Novacyt S.A. (NVYTF)
Q2 2022 Earnings Conference Call
September 29, 2022 7:00 A.M. ET
Company Participants
David Allmond - Chief Executive Officer
James McCarthy - Chief Financial Officer
Conference Call Participants
Presentation
Operator
Good afternoon, and welcome to the Novacyt H1 Results Investor Presentation. Throughout this recorded presentation, investors will be in listen-only mode. [Operator Instructions] The company may not be in a position to answer every question received during the meeting itself. However, the company will review all questions for today and publish responses where it is appropriate to do so.
Before we begin, I'd like to make the [following call] [ph]. And for the benefit of those joining us from France [Foreign Language].
And I'd now like to hand you over to David Allmond, CEO. Good afternoon to you sir.
David Allmond
Good afternoon. Thank you, and good afternoon, everybody, and welcome to the 2022 half year results presentation in which we'll also cover an extensive update on strategy and execution against our strategy.
Next slide, please. Please take the disclaimer as read. Next slide, please. So, as an organization, we are blessed with our capability from our talented team, our product portfolio, which you'll see in this presentation is extensive and expanding and our operational capability from R&D through to scale up manufacturing and international supply, regulatory and beyond.
From a vision perspective, we want to reinforce our vision, which is clear. We are committed to becoming a leading global clinical diagnostics company in infectious diseases. That is our strength and our legacy and we continue on that path. From a purpose perspective, we are proud to have protected many lives during a pandemic. And we will continue to protect lives across multiple settings in infectious disease.
Next slide, please. I'm joined today by James McCarthy, CFO, who will walk us through some of the key financials. And not here on this slide, of course, are the executive team who are bringing bench strength to the leadership of the organization along with the wider talented team and the very strong support we have from our Board of Directors. I'm also wanting to flag to you from a leadership perspective and from a capability perspective, you'll see that we've rightsized the company, but I want to reassure everybody that we’ve maintained core capability to execute against future strategy.
Next slide, please. I'm going to pick up one or two things here before I hand to James. I think the most exciting thing for me on this slide is that we have yesterday signed a deal, global deal for accelerating our clinical CE marked infectious disease assay menu with over 40 new assays that are already approved across the therapeutic verticals that we were already pursuing based on our market research. This is a huge accelerator to allow us to build into the clinical market setting with non-COVID portfolio on our instrument platforms.
So, in addition to the menu expansion, we are also enhancing the workflow solutions to be able to take the chemistry and testing to the right place at the right time, largely in decentralized laboratories, spoke laboratories, private laboratories, where near patient testing is a growth area.
The other point I will flag on this slide from my point of view, which I'm also excited about is, that we have really gone back to our research use portfolio, which is over a thousand products across veterinary food, environment, testing, etcetera, which I'll come back to later, but we have really done some extensive work on relaunching that exciting portfolio, which we think is world-class.
So, you'll see more about those points as we go through. And with that, I'll just get James to add to my comments on this slide and cover the financials.
James McCarthy
Thank you, Dave. Good afternoon, everybody. And so, I'll just pull a few points out here. And just to confirm the closure of the Microgen Bioproducts and Lab21 Healthcare business, this was something we've flagged to you back in January that we were doing strategic review and confirmed in April subject to consultation, so that business has now been closed. And I think also the big – at the start of July, in the phase of declining COVID sales, we announced that we would do some further adjustments to our cost base as we announced a [program restructuring] [ph]. That also completed more or less by the end of August.
So, I think just from an execution point of view, it's good to have those two things completed. And the third point is, on DHSC, just to reiterate on DHSC, on the 15th of June, we filed a defense of the claim received from the DHSC on the 25th of April, and the counterclaim for 81.5 million. The value of the claim and the counterclaim are broadly in-line with what we had put in our accounts at the end of 2020, and the company position in relation to the claim remains unchanged.
I mean, we believe we have strong grounds to defend the claim, and the [subcontractor rights] [ph] under the counterclaim. That position hasn't changed. Unfortunately, as you may appreciate, the company is unable to provide detail on the case. All the confidentiality clauses in the contract are still in place. It's also as a legal case, it's up to you to say. So, we are limited in what we can say. When I assure you that as anything material happens, we will keep you up to date.
Next slide, please. So, there was quite a lot of detail in the release this morning, including the accounts themselves. So, I'm just going to spend a few minutes running through a few of the highlights, maybe just to orientate you towards a few things, but there aren't quite a lot of detail in the accounts themselves. I mean, the first thing I might say, as you read the financial statements for the first half of this year, please note that the Microgen Bioproducts Lab21 Healthcare business has been reported on a separate line. It's a loss from discontinued operations in accordance with IFRS 5 five.
So, and that's been restated for 2021 and 2022. So, both sets of numbers you looking at here excludes those businesses in the main, so they are comparable. And if we start with revenue, revenue of 16.5 million, compared to 52 million in the same period last year. And the decline is mainly a result of COVID sales declining. And the quantum of that really was 13 million of [the 16.5] [ph] was COVID this year versus 47.6 million in H1 last year.
So, you can see there's been a significant fall-off in COVID sales in the first half. I mean, geographically the business is still well balanced. I mean U.K. accounts for just over 50%, but next 20% is, roughly Americas 20%, Europe 20%, and the balance then split between APAC, Middle East, and Africa. So, still quite an international business. And beyond Lab21, post the close of Lab21 healthcare, Primerdesign is going to be about 95% of total revenue.
So, I think the whole strategic rationale of having a more focused business around molecular is really that are borne-out in the long-run. If we look at gross profit, the gross profit improved from 1.2 million last year to 4 million this year. Last year was subject to a lot of significant adjustments in relation to DHSC. This year's gross profit also had some adjustments, some additional stock provisioning and write-offs in relation to falling COVID-19 demand.
I think the important point was if we exclude those from this year, the underlying gross margin would be in excess of 60% and that's a key number for us as we go forward and saying, what's the underlying margin, gross margin we can generate from this business. And in OpEx cost terms, OpEx cost fell 17% from [13.3 million] [ph] last year to 11.1 million this year. And that was mainly a result of reducing general admin costs. And that's quite important because it meant that we were maintaining investment.
And in fact, increasing investment in what I recall the front-end of the business, which is R&D and sales and marketing. And in the case of R&D, we increased R&D investment in the first half of this year by 1.4 million or H1 last year, it's like a 74% increase. And sales and marketing was pretty much comparable year-on-year. So, overall, even though we've been addressing cost of the business, we're maintaining investments in the front-end of the business. And as a metric just of size, if you like, overall headcount, which includes direct staff.
At the end of December, it was about 283. At the end of June around 210. And I think as we sit here today, close to about 160, just to give you an indication of how we're, kind of resizing the business post-COVID. In terms of profitability, we reported an EBITDA loss of 7.1 million, compared to the loss of 12 million last year. And that 5 million improvement effectively is the 2.8 million of gross profit I just mentioned and the 2.2 million savings in OpEx.
The [loss] [ph] after tax is 5 million improved by 7 million versus last year, and that's effectively the 5 million of EBITDA we saw plus an improvement in other financial income, and that's mainly the revaluation of the company balance and other balances based on the weaker sterling, which is flowed through [indiscernible] expense year-on-year.
Just to finally on discontinued operations, which I mentioned upfront, you'll see a line in discontinued operations, which is moving from 3.7 million last this year versus 0.6 million loss last year. And I think it's very important to understand that number in context. The bulk of that number is non-cash.
So, there's [about up to 3.7 million] [ph], roughly [700,000] [ph] what I would call trading [indiscernible] it's lower revenue and gross profit as that business continues to struggle, which is part of the strategic rationale for closing it down. And there's about 3 million of non-cash write-offs in relation to closure, which are things like the impairment of the assets of the building lease we held, stop write-offs. There's also a deferred tax change.
So, a lot of these are non-cash items, which make of that significant loss. So, moving on to the balance sheet. The cash position at the end of June was just under 100 million, which is [comparable] [ph] we had 101.7 million in December 2021. So, the business still has incredibly strong cash position. You'll see working capital if we exclude cash fell by a third from just over 18 million at the year-end to just under 12 million at the end of June. That's really based on following revenues and actions taken in relation to COVID-19 stock.
The capital expenditure, you'll see a decrease. I mean, in H1 last year, we spent around 2 million in H1 this year, [around 300,000] [ph]. And I think you should look at the 300,000 as a more normalized number for this business, 2 million in H1 last year, had still quite a lot of scale up over, if you remember, insourcing manufacturing, bringing manufacturing [indiscernible] investing behind that [indiscernible] quite a strong COVID business. But I think again, I think if the business is going forward this year's CapEx is a better indication of what we should be spending on CapEx going forward.
And just finally to call out our patent ORF1a/b, and that patent covers quite an extensive amount of our business. And what it means under the UK patent box, tax regime is that tax on profits associated with this patent can benefit from a tax rate of 10% rather than 19% it will not be a cash refund. It will be an offset against future tax liabilities, which is still, of course, valuable for us. We estimate that [indiscernible] to be around [£5 million] [ph].
So, I leave it there. I appreciate that's a quick run through. As I said, there's a lot more detail in the accounts themselves. And of course, at the end, we'll happily take questions. So, I'll just hand you back to Dave. Thank you.
David Allmond
So, what I'm going to do now – thank you, James. What I'm going to do now is talk to you about our delivery against the strategy that we previously set out where we are very proud of what we've achieved in the last months to prepare ourselves for future growth in a non-COVID environment. So, this slide as we've shown before, but let me just remind you all of our core strategic imperatives.
If you look on the bottom left-hand side of this chart, this is an illustration, but prior to the pandemic, we were really a research use only life science molecular company in the £10 million to £15 million range of income. And I have to remind myself every day of what the company achieved in the pandemic was amazing. Really first to market in Europe and an extensive portfolio to protect lives.
And that nominal peak there was driving significant growth in the scale of the company and its revenues and its cash, but of course inevitably, the downturn in that, which is perhaps good for us from a public health perspective, but let's say from a business perspective, is that it declines quite quickly in highly vaccinated settings, and we're seeing testing to decline rapidly. That's not unexpected, but hard to predict.
However, therefore, as we turn to our opportunities for growth beyond the pandemic, we are very fortunate as a company to have a significant portfolio already. And you'll see in this presentation, we are enhancing that portfolio significantly. So, we have a human in vitro diagnostics portfolio, which is not only COVID, but it's already expanded into respiratory, and you'll see with when I go through the deal with Clonit that now expands radically as of signing yesterday.
We have a RUO portfolio, which was the strength of the Primerdesign days, which is over thousand products spanning various areas of veterinary food, environment, and human research. And we are switching that back on, and I'll come to that separately. And then we are able to run either chemistry on instrument platforms, either the MyGo’s through RUO or the Q Series for the human diagnostics.
So, we can offer workflow solutions in the right place at the right time in diagnostics. So that [concept] [ph] of three key areas of portfolio really allow us to now turn to build a sustainable base business, which is growing and predictable.
Last thing I'll say on this slide, last two things. One is, the RUO portfolio is an innovation engine if we choose to advance something into a clinical use, but keep in mind, that now requires a long journey because of IVDR. The regulation came in May of this year. That's more like a two-year journey to bring products to human use. It's no longer a few months. And the last thing then is to say, we will continue to be a global first responder. You know, we're proud of that. That's something we've done very well in the pandemic. We did it before with Ebola, Zika, H1N1, and more recently with Monkeypox.
Next slide, please. So, again, I've shared this slide previously, but I think this sets us up in this presentation to walk through the key pillars. So, the question we have quite rightly always asked is, in 2021, you were more than 80% relying on COVID business or income and 20% non-COVID. How are you going to get to the other side to be 90% plus non-COVID and residual COVID revenues? And can you make it because the [motes] [ph] just got wider, but the price on the other side is probably bigger. And I want to convince you that we are supremely confident we will get to the other side, but it does take some time.
There are four key pillars: portfolio development, which we are making significant steps as I walk you through that in just a moment. Instrumentation is the enabler to the chemistry, and again, we're making significant advances in enhancing our instrument workflows to deploy the chemistry and replenish the chemistry in a Nespresso type model.
From a geographic expansion perspective, I'll cover that momentarily in terms of our distribution base and our direct team. And we have really, really now accelerated our efforts for business development, which has actually led us to today with the deal with Clonit, but we're not stopping there as we advance the funnel for transactable M&A opportunities.
Next slide, please. So, I'm going to walk through each pillar to show you the progress we've made since we last engaged on each of these, which I believe is substantial. And it really is now setting the foundation for future non-COVID growth. So, firstly, portfolio development, we’re really excited to sign a deal with Clonit for a global access to a broad approved CE marked menu of assays, which span the therapy to [carry of interest] [ph] that we already had identified in our market research from respiratory, gastrointestinal, insect borne disease, and sexually transmitted infections.
So, immediate access to a broad portfolio. The European opportunity, we estimate the market size for that portfolio is in the order of £470 million with a healthy CAGR of 10% approximately. So, really significant opportunity to deploy near patient solutions with our workflows and chemistry in that setting. We relaunched the RUO portfolio, but just so you understand what that took, that wasn't a situation of just launching it.
It was a case of making sure that the very extensive portfolio was fit for purpose and ready to go back to a focus in the market. We'd prioritize over 250 assays, check they're ready to go and have them on the shelf for within a week turnaround and we've maintained the other broad portfolio of the customers to order on a slightly longer lead time of 6 weeks to 8 weeks, and that will be – it would evolve as we learn the demand.
We've had some early wins since going out with that portfolio again, already seeing uptake in Canadian salmon farms, which is big business for maintaining, ensuring the salmon stock is in good health, especially in the spawning season and also in Poland with salmonella testing in chicken farms. We expect to see these to grow.
We may see repeat models of this in other countries. Just to give you a flavor, that's already seeing some early wins. And then we have advanced our own organic R&D, which is not today the center of our presentation because it is absolutely ongoing in the background, but it will take a little time to come through under IVDR to drop in to the clinical efforts we're making with the Clonit portfolio.
So, really, this Clonit offers us near-term growth and momentum to drop our future developments into. On the instrumentation side, pillar number two, we have now sourced an extraction system to put into the workflow, which would be needed for genesig assays or Clonit assays. if customers don't already have extraction, we are enhancing and expanding the co-prep flexibility for automation in the workflow beyond PROmate where it started into genesig, dry and Clonit assays.
And then we've launched the lateral flow portfolio 18 of 21 of those assays are non-COVID and actually I'm delighted to say they span the same therapeutic verticals as our molecular portfolio that I outlined above. So, really, this is a decentralized workflow to deploy and enable the use of our assays in the right place at the right time.
Next slide please. In terms of geographic expansion, another really extensive piece of work we've done is to review that globally. We've deployed our own talent selectively in countries in Europe. We're already in the U.S. In Latin America, we have initial [boots] [ph], but really to manage distribution, which, you know, which we've enhanced significantly now, making sure that in each jurisdiction, we have the right partner for RUO and the right partner for [indiscernible]. And in some cases, the same partner. And then we will manage tightly the relationship with those partners to ensure they are well trained and motivated to deliver successful channels to market across the globe.
I wouldn't have expected originally until I reviewed this given the rush of the pandemic, which was more reactionary to the business. We actually had 18 markets in the EMEA where we didn't have good distribution coverage. We've now entirely plugged that gap. We've been also optimizing our network in the U.S., Asia Pacific, and Latin America as we speak. I've just come back from Portugal where we've just had the first round of training of our EMEA distributors on our diverse portfolio getting ready to go to market with – as we relaunch RUO and our clinical portfolio.
They were very excited to see what Novacyt can offer. From a business development point of view, not a day goes by now where James and I, and some of the other senior members of the team are focused on business development across the three key areas of innovation, acceleration and strategic transaction. And I hope you join me in seeing that we've delivered on that already with the Clonit deal.
We're investigating additional panels to drop in, which are already approved to see if we can even expand further into GI. And we've found now a number of strategically aligned executable opportunities for M&A coming through the funnel. I can't be more specific, but rest assured, we will not rest until we find best use of our capital for shareholder value and future growth.
Next slide. When one comes through a pandemic and the attention responsiveness to a pandemic takes, you turn around to the warehouse and think what do I do? And here we are very excited as a company because we don't have to build not from nothing from scratch, to redeploy our teams and to drive for future growth. We have the PROmate direct direct-to-PCR platform, which we're expanding in organic R&D, the genesig platform for clinical and RUO applications, our natural flow platform, most of which is non-COVID, our SNPsig assays for delineation of variance of concern and a very extensive portfolio of instrumentation to deploy our testing in the right place at the right time.
So, we are immediately now deploying this. In fact, I've just come from a sales team that just down the road, briefing again on how to deploy these offerings to the right customers across our regions. And I'll be going back right this afternoon to keep up the momentum on driving for growth.
Next slide. The research use portfolio I've sort of covered earlier, but it, you know, many of you would be familiar it spans veterinary food environment and human research. Importantly, our MyGo range is a partner to this because the assets can be run on the open systems of 16 and 32 [indiscernible].
Again, in the chicken farm example I gave you, they would be deploying the instruments and the assays, the Salmonella. And in the salmon testing example, I gave you that we're looking for viruses in salmon, again using q32 or MyGo 32 well systems so they can do the work on the farms in, you know, in the immediate vicinity. Those are early wins. This is an extensive portfolio and we see growth opportunity now as we take this forward.
Next slide. We were already on this track depicted on this slide focused on COVID-19 initially because we dropped everything to focus on such a dramatic situation. We'd already expanded into respiratory with our winter panel with influenza AB and RSV in addition to COVID and the genesig version is on the market.
We’re still away with CDTA approval, which we're chasing every day. But now, with the Clonit deal, rather than waiting two years under IVDR with our organic efforts, which continue, we are now able to already move into respiratory, non-COVID, assays, gastrointestinal infections, sexually transmitted infections, insect borne viruses, and insect borne protozoa not listed here. So, we really have hugely accelerated our opportunity to enter these clinical markets.
Next slide. From an instrumentation perspective, we see this as the enabler. And you'll see here, if you look from the left, next to sample collection is an example of extraction instrument, which we will bring into the workflow because the genesig and the Clonit chemistry would require it. Some customers have this already in different forms, but we would be able to offer it where needed.
The co-prep was a PROmate enabled system for automation, allowing that convenience, walk away time, reduce contamination risk and human error risk, but we're now bringing on the genesig, our dry formulations, which we've just announced recently, and also the Clonit chemistry into the capability of the liquid handler. And then as you, I'm sure, know, we can attach or daisy chain, if you like, multiple [q32’s or 16's] [ph] to one liquid handler, up to 8 in fact, which could take you to well over a thousand tests a day if you weren't seeking to scale up with a semiautomated workflow.
And from a deployment perspective, this workflow, either a part of it, if it's a q16, you could in a carry case on a battery could go out in the field, but from a VersaLab perspective, as we did in the pandemic can be deployed, you know, into areas of need. We did that in the pandemic at airports and the Port of Dover and in employee settings, etcetera. So, we have that ultimate flexibility.
Next slide. From a climate deal perspective, it comes in three phases as we see it. Number 1 is now, and that means we have access to over 40 approved assays across those areas I've outlined, including a very extensive transplantation portfolio that complements the work we were already doing.
Number 2, we start to validate those in a prioritized way onto our key instruments. We've already completed a number of STI validations, which led us to the signing of the deal because we became confident and we will now move to the Respiratory GI in the next couple of months to get those validated onto our platforms, and then we'll bring in the entire workflow to make sure that we can deploy the whole automation and scalable workflow and that's only into next year, we'll be ready for that.
Why have I [asterisked insect-borne] [ph] is just because we need to define a clear international regulatory strategy because most of those disease occur ex-Europe and we want to make sure that we're prioritizing the right countries for regulatory access alongside the validation work, which requires our R&D team to undertake that work.
Next slide. I said to you in the illustration earlier that we want to build a solid, sustainable growth-based business with our extensive portfolio, not beyond COVID, and we will do that, but we then can remain responsive to outbreaks. We've done that recently with Monkeypox and Adenovirus F41, one of the suspected viruses in juvenile hepatitis cases, and we can turn those assays in three weeks, and we are proud of our ability to respond fast when we are needed.
Next slide. In terms of business development, I touched on this earlier, but let me give you a little bit more color of what we've delivered against these three subheadings that we shared with you earlier in the year. Number one, on innovation, which is earlier technology where we're seeking to develop disruptive technology, we're advancing our efforts on a co-development of a point-of-care biosensor platform.
That's early, but it's, you know, it's advancing towards stage gates. From an acceleration perspective in the [middle market] [ph], that's where we've had the biggest traction, which leads us to today's presentation, with a huge expansion in the approved menu to run onto our systems. We've also added a digital reader into the lateral flow portfolio.
We've expanded as I've described on, you know, our capability and we're expanding the capability on the liquid handler and bringing extraction in. And rest assured on the third pillar here of strategy, we really have now increased the funnel for strategically aligned, transactable deals. I can't give more detail, but we will be coming back to you once we have something that is, you know, is announceable, but we are working tirelessly to deploy capital towards strategic transactions to accelerate growth and deliver shareholder value.
Next slide. So, in – by the way of summary, I won't repeat too much here what I've said, but I just will say let’s, we are, I want to reiterate on the revenue side, we see Q3 2022 at circa £2m, similar levels in Q4 and an expected full-year loss of 13.5 million, but I think the key takeaway for me as we prepare ourselves for future growth is that we really think we're now well-positioned with our core capabilities maintained despite downsizing to drive towards our vision to be a leading global clinical diagnostics company.
I hope you've seen today that on every pillar that we set out to make it to the other side as we transition to become a non-COVID growth company, we've hit a lot of positive results, and we will continue to execute on that plan.
And with that, I'll stop and we perhaps could go into some questions. Thank you.
Question-and-Answer Session
Operator
David, James, thank you very much for your presentation. [Operator Instructions] David, James, we've received a number of questions both pre-submitted and live from investors. And I want to start off the Q&A session with this one here, which reads as follows. Why have you chosen to focus on the specific areas outlined in your strategy for development of your portfolio?
David Allmond
Okay. Yeah. So, when about six months ago, we completed some significant market studies, market research studies, we've centered mostly on Germany, UK, Nordics as examples of key markets where really we were researching the question of which are the most attractive markets we should consider in the future in terms of addressable market, unmet need, competition, and reimbursement potential.
And then alongside that in parallel, we were considering which is the best strategic fit for the company given our workflow so that in terms of could we leverage Novacyt’s capability and could we offer differentiated propositions in a decentralized setting for our customers? And from that, we picked the key areas, which are our respiratory, gastrointestinal, insect borne, STI is a growth area in that near [patient setting] [ph]. And the transplantation assays, which we were already embarking on, we’ve now expanded there.
So, I'm very confident that we've done the diligence from a market perspective on which are the most relevant areas of focus, but what I'm most excited about is, I now don't have to wait two years for our own organic R&D, which will be highly contributory. I can get going now with the team in deploying our workflows and chemistry into what we believe is in the order of £470 million market opportunity, which is growing significantly, and that's Europe only. We will reach beyond Europe with our capability.
So, there's a really complementary business development deal here and it's fully aligned. And I said to you earlier, the natural flow portfolio is also aligned to those therapeutic verticals as a screening tool ahead of reflex to confirmation. So, I think, hopefully, that gives you some reassurance that we're on to the right therapeutic areas.
Operator
That's great. Thanks for that. How does the reduced cost base leave you placed to execute your strategy?
James McCarthy
Yeah. So, I shall take that one. I don't think it affects our strategy as we lay it out at the moment. I think I mentioned in the results, particularly in relation to R&D, we actually increased our R&D spend in the first half of this year over last year. We increased R&D spend significantly. So, I think we're walking out to protect the investment, as I recall, and repeat the front-end of the business, which is R&D and sales and marketing in [commercial end] [ph].
And I think if you look at our full-year costs, I think it's around like 10 million, which half our cost base, is under half our cost base this year will be spent across R&D and commercial. So, these are considerable [sums] [ph]. We're still investing in the front-end of the business. And we believe that this efficient support strategy is, we [plan a lot at the moment] [ph].
Operator
James, thank you very much for that. The next question here reads as follows. Can ITIS machines purchased by customers for COVID-19 testing also support testing for other diseases?
David Allmond
Yeah. I'll take that one. It’s Dave. Yeah. So, the answer is, yes. But actually, let me go a bit further than that. So, if you think of the [ITIS machines] [ph], which are, we believe, best in that category, from the – we have the MyGo range, which are open instruments 16 well and 32 well thermocyclers. They can be used extensively across the RUO portfolio that I shared with you across those broad areas. And indeed, they are sold together with chemistry for that purpose.
If you then think about clinical use, the q32’s, q16’s, the answer is yes. We can use our new assays such as the respiratory assay and all of the Clonit assays of relevance will be validated on to the q32, q16 as appropriate. And what we'll be doing is updating the [indiscernible] working with Clonit who would update their [indiscernible] once we do the validations, which doesn't push us into IVDR. These are seen as minor changes.
So, it really gives us an acceleration of the versatility of our instrument platforms across a very broad menu. So, that's a good question, but that's actually why we're excited about both the offerings we have, bringing them together.
Operator
That's great. Thank you very much for that. The next question is really around institutional investment and [if and ask] [ph] if you're looking to attract any institutional investment?
David Allmond
So, I'll let James take that.
James McCarthy
Yeah. Look, in a short answer, yes, of course. We'd love to have more institutional investors on board. I think if we look just briefly the history of the company, I think during the COVID period, I think it's difficult for institutional investors to get involved because of the uncertainty of COVID revenue and I think that's a problem to be the case. So, I think part of explaining the strategy, part of setting out a clear strategy is to demonstrate to all investors that there is a roadmap.
It's a roadmap that can be valued, that can be measured, and ultimately, we have to produce track record against that strategy to attract and all investors, institutional investors in particular group. So, in a short answer, yes, but I think we have to put more [runs] [ph] on the board, have more track record, before realistically are expecting institutional investors to come on board.
Operator
Perfect. Thank you very much. The next question, we've had this question from a few investors. I can see there's one from Stuart and Sam here and just grouping those together, what is the latest update in regards to the dispute with the DHSC?
James McCarthy
Yeah. So, again, I shall take that one. Look, in my statement that we're on, I mean, I just outlined where we were in the process. We’ve filed our defense of their claim and our counterclaim for 81.5 million for unpaid invoices plus interest. I mean, I would repeat the company position. We believe we've strong grounds to defend the contractual rights and to enforce our contractual rights out of the counterclaim.
It's still a legal case. The confidentiality clauses in the contract remain in place. So, we are very limited on what we can say about this in public. So, and I think that's very frustrating for people. I think people would like to hear a lot more about the case. We'd like to hear more about the exchanges, but unfortunately, that's not going to be the case as we go through this dispute.
All I can assure you is that as something relevant for investors, of course, we will always share with you as we have done. And yes, it's taken time and it's a slow process and that frustrates everybody, and certainly frustrates management, but I think it’s a process we have to see through now. And again, that's maybe unsatisfactory to a lot of people because we're not getting into the detail, but I think in this instance, that's as good as it's going to get, I'm afraid.
Operator
Thanks very much for that, James. And the next question here asked, can you comment on the CTDA approvals?
James McCarthy
Yeah. Absolutely. I'll take that one too. So, you know, the CDTA was in motion last day, last year and set up to approve these tests, as you all know. And it's been a headwind for us to get through those process, but we're very pleased that we've made significant progress to get five of our products now approved by the CDTA, which is the most, we believe, a UK based company.
In recent times, we've had the approval of the PROmate assays for the one gene assays this q16 and q32 instruments and also a 2G PROmate assay approved on the q32s. And then post period in July, we also got a UK approval for [indiscernible] direct assay, which was great to have that validation of that assay based on the clinical evidence. And we are continuing now to see through hopefully the final approvals, particularly winter panel.
I'm raising that every other day to get that, you know, approval through because the winter is coming and flu could be an issue as we've seen in the news. There is also a 3G genesig assay under review, and then we have the final two will be the lateral flows. So, we have more to do. I appreciate when governments put in new processes that they need to take time to bed in. It has been challenging. I think we've done the best possible job we could do as a company to deal with the regulatory requirements.
Operator
Thank you very much for that. The next question here is really around expansion and asked, how is an oversight tempting to grow the business internationally, including in the U.S?
James McCarthy
Yeah. Okay. So, what we've done, you know, internationally is that number one, we were a U.K., operationally U.K.-based company and that's the home market, but James has shown you that's not, that's half of our business. We were already expanding into Europe. We have more direct presence in Europe covering Germany, covering Southern Europe, but we also have coverage now directly just to manage our distributors for the Middle East. And we will be very judicious in deploying our teams on the ground, but we are certainly enhancing the distribution network with those individuals initially.
As I described to you earlier, we've had a huge amount of work to get the right partners and make sure we're working closely with them in all the key markets, but I will, you know, in the future, if we see an opportunity in a particular market where we need to go more direct and the business case is clear, that is certainly something we'll look at on a case-by-case basis.
Outside of Europe, I mentioned Europe because that's our primary focus because that's where CE marks apply across the European economic area. The other areas we have deployed in Latin America is someone to manage in local time, local language, our distribution. We have deployed previously as you're all well aware in North America, managing and optimizing our distribution. And we have revitalized our partnership with our agent in Asia Pacific who manages distribution in the APAC region.
And then from a central perspective, through our international team, we still [liaise] [ph] on a regular basis with the WHO, UNICEF, and the NGOs where we had a huge demand and success during the pandemic. So, what to expect there is to build success, build growth, and then one step at a time, you know, where should we invest directly next? And can we get, you know, the best out of our partners? I think we're making great progress to be with international reach given our scale.
Operator
Thank you very much. That's great. Next question here. Are the new LFTs CE marked and have we developed them by ourselves?
James McCarthy
Yeah. So, yes, the LFTs are CE marked, so they're all professional use. One of them is actually a self-test, saliva-based antigen test for COVID-19, and therefore can be used by individuals. The rest of them are professional use. They're all CE marked. We didn't manufacture them [directly ourselves] [ph]. We are not a natural flow originator, if you like.
So, they're OEM from another party that there are brand on the path flow. And as I said, you know, in the presentation, what I'm excited about if you have an offering, it's complementary to the molecular portfolio because it conveniently spans the same therapeutic verticals for where we're focused on the molecular side. And you do see in healthcare, in certain settings, screening, and then reflex to PCR confirmation.
So, yeah, we can offer natural flow across a range of [sexually transmitted] [ph] infections, gastrointestinal infections, such as [enterovirus] [ph], respiratory infections, and insect borne infections. So, you know, that portfolio really is, as I said earlier on is very nice to have that, complementary to our molecular portfolios.
Operator
Thank you very much. The next question here reads as follows. How do you intend to use CO-Prep post-COVID?
David Allmond
Yeah. So, I sort of covered that earlier, but let me just go over the couple of key points again. So, CO-Prep was launched earlier in the year. It's been deployed already in settings, largely for film and media testing where it allows an efficiency around the staffing, the voluntary staff and the sample stewardship, reduce contamination risk and walk away time, but because we now have an expanded menu, beyond PROmate with dry formulations, we also have genesig platform, and we have a very diverse Clonit chemistry platform.
We'll open up the CO-Prep functionality in the workflow to all of that chemistry to give it flexibility so that the semi-automation with multiple q-series could offer whatever the spoke laboratory or private laboratory needs from, you know, 40 or 50 samples a day up to a thousand. So, the CO-Prep is an enabler within that flow and I think offers significant value for efficiency in certain customer settings. So, we continue to be excited about it.
Operator
That's great. And perhaps one final question. I know we're coming up to the hour. What tests and instruments are we working on?
David Allmond
Yeah. So, if I go back a little bit from the prior presentations we gave, let me just go back to those. So, number one, we are working on our own R&D on using on PROmate platform, initially on GI panels. So, viral and bacterial panels, which is a very significant opportunity. As you could imagine, the sample type is complex, so that requires quite a bit of work on the master mix to being able to do that in a direct PCR. So, that's advancing nicely now through R&D.
We also you know, completed work on some transplant assays we were working on, but that's now hugely complemented by the Clonit deal, which has one of the most extensive transplant portfolios around. So, that's been accelerated. We're working on respiratory panels, which are non-COVID. That's not just influenza or – influenza and RSV, that's into other respiratory panel such as parent influenza, adenovirus, rhinovirus, etcetera, and the insect borne viral panel, Zika, dengue, yellow fever, and Chikungunya virus, which as we may have seen, if you look up the arbovirus initiative under the WHO, you can imagine under climate change inset borne disease has become highly problematic with dengue outbreaks expanding now from what was 10 countries into over a 100 and this will only get more challenging as mosquitoes, etcetera, migrate their habitats.
So, all of that continues. And I said, it wasn't the centerpiece of today's presentation, really because we're so excited about the acceleration on the Clonit side, but we will be updating you in due course as those come through our pipeline. And you could imagine with a commercial background like myself, being able to get started in a much more, you know, clinical play alongside our RUO relaunch over the next couple of years gives us a real near-term opportunity and momentum to drop our own R&D products into that [indiscernible] as they come through.
Operator
That's great. David, James, thank you very much for that. I think you've addressed those questions you can from investors. And of course, the company will review all questions submitted today and will publish those responses on the Investor Meet Company platform. But just before redirecting investors provide you with their feedback, which is particularly important to you both, David, could I just ask you for a few closing comments?
David Allmond
Yeah. My closing comments, thank you, would be firstly and foremost, thank you to everybody for taking the time today to come and listen to our interim results and our strategic update. I hope you join me in seeing the amount of work we're putting in to right size the company, clarify the strategy, and execute, and we will continue to execute tirelessly and we will continue to seek to deploy the capital for future growth and shareholder value and be keeping you up to date as things progress, but thank you and wishing you a wonderful rest of the day.
Operator
David, James, thank you very much for updating investors today. Could I please ask investors not close the session as you’ll now be automatically redirected to provide your feedback in order that the management team can better understand your views and expectations. This [indiscernible] complete, but I'm sure will be greatly valued by the company. On behalf of the management of Novacyt, we'd like to thank you for attending today's presentation and good afternoon to you all.
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Novacyt S.A. (NVYTF) Q2 2022 Earnings Call Transcript