ImmunoPrecise Antibodies Ltd.

Good morning, ladies and gentlemen, and thank you for joining us today for the Immunoprecise Antibodies Fourth Quarter and Fiscal Year-End 2024 Earnings Call. Today's call will be led by our CEO, Dr. Jennifer Bath, and our CFO, Kristen Taylor. Please note that a copy of today's presentation, along with our financial statements, will be available on IPA's company website for your reference. We encourage you to review these materials to gain a deeper understanding of IPA's performance and strategic direction. Once again, thank you for joining us today. 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 our participants to refer to our filings with the Securities and Exchange Commission, SEC, including our most recent form, 20F, and our 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. Thank you for understanding, and we appreciate your continued interest in immunoprecise antibodies.

Thank you, Kayla, and thank you, everyone, for joining us today. Over the past quarter, we have made significant strides in our strategic initiatives, positioning us for accelerated growth and operational efficiency. We look forward to sharing these updates, and we will go into more detail this morning on our achievements and ongoing strategy, both in our wet labs as well as within our subsidiary BioStrand. But first, I will provide an overview of the market and our foundational performance. The biopharmaceutical industry continues to evolve at a rapid pace, driven by advancements in technology, changing market dynamics, and an increased focus on personalized medicine. There is a strong and growing trend towards precision medicine, such as pharmacogenetics, where treatments are tailored to individual patients based on their genetic makeup. Additionally, consumer behavior continues to shift toward a demand for comprehensive solutions that can accelerate the drug discovery and development process. Pharmaceutical companies are increasingly seeking partners who can provide end-to-end solutions from initial discovery through characterization, manufacturing, and development of therapeutics. In addition, increasingly, these companies are also looking for a competitive edge with disruptive AI technologies. Amid significant industry changes, including budget reductions and vendor consolidation, Immunofree Science Antibodies has not only maintained but strengthened its market position. Our deep understanding of the market landscape and foresight in recognizing the demand for end-to-end services with robust science and metadata analysis capabilities have enabled us to thrive during a period of market downturn. By anticipating these industry needs, we have successfully positioned ourselves to meet the evolving demands of our clients, demonstrating our industry expertise and resilience. This strategic insight has been pivotal in driving revenue growth and solidifying our leadership in the field. Our strategic initiatives, particularly in AI-driven drug discovery, have now positioned us at the forefront of capabilities in the technology industry. The commercial launch of Lens AI has resulted in the signing up for early access and has been well-received. with increasing interest from pharmaceutical, healthcare, and technology companies looking to enhance their drug discovery capabilities. Our recent collaboration with PGxAI to develop an AI model for pharmacogenetic recommendations is another testament to our market leadership. We believe our investments in platform development, particularly with AI, provide a unique offering that bridges the gap between discovery and individualized patient profile. Our ability to offer comprehensive solutions backed by our proprietary technologies and expertise has been a key factor in our success. In conclusion, we are confident in our strategy and optimistic about the future of the biopharmaceutical industry and our place in it. We remain committed to leveraging our technical capabilities and industry expertise to deliver innovative solutions that meet the evolving needs of our clients and drive shareholder value. We are proud to announce our fifth consecutive quarter of record revenue, coupled with record fiscal year revenues. This growth is attributable to the success of our end-to-end services, combining our wet lab and in silico technologies. Our square footage expansion strategy has proven successful, and we anticipate continued growth as we expand IPA Canada's industry-leading discovery services. Additionally, we have significantly reduced our cash burns, by showcasing our commitment to financial prudence and operational efficiency. This quarter, we launched the groundbreaking Lens AI API and vector search software for AI-driven drug discovery. Developed by our subsidiary BioStrand, these innovations enable our partners to access our Lens AI Biointelligence suite of Insilico discovery applications and to integrate sizable databases and electronic health records with large language models. BioStrand is ramping revenues attributable mainly to client programs accessing the Lens AI biointelligence suite. The Lens AI software has been rolled out both internally and externally, and we have accelerated our SAS model timelines with the commercial rollout of the Lens AI API. BioStrand is pleased to announce that it continues to accept early access to agreements. Today, we are excited to provide more in-depth updates on these rollouts, our newest collaborations and successes with Lens AI, and the early access adopters for this groundbreaking technology. We have entered into a strategic collaboration with PGxAI to develop an AI model for pharmacogenetic recommendations using Biostrand's Lens AI Foundation AI model. This collaboration is expected to advance personalized medicine and improve patient outcomes. Additionally, we are engaged in three-way discussions with a leading semiconductor manufacturer and technology company and one of our largest pharmaceutical clients regarding a potential R&D collaboration on our foundation AI model. Our business development discussions are rapidly ramping and are a direct result of our industry reputation, know-how, and contacts, coupled with the power of our Lens AI innovations. Our advancements in innovation were recently recognized when BioStrand received the prestigious 2024 Impact Award, sponsored by InterSystems, for its Lens AI technology in biotherapeutic research. We look forward to sharing more details on these developments today. Last but not least, We are very pleased to announce the appointment of Kristen Taylor as our chief financial officer. Kristen has been serving as interim CFO since September 19th, 2023, and now transitions off into the role in transitions into the role on a permanent basis. Her extensive experience in early stage and large growth companies will be invaluable as we continue to expand our operations. Now, Let's move on to the financial highlights for this fiscal year. Our total revenue for fiscal year 2024 was $24.5 million, a substantial 19% increase over last year and well above industry average. This robust growth was fueled by our ability to exceed clients' expectations, develop new and innovative services, and expand our facilities capacity in Europe. we achieved a notable reduction in operating expenses, primarily driven by a substantial decrease in R&D expenses after having concluded spending on later stage R&D assets to cue them for partnering initiatives. Additionally, we saw a significant reduction in cash burn year over year, despite significant capital investments in equipment that support Lens AI outputs. For equipment that is already in strong demand and consistent commercial use, This reflects our efforts to manage cash flow effectively and strategically invest in our growth. In conclusion, while growing a company of our size at this stage of development presents challenges, our consistent revenue growth, efficient R&D spending, and strategic financing decisions position us well to meet our next value growth milestones. Our strong CRO business and the efficiency of our Lens AI Universal Foundation AM model help us to adapt our R&D efforts to best meet the needs of our customers and partners. For more detailed financial information, our CFO, Kristen Taylor, will provide more insights. The performance of our stock, coupled with the broader market dynamic, has been challenging. Despite our consistently strong revenue growth, reduced cash burn, and the successful commercial launch and validation of Lends AI, we're frustrated that our stock valuation, our current stock valuation does not reflect the intrinsic value of our business. There is a clear disconnect between our market cap and the substantial progress we've made. We are trading at a valuation that does not accurately represent our achievements, our client base, our growing revenue in particular compared to the rest of the industry, our growth rate, nor our reputation. This disconnect is particularly evident when considering our ongoing successes in executing our business plan and the rapidly growing stream of business opportunities we are capturing. We are acutely aware of the difficult broader market and biotech environment. However, we believe that our strong fundamentals should position us better in the market. To address this, we are taking forceful actions to combat the disparity between our market value and our true potential. First, we have recently hired an investor relations firm, Quantum Corporation, with which we are very pleased, to enhance our outreach and media access, ensuring that the true value and future potential of IPA are communicated broadly. We are committed to increasing our visibility within the investment community and actively engaging with new investors to build and gain their awareness of IPA. Second, we are leveraging our proven track record of consistent revenue growth, innovative technology, and an expanding client base to highlight our intrinsic value. Our focus is on entering new markets and showcasing our leadership potential in the technology and AI sectors. By demonstrating our achievements and advancements, we aim to attract and secure business development deals that align with our growth strategy. Our strategic investments in proprietary technologies enable us to offer unique, high-value solutions that differentiate us from competitors. Furthermore, our efforts in international expansion are designed to tap into new opportunities and broaden our global footprint, reinforcing our commitment to long-term growth and solidifying our position as a market leader. Third, we are intensifying our business development and sales efforts. actively capturing new opportunities in the technology and AI markets. We are receiving daily interest in our AI technologies and capabilities, highlighting the market's recognition of our innovative solutions. Our focus is not only on executing our strategic goals, but on monetizing these opportunities. By successfully demonstrating our ability to drive significant value, we are confident that the market will recognize and reward the true potential of our company. These efforts are geared toward expanding our client base and showcasing our strategic growth initiatives, which sets us apart as leaders in these dynamic sectors. Fourth, we will be holding an investor R&D day, providing the opportunity for investors to explore multiple capabilities through live presentations, ask questions, and view investor-focused live demonstrations of our Lens AI biointelligence suite of applications as it pertains to drug discovery. We look forward to having you join us this fall. In short, we are frustrated with our current valuation and stock price performance. We are vigorously motivated and actively addressing this disconnect. We believe that through our continued execution and strategic initiative, we will regain the confidence of the market and unlock the true value of IPA. This year, began on a strong note with Biostrand tackling a major industry challenge in systems biology, solving the information integration dilemma, also known as the IID. Through their patented HIFT technology, Biostrand has harmonized diverse data outputs, significantly enhancing the efficiency and power of our biological discoveries. These advancements have the potential to rapidly accelerate drug discovery and development timelines. demonstrate our coveted ability to manage complex biological data in transformative ways. Additionally, BioStrand published a white paper on an unprecedented and patented approach to biological sequence retrieval by combining natural language processing, or NLP, and database research. This innovation has improved the accuracy and efficiency of biological data retrieval and is central to our patented HIP technology. strengthening our position in biotechnology innovation. In January, we introduced an advanced foundation AI model that combines large language model stacking with our HIPs technology. This model offers novel capabilities in scalable data integration and analysis, allowing Lens AI to process and interpret large amounts of data even more effectively and demonstrating its applicability the rapidly advancing technological industry of LLM and multimodal inquiries. Our partnership with InterSystems, announced in February, integrated vector search capabilities with the Lens AI platform to enable the much needed industry-related capability for AI-driven healthcare applications. This collaboration addresses data processing challenges in healthcare enabling more accurate and efficient analysis from clinical data back to discovery. This alliance enhances our technological capabilities and expands our market reach, providing robust and scalable solutions for our customers. We are working closely with InterSystems on the continued rollout of Lens AI, leveraging their next-generation IRIS data platform. In March, we announced the development of an advanced large language model for electronic health records. This innovation leveraged BioStrand's AI and data integration expertise to improve the retrieval and analysis of EHR, aiming to enhance patient outcomes. This was achieved through our collaboration with InterSystems Corporation, the main database provider for clients such as Epic Systems. This collaboration integrates advanced technology into practical healthcare solutions, demonstrating our efforts to improve patient care and streamline healthcare data processing. In April, BioStrand received the 2024 Impact Award for its Lens AI technology, recognizing the potential for our HIFT-powered platform and our commitment to advancing in the biotechnology industry. We've made significant advancements in our product offerings this past quarter, particularly with the launch of our Lens AI API and vector search capabilities. The immediate commercial offering of Lens AI API provides access to BioStrand software across multiple markets, including technology, biotechnology, pharmaceutical, agriculture, agricultural, and healthcare companies. This leapfrogged our previous commercial timeline, offering immediate access to our technologies on a subscription basis and is expected to enhance global drug discovery and development processes. Our unique value proposition lies in our ability to bring partners and collaborators into the drug discovery space with leading technology by integrating our foundational AI with existing algorithms, data management systems, and software On Amazon Web Services, or AWS, our most recently signed partner, IPA gains direct access to new client streams and enhanced technologies from partners and collaborators. Furthermore, we are working diligently to onboard BioStrand on the AWS Partner Network a global community of partners that leverages AWS technologies, programs, expertise, and tools to build solutions and services for customers. This partnership will provide us with access to technical and business support, best practices, and extensive resources to accelerate the delivery of our SaaS solutions. As part of this partnership, BioStrand plans on offering Lens AI in the AWS marketplace, a sales channel that enables independent software vendors, and consulting partners to sell their solutions to AWS customers. Additionally, there is a vibrant pharma and life science activity on AWS looking to add deep data providers specifically through APIs, such as our Biointelligence Suite. This collaboration aims to enhance our technological capabilities and expand our market reach, providing our customers with robust and scalable solutions. In February 2024, the Oath Netherlands Lab moved to a new facility, significantly expanding our laboratory space for both discovery and development work. Along with this expansion, we enhanced our service offerings through the acquisition of additional capital equipment and services. In April 2024, we purchased an LSA from Cartera to expand our services. This equipment supports our high-throughput screening capabilities, particularly in our in-silico outputs from BioStrand. Screenings with the LSA have been quickly adopted by our clients, implemented in various ongoing programs, and began contributing six-figure revenues in short order. The site has also expanded its discovery services to accommodate the growing VHH, or Camelid, antibody market. Despite the OSE facility relocation activities in February of 2024, thanks to careful planning and teamwork across our EU locations, revenues were uninterrupted as the team continued to drive strong growth in fourth quarter and into the new fiscal year. The growth in OSE is primarily driven by an increase in human phage and B-cell-based discovery programs. These expanding European capabilities have not only contributed to revenue growth, but also greatly enhanced the rollout and adoption of our fee-for-service work with the BioStrand Biointelligence suite of tools. With the expanded lab facilities at both sites in the Netherlands, we have witnessed significant growth in sales. In addition to phage display and B-cell-based discovery programs, this growth has been fueled by custom protein production with additional contributions from antibody characterization and optimization. In conclusion, our operational performance in the past quarter reflects our commitment to innovation and operational efficiency, as well as customer satisfaction. We are excited about bringing the opportunities ahead and remain committed to delivering value to our shareholders. We are excited to turn our attention to our Lens AI updates from the past quarter. highlighting our progress in its commercialization. For clarity, I want to start by providing a description of the Lens AI access model, including an explanation of the difference between the Lens AI API and the Lens AI portal and the target audiences for these platforms. The Lens AI platform operates as a software as a service or SAS model with all processing happening in the cloud. Most users interact through a web portal user interface, requiring only a machine with a browser and internet access. For technical users, interaction with our services via an API is also possible. The API endpoints initiate the same cloud processing as the web portal. So the actual requirements for client machines are minimal. There is no overhead in computation or memory. And if they're managing data through our platform, there's no need for additional disk space. Our revenue model is based on a per-sequence basis, with bulk usage qualifying for a discount on an annual basis. Pricing applies to every application from our Lens AI Biointelligence Suite, whether through our API or through the portal, ensuring our services are accessible and scalable. This flexible pricing strategy allows us to cater to a wide range of customers, from small to large companies across multiple industries, ensuring broad market penetration and sustained revenue growth. With this in mind, we are proud to provide our updates on BioStrand's Lens AI software rollout. About five months ago, BioStrand successfully rolled out Lens AI in an internal launch, including at our Utrecht and Oost sites. which have been actively using the Lens AI portal for advanced protein modeling and data analysis. This rollout showcases the platform's security and utility. In Utrecht, we are collecting feedback to enhance the data analysis functionalities of Lens AI. As these tools are used, BioStrand gathers feedback on client preferences for running jobs with Lens AI's analytical tools, how clients prefer to organize their work, and the most useful information for reporting documentation. This provides essential testing for resilience and robustness of the platform. On the other hand, the rollout in Oath has provided valuable insights into client preferences, particularly regarding the data exchange capabilities of Lens AI. The team in Oath has direct access to the Lens AI platform for providing real-world solutions with their clients to employ data analytics, manage that uploads and downloads, and use the platform for data sharing with clients. This milestone enables BioStrand to collect feedback on the ease of use and robustness of Lens AI. BioStrand data scientists have internal access to Lens AI as they use the platform similarly to advanced customers with a technical background. Their insights inform both advanced pipeline use and the integration of the Lens AI API. into their data science workflows. Commercial projects for clients and partners are being successfully executed end-to-end, meaning entirely in silico, on the Lens AI platform, providing realistic feedback on its use, accuracy, performance, and resilience in complex cases as well as API-based cases. We are pleased to announce that we have initiated the public rollout of Lens AI with select partners ahead of schedule. In addition to this, based on their positive experience and outcomes from Lens AI applications, one of our large pharmaceutical company clients has chosen to expand from the initial Lens AI services to a broader integration with our software as a service and API solutions. This successful model demonstrates the platform's capability to generate significant revenue streams through these commercially available solutions, which support recurring revenue for Biostrand. We have not yet secured new milestone and royalty discovery deals. However, we are actively engaged in discussions with multiple parties, including current large clients that have already utilized Biostrand's Lens AI Biointelligence Suite and have indicated their interest in converting to a partnership model for its added benefits. We are optimistic that these ongoing discussions will soon lead to significant partnerships and open new revenue opportunities. Our unique value proposition lies in our ability to bring partners and collaborators into the drug discovery space with leading technology and access to hundreds of biotechnology and pharmaceutical partners. By integrating our foundation AI lens AI with existing algorithms, data management systems, and software on the Amazon Web Services, IPA also gains direct access to new client streams and advanced technologies from partners and collaborators for access to high revenue programs. Looking ahead, we anticipate continued expansion and progress in this challenging market in the upcoming fiscal year. Our guidance is based on our internal KPIs, strong operational performance, successful execution of our strategic initiatives, focused liquidity management, and robust demand for our products and services. We expect our revenue growth to continue, driven by our B-Cell Select platform, our enhanced manufacturing facility, and our groundbreaking Lens AI software. We also anticipate further revenue generation from partnerships and fee-for-service projects powered by Biostrand's Lens AI technology. Our focus on operational efficiency and financial prudence will continue to drive improvements in our profitability metrics. In conclusion, we are optimistic about the future and confident in our ability to deliver strong results. We remain committed to our mission of revolutionizing the biotherapeutic research and technology landscape and look forward to sharing our progress in the coming quarters. We appreciate your continued support and presence as we navigate these challenging times and work toward delivering sustained value to our shareholders. I'd now like to turn the call over to our Chief Financial Officer, Kristen Taylor.

Thank you, Jennifer. Good morning, everyone, and thank you for joining our fourth quarter and annual fiscal year 2024 earnings call. Following up on Jennifer's review of our progress in the market, I will provide an overview of our financial performance for the fiscal year ended April 30, 2024, along with further details of our financial strategy and outlook. As a reminder, all numbers I reference are in Canadian dollars, unless otherwise noted. As you are aware, our company is at the forefront of custom antibody discovery, leveraging cutting-edge technologies to accelerate and enhance the development of novel antibody-based therapeutics. This year, we made significant strategic investments in building and integrating artificial intelligence capabilities into our drug discovery and development processes. We also achieved above-market revenue growth on expanded wet lab capabilities, along with key validation of our AI technologies highlighted by Jennifer. This chart shows the quarter-over-quarter revenue growth we achieved through these efforts over the last three years, with recognizing 6.5 million of revenue in the fourth quarter for yet another quarter of record revenue growth. On to key financial highlights for the year. Our total revenue for fiscal year 2024, which largely represents our custom antibody project and product revenue, was 24.5 million. This represents a 19% increase in revenue compared to fiscal 2023. And previous year-over-year revenue growth was 7%. This increase in growth was driven by our abilities to deliver for our clients while providing additional capacity for facility expansions in Europe. We also continued to increase our capabilities through investment in R&D and capital equipment. We will continue to target above-market growth in fiscal 2025 with continuing our investments in R&D, including ongoing investments in Lens AI. Our gross profit margin for the year was 49%. a decrease from 56% from the previous year. As discussed on prior calls, this represents the additional costs associated with our wet lab expansion, as well as reflecting a lag in inflationary costs being built into our pricing. With continuing to review pricing opportunities, as well as providing higher margin services, we are targeting improvements in our gross profit margin in fiscal 2025. With respect to our operating expenses, Overall operating expenses not including ass impairment for the year decreased by 30% to 26 million. The primary driver of this decrease was our reduction in R&D expense as we wrapped up spend on key pipeline assets, including our therapeutic antibody assets that remain a focus in out licensing efforts. This resulted in a reduction in R&D expense to 4 million in fiscal 2024, versus the previous year of $14.1 million. For the fourth quarter, R&D expense was $1.3 million versus $0.9 million for the previous year. The R&D spend in fiscal 2024 was primarily on the Lens AI capabilities and validation as we go to market with our Lens AI APIs. We are currently targeting similar levels of spend in fiscal 2025. We will continue to monitor market conditions for indications that we need to accelerate or alternatively initiate operational cuts where we determine it would not impact near-term revenue and cash generation. Year-to-date sales and marketing expenses remain flat at 3.5 million compared to 3.6 million in fiscal 2023. For the fourth quarter, it was flat year-over-year at 0.9 million. This spend represents our synergistic sales efforts across our comprehensive antibody discovery and development services, along with efforts towards TALIM pipeline out licensing opportunities. And general and administrative expenses for fiscal 2024 were 15.6 million. This is up slightly from the previous year expense of 15.4 million. For fourth quarter, G&A expense was 4.1 million versus 3.6 million for the previous year. overall we continue to see results from our strategic expense management even as we grow our revenue and our ai offering in summary we reported a net loss of 27.2 million in the fiscal year compared to a net loss of 26.6 million in the prior year our fiscal 24 net loss reflects that we recorded a non-cash impairment loss of 11.4 million on goodwill and 3.8 million on intangible assets for our BioStrand unit as part of our annual IFRS accounting asset test. This impairment factors in the rise in the discount rate as well as the delay in the expected cash flows as we bring the next round of BioStrand Lens AI capabilities via the APIs to market. Without the IFRS accounting impairment, net loss would have been 12.1 million in fiscal 2024, versus 24.1 million in fiscal 2023. Because these accounting impairments represent non-cash items, in fiscal 24, we achieved revenue growth and expense reduction that resulted in a significant year-over-year reduction in overall cash burn. This reduction in cash burn through increased revenue and management expenses supported us in finishing fiscal 2024 with unrestricted cash of 3.5 million. Our overall use of cash in fiscal 24 was 4.8 million, compared to a use of cash of 22.4 million in fiscal 2023. Major components of our fiscal 24 use of cash included the ongoing investment in BioStrends Lens AI, which is the largest use of the 5.8 million operational burns. We also invested in capital equipment, totaling 1.4 million for the year. which included our purchase in the fourth quarter of an LSA from Cartier to support our European sites growth. While these investments in R&D and capital equipment are crucial for our long-term growth and competitive positioning, they have required financing above the positive cash flow currently generated by our three CRO sites. To provide additional cash flow, we continue to run lean and to initiate small equity raises. In December, we completed a small equity raise with benchmarks And in early March 2024, we utilized our ATM, where we issued 629,000 shares for proceeds of 1.8 million. Additionally, subsequent to our year end, in June, we continued to utilize our ATM facility in small amounts, issuing 358,000 shares and raising an additional 490,000. And in July 2024, we entered into an agreement to sell and issue U.S. 3 million of convertible debentures with an annual interest rate of 8%. The sale and issue of the first tranche totaling U.S. 2 million was completed on July 16, 2024, and the sale and issue of the second tranche of U.S. 1 million is expected to close on or about the date that the initial registration statement is declared effective by the SEC. We continue to monitor our cash from operations as well as cost of capital versus returns on R&D and CapEx investments to assess the need to raise additional funds. Growing a company of this size at this development and these cash balances is not without challenging hard decisions. Our funding strategy remains consistent of raising funds while balancing market conditions versus our return to enable us to meet our next value growth milestones. This is where growing our cash flows from our strong CRO business has been beneficial. While we monitor our revenue growth and cash flow, along with monitoring market requirements, we are able to slow down or speed up our R&D efforts as we work to best meet our clients' and our partners' needs. In conclusion, we remain committed to our growth strategy while managing liquidity carefully, positioning us for strong growth and market leadership. I would like to extend my gratitude to our shareholders for their continued support and trust in our vision as we navigate through growth as well as challenges. We remain focused on executing our strategy and delivering results. And with that, we'd be happy to take your questions.