Novacyt, an international molecular diagnostics group, recently held an earnings call where CEO Lyn Rees and CFO Steve Gibson discussed the company's interim results and strategic developments. The call highlighted the successful acquisition of Yourgene Health, expansion across various sectors, and financial growth despite setbacks.
Novacyt reported increased revenue and gross profit, though it also faced a significant EBITDA loss and total loss after tax, largely due to a dispute with the Department of Health and Social Care (DHSC). The company, listed with the ticker symbol NCYT, remains optimistic about its future, emphasizing cost savings, operational efficiency, and a strong cash position.
Key Takeaways
- Novacyt's revenue grew by over £7 million, with gross profit reaching £26.5 million.
- The company recorded an EBITDA loss of £5.6 million and a total loss after tax of £17.7 million for H1.
- Novacyt is ahead of schedule in achieving cost savings, with £5 million expected by FY '25.
- The cash balance stands at over £36.5 million, reflecting liquidity improvement after the DHSC settlement.
- Leadership changes include John Brown stepping in as Chairman.
- Novacyt is advancing its products through IVDR certification and focusing on high-margin businesses.
Company Outlook
- Novacyt aims to enhance its product lineup, focusing on reproductive healthcare and leveraging Ranger technology.
- The company is optimistic about future prospects, with strong growth in core products and a commitment to innovation.
Bearish Highlights
- The company faced a significant EBITDA loss and total loss after tax due to the DHSC dispute.
- An £11 million cash consumption occurred in H1, although the cash balance improved by the end of August.
Bullish Highlights
- Novacyt reported growth in revenue and gross profit, primarily driven by the inclusion of Yourgene's sales.
- The company is experiencing a 30% CAGR in cystic fibrosis products and 12% growth in the NIPT segment.
- Cost-saving measures are yielding positive results, with £2.5 million already saved.
Misses
- The company recorded an EBITDA loss and a total loss after tax for H1, influenced by provisions related to the DHSC settlement.
Q&A Highlights
- The management expressed confidence in their financial position, with sufficient cash reserves to reach profitability.
- Detailed financial updates are planned for H1 2024, focusing on cost management and product offerings.
- The company is prioritizing R&D investments for organic growth over M&A opportunities.
Novacyt remains focused on strengthening its position in the molecular diagnostics market, with a strategic emphasis on high-margin businesses and R&D investment to drive future growth. Despite financial losses, the company's management is confident in its cash reserves and the ongoing integration of Yourgene, which is expected to yield further cost savings and enhance product offerings. Novacyt's commitment to innovation and operational efficiency, coupled with a positive outlook on core product growth, positions the company to navigate the evolving regulatory landscape and market demands.
Full transcript - None (NVYTF) Q2 2024:
Lyn Rees: Thank you very much and good morning everyone and obviously thank you for joining us and taking some time out to listen to our interim presentation this morning. I'm presenting to you today myself, I'm now the CEO at Novacyt been in situations since the 1 of May. Prior to that I spent six years at Yourgene and prior to that I was with BBI. So in the industry for 20-odd years plus, done a lot of acquisitions, and looking forward to presenting the results today. Alongside me, we have Steve.
Steve Gibson: Hey, good morning, everyone. Thanks, Lyn. So yes, Steve Gibson, I'm the CFO. I've been with Novacyt now for around 7.5 years and prior to that I spent just under 12-years at Hewlett-Packard in a variety of different roles.
Lyn Rees: Thank you, Steve. Okay, so just a quick introduction to what it is that we do here at Novacyt, and we're an international molecular group, diagnostics company with a growing portfolio of clinical assays, instrumentation, and research tools. And this is how we're basically structuring the business now, as you can see on this slide. We've obviously got the Novacyt Group. On the left-hand side, as I look at it, we've got Yourgene Health, which is a clinical division. You know, for long-standing shareholders of Novacyt, you'd have been aware of the strategy to develop a clinical diagnostics business. Well, that is effectively what the group bought when it bought Yourgene. So we got Yourgene health, which is clinical IVD assays, DNA size selection, we have primary design that sits in the middle, which is research use-only qPCR kits, and then we have our automation piece or our machinery piece, which is ITIS, our Ranger Technology. As a business, we cover human health, predominantly reproductive health, precision medicine and infectious disease, and in non-human applications, we have veterinary, animal, food, water, agriculture and plant genomics. In terms of where we're based, the picture you can see on the left is our facility in Manchester. We also have facilities in Southampton and Stokesley, and we have a small sales office in Miami, a sales and finance office in Singapore manufacturing an R&D in Canada, and we have commercial presence in over 65 global territories, either through direct sales or through our distribution network. We're headquartered in Vélizy in France, and we're listed on the London Stock Exchange and the Euronext Growth Exchange. Currently Novacyt employs about 240 people, and those numbers were accurate towards the end of June. In terms of our business segments, we're going to touch a lot more on this later. As I mentioned earlier, on the left-hand side, we have our clinical products, predominantly in reproductive health, where we have an NIPT product, a cystic fibrosis product, and other rapid aneuploidy tests. That side of the business is growing really, really nicely. Steve's going to explain a little bit more on those growth cycles when he goes through the numbers. We also have our precision medicine, which is a pharmacogenomic product, and that's where we put our clinically approved infectious disease products. So Winterplex is the COVID product that you would have known and we have some additional multiplex PCR panels in there as well. In the instrumentation side and DNA this is our Ranger Technology for all of those Yourgene shareholders. This is size selection technology that is used when you've got your sample and before you sequence your sample and start looking for the DNA. And so we've got a next generation size selection. We've got our automated version of that and we've got some target enrichment technology. And this is also where ITIS lives which is the my go the QPCR hardware and capability sets. And then on the right hand side is our research use only products this is the old primary design business, so this is the business that we've been focused on in the last six months, getting back to being more quick to respond, more feet to foot. It's a sort of GBP5 million business at a high margin. And in there we have products for human health, agriculture, animal health, environmental, as well as our pharma, surgical research services, whole genome sequencing and whole exome sequencing. And it's this part of the business that responds to pandemics and the like and we’ll touch on that a little bit later on. So I'm going to hand over to Steve now, who's going to talk us through the integration.
Steve Gibson: Good morning, everyone. So we wanted to provide a bit of an update on how integration has progressed from a cost savings perspective. And if you remember, one of the rationales for the acquisition was that we believe we could deliver savings around GBP5 million across the two businesses by the end of year three. So we've completed actions that will deliver that annualized benefit by the end of FY ‘25. So around 18-months quicker than we originally planned. And those savings have been made across four key categories. So firstly, we refocused the Primer Design business back to its core DNA of the [Indiscernible] business. And that did sadly mean a number of people left the business. We also had two sets of management teams and leadership teams and two sets of boards. And we needed to consolidate them and pick the best of the both teams. We also had a number of external advisors and consultants and again where we had duplicates we picked one and for other services we terminated them. And then finally we saw general efficiencies and economies of scales across multiple areas, facilities, costs, insurance costs and recruitment fees. So we have made good progress, but there is still more to go after. Now if we turn to the financial highlights, and obviously top of the list is the successful resolution of the DHSC dispute, and that resulted in a net cash inflow to the business of over GBP7 million. This settlement also triggered a number of accounting adjustments that inflated our gross profit and also our OpEx number in H1, and I'll chat through them more in detail. So from a revenue perspective, we increase year-on-year by over GBP7 million to over GBP10 million. And that's been driven by the inclusion of Yourgene sales post-acquisition. And Yourgene is seeing really strong growth from a pro forma perspective, its reproductive health range products of over GBP0.30 and also in its core NIP business of over 5% at the end of H1. It's worth noting that the FY ‘22 revenue figure of GBP16.5 million also includes around GBP13 million of COVID sales. So you can see we've made good progress over the last three years and grown the top line. From a gross profit perspective we deliver GBP26.5 million or over 250%. However that's been inflated by the reversal of the GBP19.8 million product warranty provision that's no longer required following the resolution of the DHSC dispute. After we removed the impact of this one-time entry, the underlying gross margin was GBP6.7 million, or 65%. Now we were targeting as a business to deliver a margin in the range of 60% and we've done so. And that's been achieved through strong sales in our PCR range of products. And what we saw is our Primer Design business to deliver a gross margin of over 80%. If you look at the FY ‘22 and FY ‘23 gross profit numbers, they were heavily impacted by COVID-19 stock write-offs that diluted margin that we haven't seen again in 2024. And from an EBITDA perspective, we were broadly flat year-on-year at a loss of GBP5.6 million. Now the upside that we saw on gross profit was offset by the booking of a GBP20 million bad debt provision as a result of the DHS invoice no longer being produced. Now if we move on to look at revenue in a little bit more detail, if we kick off from a business unit perspective, what we're demonstrating here is that the mix has changed substantially year-on-year. So Yourgene now accounts for around three quarters of our total group revenue and it delivered GBP7.8 million of revenue in H1. Primer Design delivered just over GBP2 million, but this is where you can really see the mix is changed year-on-year. Last year Primer Design accounted for around 80% of the business, and this year it's just over 20%. If we also look at revenue from a geographic perspective, we remain well-balanced, and we have a diversified income stream, and we're not reliant on any one region for our revenue. Our biggest region is Europe, and that delivered sales of over GBP5.5 million. And if we dig into it a little bit deeper, our domestic U.K. market, which is where we have our largest commercial present, continues to be a key player and delivered over GBP2.3 million of revenue. Now, France generated sales of over GBP1.3 million and that's because of our long established NIPT customer base and then the Asia Pacific region continues to grow and delivered over 25% of our group revenue. We've seen there, strong demand for our reproductive health range of products and in particular our cystic fibrosis tests. Now if we move on to look at OpEx, this increased to over GBP32 million as a result of looking at GBP20 million bad debt provision following the settlement with the DHSC. Now if we remove the impact of this one-time entry, it means our underlying OpEx costs were GBP12.1 million, compared to GBP7 million in the prior period. And this GBP5 million increase was driven by the inclusion of Yourgene costs. Now a better way to look at the OpEx costs is to look at H1 ‘23 on a pro forma basis and the H1 numbers on a pro forma basis for FY ‘23 totaled GBP14.7 million. So it means on a like-for-like basis we deliver savings of around GBP2.6 million or if you annualize them it's over GBP5 million and that's what underpins the integration savings that I talked through earlier. So as I said, we've made really good progress on the cost base, but there's still more to go after, and we will still deliver further savings. From a profitability perspective, as I mentioned, EBITDA was broadly flat year-on-year, but in addition to that, we saw exceptional cost totaling just over GBP8 million, of which the majority related to the DHSC. So there's around GBP7.5 million of exceptional costs specifically related to DHSC and the biggest item by far was the DHSC settlement for GBP5 million. And then in addition to that there's around 700,000 of other costs that cover restructuring fees and Taiwan divestment fees. So this meant overall the group reported a loss after tax attributable to the owners of GBP17.7 million in H1. Now if we move to the balance sheet, well you'll see that there's been some big swings since year end and that's all been driven predominantly by the DHSC assessment. So our trade and other receivables balance has decreased by around GBP20 million and it's driven by two factors. Firstly we wrote off the December 2020 DHSC invoice for GBP24 million including VAT as it will no longer be paid, but we offset this by increasing our VAT receivable balance by around GBP4 million and that increased to over GBP12 million and as investors will know we issued the RNS in August that was the good news that the HMRC in the U.K. had repaid us the GBP12 million. Current liabilities has decreased by around GBP16 million and that was driven by two factors. Firstly, we released the product warranty provision for just under GBP20 million as it's not required, but this was offset by the booking of the GBP5 million DHSC settlement in June that we then subsequently paid in July. Now if we turn to the final slide that I'll be presenting we'll talk through cash flow. So what this show -- slide is showing is that we consumed around GBP11 million of cash in H1 and we closed the period with just under GBP33 million in the bank. Now it should be noted that some of the cash outflows in H1 are not repeated in H2, such as the contingent consideration and also DHSC related payments. This slide, though, does exclude the GBP5 million payment to the DHSC that we made in July and it also excludes the GBP12 million VAT refund that we received in August, because they're post-period events. So if we roll forward a couple of months to the end of August, then our closing cash balance was just over GBP36.5 million. That's the brief financial summary and if you'd like to see further details, they're on our company website and I'll hand back to Lyn now.
Lyn Rees: Thank you, Steve. Okay, so let's talk through some of the operational highlights. So I guess from a corporate perspective, you know, Steve has very nicely articulated the GBP7 million swinging in our favor from a cash perspective. It was just nice to get that overhang away from the business and the shares, so we can start to focus now. So thank you to the team that was so instrumental in resolving that DHSC situation. We've also completed the disposal of our Taiwanese facility as well. So as we'd spoken about before, we'd been positioning a lot of our APAC customers to direct customers rather than send out customers. So we saw the usage of our lab in Taiwan decrease, you know, month-on-month and we successfully completed the disposal of that business last month or the month before. Again, making sure that we've got a clear runway ahead of us as a business to execute our plans in the next three years. So, pleased with the progress there. I think from a board position, obviously, you would have seen the announcement this morning and I'd like to formally acknowledge and thank James Wakefield for nine years of really great service, you know, guiding the business through some real defining acquisitions and, you know, guiding the business through the uncertainty and the unknown, COVID explosion, and then the post-COVID cooldown. So thank you James for all your support and effort that you've put into this organization over the last nine years. With James leaving, John Brown steps into this Chairman role. John, huge sector experience. I've worked with John closely in the past. Really looking forward to him becoming Chairman as we go through this next stage of our growth journey at Novacyt. So really looking forward to work with John and obviously myself, Steve and Joe are kind of still into our sort of first five or six months in this role. So pleased with the progress we're making and looking forward to sharing more around our plans in H1 next year from myself, Joe and Steve. IVDR certification, that's a big one for me. The market is changing. The regulatory landscape in Europe is becoming far more challenging, far bigger hurdles to achieve as an organization to be able to effectively sell a product with an IVDR certification. We've invested heavily in that. I'd like to think we're ahead of the curve. We've already had our cystic fibrosis product, which is probably the fastest growing product in our portfolio right now, put through the IVDR process. Next up is our prenatal aneuploidy test, then our NIPT test will follow. My view on the IVDR certification, it's going to make the market more challenging to operate in. So for quality organizations like Novacyt, who have made that investment historically, it means that we're going to be able to get through the IVDR process, but there's going to be a lot of companies that won't be able to, single product companies, and companies that just simply can't afford the investment in IVDR. So I see IVDR as a differentiator in the coming years and I'm hoping it will lead to less competition and less price pressure in this space. So delighted with the progress that our technical and quality teams have made already on our IVDR journey and look forward to updating you with more news on that in the coming months. In terms of product development, this box looks a little bit empty. It's just got the Adenovirus and oysters tests in there at the moment. It's this box that we'd expect to fill up significantly over the next three years. So the next time that Steve and myself are presenting, we'll be accompanied by Joanne Mason, our CSO. And Joanne is going to lay out the product development timeline and new product innovation launch date, so you can see what content is coming to market when. Because I firmly believe that we've got to invest in R&D, we've got this base across the world now, we've got this diversification on a geographic and product level that Steve has articulated. We need to invest and get more products into that space. So look forward to sharing those plans with you in due course. I think in terms of our reproductive health care business, our core growth drivers are NIPT tested, our cystic fibrosis testing and our rapid aneuploidy. So let's start with NIPT, I mean we're currently where we sit at the end of September. We're tracking it about we're double-digit growth, I think by 12% growth at the moment Steve. We see that as a result of natural adoption for this technology. More and more parents to be want to use this technology. It's quicker, it's safer, it's a more accurate results. We see natural adoption, but also, you know, we've seen quite a lot of competition come out of the marketplace in the last couple of years with favorable reimbursement policies from governments, routine national screening now sat in place, patient demand rising, all of these things are leading to good growth for us there. I think the key for us moving forward is continuing to refresh our content in NIPT space. I'll share a little bit more about that with you later on. Cystic fibrosis is the biggest, fastest growing product in the portfolio at the moment. That's got a 30%-plus CAGR year-on-year, particularly driven by increased prevalence and rising awareness for CF. Approval of new drugs, which means that more of the population is getting tested alongside gene therapies, and continuing health screening and reimbursement, specifically in the APAC region. So that product is growing really, really strongly. It would be good to have some additional content around it. So we are looking at bringing additional assays alongside our cystic fibrosis, not assays that we developed themselves, assays that we can outsource from other parties to take advantage of this market growth opportunity. And so when I look at this slide, this is the core of Yourgene. Yourgene was a clinical business that was focused very much on reproductive health, and the two big products in that space are both growing at double-digit at the moment. And we expect that, and we hope that to continue with the general prevalence of the use of this technology in the marketplace, but also some additional new products that we intend to bring to the market ourselves in coming years. In terms of other opportunities, well, we've still got our range of technology. So we continue to see that grow. Revenue is slightly down year-on-year. That's because we sold more hardware last year and we move into a reagent model this year. That's certainly supporting the margin improvement that we're seeing across the group, compared to budget at present. And Ranger remains a key part of our growth strategy, because it straddles multiple market segments. It's not just reproductive health care. It's synthetic biology or fake DNA. It's liquid biopsy, which are becoming more and more the go-to kind of test for early diagnosis of cancers. And then there's the plant and animal genomics market as well, which is rapidly expanding. You know, this technology addresses the key industry challenges of sample prep and high volume requirements for gene synthesis. And it's a proven technology now, having been in the market for five years plus. So we now have dual manufacturing capability for Ranger. We can make in the U.K., we can make in Vancouver. We just sold our first NIMBUS product in Europe, which is the largest scale machine that we do, and we continue to see reagent pull-through coming through from that exciting range of instruments that we've taken to market. Precision medicine continues to be a focus for us. It would be good to have some new products alongside this. This is a bit of a product orphan in our portfolio at the moment and when your gene had some funding issues it was the R&D around that product development that we had to put on hold. So really pleased that you know under Joanne Mason team, we've been able to you know reinvigorate our R&D efforts. And I think we definitely need a new DPYD product because the market leading product that we launched kind of three years ago now and some of our competitors have added some additional markers that now make our product look a little bit less punchy, compared to some of the new guys in the market. So we've got a new product development aren’t working as we stand right now. Looking forward to launching that next year and continuing the growth in this exciting space, as well as putting some additional products and services around that as well to make more of a range sell to market. And then the RUO, that's primary designs, all straightforward business, 1,200 assays. We can make an assay in a couple of days and get it out to the customer in their hands. We've got a growing pipeline of animal, agriculture, and this is the side of the business that will always be there to deal with things like infectious disease, rises, mini pandemics, et cetera. It's a very, very high margin business. And effectively, this part of the business should be the cash cow that funds the rest of the business, funds the effort we want to make in R&D and our commercial growth plans, et cetera. And again, speak a little bit more about that a bit later on. So if we go into those with a bit more detail, I think where we look at driving global sales, we're making really good progress there. Cystic fibrosis 30%, NIPT 12%, our core products are all double-digit growers. As I've already mentioned, we had the first European sale of our NIMBUS product, our highest throughput on the range of technology. We have put new NIPT customers in Europe this year, in France, in Asia. We've just done the first NIPT system in Colombia, in Bogota, in Colombia sorry in Bogota. So we still keep that part of the business growing nicely, and this is why we're seeing the double-digit growth there. We've launched MagBench which is another one of our automated systems into APAC and Middle East. We've already made quite a lot of progress I think over the last six months there. Future milestones, well the future of NIPT is all about adding additional content. It is my hope that sometime next year we will have the only IVDR product in the market for NIPT that has microdeletions, the three Trisomy’s, copy number variations. And I think once we've got that product in the market and it's approved, it's very difficult for our potential customers to use lab developed products or an inferior product, because once there's an IVDR approved product that ticks all the boxes, the customer base has to kind of use them. So I see the future growth of NIPT coming through that, next generation of products that Joanne and the team are developing right now. We're also upgrading our cystic fibrosis product. We're not resting on our laurels, it's market leading at the moment. So we're going to be adding some additional content to that just to future-proof that product alongside, as I've said, the DPYD product investment. And then as we move to more of a consumer model for Ranger, we'll probably see a dampening of the revenue but an improvement of the margin. And we're looking to add some functionality to the light bench technology that looks at fragmentation as well as size analysis, which will significantly reduce the need for capital purchase at this essential stage of the sequencing workflow. So our existing core products, we've got new product development plans coming out around them. We're already seeing really strong double-digit growth, really confident the progress we're making and where the future of those products and services are heading. In terms of IVDR and R&D, I've tried to explain the importance, I think, of IVDR. I think that's a real differentiator for us as a business. And the way it works is if you have an IVDR approved product in a region, local labs, local hospitals, local research industries, institutes have to use that product rather than non-approved or developed in-house or lab-developed tests or RU or whatever you want to call them. So I think that's going to be game-changing for us. So we're going to continue to invest in that. We've already got our cystic fibrosis product through and we're just about to go through with our Q-star assay, which is our [anapoloidae] (ph) assay, and I think in the future more of that to get our first accreditation, get the DPYD update planned and through the accreditation and then make sure we get the NIPT product approvers in a timely manner as we possibly can. When we look at rebuilding the RUO business, as I said, that's predominantly the old primary design business. We've launched Adenovirus product in oysters. I mean, who knew that it was oysters that spread norovirus every Christmas? So we've got a great point of care product that sits literally by the sea where the product is harvested, brought in and tested near the harbors office, so to speak. We are in the process of updating our Monkeypox assay. And I guess a lot of you on this call are going to know about Monkeypox. So the reason we've been quiet about Monkeypox is it's not really material. I mean, we've received orders through June and July and August. Our product is one of 50 probably products available in the market. So it's nowhere near like it was early COVID, where Primer Design had the only product in the market. So we've got more competition. Our product isn't approved. It's a research use only product. There are some approved products already out there. And because there's a vaccine already available in the marketplace for, you know, $100 this isn't another COVID. We will make revenue from it. It'll be interesting to see what happens over the winter season, because that's typically where you see a higher numbers of Monkeypox cases, people staying indoors closer to one another. But yes, I mean it showed what Primer design does. There was a problem, we reacted, put a product in there, we sweated all of our distributors and historic COVID contacts to see if anybody wanted product and we sold some product off the back of it. But we're in the same position for swine flu, for avian flu, for COVID when it -- if when it starts again. That's what the business does. It sort of peaks and troughs around these sort of pandemics. But for anyone that's thinking that Monkeypox is going to be like COVID, you know, it's not going to be like COVID. We will make some revenue from it. But that is unlikely to be material revenue, given the size of the group revenue that we sit today. I think in terms of what the future for this business is, you know, to continue to make it fleet of foot. You know, as I said, I want customers to ring up and be able to get a custom asset within two or three days. I want to be able to ship product anywhere in the world really quickly, because I haven't got a big clinical quality procedure around the business and I think we've made some really strong progress in those areas. We're going to be looking at new aquaculture and veterinary products. I think there's a significant market opportunity there. We've got a very complete range and having worked personally in those spaces historically, I think there's more we could be doing there. We've got a custom asset portfolio growth and supporting customer clinical trial bills and bringing more products to market like the DNA extraction kit that works for bowel cancer that we will have rights then sell into the market. So you know the research use only business for the old primary design get it back to that sort of GBP5 million for the business you know spitting out high margin products and effectively becoming a cash cow, so we can invest that money in further R&D and further commercial expansion. And to accelerate that, the more partnerships we have, the better. We're partnering with PacBio still for our Ranger Technology. We've got ongoing collaborations with a number of key institutions, and that's around infectious diseases, around reproductive healthcare, looking at the core segments of our business. I think longer term, you know, launching more functionality. So the work we've done with PacBio has shown that if we can get fragment analysis alongside our Ranger Technology, which is size analysis, you know, we've got a bit of a home run then, because it's half the capital equipment purchase that you'd require to do your pre-sequencing work and your sample. So again, when I look at the progress that we're currently making, I'm pleased with the progress. I think a lot of our time has been spent looking at the cost side of the business. Myself and Joe and Steve are only a couple of months into this. Next is once we've got that cost base settled and then really focus on the growth drivers. But from my perspective, they're in really strong shape at the moment. So trying to pull all of that and summarize that together. We're an international business. Steve has demonstrated our geographical dependence is well diversified. We're strong across the world. And we built a really strong foundation GBP20 million plus revenue that we need to now grow and kick off from. We have a range of reproductive healthcare products, we have a range of precision medicine products, and we have a range of infectious disease products. So straddling three of the fastest growing markets within the molecular space. We're well ahead, I think, of the integration of Yourgene health. I think we promised cost savings 18 months down the line, and you'll see from the former analysis that Steve's done today that we've already made GBP2.5 million savings in the first six months of this year. You extrapolate that out for the rest of the year, then there's your GBP5 million savings. And as a leadership team, we're still focused on delivering more savings. We think there is more synergy to be had over this business, and we're not going to rest until all of that has been captured and executed. We've got a broader technology portfolio, stronger end-to-end offering, so we've got the automation, we've got the machine capability, we've got the product development and manufacturing, which is why we're looking forward to continued growth of those key product areas, because we can make them in lots of different places and we've got good flexibility there. As I said, we've completed the actions that have delivered the annual cost reductions and the margins up significantly on where we thought it would be because we're focusing on prioritizing on the high margin products and really pushing our efforts to take them to market. And to really get the future growth that this team wants to deliver for our shareholders, for our board, it's having that strategic investment in R&D. We need new products. When Yourgene had its fundraising challenges, it was R&D that we cut, so some of those programs were absolutely stopped in its tracks. I think when Novacyt started going on a clinical journey, that is a long process, and they have absolutely expedited that by buying Yourgene and having all of that already existing in one division, which makes it easier to have a clinical division, a research use-only division and then these analytical instruments divisions. So the business is I think in a really strong place. We've got great cash in the bank, you know, and if you look at some of the comparator companies of similar size and a similar market space, you know, we've got double-digit growth in the key product areas. We've got a lot of cash in the bank and we've got an experienced team to deliver this from a well-funded manufacturing base. So our plan I think is to come out in another couple of months, sometime in H1, with much more granularity around the numbers, much more specifically around the costs, because everyone wants to know how long is our cash going to last for. I can say now we're comfortably confident that our cash will last long enough for us to reach profitability, but we're not resting on our laurels there, and we will go after additional savings to further protect that cash. But we've got good cash in the bank, we've got good existing products, we've got a new pipeline of products coming through, and we're very, very excited about the future. So thank you for listening everyone. I think, I hand back now to the question-and-answer side.
Operator: That's great. Thank you very much for your presentation. We have received a number of questions both pre-submitted and throughout today's presentation, so I'll just dive in with the first one here. I think you did touch on it in your presentation, but maybe some more color if you can add some more color, that'd be great. What’s your change for Novacyt in Monkeypox?
Lyn Rees: Yes, I mean, I still think it's early doors in Monkeypox. There's a lot of talk, there's a lot of tenders out there at the moment. So I think we'll have a bit more news over the next couple of months. Existing research use-only, [GenPsych] (ph) generated some revenues in July and August. We're entering some tenders. But those numbers aren't material at group level. The market is far more saturated as I mentioned earlier, compared to the COVID-19 pandemic. You know lots of available products, you know, vaccines et cetera. So it's not like COVID. We are currently updating our assay to get this Clade 1b strain in it. That seems to be the most dangerous strain, the strain that's more infectious than any other strains, and there's not a product on the market currently with that. So we do have an opportunity to differentiate that, and we've got the R&D team working on that product as we speak. And we will continue to monitor and assess whether there's going to be enough demand longer term to take this into a test for clinical use, get the IVDR approval in it. Because as I said at the moment, it's research use-only. So we've reacted, we've seen some incremental sales, they're not material. The opportunity could develop more as we go into what is traditionally a busier period for this type of infectious disease, and we keep you updated.
Operator: Thank you very much. The next question here, when will the integration of Yourgene be complete?
Lyn Rees: I think it's largely complete now. Steve has very clearly articulated where we save money and how we got to those GBP5 million cost savings. We've refocused Primer design back into the RUO market. The cost base is down significantly there, but more importantly, the speed of which we respond to our customers is up significantly. Eliminated the duplicate corporate function, integrated all key operational departments. We've gone through a big product rationalization, so that's where we maybe appear to be losing certain revenues at the moment, because there were certain products that we made that we just didn't make any money on, or were non-profitable. So there's a big rationalization of products and services that has happened and is continuing. And we've also rationalized our distributor network. So I think we're ahead of the curve on the cost savings that we said. There is more to come. And yes, I'm really pleased with the way the integration is working out. By H1 next year, we'll have all of this work done. So myself, Steve and Joe will be presenting to you a very clean cost line, a very clean understanding of where these products are coming from in terms of new content and when they come into market and some clarity on our future growth expectations as well.
Operator: That's great. Thank you. The next question asks if you're evaluating future M&A opportunities?
Lyn Rees: Not at the moment. I mean, our current focus is on the strategic things that we've mentioned today, you know, the rationalization, or the integration of Yourgene and Novacyt. We're investing in R&D. We're seeing organically that's where new products bring new revenue so we're putting a chunk of money into R&D to bring some new products to market. And with this and our combined commercial strength, we think that's more of enough of an organic story to take to market. Obviously, if things drop on our lap, and of interest, we would consider them, but our focus at the moment is very much organic growth.
Operator: Thank you very much. Turning to next question. Would you consider a trade sale to a larger company?
Lyn Rees: Well, I'll hand over to Steve for this.
Steve Gibson: Yes. So sort of similar answers, I think really what Lyn gave from an M&A perspective, right? Our focus as a business is to continue to grow the new business, the combined most like Yourgene business, right, and making it success of it. But clearly, you know, if an opportunity comes along that's in the best interest of shareholders, then we would consider it absolutely.
Operator: Thanks, Steve. When can we expect a more detailed update or some more guidance?
Lyn Rees: Yes, I mean, I keep saying H1 next year guys and that's the date. Sorry I'm not going to be more specific around that at the moment, because we're still working through our plans. I mean this new leadership team has been in place for just five months. We've integrated two complex businesses. We've demonstrated on a pro forma basis that we've got the GBP5 million cost savings already under our belt. We concluded the DHSC dispute. We sold the Taiwanese business. So I think the team has done a good job. The foundations are certainly in place to accelerate growth around the product portfolio in the years to come. We look forward to updating the market with that and going back to more of a traditional market model of numbers in the market, analysts reporting on us in H1 next year.
Operator: Understood, thank you. Can you provide an update on the progress of your RUO business and can you provide an update on the multiplex infectious disease products?
Lyn Rees: Yes, so again we've kind of touched on this in the presentation, you know, that all primary design business sits at about 1,200 assays at the moment. I think we deliver close to 500 custom assays. In June we launched a real-time PCR workflow for rapid on-site detection of norovirus. It's not going to be a massive market. There aren't that many oysters that are formed, but it shows that you can put some point-of-care technology right in the field of use, get a clinical result. So that could be used in animal farming, in crop farming, just doesn't have to be in shellfish. So what we're going out and doing here is demonstrating that we've got a hardware and an assay that can be run next to the place where you harvest the product or you source the product. So it doesn't need to go to a central lab. Products unsent on the road are at risk, because they haven't had a pass or fail result with regard to what you're testing. So I think that's all about proving the model and we just chose norovirus to do that. And additional agriculture and veterinary products will be following very quickly from this team. But as part of this product evaluation that we did, we decided not to continue with the clinical side of this business. It was slowing things down. It was very expensive, and effectively Novacyt bought that capability when they acquired Yourgene. So the business is moving much back to the business that I remember Primer Design being. I used to be a customer of Primer Design. Quick, great customer service, great quality product, but from a research perspective, not a big clinical product, only easy to get your hands on. And I'm pleased with the progress that we're making there so far.
Operator: Thank you very much. Moving to the next question, what's the impact of your global demonstrations training events?
Lyn Rees: Yes, I mean, I think this is something we spoke about last time. This was around creating awareness fundamentally. You know, we are a relatively small brand compared to the likes of Illumina (NASDAQ:ILMN) and PacBio, et cetera. So being able to partner with those guys created awareness for us. It's from these global demonstrations that actually the request came back from the customer base to add fragmentation analysis to the Ranger Technology. So that's a product upgrade that was driven by market feedback. We're working on that now. And yes, I think the purpose of these events is fundamentally educate customers, make them aware of our product and hopefully lead to better sales of our products. And predominantly it's NIPT and cystic fibrosis and Ranger that are going out and being promoted in these things at the moment. And we can see the results in the growth rates we get in there.
Operator: That's great thank you Lyn. Next question why is there a lack of news flow?
Lyn Rees: Okay, well I mean the way the stock market works is we can only announce news that's material so we haven't had any material news. The new management team has been in place for just five months. That's a relatively short period of time to bring together two quite complex businesses. We've got to protect the culture. We've got to protect the product efficacy. We've got to protect the existing customers. You don't rush those things. You only lose a customer once. It's very hard to win them back. So we've taken our time with the integration and working hard to combine the businesses and making sure that when we come out to market in H1 next year, we have a very, very understood cost base, a very clear understanding of the growth opportunities of the business and a very clear timeline on when we're going to be launching our new products and what investment we're going to be making into that. So I appreciate everyone's patience, I'm sure you'd all like to hear more news, but we will come to market, as I said, in H1 next year with all of these stories refreshed and a very, very clear picture of where the business is heading and what milestones you should be evaluating our performance on.
Operator: Thank you very much. And maybe time just for one more question. Can you explain the reason for publishing the RNS for VAT reimbursement in the middle of the day?
Lyn Rees: Oh, that's a Steve question.
Steve Gibson: Yes, it's an interesting question. Let me take that then. I think the key thing is, you know, We're fully aware of what our aim obligations are to announce without delay. But maybe let me put you on the bones in terms of how it works practically, right? So we have multiple bank accounts as a business. So obviously the team coming in the morning and once they are identified with a large cash payment dropped into our bank, they then inform me and then we kick into gear and get the ball rolling on getting the announcement ready. That obviously has to go through a number of internal reviews and then external reviews. I was really pleased that we announced it within about three hours of finding out. So we announced it without delay.
Operator: Perfect. Thank you very much and thank you for answering those questions. You can for investors of course the company can review all the questions have been submitted today. All publishers responses on the investor meet company platform. Just before redirecting investors pride you their feedback. It's particularly important to you both. Lyn, could I just ask you for a few closing comments?
Lyn Rees: Yes, certainly. And again, thank you, shareholders, for being supportive of our business and for being patient as we go through this transformational integration of Yourgene into the Novacyt Group. I think the couple of things I'd just like to just remind you on before you leave is that our core products are growing really well. Cystic fibrosis up 30%, NIPT up 12%, as we said at the moment. You know, fantastic result. I think with the DHSC dispute, you know, having a net GBP7 million swing in our favor puts us in a cash position of around about GBP36 million, you know, for this time in the business, which compared to many organizations in the same size and the same market for us, we are streets ahead from a cash perspective. So I think that's really, really strong for us. We're putting a lot of investment into new content, so we're reinvesting into R&D in what I think are the right areas for R&D, to put new products around existing products or to improve the existing products that are already taking market share in market. We've got the IVDR framework that's come in that I think will change the market space, it will reduce the number of competitors in there, it will make it harder for or make it easier for high quality companies like ourselves to take our products to market. So I'm really looking forward to riding that IVDR wave. And then this product rationalization that's going on in the background and more looking for additional synergy opportunities means that Steve, myself and Joe will work closely with the rest of the board to protect that GBP36 million cash for as long as we can. We believe we've got more than enough to get us through to profitability. And with the new products that we're going to be bringing to the market and the existing products that we're going to be bringing to the market, we expect to see some positive updates over the next couple of years. So we look forward to coming back in H1 next year and presenting these stories for the first time to you and, you know, reimagining or breathing life into our investment story I think is one of our next key milestones. But leave us another couple of months just to finish off the rationalization work, finish off the synergy work, and we look forward to seeing you in the new year.
Operator: That's great, Lyn, Steve. Thank you very much for updating Investors today. Could I please ask Investors not to close the session as you'll now be automatically redirected. Provide your feedback in order that the management team can better understand your views and expectations. This will only take a few moments to complete, but I'm sure will be greatly valued by the company. I'll have the management team at Novacyt, we'd like to thank you for attending today's presentation and good afternoon to you all.
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