ImmunoPrecise Antibodies Ltd.

Good morning, and thank you for joining us. My name is Chantal, and I'll be your conference operator today. Welcome to IPA's fourth quarter and fiscal year-end earnings conference call. Also on the call with me today are Jennifer Bath, Chief Executive Officer, Lisa Helbing, Chief Financial Officer, and Brad McCann, Vice President of Finance. Before we get started, some statements we make today may be considered forward-looking statements for the purpose of applicable United States and Canadian security laws, IPA cautions that these forward-looking statements are subject to risks and uncertainties and may cause actual results to differ materially from those indicated in these forward-looking statements. Additional information about these risks and uncertainties is included in our SEC filings. IPA takes no obligations to update these forward-looking statements except as required by law. On today's conference call, non-GAAP financial measures will be used to help investors understand IPA's business performance. We refer current and potential investors to the forward-looking information section of its management discussion and analysis issued today at www.cedar.com and on edgar at www.sec.gov. Following our prepared remarks, we'll answer investor-submitted questions So with that, I'll now turn the call over to Dr. Bath.

Thank you, Chantal, and good morning, everyone, and thank you for joining us today. I'll provide perspective on our company's background and overall performance, as well as our quarterly and year-end business highlights, pipeline progress, financial results, and IPA's goals for 2023 in more detail. For those who have been following IPA's story, you're aware of our transformation in stage one of our strategic plan. Just a few years ago, we executed on a massive organizational and operational restructuring. We laser focused on our commitment to transform traditional drug discovery and unveiled transformative technologies, reducing timelines, increasing efficiencies, and providing diverse and clinically relevant therapeutic products. Our persistent strive to transform the industry guided multiple strategic acquisitions, each instrumental in setting a new standard for distinctly end-to-end capabilities and ultimately the foundation for IPA's public recognition as the top-ranked global contract research provider by the reputable Roots Analysis. Our first acquisition of Uprotein Express, or UPE, added manufacturing expertise for expressing even the most challenging of proteins, outputs utilized throughout every step of antibody discovery and development. With over 10 years of commercial experience at the time of acquisition, as well as expertise in both high-throughput small-scale and large-scale preclinical manufacturing, the acquisition of UPE enabled us to bring critical components of end-to-end services in-house, while adding advanced capabilities in the expression of contemporary antibody formats, such as monoclonal, bispecifics, trispecifics, VHH, SCFVs, and shark antibodies. IPA's second acquisition was the highly reputed Modiquest Research, specializing in trusted antibody display technologies and downstream antibody engineering and optimization, extending IPA's support of client services even further. These strides set the stage for IPA as a company looking to pave the way in antibody contract research by setting a standard for purposeful end-to-end capabilities, as well as accountability for scientific rigor technological outputs, and sustainable therapies. Requests for IPS discovery services continue to ramp with double-digit year-over-year revenue increases at both discovery sites and requests not only from pharma but increasingly from many of our competitors whose services still retain the substantive gaps. IPS vision continues to bear fruit through its actions. Our team understands the intricacies of the industry, the market, existing and future technologies and their overarching trends. Our ability to set the course by identifying and integrating disruptive technologies continues to blaze new paths in our industry. This brings us to phase two of IPA's strategy. IPA is certain that the future of drug discovery lies in the ability to combine meaningful laboratory outcomes with intelligently coded algorithms to discover safe and effective personalized medicines. Years of market research and due diligence, including evidence-based research, culminated in the last quarter with the acquisition of BioStrand, a company that has since been rated by Startup Insights as a top five global bioinformatics startup. BioStrand combines what we refer to as intelligent coding through the indexing of patent-pending data objects called HIPs with rapid and actionable outputs. In short, HIFs are biological fingerprints identified and isolated by Dr. Van Hifta, co-founder of BioStrand. HIFs are indexed and therefore pre-computed, which greatly alleviates the computational workload of multi-omics analysis. HIFs connect sequences to unstructured data, such as scientific publications, through our proprietary Lens AI NLP engine. With our enhanced competitive advantage, IPA is dedicated to merging intelligent system thinking with leading lab technologies that yield highly specific antibodies directed at individualized patient genetic mutations. This has the potential to enable not only more effective therapies, but to eliminate unwanted adverse events, such as those observed during chemotherapies. A major challenge in personalized medicine is, in part, software limitations for the rapid and in-depth analysis of tremendously large data sets and the analysis of genes to disease relationships as core concepts. This is where the power of HIPs revolutionized the coding of algorithms, enabling the world's only single software multi-omic analysis platform as well as analysis and retrieval of corresponding data in seconds or minutes, compared to months or even years with other software, depending on the complexity of the project. This includes the correlation of data which would otherwise not likely be identified, and yet is meaningfully related based on unseen commonalities within HIFS. IPA may be swimming against the popular current of present-day thinking regarding coding and data analytics. but we stand firmly behind the belief that the present-day conversation has been misdirected. As data analysts and investors, we're historically not aware of the possibility to code and index these data objects and data objects, but HIPs are putting forward this opportunity. While in recent history, companies such as IBM, Microsoft, Google, and Honeywell have invested aggressively in quantum computing, We maintain that large scale and actionable data analysis and insights aren't about brute force, nor about how much data can be stored. It isn't reliant on coding more complex algorithms on higher energy usage or even on better and faster computers. It's about intelligent coding and ultimately about the indexing of HIFs and the ability to correlate their relationships to disease in the context of a system If you'd like more details on HIP and how they're transforming data analytics and drug discovery, please do reach out and schedule a call with us. We'd be happy to explain in more detail. Before we get too far down that exciting path, I'd like to turn our attention to the fiscal year and quarterly financials update. Our performance this quarter tops off another excellent year for IPA with record revenues, both for the quarter and the year end. The business continues to increase steadfastly, delivering full fiscal year 2022 revenues of more than $19.3 million, up 8.1% overall from fiscal year 2021. Revenue growth rises to a 15.9% increase when analyzing revenue solely from the CRO services. In other words, without last year's TALM outlicensing. These results demonstrate our continued trend of site profitability and an increase in performance across each of our subsidiaries. including double-digit operational revenue growth from our discovery sites, boasting increases of 24.4% in oaths and 16% at our Victoria site. The only CRO location without double-digit revenue increases is Utrecht, our manufacturing site, which is operating at maximum capacity due to space limitations. Despite this, they continue to deliver increased profitability and are on target for transitioning to their new production facility this October. The new facility will double their lab space and provide ample room for future growth. The proven track record of growth combined with the new and novel technologies that position IPA for the future has company insiders' confidence in the direction of the business. This can be demonstrated by the amount of insider buying during 2022. Despite being in a blackout since mid-May, insiders have purchased over 80,000 shares, representing a total investment of over one-half of a million. We'd like to turn our discussion to our strategic marketing goals now, which were recently defined and commenced with new marketing leadership. The marketing plan set forth to position IPA as a market leader, introduce new differentiating AI technology, and scale across all verticals to support fast growth expectations. Key milestones and value drivers include the launch of a world-class IPA brand, including the integration of BioStrand, the seeds of a new narrative on the market, and a blueprint for a scalable marketing operational model with a robust digital and social media engine. At the end of the fourth quarter, begin the strategic shift on an IPA website overhaul that will enable full digital ecosystem and CMS integration. We'll provide real-time metrics, inspire robust audience engagement, and lead generation. It will automate commercial activity and track conversions and ensure nimble content and asset updates. IPA's operations is bursting with new activities to share with its stakeholders, and we're excited to have the opportunity to share some of these here today. After years of planning, licenses, and approvals, our newly built vibarium at our site in Victoria, British Columbia, became fully operational this week. This new facility supports and enhances IPA's ability to optimally perform our unique and proven immunization techniques that are vital to our differentiated antibody campaigns. The vivarium now has double the square footage of usable space and includes an additional procedure room, which enables new service offerings, including our long-awaited entry into preclinical services, effectively expanding our already comprehensive suite of offerings. We've mentioned on numerous occasions our leading wet lab technologies. such as our B-cell select that yields highly diverse and specific antibodies. These capabilities have been optimized over the past 15 years, now yielding industry-leading results, and IPA is poised to soon present a workflow in which highly characterized clones from our renowned Function-First platforms are analyzed and phylogenetically overlaid with what is known as a sequence repertoire. Using functional data in conjunction with BioStrand's lens AI software, IPA can theoretically, in an unprecedented move, identify patterns that predict functional outcomes. To our knowledge, IPA would be the first and only company with a comprehensive B-cell workflow that can interrogate memory B-cells, plasma B-cells, and leverage their data output to identify additional lead candidates from a next-generation sequencing, or NGS, B-cell repertoire. Because of IPA's vertical integration, this workflow will grow all aspects of IPA's core end-to-end services, especially for high-profit margin search services such as protein expression and biophysical characterization. And lead candidates identified through sequence analysis require wet lab verification. NGS is a technology that identifies DNA or RNA sequences to explore genetic variations linked to disease or other biological phenomena. Using several samples and hundreds to thousands of genes, NGS makes it possible to uncover and analyze a variety of genomic characteristics in a single sequencing run. While most NGS efforts are directed toward decoding and analyzing human and mouse repertoires, We are excited to announce today that IPA has custom-developed a multi-species NGS platform to analyze novel sequence from many antibody-referenced genomes, such as rats, chickens, rabbits, llama, and sharks. This platform also enables cross-species and multi-omic hip analysis using our Lens AI software, with the aim of providing novel functional insights early in the discovery process. This newly built custom platform is a stepping stone for IPA's future AI endeavors as it formalizes a pathway from the lab to AI-supported antibody analysis in a seamless workflow that will soon be made available to IPA clients. Continuing on the theme of new operational activities, we've shared previously how our present discovery and development workflows result in a progression of successful candidates to ultimately third parties for preclinical and clinical manufacturing for use in IND enabling and human studies. Capturing this market would enable us to support our loyal clients from concept all the way to the clinic. And our existing workflow has been purposely designed to smoothly transition these lead molecules into clinical manufacturing. We're pleased to announce today that the National Growth Fund of the Netherlands has granted funding to the ENCODE Pact, of which IPA is an active and prominent partner in the biologic stream. In addition to funding preclinical research programs and GMP manufacturing projects, the stream also includes a dedicated investment toward a Netherlands-based GMP production facility for IPA. To support our next stream of revenue growth, We have an exciting and diverse pipeline of promising new potential first-in-class and best-in-class antibody therapies to address critical unmet needs in various disease areas, including oncology, inflammatory diseases, cardiovascular diseases, and neural-related disorders. Notably, we now have ready-to-license opportunities from our pipeline, including TATX 114 and 24. as well as CATX22 for hematologic malignancies, which has the potential to treat B-cell lymphomas or acute myeloid leukemia. Programs 24 and 114 address validated targets, which we push toward generating best-in-class and next-generation assets. For these two programs, we are in discussion with various companies to explore early-stage out-licensing options. The TACX22 program, as well as programs 112, 20, and 21, address relatively unexplored targets and are the focus of the generation of potential first-in-class assets. In general, as with any first-in-class asset, these programs require comprehensive in-depth proof of concept screening before moving to advanced out-licensing discussions. However, we are continuously exploring partnering options to further develop our first-in-class programs And for TATX22 and 112, we have ongoing co-development discussions with several potential partners. The internal programs clearly benefit IPA's capabilities to characterize various antibody formats in an early stage of development. For example, we generated a set of bispecific antibodies by combining lead candidates from our TATX24 program with a subset of TREC-B lead candidates and use high-throughput screening methods to confirm intended bispecific binding activity. The development of these bispecific antibodies provides additional partnering and out-licensing opportunities through the generation of new assets. One of our most advanced assets is clearly our TATX03 anti-SARS-CoV-2 antibody cocktail. COVID remains a topic of interest for most, and it's certainly not going away anytime soon. So why does COVID seem so less severe today, mainly because people are building immunity through infections and vaccinations. However, at the same time, the virus is gaining fitness. And as it continues to do so, we encounter increasingly concerning variants with immune-invasive and even immune-suppressive characteristics. On the flip side, the world is now very limited with respect to efficacious therapies that stand up to the more recent variants, such as BA.5. In the past month, we've published both pseudovirus neutralization, preclinical, and TMC updates on our lead anti-COVID candidate, polycope TATX03, a four-antibody cocktail that acts synergistically against SARS-CoV-2 and its variants. We finalized the preclinical work, and as predicted, based on its silico modeling for binding to BA.2, our TATX03 cocktail totally neutralizes the BA.2 subvariant. with the NIH currently performing additional variant screening in the coming weeks. With respect to the final preclinical safety studies, we recently announced very positive safety outcomes. The generation of a GMP production cell lines are actually finished, and the first GMP batches of antibodies are being produced right at this moment. The retained efficacy of our product against now and newer now that newer variants of concern underscore the potential for our product to address currently known SARS-CoV-2 variants of concern and the strength of the intentional design of our cocktail. We believe that moving the product into the clinic as fast as we can is of great importance in the light of rising infection numbers due to Omicron subvariants. We are currently progressing well with our polytope TATX03 submission to regulatory authorities and are still aiming for regulatory filing for approval of clinical studies in humans in Q3 of this calendar year. Next to the ongoing conversations with the FDA, we are also in pre-filing communications with the EMA about the further development of TATX03. We feel well-positioned to finalize our documentation for a clinical trial application and are hopeful to start the first in human studies by the end of this year. Early this calendar year, we filed a patent covering polytope THX03, which will be published this coming week. Based on quite extensive data package for THX03, we elaborated on our finds in two new manuscripts to be submitted third quarter of this calendar year. Overall, we expect that the impressive data package will support our outreach efforts to attract partners for further development or outlicensing of this unique product. Lastly, regarding COVID, our collaboration with Electrify to generate a high concentration formulation of polytope THXO3 has gotten off to a great start. The first formulation and stability studies by Electrify show that polytope is highly amenable to their technology. The antibodies can be formulated to high protein concentrations as a mixture and remain stable under a variety of conditions. Finalizing studies are underway to determine the ultimate formulation. after which the product will be tested in vitro functional studies and a very reduced number of preclinical bridging studies to support pre-IMD discussions. We've dedicated efforts this calendar year to the rapid development of a meaningful IP portfolio, including a U.S. provisional patent application pertaining to optimized antibodies against SARS-CoV-2 variants filed just this week. The portfolio consists of applications to the USPTO, PCT, or international patents, as well as foreign non-PCT patent applications. In addition to the rapidly growing number of applications filed by TALIM Therapeutics, with two additional applications for non-COVID TALIM assets currently in preparation, IPA also acquired four families of patents from the BioStrand IP portfolio. spanning broad capabilities and multiple geographic regions. With this, I'd like to now turn the call over to Lisa to discuss IPA's fiscal 2022 financial results in more detail.

Thank you, Jennifer, and good morning, everyone. I'm Lisa Helbling, IPA's CFO. Unless otherwise noted, all numbers referred to are in Canadian dollars. I will start with a financial update with a review of the fourth quarter. IPA achieved another record revenue quarter with the company's total revenue exceeding $5 million. The company's total revenues of 5.2 million during the three months ended April 30th, 2022, compared to a 4.9 million in 2021 was a 400,000 or a 7.4% increase. Most notably, the company's product sales revenue was 475,000 compared to 197,000, a 278,000 or 141% increase over the same period last year. The company launched a new webshop during the year contributing to the increase in product sales from the company's online catalog featuring products such as antibodies, enzymes, and proteins. The company's gross profit was $3.3 million with a 63% gross profit margin compared to $2.8 million and a 57% gross profit margin in 2021. The gross profit margins are within management's expectations. The higher gross profit margin for this quarter is a result of the mix of business with a higher percentage of sales from our UTRIC location that manufactures proteins, antibodies in various forms. The company's operating expenses for the quarter were $7.6 million compared to $5.9 million in 2021, an increase of $1.7 million. There were five expenses that primarily make up the increase, and I'll discuss these in order of the largest expense changes. Professional fees increased to $1.5 million from $300,000 in 2021, primarily due to increased legal and accounting fees related to the acquisition of BioStrand. Consulting fees increased $545,000 in the fourth quarter due to advisors engaged to help the company with its strategic activities. Research expense increased to $900,000 from $600,000 in 2021 due to the company's strategic investment in research, including the company's SARS-CoV-2 polytope cocktail. and other research projects, most of which can be found on TALIM's website. Salaries and benefits totaled $1.9 million compared to $1.7 million for the same period last year, an increase of $273,000. The increase includes the addition of strategic leadership roles in sales and marketing and lab operations. Share-based payments of $786,000 is $536,000 lower than the same period last year, The decrease in expense is primarily due to vesting of option awards that were granted to employees on January 1st of 2021. Total other expense for the quarter was $82,000 compared to $913,000 in the prior year, a reduction in other expense of $831,000. Unrealized foreign exchange loss was lower in 2022 by $851,000. The unrealized foreign exchange loss is a result of currency revaluations of held U.S. dollars at the current quarter end exchange rate. This year, COVID-19 related subsidy income was nil compared to $448,000 in the fiscal year 2021. Included in other income in 2022 is $109,000 of gains related to an IPA investment. Further information can be found in the consolidated financial statements, footnote number eight. The company recorded a net loss of 4.6 million for the quarter compared to a net loss of 5 million for the three months ended April 30th, 2021. The company achieved higher gross profits while incurring reduced unrealized foreign exchange losses and income tax expense, partially offset by higher professional and consulting fees. I will next turn my attention to our full year results. The company achieved record total revenues of 19.4 million during the fiscal year 2022, compared to a $17.9 million revenue in 2021, a $1.5 million or 8.1% increase. As Jennifer mentioned, during the fiscal year 2021, the company, through its subsidiary Talum Therapeutics, sold its first and to date only internally generated therapeutic antibody asset. Excluding that sale, the company's CRO business, the revenues in fiscal year 2021, would have been $16.7 million, resulting in an increase in our CRO revenue, for the fiscal year 2022 of 15.9%. The company's project revenue was $17.4 million compared to $15.9 million last year, a 9.1% increase. Growth is driven primarily by the company's B-Cell Select platform with expansion in both the number and size of projects under contract leading to revenue increases of $1.4 million. Product sales during fiscal year 2022 totaled $1.7 million compared to $1.9 million last year, a decline of $245,000. The lower product sales relates to the company's sale of that first internally generated therapeutic antibody asset in fiscal year 2021. In fiscal year 2022, the company achieved product catalog sales of $1.7 million, a growth of $700,000 over last year. The company launched that new webshop and gained new distributors. The company's gross profit was $11 million with a 57% gross profit margin compared to $11.5 million and a 64% gross profit margin in 2021. The gross profit margins are within management's expectation. The higher gross profit margin during the fiscal year 2021 includes the sale of that first internally generated therapeutic antibody, the costs for which have been expensed as research in prior years as required by IFRS. Removing the impact of that asset sale gross profit margin last year would have been 61.8%. The company's operating expenses on a year-to-date basis were $27.7 million compared to $19.1 million in 2021, an increase of $8.5 million. I'll discuss the changes in order of largest changes of expense. Our research expense increased to $6.7 million from $2 million in 2021, due to the company's strategic investment in research, including the company's SARS-CoV-2 polytope cocktail and other research projects, most of which may be found on TALM's website. Professional fees totaled $2.6 million compared to $1.4 million during the prior year, an increase of $1,187,000, primarily supporting the acquisition of BioStrand. Insurance increased to $1.9 million from $700,000 in 2021. The company's D&O insurance premium increased as a result of our December 2020 listing on NASDAQ. Fiscal year 22 has a full year of premium expense, where fiscal year 21 had four months of premium expense. Salary and benefits totaled $6.6 million compared to $5.6 million for fiscal year 21, an increase of $981,000. The increase includes strategic leadership roles in sales and marketing to support the company's growth. routine pay increases, and the addition of director cash compensation that was effective after the fiscal year 2020 annual general meeting. Consulting fees totaled $1.2 million in 2022, an increase of $877,000 over 2021. The company expanded its use of consultants related to research and development, capital markets, and strategic initiatives. Total other income for the fiscal year 2022 was $900,000 compared to $1.6 million in the prior year, several items make up the $700,000 decline in other income. The company recorded $75,000 in grant and subsidy income this year compared to $2.7 million in fiscal year 2021, primarily related to COVID-19 programs. Detailed information about the grant and subsidy income can be found in footnote 19. The company recorded unrealized foreign exchange gains of $631,000 this year compared to unrealized losses of $1 million in the prior year. This unrealized gain is a result of currency revaluations of held U.S. dollars at the current quarter end exchange rate. Accretion expense in the current year is $261,000 lower than fiscal year 2021, as the company retired its final obligation related to deferred acquisition payments on May 3rd of 2020. The company recorded a net loss of $16.7 million for the fiscal year 2022, compared to a net loss of $7.3 million in 2021. The $9.4 million increased net loss is primarily due to the company's investment in research and development, increase in professional and consulting fees, increased insurance costs, and higher salaries to support the company's strategic plans and operations, along with lower grant and subsidy income. Before I touch upon adjusted EBITDA, I must caution the investor that adjusted EBITDA is a non-IFRS measure. Do not place undue reliance on adjusted EBITDA. I urge you to read all the IFRS accounting disclosures presented in our consolidated financial statements for the year-ended April 30, 2022 and 2021. Adjusted EBITDA is management's views of The decline in adjusted EBITDA includes $4.7 million in investments in research and development, a decrease in grant and subsidy income of $2.7 million, increased professional and consulting fees of $2 million, increases in D&O insurance premium of $1.1 million, and increased salaries and benefits of $981,000. I'll provide a few comments about IPA's liquidity. As of April 30, 2022, the company held $30 million in cash, and had working capital of $28.2 million. For the year, cash used in operating activities was $9.9 million. As part of our investing activities, the company made equipment purchases of $1 million and used cash of $3.7 million towards the acquisition of BioStrand. As part of financing activities, the company received $3.9 million from issuing common stock and made lease payments of $1 million. The company continues to operate as a going concern, and according to management's estimate, there are sufficient cash reserves to sustain existing operations and associated NASDAQ costs for at least one year. Finally, we previously reported that on October 13th, the company established an at-the-market equity offering facility, which entitles the company at its discretion and from time to time during the term of the agreement to sell through its agent H.C. Wainwright and company common shares of the company having an aggregate gross sales price of up to U.S. dollars 50 million. At April 30, 2022, and as of today, U.S. 50 million of the company's stock remain available for sale under the ATM facility. With that, I'll turn the call back to Jennifer and Chantel for questions and answers.