Intelligent Bio Solutions Inc. (INBS) Q1 2023 Earnings Report, Transcript and Summary

Greetings. And welcome to the Intelligent Bio Solutions Inc. First Quarter 2023 Earnings Conference Call. Currently, all participants are in listen-only mode. A question-and-answer session will follow the formal presentation. As a reminder, this conference call is being recorded. Joining us on the call today from the company are Harry Simeonidis, CEO and Chairman of the Board; Spiro Sakiris, Chief Financial Officer; and Philip Hand, Executive Chairman of Intelligent Fingerprinting Limited. A press release announcing the results and the update has been issued this afternoon and is available now on the company’s website. If you haven’t received this news release or if you would like to be added to the company’s distribution list, please contact the Investor Relations Department noted at the bottom of the earnings release. Some of the statements on this conference call are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934 and the Private Securities Litigation Reform Act of 1995, which involves risks and uncertainties. Forward-looking statements on this call include, without limitation, Intelligent Bio Solutions, Inc.’s ability to develop and commercialize its diagnostic test, realize commercial benefits from its partnership and collaborations, and secure regulatory approvals, among others. Although Intelligent Bio Solutions, Inc. released these expectations reflected in such forward-looking statements are reasonable as of the date made, expectations may results have been materially different from the results expressed or implied by such forward-looking statements. Intelligence Bio Solutions, Inc. has attempted to identify forward-looking statements by terminology, including beliefs, estimates, anticipates, expects, plans, projects, intends, potential, may, could, might, will, should, approximately or other words that convey uncertainty of future events or outcomes to identify these forward-looking statements. These statements are only predictions and involve running uncertainties and other factors included in the company’s public filings filed with the Securities and Exchange Commission. Any forward-looking statements contained in this release speak only as of the date. We undertake no obligation to update any of these forward-looking statements contained in this release to reflect any events or circumstances occurring after the or to reflect the occurrence of unanticipated events. During this conference call, the company may refer to EBITDA, a non-GAAP measure. EBITDA is not and should not be considered an alternative to net income loss, income loss from operations or any other major of determining operating performance. EBITDA is normally calculated by adding back income tax, depreciation and amortization to net income loss. I would now like to turn the call over to Harry Simeonidis, CEO of Intelligent Bio Solutions, Inc. Harry, please go ahead.

Thank you, Operator. And thank you everyone for joining us on our fiscal first quarter 2023 financial and business update call. Today, I am going over the last three months milestones and achievements. Most notably of which was our acquisition of Intelligent Fingerprinting Limited or IFP, which lays the foundation for a future of the company and is reflected in our announcement name change to Intelligent Bio Solutions. In brief now, we have a strong broad technology platform for delivering convenient, on-site diagnostic and substance testings with comprehensive and complementary manufacturing commercial infrastructure and expertise from both companies. I will then turn the call over to Phil Hand from IFP, then Spiro, our CFO, for a review of some key financial metrics included in our preliminary year-end and fourth quarter results with an updated forecast cash burn. Without a doubt, finalizing the acquisition of Intelligent Fingerprinting or IFP, announced on October 4th, which has been in active development for some time is a significant achievement for the business going forward. Not only with the highly complementary and synergistic on-site point-of-care testing technologies, but also increased our commercial manufacturing and regulatory capabilities. We are confident that this acquisition is in the best interest for both companies and shareholders alike. As a brief reintroduction, IFP is a U.K.-based developer and manufacturer of point-of-care medical diagnostic products, specializing in lateral flow products, utilizing fingerprint sweat as its primary test substrate. IFP’s pioneering and proprietary testing for evidence of recent drugs of abuse misuse including opioids, cocaine, amphetamines and cannabis. This is commercially available in specific geographies and leverages a full portable system with sample collected and analyzed on-site in a matter of minutes. We are in the process of expanding our geographies globally and we expect to be selling within Australia early in the new year, followed by other regions within Asia and Europe. Turning then to what we now simply refer to as the biosensor product, which is a non-invasive saliva-based glucose biosensor solution for patients living with diabetes. Intelligent Bio Solutions has initiated activities toward key clinical studies intended to be conducted in parallel. The first of these studies is intended to optimize the testing by eliminating the variables that may affect detection of glucose levels in saliva and in the sample collection method. While the second study is designed to effectively assess the accuracy and the reproducibility of measuring saliva glucose with the biosensor strip. Preparations for both of these studies is actively underway and neither one is in any way impinge financially or otherwise by the recent IFP acquisition. Meanwhile, and leveraging IFP’s ongoing manufacturing infrastructure and expertise, Intelligent Bio Solutions continues to progress its construction of a state-of-the-art manufacturing facility at the University of Newcastle, Australia. Specifically aimed at production of the biocentre to support both clinical development and commercial demand primarily for glucose testing, but also with other potential test applications very much in mind. The company anticipates construction to commence before the end calendar year of 2022. Finally, and before turning the call over to Phil, it would be remiss to not also welcome Mr. David Jenkins and Mr. Jason Isenberg to our Board of Directors. Both individuals bring a wealth of operational, technical and strategic experience, and insights that will be invaluable as we both grow and pivot our integration of IFP, and further development of the biosensor into IBS. I would now like to turn the call over to Phil, the Chairman of IFP, who will be introducing IFP’s product and our future. Phil, please go ahead.

Thanks, Harry, and I welcome the opportunity to partake in the company’s earnings calls. Let’s get straight into it. The IFP fingerprint testing platform is proving highly disruptive when compared to the traditional invasive urine and saliva tests, and is garnering widespread attention and adoption. Among the many recent contracts that serve as a testament to the overall and relative value of the fingerprint test are those recently announced new client relationships with Goldstar Transport, Eastern Airways and The Glass Systems Group. Each of these sales wins reflects the unique advantages, both technical and practical of on-site testing, these being sufficient to displace legacy methods and warrant organization wide adoption and rollout. Adding context to the opportunity with IFP, the global drug testing market is estimated to be approximately $4.6 billion as of 2023, with an anticipated compound annual growth rate of 5.6%. The United States alone is estimated to comprise some 75% of this global market. Intelligent Bio Solutions has its eyes set squarely on expansion of the IFP product line into the U.S. point-of-care workplace market, which ultimately requires commercial accreditation from the U.S. Food and Drug Administration, FDA. Initial interactions with the FDA have begun in earnest and though additional work remains, we believe those interactions to have been favorable. In all, we see envision in our pursuit of U.S. market approval and launch as a two-year plan, requiring approximate funding of $2 million to $3 million that will open access to an estimated $3 billion U.S. drug testing opportunity. As with GBS’ prior proprietary saliva-based testing technology, Intelligent Bio Solutions intends to explore the full breadth of applications for fingerprint testing beyond the current portfolio of drugs of abuse, including potential diagnostic applications already identified, these being, opioids for pain, epilepsy treatments, antipsychotics, cortisol, C-peptide and fructosamine. Based on the IFP knowledge base and intellectual property, Intelligent Bio Solutions also foresees diagnostic potential for the fingerprint testing platform in areas including infectious diseases, such as MRSA, Lyme disease, dengue, severe dengue, measles and German measles. And finally, also in quality control assurance of the food supply with prospective testing capabilities for biological food contaminants such as [inaudible], Salmonella and Proteus. Moving beyond just fingerprint assays, another area that clearly demonstrates the diagnostic potential of IFP’s lateral flow technology is the recent receipt of CE marking for a saliva-based rapid antigen screening test for COVID-19, which is both less invasive compared to nasal and throat tests, contains no single-use plastic and is 95% lighter than conventional tests, reducing both material waste and logistics costs associated with ongoing global demand for COVID testing. The management team that is now integrated into IBS along with the intellectual property behind IFP will allow us to continue to grow at a rate that would not have been attainable without coming under the Intelligent Bio Solutions umbrella. I would now like to turn over the call to our CFO, Spiro Sakiris, for a more detailed review of our third quarter financials. Thank you, Spiro.

Thank you, Phil. I will now provide a brief overview of Intelligent Bio Solutions 2023 first quarter results. As of September 30, 2022, the company’s cash, cash equivalents and marketable securities totaled approximately $5.74 million, compared to approximately $8.24 million on June 30, 2022. This change was primarily due to expenditure relating to the proposed pilot manufacturing facility in Newcastle, reduction of current liabilities from June 2022, the major component of this being equipment purchases being commissioned for this facility, and exchange rate losses from the conversion of our foreign currency balances to USD and general overhead. For the year ended September 30, 2022, the company had a preliminary net loss of $1.21 million or $0.08 per share, compared with a net loss of $1.43 million or $0.10 per share for the same period last year. This decrease in loss is primarily due to government support income recognized in the current period compared to the same period last year. Government support income was $0.31 million and zero for the year ended September 30, 2022 and 2021, respectively. This is a result of increased qualifying expenditure incurred in setting up of the pilot manufacturing facility. The company is of the view that the current operating plan and financial resources, its cash, cash equivalents and marketable securities as of the 30th of September 2022 will be sufficient to cover expenses and capital commitments into the first half of 2023. This cash runway forecast does not incorporate revenue from planned new markets for the IFP product nor the potential exercise of the glucose North American license option agreement. Lastly, we will be switching over to a December 31 calendar year when it comes to our reporting. That being said, in our next earnings release, we will be reporting 2022 full financials that will incorporate IFP. With that summary complete, I’d now like to turn it back to the Operator for any outstanding questions amongst our call participants. Operator?

Yes. Thank you. [Operator Instructions] And the first question comes from John Vandermosten with Zacks.

Hi, everyone and Spiro. Phil good to hear your voices and Harry welcome back to the CEO role and also congratulations to all of you on the new companies that you added, new clients that you added since the merger close. So things are starting off pretty good. I had a couple of questions on few different topics. I guess, I will start out with just the initial effort in Australia and New Zealand with IFP. You had mentioned there you expect to start with that. What are some of the items that you will accomplish and when do you expect to see, I guess, the first sale take place? What are some of, l guess, the milestones that you have for that region?

Yeah. And -- thanks, John. This is Harry. Appreciate your kind words. Look the IFP in the past have been able to reach the Australian market, but efforts that we are doing in the Australian market now is giving a end-to-end solution for very similar to what we are seeing in the U.K. now, so the ability for people to test on-site without return to the lab process if they need to verify the test. So we have gone through regulatory requirements. We understand what they are and they are minimal. The next phase is bring in demo units, so we can start the showing the technology and we are also looking at providing good laboratory back to base condo and testing options for our clients. So the plan is very aggressive. We would like to be able to start seeing sales in the first quarter in 2023 and just getting through just some of the logistics we don’t see foresee any problems and we expect the success that we are seeing in the U.K. Remember this technology is an unbelievable way that people can actually test for substance abuse at point-of-care on-site minimally abusive and very affordable solution. So we are going to go off the back of what we seeing or currently already what we are doing in the U.K. and we are going to replicate that in Australia. So we are expecting, like I said, we are expecting strong growth and not in terms of earning revenue but in terms of client base, because that’s the key for the success of the business is increase our number of customers that we have out there.

Great. And then the follow-on regions that you are going to pursue, I think, there’s United States, obviously and then Asia. Is there any -- are there any kind of easier areas to approach first?

Look, the holy grail for us is and like Phil said is, the U.K. -- the U.S. represents 75% of the overall market and that’s the one we are really focused on getting there. Our plan is to get in there within two years, going through all the regulatory requirements that we need to do. So that’s very exciting to that and we expect that in two years. There are so many other regions that have already inquired in terms of our technology and they want to get our hands on it. We want to make sure we do it right, giving the end-to-end solution. So we have to work with bodies there, pathology labs as well to get that back to base testing. So to answer your question, is the demand out there, we are seeing a lot of interest all over the world and from Japan, from Indonesia, from mostly all of the places within Asia and then we are very aggressively looking in Europe. So the technology can be ordered by anyone today. It’s just we want to make sure that they have the ability to go to the back to base laboratory testing to verify any results that they have at point-of-care.

Great. And then I saw in your presentation that you had this U.K. police force project out there. What is that and is that -- could that potentially be a big revenue generator in the future?

Absolutely. And what I will do here is I am going to pass it over to Phil, who can really explain the details on that one. Phil, do you want to take the lead on this one?

Yeah. Yeah. Hi, John. Good to speak to you and thanks, Harry. Yeah. The U.K. police side of things is a really pretty large and active market and it doesn’t just extend to the U.K. actually, Harry has already talked about Europe. And we have got a lot of significant interest from a number of European countries with respect to drug testing on the road side and looking at how drivers might be potentially impaired through drug usage. The market has changed quite a lot in terms of people moving away from driving into the influence of alcohol to being wise to that and now turning to driving under the influence of drugs with a thought process that they might not be able to be quite as easily identified using the technology that has been out there in the past. But with the advent of new technologies that we can bring to the market and use in a point-of-care scenario like the intelligent fingerprinting -- fingerprint testing solution, we have garnered quite a lot of interest from the U.K. police force in the context of that. So we are talking to the right bodies. We are talking to the Home Office here in the U.K. We are talking to the Department of Transport. As Harry said, it’s important to make sure that the whole process from sort of start to finish is put in place. But we have seen significant interest and I think as we go through into 2023 and beyond, certainly, in some of the other European countries, we will start to see some pickup of the product in those market areas.

Got it. And next question is on the manufacturing facility. I saw in your press release that you have received some more equipment for that. When are you anticipating the cash flows for the grant funding to roll in?

John, great question on that. And like we said, we are aggressively continuing our project on the manufacturing facility, but I will get Spiro to go into the financial details in terms of the government grants coming back. Spiro?

Hi. Thanks. Thank you, John. Thanks for that question. Now with the money flowing in from the grant process, it’s all based around milestones. So as we achieve each milestone, we expend the funds beforehand and then we get the proceeds of the grant. So we are basically working now on the next stage of the grant reimbursement and we will announce that to the market once that happens. But that’s -- the next stage is looking to be coming out shortly and then what we do is after that, leading up until the manufacturing there’s different stages that come through.

Okay. So it sounds like looking at your cash level right now, you have already spent some money that will get replenished from the grant reimbursement when it comes, is that right?

You got exactly right. And that will be -- we will work on that as we speak.

Okay. Well, that’s good news. And next question, I know I am jumping around here, but I saw cortisol was your next test for the biosensor. What does the -- I don’t have a sense of what the market looks like for that. Can you tell me what you pursue there and where the demand for that is?

Yeah. Look, in terms of that one, we are still analyzing in terms of the overall market and the opportunity. It is a test that’s currently being done out in the market. But with our solution, we believe that it could be actually a better test and a more -- a non-invasive test. We are at the stage now to actually identify that market. So I don’t have the answer on me right now, but the market is substantial. But to that point, John, what we do here at IBS is, with every test that we are looking to go down, there’s two parameters. One is how easy is it to develop the product and get it regulatory approved. But how big is the opportunity? Is there a need for the market? So that’s what we are going through right now. We have got the ability to test for cortisol and we believe, but now we just want to substantiate that in terms of, is there a market there and does it make sense for us to go down that path? So we are in that stage of exploring as we speak.

Okay. Got it. And regarding the saliva blood correlation study, is there a journal article being put together for that, is that something that we would see out there in the near future and what -- do you have any general targeted or timing on that, if so?

End results, we -- at this stage, no. We won’t be publicizing anything until we get it to, as you can understand, the perimeters where we actually want them to be. So we expect the, probably, the next release in terms of the update in terms of where we are in the clinical trials, that will probably be more on the back end of Q1 next year or maybe early Q2 and that’s when we believe that we can start publicizing some of our results.

Very good.

Okay. Well, thank you for taking my questions. Appreciate it.

No. Thank you, John. Always appreciate your questions.

Thank you. This concludes our question-and-answer session. I would like to turn the floor to Mr. Simeonidis for any closing comments.

Thank you, Operator. Look, in closing, as you can see, we have had a significant progress in the last quarter, which has really laid a strong foundation for the business. The team and I are very excited and focused on the path forward as we deliver intelligent solutions to our customers all over the world. And now more than ever, non-invasive point-of-care screening solutions are in real high demand, especially in areas like diabetes and substance abuse. And as you can -- as you heard from Phil, the overall market in terms of substance abuse in the U.S., there is a huge need in terms of getting that under control. We intend to be at the forefront of both technology and innovation and market penetration in every possible vertical and region globally. Inevitably taken for granted, I sincerely thank the entire Intelligent Bio Solutions team for their perseverance in pulling together the IFP acquisition over the goal line and our equal commitment and energy integrating the two businesses going forward. We likely generally appreciate the ongoing support of all our shareholders, who are empowering us to drive testing and diagnostic innovations, and look forward to sharing details of the exciting new pursuit as we continue our progress. If you require any other further information, please visit us online or reach out your Investor Relations Department with any other further questions. Thank you.

Thank you. The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect your lines.