MindWalk Holdings Corp. Q2 FY2025 Earnings Call

Good morning, ladies and gentlemen, and thank you for joining us today for ImmunoPrecise Antibodies Second Quarter Fiscal Year 2025 Earnings Call. We appreciate your time and interest in IPA. Today's call will be led by our CEO, Dr. Jennifer Bath, and our CFO, Kristin Taylor. They will provide a review of our financial performance, strategic initiatives, and key operational highlights for the quarter. Please note that a copy of today's presentation, along with our financial statements will be available on our company website for your reference. We encourage you to review these materials to gain a deeper understanding of our performance and strategic direction. Once again, thank you for joining us today. We look forward to sharing our progress and discussing our future plans with you. Before we proceed, I would like to remind everyone that today's discussion will contain forward-looking statements. These statements are based on current expectations and assumptions that are subject to risks and uncertainties. Actual results could differ materially from those anticipated due to various factors, including, but not limited to, changes in market conditions, regulatory changes, and other unforeseen business risks. Please note that these forward-looking statements are made as of today, and we undertake no obligation to update them as a result of new information or future events unless required by law. We strongly advise all participants to refer to our filings with the Securities and Exchange Commission, SEC, including our most recent Form 20-F and other periodic reports, for a more detailed discussion of these risks and uncertainties and for a more complete understanding of the risks inherent in our business operations and the potential impact on our future performance. We appreciate your continued interest in ImmunoPrecise Antibodies. I will now turn the call over to IPA's President and CEO Dr. Jennifer Bath.

Thank you, Regina, and good morning, everyone. Thank you for joining us today to review IPA's second quarter results for fiscal year 2025. Operationally, this quarter has been transformative for IPA as we continue to drive adoption in AI-driven antibody development, push innovations at our global operations, and firmly execute on a strategic plan to ensure sustained growth and increasing shareholder value. Our decision to relocate our headquarters from Victoria, British Columbia to Austin, Texas marks a significant step in IPA's growth strategy. Austin has emerged as a global hub for artificial intelligence, semiconductor innovation, and biotechnology, a unique convergence that aligns perfectly with our strategic goals. Austin's vibrant AI community and collaborative culture are driving breakthroughs in precision medicine and data-driven research, which directly supports our LENSai platform and HYFT technology. The city's strong semiconductor industry provides a solid foundation for our AI-driven initiative, while its rapidly growing biotech sector offers fertile ground for partnerships and innovation. The University of Texas at Austin further enriches this ecosystem, providing a steady stream of skilled talent and fostering collaborations that fuel innovation. With $1.5 billion in funding across 253 biotech startups, Austin is becoming a focal point for life science advancement. By positioning IPA at the intersection of AI, semiconductor technology, and biotech in Austin, we're ensuring access to top-tier talent, fostering strategic collaborations, and solidifying our leadership in the evolving life sciences sector. This move is a cornerstone of our rebranding and repositioning strategy, aligning our operations with long-term growth opportunities and strengthening our presence in a critical market for life sciences. Before we proceed, I'd like to recognize Dr. Barry Springer, who is stepping off our public company Board of Directors to begin his well-earned retirement. Dr. Springer's distinguished career and strategic guidance have been invaluable to IPA. We extend our heartfelt thanks for his contributions, and we wish him all the best. We are excited to announce that we are actively pursuing the divestiture of our two European wet labs in Utrecht and OSE in the Netherlands, a decision driven by our commitment to reduce increasing redundancies and focus on areas of the highest impact and growth. By consolidating operations, we not only reduce service redundancies, but we aim to enhance efficiencies, streamline resource allocation, and prioritize investments in transformative initiatives such as AI-driven drug discovery. The divestiture process is a key part of a larger rebranding and repositioning strategy expected to conclude by the end of this fiscal year. This decision allows us to redirect capital and operational bandwidth towards high growth areas, including the rapidly expanding LENSai platform as well as the continued expansion of our Canadian laboratory, home to our renowned Memory B cell platforms. Not coincidentally, these efforts align with our recent headquarters relocation to Austin, reinforcing our focused strategy to expand our US footprint, and we have identified unique accretive investment opportunities that position IPA to leverage the dynamic AI and life sciences ecosystem in the US while strengthening our operational presence. As part of our ongoing commitment to financial discipline, we implemented another round of cost-cutting measures this quarter to prioritize high growth initiatives and maximize efficiencies. While no senior executives have collected a fiscal year 2024 bonus including guaranteed bonuses and thus have received only base pay, in a key development under this initiative, I have voluntarily agreed to a modification in my compensation structure as well. My guaranteed bonus has been eliminated and my compensation will now be split into two components. Half will be included in the base salary. The performance-based bonus tied directly to achieving defined milestones will be reduced from 100% of the base salary to a maximum potential of 70% of the base salary. This adjustment reflects my commitment to aligning our executive compensation with the company's long-term goals. As an additional update, we have decided to conclude our partnership with Quantum IR based on stakeholder feedback. Moving forward, we will focus on building a more effective and responsive investor relations strategy to strengthen our communication with our investors. This quarter, we significantly enhanced our industry profile through two key events, the AI Driven Drug Discovery Summit USA and our inaugural TECHday. At the AI Driven Drug Discovery Summit, Dr. Dirk van Hyfte, our Head of Innovation and co-founder of BioStrand, participated in a fireside chat alongside Adam Root, Vice President and Head of Protein Sciences at Generate Biomedicines. Their discussion, titled 'Beyond Conventional: the Intersection of Machine Learning and Biological Engineering to Invent Novel Medicine,' highlighted transformative approaches to drug discovery. At this event, Dirk emphasized the integration of BioStrand's patented HYFT universal fingerprint technology with wet lab experimentation, creating a seamless workflow for antibody discovery. He explained how BioStrand's technology helps organize and connect different types of biological information, making it easier to use and understand for drug discovery. Adam shared insights into Generate Biomedicine's machine learning models for protein engineering, focusing on their ability to design novel protein-based therapeutics tailored to specific biological challenges. The synergy between IPA's technology and Generate Biomedicine's protein engineering exemplified how AI and biologics are converging to overcome long-standing challenges in the field. This conversation drew significant interest from attendees, reinforcing IPA's leadership and advancing precision drug discovery through innovative technologies. In addition to the fireside chat, we hosted a private technology meet and greet at the conference, bringing together key industry players and investors to showcase our latest innovations. Following these engagements, we hosted our TECHday at the headquarters of IPA's partner InterSystems, located in Cambridge, Massachusetts. This event marked a significant milestone as we unveiled five groundbreaking analytical applications that we believe have the potential to revolutionize antibody therapeutics. We demonstrated AI-driven tools spanning the entire spectrum of drug discovery development and optimization, including advanced 3D protein modeling, epitope mapping, epitope binning, immunogenicity testing, and molecular dynamic simulations. Through these applications, the LENSai platform offers increased scalability and unprecedented speed, accompanied by cost reductions and energy savings. More importantly, LENSai's outputs are comparable to, and in many cases more precise than, traditional technologies while being directly accessible to users. This represents a fundamental and tangible shift in advanced drug development. We see this milestone as the beginning of truly democratizing drug discovery. At TECHday, we also presented our newest AI-driven discovery application integrated with our proprietary Rabbit B Cell Select platform. This tool, called HIT Expansion, takes existing lead candidate molecules and identifies significantly more novel sequences, increasing the chances of successful outcomes. By dramatically expanding the pool of potential therapies, it allows us to rapidly run sophisticated applications against each of the expanded pool candidates very early on in the screening process, eliminating low potential leads to reduce later stage failure rates that cannot be detected by traditional technologies. We are excited to announce that IPA will also be rebranding this upcoming year to better reflect who we are and where we're headed as we continue to drive innovation in drug discovery. Our new brand will unify all of our entities under one strategic umbrella, emphasizing our fully integrated approach: Science powered, technology driven, unified, and amplified. Our transformation reflects the future of limitless potential. This rebrand also signifies our commitment to transforming the way drug discovery processes are carried out, making them more seamless, efficient, and impactful. It's really more than a new brand. It's a reflection of our relentless drive to accelerate discovery and advance therapies toward clinical success faster and more efficiently. This quarter, we announced significant progress in our TATX-112 program, which focuses on developing antibodies targeting the TrkB protein associated with aggressive cancers. The program has successfully identified multiple antibodies capable of infiltrating and eliminating TrkB expressing cells in in vitro ADC or antibody-drug conjugate assays. Our TATX-112 program has reached a significant milestone, demonstrating our ability to target and eliminate these TrkB expressing cells, indicating its potential to treat TrkB overexpressing tumors such as those found in neurological, gastrointestinal, respiratory, and ovarian cancers, as well as others. Earlier this year, we entered into a material transfer agreement with Biotheus to combine our AI-driven antibody engineering with their proprietary technology to create novel therapies for hypoxic solid tumors. In a significant development since the MTA, Biotheus has been acquired by BioNTech, a global leader in immunotherapy. This acquisition not only highlights the value of Biotheus' technology but has also opened new avenues for collaboration with BioNTech. We are enthusiastic about the potential to work closely with BioNTech in advancing oncology-focused antibody therapeutics and exploring synergies between our AI-driven platforms and their cutting-edge oncology strategy. ImmunoPrecise Antibodies is pleased to announce a significant update on the OncoResponse rabbit anti-LILRB2 antibodies discovered using our proprietary B Cell Select platform. These antibodies have successfully progressed through IND-enabling and Phase I/II clinical trials. ICA is an undisputed leader in the rapidly advancing field of rabbit-based antibody discovery and development, which is gaining traction due to its high levels of antibody specificity and affinity. Our B Cell Select platform has been instrumental in this achievement, enabling the rapid selection of highly specific and non-cross-reactive antibodies directly from B cells. Recent clinical data shows that the anti-LILRB2 treatment is well tolerated and exhibits early signs of efficacy in patients with solid cancers. Notably, these antibodies have advanced to further evaluation in patients previously treated with PD-L1 or PD-1 agents, providing a high-profile showcase for the emerging field of rabbit-based therapeutics. We are also proud to have partnered with the Mayo Clinic on the groundbreaking study published in Autophagy. As another testament to our industry-leading rabbit B Cell Select platform, we developed antibodies targeting phosphorylated ubiquitin, a marker of mitochondrial damage critical to understanding neurodegenerative diseases like Parkinson's and Alzheimer's. We are excited to share progress in our collaboration with a leading semiconductor company to enhance the computational efficiency of our drug discovery pipelines. This partnership has been instrumental in driving advancements across multiple fronts. During this partnership, we are currently integrating optimized versions of AlphaFold2, AFmassive, and AFmassive into our LENSai portal. These enhanced pipelines significantly improve the speed and cost compared to existing solutions, positioning our platform for greater scalability and efficiency. Another standout achievement of this collaboration is the reduction of epitope mapping timelines from days, which was already extremely fast, to mere hours. By leveraging the two companies' advanced computational methods, we've been able to maintain high accuracy while significantly lowering resource consumption. This milestone not only accelerates discovery but also reinforces our platform's ability to deliver results with precision and reliability. Looking ahead, this collaboration is also exploring cost-efficient alternatives to traditional cloud platforms. These efforts will support sustainable growth as we continue to scale our AI capabilities and wet lab integration, ensuring BioStrand's innovative solutions remain accessible and impactful. In parallel, we've initiated conversations with another prominent semiconductor leader who has expressed strong interest in collaborating with us. These discussions aim to explore joint advancements in AI-driven drug discovery and computational efficiency, further strengthening our capabilities in precision medicine. BioStrand's dual revenue model combines application-based pricing through portal and API access as well as data management subscription services. The current focus is on application-based services. BioStrand provides high-value analytical applications like immunogenicity analysis and epitope binding and mapping offered via portal or API access. Since our last earnings call, BioStrand has onboarded four new early access adopters, offering competitively priced services to attract a broad client base while maintaining gross margins of 80% to 85%. Lastly, data management capabilities are being built out and will be added in the future. LENSai's data management service offers scalable solutions for seamless data integration and efficient data handling, targeting medium to high-volume clients. This subscription model is expected to generate steady, predictable recurring revenue. Our partnership with AWS progresses as planned. We are currently conducting the foundational technical review, which we will submit this December. A first marketplace offering is anticipated by March, followed by a progressive launch of analytical pipelines for consumption by AWS users. I'll now turn things over to Kristin Taylor for our financial updates this quarter.

Thank you, Jennifer. I'll provide a brief overview of our financial results for the second quarter of our fiscal 2025 before touching on our financial position as of the end of the period, which was October 31, 2024. As a reminder, all numbers I reference are in Canadian dollars, unless otherwise noted. For the second quarter of our fiscal 2025, we generated revenues of $6.1 million versus $6.1 million in the previous year. While flat year-over-year, this represents a 16% increase over revenues in the first quarter of fiscal 2025 with strong growth achieved quarter-over-quarter at each of our wet lab sites. BioStrand, our AI-driven platform, achieved $397,000 of revenue in the second quarter, marking its highest quarterly revenue achievement to date, along with life-to-date revenue of $917,000. As we continue to roll out the fee-for-service analytical capabilities of LENSai to our clients, not only are we supporting drug discovery and development with more efficient and effective tools, but also achieving much higher gross margins than what is recognized from traditional wet lab methods. Now on to our operating expenses. Our research and development expenses for the second quarter of fiscal 2025 were $1.2 million versus $0.8 million for the second quarter of fiscal 2024. Year-to-date R&D expenses were $2.8 million versus $1.8 million in the previous year. While this represents a substantial percentage increase, the dollar value highlights our capital-efficient investment strategy as we expand our proprietary platform, LENSai. Our sales and marketing expenses for the second quarter of fiscal 2025 were $1.2 million versus $0.9 million in the previous year. Year-to-date sales and marketing expenses were flat year-over-year at $2 million versus the previous year. We continue to benefit from cross-selling efforts across both our wet labs and LENSai platform as we support the expansion of our comprehensive AI-enhanced antibody drug discovery and development services. General and administrative expenses for the second quarter were $3.3 million, also flat against the previous year. Year-to-date, G&A was $7.4 million versus $7.3 million as we actively managed our expenses to offset inflationary pressures. As Jennifer discussed, we continue to initiate cost-saving efforts so we can focus our spending on growing our business and proprietary technologies. Over the past 18 months, we made difficult decisions, including laying off or not filling open positions for almost 50% of the corporate overhead positions and delaying select expansion investments as we monitor market trends. We are also looking at additional non-dilutive state and local incentive programs to offset the costs and support the ramp-up of our enhanced LENSai tech offerings. We have successfully utilized this type of funding over the years and continue to use non-dilutive funding to support our R&D in Canada and Europe. Overall, we reported a net loss of $2.6 million for the second quarter of fiscal 2025 or $0.09 per share versus our second quarter of fiscal 2024 that resulted in a loss of $2.4 million or $0.10 per share. As for our cash position and liquidity, we ended the second quarter of fiscal 2025 with cash of $3.6 million versus our year-end cash balance of $3.5 million. Our October 31, 2024 ending cash balance reflects our cash used by operations, including R&D spend for the first six months of the year of $4.1 million. This use of funds was offset by $4.8 million from net financing activity, which reflects capital raises net of lease payments. On the Yorkville debentures, the second tranche of $1.3 million, which closed on August 16, 2024, was extinguished through conversion as of December 9, 2024. We continue to work with Yorkville on the conversion of the remaining tranche to minimize potential share price disruptions. We also believe that exploring a potential sale of our two European wet labs will further support cost-cutting through streamlining overlapping capabilities while generating upfront cash. As our operations evolve, we see value in consolidating operations while we continue to focus on growing our technology and assets. Building and commercializing LENSai has been an investment, but as we receive feedback from early adopters and see the gross margin gains on early revenue, it strengthens our commitment to this strategy.

Our first question will come from Swayampakula Ramakanth with HCW. Please go ahead. Thank you.

This is RK from H.C. Wainwright. Jennifer, you shared a lot of information this morning. I apologize for being jet-lagged from an overnight flight. I would like to understand the strategy behind a couple of your initiatives, specifically relocating the headquarters to Austin and the proposed cost containment measures. While I recognize the immediate financial benefits, what are your overall thoughts and the Board's perspective on these strategies?

Thank you for your question. Regarding the relocation of our headquarters, this has been a topic of discussion for several years. The current headquarters is not situated in a vibrant biotechnology area and lacks a strong association with biotechnology and related technologies. It's also fairly isolated. While we have a functioning lab there, we don't have significant executive presence or community integration, which is essential for a headquarters. Additionally, choosing new locations allows us to access various non-dilutive funding sources. For instance, we've secured over $2 million in funding from North Dakota in recent years, which requires having our operational leaders on-site. Texas is well-known for being conducive to these types of funding opportunities, and we have already started forming partnerships for non-dilutive funding in both biological research and semiconductors. As we became more integrated and familiar with these areas, relocating there became increasingly clear, especially when compared to Boston, which we also have future plans for. However, the connections we could make in Texas seemed more beneficial at this time. In terms of cost containment, we believe adjusting bonuses aligns well with market conditions, market capitalization, and our shareholders' interests. While divestitures play a role, they aren't entirely about cost containment. Our growth trajectory and the capital generated from these divestitures are crucial for our future and reducing dilutive financing. This quarter, we've seen a significant rise in demand for BioStrand, which was also reflected in their growing revenue. We're also reducing ongoing expenses related to our new locations, as we have nearly 100% overlap between them and BioStrand and IPA Canada. For the last four years, we have strategically duplicated protein manufacturing services in Utrecht. Our Canadian facility has been ramping up, and although people tend to stay local, this is part of our broader expansion plan. We're considering a modest investment to enhance our manufacturing capabilities in the U.S. Regarding antibody development, the primary source of income in Oss, we acquired Oss primarily for its development capabilities, especially in humanization and other downstream properties. BioStrand's applications are increasingly overlapping with what we offer in Oss. While they don't cover all technologies, the ones they do are competitive, with lower overhead, higher profit margins, and faster turnaround times. Looking ahead to the next six to twelve months, we expect continued growth in BioStrand's application development. This redundancy supports our strategy to simplify our corporate structure and focus on areas that drive future revenue and growth for the company.

Perfect. So just talking about what you have done financially in the second quarter of 2025, going forward, as you're talking through the changes in the corporate structure and whatnot, how should we think about contributions to the entities? And also, how should we think about growth from here? And I'm just trying to kind of get everything into my head properly.

Sure, that's a good question. When considering contributions from various entities, Canada is a key player for us. Over the past year to year and a half, Canada has been our leading service provider through the Memory B Cell Select platform, particularly its rabbit variant, which is gaining attention and can accommodate multiple species. We expect this growth to continue alongside their expanding presence in protein manufacturing and other services. They are successful in single-step hybridoma discovery programs, providing protein expression, cloning, NGS services, and more. Additionally, we see a low capital investment opportunity that allows us to access the Boston Cambridge area, where we already have a growing revenue base and can tap into a market that has opened up due to stricter regulations on Chinese facilities. This is particularly relevant for high throughput downstream activities at BioStrand, enabling rapid validation of work from our in silico platform after lead candidate selection and optimization, while also supporting operations in Canada. We're looking to offer a more focused, low-cost service in the U.S. where we have tested demand and received positive interest. BioStrand, which recently approached nearly half of its total revenue from the last two years in just this past quarter, reflects the high demand for fee-for-service work. We are engaging with new early access adopters, with a strategy to convert them into long-term revenue sources. Despite working with limited resources, the performance from BioStrand has been impressive. However, we recognize that real growth potential will be unlocked with additional engineering support for LENSai. We anticipate a tripartite revenue contribution moving forward. While we may lose some revenue from other locations, we will ensure our capital is directed towards high-growth and high-margin areas, particularly focused on BioStrand.

Okay. My last question is about your assets, particularly the LILRB2 and Trk assets. What can we anticipate regarding the next set of data and the progression of these programs through development?

That's a great question because all the assets currently within Talem are mainly in development and optimization stages. We haven't focused much on this, but you may have noticed in recent press releases, including the one about Biotheus, that BioStrand has started to play a key role in optimizing and engineering the assets we've discovered in Talem. This has been very important for us in terms of the added value from BioStrand. Regarding the next set of data, that's an interesting question. With the asset that has been out-licensed to Biotheus and now under the control of BioNTech, we are in regular communication with them, receiving updates and collaborating to advance that particular asset. We expect to receive further information from them in about six months from when they signed the original MTA. As for the other assets, we are working not only on these, which involve further development and optimization, but also on other assets that have been developed from the ground up at BioStrand. This approach has completely transformed our drug discovery process. We are still excited about our potential best-in-class and first-in-class assets in Talem. The time and cost efficiencies we achieve through BioStrand, demonstrating that this work can be done entirely in silico and validated with wet lab and preclinical work, represents a significant advance for us and validates our approach. Shareholders and stakeholders will gain valuable insights when we release the novel drugs we are currently holding back, particularly with the insights we're gaining from LENSai. We are investigating current diseases and existing drugs, aiming to reveal insights that have previously remained undiscovered due to a lack of tools to elucidate the link between diseases and drugs. In summary, you will see an update soon on the assets within Talem, highlighting the contributions from BioStrand, as well as upcoming assets that were fully discovered and developed within BioStrand, showcasing their capabilities and the potential of these assets.

Our next question comes from the line of Will McHale with Ingalls & Snyder.

Jennifer, my first question is how do we reconcile the discoveries and advancements you mentioned in both the script and the press release with the revenue being flat year-over-year? Is it just a timing issue where we haven't really ramped up commercialization on these developments? What’s the best way to understand this situation?

Yes. That's a great question, Will. I mean, we stand by this fact that our technologies are exceptional in the industry. Our retention rate for clients continues to be very strong, and our reputation is really exceptional in discovery and development phases. Despite occasionally hearing that biotech and pharmaceutical industry companies have recovered from a bit of a downside, that's not what we hear and what we see from clients and partners and, more importantly, competitors. So especially in the service industry which tends to be a lagger because you're looking at other groups needing to recover, stop really the significant budget constraints, which we saw a very strong impact for pharmaceutical and biotech companies over the last summer. But then in addition to that, be more comfortable releasing the reins on their spend. So when I look at being more flat year-over-year on that quarter, I see a couple of things. I see, one, pretty swift recovery from a quarter that did dip, which is a little bit more aligned with what we're seeing with our competitors, although not as extreme to what they've experienced over the last 18 to 24 months and a swift recovery into this quarter, which I think would represent and be a part of the impact of why we would have been flat year-over-year, right, because it's a bit of a rebound or recovery, much of which we attribute to the significant belt tightening that we saw over the summer, which isn't hypothetical or picked up from papers. I mean, these are things obviously that our clients talk to us about. They tell us about these budget constraints and reorganizations, et cetera. So I do believe that, that's the primary impact that we've seen with regard to that.

Got it. And I guess the new products or services that we're launching, they're ripping, but they're just not yet at scale to have enough of an impact to really move the needle in a significant way?

Yes. Many of the BioStrand users in the early access phase have a specific time frame to use the technologies, provide feedback, and identify any issues. Each of these groups is customized in terms of their specific usage, not the algorithms themselves. Part of the early access agreement requires them to give direct feedback to the BioStrand team so the engineers can make necessary improvements. This process isn't quick because users must use the products, and the engineers, with their limited staff, need to implement modifications. Early access users are not paying their monthly subscription fees during this period, which typically lasts about a month, although some may be longer. That's when we begin to evaluate conversion. We don't expect immediate revenue from this, but we are observing growth.

Got it. And I guess, as those convert over the course of this fiscal year, you'd expect BioStrand to exit the year at a much higher revenue run rate than it is today.

Exactly. That is absolutely our aim. Based on the pipeline information we have, we look at prospects, which are people we're talking to who have an interest. We also consider leads, those who have gone beyond interest, received quotes, and are engaged in meaningful conversations that indicate they have the intent, capital, and ability to execute. Additionally, we account for clients who have already executed a quote. We use all this information for pipeline projections to better understand our anticipated positions over the next quarters, similar to our other locations. We anticipated the build-up to what we observed this quarter, and we're pleased with the substantial increase, especially as the profit margins are even greater than expected. That said, the pipeline KPIs we monitor indicate that we should expect BioStrand to perform well and continue to grow. The API usage of LENSai and the portal usage of LENSai are significant components of this growth, along with our fee-for-service work. Our largest client continues to use LENSai predominantly for complex drug discovery programs, which has also been a major contribution, and we have recently signed additional contracts with them. We have solid reasons to believe this will continue. Anecdotally, this group has previously attempted to work with several AI companies that did not deliver on their promises, and BioStrand was the first to succeed. They have validated the results from BioStrand in their lab, marking a first for them. They have returned to us, recognizing that no one else has achieved the true definition of de novo discovery by building a therapeutic molecule entirely de novo, and they have asked to contract BioStrand specifically for that due to their confidence in our technology. We consider not just this anecdotal feedback but also the signing of new contracts and their trust in us to continue expanding alongside them.

Got it. That's all super helpful. A question on our capital structure and balance sheet. I think it's not a coincidence that our share price has lagged pretty badly since the convertible financing that we took on over the summer. I'm just curious to get what your guys' thoughts are on whether we pay that off with proceeds from the divestiture of the European assets or just kind of how you're thinking about optimizing our capital structure.

Yes. That's a great question, Will, because we are painfully aware that the optics of that particular transaction have been difficult for some shareholders. And we've heard that directly from retail shareholders and institutional shareholders alike. And so we've been pleased with some of the ways that things have unfolded with regard to that debenture, but concerned about the optics and the impact for both existing investors and new investors that would like to come into the story. And so regarding that, we have, as Kristin mentioned, approximately $2 million left on that, not a super large sum. And we absolutely have had detailed conversations around when and how to remove that particular investment group from the equation in order to just reduce whether it's the downward pressure or the burden on the share price or also just the optics, is an important priority for us. So yes, that would be an expected part of the capital from that event at the end of the fiscal year-end.

Got it. Okay. That makes a lot of sense. I was wondering if you could provide an update on the discovery program with Astellas? Just sort of where we stand or whatever the path ahead looks like. I understand you may be limited to what you're allowed to say, but anything would be helpful.

Yes, we have consulted with a lawyer regarding the contract to determine what, if anything, we can disclose, which is quite limited. We also reached out to Astellas to request an exception to share minimal details that would allow a connection to them. However, our request was declined. This is part of their strategy in managing the information about their work and its current status, especially since they collaborate with various partners. The contract restricts us from discussing the status of the program, any updates, or its historical, current, or future aspects. It includes very specific limitations on what we can disclose, with some areas being more tightly controlled than others. We approached them for an exception, but they did not find it appropriate. We wish we could provide more information on this, as there are times when we are able to do so with other partnerships.

Could you elaborate on what a potential collaboration with semiconductor companies would entail from a commercial perspective? Would it involve us partnering and co-developing a solution for pharmaceutical partners, or how do you envision that looking?

That's a great question. Our current collaboration is focused on cloud-based infrastructure for our offerings. We're working together with various semiconductor companies and larger AI or chip manufacturers. These groups often have established market access and compatible technologies, but lack proprietary drug discovery programs to enter that market. They also typically don’t have strong relationships with pharmaceutical companies. Many have found that building these relationships requires considerable time and resources, often taking 12 to 18 months of due diligence and interactions between the groups. We provide them with LENSai, which is a unique tool that helps them demonstrate their existing capabilities while enabling them to engage with the pharmaceutical community. Additionally, our technology can be complementary to what they already offer. It appears that many technology and semiconductor firms are trailing behind in adopting AI and machine learning applications, particularly in drug discovery, which has been a focal point in the market over the last year. In this partnership, we're collaborating to combine their strengths with ours to create faster, more scalable, and more effective products that we can market together, with a specific emphasis on cloud integration and offerings for this new market.

Got it. My final question is about the potential divestitures of the European assets. Looking at recent transactions of CROs in the private market and estimating their revenue bases, it seems like this could significantly improve our balance sheet. While we would lose some revenue, it appears we would be left with a smaller but likely faster-growing base. First, did I understand that correctly? Also, you mentioned possible additional investments. Could you elaborate on that?

Great questions. First, regarding the divestments, it's interesting to consider the growth potential of our company as a CRO. We've discussed how fragmented the industry is, with separate components like discovery, development, characterization, and manufacturing, usually addressed by companies specializing in just one or two areas. Over the last seven years, we’ve successfully built an integrated end-to-end solution, but we'll reach a limit on revenue potential strictly as a CRO unless we make substantial investments to advance into the next phases of the CRO process. Currently, we perform stable cell line development but do not engage in GLP manufacturing, preclinical trials, or any associated safety and efficacy evaluations. These areas represent the next steps for us. We also lack capabilities in clinical manufacturing, commercial manufacturing, or any relevant QA/QC batch release processes. This limits our potential revenue growth. However, we've made significant strides into emerging markets, such as bispecifics, multispecifics, VHH antibodies, and ADC production, with Talem being a major focus. In terms of our growth potential, we will not face the same revenue caps that traditional antibody CROs do. For example, Charles River, a leading entity, has diverse revenue streams from preclinical and clinical spaces, with antibody discovery and development representing only a small portion of their overall revenue. Anecdotally, though I lack concrete evidence, we've been informed that our revenue is higher in overlapping areas. Looking ahead, we see strong growth potential for BioStrand. With changing market dynamics, particularly driven by AI and machine learning impacting antibody discovery and development, BioStrand and LENSai present compelling opportunities. The capabilities they offer, like epitope mapping, can drastically reduce timelines and costs compared to traditional methods like x-ray crystallography, which can take years and cost millions. We can achieve similar results in hours with greater precision due to our ability to scan the human proteome rapidly. Overall, our applications are typically faster, more cost-effective, and often provide more informative insights than existing capabilities. We expect this growth potential to enhance our business significantly, led by innovations in AI and machine learning. While we won't see immediate revenue recovery, we remain focused on building strategically, understanding the evolving needs of the market and pharmaceutical companies. Regarding potential investments, these would primarily support our downstream capabilities of BioStrand. The demands from in silico work differ significantly from traditional discovery and development pipelines, necessitating rapid and high-throughput processes. We’ve engaged with a group in the Boston area known for their unique technologies that would complement our offerings. This investment aims to enhance downstream production and screening tailored to BioStrand while also establishing a hub for innovation in the community. We anticipate that this will enhance our ability to respond to market demands for innovative technologies linked to AI and wet lab capabilities, particularly in phenomics. Canada has recently been recognized as an early adopter of our Hit Expansion technology and is working closely with us to integrate offerings within BioStrand. This situation underlines the necessity of having a unified and streamlined offering with significant growth potential and higher profit margins, facilitated by a stronger integration and feedback loop. Additionally, part of our strategy includes a rebranding initiative to simplify our corporate structure and optimize our operations. This will help us harness synergistic cost savings and focus on delivering a more specific offering centered around LENSai, while still retaining our capabilities in Canada. This strategic direction positions us for better revenue and profit margin opportunities going forward.

Understood. Overall, we will have a slightly lower revenue base, but we will be growing at a faster pace, achieving much higher margins, significantly improving our cash balance sheet, and aligning exceptionally well with major trends in the industry.

Exactly. And we are making the assumption that we will have several years of operating capital as well, and then also all the reduced overhead associated with those two locations and one fewer officer as well. Our Chief Scientific Officer will also be a part of that transaction.

Thank you for your insightful questions. I will now hand over the call to Dr. Jennifer Bath, our CEO, to conclude the call.

Thank you. I'll need one second to relog back into my computer. Okay. All right. So thank you so much, Regina. So just closing us out here. One second here. Okay. So thank you again for joining us today. We hope that it's clear through today's announcements, our relocation to Austin, the divestiture of the European wet labs, and also the upcoming rebranding initiative, they all align with our vision to create a more agile, a more focused, and an innovative company. We're not just adapting to the future of drug discovery. We are actively shaping it. With our enhanced computational efficiency, expanding partnerships and the imminent launch of our marketplace offering on AWS, we're poised to accelerate the democratization of drug discovery. Our journey is one of significant potential where science-powered, technology-driven solutions will continue to break new ground. As we forge ahead, we remain committed to delivering value to our stakeholders, advancing therapeutics toward clinical success, and ultimately making a profound impact on global health. Thank you so much for joining us today.

And this will conclude today's call. Thank you all for joining. You may now disconnect.