things up my sleeve than just my arms. So on that note, we'll draw a line there. Alex?

That's fantastic, Adrian and Stephen. Thank you very much indeed for your presentation. [Operator Instructions] I would like to remind you that a recording of this presentation along with a copy of the slides and the published Q&A can be accessed via investor dashboard. Adrian and Stephen, as you can see, we have received a number of questions throughout today's presentation. And Adrian, if I may now hand back to you to chair the Q&A, and I'll pick up from you at the end. Thank you.