Quotient Limited

Good day and welcome to the Quotient Limited First Quarter Fiscal Year 2022 Financial Results Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Peter Buehler. Please go ahead, sir.

Thank you, Cecilia. Good morning, everyone, and welcome to Quotient's Early Conference Call for the quarter ended June 30th, 2021. Joining me today is Manuel O. Mendez, Chief Executive Officer of Quotient. Today's conference call is being broadcast live through an audio webcast, and the replay of the conference call will be available later today at www.quotientbd.com. During this call, Quotient will be making forward-looking statements, including guidance and projections as to future operating results and expected development and commercialization timelines. Because such statements deal with future events, actual results may differ materially from those projected in the forward-looking statements. Additional information concerning factors that could cause actual results to differ materially from those in the forward-looking statements can be found in Quotient's filings with the U.S. Securities and Exchange Commission, as well as in this morning's release. The forward-looking statements, including guidance and projections provided during this call, are valid only as of today's date, and Quotient assumes no obligation to publicly update these forward-looking statements. With that, I would like to turn the call over to Quotient's Chief Executive Officer, Manuel.

Thanks, Peter, and good morning, everyone. Thank you for joining us today. We've accomplished a lot in the last couple months. Consistent with our last earnings call, today we'll be updating you on three pillars, the Mosaic solution, ABBA by quotient, and quotient's financial position. First, regarding our Mosaic solution, we will provide an update on the Mosaic transfusion pipeline, which includes three modalities, immunohematology, serological disease screening, and molecular disease screening. Next, we will look into the continued progress in our mosaic commercial execution as we prepare for our upcoming launch in Europe. Additionally, we provide an update on our continuing evaluation of ways to leverage the full capacity of mosaic solution to expand into new market segments. The second pillar that we will comment on is the expansion of the ABBA by quotient customer base, product portfolio, and geographical coverage. And finally, we will provide an update on our third key pillar, the strengthening of quotients financial position. Regarding the transfusion market, let's begin with our first mosaic transfusion modality, the mosaic expanded immunohematology microarray. I'm happy to announce that the EU field trials are progressing as expected. We wanted to share some preliminary data in advance of the completion of the field trials. The detailed performance results were published in our press release as of this morning. The preliminary results are very good. The microarray contains all the key commercial relevant specificities. Most specificities demonstrate performance of 99% or better. Additionally, we received positive feedback from our customers who stated that the Mosaic time-to-result is much faster than the competition, is very easy to use, and requires minimal training. We are pleased to hear that our customers are happy with the Mosaic solution. We expect the CE mark approval around year end, followed by the commercial launch in the EU and other countries which accept the CE marking. In the U.S., the immunohematology field trial activities have commenced. Protocols have been finalized and accepted by IRBs. Site-specific testing agreements are being completed. Instruments have been installed. and staff have been trained on operating the MOSAIC system. Now, I would like to update you on our second MOSAIC modality, the serological disease screening microarrays. Firstly, let's review the updates on the initial STS microarray for the U.S. The initial STS field trials in the U.S. are on track to commence in Q3, followed by the submission of the 510 pre-market notification around year end. Secondly, we're encouraged with the progress of the expanded STS microarray development. We integrated the test into the microarray. Internal performance data results were 99% or better for most tests. The R&D team are working on the optimization of the microarray performance. Our target is to submit for CE marking in Q3 of calendar year 22 and to the USDA by Q3, Q4 calendar year 22. Next, our third mosaic modality, the molecular disease screening microarray, continues to regress through development with primers and synthetic target sequences selected for HIV-2, hepatitis E, and West Nile virus. Additionally, we established external partnerships to accelerate the development of the commercial MDS menu and the system and assay integration. Shifting beyond development, our focus has also been on mosaic commercial execution. Our commercial team and technical teams have been working on the qualification of the expected immunohematology tenders within the next two years. Within that time, we expect to participate in approximately 25 tenders, which represents approximately 50% of the total 21 million annual donations in the European market. Currently, we have 15 customers with first-hand experience on the Mosaic solution. and we have made progress with the previously committed 12 MOSAIC evaluations, five of which are scheduled to take place by year end. As an outcome of the evaluations, we expect to be able to participate in tenders which require evaluations, generate scientific data for white papers, and build country reference sites. In addition to these evaluations, we expect to perform another 10 workflow assessments before the year end of the fiscal year. These assessments will not necessarily require the installation of an instrument and will focus on a lean assessment of the lab workflow. Additionally, we have targeted a distribution program in countries which accept a CE mark approval. We have identified 25 potential distributor relationships across 40 countries with a view to driving market adoption in alternate geographies to our current direct model. The strong performance of the MOSAIC solution is documented in soon to be published peer review publication on the MOSAIC COVID-19 antibody microarray and its comparison to other commercially available high throughput SARS-CoV-2 serological assays. The findings are another testament to the value of our MOSAIC solution. I'd like to conclude our update on the MOSAIC solution by providing you with information on how we've leveraged MOSAIC's power and flexibility by exploring opportunities in new market segments. Part of our strategy has always been to develop and commercialize Mosaic beyond transfusion diagnostics. As the commercial launch in transfusion diagnostics goes closer, we invested time to analyze the market and assess the capabilities of the Mosaic technology. The first and most obvious market is the 750 million plasma market that we have referenced in previous communications. This market requires serological and molecular testing. We will first deploy a mosaic serological disease screening microarray that will essentially be a reduced version of our expanded SDS microarray. As such, we have decided to include a testing for the plasma market in the upcoming expanded SDS field trials. Our analysis also shows the mosaic technology is well suited for clinical diagnostics. The two areas that we will explore in more detail and expect to address first are allergy testing and autoimmune diseases. Based on our assessment, these two markets represent a total opportunity of greater than $5 billion, and we have determined that Mosaic is well-suited for both clinical areas. Finally, in collaboration with an external party, we have completed a companion diagnostic study to assess the feasibility of Mosaic to help differentiate between vaccine-induced seropositivity and natural seropositivity. The results of the study are very encouraging. We look forward to providing you with further information on our expansion into new markets in the coming quarters. Now, I'd like to update you on our second key pillar, ALBA by Quotient. Our ALBA by Quotient business generated $9 million in sales and grew 2% over the first quarter of last year. The growth of our ALBA business was adversely impacted by a contractual price decrease of our largest OEM customer and a lower number of shipping cycles in the quarter. We continue to see solid growth potential for our ALBA business and have evaluated several opportunities. These opportunities include the expansion of the product portfolio, the expansion of our customer base with the acquisition of new OEM customers, and the geographical expansion where we are now in the process of registering the Al-Baba Quotient products in additional markets such as Germany, Switzerland, Spain, and other countries. Finally, our third and final key pillar that I'd like to update you on is Quotient's financial position. At the end of May and early June, we issued convertible notes with an aggregate principal amount of $105 million at an attractive interest rate of 4.75%. These added cash to our balance sheet, which at June 30, 2021, showed $166.7 million in cash and short-term investments. We believe the fact that we are able to raise this amount with Hybridge, one of our important long-term shareholders, and other investors, demonstrates the confidence of the investor base in our technology. We are well-financed to execute on our plans. Additionally, we are in discussions to restructure or refinance our existing debt of $133 million, with the main purpose to avoid further principal payments coming due before the commercial launch of Mosaic. Another action related to our financial flexibility, we are currently reviewing our P&L structure and how we allocate resources. As an outcome of this analysis, I have initiated actions to optimize our cost structure and reallocate resources as Mosaic transitions into the commercial phase. We will further elaborate on these measures later in the calendar year. I would like to comment on the situation around our investments into Credit Suisse supply chain funds. At the beginning of July, we received a further payout of $5.8 million, which reduced the remaining balance of our investment in those funds to $28.9 billion. Based on the latest communication from Credit Suisse, we expect a further payout in August. we continue to remain confident that we should recover the remaining balance. With this, I would like to turn it back to Peter for the financial update.