Microba Life Sciences Limited (MAP) Earnings Call Transcript

Hello, everyone. Very pleased to share an update on our progress following close of the quarter ended 30 June 2025. So for anyone new to Microba, after the quarterly update, I will zoom out and provide an overview of Microba's business. So if you're new, hold on to the end for that. If you have any questions throughout this, please use the question submission feature, and I will address as many of those as I can in this live session. And then any I can't get to or answer after in the Investor Hub platform. So I'm going to move quickly past our disclaimers and go straight to this first slide. So closing out FY '25, we delivered strong growth in early clinical adoption and expanded in the U.K. by opening up access to our flagship MetaXplore product. The headline results from that close in the year are 161% year-on-year growth for our core testing products, $15.67 million in revenue and over 12,600 units in core test volume. On the back of that, we've already moved swiftly into FY '26 where we will keep expanding clinical adoption in Australia and the United Kingdom, expect our strong growth of those core testing products to continue and aligned to that growth expect regional breakeven points in both Australia and the U.K. And then we've laid out our circa 3-year strategic objective to continue rapid focused penetration of what we call innovator and early adopter clinicians across core markets to achieve breakeven for the whole company. So let me break down the strong top line numbers from the quarter. We delivered a record quarter for our core tests, up 88% year-on-year with continued growth and clinical adoption in both Australia and the United Kingdom. So in Australia, we saw MetaXplore achieved record sales for the quarter, continued growth in ordering clinicians, and we released a landmark MetaXplore study results from over 4,600 patients identifying actionable results in over 70% of cases. And we released breakthrough study results for MetaPanel showing the ability to detect undiagnosed pathogens in 20% of patients with 80% of those not routinely detected with any standard testing. In the U.K., full market access for MetaXplore was achieved to target at the end of May, with June then delivering a record month. And that delivered a record strong growth results for the quarter, with the product now representing 66% of all GI tests sold in the U.K. when we got to the end of June as we complete the transition and discontinuation of legacy product lines. And useful to call out on this chart related to our guidance and breakeven objective for FY '26, we expect a similar growth profile in FY '26 as we had in FY '25. So remaining consistent in Q1 and then stepping up each quarter aligned to growth in clinician adoption and usage in conjunction with planned product feature releases. In the prior quarter, so Q3, to support all investors to understand our transition of product and revenue mix, we put our guidance for Q4 and for the full financial year. So I was very pleased when we released the results to state that we delivered in line with our guidance, landing in the middle of the range with our full FY '25 revenue result of $15.67 million, which was up 30% year-on-year. A strong result whilst pulling out substantial revenues aligned to discontinuation of legacy products. So that all sets up well for what lies ahead in FY '26. As a quick reminder on the reference to legacy products, after years of work to distill the clinical value of Microba testing and launch our world-leading MetaXplore and MetaPanel products, we've been strategically transitioning to focus 100% of our resourcing onto these core testing products. We've made great progress in liberating our team's focus here to continue accelerating growth of our core tests. So to clearly showcase our progress here, we've grouped our products into 3 categories here: growth, base and legacy to make it easier to understand. So growth at the top there are our core tests, opening up this major new $25 billion category with accelerating sales. Our base products include supplements and some strategic international partners, which we expect to remain relatively stable with potential for future growth. And our legacy products and services are being discontinued and superseded by our core tests, and that transition is nearly complete, with the last U.K. products to unwind and be fully discontinued before the end of this calendar year. So if you have any questions on this transition, we actually did a deep dive of our diagnostic strategy and all of the details of that transition in March, which is all available publicly online. So if you've got any questions, please go back and reference that material. There were a range of milestones and highlights from the quarter. We summarized the key highlights here, but I'm going to take you through them in more detail on the following slides, covering our continued momentum in Australia with our core tests, our accelerating growth in the U.K. with MetaXplore and the partnering focus for our therapeutics with upcoming deal catalysts. Before I get there, it's important to highlight the 2 major sets of clinical study results that I spoke to before that we released during the quarter. So for chronic GI symptoms, analysis of over 4,600 MetaXplore report showed over 70% identified actionable results and a separate study in a subset of patients found over 65% reported health improvements after MetaXplore result guided care. For GI infectious disease, analysis of over 800 MetaPanel patients would not resolve their conditions through routine testing showed that we could detect a pathogen in 20% of patients with about 80% that would be missed by routine tests. And then an independent study showed 100% symptom resolution in patients treated using the therapy guidance in the report. So these are just the headline results, but I really do encourage people to go back and read all of the full details. These are significant results, not just for Microba but for the whole microbiome sector. And this mounting evidence clearly shows the clinical utility of our tests, which supports increased clinical adoption and usage in our growth ahead. Now with the intimate linkage between product advancement and the adoption curve in our growth strategy, which we recently outlined, we're going to start providing more updates on the advancements that we're making on product. And there were 2 key ones from last quarter. The first is a new feature for MetaXplore, which we call Marker Cards. And this updates the presentation of Marker information in the test result to make it clearer and more intuitive for clinicians to interpret. So here as leaders in the field, we are seeking to really set a new standard for the display of this type of information. And this sets the foundation for a number of other upcoming feature releases aligned to increasing rapid interpretability and actionability of the test results. We also released another feature for MetaXplore, which is an advanced version of our report sharing. This gives patients secure control over access to their report, and it allows practitioners to share results directly with colleagues and collaborating peers. It's typically a care team of various specialists supporting these chronically unwell patients. So this not only supports that collaborative care model, but it unlocks new levers for referral growth and clinician engagement. It also sets a foundation for future features on the road map related to these collaborative care models, which you'll hear more about in due course. So now let's dive into each of those categories, starting with growth. Our core testing products and clinical software targeting a $25 billion market. Starting in Australia, it was a record quarter for MetaXplore. We saw continued strong growth with Q4 sales of 3,451 tests, which was up 88% year-on-year. Ordering clinicians reached 790, up 89% year-on-year, with that growth being driven by a continued increase in the number of ordering clinicians, supported by clinician education, our targeted field sales activities, and those product advancements that we keep making. Switching to the U.K., we saw breakout sales for MetaXplore at the end of the quarter, aligned to shifting from what was closed group early access into full market access, where we saw sales hit 429 tests, which was up quarter-on-quarter 74%, and that strong growth was underpinned by successful onboarding and adoption of new ordering clinicians to the product, supported by success with the team's education events and our targeted field sales activities there in the U.K. Next, MetaPanel adoption continues to gradually build in Australia. So Q4 sales of 266 tests, which was up 85% year-on-year. And our current focus here with MetaPanel is on the development of gastroenterology specialists. It is the specialist that will drive adoption activity down into the rest of the clinician market, and that starts with gastroenterology key opinion leaders at the top, and the team have been making some really great progress there. And we expect a gradual rate of adoption over the next year, and then it's really from FY '27 where we see the opportunity for larger volume from MetaPanel through our KOL and evidence generation work starting to then translate into broader adoption and routine referral behavior. So I would say, still very much in an early market development phase for that test. Now to our base category, which are products which we expect sales and revenue to remain largely consistent, but with opportunity for future growth. And this is our supplements and select strategic international partners. Here, we saw growth of our in vivo branded and owned products against a reduction in distributed supplement products. So U.K. supplement sales were $1.1 million, which was down 11% year-on-year. That was due to a focus on our higher margin in vivo owned and branded products where we delivered sales of $0.68 million, which was up 12% year-on-year. Aligned to that, we saw our top-selling product, a prebiotic supplement called PHGG, achieved multiple record months with really good management from the team and execution on digital campaigns and distributor management. And there's a strategy playing out here, which we will share more on as this starts to reveal itself over the year ahead. Finally, our legacy category. These are the products and services that we are phasing out and discontinuing. This phase of our legacy products and services is almost complete. So our nondiagnostic insight testing was completely discontinued in the last financial year. Our research services business in that year was also sold, and the last piece is to finalize the discontinuation of legacy products in the U.K. And that migration of customers from legacy EcologiX testing to MetaXplore in the U.K. is going well. Legacy EcologiX sales officially closed at the end of July and then processing ends in October. June MetaXplore sales got to 66% of total GI tests in the U.K. with strong clinician demand, so that transition from legacy products to core is very much on track and expected to complete before the end of this calendar year. Now an update on therapeutics, which is the attractive upside to Microba leveraging our leading data bank in years of R&D. From our data, we've developed a rich pipeline of what the FDA have defined as a modality called Live Biotherapeutics. We've now moved from an R&D and investment phase into a partnering focus phase. So no further R&D expenditure is planned from here. We're focused on deals. And there are 2 catalysts coming up before the end of the year, which we expect can stimulate deal activity for our assets. So we are ready and in position after many years of work and IP protection on these assets to capture that deal activity with deal precedents ranging from $1.5 billion to $11 billion. So what's our focus and the upcoming catalysts? Well, in diagnostics, we are focused on continued momentum in Australia and U.K. for core test sales and clinical adoption, supported by multiple new MetaXplore feature releases supporting that growth. In therapeutics, those 2 sector deal catalysts before the end of the year, which we expect can stimulate deal activity for our therapeutic assets. And aligned to our FY '26 guidance, we will advance towards our regional breakeven milestones in Australia and the U.K., supported by 100% year-on-year growth in core test volume targeting over 24,000 tests for this year, remembering that it will build quarter-on-quarter as it did in FY '25. So that closes the quarterly update. And on that, I will now go to some of the submitted questions that I can see here. And a reminder that any that I don't get to live, I'll ensure that I answer after this on Investor Hub. Also a reminder, for anyone new to Microba, once we've completed some of these live questions, I'll do a quick recap on the business.

So let's start with the first question here. The growth is positive in Australia and the U.K. But how sustainable is this trajectory and what's driving it? Well, it's a big market. I routinely say that we have barely scratched the surface of it. We are only in the first thin slice of this with what we call innovator and early adopter solo clinicians that fit a certain clinician profile. We have a whole roadmap expanding 1 tightly defined customer segment at a time. We have a range of drivers supporting that growth aligned to what we call the clinician adoption curve, which I've got at the back of this slide deck, and I'll go through in the next half. And that includes our continued clinician education, KOL development and peer influencing activities, includes targeted specialized field sales and the release and dissemination of study results that continue to validate clinical utility. And finally, multiple product features that will open up usage with more clinicians as we go from left to right on the adoption curve with different clinician types and different clinician settings. So the next question here is MetaPanel growth -- sorry, MetaPanel is growing, but it's very slow. What's the plan to accelerate adoption? So as I said before, MetaPanel usage will, in large part, be driven by gastroenterology specialists, which we in turn drive expanded use into general practice and into other clinical settings. So MetaPanel is in an early market development phase, evidence generation and dissemination of that evidence takes time and educating and influencing specialists takes time. So on the surface, it can look like not much progress. But underneath, lots of groundswell, particularly leveraging our recent study results, which is resonating with clinicians. And although not visible in the numbers, the team have made good progress in developing key opinion leaders and partnerships like colonoscopy clinic, which is progressing well. So we have an intensive focus on MetaXplore in FY '26, which will deliver much of the growth for this financial year. And as I said before, MetaPanel, I expect a continued gradual build in sales over the course of this next year. But then from subsequent years, we expect MetaPanel can be a larger contributor to volume as our KOL and evidence development work really starts to translate into that adoption and routine referral behavior that we can see in the evidence supports. Okay. So the next 1 here. Supplement sales and revenue dipped overall, but in vivo owned and branded supplements grew. Can you explain that further? Yes. When we acquired in vivo, the supplements part of the business had 2 parts. It had a distribution right to sell a brand called Designs for Health, which is a respected U.S. brand, and to be able to distribute that into the U.K., which they've been selling for many years. And the second part was a compelling but relatively new portfolio of well-formulated evidence-based in vivo owned and branded supplements. And now we're prioritizing our higher-margin in vivo branded products over those third-party designs for health products. And aligned to that focus, we made some strategic moves, which impacted the designs for health sales. And we expect those to now from that new base to hold relatively steady for those Designs for Health products. So the impact in this quarter was a specific strategic move, not a trend. And we showed what we can do with some liberated focus on our own higher-margin products with our top-selling PHGG product, as I mentioned, hitting a new record delivering 12% growth year-on-year. And so this strategy, we expect to gradually improve revenue and margins for that supplements business and set a foundation for future growth in that part of the organization. Next 1 here, therapeutics. So no more R&D spend, what's the partnering timeline and what are the risks? Yes. So R&D stopped. We've got our IP now fully focused on partnering aligned to the 2 upcoming catalysts with peer companies, the Microbiotica and Vedanta that are due to readout on Phase Ib or Phase IIa studies before the end of this year. As I said before, a positive results from either of those trials can spark deal activity for the modality. And we believe we have some of the best assets in the class. So we are ready and in position to capture that deal activity if or when that fires up. The risk would be that the trials don't hit their endpoints and that delays deal activity until another catalyst moment for the sector. But our assets are heavily derisked and packaged they're ready to partner. Next 1 here. Regarding the FY '26 guidance targeting over 24,000 core tests and regional breakeven points, how confident are you? We feel good about our strategy. To achieve our target in Australia, we don't have to accelerate. We need to maintain our average quarter-on-quarter growth rate. For the U.K., the number we're targeting is aligned to our first year in Australia. And so we feel good about our position for FY '26. Next is capital raise seems tough. Why that timing? And what can you share about how it went? I would say it's easy to look back at the share price chart and say that we should have raised in February. But based on market feedback, there were 2 necessary ingredients for that capital raise. The first was Sonic participation as a cornerstone, and the second was demonstrated growth in the U.K. So starting with the second part, Q3 was our first full quarter of MetaXplore access in the U.K. So we were only able to show those U.K. growth results when we go to April. And then our terms with Sonic for their investment and our plans for the U.K., including the laboratory services agreement also took time to complete. And so in April, with those ingredients coming together, we then engaged with key shareholders and with institutional investors. We introduced new guidance on our path to breakeven and more information on our growth strategy, product road map and product accelerated growth model. Unfortunately, the timing seem to coincide with our end of financial year and likely tax loss selling impacting the share price. And I would say I'm a shareholder like everyone else, and it was a really painful process. And I've said a few times that I feel it is a real dichotomy at the moment. The business is in the best position that it's ever been. The share price doesn't currently reflect it. Although with what we can see in FY '26, we expect that to change quickly. So I'm going to close the quarterly -- and any questions there in the interest of time? The questions that I haven't gotten to yet, I apologize, but I will get to them on Investor Hub.

And now for anyone new to the Microba business, I will do a quick recap so that you can understand the business in its entirety and get a full appreciation of the global opportunity. So let's start by diving into who we are? Why we exist? Our traction and excitement of what lies ahead, starting with a clear summary of the opportunity. So first, why we exist? Your body is home to trillions of tiny microorganisms. Most of them, about 95% live in your gut, and we call this ecosystem of organisms your gut microbiome. And these tiny organisms are essential for your health. In fact, they're so essential that there are now more than 21,000 studies showing that they are key to how we can develop and treat chronic diseases. In fact, there are now over 150 studies demonstrating that if we change these tiny organisms in our gut, we can improve and even treat chronic diseases ranging from cancer to depression to diabetes, bowel, heart, and many other diseases. From that, we have a clear global and ambitious vision to realize what we see is set to be a revolution in health care. A world where there is broad acceptance of the microbiome as critical to health and disease management, testing your microbiome is commonplace with your doctor, and microbiome therapeutics are approved and routinely used for both maintenance and treatment of multiple chronic diseases. And that ultimately leads to millions of patients living healthier lives. Taken together, if microbiome diagnostics and therapeutics indeed play a meaningful role in supporting these patients, this market opportunity could ultimately be worth more than $1 trillion. And this is not theoretical R&D. We are a commercial stage and we are already making both of these parts of our vision a reality. So for our diagnostics business, we're opening up a major new diagnostic category which could be worth more than $100 billion. Our focus today is $25 billion of that, patients with unresolved gastrointestinal disease. We have accelerating traction in our first 2 markets, Australia and the United Kingdom. FY '25 delivered $15.67 million in revenue. And we have regional breakeven milestones targeted in FY '26 aligned to 100% year-on-year growth for our core testing products. For our therapeutics business, we've invested for 5 years in R&D to build a rich pipeline of live biotherapeutic assets, completed deep preclinical and early clinical validation and now in a position to harvest the fruits of that labor. We've transitioned from an R&D phase into a partnering phase. We have multiple streams to value return with deal precedents between $1.5 billion to $11 billion. And upcoming deal catalysts, as I spoke to earlier, for the modality and sector expected before the end of this calendar year, which we are in position to leverage. Now let's dive into our products and the clinical data supporting them. With this central impact that the microbiome has on a range of diseases, there is a lot of opportunity here in the microbiome. And today, we are laser focused on applying our technology to help patients suffering from gastrointestinal disease. Why is because it is a ginormous market. There are 82 million people every year across 7 key markets seeing a doctor with gastrointestinal issues, including people with severe diarrhea, bloating, pain, irritable bowel syndrome, even inflammatory bowel disease. So how do we help these patients? Well, many of the answers lie in their gut microbiome. And to address that, we've developed 2 tests, MetaPanel for diagnosing gastrointestinal pathogens, which we deliver here in Australia right now, together with Sonic Healthcare, and MetaXplore for diagnosing gastrointestinal disorders, which is now both in Australia and recently entered in the United Kingdom. And here, you can see the impact of these tests. So 82 million patients suffering, half not getting a resolution, and our real world data has now shown that with our test we can get critical new diagnosis and treatment recommendations for over 70% of these patients who previously had no path to a resolution, and get improved outcomes for over 60% of these patients. That's huge. And we've, over recent months, as I put out upfront, put out a raft of high-impact clinical data demonstrating that in thousands of patients. With multiple studies progressing on the road map, we expect a continuation of data here, further demonstrating clinical utility of these tests and supporting clinical adoption. We understand this market intimately. So I consistently say, as I said before, we haven't even scratched the surface of this market. So for the avoidance of doubt, this is the data breaking it down. This shows from deep primary, secondary and tertiary research, including a large body of work with a Boston-based consulting firm called Veranex. We have a clear understanding and breakdown of the addressable market here and how we target it, as I say, slice by slice, bite by bite. And so even from the first handful of markets here and a focus on 1 patient population, these individuals with unresolved gastrointestinal disorders. We only have to capture a fraction of 1% to hit our internal targets over the next 3 years. And we have testimonials from high-impact clinicians and patients that have been suffering for a 10, 20 or even 30 years now completely resolved. So let's dive into our growth model. Our growth strategy is intimately aligned to the adoption curve. At Microba, we talk about this internally also as something that we call the skepticism curve with 4 dimensions. So on the left of the innovator side, we have integrated and functional medicine clinicians, which have low demands of the testing products in terms of interpretability, actionability, business integration and workflow integration, that's those 4 dimensions. And then all the way on the right, at the laggard end, we have someone like a very traditional general practitioner being the most skeptical and slow to change. We have very high demands on those 4 dimensions of interpretability, actionability, business integration and workflow integration. But the key thing to call out is that the demand across the vast majority of this spectrum is already strong. The clinical importance of the microbiome is accepted. It is an essential organ that doctors have missed. And we now see it discussed at almost every clinician conference that we visit. The product just needs to meet the increasing needs from these clinicians as we go from left to right through the adoption and skepticism curve. The way that we do that is by delivering features 1 step at a time from left to right, opening up more and more of the clinician market, addressing their unique needs from the product to service their practice model and their patients. The team have an incredibly clear product road map that they're executing, shipping new features every quarter. And here, you can see little snippets of those features across those 4 dimensions. And over the continued quarters ahead, we're planning more significant feature releases related to interpretability and actionability of the report, as well as features that serve high-volume clinics, which stand to be a key growth driver for this next step of the adoption curve ahead of us. In parallel, we believe that group for sales in MedTech, as a general statement, is outdated and increasingly ineffective and inefficient. Microba is in a unique position in that we have a laboratory in vitro diagnostics component to our product but the major value unlock is through our medical software stack that sits over the top of it. So I'd like to say that we have the clinically trusted medical device component. So like a Cochlear is to hearing health, Microba is to gut health. But then we have a sticky clinical software stack that sees a scale like a medical SaaS company like Pro Medicus. So like Pro Medicus is to medical imaging data, Microba is to gut health data. And aligned to that, we're leveraging a combination of what I would call SaaS and medical sales best practice in our growth model. So sales, don't get me wrong, is an important base layer of presence in market. But we are executing what's called a product-assisted and product-led growth system that will continually reduce customer acquisition costs, increase resource efficiency and shorten sales cycles and time to value. What does that mean in practical terms? It means that rather than a Microba specialist onboarding, training and supporting a clinician to be successful with the test and embedded into their routine care protocols for these patients that we have efficient digital systems that enable scalable, self-serve onboarding, training and support, always on and increasingly AI-assisted. We are intensively focused on growth, but in conjunction with the underlying unit economics of the business. And we have a clear formula that we're executing, which is laid out here. So customer and market growth metrics going up together with multiple metrics improving underneath for unit economics and profitability. And that drives us in the short term to those regional breakeven points in FY '26. But fast forward a few years more to breakeven for the whole company. Finally, we have partnerships with 2 of the world's largest medical diagnostic companies, which has given us the opportunity to leverage, first, the laboratory networks of these companies, so we don't need to build labs everywhere, and we can scale as a software company, not as a laboratory services company. And we recently announced our agreement with Sonic in the U.K., which their subsidiaries called The Doctors Laboratory, executing exactly that model. And the second opportunity for our partner leverage is to leverage their large customer networks to efficiently educate and acquire customers, enabling these partners to refer and then triage those customers to us to be fully serviced with the world's leading clinical microbiome testing services. And finally, there is the attractive additional upside to Microba leveraging all of the data generated from our diagnostics business and years of R&D and investment. So from our data, we've developed a rich pipeline of live biotherapeutic assets here, targeting multiple chronic diseases. We've moved from an R&D and investment phase into a partnering-focused phase to deliver return on investment. No further R&D expenditure is planned from here, focused on deals. And as I said earlier, there's these 2 catalysts that are coming for the end of the year, and I'll speak a little bit more to that in a moment, which we expect can stimulate deal activity on these assets. And we are ready in a position to capture that deal activity. So we've built an incredible platform here for drug discovery from the microbiome, leveraging artificial intelligence. We've taken those assets through deep clinical and early clinical validation with our lead asset, MAP 315, ready to advance into Phase II. We have 2 major pathways to value return on these assets. Pathway 1 is what we call live biotherapeutics. So that's the traditional drug route, disrupting and advancing standard of care across multiple chronic diseases with these deal precedents ranging between $1.5 billion to $11 billion. And then pathway 2 is what we call next-generation probiotics. So disrupting the $79 billion probiotic market with new healthy human-derived products advancing from work that we recently completed with the world's largest probiotic manufacturer, international flavors and fragrances or IFF, with deal opportunities there ranging between $50 million to $100 million. There's a range of relevant deal comps and recent activity that we've laid out here for both of those tracks. And there are these 2 major deal catalyst coming up before the end of this calendar year. So we have 2 peer companies expected to read out on key clinical trials before the end of 2025. Everyone is waiting to see a strong Phase Ia or Phase II result for this new live biotherapeutic modality. They specifically want to see a clinical result in patients in a chronic disease population that is appropriately powered. The results from these trials if positive, would deliver that data that everyone is wanting to see, and validate this new modality. And if that occurs, it's reasonable to expect that competitive deal activity could commence and deal precedents, like the ones on the prior slides, become a real opportunity for Microba. And we are ready and in position with best-in-class assets to capture those deals. So I will close by saying, as I always do, I'm incredibly excited about the opportunity, the impact and the growth ahead for Microba. We have a world-class team. We have best-in-class technology and category-defining products. For patients, we are already changing lives, and there are a lot of patients and people that need our help. And Microba represents a real category-defining company with the clinical side of a Cochlear but with the medical software and scaling opportunity of a Pro Medicus. We have decades of growth here to unlock, and it's an incredible time, I believe, to be a Microba shareholder. So thank you all for listening and to all our shareholders for your ongoing support. And I'll close there. Thank you, everyone.