Immuron Ltd Q4 FY2022 Earnings Call

Good morning, everyone. And welcome to Immuron’s Full Year Results Webinar. Today is Wednesday, the 7th of September, 2022. I'd like to welcome the CEO, Steven Lydeamore to provide a brief overview of the results before we move to a Q&A. If you'd like to submit a question, please do so via the Q&A box at the bottom of the screen. I will now hand over to Steven to commence the presentation. Thank you.

Well, thank you. It's my first webinar on behalf of Immuron as CEO. So thank you for joining today. I'll just click through to the first slide here. Immuron is a globally integrated biopharmaceutical company. An important point to note here is that we are both commercializing, so we have two commercial products, as well as developing gut-mediated disease products. We have been around a long time in the market. Capitalization of $20.5 million as of the 23rd of August and we had cash and equivalents of $22.1 million as of the 30th of July 2022. We've refreshed our corporate structure, so I'm here today as CEO and we recently acquired Joanne Casey, as an R&D Manager. Great news for the company is that international travel is starting to rebound again and you would have seen an escalation in travel and sales increased significantly. The addressable market continues to grow as Immuron expands its distribution capability into FY 2023. We are capable of producing highly specific orally active immunoglobulins. That's quite a mouthful, but I'll talk a little bit more about that later. Essentially, it's a technology, a platform technology that allows us to target enteric pathogens. We’re presently completing an assessment of the entire portfolio, target markets, competitive advantages, and growth drivers, with the view to implementing a growth strategy for the company to increase shareholder value. FY 2023 revenue exceeded budget by 92%, driven largely by the resurgence in global travel. We have an extremely strong balance sheet, which supports our plan for an organic and M&A strategy to grow the company. The next major milestone for the company is filing with the FDA for an IND and to initiate a clinical trial for Travelan, IMM-124E this financial year. Quick snapshot of the company here, you can see that, once again, market cap $20 million, cash and cash equivalents $22.1 million. I think it would be fair to say that we are undervalued, and we'll talk more about where that value in the company lies. You can see below there the shareholders, so roughly 35% of our shares are held in the U.S. by BNY Mellon, the holder of the American Depository shares; management and the board also have a substantial interest of 3% in the company. We are aligned with our shareholders and plan to grow the wealth of the company. The strengths of the company lie not only in the platform technology that I talked about before, but also in the distribution relationships. I'll touch more on that later. Essentially, we're in Australia, well established in the retail pharmacy network with over 3,500 pharmacies covered. We saw evidence-based OTC products. In the U.S., we have a cornerstone customer in Passport Health, the largest provider of travel medicine services in the United States. The second product, Protectyn, which is a liver and gut health product, we plan to launch into our network. We're exploring both the USA and Canada for that. Let's just have a look at the addressable market here. So the digestive health market for supplements is greater than $15 billion; it's a large market and it's growing. Traveler's diarrhea in itself is a $1 billion market growing at 7%. Travelan has a large market potential. So if we look at U.S. and EU travel numbers, assuming a penetration rate of 15%, on those conservative assumptions, we're looking at potential sales of $83 million and $50 million, respectively, in the U.S. and Europe. The Clostridiodes difficile infections market, and this is one of our lead clinical programs, has a market that's expected to be $1.7 billion by 2026 according to Global Data. Just touching on the right there, you can see our flagship product Travelan. Wouldn't we all like to start traveling again? If we do, we should remember that 30% to 70% of travelers experience traveler’s diarrhea. So it's important to take Travelan, the only preventative medicine for traveler’s diarrhea. Let's just quickly have a look at our technology platform. So it's based on bovine colostrum, so you get a lot of natural benefits from that. But what we do is take a highly specific vaccine. We immunize, like a cow giving birth, we isolate hyperimmune antibody-rich bovine colostrum, which is specific for targeted pathogens. We neutralize those toxins and we clear the pathogens, resulting in a number of label claims that we're allowed to make in Australia. For example, for Travelan, not only can we reduce the occurrence, but we can also reduce and relieve diarrhea, abdominal cramping, gastrointestinal pain, immune defense, liver function health, as well as repair gastrointestinal gut wall lining. So you can see it's a broad activity in the gut. Not only does it target those pathogens, but it also has broad liver and gut activity. Let's have a look at our clinical programs here. So there are two sections here. The first is Immuron programs, and the second are partnered programs. We're quite proud of our partnered programs. We have some of the leading Government Defense Departments working with us. The University of Uniformed Services is conducting a trial with Travelan and another OTC product for the armed forces. CampETEC is a product that we've developed in conjunction with the Naval Medical Research Center. That's currently on clinical hold. Unfortunately, you would have seen that ASX release. We're hoping to resolve that clinical hold as soon as possible and get this research underway. Regarding Travelan, that milestone I mentioned before, we're planning on filing the IND soon with the FDA in order to get this controlled human infection model study in ETEC, that’s Enterotoxigenic E. coli challenge study. We plan to conduct that in the U.S. market. Also for IMM-529, the product I mentioned before for Clostridiodes, the $1.7 billion market opportunity, we're currently undertaking a market evaluation just to double-check that program has been on hold for the last two years during the pandemic to ensure that both the technology and the market opportunity is as we believe it to be, and confirming that we will plan to move ahead with clinical trials for that product as well. Touching back on the distribution capability, the company has spoken a lot about its science and its programs for new diseases, but we're already in the market selling commercial products, Travelan and Protectyn. Travelan is sold in Australia, the USA, and Canada. We have strengths in the Australian retail pharmacy, with more than 3,500 pharmacies. In the U.S., we have the B2B or business-to-business market with the largest travel clinic, Passport Health. In Canada, we have a presence in retail pharmacy and e-commerce. Here is a profit and loss statement. So this was a results presentation. After all, you can see that we have low-based with growing revenue of 425% with growth in both Australia and the rest of the world, which includes the U.S. and Canada. We have very good profit margins here. The commercial side of the business is almost breaking even. Back before the pandemic, we reached a run rate of around $3 million for these products, and we're planning to get back to there and to grow even beyond that. I mentioned before a strong balance sheet, cash of $22.1 million, and essentially no debt. The only other non-current liability we have is the recognition of a lease commitment. What does this allow for? It enables us to pursue both an organic and M&A strategy. Not only are we going to focus on growing our commercial products, Travelan and Protectyn; looking to expand sales across target geographies beyond the U.S., Canada, and Australia; growth in our distribution, network sales, and marketing activities. We have got other channels within the markets we currently exist in, so we can expand. We're looking at new formulations as well, for example, one-daily dosing, which would be a good thing for FDA approval. On the M&A side, some of the key criteria we're focusing on obviously include expanding market verticals and product offerings, expanding our customer base. Keys to this include ensuring that the target company or product has strong IP and management, and that we can secure cost and earnings synergies, as well as grow our revenue base. Key milestones for our science program include Travelan. I mentioned before about filing that IND; that's coming up for this half of the calendar year. We plan to initiate that trial upon approval of the IND in the first half of next calendar year, with a view to having topline results before the end of the calendar year. The CampETEC program in conjunction with the NMRC, we plan to submit the complete response letter for the clinical hold that I mentioned before and get that program underway hopefully before the end of next calendar year. There are two programs in that, so that's Campylobacter and ETEC and Enterotoxigenic E. coli; two separate clinical trials are planned for that particular product. For IMM-529, we plan to manufacture the clinical drug product assuming the market evaluation I mentioned before confirms that go ahead with this project at the beginning of next calendar year, with a view to submitting an IND to the FDA before the end of the year. If that is approved, we'll be looking at the first half of 2024 to start that clinical program. The Uniformed Services University trial of Travelan and Florastor is expected to start around the first half of 2023. This is important for our commercial products as it will be a field trial and will show in a real-world setting how well Travelan performs for people traveling to areas of high risk. That concludes my presentation. I'm sure that you'll have many questions. Before we move on to Q&A, I just want to share this last slide here. These are scientific references for those that are scientifically minded. I've shown some of the key references demonstrating the evidence base we have for our lead commercial product, Travelan, as well as IMM-529 for Clostridiodes difficile. I'll hand back to you for Q&A. Thank you.

Thanks, Steven. There have been a number of questions that have been submitted, so I'll just go and read through these questions and comments as they come through one by one. The first one, Steven, congratulations on becoming CEO, with our market cap languishing at approximately A$20 million and considering we have almost close to $30 million in the bank, once we received the DoD grant of approximately $6 million, which should be soon? What measures will you be taking to get the share price trading above cash backing or much higher in the short-term?

Look, that's a very good question and a fair one. I share your disappointment with the current market cap, especially given the current cash balance which exceeds our market cap. I mentioned during our presentation that we plan to wisely spend that money on growing the value for shareholders. So we're undertaking that evaluation with all of our commercial and clinical programs with a view to establishing a strategy for both organic and M&A growth. I think you'll hear more about that relatively soon because we have a number of activities underway on both fronts. We've almost completed a revised marketing plan for Travelan in Australia and the next cab off the rank will be Travelan for the U.S. market. On the M&A front, there are a number of interesting opportunities; it's too early to talk about those, but some of them are quite promising.

Hello, Steven, and congratulations to you and Joanne on joining the company for a new era for Immuron, and hopefully an early, better era for shareholder returns. Reading through the presentation document, there was a reference made to quarterly updates from Immuron moving forward. Definitely welcome that, as previous management's regular communication with shareholders has been very poor. Also, with Hensley involved, will there be increases at Immuron in the short-term?

That's also a very good point. The scale of the work that we're doing is clearly not getting the message across. Webinars like this, we will do quarterly; I plan to actually create an opt-in service to provide your email to the company so we can share newsletters and similar information. Hensley is assisting Immuron in Investor Relations and Public Relations, promoting what we're doing not only to existing shareholders but also to potential investors, brokers, and investment groups, so setting up meetings and the like for me. They’re also assisting me at the moment in identifying potential M&A opportunities and will help evaluate those before we move forward.

Thanks, Steven. Next set of questions that have come through: what is the company doing to try and increase shareholder value?

Similar question to the first, I guess, so there's two aspects here. One is on the commercial products. I think the sales we’re currently doing on those, at our peak, we were just shy of $3 million. I think Travelan alone could be a more than $10 million product without doing too many things, and we can just execute on those items that I showed before, which is expanding within existing markets in new channels. For example, in the pharmacy market in the U.S., and we've had success in Australia; there's no reason why we couldn't be successful in the U.S. market, as well as in Canada. So I didn't show those as growing in Canada because we exist in those channels, but I wouldn't say we're performing well. If we ramp up our sales and marketing strategy and invest wisely, we can grow Travelan into more than $10 million within the next few years. On the M&A front, we've got opportunities to expand into new markets, either through out-licensing or distribution agreements with companies in other markets, or potentially acquiring companies that have a foothold in markets we wish to enter. Hopefully, we could find some targets that would allow us to expand not only geographically but also add new products to the portfolio. Even in Australia, having only two products in a market where we have good evidence base clients in over 3,500 pharmacies, it would obviously make sense to have more products in that category. There are many things we can do, and you can be assured that we're looking at all of them to grow value for the company and get that share price back up to where it should be.

There seems to be little to no market awareness of Immuron, and this is reflected in the share price and lack of volume. Again, what is the company doing to change this?

Yeah, so communicate, communicate, communicate. Not only with existing shareholders but new potential investors, and that will be through webinars, social media, direct communications, newsletters to email subscribers, meetings with brokers and investor groups, and presentations. I've signed up to present in Perth at the AusBiotech Investor Conference coming up in October, looking for more opportunities to do more of that, not only in Australia but also in the U.S. I mentioned before that we have 35% of our shareholders in the U.S., and at one time it was greater than 50%; we should try to get that back up again and drive that share price upward by increasing awareness.

At what stage is the company at with its FDA submission for Travelan?

As I mentioned at the beginning of the slide deck and also towards the end, we are getting very close to filing the IND. So that's an Investigational New Drug. That's the first step in the process of getting approval to start a clinical trial. That first clinical trial for Travelan will be a controlled human infection model study likely to be done in the United States. I'm getting results for that, and in the deck, you’ll be able to download this after the webinar and see the dates there. We'll discuss those results with the FDA to determine what additional studies may be required.

And what stage is the European patent submission now?

I guess it depends on which European patents. So we have two; there's the full patent for protection against pathogens, that was recently approved in Europe back in January, and there was an ASX release about that. We also have a European patent for clostridium difficile, and we got a notification of intent to grant. It has not yet been granted, so we're expecting that relatively soon. I think that was also announced to the ASX recently.

Next question, in regards to the company's failed acquisition last year, is there potential for a joint venture? If not, is the company planning to address how the submission was handled and managed by the ASX?

Yeah. Look, that was a disappointing event for the company, no doubt. The problem is that time has passed, and the market has somewhat moved on. You would have seen recently we put out an ASX release saying that we'd evaluated the SARS-CoV-2 market opportunity with a view to taking our own product, IMM-124E, into that space. We had very good preclinical in vitro data showing activity against SARS-CoV-2. Unfortunately, we couldn't find a mechanism of action, which is necessary to take it through those next steps into animal and then human clinical trials. The key point here is that we've decided not to take that forward because the market opportunity has changed such that we don’t believe there would be a place for us with either our own product, IMM-124E, or that previous opportunity. So I think the time has passed. We're not pursuing a JV or any other alternative structure for that particular company or product, and we're not taking any action against the ASX. I don’t see that as a wise investment of Immuron’s resources.

Next question, Amazon U.S. seems to be out of stock a lot. Recently, it's been at least three weeks without stock. Are there challenges with supply, specifically with supply to Amazon?

Look, yeah, that is true. We have been out of stock on Amazon. We're just going through a transition at the moment; we've been marketing our product Travelan through a third party called Medic in the U.S. They have their own Amazon Shop and sell Travelan along with a lot of other products. Our plan is to go direct into the U.S. market, so we will have an Immuron on Amazon Shop. We think there are greater advantages in that as we will be selling directly, allowing for a higher selling price; it could be the retail price. We're moving to a new company that’s going to support us in this arena. This is a transitional phase where we’re moving from one supplier to another. We expect to be up and running again around November.

In reference to Travelan, with such a compelling product, why is the awareness of the benefits so poorly promoted at Chemist Warehouse outlets?

Look, point taken. I don't think that we can change how many products are displayed. If you go into a pharmacy, whether it's Chemist Warehouse or somewhere else, you'll see products that are used for traveler's diarrhea after it occurs, like Imodium or Gastro Stop, and they have their place if you experience traveler's diarrhea; clearly, that’s something you would consider using alongside other treatments that can relieve some symptoms of traveler's diarrhea. One of which is Travelan, by the way; I mentioned that before. It doesn’t only reduce the occurrence but also helps reduce the symptoms of traveler's diarrhea. We do sit on the shelf in most pharmacies. Next, another product called Travacalm, which causes some confusion because Travacalm is for motion sickness; it's not for traveler's diarrhea. The marketing could be improved, and I mentioned that we've just about completed a review of the marketing strategy for Australia, covering not only what we do in pharmacies but also online and through social media. We do intend to increase promotional spend both in social media marketing and search engine optimization, as well as pharmacy programs. To make it stand out on the shelf, we need details like end displays and wobblers, but all of these things are being looked at, and we plan to implement them for the upcoming peak travel season around Christmas and New Year.

Great. Another question: a research report or broker analysis in the short term would assist with the current valuation of Immuron, and a 12-month target price would be another proactive measure. Unfortunately, previous senior management have not embraced this idea. However, the share price has greatly underperformed over the last 12 to 18 months under current management. What do you think about this, Steven?

Look, I certainly do. You're right. Getting the word out there is important, and a broker or research analyst report is one tool that can be utilized for that. I'm certainly not against it. I've seen it be successful at two other ASX companies that I worked with in the past, and it is something that I will consider. I promise that we will consider it. It’s important that if we do have a research analyst report, it’s done independently, so someone independently reviews and makes their own assessment of the market potential and the target share price for the company. That type of independent view resonates best with potential investors and existing shareholders. I believe we have to increase communication with the market both with existing shareholders and potential investors. As I said before, we're planning to ramp that up with more webinars, more information via social media channels, more meetings with shareholders, and live presentations at conferences, etc.

Great. And on that note, that sounds great regarding presentations and media coverage to boost Immuron’s market profile moving forward. Does Immuron have a Twitter account, Instagram account, or other platforms where you post this information?

We do actually have an Instagram account. I think it might be limited to Travelan, our key product. We also have a Facebook account, and in fact, our Facebook account for Travelan has more than 25,000 followers, showing there's a loyal base of people out there for Travelan. We have a Twitter account as well. I must admit that the company hasn't been active on posting anything. I posted something the other day about this results presentation on LinkedIn for the first time, and I shared that with my own personal LinkedIn. People that are listening today and shareholders, please share that with your own contacts and help us spread the word. Yes, we do have those accounts and we will start using them. We’ve got a strategy for using them for our product, and we will develop a strategy for using social media channels for the company itself as well.

Great. And another question: some years back, the Phase II NASH trials reportedly indicated that we had the best in-field product. Why has nothing progressed in this opportunity?

We've had mixed results with that product. It's important that we demonstrate through preclinical and clinical trials and mechanisms of action. One of which has to do with the LPS toxin, which is one of the key reasons why our Protectyn product is so effective in liver and gut health. We did have one study that didn’t quite meet the endpoints in NASH. The company has decided to focus on other pathogens and other indications for the product going forward. Therefore, we do not plan any further studies in NASH.

All right. It seems to be all the questions today, Steven. I'll throw back to you for some final comments.

Look, it was a pleasure to speak to you for the first time. I will be sharing this recorded webinar both on our website and through social media. Please share it with your contacts as well. I hope you feel energized about the company. It seems absurd to me that we have a market cap of $20 million and cash equivalents sitting in the bank. I personally think, coming in, this is what excites me: we have two commercial products on the market, we have multiple clinical assets moving into Phase II trials. That doesn't sound like the profile of a company valued at cash. I plan to, with your help, increase communication about what we’re doing and move these programs forward. The key thing is, we'll say we're going to do XYZ; the plan is to do that and be able to report that to the market. Delivering on what you promise is key to getting that share price back up again, and that's what we’re going to do.

Great. Thanks, everyone. That now concludes today's webinar. Thank you everyone for attending. Have a good day.

Thank you, everybody.