Alan Kohler discusses the life sciences investment landscape with biotech developer Anteo.
THIS IS AN UNEDITED TRANSCRIPT
AK: And hallo again. Welcome to Eureka Interactive and now we’ve got Dr Geoff Cumming who is the CEO of Anteo Diagnostics. G’day, Geoff. Thanks for coming in.
GC: G’day, Alan. Pleased to be here.
AK: And it’s great to have you here. You were just telling me you live in Sydney, the company is in Brisbane and we’re in Melbourne.
GC: Originally from Melbourne.
AK: And your family is in Melbourne?
GC: Yes. Yeah.
AK: Hopefully your wife and children are in Melbourne, are they?
GC: No, we live in Sydney.
AK: You live in Sydney.
GC: But all of my wife’s sisters are in Melbourne and so are a lot of family and friends. Given I was a Monash boy, all university and school friends are here as well.
AK: Yeah, right. Now, Warren Buffett says never invest in a company you don’t understand which means, speaking personally, I would never be able to invest in Anteo because I’ve been reading about it and buggered if I can figure it out.
GC: Well, let’s see if in half an hour, we can get you on the register, Alan.
AK: Well, you certainly need to help me understand this business. Now, so you’ve got this… your technology is nanoglue?
GC: Nanoglue, yes.
AK: It’s got nothing to do with my nana.
GC: No. No. No, no. It’s ten to the minus nine metres, right, so it’s very, very, very small.
AK: And the product is Mix & Go?
GC: Mix & Go is the product. It is a nanoglue and it was originally designed to get better outcomes with immunoassays. So immunoassays are part of the pathology spectrum. About 20 per cent of all pathology tests… when you give blood, urine to your doctor, it goes off to, in the Australian context, Sonic and Sonic buys kits from a range of manufacturers to do tests on that blood or urine to determine whether you’ve got an illness and if you’ve got, how badly do you have it? The suppliers to Sonic would be the likes of Roche or Beckman and we’re in the course of acquiring a Belgian company who would also be a potential supplier to Sonic. We had [1:58???] Anteo. Anteo has an enabling technology that allows for better outcomes for those pathology supply companies. We can either allow the manufacturer to produce it more sensitively or less expensively.
AK: So you don’t sell the product to the pathologists?
GC: No.
AK: You supply those who are…
GC: We supply the people that make the kits that the pathology labs will use.
AK: Right. So what do you actually supply them with?
GC: It’s a juice. It’s just a liquid that in the first instance was intended to bind on to a specific part of an antibody and lead to better outcomes, so you can improve the sensitivity or if the existing test that’s on the market has got all the sensitivity that’s required, we can allow a test of the same sensitivity to be manufactured using as much as 90 per cent less antibody. So that was where we started and we’re now…
AK: Well, let’s in fact… let’s talk about where you started.
GC: Yeah.
AK: What were the foundations of the business? How did it begin?
GC: Okay. Joe Maeji is one of the founders of the business and is currently Chief Scientific Officer. As a technology company I think it’s important to, if you can, retain those historical links and we’re lucky to have Joe with us. He is still the best person to know what the capabilities of our technology are, but more and more we’re getting other people on board that have ability to extract commercial value from the known aspects of the technology.
AK: So, but he invented this Mix & Go, right?
GC: Yeah. Yeah, exactly.
AK: And what exactly was the idea? What was the essence of the idea that he had?
GC: Well, he was originally in the high throughput drug screening where you need to do a lot of tests in a short period of time and determine where drug leads might come from. And so he wanted something that would act quickly and strongly, be able to bind things. And he had an idea that. The roots of Mix & Go are… There’s nothing new there. There are basically three broad binding mechanisms in nature. One is passive which is quite random. Another one is covalent, a chemical process. And this is coordination chemistry. Most people use either passive or covalent binding. Joe’s notion was to use coordination chemistry and that’s what’s at the root.
AK: So could you define coordination chemistry for us?
GC: In this case it’s metal ligand binding, so a metal – in our case it’s chromium – binds to the ligand of interest. In the first instance, it’s immunoassays, but because it’s really just a nanoglue, whilst we’ve chosen to focus, to begin with, on antibodies and therefore immunoassays, with minor, he says because he’s not the chemist, minor modifications to our Mix & Go, we can start to use it in a range of different contexts, such as separations. Or indeed earlier this year we filed a patent in batteries, so it’s a long way from an immunoassay to a battery, but that’s as a result of the broad potential that the technology offers.
AK: So that explains the business you’ve got called Anteo Energy?
GC: Exactly. Yes.
AK: So when you say you’ve got a patent in batteries – we’ll get to them in some more detail later, but what are you going to make batteries or something?
GC: No. We have no aspirations to be Duracell mark II, but we do have aspirations of supplying the likes of Duracell or Tesla or Apple with the technology because the work that we’ve done shows that Mix & Go has the ability, particularly with some of these newer generation batteries, to make some profound differences, not the sort of… a five per cent, 10 ten per cent, but seven-fold, 10-fold difference. So we have big aspirations in that area.
AK: So the big news is that you’ve made an acquisition recently of a company called DIAsource ImmunoAssays, as you mentioned that before.
GC: Yes. Yes.
AK: Can you tell us why you did that?
GC: Yeah.
AK: Are they a distributor of your product?
GC: No. No. In fact about two years ago I was at a conference and I met with the CEO of DIAsource because I thought that we could help them to get better outcomes. They’re like a Roche or a Beckman. They manufacture a whole range of kits that the likes of Sonic will use to determine your health. So I approached Geoff[Jozef6:41???] Vangenechten, the CEO, and we started talking. Our board at around about that same time recognised that we’re a growth company and considered how do we grow quickly? One path to rapid growth is acquisition. And so at that stage we hired a US based investment bank called Ferghana and they scoured the world for companies that they thought would meet our criteria and DIAsource was one of the companies that they came up with; in fact it was top of the list. Our criteria at that time were we wanted a cash flow positive company, we wanted a deal that was going to be accretive and we wanted a company that had products in its portfolio that could benefit from the inclusion of our product. So DIAsource met those criteria and we started to court.
AK: Right. How much did it cost you?
GC: Well, at the moment nothing, but when we do finalise the acquisition, it will be 15.4 million euro, so something in excess of 20 million Australian dollars.
AK: Right. And I mean I looked in your quarterly report here and you’ve got $3.489 million in cash.
GC: Not quite enough to do it, Alan.
AK: No, no, not quite enough to do it. You’re a bit short there, so what’s going on?
GC: So we’ll have to raise money and there’s some flexibility under the share purchase agreement that we’ve now executed with DIAsource and as the finality and certainty come to those variables, we’ll release it to the market. But what is in the market is that it’s a 15.4 million euro transaction.
AK: Right. Okay. But you didn’t consider giving them shares?
GC: Yes, absolutely and that’s part of variability, so and at least part of it will be through placement of shares to the vendors, the current owners of DIAsource.
AK: Right. Well, we’ve got tonnes of questions from the audience here, Geoff, who are clearly well informed on your company, so we’ll go straight to them which makes my job easier, thanks very much for that.
GC: Okay.
AK: Roy says, when Mix & Go takes off, is it likely it will become the industry standard?
GC: Well, we think it’s better than the conventional approach. So without sort of trying to overegg it, we believe that it will, in time, become the industry standard. You don’t know what’s around the corner in terms of invention, but right now, we feel that this approach is best in class.
AK: Right. Okay. Tony W, given his full name here, thank you, Tony, in the recent 4C/ForeSee[9:34???] – this is that thing – any mention of POC 1 was relegated to almost an afterthought. Is that because the focus for the update was the acquisition or does that reflect a waning of enthusiasm on the part of POC 1? I don’t know what POC 1 is, so firstly tell us what it is.
GC: Okay. POC 1… In our business, a lot of people want to retain their confidentiality and so we’re dealing with a lot of companies that we would love to sing about very loudly, but they won’t let us. POC 1 is one of those and POC 1 is an acronym for Point-Of-Care. So there is a large European company that is developing a point-of-care device and this is I think an important… as a side line to what we’re talking about. Historically, when your blood has been sent off to a pathology lab, instruments bigger than this table of yours are used to churn out hundreds of thousands of tests per day. There’s a great trend towards miniaturisation. Now, the conventional approach that I’ve mentioned that’s commonly used when binding antibodies, about one in five antibodies binds in a manner that allows them to be functional. With ours, five in five do. So therefore our approach is a manner that lends itself, a process that lends itself to miniaturisation. POC 1, a very large European company developing a point-of-care device miniaturised, it needs things to work well, efficiently, effectively. And so they’ve looked to us. They’ve been developing this thing for about 10 years and it’s not on the market.
AK: Oh, so POC 1 is not the name of a company?
GC: No.
AK: It’s just point-of-care 1 and you’re keeping the name of the company secret?
GC: Yes.
AK: Right, I see. And so there’s a possible deal, but nothing yet?
GC: Exactly. And our expectation is that that device will be launched next year. It’s going to be in the first instance probably used in ambulances and emergency departments. The first test will be a troponin test which is an early measure of heart attack, so we’re working closely with them. Back to the question, the answer is no, there’s no waning of enthusiasm for POC 1. The work is continuing well. I’m heading to Europe the week after next and we’re meeting with POC 1 there. They are keen to talk with us about expanding our association with them, so it’s certainly not any waning of interest but rather indeed, as the alternative choice was, a focus on the acquisition of DIAsource.
AK: Yeah, fair enough. Another, this time, anonymous question, Geoff, what attracted the ex-president of DiaSorin to join Anteo?
GC: There was a… Okay.
AK: Who was the ex-president? Who are we talking about?
GC: We’re talking about a fellow by the name of Carroll Streetman and Carroll was, as the listener has suggested, the president of DiaSorin Inc in the US. DiaSorin is an Italian diagnostics company, so like Roche and Beckman. DiaSorin is an Italian one. DiaSorin Inc is the US arm of that company. DIAsource, the company that we’re looking to acquire, has as part of their portfolio of products vitamin D and the global leaders in vitamin D testing are DiaSorin. So we’ve hired Carroll for a variety of reasons, but certainly we would expect that he will help us to extract greater value from that vitamin D franchise than would otherwise have been the case. And just by way of background, vitamin D testing probably a couple of years ago was about $500 million globally. It’s predicted by 2018 to be about $2.2 billion. Why is it so? Historically, vitamin D is associated with Rickett’s, bone metabolism and so on. More recently, there have been clinical linkages between deficiencies in vitamin D and colon cancer, depression and various autoimmune diseases like MS, so that’s why the magnitude, the amount of vitamin D testing is going up. DIAsource, our target, has got a very interesting and commercially valuable vitamin D asset.
AK: And what? Does Mix & Go detect vitamin D deficiency?
GC: Well, no, but it helps in the development of new… it may help – we haven’t done the work, but we expect that it will help in the rapid development of new vitamin D tests or indeed any one of these immunoassays. Vitamin D is generally an immunoassay.
AK: Right. There’s a long question here from another anonymous person asking about POC 1. I think you’ve kind of answered that with comments on the progress of the POC 1. It’s kind of progressing I think was…
GC: Yes. I think well. It’s not necessarily obvious, but we are achieving… We had some targets that were set and needed to be met by the end of November in order for us to get the payment, just in terms of our business model. We have some, a small number of products that we sell over the net. We try to target the people that we sell those to, to people that we think have got a good… a significant need for our product, that could commercially benefit from it and so when we sell them product, they will use it and hopefully it works, but it’s not quite what they want, we will then charge…
AK: They’re not going to buy it if they don’t use it, are they?
GC: Well…
AK: How much do you sell it for?
GC: Oh, a kit might be less than $1000, so it’s intended to be a teaser. So they’ll try this and see that it works, but they want it to work on a different surface or get greater sensitivity or whatever it might be, we’ll then enter in to a programme where we will do some work to produce a bespoke solution on their behalf, and get paid for it, and when we’ve come up with a bespoke solution, we’ll license it to them and derive revenues through either supply agreements or royalties for the life of the product. So that’s the business model and at the moment we’re really beginning, but some of the… POC 1, for instance, where we’ll get something approaching half a million dollars from them this year, as a result of this work towards a bespoke solution.
AK: The same questioner says, well, how important is POC 1 to the new Anteo – I didn’t know there was a new Anteo, but anyway – he says, to the new Anteo, given that once upon a time POC 1 and POC 2 were your biggest potential and now you’ve got the likes of Cook, as well as a number of deals with distributors distributing your own products?
GC: Yeah. Well, we would hope not to be a one trick pony and we would want to share the eggs in to a variety of baskets.
AK: But you’ve got one thing though, haven’t you?
GC: We’ve got… Essentially we do, but Mix & Go is at the core of everything we do, but I’m not the chemist and I can say well, we can make minor variations to that core subject, core technology or product that makes it applicable to a whole range of different things, right. And so whilst there’s a single notion behind it all, we’ve actually… When I joined we had literally two products. Now, we’ve got in excess of a hundred that we can draw on and that’s increasing with most of the interactions that we enter in to.
AK: Now, he mentioned something called Cook. I assume that’s Cook Medical.
GC: Cook Medical.
AK: How’s that progressing? What are the market sizes of the potential products that Mix & Go could be incorporated in to? And how may the projects… How’s it all going anyway?
GC: Well, that’s an exciting one for us because most of our work to date has been in either life sciences or in vitro diagnostics, pathology. Cook is a medical device company and that by definition they produce things that go inside the body and that requires a whole different standard of production and care and, you know, risk. Now, Cook is, I would say, the largest privately owned medical device company in the world. Because they’re privately owned, it’s difficult to know much about their financial performance, but estimates suggest that they’re about a $3 billion revenue company. We’re working with them initially. By chance their Australian outpost is located in the same technology park as we’re based in in Brisbane. That’s how the interaction started. We’re working with them on a device, so it will be a new generation device for an existing product that’s on the market and work is going well.
AK: What will the device do?
GC: Well, they’re all implantable, so the sorts… And again, we’re back to secrecy, but the sorts of things that Cook do, they make introducer sheaths, they make catheters, they make stents, so all of these things. Often times, they’ll go in through the groin up to the heart. A stent of course will stay around the heart. These are all the sorts of things that they produce. And what they’re wanting to do is make sure that they’ll slide through the veins smoothly without doing any internal damage. They want to make sure that once they’re in place no untoward things occur, so obviously you would want to steer clear of clots and the like. So we’re working with them firstly on a single product; now, on probably three different projects that are all… The listener has asked how big are they? Well, this is all the bread and butter of Cook and it’s a $3 billion company. All of their products would be I would guess, you know, $100 million plus.
AK: But these implantables can benefit from having Mix & Go.
GC: Absolutely. Yes. Yes.
AK: What, painted on the outside of them or something?
GC: Yeah. So for a variety of purposes.
AK: Dipped in?
GC: Yeah. So you can dip it in Mix & Go and then put whatever coating you want on it and it sticks and so we can improve outcomes and the early indications are… We’ve come up with some evidence that suggests that we’ve got a better result and now we’re getting feedback from them as well.
AK: Barry says, total shareholder return, average annual rate, 10 year minus 6.8 [per cent] – I haven’t checked these numbers, so I don’t know if they’re right; you might know – 10 year minus 6.8 [per cent], five year plus 10.6 [per cent], three year plus 12.9 [per cent], one year minus 23.4 per cent. Can you comment?
GC: Well, it’s a function of a sale of companies that are in the formative stages. In the end what the investors are looking for and indeed what the company is looking for is revenue. And until you’ve got revenues, the shareholders will value it based on their belief of what the technology can lead to and that’s, at least in part, what we expect to…
AK: But you’ve obviously had a lousy 12 months?
GC: We have had... Well, I think the industry has had a reasonably lousy 12 months. But I think that DIAsource, the acquisition of DIAsource will address some of the issues that people would see. And in the end I think that we… When I joined, the share price was 0.6 per cent per share and our market cap was about 1.2. We are now trading at around about nine cents per share and a market cap of about 80, so it’s not bad, but the listener is again quite right. Ten cents sounds okay. Let’s say it’s 10 cents, but we have been at 28 [cents].
AK: That’s right. Mind you, if you’ve taken it from, you know, 1 point something…
GC: 0.6 to…
AK: 1.6 to 80, that’s okay.
GC: Yeah. Not bad. But we think it’s revenues that will turn it around and in fact provide the basis for fundamental analysis and I think that the acquisition and the cash flows will put us on the radar of some funds that previously would not have viewed us and that will give us increased credibility and so the story evolves.
AK: So if you take over DIAsource, do you immediately become cash flow positive?
GC: Yeah, I would say within the first quarter; worst case would be in the first six months.
AK: Right. Trey says, what’s the revenue potential of the battery side of the business? Is this bigger in the long term than the diagnostic applications?
GC: Hard to know, but I believe that on the basis of the work that’s been done to date I think it has great potential. There’s more work to be done and that’s being done at the moment. We would expect a couple more patents within the next six months, let’s say, and those patents should demonstrate the bonafides of the technology more broadly and it’s at that stage that we would be interested in talking more broadly with industry players.
AK: Another question, can you give an update on the opportunity for pre-treatment of blood sample tubes? Would a joint venture with a large life science company be a part of the strategy? Josh Soldo gave this presentation to Beckman Coulter. Are there others interested?
GC: Yes.
AK: I don’t know who Josh Soldo is.
GC: Josh Soldo was also with DIAsource, so that’s two people from DIAsource that are now involved with Anteo. Josh was involved in filing a patent on sample pre-treatment. And the listener has referred to treating blood collection tubes with Mix & Go and indeed that’s something that we are looking at and is at the core of the patent that was filed earlier this year and we are talking to a range of relevant players, so tube suppliers, bead suppliers and in vitro diagnostic companies with a view to forming a consortium to exploit the commercial potential of that patent.
AK: Right. Geoff, it’s been mentioned on social media that you’ve alluded to the potential for 10 times $10 million deals for Anteo. I don’t know whether… Can you please expand on that? Where do you see these deals coming from? Did you say that on social media?
GC: I don’t believe I have said that on social media.
AK: Or have you said it anywhere? Or 10 times $10 million deals?
GC: The market that we’re involved in is probably about a $60 billion market and if you take any of the companies that we’re working with…
AK: You’re just talking about pathology there, DIAsource…
GC: Well, and $20 billion is immunoassays. Now, we’re looking at immunoassays but life sciences, batteries and so on, but if you stick to the area in which we’re most progressed and that’s the in vitro diagnostic, if you take… Let’s take an example of a large diagnostic company, they would use in excess of 40 kilos of beads to use at the core of their immunoassays. That’s about $24 million worth of beads that they’re buying. We can produce better results than the beads that they’re currently using and we can halve the price. There’s one example of a $10 million capable stream of revenue for us. We’re working on a range of those. So it’s not, in my view, outlandish to consider that there are multiple $10 million streams that we have the capability of addressing.
AK: That’s great. There’s somebody who knows all about your company who’s asking lots of questions. He’s not saying what his name is or her name is. But it’s great. It helps to make my job easier. How is the Qiagen partnership with the sales of AMG products with the lateral flow readers going? Goodness gracious. Can you give some potential around this?
GC: No, I can’t give any potential around it, but I can say that in two weeks’ time there’s one of the world’s major conferences on in Dusseldorf, Germany and Qiagen is going to be there. We’re meeting with them and we’re talking about just that, so how is it going, where is our relationship going and we hope that… Qiagen is a nice sized European company. We’re looking to solidify the relationship that we have with them.
AK: What are you currently selling online? This is Mike. Thank you, Mike. What are you currently selling online and where are you selling it? Are you providing free trials to show that it works?
GC: As I said, we do have about half a dozen products that we do sell over the net to the extent that it’s possible. We try to target the sale of those products to entities that have a potential to use significant quantities of it. We do not sell large quantities of that over the net at the moment and indeed in to the future we don’t expect that that’s going to be multimillion dollars’ worth of sales of products over the net. We are making small sales, we are making those sales to relevant players and where we consider it to be a commercially astute move, we’ll provide free samples to allow people to do it, but our desire is to sell the product and then the majority of cases it’s product sales and what we hope to get from there is the research and collaboration revenue to produce a bespoke solution and then on to the third revenue stream which will be a licensed product in to the future.
AK: Right. So in a way do the online sales provide leads in a way?
GC: Yes. Yes, it does, yeah.
AK: Yeah. Where are we in regards to the custom bioseparations product with Sigma Aldrich? There you go. See, I even sound like I know what I’m talking about.
GC: Well, Sigma Aldrich… Even though you might not be in the area, Alan, you probably have heard of Sigma Aldrich.
AK: I’ve heard of Sigma, not specifically.
GC: There you go. So Sigma is… they’re well-known.
AK: Yeah.
GC: And reasonably recently, about August I think, it was announced that they were going to start selling our products in their catalogue. That was after two years’ due diligence and so that gives an indication of how long some of these things take. Now, they are in the process and I believe we’re within days of seeing our products available through the Sigma network. As part of that due diligence, it gives the Sigma scientists the green light to start looking at including our product in to some of their proprietary products that are under development and that is indeed happening.
AK: Good. And is the acquisition due for completion in November? And if so, is further information going to be released before the AGM?
GC: The AGM is next Monday, so if there’s going to be further information before then, we’ve got to move rapidly.
AK: Get on your bike.
GC: But the terms of the SPA, Share Purchase Agreement, are that we’re looking for completion through the course of… well, certainly by the end of the calendar year.
AK: Right. I think this is probably the last question. From Sam, can you explain how Mix & Go improves the performance of batteries?
GC: Yes. Well, I can give a lay explanation.
AK: You’ve got one minute. Tick, tick, tick.
GC: One minute, okay. So with batteries, particularly the newer generation batteries, the electrodes will swell and shrink with charge and discharge and eventually that cycle causes instability in the electrode and the electrode will fall apart and you’ll have to get a new battery. Mix & Go helps it to stick together, so it can swell and shrink and retain its structural integrity. So as a result we can allow potentially faster charging of batteries, more charge to go in to them, longer life of batteries – Duracell won’t necessarily like that – so a range of benefits.
AK: But that’s a good point. I mean battery manufacturers and sellers won’t want them to last longer.
GC: But if you can make them lighter, if you can get more charge in to them, it might…
AK: They’re not going to have a bar of you.
GC: They might find a way of reducing the life, right, but if you can get more charge in there, particularly… The two big growth areas with batteries are going to be electric vehicles and storage for domestic electricity.
AK: So the thing with electric vehicles is getting more range.
GC: Range and weight.
AK: And weight. And so, what, are you going to… your technology helps both those things?
GC: Well, that’s what we hope to be able to demonstrate, yeah.
AK: Right. Very good. Well, we’re out of time.
GC: Well, there we go.
AK: It’s been head-swelling to talk to you, Geoff. Thank you. And thank you for all your questions. That was great. See you next time.
END
ADO Price at posting:
9.3¢ Sentiment: Buy Disclosure: Held
(20min delay)
