2019 Financial Results
Important Disclaimer
- This presentation is intended to provide a general outline only and is not intended to be a definitive statement on the subject matter. This presentation is not financial advice and has been prepared without taking into account the objectives, financial situation or needs of a particular person.
- Neither the Company, nor its officers or advisors or any other person warrants the accuracy of the analysis herein or guarantees the investment performance of the Company. Investors must make their own independent assessment of the Company and undertake such additional enquiries as they deem necessary or appropriate for their own investment purposes.
- The statements contained in this presentation that are not purely historical are forward-looking statements within the meaning of the United States Exchange Act. Forward-looking statements in this presentation include statements regarding our expectations, beliefs, hopes, intentions or strategies. All forward-looking statements included in this presentation are based upon information available to us as of the date hereof, and we assume no obligation to update any such forward-looking statement as a result of new information, future events or otherwise. Our actual results could differ materially from our current expectations.
- The Company is subject to a number of risks. For a summary of key risks, refer to the Company's most recent Form 10-K filed with the United States Securities and Exchange Commission and the Australian Securities Exchange.
- Under applicable United States securities laws all of the shares of our common stock are "restricted securities" as that term is defined in Rule 144 under the Securities Act of 1933, as amended. Restricted securities may be resold in the public market to United States persons as defined in Regulation S only if registered for resale or if they qualify for an exemption from registration under the Securities Act. We have not agreed to register any of our common stock for resale by security holders.
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Highlights
Balance sheet supporting investment in product development
- Lump sum service fees of A$44.6 million received on 18 February 2019
-
Coagulation product negotiation with Siemens settled on 18 September 2019
Siemens Xprecia Stride™ strip revenue of A$4.9 million up from A$1.7 million in the prior - corresponding period (pcp)
- FY19 net cash of A$37.2 million up from A$12.1 million in the pcp
- Investing in new product development using existing technology outside of medical devices
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1. Corporate Overview
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Corporate Summary
Cash backed share price
Capital Structure | |
Last price as at 21February 2020 | A$0.175 |
CHESS Depositary Interests on issue | 177.6m |
CHESS Depositary Interest Holder (21 February 2020) | Holding | Ownership |
Viburnum Funds Pty Ltd | 36,636,061 | 20.6% |
CVC Ltd | 23,820,765 | 13.4% |
Market Capitalisation | A$31.1m Jencay Australia Investment Fund | 20,792,320 | 11.7% | ||
+ Total Debt (as at 31 December 2018) | - |
- Cash (as at 31 December 2019) | A$37.2m |
KFT Investments Pty Ltd | 17,975,043 | 10.1% |
Other holders of CHESS Depositary Interests | 78,347,665 | 54.2% |
Enterprise Value | (A$6.1m) Total CHESS Depositary Interests on issue | 177,571,854 | 100.0% | ||
Board and Senior Management | |||||
Mr Craig Coleman | Non-Executive Chairman | ||||
Mr David Hoey | Non-Executive Director | ||||
Ms Judith Smith | Non-Executive Director | ||||
Mr Marshall Heinberg | Non-Executive Director | ||||
Acting Chief Executive |
Mr Salesh Balak | Officer/Chief Financial Officer |
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Siemens Definitive Agreements
Provides UBI with complete control over all development activities
-
Definitive agreements executed on 18 September 2019
Commitment from Siemens to purchase a certain minimum amount of strips from UBI over the - subsequent 42 months
Enables UBI to pursue partnership and distribution opportunities for coagulation products outside of - its arrangement with Siemens
-
Provides UBI with increased management over the pricing of analyzers and strips
Provides UBI Access to Siemens' proprietary reagent which is required to manufacture the - coagulation strips
Sales and marketing personnel have now been engaged to explore commercial opportunities for the - Xprecia Stride™ system
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2. Products and Services
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Coagulation Testing - FY19 Summary
Revenue increase represents increase in market share
FY19
Commentary
Comment
- Test strip sales of A$4.9 million, up from A$1.7 million in the pcp
- Production contribution margin of A$2.0 million (41%), up from A$0.1 million (4%) in the pcp
- Manufacturing contribution and margins have increased due to investment in scale up projects which have improved efficiency and yield
Coagulation Testing Revenue
A$6m
A$4.9m
A$5m
A$4.1m
A$4m
A$3m
A$2m | A$1.7m | ||
A$1m | |||
A$0m | |||
FY17 | FY18 | FY19 | |
Coagulation Testing Margin
A$3m
A$2.0m
A$2m
A$2m
A$1.1m
A$1m
A$1m
A$0.1m
A$0m
FY17 | FY18 | FY19 |
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Other Services - FY19 Summary
Lack of LifeScan quarterly service fees evident in FY19 revenue
FY19
Commentary
Comment
- Other Services revenue excluding revenue generated from LifeScan comprises revenue from testing services undertaken by HRL and other services undertake on behalf of our partners
- Other Services revenue excluding revenue generated from LifeScan was A$1.9 million, up from A$1.8 million in the pcp
- During 2018, LifeSan exercised its right to convert its obligation to pay quarterly service fees to UBI. Accordingly UBI will not receive any further quarterly service fees beyond 2018
Other Services Revenue
A$80m | A$67.8m | |||
A$70m | ||||
A$60m | ||||
A$50m | ||||
A$40m | ||||
A$30m | A$21.1m | |||
A$20m | ||||
A$10m | A$2.0m | |||
A$0m | ||||
FY17 | FY18 | FY19 |
Other Services Margin
A$80m | A$66.9m | |||
A$70m | ||||
A$60m | ||||
A$50m | ||||
A$40m | ||||
A$30m | A$20.2m | |||
A$20m | ||||
A$10m | A$1.3m | |||
A$0m | ||||
FY17 | FY18 | FY19 |
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3. FY19 Results (Year ended 31 December)
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Profit and Loss
Need to replace revenues previously received from LifeScan
A$m, 12 months ended 31 Dec | 2019 | 2018 | Change | Commentary | ||
Blood Glucose | 0.2 | 66.1 | -99.6% | Coagulation Testing revenue reflects increase in market share | ||
Cost of Goods Sold includes Siemens coagulation test strip manufacture | ||||||
Coagulation Testing | 5.6 | 2.2 | 155.6% | Decrease in research and development primarily a result of reduced project activity | ||
during Siemens Definitive Agreement negotiation | ||||||
HRL | 1.1 | 1.2 | -8.3% | Selling, General and Administrative expenses decreased due to cost management | ||
initiatives undertaken during the year | ||||||
Total Revenue | 6.9 | 69.5 | -90.1% | Term loan repaid in 2018 eliminated financing costs | ||
Previous period included $2.6 million impairment of fixed assets in 'Other' expense | ||||||
Cost of Goods Sold and Services | 3.6 | 2.5 | 42.2% | line, which did not feature in 2019 | ||
Research and Development | 5.5 | 11.6 | -52.2% | |||
Selling, General and Administrative | 7.0 | 7.0 | -0.2% | |||
Financing costs | 0.0 | 3.0 | -100.0% | |||
R&D cash rebate | -2.8 | 0.0 | nmf | |||
Other | -0.3 | 3.4 | -106.5% | |||
Total Expenses | 13.0 | 27.5 | -52.6% | |||
Income Tax Expense | -1.3 | 4.4 | -130.3% | |||
NPAT | -4.8 | 37.6 | -112.9% | |||
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Cash Flow
Receipt of lump sum service fees in February 2019 boosts our cash position
A$m, 12 months ended 31 Dec | 2019 | 2018 | Change |
Net cash provided by operating activities | 33.2 | 1.8 | 1744.4% |
Net cash used in investing activities | -10.2 | -0.4 | -2450.0% |
Net cash used in financing activities | 0.0 | -20.9 | 100.0% |
Movement in exchange rates | 2.1 | 2.2 | -4.5% |
Net movement in cash at period end | 25.1 | -17.3 | 245.1% |
Cash at period end | 37.2 | 12.1 | 207.4% |
Cash Reconciliation
A$80m | ||||||||||||||||||||||||||
A$70m | A | $18m | ||||||||||||||||||||||||
A$60m | ||||||||||||||||||||||||||
A$50m | A | $10m | A$4m | A$5m | ||||||||||||||||||||||
A | $60m | A$0m | A$2m | A$1m | ||||||||||||||||||||||
A$40m | ||||||||||||||||||||||||||
A$30m | ||||||||||||||||||||||||||
A$20m | A | $37m | ||||||||||||||||||||||||
A$10m | A | $12m | ||||||||||||||||||||||||
A$0m | ||||||||||||||||||||||||||
Cash 31 Dec 2018 | Sales | Expenses | Acquisition of assets from Siemens | Income tax | Siemens Milestone | Capex | Forex | Other | Cash 31 Dec 2019 | |||||||||||||||||
Commentary
- 2019 operating cash flow includes receipt of US$31.5 million LifeScan lump sum service fee
- The impact of Siemens Definitive Agreement included in 2019 investing cash flows
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Balance Sheet
Healthy cash balance to carry out strategic initiatives
A$m, as at 31 Dec | 2019 | 2018 | Change |
Cash and cash equivalents | 30.2 | 11.8 | 156.2% |
Trade and other receivables | 0.1 | 50.2 | -99.7% |
Prepayments | 0.1 | 0.2 | -14.3% |
Other current assets | 6.6 | 1.9 | 253.3% |
Current Assets | 37.0 | 64.1 | -42.1% |
Property, plant and equipment | 4.8 | 5.6 | -15.6% |
Intangibles | 15.9 | 0.0 | nmf |
Other non current assets | 4.9 | 0.3 | 1433.7% |
Commentary
- Cash position supported by receipt of lump sum service fees in February 2019, previously reflected in other receivables in 2018
- Other current assets comprise primarily of R&D cash rebate receivable , restricted cash and inventory
- Increase in intangibles associated with assets subject to the Siemens Definitive Agreements
- Other non current assets represents restricted cash
- Contingent consideration represents payments to Siemens in the event of achieving a pre-defined milestone
Non Current Assets | 25.6 | 5.9 | 330.3% | Deferred income tax liability represents adjustment to the cost base of assets acquired |
with Siemens Definitive Agreements | ||||
Total Assets | 62.6 | 70.0 | -10.5% | |
Income taxes payable | 0.0 | 4.4 | -100.0% | |
Trade and other payables | 1.6 | 2.4 | -31.8% | |
Contingent consideration | 2.1 | 0.0 | nmf | |
Deferred revenue | 2.7 | 2.3 | 13.9% | |
Other current liabilities | 3.7 | 4.1 | -9.6% | |
Total Current Liabilities | 10.1 | 13.2 | -23.8% | |
Deferred revenue | 1.4 | 3.5 | -59.0% | |
Deferred income tax liability | 3.1 | 0.0 | nmf | |
Other non current liabilities | 2.6 | 2.6 | -0.3% | |
Total Non Current Liabilities | 7.1 | 6.1 | 16.4% | |
Total Liabilities | 17.2 | 19.3 | -10.6% | |
Net Assets | 45.4 | 50.7 | -10.4% | |
Total Equity | 45.4 | 50.7 | -10.4% | |
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4. Research and Development - Introducing Free Sulfur Dioxide (SO2) Test
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R&D Strategy: Overview of Considerations
A range of variables/parameters were considered when reviewing the R&D strategy
Regulatory
Complexity
Human Animal
Health Health
Food and | Agriculture |
and/or | |
Drink | |
Enviro. | |
Alternative
Industries
Leverage
Existing
Work
R&D
Program
Strategy
Technical
Complexity
Project
Timelines
RevenueCosts Return
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R&D Strategy: Why a non-medical device platform?
Overall assessment concludes faster & cheaper development cycle compared to medical devices
-
Alternative Industries: Food & Drink industry, no true point of use device commercially available
Leverage Existing Work: Ability to use previously developed meter design, existing electrochemical - cell technology, and existing manufacturing process
Regulatory Complexity: Focus on in-process testing (lower regulatory complexity) and no regulatory - authority review required prior to launch
Project Timelines: Lower regulatory complexity has reduced development timelines, no complicated - clinical trials required
- Project Costs: No large investment required (given no clinical trials), current infrastructure is suitable
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R&D Strategy: Introducing Free Sulfur Dioxide (SO2) Test
UBI is developing an in-process test to monitor the concentration of free SO2 during wine production
Sulfur dioxide (SO2) is widely used in wine production as a preservative to protect wine from negative | |
effects of oxygen exposure and microbial contamination during ageing/storage | |
SO2 allows wine to continue developing safely throughout its entire lifetime |
SO2 occurs naturally as a result of the fermentation process, but requires a supplement to fully | |
protect the wine | |
SO2 levels in wine is regulated, with the wine manufacturer requiring a final SO2 concentration value | |
from an accredited laboratory to export | |
UBI is developing an in-process test to monitor the concentration of free SO2 during wine production |
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R&D Strategy: Wine Industry Overview
The wine manufacturing market is stable and well established, with similar core processes and in-process testing performed worldwide.
Large Winery Footprint, comprising >100,000 wineries EU/RoW, 10,043 wineries in United States and | |
2,954 wineries in Australia and New Zealand1 | |
Three main in-process tests conducted during wine production: 1) Free Sulfur Dioxide to confirm
sulphite present to preserve wine, 2) Malic Acid to confirms wine does not have flat or sour taste, and 3) Residual Sugars to confirm dry wine is not sweet
Global market for the three main in-process tests (above) is estimated at 70 million tests annually2 |
1. 2019 Statistical Report on World Viticulture, Int'l Org of Vine and Wine, Wines and Vines Annual Survey 2018/19, Australia New Zealand Wine Index Directory, NZ
18 Winegrowers Annual Report 2019
2. Free Sulfur Dioxide ~20 million tests annually, Malic Acid ~10 million tests annually and Residual Sugars ~40 million tests annually - UBI estimate
R&D Strategy: SO2 Testing During Wine Production
Three main in-process tests conducted during wine production
Harvest | Crush | Fermentation | Press | Aging | Finishing | Bottling |
Residual | Malic Acid | Free SO2 |
Sugars Testing | Testing | Testing |
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Market Opportunity: Point of Use Testing
Wine testing cannot replace the skills of the wine-maker, but providing real-time data can allow the wine-maker to optimize production and produce wines of a consistently high quality
- High Accuracy (perceived)
- Complex to Run
- 20 minutes test time
- Set Up > ~$1K
- Reagents > ~$7-$15
- High Accuracy
- Complex to Run
- High Throughput
- 15-20minutes test time
- Set Up > ~$ 50K
- Reagents > ~$150
Testing
Performed in
Laboratory
(onsite or external)
- High Accuracy
- Complex to Run
- 20 minutes test time
- Set Up > ~$2K
- Reagents > ~$35-$75
More Frequent Testing
- No specialist operator
- Ease of use
- Cheaper set up
- Cheaper test price
- No dangerous chemicals
UBI
Growth
Opportunity
Continued Use of Preservatives
- Preservative concentrations are regulated
- SO2 industry standard preservative
Point of Use Testing
- Immediate adjustment to the wine manufacturing process if required
- Platform for In-Process Testing (multiple tests)
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Market Opportunity: Market Differentiator
UBI's product meets all parameters1
Cost Efficiency: Current test cost ~A$15/sample at winery or lab (with overnight shipping costs). UBI strip
-
cost is substantially lower than this
Time Efficiency: Current lab test time 24hrs+ (including shipping) and winery test time of ~20 minutes, - compared to UBI test time ~1 minute
Usability: Simple to use with no special skills required, no sample preparation and no dangerous chemicals - - likely to lead to increased number of tests
Quality: Early data indicates suitable performance for a non-lab test, simple test allows better monitoring - and quality of wine and low regulatory barriers
- Lab Test: Point of use test accessible to all wineries
1. Subject to the successful completion of R&D
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5. Strategic Considerations
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FY20 Priorities
Comfortable cash position sufficient to drive strategic initiatives
- Increase Xprecia Stride™ revenue by channelling new customers and distributors
- Increase HRL revenues through sales and marketing initiatives
- Undertake research and development work for the wine testing platform
- Cost savings initiatives
- Identify, investigate and evaluate inorganic growth options
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Disclaimer
Universal Biosensors Inc. published this content on 26 February 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 26 February 2020 03:52:10 UTC